Housing Authority of Farmerville - app.lla.state.la.us · PDF fileHOUSING AUTHORITY OF THE TOWN OF ... primarily due to spending about $31,000 less for operations than ... and whether

HOUSING AUTHORITY OFTHE TOWN OF FARMERVILLE

Farmerville, Louisiana

MANAGEMENT DISCUSSION & ANALYSISAND AUDITED FINANCIAL STATEMENTS

YEAR ENDED SEPTEMBER 30,2005

Under provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials, Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

Release Date

TABLE OF CONTENTS

Page

Management Discussion and Analysis 1-6

Accountants' Report on Financial Statements 7

FINANCIAL STATEMENTS

Statement of Net Assets 8

Statement of Revenues, Expenses, and Changes in Fund Net Assets 9

Statement of Cash Flows 10

Notes to Financial Statements 11-18

SINGLE AUDIT SECTION

Accountants' Report on Compliance and Internal Control StructureOver Financial Reporting Based on an Audit of Financial StatementsPerformed in Accordance With Government Auditing Standards 19

Status of Prior Audit Findings 20

Schedule of Findings and Questioned Costs 20

SUPPLEMENTARY INFORMATION

Financial Data Submission Summary - Net Asset Accounts 21 -22

Financial Data Submission Summary - Income Statement Accounts 23-24

Housing Authority of the Town of Farmerville, Louisiana

Management's Discussion and Analysis (MD&A)September 30, 2005

The management of Public Housing Authority of Farmerville, Louisiana presents the following discussion andanalysis (MD&A) of the Housing Authority's financial activities for the fiscal year ending September 30, 2005. Thisrepresents an overview of financial information. Please read this discussion and analysis in conjunction with theAuthority's included audited financial statements.

FINANCIAL HIGHLIGHTS

[] The primary source of funding for these activities continues to be subsidies and grants from the Department ofHousing and Urban Development (HUD), whereas tenant rentals provide a secondary but also significantsource of funding.

Q The Housing Authority's assets exceeded its liabilities by $377,783 at the close of the fiscal year ended 2005.

[] Of this amount $302,967 represents a restriction equal to the net amount invested in land, building,furnishings, leasehold improvements, equipment, and construction in progress.

[] The remainder of $74,816 of unrestricted assets could be used to meet the Housing Authority's ongoingobligations to citizens and creditors. As a measure of financial strength, this amount equals 42% of thetotal expenses of $179,997 for the fiscal year 2005, which means the Authority might be able to operateapproximately 5 months using the unrestricted assets alone.

G The Housing Authority's total net assets increased by $48,851, a 15% change from the prior fiscal year 2004.This increase is attributable primarily to receiving Federal capital grants, described in more detail below. Wereit not for these grants, the Authority would have had a small decrease in total net assets.

Q The increase in net assets of these funds was accompanied by an increase in unrestricted cash by $37,063 fromfiscal year 2004, primarily due to spending about $31,000 less for operations than Federal funds received foroperations; spending about $5,000 less for capital assets than Federal capital grants received.

Q The Authority spent $2,492 on capital asset additions and $51,336 on construction in progress during thecurrent fiscal year.

[] These changes led to an increase in total assets by $40,895 and a decrease in total liabilities by $7,956.However, as another measure of financial health, there are still roughly $4.67 of current assets covering eachdollar of total current and long-term liabilities.

[] The Housing Authority continues to operate without the need for debt borrowing.

OVERVIEW OF THE FINANCIAL STATEMENTS

This MD&A is intended to serve as an introduction to the Housing Authority's basic financial statements. TheHousing Authority is a special-purpose government engaged in business-type activities. Accordingly, only fundfinancial statements are presented as the basic financial statements, comprised of two components: (1) fund financialstatements and (2) a series of notes to the financial statements. These provide information about the activities of theHousing Authority as a whole and present a longer-term view of the Housing Authority's finances. This report alsocontains other supplemental information in addition to the basic financial statements themselves demonstrating howprojects funded by HUD have been completed, and whether there are inadequacies in the Authority's internalcontrols.



Reporting on the Housing Authority as a Whole

One of the most important questions asked about the Authority's finances is, "Is the Housing Authority as a wholebetter off, or worse off, as a result of the achievements of fiscal year 2005?" The Statement of Net Assets and theStatement of Revenues, Expenses, and Changes in Net Assets report information about the Housing Authority as awhole and about its activities in a way that helps answer this question. These statements include all assets andliabilities using the accrual basis of accounting, which is similar to the accounting used by most private-sectorcompanies. All of the current year's revenues and expenses are taken into account regardless of when cash isreceived or paid.

Fund Financial Statements

All of the funds of the Housing Authority are reported as proprietary funds. A fund is a grouping of related accountsthat is used to maintain control over resources that have been segregated for specific activities or objectives. TheHousing Authority, like other enterprises operated by state and local governments, uses fund accounting to ensureand demonstrate compliance with finance-related legal requirements.

The Housing Authority's financial statements report its net assets and changes in them. One can think of theHousing Authority's net assets - the difference between assets and liabilities - as one way to measure the Authority'sfinancial health, or financial position. Over time, increases and decreases in the Authority's net assets are oneindicator of whether its financial health is improving or deteriorating. One will need to consider other non-financialfactors, however, such as the changes in the Authority's occupancy levels or its legal obligations to HUD, to assessthe overall health of the Housing Authority.

USING THIS ANNUAL REPORT

The Housing Authority's annual report consists of financial statements that show combined information about theHousing Authority's most significant programs:

Low Rent Public HousingPublic Housing Capital Fund Program

The Housing Authority's auditors provided assurance in their independent auditors' report with which this MD&A isincluded, that the basic financial statements are fairly stated, The auditors provide varying degrees of assuranceregarding the other information included in this report. A user of this report should read the independent auditors'report carefully to determine the level of assurance provided for each of the other parts of this report.

Reporting the Housing Authority's Most Significant Funds

The Housing Authority's financial statements provide detailed information about the most significant funds. Somefunds are required to be established by the Department of Housing and Urban Development (HUD). However, theHousing Authority establishes other funds to help it control and manage money for particular purposes, or to showthat it is meeting legal responsibilities for using grants and other money.

The Housing Authority's enterprise funds use the following accounting approach for Proprietary funds: All of theHousing Authority's services are reported in enterprise funds. The focus of proprietary funds is on incomemeasurement, which, together with the maintenance of net assets, is an important financial indicator.



FINANCIAL ANALYSIS

The Housing Authority's net assets were $377,783 as of September 30, 2005. Of this amount, $302,967 wasinvested in capital assets, and the remaining $74,816 was unrestricted. No other specific Assets are restricted. Also,there are no other restrictions on general Net Assets.

CONDENSED FINANCIAL STATEMENTS

Condensed Balance Sheet(Excluding Interfund Transfers)

As of September 30,2005 - 2004

ASSETSCurrent Assets $ 95,208 $ 67,624Capital Assets, Net of Depreciation 302,967 289,656

Total Assets $ 398,175 $ 357,280

LIABILITIESCurrent Liabilities $ 20,392 $ 28,348

NET ASSETSInvested in Capital Assets, Net of Depreciation 302,967 289,656Unrestricted Net Assets 74,816 39,276

Total Net Assets 377,783 328,932

Total Liabilities and Net Assets $ 398,175 $ 357,280



CONDENSED FINANCIAL STATEMENTS (Continued)

The net assets of these funds increased by $48,851, or by 15%, from those of fiscal year 2005, as explained below.In the narrative that follows, the detail factors causing this change are discussed:

Condensed Statement of Revenues, Expenses, and Changes in Fund Net Assets(Excluding Interfund Transfers)Fiscal Year Ended September 30,

2005 2004

OPERATING REVENUESFederal Grants - Operating $ 93,933 $ 76,046Rental Revenue 70,902 69,643Other Tenant Revenue 11,900 8,646

Total Operating Revenues 176,735 154,335

OPERATING EXPENSESOrdinary maintenance and repairs 72,261 100,989Administration 40,694 29,385Depreciation 40,516 39,536General 25,686 25,969Utilities 840 733

Total Operating Expenses 179,997 196,612

(Losses) from Operations (3,262) (42,277)

NON-OPERATING REVENUESInterest Income 777 526

Total Non-Operating Revenues 111 526

(Losses) after Non-Operating Revenues and Expenses (2,485) (41,751)

OTHER CHANGES IN NET ASSETSFederal Grants - Capital 51,336 44,362

NET INCREASES IN NET ASSETS 48,851 2,611

NET ASSETS, Beginning of Year 328,932 326,321

NET ASSETS, End of Year $ 377,783 $ 328,932


Management's Discussion and Analysis (MD&A)September 30,2005

EXPLANATIONS OF FINANCIAL ANALYSIS

Compared with the prior fiscal year, total operating and non-operating revenues increased $29,625, or by 15%, froma combination of larger offsetting factors. Reasons for most of this change are listed below in order of impact fromgreatest to least:

[J Federal revenues from HUD for operations increased by $17,887, or by 24% from that of the prior fiscal year.The determination of operating grants is based upon a three year average of past operations performance. Thecurrent contributions were greater because of slight increases in performance of at least one of the prior fiscalyears' operations.

rj Federal Capital Funds from HUD increased by $6,974, or by 16% from that of the prior fiscal year. TheHousing Authority was still in the process of completing projects funded from grants by HUD for fiscal years2003 through 2005, and submitted a new grant during fiscal year 2005.

fj Total non-grant revenue increased by $4,513 from that of the prior fiscal year, due to two major factors: Tenantrental revenues increased by $ 1,259, or by 2%, because occupancy rates increased by 5%. In addition, othertenant revenues (such as fees collected from tenants for late payment of rent, damages to then- units, and otherassessments) increased. Since there was an increase in tenant revenues, the amount of these fees changedaccordingly.

[] Interest income totaling $777, did not change significantly from the prior to the current year.

Compared with the prior fiscal year, total operating and non-operating expenses decreased $16,616, or by 8%, butthis also was made up of a combination of offsetting factors. Again, reasons for most of this change are listed belowin order of impact from greatest to least:

Q Maintenance and repairs decreased by $28,728 from that of the prior fiscal year because contract labor costsdecreased by 38%.

Q Administrative Expenses increased by $11,309, or by 38% from that of the prior fiscal year due to acombination of factors: Management fees paid to outside consultants increased by $9,997; therefore, totaloutside professional fees increased by 51%. In addition, staff travel reimbursements increased by $1,837, stafftraining costs decreased by $2,009, and sundry expenses increased by $1,254; therefore, other staffadministrative expense increased by 10%.

Q Depreciation expense increased by $980, or by 2% from that of the prior fiscal year, because there was anincrease in capital assets by $51,336.

[] Utilities and General Expenses, totaling $26,526, did not change significantly from the prior to the current year.



CAPITAL ASSET AND DEBT ADMINISTRATION

Capital Assets

At September 30, 2005, the Housing Authority had a net of capital assets of $302,967 invested in a broad range ofassets and construction in progress from projects funded in 2003 through 2005, listed below. As stated in thefinancial statements and notes to the financial statements the capital assets increased by a net amount of $13,311.There was $51,336 in capital grant additions as well as $2,492 in equipment additions from operations. This wasoffset by depreciation expense of $40,516. More detailed information about capital assets appears in the notes to thefinancial statements.

Capital Assets, Net of Accumulated DepreciationAs of September 30,

2005 2004Land , $ 6,430 $ 6,430Construction in Progress 37,535 39,876Buildings 1,072,592 1,023,859Leasehold Improvements 92,726 92,726Furniture and Equipment 63,852 58,336Less: Accumulated Depreciation (970,168) (931,571)

Total $ 302,967 $ 289,656

As of the end of the 2005 fiscal year, the Authority is still in the process of completing HUD grants of $217,468obtained during 2003 through 2005 fiscal years. A total remainder of $45,975 will be received and spent forcompleting these projects during fiscal year 2006.

Debt

The Housing Authority has not incurred any mortgages, leases, or bond indentures for financing capital assets oroperations.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGETS AND RATES

The Housing Authority is primarily dependent upon HUD for the funding of operations; therefore, the HousingAuthority is affected more by Federal budget than by local economic conditions. The capital budgets for the 2006fiscal year have already been submitted to HUD for approval and no major changes are expected.

The Capital fund programs are multiple year budgets and have remained relatively stable. Capital Funds are used forthe modernization of public housing properties including administrative fees involved in the modernization.

CONTACTING THE HOUSING AUTHORITY'S FINANCIAL MANAGEMENT

Our financial report is designed to provide our citizens, investors, and creditors with a general overview of theHousing Authority's finances, and to show the Housing Authority's accountability for the money it receives. If youhave questions about this report, or wish to request additional financial information, contact E. WoodrowWhittington, Jr., at the Housing Authority of the Town of Farmerville, Louisiana; P. O. Box 446; Farmerville, LA71241-0446.

REPORT ON EXAMINATIONOF FINANCIAL STATEMENTS t

AND SUPPLEMENTARY INFORMATION

YEAR ENDED SEPTEMBER 30,2005

INDEPENDENT AUDITOR'S REPORT

Board of CommissionersHousing Authority of theTown of FarmervilleFarmerville, Louisiana 71241

HDD-New Orleans Office501 Magazine 9th FloorNew Orleans, Louisiana 70130

We have audited the accompanying financial statements of the Housing Authority of the Town ofFarmerville as of and for the year ended September 30, 2005, as listed in the table of contents. Thesefinancial statements are the responsibility of the Housing Authority's management. Our responsibility is toexpress opinions on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United Statesof America and the standards applicable to financial audits contained in the Government AuditingStandards, issued by the Comptroller General of the United States. Those standards require that we planand perform the audit to obtain reasonable assurance about whether the financial statements are free ofmaterial misstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinions.

In our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of the Housing Authority of the Town of Farmerville, as of September 30, 2005, and thechanges in financial position and cash flows for the year then ended in conformity with accountingprinciples generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued our report dated December 9,2005 on our consideration of the Housing Authority's internal control over financial reporting and our testsof its compliance with certain provisions of laws, regulations, contracts and grants. That report is an integralpart of an audit performed in accordance with Government Auditing Standards and should be read inconjunction with this report in considering the results of our audit.

Management Discussion and Analysis is not a required part of the basic financial statements but issupplementary information required by the Governmental Accounting Standards Board. We have appliedcertain limited procedures, which consisted principally of inquiries of management regarding the methods ofmeasurement and presentation of the required supplementary information. However, we did not audit theinformation and express no opinion on it.

The Financial Data Schedule required by the U.S. Department of Housing and Urban Development, ispresented for purposes of additional analysis and are not a required part of the financial statements. Suchinformation has been subjected to the auditing procedures applied in the audit of the basic financialstatements and, in our opinion; the information is fairly stated, in all material respects, in relation to the basicfinancial statements taken as a whole.

RECTORMOFFITT&LINDSAY, EC.Certified PublicAccountants

One Wisteria Place2220 Wisteria DriveSuite 200SneUville,GA 30078(770)879-8411Fax:(770)879-8431www.rml-cpa.com

Rector, Moffitt & Lindsay, P.C.Certified Public Accountants

Snellville, GeorgiaDecember 9, 2005

HOUSING AUTHORITY OF THE TOWN OF FARMERVILLE


STATEMENT OF NET ASSETS

SEPTEMBER 30,2005

ASSETS

Current Assets

Cash & Investments $ 86,136

Accounts Receivable 181

Prepaid Insurance 5,649

Materials Inventory 3,242

Total Current Assets 95,208

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

Fixed Assets

Land 6,430

Buildings & improvements 1,165,318

Furniture & Equipment 63,852

Construction in progress 37,535

Less: Accumulated depreciation (970,168)

Total Fixed Assets 302,967

TOTAL ASSETS $ 398,175

LIABILITIES & NET ASSETS

Current Liabilities

Accounts payable $ 15,458

Tenant security deposits 3,465

Deferred revenue 1,469

Total Current Liabilities 20,392

NET ASSETS

Invested in capital assets, net of related debt 302,967

Unrestricted net assets 74,816

TOTAL NET ASSETS 377,783

TOTAL LIABILITIES & NET ASSETS $ 398,175



STATEMENT OF REVENUES. EXPENSES. AND CHANGES IN FUND NET ASSETS

FOR THE YEAR ENDED SEPTEMBER 30. 2005

Operating Revenue

Dwelling rent

Governmental grants & subsidy

Other income

Total Operating Revenue

Operating Expenses

Administration

Utilities

Ordinary maintenance & operations

General expense

Depreciation

Total Operating Expense

NET INCOME/(LOSS) FROM OPERATIONS

Nonoperating Revenue/fExpenses)

Investment income

Net loss before capital contributions

Governmental grants - capital

Net increase in Net Assets

Net Assets - beginning balance

Net Assets - ending balance

70,902

93,933

11,900

176,735

40,694

840

72,261

25,686

40,516

179,997

(3,262)

777

(2,485)

51,336

48,851

328,932

377,783




STATEMENT OF CASH FLOWS

FOR THE YEAR ENDED SEPTEMBER 30. 2005

CASH FLOWS FROM OPERATING ACTIVITIES

Receipts from customers and users $ 69,476

Governmental grants & subsidy - operations 87,726

Payments to suppliers (117,884)

NET CASH PROVIDED/OJSED) BY OPERATING ACTIVITIES 39,318


10

CASH FLOWS FROM INVESTING ACTIVITIES

Interest received 777

NET CASH PROVIDED FROM INVESTING ACTIVITIES 777

CASH FLOWS FROM CAPITAL & RELATED FINANCING ACTIVITIES

Purchases of equipment - operations (2,492)

Additions to fixed assets - Capital Grant (51,336)

Governmental grant funds received 51^336

NET CASH USED BY CAPITAL & RELATED FINANCING ACTIVITIES (2,492)

NET INCREASE/(DECREASE) IN CASH 37,603

CASH AT BEGINNING OF PERIOD 48,533

CASH AT END OF PERIOD $ 86,136

CASH FLOWS FROM OPERATING ACTIVITIES

Net increase/(loss) from operations $ (3,262)

Adjustments to reconcile net loss to

net cash provided by operating activities:

Depreciation 40,516

Decrease (Increase) in accounts receivable 8,659

Decrease (Increase) in prepaid expenses 542

Decrease (Increase) in inventory 819

Increase (Decrease) in accounts payable (9,325)

Increase (Decrease) in security/trust deposits (100)

Increase (Decrease) in deferred revenue 1,469

NET CASH PROVIDED/(USED) FROM OPERATING ACTIVITIES $ 39,318

HOUSING AUTHORITY OF THE TOWN OF FARMERVILLEFarmerville, Louisiana

NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30,2005

NOTE 1 - SUMMARY OF ORGANIZATION, SIGNIFICANT ACCOUNTING POLICIES ANDREPORTING ENTITY:

A. Introduction:

The financial statements of the Authority have been prepared in conformity with generallyaccepted accounting principles (GAAP). The Authority's reporting entity applied all relevantGovernment Accounting Standards Board (GASB) pronouncements. Proprietary funds andsimilar component units apply Financial Accounting Standards Board (FASB) pronouncementsand Accounting Principles Board (APB) opinions issued on or before Nqvember 30, 1989, unlessthose pronouncements conflict with or contradict GASB Pronouncements in which case, GASBprevails. The more significant of the government's accounting policies are described below:

B. Organization:

The Housing Authority of the Town of Farmerville ("The Authority") is a public body and abody corporate and politic organized under the laws of the State of Louisiana for the purposeof providing adequate housing for qualified low-income individuals. To accomplish thispurpose, the Mayor appoints a Governing Board for but the Board designates its ownmanagement. Additionally, the Authority has entered into annual contribution contracts withthe U. S. Department of Housing and Urban Development ("HUD") to be the administrator ofthe housing and housing related programs described herein. The Authority is not subject toFederal or State income taxes and is not required to file Federal or State income tax returns.

C. Reporting Entity:

In determining how to define the reporting entity, management has considered all potentialcomponent units by applying the criteria set forth in Section 2100 and 2600 of the Codification ofGovernment Accounting Standards Board and Financial Accounting Standards Board andStatement Number 14 of the Government Accounting Standards Board, the Financial ReportingEntity.

Financial Accountability - The Authority is responsible for its debts, does not impose a financialburden on the Town of Farmerville and is entitled to all surpluses. No separate agency receives afinancial benefit nor imposes a financial burden on the Authority.

Appointment of a Voting Majority - The Authority is governed by a Board of Commissionersappointed by the CEO of Town of Farmerville and has governance responsibilities over allactivities related to all housing activities within Town of Farmerville. The Board ofCommissioners has decision making authority and the power to designate management. Themembers do not serve at the discretion of the Town; i.e., they can be removed only for cause. TheAuthority's Board elects its own chairperson.

Imposition of Will - The Town has no influence over the management, budget, or policies of theAuthority. The Authority's Board of Commissioners has the responsibility to significantlyinfluence the Authority's operations. This includes, but is not limited to, adoption of the budget,personnel management, sole title to, and residual interest in all assets (including facilities andproperties), signing contracts, issuing bonds, and deciding which programs are to be provided.

11



(Continued)

NOTE 1 - SUMMARY OF ORGANIZATION, SIGNIFICANT ACCOUNTING POLICIES ANDREPORTING ENTITY: (Cont'd)

C. Reporting Entity: (Cont'd)

On the basis of the application of these criteria, the Authority is a legally separate entity that isfiscally independent of other governments, and there are no other entities that are to bereported as component units of the Authority nor for the Authority to be included in Town ofFarmerville financial reports therefore, the Authority reports independently. During the reviewof the Authority's budgets, annual contributions contract, minutes of the Board ofCommissioner's meetings, cash receipts and cash disbursements for the reporting perioddisclosed that the Authority operated the following programs under Annual ContributionsContracts:

1. Low Income Public Housing - The objective of the program is to provide decent, safeand sanitary housing and related facilities for eligible low-income families and theelderly.

2. Capital Fund Program - The objective of this program is to improve the physicalcondition of the Low Income Public Housing units and upgrade the management of theprogram.

D. Basis of Presentation, Basis of Accounting and Measurement Focus:

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

Basis of Presentation - The financial statements of the Authority are presented from a fundperspective. Fund accounting is designed to demonstrate legal compliance and to aid financialmanagement by segregating transactions related to certain Authority functions. The fund is aseparate accounting entity with a self-balancing set of accounts. The accounting and financialreporting method applied by a fund is determined by the fund's measurement focus. Theaccounting objectives are determination of net income, financial position and cash flows. Allassets and liabilities associated with the Proprietary Fund's activities are included on thestatement of net assets. The Authority uses the following fund:

Proprietary fund:Enterprise fund - This type of fund is reported using an economic resources measurementfocus. Additionally, it is used to account for operations that are financed and operated in amanner similar to private businesses where a fee is charged to external users for servicesprovided.

E. Revenues and Expenses:

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

12

HOUSING AUTHORITY OF THE TOWN OF FARMERVILLEFarmerviUe, Louisiana


(Continued)


F. Encumbrances:

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

G. Budgets:

The Authority adopts budgets on die basis of accounting consistent with the basis ofaccounting for the fund to which the budget applies. The Authority prepares annual operatingbudgets that are formally adopted by its Governing Board of Commissioners. The budgets forprograms funded by HUD form the basis of the Federal Financial Assistance received throughHUD.

H. Inventories:

Inventories are recorded at average cost. The consumption method is used to account forinventories. Under the consumption method, inventories are charged to expense whenconsumed.

I. Capital Assets and Depreciation:

Capital assets are stated at historical cost. Donated capital assets are stated at their fair valueon the date donated. This includes site acquisition and improvement, structures andequipment. All infrastructure assets were capitalized at the conclusion of development thendedicated to the Town of FarmerviUe for maintenance and repairs. Depreciation of exhaustiblecapital assets used by proprietary funds is charged as an expense against operations, andaccumulated depreciation is reported on the statement of net assets.

The estimated useful lives for each major class of depreciable capital assets are as follows:

Buildings & improvements 15-30 yearsFurniture, fixtures & equipment 3-10 yearsVehicles 5- 7 yearsSpecialized use equipment 2-10 years

J. Collection Losses:

Collection losses on accounts receivable are expended, in the appropriate Fund, on the specificwrite-off method.

13



(Continued)


K. Insurance:

The primary technique used for risk financing is the purchase of insurance policies fromcommercial insurers that include a large deductible amount. The use of a large deductibleclause reduces the cost of insurance, but, should loses occur, the portion of the uninsured lossis not expected to be significant with respect to the financial position of the Authority. TheAuthority secures required insurance coverage through the competitive bid process. As of thedate of the fieldwork, the Authority had the required coverage in force.

L. Cash and Investments:

1. The Authority cash and cash equivalents are considered to be cash on hand, demanddeposits, and short-term investments with an original maturity of three months or less whenpurchased to be cash equivalents.

2. Investments are stated at fair value, except for U. S. Treasury Bills, which are reported atamortized cost. The Audiority reports all money market investments having a remainingmaturity at time of purchase of one year or less at amortized cost. Investment securities arenormally held to mature at par value and adjustments are made to the investment portfolio toreflect increases/(decreases) in gains made.

M. Compensated Absences:

Compensated absences are absences for which employees will be paid, i.e., sick leave, vacation,and other approved leaves. In accordance with GASB Statement No.16, Accounting forCompensated Absences, the Authority accrues the liability for those absences that the employeehas earned the rights to the benefits. Accrued amounts are based on the current salary rates.Full-time, permanent employees are granted vacation and sick leave benefits in varying amountsto specified maximums depending on tenure with the Authority. Vacation and sick pay isrecorded as an expense and related liability in the year earned by employees.

14



(Continued)

NOTE 2 - CASH AND INVESTMENTS:

1. Cash

It is the entity's policy for deposits to be 105% secured by collateral valued at market or par,whichever is lower, less the amount of the Federal Deposit Insurance Corporation (FDIC) insurance.The entity's deposits are categorized to give an indication of the level of risk assumed by the entity atSeptember 30, 2005. The categories are described as follows:

Category 1 - Insured or collateralized with securities held by the entity or by its agent in theentity's name.

Category 2- Collateralized with securities held by the pledging financial institution's trustdepartment or agent in the entity's name.

Category 3 - Uncollateralized. (This includes bank balances that are collateralized with securitiesheld by the pledging financial institution, or by its trust department or agent but nonein the entity's name.)

Cash, Deposits, categorized by level of risk, are:

CategoryTotal

Book Balances

.5JL147 S 0 $ Q_ $ 51.147

2. Investments

Investing is performed in accordance with HUD regulations and State Statues. Funds may beinvested in the following type of investments:

• Direct obligations of the United States pledged by its full faith and credit.• Obligations of Federal government agencies and government sponsored agencies.• Demand, savings, money-market, certificates of deposit, and Super NOW deposits at

commercial banks, mutual savings banks, savings and loan associations and credit unionsprovided that the entire deposit be insured by the FDIC or the National Credit Union ShareInsurance Fund (NCUSIF) and any deposits in excess of insured amounts are adequatelycollateralized.

• Certain municipal depositary funds and local government investment pools provided that allinvestments made by these funds or pools are on the HUD-approved list of investmentsecurities. The entity must limit its investments in this category to no more than 30 percent ofthe entity's available investment funds.

• Repurchase agreements for a term of 30 days or less entered into with Federally insureddepositary institutions for purchase and sale of securities identified in 1 and 2 above.

• Certain no-load, open-end mutual funds investing in only HUD-approved investment securities.• The entity must limit its investment in this category to no more than 20 percent of the entity's

available investment funds

15


NOTES TO FINANCIAL STATEMENTSSEPTEMBER 30, 2005

(Continued)

NOTE 2 - CASH AND INVESTMENTS: (Cont'd)

The entity's investments are categorized to give an indication of the level of risk assumed by theentity at September 30, 2005. The categories are:

Category 1 - Insured or registered, with securities held by the entity or its agent in the entity'sname

Category 2 - Uninsured and unregistered, with securities held by the conterparty's trustdepartment or agent in the entity's name

Category 3 - Uninsured and Unregistered, with securities held by the counterparty, or its trustdepartment or agent but not in the entity's name

Investments, categorized by level of risk, are:

CategoryTypes of Investments 1 _2, ___._3_ Carrying Value CostDeposits at federally S 34.989 $ O.OQ S O.QO S 34.989 S 34.989Insured depositories

NOTE 3 - ACCOUNTS RECEIVABLE:

Accounts receivable at September 30, 2005, consisted of the following:

Tenants $ 129Accrued interest 52

S 181

The Interfund balances of $1,068 were eliminated from the accounts receivable and accountspayable portions of this report.

NOTE 4 - DEFERRED CHARGES:

Deferred charges consisted of the following at September 30, 2005:

Prepaid insurance $ 5,649Inventory - materials 3,242

$ 8,891

16



(Continued)

NOTE 5 - CAPITAL ASSETS:

The following is a summary of changes in the net capital assets during the fiscal year endedSeptember 30, 2005:

Capital Assets:LandBuildings & Improv.EquipmentConstruction in prog.Accumulated Depr.

Net Capital Assets S 289.656 S 53.828 S (40.5171 $ 302.967

The depreciation/retirements line includes current year depreciation is $40,517, a write-off ofequipment of $ 1,920 and transfers between buildings and equipment of $2,195.

NOTE 6 - ACCOUNTS PAYABLE AND DEFERRED REVENUE:

Accounts payable at September 30, 2005, consisted of the following;

Balance atSept 30,

2004

$ 6,4301,116,585

58,33639,876

(931.5711

Additions

$ 00

5,24148,587

0

Depreciation/Retirements

$ 048,733

275(50,928)(38,597)

Balance atSept 30,

2005

$ 6,4301,165,318

63,85237,535

(970,168)

Vendors & contractorsTown - Payments in lieu of taxesDeferred revenue - HUDPrepaid rentsTenant security deposits

1,56113,8971,068

4013.465

S 20.392

The Interfund balances of $1,068 were eliminated from the accounts receivable and accounts payableportions of this report.

NOTE 7- CONTINGENCIES:

The entity is subject to possible examinations made by federal regulators who determinecompliance with terms, conditions, laws and regulations governing grants given to the entity in thecurrent and prior years. These examinations may result in required refunds by the entity to federalgrantors and/or program beneficiaries.

NOTE 8- RELATED PARTY TRANSACTIONS:

There were no related party transactions to be reported for the fiscal year ended September 30, 2005.

17



(Continued)

NOTE 9- PENSION PLAN:

The Authority does not have full-time employees and therefore does not provide a defined pensionplan because the employees that provide work for the Housing Authority of the Town ofFarmerville work for Housing Authority of the Town of Ruston and the pension plan is provided byHousing Authority of the Town of Ruston.

NOTE 10- RT,SK MANAGEMENT:

The Authority is exposed to all common perils associated with the ownership and rental of real estateproperties. A risk management program has been established to minimize loss occurrence and totransfer risk through various levels of insurance. Property, causality, employee dishonesty and publicofficial's liability forms are used to cover the respective perils. Commercial carriers insure allcommon perils such as business auto, computer and other miscellaneous policies.

NOTE 11 - ECONOMIC DEPENDENCY:

The PHA Owned Housing is economically dependent on annual contributions grants from theFederal government. The program operates at a loss prior to receiving the contributions andgrants.

NOTE 12 - SUPPLEMENTARY INFORMATION:

The supplementary information has been included in order to show the financial statements of theHousing Authority on the GAAP basis of accounting but in the format of the HUD Handbook7476.3, Audit Guide. This is due to the fact that some supplementary information is reviewed by thefield office and provides greater detail concerning the operations of the Housing Authority

18

SINGLE AUDIT SECTION

ACCOUNTANT'S REPORT ON COMPLIANCE AND ON INTERNAL CONTROL STRUCTUREOVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS

PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS

Board of CommissionersHousing Authority of theTown of FarrnervilleFarmerville, Louisiana 71241

HUD-New Orleans Office501 Magazine 9th FloorNew Orleans, Louisiana 70130

We have audited the financial statements of the Housing Authority of the Town of Farmerville, as ofand for the year ended September 30, 2005, and have issued our report thereon dated December 9, 2005.We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica and the standards applicable to financial audits contained in Government Auditing Standards,issued by the Comptroller General of the United States.

Internal Control Over Financial ReportingIn planning and performing our audit, we considered the Housing Authority of the Town of

Farmerville's internal control over financial reporting in order to determine our auditing procedures for thepurpose of expressing our opinions on the financial statements and not to provide an opinion on the internalcontrol over financial reporting. Our consideration of the internal control over financial reporting would notnecessarily disclose all matters in the internal control over financial reporting that might be materialweaknesses. A material weakness is a reportable condition in which the design or operation of one or moreof the internal control components does not reduce to a relatively low level the risk that misstatementscaused by error or fraud in amounts that would be material in relation to the financial statements beingaudited may occur and not be detected within a timely period by employees in the normal course ofperforming their assigned functions. We noted no matters involving the internal control over financialreporting and its operations that we consider to be material weaknesses.

Compliance and Other MattersAs part of obtaining reasonable assurance about whether the Housing Authority of the Town of

Farmerville's financial statements are free of material misstatement, we performed tests of its compliancewith certain provisions of laws, regulations, contracts and grants, noncompliance with which could have adirect and material effect on the determination of the financial statement amounts. However, providing anopinion on compliance with those provisions was not an objective of our audit and, accordingly, we do notexpress such an opinion. The results of our tests disclosed no instances of noncompliance or other mattersthat are required to be reported under Government Auditing Standards.

This report is intended solely for the information and use of the Housing Authority of the Town ofFarmerville, the State of Louisiana, HUD, federal audit agencies, and pass-through entities and is notintended to be used by anyone other than these specified parties. However, under Louisiana RevisedStatute 24:513, this report is distributed by the Legislative Auditor as a public document.

RECTORMOFFITT&LINDSAY, ECCertified PublicAccountants

One Wisteria Place2220 Wisteria DriveSuite 200Snellvilie,GA 30078(770)879-8411Fax:(770)879-8431www. rml-cpa.com

Rector, MoTfitt & Lindsay, P.C.Certified Public Accountants

Snellville, GeorgiaDecember 9, 2005

19

STATUS OF PRIOR AUDIT FINDINGS

The prior audit report for the period ended September 30, 2004, contained no formal audit findings.

SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Section I - Summary of Auditor's Results

Financial Statements

Type of Auditor's report issued: Unqualified

Internal Control over financial reporting:

• Material weakness (es) identified? yes X_ no

• Reportable condition (s) identifiedthat are not considered to be

material weaknesses? _ yes _X_ no

Noncompliance material to financialStatements noted? __ yes _JX_ no

Identification of major programs:(None)

Dollar threshold used to distinguishbetween type A and type B programs: $300,000.00

Auditee qualifies as a low-risk auditee? Yes

Section II - Financial Statement Findings

NONE REPORTED

Section III - Federal Award Findings and Questioned Costs

N/A

20

SUPPLEMENTARY INFORMATION


FINANCIAL DATA SUBMISSION SUMMARYNET ASSETACCOUNTS

SEPTEMBER 30, 2005

Account Description

ASSETS:

CURRENT ASSETS:

Cash:

Cash - unrestricted

Total Cash

Accounts and notes receivables:

Accounts receivable - tenants - dwelling rents

Accounts interest receivable

Total receivables, net of allowances for uncollectibles

Current investments

Investments - unrestricted

Prepaid expenses and other assets

Inventory - materials

Interprogram due from

TOTAL CURRENT ASSETS

NONCURRENT ASSETS:

Fixed Assets:

Land

Buildings

Furniture, equipment & mach. - dwellings

Furniture, equipment & mach. - admin.

Leasehold improvements

Accumulated depreciation

Construction in progress

Total fixed assets, net of accumulated depreciation

TOTAL ASSETS

Low-Rent

14.850

Capital Fund

14.872

51,147 $

51,147

129

52

181

34,989

5,649

3,242

0

95,208

6,430

1,072,592

14,190

45,161

92,726

(968,538)

0

262,561

0

0

0

0

0

0

0

1,068

1,068

0

0

4,501

0

0

(1,630)

37,535

40,406

TOTAL

51,147

51,147

129

52

181

34,989

5,649

3,242

1,068

96,276

6,430

1,072,592

18,691

45,161

92,726

(970,168)

37,535

302,967

357,769 $ 41,474 $ 399,243

21


FINANCIAL DATA SUBMISSION SUMMARYNET ASSETACCOUNTS

SEPTEMBER 30, 2005

Account Description

LIABILITIES AND EQUITY:

LIABILITIES:

Low-Rent

14.850

Capital Fund

14.872 TOTAL

CURRENT LIABILITIES

Accounts payable <= 90 days

Accounts payable - other gov.

Tenant security deposits

Deferred revenue

Interprogram (due to)

TOTAL CURRENT LIABILITIES

TOTAL LIABILITIES

EQUITY:

Capital assets net of related debt

Retained earnings - unrestricted

TOTAL EQUITY

TOTAL LIABILITIES AND EQUITY

1,561

13,897

3,465

401

1,068

20,392

20,392

262,561

74,816

337,377

0 $

0

0

1,068

0

1,068

1,561

13,897

3,465

1,469

1,068

21,460

1,068

40,406

0

21,460

302,967

74,816

40,406 377,783

357,769 $ 41,474 $ 399,243

22


FINANCIAL DATA SUBMISSION SUMMARYINCOME STATEMENT ACCOUNTS

SEPTEMBER 30,2005

Account Description

REVENUES:Net tenant rental revenueTenant revenue - other

Total tenant revenue

Low-Rent14.850

70,9020_

70,902

Capital Fund14.872

0

0

TOTAL

70,9020

70,902

HUD PHA grantsHUD Capital grantsInvestment income - unrestrictedOther revenue

TOTAL REVENUES

EXPENSES:Administrative

Auditing feesOutside management feesOther operating - administrative

Total Administrative Expense

UtilitiesWaterElectricityGasOther utilities expense

Total Utilities Expense

Ordinary Maintenance & OperationOrdinary maint. and oper. - materials & othersOrdinary maint. and oper. - contract costs

Total Ordinary Maintenance & OperationGeneral Expenses

Insurance premiumsPayments in lieu of taxesBad debt - tenant rents

Total General Expenses

TOTAL OPERATING EXPENSE

EXCESS OPERATING REVENUE OVER OPERATING EXPENSE

39,7650

11111,900

123,344 $

54,168

51,33600

105,504 $

93,93351,336

77711,900

228,848

3,000 $

24,980

12,214

40,194

114

14053947

840

13,24058,310

71,550

12,566

7,006

6,11425,686

500 $

00

500

0

000

0

150561711

0000

3,500

24,980

12,214

40,694

114

14053947

840

13,39058,871

72,261

12,566

7,006

6,114

25,686

138,270 1,211 139,481

(14,926) 104,293 89,367

23


FINANCIAL DATA SUBMISSION SUMMARYINCOME STATEMENT ACCOUNTS

SEPTEMBER 30, 2005

Account Description

Other Expenses

Depreciation expense

Total Other Expenses

TOTAL EXPENSES

Other Financing Sources/(Uses)

Operating transfers inOperating transfers out

Total Other Financing Sources/(Uses)

EXCESS OF REVENUE OVER EXPENSES

Equity transfersPrior period adjustmentsBeginning Equity

Ending Equity

Units months availableUnits months leased

Low-Rent

14,850

39,136

39,136

Capital Fund

14.872

1,380

1,380

TOTAL

40,516

40,516

177,406 5

52,9560

52,956

1 2,591 $

0(52,956)

(52,956)

179,997

52,956(52,956)

0

(1,106) 5

182,6640

155,819

337,377 S

448417

1 49,957 $

(182,664)0

173,113

; 40,406 $

00

48,851

00

328,932

377,783

448417

24

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