Consolidated Financial Statements
and Supplementary Information
A Community of Friends
As of and For the Year ended June 30, 2014
with Report of Independent Auditors
A Community of Friends
Table of Contents
REPORT OF INDEPENDENT AUDITORS
FINANCIAL STATEMENTS
Consolidated Statement of Financial Position
Consolidated Statement of Activities
Consolidated Statement of Cash Flows
Notes to Financial Statements
PAGE
1
3
4
5
6
SUPPLEMENTARY INFORMATION
Schedule of Consolidated Functional Expenses
Consolidating Financial Statements
Consolidating Schedule of Financial Position
Consolidating Schedule of Activities
31
32
REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER
FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS
BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN
ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
33
30
Report of Independent Auditors
To the Board of Directors
A Community of Friends
We have audited the accompanying consolidated financial statements of A Community of Friends
and Subsidiary (collectively the "Company"), which comprise the consolidated statement of financial
position as of June 30, 2014, and the related consolidated statements of activities and cash flows for
the year then ended, and the related notes to the financial statements.
Management’s Responsibility for the Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with accounting principles generally accepted in the United States of
America; this includes the design, implementation, and maintenance of internal control relevant to
the preparation and fair presentation of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with auditing standards generally accepted in the
United States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audit to obtain reasonable assurance about whether the
consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures
in the consolidated financial statements. The procedures selected depend on the auditor’s judgment,
including the assessment of the risks of material misstatement of the consolidated financial
statements, whether due to fraud or error. In making those risk assessments, the auditor considers
internal control relevant to the entity’s preparation and fair presentation of the consolidated financial
statements in order to design audit procedures that are appropriate in the circumstances, but not for
the purpose of expressing an opinion on the effectiveness of the entity’s internal control.
Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of
accounting policies used and the reasonableness of significant accounting estimates made by
management, as well as evaluating the overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis
for our audit opinion.
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the consolidated financial position of A Community of Friends and Subsidiary as of June
30, 2014, and the changes in their net assets and their cash flows for the year then ended in
accordance with accounting principles generally accepted in the United States of America.
Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the consolidated financial
statements of A Community of Friend and Subsidiary as a whole. The accompanying supplementary
information on pages 30 through 32 is presented for purposes of additional analysis and is not a
required part of the consolidated financial statements. Such information is the responsibility of
management and was derived from and relates directly to the underlying accounting and other
records used to prepare the consolidated financial statements. The information has been subjected
to the auditing procedures applied in the audit of the consolidated financial statements and certain
additional procedures, including comparing and reconciling such information directly to the
underlying accounting and other records used to prepare the consolidated financial statements or to
the consolidated financial statements themselves, and other additional procedures in accordance
with auditing standards generally accepted in the United States of America. In our opinion, the
information is fairly stated, in all material respects, in relation to the consolidated financial statements
as a whole.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
November 24, 2014 on our consideration of A Community of Friends and Subsidiary’s internal
control over financial reporting and on our tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements and other matters. The purpose of that report is to
describe the scope of our testing of internal control over financial reporting and compliance and the
results of that testing, and not to provide an opinion on internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering A Community of Friends and Subsidiary’s internal control over
financial reporting and compliance.
Los Angeles, California
November 24, 2014
A Community of Friends
Consolidated Statement of Financial Position
June 30, 2014
ASSETS
Current assets
Cash and cash equivalents
Rental properties reserves
Project receivables
Partnership receivables
Developer fees receivable, net
Contracts receivable
Other receivables
Prepaid expenses and deposits
$
Total current assets
Long-term project receivables
Long-term partnership receivables
Long-term developer fees receivables, net
Notes, advances, and interest receivable, net
Investment in partnerships
Real estate in development
Property and equipment, net
Other long-term assets
Total assets $
2,612,150
3,582,483
47,763
396,230
2,020,381
1,088,498
82,280
100,125
9,929,910
1,183,580
1,194,782
2,486,288
11,910,482
3,347,953
941,483
13,465,207
15,841
44,475,526
LIABILITIES AND NET ASSETS
Current liabilities
Accounts payable and accrued expenses
Current portion of notes and interest payable
$
Total current liabilities
1,258,974
1,078,392
2,337,366
Total liabilities
53,892
35,689,280
38,080,538
Deficiency in partnership investments
Notes and interest payable, net of current portion
Net assets
Unrestricted
Temporarily restricted
Total net assets
Total liabilities and net assets $
See notes to consolidated financial statements.
3
6,020,407
374,581
6,394,988
44,475,526
A Community of Friends
Consolidated Statement of Activities
Year ended June 30, 2014
Unrestricted
Revenue and support
Government grants and contracts
$
Foundation grants
Developer fees
Partnership and property management fees
Rental income
Administrative fees
Interest income from loans
Other interest income
Gain on forgiveness of loan
In-kind donations
Fundraising
Miscellaneous
Net assets released from restriction
Total revenue and support
2,151,686 $
342,347
1,497,866
871,208
2,542,557
103,149
330,611
2,481
614,323
44,380
171,466
27,361
305,687
9,005,122
Functional expenses
Program services
Administrative services
Total functional expenses
9,106,985
1,311,432
10,418,417
Change in net assets before income from
investment in partnerships and
contribution from the acquisition of
a limited partnership
(1,413,295)
Contribution from the acquisition of
a limited partnership
Temporarily
Restricted
- $
520,000
(305,687)
214,313
-
214,313
Total
2,151,686
862,347
1,497,866
871,208
2,542,557
103,149
330,611
2,481
614,323
44,380
171,466
27,361
9,219,435
9,106,985
1,311,432
10,418,417
(1,198,982)
109,746
-
109,746
Income from investment in partnerships
2,897,221
-
2,897,221
Change in net assets
1,593,672
214,313
1,807,985
Net assets, beginning of year
4,426,735
160,268
4,587,003
6,020,407 $
374,581 $
6,394,988
Net assets, end of year
$
See notes to consolidated financial statements.
4
A Community of Friends
Consolidated Statement of Cash Flows
Year ended June 30, 2014
Cash flows from operating activities
Change in net assets
$
Adjustments to reconcile change in net assets to net
cash used in operating activities:
Depreciation and amortization
Income from investment in partnerships
Provision for doubtful accounts
Gain on forgiveness of notes payable
Contribution from the acquisition of a
limited partnership
Decrease (increase) in:
Receivables
Prepaid expenses and deposits
Interest receivable
Other assets
Rental properties reserves
Increase (decrease) in:
Accounts payable and accrued expenses
Accrued interest
Net cash used in operating activities
Cash flows from investing activities
Purchases of property and equipment
Investment in limited partnership
Issuance of note receivable
Real estate in development
1,807,985
882,220
(2,897,221)
148,656
(614,323)
(45,720)
(1,241,304)
3,588
(489,393)
60
(20,572)
(436,504)
1,841,871
(1,060,657)
Cash used in investing activities
(203,244)
(40,000)
(400,000)
(696,191)
(1,339,435)
Net cash provided by financing activities
1,010,000
(269,388)
740,612
Change in cash and cash equivalents
(1,659,480)
Cash flows from financing activities
Proceeds from notes payable
Payments on notes payable
4,271,630
Cash and cash equivalents, beginning of year
Cash and cash equivalents, end of year
Supplemental disclosure of cash flow information
Interest paid
`
Supplemental disclosure of noncash investing and financing
activity
Net noncash net assets of limited partnerships
acquired by Supportive Housing LLC
Forgiveness of notes payable
See notes to consolidated financial statements.
5
$
2,612,150
$
125,076
$
45,720
$
614,323
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 1
ORGANIZATION
A Community of Friends (ACOF) was organized in 1988 pursuant to the General
Nonprofit Corporation laws of the State of California.
ACOF is an affordable housing developer that specializes in developing permanent
supportive housing for formerly homeless individuals and families living with mental
illness, and ensuring the provision of supportive services to these households. ACOF
provides supportive services in approximately half of the buildings in its portfolio, and
partners with community-based social service agencies to provide services in its
other buildings.
ACOF functions as a general partner in the limited partnerships that own the
buildings developed as affordable housing. ACOF also directly owns and manages
five affordable apartment buildings.
ACOF’s income is derived from fees earned related to development and asset
management of its affordable housing projects, grants received from foundations and
corporations, and contracts awarded by various federal and local government
agencies.
In August 2011, ACOF formed Supportive Housing LLC to be the limited partner for
acquisitions and for partnerships where the investor limited partner exits at the end of
the 15-year tax credit compliance period. In September 2011 and October 2011,
Supportive Housing LLC purchased the limited partner interest in Parker Hotel, L.P.
(99%) and Las Palomas Hotel, L.P. (99%). In October 2012, Supportive Housing LLC
purchased the limited partner 99% interest in 235 Berendo, L.P. and Gower Street
Apartments L.P. In July 2013, Supportive Housing LLC purchased the limited
partner 99% interest in 39 West Apartments, L.P. ACOF holds the remaining 1%
interest in all five partnerships.
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The accompanying consolidated financial statements include the accounts of ACOF
and investments in limited partnerships or limited liability companies in which ACOF
has a controlling interest (collectively, the “Company”). All significant intercompany
transactions have been eliminated in consolidation.
The following entities are included in the consolidated financial statements of ACOF:
A Community of Friends
Supportive Housing LLC, which controls the following:
235 Berendo, L.P.
Las Palomas Hotel, L.P.
Parker Hotel, L.P.
Gower Street Apartments, L.P.
39 West Apartments, L.P.
There are additional 34 limited partnerships in which the Company has an interest
which are not controlled by the Company and do not require inclusion in the
consolidated statements in the current year. (See Note 9).
6
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation
The Company reports information regarding its financial position and activities
according to three classes of net assets: unrestricted, temporarily restricted, and
permanently restricted net assets. Net assets, revenues, expenses, gains and
losses are classified based on the existence or absence of donor-imposed
restrictions. The Company does not have any permanently restricted net assets at
June 30, 2014.
Method of Accounting
The Company’s consolidated financial statements have been prepared on the
accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America.
Developer Fee Income Recognition/Receivable
The Company receives developer fees in connection with overseeing construction
projects from initial identification through purchase, construction and occupancy,
which average a 48-month period. Although development efforts begin prior to the
purchase of property, the related developer fees are generally not determined until
after partnerships are formed and/or project financing has been arranged.
In the aggregate, approximately 60% of the development effort is expended prior to
obtaining project construction financing, and the remaining construction takes an
average of 16 months thereafter. As a result, management established its income
recognition policy for developer fees to recognize a total of 60% of the income upon
obtaining project financing, and to recognize the remaining income ratably over the
succeeding 16 months. Management establishes a reserve on developer fees
receivables based on the limited partnerships’ ability to generate sufficient future
cash flows for payment.
Contributions and Pledges
Contributions received are recorded as unrestricted, temporarily restricted, or
permanently restricted support depending on the existence and/or nature of any
donor restrictions. Conditional contributions are recorded as support in the period the
condition is met. Such contributions are required to be reported as temporarily
restricted support and are then reclassified to unrestricted net assets upon expiration
of the restriction, usually when the funds are spent. Management has elected to
present temporarily restricted contributions whose restrictions are met in the same
reporting period as unrestricted support.
Cash and Cash Equivalents
The Company considers all highly liquid investments purchased with original
maturities of three months or less to be cash equivalents.
The Company places its cash and cash equivalents with major, national financial
institutions. Except for the $100,000 deposit with Enterprise Community Loan Fund,
Inc., the balances at the institutions are insured by the Federal Deposit Insurance
Corporation up to $250,000 at each bank. At times, cash balances are in excess of
the insured limit. The Company has not experienced any losses in such accounts
and believes it is not exposed to any significant credit risk on cash and cash
equivalents.
7
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Contracts and Contract Receivable
The Company enters into contracts with various governmental agencies to fund
supportive services. The contracts are generally for a period of one to three years
and renewed annually.
Contracts receivable represent monies due from governmental agencies. Because of
administrative delays, the Company can incur costs under a contract already
awarded but is the process of having the contract signed by the governmental
agencies. These costs accounted for as receivable represent an increased credit
risk. The Company has historically not suffered any loss as a result of the delay in
the government agencies signing the contracts.
Interest Capitalized
The Company follows the policy of capitalizing interest as a component of the cost of
property constructed or as a project receivable from a related limited partnership. For
the year ended June 30, 2014, interest capitalized in real estate in development
amounted to $5,224.
Property and Equipment
Property and equipment are stated at cost, less accumulated depreciation and
amortization. The provision for depreciation and amortization is computed using the
straight-line method over the estimated useful lives as follows:
Building and improvements
Furniture and equipment
27.5 to 40 years
5 to 7 years
Investment in Partnerships
The Company is the general partner in various limited partnerships. These
investments are accounted for using the equity method and the Company will only
recognize additional losses on these limited partnerships to the extent that the
Company is liable for the obligations of the limited partnerships or is otherwise
committed to provide them additional financial support.
Functional Allocation of Expenses
The costs of providing the various programs and activities have been summarized on
a functional basis in the statement of activities. Accordingly, certain costs have been
allocated among the programs and administrative services benefited.
Real Estate in Development
The Company capitalizes all costs associated with the acquisition, development, and
construction of real estate for eventual transfer to a limited partnership.
Income Taxes
ACOF and its wholly-owned subsidiary, Supportive Housing LLC are exempt from
income taxes under Internal Revenue Code Section 501 (c)(3) and Section 23701 (d)
of the California Revenue and Taxation Code. Accordingly, a provision for federal or
state income taxes is not recorded in the accompanying consolidated financial
statements. ACOF is classified as an organization that is not a private foundation
under Section 509(a)(i) and 170(b)(a)(vi) of the Internal Revenue Code.
8
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 2
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes (continued)
Generally accepted accounting principles prescribe a recognition threshold and
measurement attribute for the financial statement recognition and measurement of a
tax position taken or expected to be taken in a tax return. It requires that an
organization recognize in the financial statements the impact of the tax position if that
position will more likely than not be sustained on audit, based on the technical merits
of the position. As of and for the year ended June 30, 3014, the Company had no
unrecognized tax benefits or tax penalties or interest.
ACOF and Supportive Housing LLC’s federal and state income tax returns for 2010
and subsequent years are subject to examination by the regulatory agencies,
generally for three years and four years after they were filed for federal and state,
respectively.
Use of Estimates
The preparation of financial statements requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and disclosure
of contingent assets and liabilities at the date of the financial statements and the
reported amounts of revenue and expenses during the reporting period. Actual
results could differ from those estimates.
Rental Properties
The Company owns and manages five affordable apartment buildings, known as
Orbison, Selby Hotel, Step Out Apartments, 226 Berendo and Central Court.
In-kind Donations
The value of significant contributed goods are reflected as contributions in the
accompanying consolidated financial statements if an objective basis is available to
measure the fair value of such goods at the date of donation.
NOTE 3
CONCENTRATION OF CREDIT RISK
Financial instruments which potentially subject the Company to increased credit risk
are receivables from the limited partnerships in which the Company is a general
partner.
The receivables from the limited partnerships include project receivables, developer
fees receivables, notes and interest receivables, and partnership receivables. The
credit risk of these receivables from the limited partnerships is affected by the cash
flows of the limited partnerships (See Note 9 for financial information regarding the
limited partnerships).
At June 30, 2014, the Company has developer fees receivable from various limited
partnerships amounting to $5,046,764. The partnership agreements allow for the
deferred payment of these developer fees over a ten-year period. The Company
estimates that for certain of the limited partnerships, overall project cash flows will
increase after five years when the limited partnerships’ permanent loans are paid off,
after which deferred developer fee payments will increase. At June 30, 2014, the
Company has recognized a reserve on the developer fees receivable from these
various limited partnerships amounting to $540,095 (See Note 8).
9
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 3
CONCENTRATION OF CREDIT RISK (CONTINUED)
Notes receivable are from related partnerships. The Company receives funds to loan
to the partnerships either by borrowing the funds (mirror loans), or by receiving a
grant. The notes receivable where funds were received by grant represent the
greater credit risk. The total of such notes receivable is $3,200,000 with interest
accrual of $1,674,374 at June 30, 2014 (see Note 13).
Management believes the notes will be paid upon the ultimate disposition of the
property in the limited partnership. The Company reviews notes receivable for
impairment whenever events or changes in circumstances indicate that the carrying
value of the notes may not be recoverable. During the year ended June 30, 2014, no
such events occurred, and accordingly no impairment loss was recognized for the
year then ended.
NOTE 4
CASH AND CASH EQUIVALENTS
At June 30, 2014, cash and cash equivalents are for uses as follows:
A Community of Friends and Subsidiary
Rental Properties’ Operations
$
Total
NOTE 5
$
2,033,684
578,466
2,612,150
RENTAL PROPERTIES RESERVES
At June 30, 2014, rental properties reserves total $3,582,483 and consisted of the
following:
Property
226 Berendo
$
235 Berendo
Camerford
Central Court
Figueroa
Gower
Las Palomas Hotel
Parker Hotel
Selby
Step Out
39 West
$
Replacement
Reserve
428,476 $
128,923
40,281
45,656
172,831
58,530
162,460
145,485
84,067
207,344
1,474,053 $
Operating
Reserve
137,738 $
162,127
16,165
56,902
447,820
487,091
128,067
64,441
139,682
365,162
2,005,195 $
Other
Reserves
13,815
6,869
3,235
2,649
16,549
10,689
10,934
12,894
10,173
4,962
10,466
103,235
Rental properties reserves are funds held for use by the properties for operations
and replacements. The reserves are required by regulatory agreements.
10
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 6
PARTNERSHIP RECEIVABLES
At June 30, 2014, partnership receivables consisted of the following:
Accrued partnership management fees
Accrued administrative fees
$
Total
Less current portion
Long-term
NOTE 7
$
1,559,553
31,459
1,591,012
396,230
1,194,782
PROJECT RECEIVABLES
At June 30, 2014, project receivables consisted of the following:
In operation in 2014:
Amistad Apartments, L.P.
Camino De Las Flores, L.P.
Fedora Apartments
Figueroa Court Apartments, L.P
Fox Normandie Apartments, L.P.
Gateways Housing, L.P.
Jackson Aisle Apartments, L.P.
Santos Plaza, L.P.
Sonya Gardens, L.P.
V. Nueva, L.P.
Vendome Palms, L.P.
Willowbrook Place, L.P
$
In predevelopment and construction in 2014:
Avalon Apartments, L.P.
Beverly PSH, L.P.
Vista del Rio Housing
West Villas , L.P.
3101 West Venice, L.P.
Total
Less current portion
Long-term
$
11
10,060
4,236
1,437
2,265
2,669
26,171
3,955
364,683
50,000
5,362
4,088
3,370
158
334,558
1,500
214,450
202,381
1,231,343
47,763
1,183,580
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 8
DEVELOPER FEES RECEIVABLE
At June 30, 2014, developer fees receivable consisted of the following:
Avalon Apartments, L.P.
Camino de las Flores, L.P.
Fox Normandie Apartments, L.P.
Gateways Housing, L.P.
Jackson Aisle Apartments, L.P.
ND Sepulveda I, L.P.
ND Sepulveda II, L.P.
Osborne Place, L.P.
Santos Plaza, L.P.
The Villas at Gower, L.P.
Tyrol Plaza, L.P.
Vendome Palms, L.P.
$
Vista Del Rio Housing Partners, L.P.
Woodland Terrace, L.P.
Total
Less allowance for
uncollectible receivables
Less current portion
Long-term
NOTE 9
$
1,215,417
2,731
5,463
86,526
2,474
618,345
618,345
799,900
94,966
384,663
88
476,500
67,588
673,758
5,046,764
540,095
4,506,669
2,020,381
2,486,288
INVESTMENT IN PARTNERSHIPS
The partnerships construct, own and operate affordable apartment buildings in the
greater Los Angeles and Orange County metropolitan areas. The Company identifies
the properties for development, arranges for investor partners and other financing,
supervises construction, and oversees the resulting rental activity. It usually serves
as a general partner with a minor ownership interest and receives developer fees
and other fees as provided for in each of the partnership/investor agreements. Some
of the properties are encumbered by mortgages, which are usually non-recourse to
the partnerships and their partners.
12
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 9
INVESTMENT IN PARTNERSHIPS (CONTINUED)
At June 30, 2014, investment in partnerships consisted of the following:
3101 West Venice, L.P.
836 Fedora, L.P.
AMCAL Avenida Fund, L.P.
Amistad Apartments, L.P.
Avalon Apartments, L.P.
Berendos, L.P.
Brandon Apartments, L.P.
California Hotel 1140, L.P.
Calvert Street Apartments, L.P.
Camino de las Flores, L.P.
Cedar Springs, L.P.
Figueroa Court Apartments, L.P.
Figueroa Court Partners
Fox Normandie Apartments, L.P.
Gateways Housing, L.P.
Jackson Aisle Apartments, L.P.
La Primavera Apartments, L.P.
Maryland Apartments, L.P.
ND Sepulveda I, L.P.
ND Sepulveda II, L.P.
Osborne Place, L.P.
Rayen Apartments, L.P.
Santos Plaza, L.P.
Sonya Gardens, L.P.
Step Up On Fifth, L.P.
Tyrol Plaza, L.P.
Vendome Palms, L.P.
V. Nueva, L.P.
The Villas at Gower, L.P.
Vista Del Rio Housing Partners, L.P.
West Villas, L.P.
Willis Avenue Apartments, L.P.
Willowbrook Place, L.P.
Woodland Terrace, L.P.
Total
$
$
(1,884)
(22)
(1,981)
(3,200)
(1,618)
(30,002)
(139)
(124)
(160)
(258)
(3,850)
4,924
(30)
(100)
(1,443)
(375)
(375)
(4,089)
92,279
4,721
3,913
13,225
6,643
257,546
(3,897)
23,722
2,899,983
40,000
6
991
(345)
3,294,061
At June 30, 2014, the above is summarized in the financial statements as follows:
Investment in partnerships (assets)
Deficiency in partnership
investments (liability)
13
$
3,347,953
$
(53,892)
3,294,061
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 9
INVESTMENT IN PARTNERSHIPS (CONTINUED)
The following is a summary of selected financial information from the financial statements of the limited partnerships for the
year ended December 31, 2013:
Total
Assets
3101 West Venice, L.P.
$
836 Fedora, L.P.
AMCAL Avenida Fund, L.P.
Amistad Apartments, L.P.
Avalon Apartments, L.P.
Berendos, L.P.
Brandon Apartments, L.P.
California Hotel 1140, L.P.
Calvert Street Apartments, L.P.
Camino de las Flores, L.P.
Cedar Springs, L.P.
Figueroa Court Apartments, L.P.
Figueroa Court Partners
Fox Normandie Apartments, L.P.
Gateways Housing, L.P.
Jackson Aisle Apartments, L.P.
La Primavera Apartments, L.P.
Maryland Apartments, L.P.
ND Sepulveda I, L.P.
ND Sepulveda II, L.P.
Osborne Place, L.P.
Rayen Apartments, L.P.
Santos Plaza, L.P.
Sonya Gardens, L.P.
Step Up On Fifth, L.P.
The Villas at Gower, L.P.
Tyrol Plaza, L.P.
Vendome Palms, L.P.
V. Nueva, L.P.
Vista Del Rio Housing Partners, L.P.
West Villas, L.P.
Willis Avenue Apartments, L.P.
Willowbrook Place, L.P.
Woodland Terrace, L.P.
$
- $
1,372,677
11,264,186
6,015,681
7,871,741
3,581,644
2,352,102
4,191,433
8,016,217
2,982,463
(1,424)
2,893,070
3,948,709
3,294,950
3,971,691
2,013,373
22,118,993
19,231,811
19,975,350
12,140,561
4,833,271
3,297,264
16,163,231
27,154,371
7,277,673
13,121,866
3,520,545
12,512,133
14,007,745
5,969,569
9,493,946
254,586,842 $
NonRe course
Debt
1,410,021
6,619,034
3,778,807
5,658,579
2,782,356
2,613,996
2,518,058
6,114,583
3,265,897
1,960
1,575,870
1,519,488
2,042,196
2,118,793
1,591,924
13,377,554
12,994,664
12,870,463
5,482,044
2,654,826
2,192,652
11,414,316
14,848,574
2,336,301
10,070,858
2,859,935
8,010,709
7,191,657
3,626,112
6,164,612
159,706,839
14
Total
Capital
(Deficit)
$
$
- $
(66,159)
3,953,636
2,116,662
1,046,974
735,943
(299,080)
947,982
1,596,045
(349,262)
(1,424)
1,211,154
2,070,773
852,208
1,834,784
230,116
5,583,002
3,426,629
5,571,952
6,576,647
1,031,156
1,018,878
2,686,358
8,085,594
4,906,566
2,543,572
584,126
3,810,598
6,594,813
1,803,022
1,909,107
72,012,372 $
Rev enue s
195,827
349,581
421,724
445,532
307,029
248,642
336,315
368,961
434,863
304,819
438,659
326,075
215,616
227,310
191,887
896,774
743,565
332,474
536,252
485,374
874,968
831,551
402,346
503,689
2,997,391
563,203
288,367
540,812
14,809,606
$
$
Company's
Allocated
Net
Share of
Income
Partnership
(Loss)
Income (Loss)
- $
(77,285)
(8)
(374,814)
(37)
(432,332)
(43)
(2,843)
(125,986)
(13)
(166,378)
(1,664)
(248,849)
(25)
(367,114)
(18)
(113,461)
(46)
(68)
(14)
(156)
(155,640)
(220,787)
(11)
(78,431)
(4)
(88,980)
(9)
(180,008)
(18)
(500,124)
(25)
(503,565)
(25)
(700,272)
(70)
(697,397)
(70)
(345,588)
(35)
(113,679)
(11)
(1,109,411)
(56)
(748,527)
(38)
(115,521)
(6)
(429,326)
(43)
(186,762)
(187)
2,552,531
2,899,991
(556,911)
(56)
(324,188)
(32)
(498,583)
(50)
(6,910,299) $
2,897,221
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 10
REAL ESTATE IN DEVELOPMENT
At June 30, 2014, real estate in development consisted of:
Land
Building
$
Total
NOTE 11
252,242
689,241
941,483
$
PROPERTY AND EQUIPMENT
At June 30, 2014, property and equipment consisted of the following:
Land, building, and improvements
Furniture and equipment
$
26,753,327
1,016,295
27,769,622
Less accumulated depreciation
and amortization
Total
14,304,415
13,465,207
$
For the year ended June 30, 2014, depreciation and amortization expense amounted
to $882,220.
NOTE 12
OTHER LONG-TERM ASSETS
At June 30, 2014, other long-term assets consisted of:
Security deposit
Loan fees, net
Organization logo, net
$
Total
$
823
5,000
10,018
15,841
Loan fees are amortized over the life of the related loan. ACOF logo is amortized
over its estimated useful life.
15
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 13
NOTES, ADVANCES, AND INTEREST RECEIVABLE
At June 30, 2014, notes, advances, and interest receivable consisted of the
following:
Interest
Receivable
Principal
Notes receivable from limited partnerships are proceeds
from notes payable to Los Angeles Housing and
Community Investment Department (HCID) and are
loaned directly to the limited partnerships with the same
interest rate and terms as the notes payable (see Note
14). These notes receivable are from the following limited
partnerships:
Figueroa Court Apartments, L.P.
V. Nueva, L.P.
Calvert Street Apartments, L.P.
$
514,500 $
1,497,333
1,104,472
888,342
1,599,181
1,440,450
Notes receivable from California Hotel 1140, L.P.
proceeds from note payable to Bank of America
Community Development Bank loaned directly to
California Hotel 1140, L.P. Interest accrues at 3%
annually. The principal balance and any accrued and
unpaid interest matures on December 15, 2047.
72,781
194,079
Notes receivable from Maryland Apartments, L.P.
proceeds from note payable to U.S. Bank loaned directly
to Maryland Apartments, L.P. Interest accrues at 0.5%
per annum and matures in December 2021.
11,123
162,986
Notes receivable from V. Nueva, L.P., interest accrues at
1% per annum and matures in December 2018.
11,759
75,000
Notes receivable from Osborne Place, L.P. proceeds
from note payable to Los Angeles Homeless Services
Authority loaned directly to Osborne Place, L.P. Interest
is at 0% and matures in 2068.
-
400,000
Notes receivable from The Villas at Gower, L.P.,
collateralized by a deed of trust on a certain property
located in Los Angeles, California with interest is 0% and
matures in 2065. The note was funded by California
Department of Housing and Community Development’s
Infill Infrastructure Grant Program.
-
1,810,000
16
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 13
NOTES, ADVANCES, AND INTEREST RECEIVABLE (CONTINUED)
Interest
Receivable
Principal
As discussed in Note 3, the funding for the following
notes receivable originated from grant funds:
Notes receivable from Figueroa Court Apartments,
L.P. has annual payments of $3,250 due from
residual receipts and matures in April 2017. Interest
accrues at 7.18% per annum.
$
615,405 $
400,000
Notes receivable from California Hotel 1140, L.P.,
interest accrues at 0.5% per annum and matures in
December 2017.
25,001
400,000
Notes receivable from Amistad Apartments, L.P.,
interest accrues at 5.6% per annum and matures in
December 2033.
257,600
400,000
Notes receivable from Calvert Street Apartments,
L.P., interest accrues at 5.46% per annum and
matures in December 2032.
230,775
400,000
Notes receivable from La Primavera Apartments,
L.P., interest accrues at 4.92% per annum and
matures in December 2032.
236,160
400,000
Notes receivable from Willowbrook Place, L.P.,
interest accrues at 5.0% per annum and matures in
October 2060.
154,707
400,000
Notes receivable from Woodland Terrace, L.P.,
interest accrues at 5.0% per annum and matures in
December 2060.
154,726
400,000
Notes receivable from Santos Plaza, L.P., interest is
at 0% and matures in 2034.
17
-
400,000
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 13
NOTES, ADVANCES, AND INTEREST RECEIVABLE (CONTINUED)
Interest
Receivable
Notes receivable from Beverly PSH, L.P. proceeds
from drawing down from ACOF's line of credit with
Enterprise Community Loan Fund, Inc. Interest
accrues at 7% per annum and matures at the earlier
date of Beverly PSH, L.P.'s receipt of permanent
financing or October 2015.
$
Total
Less allowance for uncollectible notes and
interest receivable
Net notes, advances, and inrterest receivable
NOTE 14
-
Principal
$
4,277,351
$
1,235,898
3,041,453 $
300,000
10,679,029
1,810,000
8,869,029
NOTES AND INTEREST PAYABLE
At June 30, 2014, notes and interest payable consisted of the following:
Interest
Payable
Principal
514,500 $
1,807,299
1,104,472
889,461
1,497,333
2,100,355
1,599,182
1,440,450
A Community of Friends
Notes payable to HCID, principal and interest due in
annual payments (as defined in the loan agreements)
derived from the operations of the various limited
partnerships. Interest accrues annually on the
outstanding principal balance at 2.5% to 5.72% per
annum until the final sale of the property or
refinancing of the loan. The proceeds were loaned
directly to specified limited partnerships, represented
by loans receivable (see Note 13) with the same terms
as the notes payable. The loans are collateralized by
a deed of trust on the respective property. The notes
payable mature as follows:
Figueroa Court Apartments, L.P., due in
September 2038
Las Palomas Hotel, L.P., due in June 2051
V. Nueva, L.P., due in August 2040
Calvert Street Apartments, L.P. due in July 2041
18
$
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Interest
Payable
Note payable to Bank of America with no interest or
principal payments due until maturity. Interest accrues
at the rate charged by the Federal Home Loan Bank
of San Francisco per annum on the unpaid portion of
the outstanding principal. Should ACOF comply with
requirements as stated in the loan agreement, this
note becomes interest free. The loan matures in
December 2052 and is collateralized by a deed of
trust on the California Hotel 1140, L.P. property.
Management does not anticipate having to pay
interest, and therefore, has not accrued interest on
this loan.
$
-
Note payable to U.S. Bank. Should ACOF comply with
requirements as stated in the loan agreement, the
loan balance will be forgiven, otherwise principal is
payable in full in December 2021. The note is
collateralized by a deed of trust on the Maryland
Apartments, L.P. property.
-
Principal
$
194,079
162,986
Notes payable to the California Department of
Housing and Community Development. Interest
accrues at a simple interest rate of 3% per annum.
Interest payments are due annually unless a written
request for a deferral of interest payments is
submitted. The outstanding principal is to be repaid
exclusively from residual receipts (as defined in the
loan agreement) and is due upon maturity. The notes
payable are collateralized by trust deeds on the
property and are as follows:
Orbison House property, due in March 2031
Selby property, due in July 2031
226 Berendo property, due in July 2033
19
241,396
497,340
901,220
345,000
725,000
1,681,983
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Interest
Payable
Principal
183,804 $
287,421
1,135,737
204,000
325,000
1,788,214
Notes payable to HCID, principal and interest due in
annual payments made exclusively from residual
receipts (as defined in the loan agreement) derived
from the project at the financed property,
collateralized by a deed of trust. Interest accrues
annually on the outstanding principal balance at 3%
per annum until the final sale of the property or
refinancing of the loan. Any unpaid accrued interest
will be rolled over into the principal balances at the
beginning of each calendar year. The notes payable
mature as follows:
Orbison House property, due in December 2019
Selby property, due in July 2021
226 Berendo property, due in September 2034
$
Notes payable to HCID with no interest or principal
payments due until maturity. Interest accrues at the
rate of 8.5% to 10% per annum on the unpaid portion
of the outstanding principal. Should ACOF comply with
the Rent Regulatory Agreement, these notes become
interest free. The loans are collateralized by a deed of
trust on the Selby property. Management does not
anticipate having to pay interest, and therefore, has
not recorded accrued interest on these loans.
Management requested an extension of these notes
and is waiting for approval by the lender. The notes
payable originally due in February 2012 was extended
as follows:
February 2015
February 2015
-
413,250
50,000
Notes payable to the Berkadia Commercial Mortgage,
LLC, including interest at 4.5% per annum on any
unpaid portion of the outstanding principal. Payments
of $2,048 are due monthly and include interest and
principal. The loan matures in April 2015. The loan is
collateralized by a trust deed on the 226 Berendo
property.
-
15,142
20
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Interest
Payable
Principal
Note payable to Department of Housing and
Community Development of the State of California for
affordable housing related to the Step Out
Apartments. Interest accrues at 3% per annum and is
payable at 0.42% of the principal on an annual basis.
The note is collateralized by a deed of trust on the
property and matures in 2043.
$
153,675 $
Note payable to Housing Authority of the County of
Los Angeles. Interest accrues at a simple interest rate
of 3% per annum. The outstanding principal and
accrued interest is to be repaid in annual installments.
The loan is collateralized by the Step Out Apartments
property and matures on May 15, 2031.
360,856
1,063,688
Note payable to the Community Development
Commission of the County of Los Angeles used for
acquisition of the Step Out Apartments property.
Interest accrues at a simple interest rate of 3% per
annum. Principal and interest are due in annual
payments made exclusively from residual receipts (as
defined in the loan agreement) derived from the
project and are due March 2031. The note is
collateralized by a deed of trust on the Step Out
Apartments.
56,442
176,893
Note payable to Bank of America. Interest accrues at
the Affordable Housing Program ("AHP") subsidy rate
if AHP requirements are not met. If AHP requirements
are met, principal and interest will be forgiven. The
loan is collateralized by a deed of trust on the Step
Out Apartments property and matures in March 2020.
-
280,000
Notes payable to HCID, to be used in the financing
acquisition of the Central Court apartment, and
partially finance the rehabilitation and permanent
costs. The loans are non-interest bearing and annual
principal payments are made exclusively from residual
receipts (as defined in the loan agreement) derived
from the project at the financed property. The notes
are collateralized by a deed of trust on the Central
Court property. Both notes mature in February 2059.
-
740,360
21
516,851
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Interest
Payable
Note payable to Department of Housing and
Community Development of the State of California
(DHCD) for affordable housing related to the Central
Court property. Interest accrues at 3% per annum and
is payable at 0.42% of the principal on an annual
basis. The note is collateralized by a deed of trust on
the property and matures on the 55th anniversary of
the date of recordation (September 2062) of the
Regulatory Agreement or such later date as may be
approved in writing by DHCD.
$
94,767 $
Principal
689,200
Note payable to Wells Fargo Bank to be used for
predevelopment and land acquisition for affordable
housing projects. The unsecured note accrues
interest at 2% per annum, and matures in October
2014. The interest is payable on a quarterly basis and
the principal is due at maturity. ACOF is in the
process of extending the maturity date of the loan as
allowed under agreement or replacing it with a new
loan .
-
400,000
Note payable to Wells Fargo Bank to be used for
predevelopment and land acquisition for affordable
housing projects. The unsecured note accrues
interest at 2% per annum, and matures in October
2014. The interest is payable on a quarterly basis and
the principal is due at maturity. ACOF is in the
process of extending the maturity date of the loan as
allowed under agreement or replacing it with a new
loan .
-
200,000
Unsecured working capital line of credit and
predevelopment loan of $250,000 with Enterprise
Community Loan Fund, Inc. at 0% per annum with an
initial maturity of December 2010. This loan was
modified in October 2010 to extend the maturity date
to October 2013. In October 2013, the loan was paid
in full and ACOF entered into another loan agreement
amounting to $310,000 with a maturity date of
October 2015.
-
310,000
22
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Interest
Payable
Drawn by Beverly PSH, L.P. from ACOF's existing line
of credit with Enterprise Community Loan Fund, Inc.
The funds were drawn in the form of predevelopment
loan of $300,000, bearing 7% interest rate per
annum, secured by "Collateral Assignment Developer
Fees" executed by ACOF and St. Anne's Maternity
Home and matures at the earlier date of Beverly PSH,
L.P.'s receipt of permanent loan financing or October
$
2015.
-
Note payable to Los Angeles Homeless Services
Authority (LAHSA) wherein the proceeds were loaned
directly to Osborne Place, L.P for project
predevelopment (see Note 13). The note bears 0%
interest rate per annum, is collateralized by deed of
trust on real property of Osborne and is payable to
LAHSA on the earliest of (a) the date the Property
ceases to operate as initially funded under SHP grant
within 20 years from operating start date, (b) the date
the Property is sold or refinanced and (c) on event of
default by ACOF.
-
Parker Hotel, L.P .
Note payable to the City of Los Angeles at 2% interest
per annum. Principal and interest are paid annually,
from residual receipts sourced from operations. The
note matures in March 2035 and is collateralized by a
deed of trust.
Gower Street Apartments, L.P.
Note payable to the City of Los Angeles at an interest
rate of 5% per annum. Payment of principal and
interest is sourced from 50% of the residual receipts.
The note secured by deed of trust on real property will
mature in June 2037 and any unpaid interest at
maturity date will be forgiven if fair market value of the
collateral property is less than the principal balance of
the note and all other indebtedness secured by the
property. As of June 30, 2013, no interest was
accrued because the current market value of the
property is lower than the loan balance.
23
1,496,082
-
Principal
$
300,000
400,000
1,605,167
1,968,068
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Interest
Payable
235 Berendo, L.P.
Note payable to Chase Bank. The note is non-interest
$
bearing and matures in October 2014.
Note payable of 235 Berendo, L.P. to the City of Los
Angeles. The note bears an interest rate of 5% per
annum and matures in September 2039.
-
1,004,093
Principal
$
96,000
1,399,671
Additional 6% interest per annum due to the City of
Los Angeles on various loans, which were repaid in
September 24, 1999, as described below:
Interest related to the acquisition loan
Interest related to the predevelopment loan
Interest related to the rehabilitation loan
39 West Apartments, L.P.
Note payable to HCID, bearing interest rate of 5% per
annum. Principal and interest payments are due
annually from residual receipts as defined in the loan
agreement. The note matures in December 2016 and
is collateralized by deed of trust on the property.
Non-interest bearing note payable to Citibank,
collateralized by deed of trust on the property. All
payments are deferred until due date on March 2019.
520,165
81,136
800,718
709,938
-
-
1,056,484
182,794
12,840,522
23,927,150
1,078,392
$ 12,840,522 $ 22,848,758
Total
Less current portion
Long-term portion
During the year, Las Palomas Hotel, L.P.’s note payable to Citibank amounting to
$367,874 and Gower Street Apartments, L.P.’s note payable to J.P. Morgan Chase
amounting to $246,449 were forgiven as a result of compliance with the
requirements stated in the loan agreements.
24
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 14
NOTES AND INTEREST PAYABLE (CONTINUED)
Future maturities of notes payable at June 30, 2014 were as follows:
Year ending
June 30,
2015
2016
2017
2018
2019
Thereafer
Total
NOTE 15
$
$
1,078,392
610,000
35,079,280
36,767,672
GOVERNMENT GRANTS AND CONTRACTS
Unrestricted revenue from government grants and contracts consisted of the
following:
Program and Funding Agency
Supportive Housing Program:
U.S. Department of Housing and Urban Development
$
Los Angeles County Department of Mental Health
Los Angeles County General Funds
Community Development Commission of the
County of Los Angeles
Total $
NOTE 16
1,716,950
352,819
8,183
73,734
2,151,686
TEMPORARILY RESTRICTED NET ASSETS
At June 30, 2014, temporarily restricted net assets are available for the following
purposes or periods:
Predevelopment support
Permanent supportive housing services
Alternative financing research
Property management services
$
$
25
100,000
111,914
100,000
62,667
374,581
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 17
COMMITMENTS AND CONTINGENCIES
Leases
ACOF began leasing its office in May 2011 under a non-cancelable operating lease
that expires in April 2017. Additional office space was leased in March 2013 at the
same rental rates. The following is a schedule of future minimum lease payments
under the said lease as of June 30, 2014 that have initial or remaining lease terms
in excess of one year:
Year ending
June 30,
2015
2016
2017
Total
$
174,215
179,508
163,699
517,422
$
For the year ended June 30, 2014, rent expense charged to operations amounted
to $173,322.
Contingencies
ACOF is contingently liable for all obligations of the partnerships relating to certain
recourse notes payable. In some cases, ACOF, as General Partner, has
guaranteed to pay all operating deficits and in others has guaranteed the limited
partners a return on their investments. However, the guarantees are only to the
extent that such items are in excess of reserves that have been set aside for that
purpose. Management believes the reserves are adequate, and it is unlikely the
Company will be called upon to pay on the guarantees.
At June 30, 2014, ACOF was contingently liable for approximately $1,654,668 in
interest related to various notes payable. Management believes the likelihood
ACOF will be required to pay the interest is remote and has not recorded such
interest on the consolidated statement of financial position at June 30, 2014.
ACOF also provided construction loan guarantees for various projects under
construction. ACOF will be responsible for repaying a loan if, when the loan
becomes due, the project does not make payment on the loan. ACOF does not
require collateral or other security from its projects related to these guarantees.
These construction loan guarantees are estimated to be $37,543,447 at June 30,
2014. Management believes the likelihood of funding a material amount of any of
the guarantees is remote.
26
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 18
RELATED PARTY TRANSACTIONS
The Company receives fees for certain services performed by the Company on
behalf of the partnerships. These fees are to be paid to the Company when cash
flows of the limited partnerships are positive. The following fees were earned by the
Company for the year ended June 30, 2014.
Partnership and property
management fees
Developer fees
Administrative fees
Total fees earned from partnerships
$
$
871,208
1,497,866
103,149
2,472,223
In October 2009, ACOF entered into a Memorandum of Understanding –
Subcontract for Property Management Services (MOU) with Barker Management,
Inc. (BMI). In accordance with the MOU, ACOF and BMI collaborated to provide
management services to the following supportive housing developments in ACOF’s
portfolio: Amistad Apartments, Camino de Las Flores Apartments and Las Palomas
Hotel.
In April 2011, the MOU was amended to add the following five additional supportive
housing developments: 235 Berendo, Fedora Apartments, Fox Normandie
Apartments, Vista Nueva Apartments and Willow Apartments. The amended MOU
also revised the compensation of BMI to a flat rate of $25 per unit per month ($15
per month for 235 Berendo) with ACOF receiving the balance of the management
fees earned beginning January 1, 2011. The amendment also provided for the
automatic renewal of the MOU for each successive one year term, unless
terminated as provided in the original MOU.
In March 2013, a third amendment to the MOU was made to add the following
properties: Figueroa Courts, 39 West Apartments, Santos Plaza Apartments,
Vendome Palms and Jackson Aisle Apartments.
For the year ended June 30, 2014, ACOF earned property management fees under
this agreement in the amount of $202,966.
NOTE 19
EMPLOYEE RETIREMENT PLAN
ACOF has a profit sharing plan for all eligible employees. Contributions to the plan
are discretionary with the rates determined by the Board of Directors. For the Years
ended June 30, 2014, ACOF's contributions to the Plan amounted to $143,981.
27
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 20
BUSINESS COMBINATION
As mentioned in Note 2, in July 2013, Supportive Housing LLC purchased the
limited partner interest in 39 West Apartments, L.P. ACOF holds the remaining 1%
interest in the partnership. Further, since the business combination involves
acquisition of affordable housing with long-term restrictions on affordability and
use, there is no readily available market information with similar terms and
restrictions. Thus, all identifiable assets acquired and liabilities assumed were
measured at their acquisition-date carrying values and resulted in the recognition of
contribution amounting to $109,746 at June 30, 2014.
The carrying value of the identifiable assets and liabilities of these partnerships at
acquisition dates were as follows:
Cash and cash equivalents
Rental properties reserves
Other receivables
Prepaid expenses and deposits
Property and equipment - net
$
Accounts payable and accrued expenses
Notes and interest payable
Partners' equity
64,026
561,488
6,400
1,282
1,826,874
2,460,070
(726,431)
(1,239,278)
494,361
ACOF's existing interest
384,615
Less consideration transferred
109,746
-
Contribution received from
acquisition of a limited partnership
$
109,746
From the date of acquisition in 2013, through Supportive Housing LLC, ACOF’s
share in net loss of the limited partnerships acquired amounted to $40,628 at June
30, 2014.
NOTE 21
INCOME FROM INVESTMENT IN PARTNERSHIPS
During the year ended June 30, 2014, ACOF recognized income from investment
in partnerships in the amount of $2,897,221.
Included in the above income from investment in partnership was a pass through
income received by ACOF from Vista Del Rio, L.P. amounting to $2,899,991. This
income was related to a donation of land to the partnership from the City of Santa
Ana. This was a one-time income pass through and all the other income from the
limited partnerships represents ACOF’s share in the net income (loss) from
operations of the various limited partnership (see Note 9).
28
A Community of Friends
Notes to Consolidated Financial Statements
Year ended June 30, 2014
NOTE 22
SUBSEQUENT EVENTS
In October 2014, ACOF and 235 Berendo, L.P. sold its property to Berendos, L.P.
All outstanding notes and interest payable were paid off from the proceeds of the
sale.
The Company has evaluated events or transactions that occurred subsequent to
the statement of financial position date through November 24, 2014, the date the
accompanying financial statements were available to be issued, for potential
recognition or disclosure in the financial statements and determined that no other
subsequent matters required disclosure or adjustment to the accompanying
financial statements.
29
A Community of Friends
Schedule of Consolidated Functional Expenses
Year ended June 30, 2014
Supportiv e
Housing
Pe rsonne l e xpe nse s
Salaries
$
Payroll taxes
Employee benefits
Total pe rsonne l e xpe nse s
1,337,170 $
81,850
190,929
1,609,949
Othe r e xpe nse s
Advertising
Auditing and accounting
Auto expense
Bad debt
SHP cash match
Consulting
Contractual-supportive services
Depreciation and amortization
Donated supplies
Dues, fees and subscriptions
Equipment leases
Fundraising
Interest
Legal fees
Liability insurance
Marketing
Meals
Miscellaneous
Office expenses
Postage
Printing
Maintenance and repairs
Rent and parking
Rental operations
Resident programs
Security
Seminars and training
Taxes and licenses
Telephone
Temporary staff
Travel
Utilities
Worker's compensation insurance
Total - A Community of Frie nds
3,008
21,551
20,347
176,626
371
310,641
1,328
44,379
741
768
4,927
662
1,389
34,514
132
374
4,549
366,491
260,981
4,393
9,467
4,238
32,983
2,914,809
Expe nse s - Subsidiary
Rental operations
Total functional e xpe nse s $
2,914,809 $
Program Se rv ice s
Re al Estate
Prope rty
Activ itie s
M anage me nt
608,560 $
38,054
64,011
710,625
Re ntal
316,279 $
21,404
40,574
378,257
2,028
15,724
9,572
141,417
111,071
21,241
4,790
3,849
297,315
1,800
2,679
40
1,030
5,148
21,020
2,529
1,283
66,136
12,324
555
11,368
9,727
3,112
15,331
1,471,714
873
6,344
2,323
427
1,717
2,095
311
16
12,094
748
161
28,500
2,540
5,709
7,092
4,368
6,455
460,030
-
-
1,471,714 $
460,030
30
$
99,346 $
7,200
14,644
121,190
Total
2,361,355 $
148,508
310,158
2,820,021
1,035
2,520
1,363
7,239
204
340,643
4,647
212,854
9,723
20,456
1,025
11,936
176,796
91,699
1,245
6,893
12,020
108,243
11,527
1,143,258
6,944
46,139
33,605
148,656
176,626
111,646
310,641
363,212
44,379
10,605
6,334
510,169
11,523
30,157
40
2,003
7,578
79,564
3,409
1,818
176,796
99,185
366,491
260,981
91,699
20,502
7,448
38,564
16,819
11,718
108,243
66,296
5,989,811
3,117,174
3,117,174
4,260,432 $
9,106,985 $
Administrativ e
Se rv ice s
Totals
777,887 $
52,137
99,022
929,046
3,839
9,630
3,237
4,862
17,258
17,389
4,668
42,405
18,837
10,563
17,309
20,179
61,738
1,723
1,966
100,259
8,361
757
13,602
4,898
18,906
1,311,432
10,783
55,769
36,842
148,656
176,626
116,508
310,641
380,470
44,379
27,994
11,002
42,405
510,169
11,523
48,994
10,603
19,312
27,757
141,302
5,132
3,784
176,796
199,444
366,491
260,981
91,699
28,863
8,205
52,166
16,819
16,616
108,243
85,202
7,301,243
1,311,432
3,139,242
200,645
409,180
3,749,067
3,117,174
$
10,418,417
A Community of Friends
Consolidating Schedule of Financial Position
June 30, 2014
A Community
of Friends
Parker Hotel,
L.P.
Supportive Housing LLC
Gower Street
Las Palomas
235 Berendo,
Apartments,
Hotel, L.P.
L.P.
L.P.
39 West
Apartments, L.P.
Eliminations
Consolidated
ASSETS
Current assets
Cash and cash equivalents
Rental properties reserves
Project receivables
Partnership receivables
Developer fees receivable, net
Contracts receivable
Other receivables
Prepaid expenses and deposits
$
2,402,418 $
1,210,276
69,541
396,230
2,020,381
1,088,498
19,971
79,478
7,286,793
40,488 $
303,421
12,431
1,235
357,575
5,659 $
556,555
28,942
4,576
595,732
1,547 $
297,919
1,147
8,723
309,336
73,197 $
631,340
5,486
4,537
714,560
88,841 $
582,972
14,303
1,576
687,692
$
(21,778)
(21,778)
2,612,150
3,582,483
47,763
396,230
2,020,381
1,088,498
82,280
100,125
9,929,910
Total assets $
1,183,580
1,549,183
2,486,288
15,818,137
3,741,535
941,483
5,733,835
15,018
38,755,852 $
899,553
823
1,257,951 $
2,047,248
2,642,980 $
1,533,733
1,843,069 $
1,932,351
2,646,911 $
1,754,925
2,442,617 $
(354,401)
(3,907,655)
(393,582)
(436,438)
(5,113,854) $
1,183,580
1,194,782
2,486,288
11,910,482
3,347,953
941,483
13,465,207
15,841
44,475,526
LIABILITIES AND NET ASSETS
Current liabilities
Accounts payable and accrued expenses
$
Current portion of notes and interest payable
Total current liabilities
993,898 $
1,078,392
2,072,290
16,287 $
16,287
217,638 $
217,638
31,712 $
31,712
335,545 $
335,545
40,073 $
40,073
(376,179) $
(376,179)
1,258,974
1,078,392
2,337,366
Total current assets
Long-term project receivables
Long-term partnership receivables
Long-term developer fees receivables, net
Notes, advances, and interest receivable, net
Investment in partnerships
Real estate in development
Property and equipment, net
Other long-term assets
Deficiency in partnership investments
Notes and interest payable, net of current portion
Total liabilities
Net assets
Unrestricted
Temporarily restricted
Total net assets
Total liabilities and net assets $
2,280,298
24,769,240
29,121,828
3,101,249
3,117,536
3,907,379
4,125,017
3,901,783
3,933,495
1,968,068
2,303,613
1,949,216
1,989,289
(2,226,406)
(3,907,655)
(6,510,240)
53,892
35,689,280
38,080,538
9,259,443
374,581
9,634,024
38,755,852 $
(1,859,585)
(1,859,585)
1,257,951 $
(1,482,037)
(1,482,037)
2,642,980 $
(2,090,426)
0
(2,090,426)
1,843,069 $
343,298
343,298
2,646,911 $
453,328
453,328
2,442,617 $
1,396,386
1,396,386
(5,113,854) $
6,020,407
374,581
6,394,988
44,475,526
31
A Community of Friends
Consolidating Schedule of Activities
Year ended June 30, 2014
A Community
of Friends
Parker Hotel,
L.P.
Supportive Housing LLC
Gower Street
Las Palomas
235 Berendo,
Apartments,
Hotel, L.P.
L.P.
L.P.
Revenue and support
Government grants and contracts
$
Foundation grants
Developer fees
Partnership and property management fees
Rental income
Administrative fees
Interest income from loans
Other interest income
Gain on forgiveness of notes payable
In-kind donations
Fundraising
Miscellaneous
Total revenue and support
2,151,686 $
862,347
1,497,866
973,832
764,070
103,149
435,629
2,481
44,380
171,466
27,361
7,034,267
- $
235,700
235,700
- $
510,340
367,874
878,214
Functional expenses
Program services
Administrative services
Total functional expenses
5,989,811
1,311,432
7,301,243
329,900
329,900
732,564
732,564
(266,976)
(94,200)
-
Change in net assets before income from
investment in partnerships and
contribution received from the
acquisition of a limited partnership
Contribution received from the
acquisition of a limited partnership
Income from investment in partnerships
Change in net assets
Net assets, beginning of year
Net assets, end of year
$
Eliminations
Consolidated
- $
448,830
246,449
695,279
- $
342,633
342,633
- $
(102,624)
(105,018)
(207,642)
1,074,134
1,074,134
857,327
857,327
383,666
383,666
(260,417)
(260,417)
9,106,985
1,311,432
10,418,417
145,650
(833,150)
(162,048)
(41,033)
52,775
(1,198,982)
-
-
-
-
-
109,746
109,746
1,226,705
-
-
-
-
-
1,670,516
2,897,221
959,729
(94,200)
145,650
(833,150)
(162,048)
(41,033)
1,833,037
1,807,985
8,674,295
(1,765,385)
(1,627,687)
(1,257,276)
505,346
494,361
(436,651)
4,587,003
9,634,024 $
(1,859,585) $
(1,482,037)
(2,090,426)
343,298 $
453,328 $
1,396,386 $
6,394,988
32
- $
240,984
240,984
39 West
Apartments,
L.P.
2,151,686
862,347
1,497,866
871,208
2,542,557
103,149
330,611
2,481
614,323
44,380
171,466
27,361
9,219,435
Report of Independent Auditors on Internal Control over Financial Reporting
and on Compliance and Other Matters Based on an Audit of Financial Statements
Performed in Accordance with Government Auditing Standards
Board of Directors
A Community of Friends
We have audited, in accordance with the auditing standards generally accepted in the United States
of America and the standards applicable to financial audits contained in Government Auditing
Standards issued by the Comptroller General of the United States, the consolidated financial
statements of A Community of Friends and Subsidiary, which comprise the consolidated statement
of financial position as of June 30, 2014, and the related consolidated statements of activities, and
cash flows for the year then ended, and the related notes to the consolidated financial statements,
and have issued our report thereon dated November 24, 2014.
Internal Control over Financial Reporting
In planning and performing our audit of the consolidated financial statements, we considered A
Community of Friends and Subsidiary’s internal control over financial reporting (internal control) to
determine the audit procedures that are appropriate in the circumstances for the purpose of
expressing our opinion on the consolidated financial statements, but not for the purpose of
expressing an opinion on the effectiveness of A Community of Friends and Subsidiary’s internal
control. Accordingly, we do not express an opinion on the effectiveness of A Community of Friends
and Subsidiary’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to prevent,
or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a
combination of deficiencies, in internal control, such that there is a reasonable possibility that a
material misstatement of the entity’s financial statements will not be prevented, or detected and
corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies,
in internal control that is less severe than a material weakness, yet important enough to merit
attention by those charged with governance.
Our consideration of internal control was for the limited purpose described in the first paragraph of
this section and was not designed to identify all deficiencies in internal control that might be material
weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify
any deficiencies in internal control that we consider to be material weaknesses. However, material
weaknesses may exist that have not been identified.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether A Community of Friends and Subsidiary’s
consolidated financial statements are free from material misstatement, we performed tests of its
compliance with certain provisions of laws, regulations, contracts, and grant agreements,
noncompliance with which could have a direct and material effect on the determination of
consolidated financial statement amounts. However, providing an opinion on compliance with those
provisions was not an objective of our audit, and accordingly, we do not express such an opinion.
The results of our tests disclosed no instances of noncompliance or other matters that are required
to be reported under Government Auditing Standards.
Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and
compliance and the results of that testing, and not to provide an opinion on the effectiveness of the
entity’s internal control or on compliance. This report is an integral part of an audit performed in
accordance with Government Auditing Standards in considering the entity’s internal control and
compliance. Accordingly, this communication is not suitable for any other purpose.
Los Angeles, California
November 24, 2014
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