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HomeMy WebLinkAboutLHC Lansing Housing Commission 0619 Financial Statement Final Lansing Housing Commission Financial Report with Supplemental Information June 30, 2019 Lansing Housing Commission Contents Independent Auditor's Report 1-2 Management's Discussion and Analysis 3-7 Basic Financial Statements Fund Financial Statements: Statement of Net Position 8-9 Statement of Activities 10 Statement of Cash Flows 11 Notes to Financial Statements 12-29 Required Supplemental Information 30 Schedule of Changes in the Commission's Net Pension Liability and Related Ratios 31 Schedule of Commission Contributions 32 Schedule of Changes in the Commission's OPEB Liability and Related Ratios 33 Schedule of OPEB Contributions 34 Notes to Schedule of Commission Contributions 35 Other Supplemental Information 36 Financial Data Schedules 37-41 Actual Modernization Cost Certificate 42 Independent Auditor's Report To the Board of Commissioners Lansing Housing Commission Report on the Financial Statements We have audited the accompanying financial statements of the business-type activities and the discretely presented component unit of Lansing Housing Commission (the "Commission") as of and for the year ended June 30, 2019 and the related notes to the financial statements, which collectively comprise Lansing Housing Commission's basic financial statements, as listed in the table of contents. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinions In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the business-type activities and the discretely presented component unit of Lansing Housing Commission as of June 30, 2019 and the respective changes in its financial position and, where applicable, its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1 To the Board of Commissioners Lansing Housing Commission Required Supplemental Information Accounting principles generally accepted in the United States of America require that the management's discussion and analysis and other required supplemental information, as identified on the table of contents, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplemental information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise Lansing Housing Commission's basic financial statements. The financial data schedules and closed grants are presented for the purpose of additional analysis and are not a required part of the basic financial statements. The financial data schedules are the responsibility of management and were derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the financial data schedules are fairly stated in all material respects in relation to the basic financial statements as a whole. The closed grants have not been subject to the auditing procedures applied in the audit of the basic financial statements, and, accordingly, we do not express an opinion or provide any assurance on them. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 11, 2019 on our consideration of Lansing Housing Commission's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Lansing Housing Commission's internal control over financial reporting and compliance. Alt& �, PLLC November 11, 2019 2 Lansing Housing Commission Lansing, Michigan Management's Discussion and Analysis For the Fiscal Year Ended June 30, 2019 This management's discussion and analysis (MD&A) of Lansing Housing Commission (the "Commission") provides an overview of the Commission's financial performance during the fiscal year ended June 30, 2019. The operations of the Lansing Housing Commission are comprised of a Low Income Public Housing Program, a Housing Choice Voucher program, a Capital Fund Program, a Section 8 New Construction Program, and a Resident Opportunity and Supportive Services Program. The Low Income Public Housing Program is funded with tenant rental revenue, miscellaneous tenant charges, and Department of Housing and Urban Development (HUD) grants and subsidies. The remaining programs are funded entirely by federal grants. The Commission also maintains a central office cost center, various business activities, and component units. This MD&A covers only the Commission's primary government activities, including its blended component unit and the Lansing Housing Commission Non Profit Development Corporation (LHCNPDC), and do not analyze the financial position or current year activity of the discretely presented component unit - Oliver Gardens Limited Dividend Housing Association Limited Partnership (Oliver Gardens). Please read this summary along with the accompanying audited financial statements of the Commission for the fiscal year ended June 30, 2019. The audited financial statements of Oliver Gardens have been presented in the financial statements of the Commission. Financial Highlights 1. Total assets exceed total liabilities by $ 16,042,394 2. Unrestricted net position equals 4,139,799 3. Total net position increased by 312,280 Required Financial Statements The financial statements of the Commission have been prepared on the accrual basis of accounting following the business-type activities reporting requirements of the Governmental Accounting Standards Board (GASB) as a single enterprise fund. These statements are as follows: • Statement of net position - Includes all of the Commission's assets and liabilities and provides information about the amounts and investments in assets and the obligations to commission creditors. It also provides a basis of assessing the liquidity and financial flexibility of the Commission. Over time, increases or decreases in net position may serve as a useful indicator of whether the financial health of the Commission is improving or deteriorating. • Statement of activities - Provides information as to the increase or decrease of current year revenue over expenses. • Statement of cash flows - Provides information about the Commission's cash receipts and disbursements during the reporting period. The statement discloses net cash provided by or used in operating activities and noncapital financing activities from capital and related financing activities and from investing activities. 3 Financial Analysis Statement of Net Position Percent 2018 2019 Change Change Assets Current and restricted assets $ 5,259,522 $ 5,222,385 $ (37,137) -1% Capital assets 14,492,096 13,546,781 (945,315) -7% Noncurrent assets 1,092,791 1,127,886 35,095 3% Total assets 20,844,409 19,897,052 (947,357) -5% Deferred Outflows of Resources 100,343 809,448 709,105 707% Total assets and deferred outflows of resources 20,944,752 20,706,500 (238,252) -1% Liabilities Current liabilities 893,195 742,502 (150,693) -17% Long-term liabilities 4,153,621 3,921,604 (232,017) -6% Total liabilities 5,046,816 4,664,106 (382,710) -8% Deferred Inflows of Resources 167,822 - (167,822) -100% Net Position Net investment in capital assets 12,398,172 11,855,031 (543,141) 4% Restricted 283,714 47,564 (236,150) -83% Unrestricted 3,048,228 4,139,799 1,091,571 36% Total net position $ 15,730,114 $ 16,042,394 $ 312,280 2% As required by Governmental Accountings Standards Board (GASB), the Commission adopted GASB Statement No. 75 in 2018. This standard required the inclusion of a liability for the Commission's estimated unfunded other postemployment benefit (OPEB) costs. Some of the changes in this net OPEB liability were recognized immediately as part of the OPEB expense measurement, and part will be deferred and recognized over future years. As illustrated in the statement of net position, the overall net position of the Commission increased by $312,280, primarily as a result in a decrease in long-term liabilities net of decreases in capital assets. There were capital asset projects ongoing during the current year related to the normal maintenance and repairs and the reconstruction of units damaged by a fire during the prior year. Overall, net capital assets decreased due to normal depreciation expense exceeding capital asset additions. The decrease in OPEB liabilities and a principal payment of approximately $301,000 on the promissory note payable with Davenport University led to an overall decrease in liabilities. 4 Financial Analysis (Continued) Statement of Activities Percent 2018 2019 Change Change Revenue Tenant rental revenue $ 1,621,451 $ 1,714,401 $ 92,950 6% Federal grants 14,666,576 16,462,935 1,796,359 12% Other revenue 1,396,575 1,408,403 11,828 1% Total revenue 17,684,602 19,585,739 1,901,137 11% Expenses Administrative expenses 2,600,196 1,553,050 (1,047,146) -40% Tenant services 83,708 83,838 130 0% Utilities 948,288 964,198 15,910 2% Maintenance and operations 2,494,575 3,213,723 719,148 29% Insurance and general expenses 388,174 458,011 69,837 18% Housing assistance payments 10,785,430 11,695,726 910,296 8% Depreciation and amortization 1,205,171 1,232,698 27,527 2% Interest expense 83,017 71,249 (11,768) -14% Loss on sale of assets 790 966 176 22% Total expenses 18,589,349 19,273,459 684,110 4% Change in Net Position $ (904,747) $ 312,280 $ 1,217,027 135% Revenue In reviewing the statement of activities, you will find that 84 percent of the Commission's revenue is derived from grants from the Department of Housing and Urban Development, 9 percent of the Commission's revenue is from dwelling rent, and 7 percent is from investment income and other income. Expenses In reviewing the statement of activities, you will find that 61 percent of the Commission's expenses are for housing assistance payments, 8 percent for administrative, 5 percent are for utilities, 17 percent are for maintenance, 6 percent are for depreciation and amortization, and 3 percent are for tenant services, protective services, general expenses, and interest expense. Change in Net Position There was a significant increase in overall revenue during fiscal year 2019. The Federal Grants increase was due to two factors. First, there was a increase in the funding for the Public Housing Capital Fund program. Second, the Commission approved a change in benefits under the other postemployment benefit plan. This change in benefit terms and change in assumptions decreased the net OPEB liability by approximately $952,000. 5 Financial Analysis (Continued) Capital Assets As of year end, the Commission had $13,546,781 invested in a variety of capital assets as reflected in the following schedule, which represents a net decrease (additions, deductions, and depreciation) of 7 percent from the end of last year. Percent 2018 2019 Change Change Land $ 1,554,771 $ 1,554,771 $ - 0% Buildings 51,223,127 51,933,079 709,952 1% Furniture and equipment 1,313,200 1,304,132 (9,068) -1% Construction in progress 914,088 397,756 (516,332) -56% Accumulated depreciation (40,513,090) (41,642,957) (1,129,867) 3% Net capital assets $ 14,492,096 $ 13,546,781 $ (945,315) -7% The following reconciliation summarizes the change in capital assets: Beginning balance- July 1, 2018 $ 14,492,096 Additions: Construction in progress 288,349 Disposals net of depreciation (966) Depreciation expense (1,232,698) Ending balance-June 30, 2019 $ 13,546,781 Debt Outstanding As of the end of the fiscal year, the Commission had $1,691,750 in debt outstanding compared to $2,123,924 in the previous year. The net change in debt for the year was a decrease of $432,174 of principal payments. Long-term Debt 2018 2019 Note payable - Davenport $ 425,762 $ 124,986 Note payable - PNC 1,698,162 1,566,764 Total long-term debt $ 2,123,924 $ 1,691,750 6 Financial Analysis (Continued) Economic Factors and Events Affecting Operations Factors that may affect the financial position of the Commission in the subsequent fiscal year are as follows: • Federal funding appropriations as budgeted by Congress for funding to the Department of Housing and Urban Development • Local labor supply and demand, which can affect salary and wage rates and the need to contract more work because of employee hiring challenges • Union contract negotiations • Local inflationary, recessionary, and employment trends, which can affect resident incomes and, therefore, the amount of rental income • Inflationary pressure on utility rates, supplies, and other costs • Pay down of underfunded pension and other postemployment benefit liabilities In the current year and for future years, the financial position of the Commission is also impacted by the Commission's adoption of Governmental Accounting Standards Board (GASB) Statement No. 68 as of July 1, 2014, the objective of which is to improve accounting and financial reporting by state and local employers about financial support for pensions that is provided by other entities. The Commission participates in an agent multiple-employer defined benefit pension plan administered by the Municipal Employees' Retirement System of Michigan (MERS) that covers substantially all employees of the Commission. The Commission's net pension liability for this plan is determined annually using a measure of the total pension liability and the pension net position at the end of each calendar year. REAC The Real Estate Assessment Center's (REAC) mission is to provide and promote accurate information in assessing the condition of HUD's housing portfolio. The Commission receives periodic physical inspections and an annual financial evaluation provided by REAC. This performance data provides an annual assessment of how each Public Housing Commission compares to its peers. Conclusion The Commission's management is committed to staying abreast of regulations and appropriations as well as maintaining an ongoing analysis of all budgets and expenses to ensure that the Commission continues to operate at the highest standards established by the Real Estate Assessment Center and the Department of Housing and Urban Development. Contact This financial report is designed to provide a general overview of the Commission's finances for all those with an interest. Questions concerning any of the information provided in this report or requests for additional financial information should be addressed to Doug Fleming, Executive Director, Lansing Housing Commission, 419 Cherry, Lansing, MI 48933, or call (517) 372-7996. 7 Lansing Housing Commission Statement of Net Position June 30, 2019 Discrete Component Unit- Oliver Primary Gardens Government December 31, (LHC) 2018 Assets Current assets: Cash and cash equivalents (Note 3) $ 4,037,366 $ 40,754 Cash and cash equivalents- Restricted (Note 3) 106,180 341,402 Receivables: Tenant receivables 47,259 - Other receivables 299,329 5,039 Due from other governmental units- HUD 30,925 - Allowance for doubtful accounts (4,726) - Prepaid expenses and other assets 49,196 4,920 Tenant security deposits - Restricted (Note 3) 133,852 5,071 Investments (Note 3) 523,004 - Total current assets 5,222,385 397,186 Noncurrent assets: Investment in partnership 1,017,786 - Capital assets: Assets not subject to depreciation (Note 4) 1,952,527 685,162 Assets subject to depreciation - Net (Note 4) 11,594,254 1,653,375 Other receivables 110,000 - Other assets 100 4,583 Total noncurrent assets 14,674,667 2,343,120 Total assets 19,897,052 2,740,306 Deferred Outflows of Resources - Pension (Note 6) 809,448 - See notes to financial statements. 8 Lansing Housing Commission Statement of Net Position (Continued) June 30, 2019 Discrete Component Unit- Oliver Primary Gardens Government December 31, (LHC) 2018 Liabilities Current liabilities: Accounts payable - Operating $ 210,262 $ 11,683 Security deposits liability 155,909 5,071 Accrued liabilities and other: Accrued salaries and wages 52,313 - Accrued interest payable - 165,053 Accrued PILOT 118,496 19,255 Compensated absences < one year 10,023 - Other current liabilities - 458,032 Current portion of long-term debt(Note 5) 195,499 32,947 Total current liabilities 742,502 692,041 Noncurrent liabilities: Compensated absences 56,800 - Accrued partnership management fees - 110,000 Net pension liability(Note 6) 1,438,679 - Net OPEB obligation (Note 7) 871,259 - Notes payable- Net of current portion (Note 5) 1,496,251 2,463,271 Other noncurrent liabilities 58,615 405,767 Total noncurrent liabilities 3,921,604 2,979,038 Net Position Net investment in capital assets 11,855,031 (157,681) Restricted 47,564 - Unrestricted 4,139,799 (773,092) Total net position $ 16,042,394 $ (930,773) See notes to financial statements. 9 Lansing Housing Commission Statement of Activities Year Ended June 30, 2019 Discrete Component Unit- Oliver Gardens Primary Year Ended Government December 31, (LHC) 2018 Operating Revenue Tenant revenue- Net $ 1,714,401 $ 278,698 HUD operating revenue 16,199,046 - Other grant revenue 1,079,056 - Other operating revenue 321,056 255 Total operating revenue 19,313,559 278,953 Operating Expenses Administrative 1,553,050 24,173 Tenant services 83,838 - Utilities 964,198 72,213 Maintenance 3,213,723 50,583 Insurance 333,407 15,494 Other general expenses 124,604 47,587 Housing assistance payments 11,695,726 - Depreciation and amortization 1,232,698 141,860 Total operating expenses 19,201,244 351,910 Operating Income (Loss) 112,315 (72,957) Nonoperating Revenue (Expense) Investment income 8,291 10,991 Interest expense (Note 5) (71,249) (88,858) Loss on sale of assets (966) (1,298) Total nonoperating expense (63,924) (79,165) Income (Loss) - Before capital contributions 48,391 (152,122) Capital Contributions- Capital grants- HUD 263,889 - Change in Net Position 312,280 (152,122) Net Position - Beginning of year 15,730,114 (778,651) Net Position - End of year $ 16,042,394 $ (930,773) See notes to financial statements. 10 Lansing Housing Commission Statement of Cash Flows Year Ended June 30, 2019 Primary Government (LHC) Cash Flows from Operating Activities Cash received from HUD operating subsidies and grants $ 16,172,025 Cash received from tenants 1,699,770 Other receipts 1,366,705 Cash payments for housing assistance (11,695,726) Cash payments for administrative expenses (1,553,050) Cash payments for other operating expenses (5,580,004) Net cash and cash equivalents provided by operating activities 409,720 Cash Flows from Capital and Related Financing Activities Receipt of capital grants 263,889 Purchase of capital assets (288,349) Principal and interest paid on capital debt (503,423) Net cash and cash equivalents used in capital and related financing activities (527,883) Cash Flows from Investing Activities Interest received on investments 8,291 Purchases of investment securities (7,080) Net cash and cash equivalents provided by investing activities 1,211 Net Decrease in Cash and Cash Equivalents (116,952) Cash and Cash Equivalents- Beginning of year 4,394,350 Cash and Cash Equivalents- End of year $ 4,277,398 Classification of Cash and Cash Equivalents Cash and cash equivalents $ 4,037,366 Restricted cash and cash equivalents 106,180 Tenant security deposits 133,852 Total cash and cash equivalents $ 4,277,398 Reconciliation of Operating Income to Net Cash from Operating Activities Operating income $ 112,315 Adjustments to reconcile operating income to net cash from operating activities: Depreciation and amortization 1,232,698 Bad debts 65,536 Deferred outflows and inflows (876,927) Changes in assets and liabilities: Receivables (117,188) Prepaid and other assets (56,178) Accounts payable 100,408 Accrued and other liabilities (45,379) Security and other trust deposits (5,565) Net cash and cash equivalents provided by operating activities $ 409,720 See notes to financial statements. 11 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 1 - Nature of Business Organization and Program Descriptions Lansing Housing Commission (LHC or the "Commission") is a Michigan public body corporation operating as a public housing authority under the Michigan Housing Facilities Act, MCL 125.65, to provide decent, safe, and adequate housing for low-income program participants. The Commission owns and provides subsidy and operation support for housing units located throughout the Lansing area. LHC's assets, deferred outflows, liabilities, deferred inflows, net position, and changes in net position are included in its primary government fund and include all AMPs, COCC, business activities, and programs of the Commission. The Commission receives and administers funds from the U.S. Department of Housing and Urban Development (HUD) and has signed an annual contributions contract (the "ACC") under the provisions of the ACC and all applicable provisions of the United States Housing Act of 1937 (42 U.S.0 1437 Section 1.1). The ACC allows the Commission to obtain financial support from HUD and provide low-income housing throughout Lansing. The Commission administers the following significant programs: Low-rent Public Housing The Commission owns, operates, and maintains 833 units of public housing in four properties throughout the city of Lansing. The Low Rent Housing Assistance Program is designed to provide subsidized housing to low-income individuals who pay monthly rent in accordance with prescribed rent formulas based on family income limits. Revenue consists primarily of this rental income, other tenant fees collected, and an operating subsidy from HUD. Housing Choice Voucher Program (HCVP) Section 8 of the Housing and Community Development Act of 1974 provides Housing Assistance Payments on behalf of lower-income families to participating housing owners. Under the program, the landlord-tenant relationship is between a housing owner and a family, rather than the Commission and a family, as in the Public Housing Program. HUD contracts with the Commission to enter into contracts with owners either to make assistance payments or to pay the difference between the approved contract rent and the actual rent paid by the lower-income families. Housing assistance payments made to landlords and some participants are funded through annual contributions contracts, as well as the administrative cost of managing the program up to a per unit limit established in the contracts. The Commission administered an average of 1,675 tenant-based vouchers monthly for the year ended June 30, 2019. Capital Fund Program (CFP) Funds from the Capital Fund Program provided by HUD are used to maintain and improve the public housing portfolio. Substantially all additions to land, structures, and equipment for these properties are accomplished by using capital grant funds. Continuum of Care Program (Shelter Plus Care and Permanent Supportive Housing) This program provides rental assistance to homeless individuals and families with disabilities. The Commission is a subrecipient of the funding from the City of Lansing, Michigan. Recovery Agreement and Action Plan On September 25, 2014, the Commission was designated as a troubled agency by HUD based on a failing Public Housing Assessment System audited financial score. When a public housing agency is determined to be substandard, it is asked to provide an assessment of its deficiencies from its own self- diagnosis and identify solutions to recover its performance for long-term sustainability. The Commission has completed its Public Housing Agency Recovery and Sustainability Assessment and, on January 6, 2016, entered into a recovery agreement and action plan with HUD. The Commission began submitting monthly progress reports to the local HUD Field Office commencing on March 1, 2016 and every month thereafter until the recovery agreement was terminated. During February 2019, the Commission received a letter from HUD notifying them that they have accomplished all corrective actions to remedy recommendations issued by HUD Departmental Enforcement Center. 12 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 1 - Nature of Business (Continued) Reporting Entity The nucleus of the financial reporting entity, as defined by Governmental Accounting Standards Board (GASB) Statement No. 14, as amended, is the primary government. A fundamental characteristic of a primary government is that it is a fiscally independent entity. In evaluation of how to define the financial reporting entity, management has considered all potential component units. A component unit is a legally separate entity for which the primary government is financially accountable. The criteria of financial accountability is the appointment of a voting majority plus the ability of the primary government to impose its will upon the potential component unit. These criteria were considered in determining the reporting entity. The five-member board of commissioners of LHC is appointed to five-year terms by the mayor of the City of Lansing, Michigan, but the Commission's board independently oversees the Commission's operation and designates its management. The City of Lansing, Michigan is not financially accountable for the Commission, as it cannot impose its will on the Commission, and there is no potential for the Commission to provide financial benefits to, or impose financial burdens on, the City of Lansing, Michigan. Accordingly, the Commission is not a component unit of the financial reporting entity of the City of Lansing, Michigan. GASB Statement Nos. 14, 39, 61, and 80 define a primary government and those organizations that should be reported as component units. The following organizations have been determined under this guidance to be component units of the Commission. Blended Component Units One component unit, despite being legally separate, is so integrated with the primary government that it is, in substance, part of the primary government. The Commission has included as a blended component unit in business activities the operations of Lansing Housing Commission Non Profit Development Corporation (LHCNPDC), a nonprofit organization. LHCNPDC has a 99 percent ownership interest in Oliver Gardens, LLC, and the Commission has a 1 percent ownership interest in Oliver Gardens, LLC. The Commission has financial accountability for the nonprofit and controls its board of directors and management. As of June 30, 2019, LHCNPDC had assets of $857,110, liabilities of $879,491, and net deficit position of $(22,381). The total revenue and change in net position were $13,378 for the year ended June 30, 2019. Discretely Presented Component Unit The component unit column in the financial statements includes the financial data of the Commission's legally separate component unit, Oliver Gardens Limited Dividend Housing Association Limited Partnership (Oliver Gardens), which meets the criteria for discrete component presentation. The separate column presentation clearly distinguishes the component unit balances and transactions from that of the primary government. The balances are presented as of and for the year ended December 31, 2018. A complete financial report can be obtained at its administrative offices at 419 Cherry St., Lansing, MI 48933. As described above, the Commission has a 1 percent managing member ownership interest in Oliver Gardens, LLC, which has a 0.01 percent general partner ownership interest in Oliver Gardens. Oliver Gardens is a residential apartment complex in Lansing, Michigan consisting of 30 low-income housing units. The Commission does have financial accountability for Oliver Gardens, but it does not have majority ownership of the entity. Oliver Gardens follows all applicable Financial Accounting Standards Board (FASB) standards. Since it does not follow governmental accounting for presentation purposes, certain transactions may be reflected differently in these financial statements than in the separately issued discrete component unit financial statements in order for them to conform to the presentation of the primary government. 13 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 2 - Significant Accounting Policies Basis of Accounting The basic financial statements of the Commission have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (GAAP), as prescribed by the Governmental Accounting Standards Board (GASB). The Commission follows the business-type activities reporting requirements of GASB Statement No. 34, which provides a comprehensive one-line look at the Commission's financial activities. The Commission reports all of its operations as a single business activity in a single enterprise fund. The enterprise fund is a proprietary fund, which distinguishes operating revenue and expenses from nonoperating items. The operating revenue of the Commission consists primarily of rental charges to tenants, operating grants from HUD, and other operating revenue that offsets operating expenses. Operating expenses include the cost of administrative, tenant services, utilities, maintenance, protective services, general operations, depreciation, and housing assistance payments. As a proprietary fund, revenue is recorded when earned, and expenses are recorded when a liability is incurred, regardless of the timing of related cash flows. The Commission's financial activities operate in a manner similar to private business enterprises and are financed through fees and charges assessed primarily to the users of the services. For financial reporting purposes, the Commission considers its grants associated with operations as operating revenue because these funds more closely represent revenue generated from operating activities, rather than nonoperating activities. Grants associated with capital acquisition and improvements are considered capital contributions and are presented after nonoperating activity as capital contributions on the accompanying statement of activities. Budgets The Commission is required by its HUD annual contributions contracts to adopt annual budgets for the Low Rent Public Housing Program and the Housing Choice Vouchers Program. Annual budgets are not required for the Capital Fund Program, as those budgets are approved for the length of any given project. Annual, project, and grant length budgets require grantor approval. Appropriations are authorized at the function level. Management may transfer budget authorization between functions. All appropriations that are not used lapse at year end. Budgeted amounts are as originally adopted or as amended by the board. Cash and Cash Equivalents Cash and cash equivalents consist of cash on hand and all highly liquid investments purchased with an original maturity of three months or less. Investments Short-term investments consisted of certificates of deposit at June 30, 2019. Investments are reported at fair value or estimated value. Current Receivables and Recognition of Bad Debts Current receivables consist of revenue that is earned at year end, but not yet received. Tenant accounts generally are collectible as long as the tenant is occupying the unit; however, the Commission has established an allowance of $4,726 as potentially uncollectible as of June 30, 2019. Tenant bad debt for the year ended June 30, 2019 was $65,536. Prepaid Expenses Prepaid items consist of certain payments to vendors that reflect costs applicable to future fiscal years. 14 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 2 - Significant Accounting Policies (Continued) Investment in Partnership The amount of this investment includes amounts invested in and due from the Commission's discretely presented component unit, Oliver Gardens. Of the amount due, $405,767 is for developer fees earned that are payable from limited partner contributions or upon the availability of cash flow generated at the operating partnership level. Also included in this amount is $270,776 due from Oliver Gardens resulting from the Commission providing accounting, management, oversight, and maintenance services. Additionally, $300,113 is a note receivable dated December 31, 2007. The loan bears interest at 1 percent, compounded annually. The total amount of accrued interest at June 30, 2019 is $41,130. No principal or interest are due until the loan matures on January 1, 2048. The note is secured by land and substantially all the real property owned by Oliver Gardens LDHA LP. The note receivable is reported at its original issue amount less principal repaid. Interest is recognized according to the terms of the specific note. An allowance for loan loss is determined based on a specific assessment of the note that is delinquent or determined to be doubtful to be collected. A note is considered delinquent if the repayment terms are not met. All amounts deemed to be uncollectible are charged against the allowance for loan losses in the period that determination is made. As of June 30, 2019, no amounts have been deemed to be uncollectible. Capital Assets Purchased assets and self-constructed assets and certain improvements are recorded as assets at cost in accordance with the Commission's capitalization policy. Costs equal or above the capitalization threshold of $2,500 that materially add to the productive capacity and extend the life of an asset longer than one year are capitalized, while maintenance and repair costs are expensed as incurred. Property and equipment are depreciated using the straight-line method over the following useful lives: Years Buildings 40 Building improvements 7-40 Furniture and fixtures, equipment, and machinery 3-10 GASB Statement No. 42, Accounting and Financial Reporting for Impairment of Capital Assets and for Insurance Recoveries, establishes accounting and financial reporting standards for the impairment of capital assets. If an indicator of impairment is identified and the decline in service utility was unexpected and significant, an impairment loss is calculated in consideration of whether the capital asset will continue to be used by the Commission. An impairment loss is generally measured by identifying the historical cost of the service utility of the capital asset that cannot be used due to the impairment event of circumstance. Impaired capital assets that will no longer be used by the Commission are reported at the lower of carrying value or fair value, or written off entirely. During 2019, no impairments were recorded. Restricted Cash Restricted cash represents amounts held in escrow accounts in the name of the entity for insurance and PILOT expenses, FSS escrows, Section 8 funds, tenant deposits, and replacement reserves. Restrictions for use in operations and approval are governed by HUD, lender requirements, or other outside parties. Other Noncurrent Assets According to the partnership agreement of Oliver Gardens, the general partner of Oliver Gardens, Oliver Gardens, LLC, is entitled to a cumulative annual partnership management fee of$10,000 per annum. As described above, Oliver Gardens, LLC is 99 percent owned by LHCNPDC and 1 percent owned by the Commission. As such, the total accrued partnership management fee of $110,000 at June 30, 2019 is reported as an other receivable on the statement of net position. 15 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 2 - Significant Accounting Policies (Continued) Other assets of the component unit include $22,917 of costs related to obtaining tax credits, net of accumulated amortization of$18,334. These costs have been capitalized and are being amortized over 15 years using the straight-line method. Amortization expense for the year ended June 30, 2019 was$1,528. Compensated Absences The Commission allows employees to accumulate earned but unused sick and vacation pay benefits. The Commission accrues a liability for benefits attributable to services already rendered by the Commission's employees. Employees are entitled to a specific amount of leave per month capped at 480 hours total. Upon separation from employment, employees with 20 years of service hired before December 31, 2009 are entitled to receive pay for 50 percent of their accrued unused sick time, and employees with 25 years of service hired on or after January 1, 2010 are entitled to receive pay for 25 percent of their accrued unused sick time. The liability for accrued and unused leave was $66,823 at June 30, 2019, of which $10,023 is current and $56,800 is noncurrent. Classification of Net Assets Net position is composed of three categories: (1) net investment in capital assets, (2) restricted, and (3) unrestricted. The Commission's positive value of unrestricted net position in the primary government may be used to meet ongoing obligations. When an expense is incurred for a purpose for which both restricted and unrestricted net assets are available, the Commission's policy is to first apply restricted resources. Each component of net assets is reported separately on the statement of net position. i. Net investment in capital assets - This category consists of capital assets (including restricted capital assets), net of accumulated depreciation and reduced by any outstanding balances of mortgages, notes, or other borrowings that are attributable to the acquisition, construction, and improvements of those assets. ii. Restricted - This category equals the restricted cash of the Commission and consists of net position restricted in its use by (1) external groups, such as grantors, creditors, or laws and regulations of other governments, or(2) law through constitutional provisions or enabling legislation. iii. Unrestricted - This category includes all of the remaining net position that does not meet the definition of the other two categories. Revenue Recognition The Commission receives funds from certain federal and other agencies under various grant programs. Receivables are recorded based upon amounts expended for the various programs for which funds have not been received to the extent grant limits have not been exceeded. The Commission leases properties to tenants under various rental arrangements. Payments from tenants are recognized as revenue in the period during which the associated use of premises occurred. Operating Revenue and Expenses The Commission's operating revenue includes HUD and state/local in support of housing units and programs, as well as other amounts received from tenants for rent and other charges for services provided. Operating expenses are costs incurred during the operation of its primary housing activities. Such revenue and expenses are reported when earned or incurred, respectively. The Commission also received a ROSS (Resident Opportunities & Self Sufficiency) Grant from HUD in fiscal year 2019 to cover the costs of the service coordinator. Capital Grants The Commission records grants received for capital outlay as contributions of capital gains. 16 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 2 - Significant Accounting Policies (Continued) Nonoperating Revenue and Expenses Nonoperating revenue and expenses are derived from transactions other than those associated with the Commission's primary housing operations and are reported as incurred, including investment activity. Pension The Commission offers a defined benefit pension plan to its employees. The Commission records a net pension asset or liability for the difference between the total pension liability calculated by the actuary and the pension plan's fiduciary net position. For the purpose of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the fiduciary net position of the pension plan and additions to/deductions from the pension plan's fiduciary net position have been determined on the same basis as they are reported by the pension plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Other Postemployment Benefit Costs The Commission provides retiree healthcare benefits to eligible employees and their spouses. The Commission records a net other postemployment benefit cost (OPEB) asset or liability for the difference between the total OPEB liability calculated by the actuary and the OPEB plan's fiduciary net position. For the purpose of measuring the net OPEB liability, deferred outflows of resources and deferred inflows of resources related to OPEB, and OPEB expense, information about the fiduciary net position of the OPEB plan and additions to/deductions from the OPEB plan's fiduciary net position have been determined on the same basis as they are reported by the OPEB plan. For this purpose, benefit payments (including refunds of employee contributions) are recognized when due and payable in accordance with the benefit terms. Investments are reported at fair value. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Upcoming Accounting Pronouncements In January 2017, the GASB issued Statement No. 84, Fiduciary Activities. This statement establishes criteria for identifying fiduciary activities of all state and local governments. An activity meeting the criteria should be reported in a fiduciary fund in the basic financial statements. The Commission is currently evaluating the impact this standard will have on the financial statements when adopted. The provisions of this statement are effective for the Commission's financial statements for the year ending June 30, 2020. In June 2017, the GASB issued Statement No. 87, Leases, which improves accounting and financial reporting for leases by governments. This statement requires recognition of certain lease assets and liabilities for leases that were previously classified as operating leases and recognized as inflows of resources or outflows of resources based on the payment provisions of the contract. It establishes a single model for lease accounting based on the foundational principle that leases are financings of the right to use an underlying asset. Under this statement, a lessee is required to recognize a lease liability and an intangible right-to-use lease asset, and a lessor is required to recognize a lease receivable and a deferred inflow of resources. The Commission is currently evaluating the impact this standard will have on the financial statements when adopted. The provisions of this statement are effective for the Commission's financial statements for the year ending June 30, 2021. 17 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 2 - Significant Accounting Policies (Continued) In August 2018, the GASB issued Statement No. 90, Majority Equity Interests. This statement improves the consistency and comparability of reporting a government's majority equity interest in a legally separate organization and improves the relevance of financial statement information for certain component units. The Commission is currently evaluating the impact this standard will have on the financial statements when adopted for the year ending June 30, 2020. In May 2019, the GASB issued Statement No. 91, Conduit Debt Obligations, which clarifies the existing definition of conduit debt, provides a single method of reporting conduit debt obligations by issuers, and eliminates diversity in practice associated with commitments extended by issuers, arrangements associated with conduit debt obligations, and related note disclosures. As a result, issuers should not recognize a liability for items meeting the definition of conduit debt; however, a liability should be recorded for additional or voluntary commitments to support debt service if certain recognition criteria are met. The standard also addresses the treatment of arrangements where capital assets are constructed or acquired with the proceeds of a conduit debt obligation and used by a third-party obligor. The requirements of the standard will be applied retrospectively and are effective for the Commission's financial statements for the June 30, 2022 fiscal year. Subsequent Events The financial statements and related disclosures include evaluation of events up through and including November 11, 2019, which is the date the financial statements were available to be issued. Note 3 - Deposits and Investments Deposits and investments are reported in the financial statements as follows: Primary Government Component Unit (LHC) (Oliver Gardens) Cash and cash equivalents-Unrestricted $ 4,037,366 $ 40,754 Cash and cash equivalents-Restricted 106,180 341,402 Tenant security deposits- Restricted 133,852 5,071 Investments-Certificates of deposit 523,004 - Total deposits and investments $ 4,800,402 $ 387,227 Michigan Compiled Laws Section 129.91 (Public Act 20 of 1943, as amended) authorizes local governmental units to make deposits and invest in the accounts of federally insured banks, credit unions, and savings and loan associations that have offices in Michigan. The law also allows investments outside the state of Michigan when fully insured. The local unit is allowed to invest in bonds, securities, and other direct obligations of the United States or any agency or instrumentality of the United States, repurchase agreements, bankers' acceptances of United States banks, commercial paper rated within the two highest classifications that matures not more than 270 days after the date of purchase, obligations of the State of Michigan or its political subdivisions that are rated as investment grade, and mutual funds composed of investment vehicles that are legal for direct investment by local units of government in Michigan. The Commission has designated two banks for the deposit of its funds. The investment policy adopted by the board in accordance with Public Act 196 of 1997 has authorized investment in bonds and securities of the United States government and bank accounts and CDs, but not the remainder of state statutory authority, as listed above. The Commission's deposits and investments are in accordance with statutory authority. 18 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 3 - Deposits and Investments (Continued) The Commission's cash and investments are subject to several types of risk, which are examined in more detail below: Custodial Credit Risk of Bank Deposits Custodial credit risk is the risk that, in the event of a bank failure, the Commission's deposits may not be returned to it. The Commission does not have a deposit policy for custodial credit risk. At year end, the Commission had $0 of bank deposits (certificates of deposit and checking and savings accounts) that were uninsured and uncollateralized. Custodial Credit Risk of Investments Custodial credit risk is the risk that, in the event of the failure of the counterparty, the Commission will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Commission does not have a policy for custodial credit risk. At year end, $273,004 of investment securities was uninsured and unregistered, with securities held by the counterparty or by its trust department or agent but not in the Commission's name. Note 4 - Capital Assets Capital asset activity of the Commission's governmental activities was as follows: Primary Government Balance Balance July 1, 2018 Reclassifications Additions Reductions June 30, 2019 Capital assets not being depreciated: Land $ 1,554,771 $ - $ - $ - $ 1,554,771 Construction in progress 914,088 (804,681) 288,349 - 397,756 Total nondepreciable assets 2,468,859 (804,681) 288,349 - 1,952,527 Capital assets being depreciated: Buildings and improvements 51,223,127 804,681 - (94,729) 51,933,079 Machinery and equipment 1,313,200 - - (9,068) 1,304,132 Total depreciable capital assets 52,536,327 804,681 - (103,797) 53,237,211 Accumulated depreciation 40,513,090 - 1,232,698 (102,831) 41,642,957 Net capital assets being depreciated 12,023,237 804,681 (1,232,698) (966) 11,594,254 Net capital assets $ 14,492,096 $ - $ (944,349) $ (966) $ 13,546,781 19 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 4 - Capital Assets (Continued) Component Unit Balance Balance July 1, 2018 Additions Disposals June 30, 2019 Capital assets not being depreciated -Land $ 685,162 $ - $ - $ 685,162 Capital assets being depreciated: Buildings and improvements 3,318,485 - - 3,318,485 Furniture and equipment 188,459 - - 188,459 Subtotal 3,506,944 - - 3,506,944 Accumulated depreciation- Buildings and improvements 1,713,237 140,332 - 1,853,569 Net capital assets being depreciated 1,793,707 (140,332) - 1,653,375 Net capital assets $ 2,478,869 $ (140,332) $ - $ 2,338,537 Construction in Progress Capital improvements made for LHC's low-rent housing units are financed by grant funds provided by HUD under capital grants. Capital grants are awarded annually based on a five-year comprehensive modernization plan submitted by the Commission. Related construction in progress are costs incurred for the modernization of low-rent units. When modernization projects are completed, HUD issues a modernization cost certificate for each grant, closing out the grant for that year, at which time, construction in progress for that grant is placed in service and transferred to the buildings or improvements categories. Note 5 - Long-term Debt Primary Government Lansing Housing Commission's debt is composed of a promissory note payable to Davenport University and a lease with PNC for the Energy Performance Contract. These are both considered direct borrowings. Davenport University The Commission purchased an office building and land from Davenport University (the "Lender") in 2012 for $950,000 with a $700,000 promissory note payable to the Lender. The note bears an annual interest rate of 2.4 percent, which is subject to adjustment concurrently with changes in the Lender's cost of funds. Equal monthly payments of $5,000 are due beginning on July 28, 2012. The outstanding principal and interest balance will be due when the note matures on June 28, 2022. PNC Energy Conservation Measures (ECMs), as defined in the Commission's Energy Performance Contract (EPC) dated December 11, 2013, are financed by PNC, as stipulated in the Master Equipment Lease- Purchase Agreement in the principal amount of $2,051,375. This obligation was issued pursuant to the provisions of Act 18, Public Acts of Michigan 1933 (Ex. Sess), as amended, and Chapter 260 of the Code of Ordinances of the City of Lansing. HUD's Public Housing EPC program is an innovative financing technique that uses cost savings from reduced energy consumption to repay the cost of installing ECMs. The project is financed with a tax-exempt lease for a term of 15 years at a fixed interest rate of 3.91 percent. PNC as the lender has a security interest in the ECMs. 20 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 5 - Long-term Debt (Continued) Component Unit Oliver Gardens has the following loans outstanding as of December 31, 2018 that are secured by land and substantially all real property owned by Oliver Gardens. These are all considered direct borrowings: Mortgage dated October 17, 2006 held by Michigan State Housing Development Authority (MSHDA) in the amount of $1,775,482. The mortgage bears interest at a rate of 5.5 percent. However, an amount equal to 0.5 percent of interest is deferred until the mortgage principal balance is paid in full. Monthly payments of principal and interest are required in the amount of$8,961. Financing fees of$45,415 were incurred in connection with obtaining loans to rehabilitate the property.These costs are being amortized over the term of the related debt and are reported net of debt on the statement of net position. As of December 31, 2018, total accumulated amortization related to these costs was $14,920. Amortization expense was $1,528 for the year ended December 31, 2018 and has been included as a component of interest expense on statement of activities $ 1,476,085 HOME loan dated June 1, 2006 in the amount of$170,000.The loan is held by the City of Lansing, Michigan under the HOME Investments Partnership Program and bears interest at a rate of 0.5 percent, compounded annually. Principal and interest are due on the loan when it matures on December 31, 2041 170,000 Community Development Block Grant (CDBG) loan dated May 31, 2006 in the amount of $550,000. The loan is held by the City of Lansing, Michigan under the CDBG Program and bears interest at a rate of 0.5 percent, compounded annually, on $150,000 of the loan. Principal and interest are due on the loan when it matures on May 31, 2046 550,000 Lansing Housing Commission note dated December 31, 2007 in the amount of$300,133. The loan is held by LHC and bears an interest rate of 0.5 percent. Principal and interest are due on the loan when it matures on January 1, 2048 300,133 Total 2,496,218 Less current portion 32,947 Long-term portion $ 2,463,271 Primary Government Future minimum principal and interest payments on the LHC promissory note (direct borrowing) with Davenport University to maturity for the years ending June 30 are as follows: Years Ending Principal Interest Total 2020 $ 58,000 $ 2,000 $ 60,000 2021 59,000 1,000 60,000 2022 7,986 361 8,347 Total $ 124,986 $ 3,361 $ 128,347 21 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 5 - Long-term Debt (Continued) Future minimum principal and interest payments on LHC's lease (direct borrowing) with PNC to maturity for the years ending June 30 are as follows: Years Ending Amount Interest 2020 $ 137,499 $ 62,000 2021 144,000 56,000 2022 150,000 50,000 2023 156,000 44,000 2024 162,000 37,000 2025-2028 720,000 78,000 2029 97,265 1,000 Total $ 1,566,764 $ 328,000 Component Unit Future minimum principal and interest payments on direct borrowings to maturity for the years ending December 31 are as follows: Years Ending Amount Interest 2019 $ 32,947 $ 74,585 2020 34,638 72,894 2021 36,411 71,121 2022 38,273 69,259 2023 40,232 67,300 2024-2028 234,222 303,438 2029-2033 300,591 237,069 2034-2038 385,765 151,895 2039-2043 543,006 376,876 2044-2048 850,133 - Total $ 2,496,218 $ 1,424,437 Changes in long-term debt for the year ended June 30, 2019 (or December 31, 2018 for the discretely presented component unit) are presented below: Balance- Beginning of Balance- Year Additions Deletions End of Year Due in One Year Primary government- Direct borrowings: Davenport $ 425,762 $ - $ (300,776) $ 124,986 $ 57,632 PNC 1,698,162 - (131,398) 1,566,764 137,867 Total $ 2,123,924 $ - $ (432,174) $ 1,691,750 $ 195,499 Component unit- Direct borrowings: MSHDA $ 1,537,924 $ - $ (31,344) $ 1,506,580 $ 32,947 City of Lansing, Michigan 720,000 - - 720,000 - LHC 300,133 - - 300,133 - Total $ 2,558,057 $ - $ (31,344) $ 2,526,713 $ 32,947 22 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 5 - Long-term Debt (Continued) Interest expense for the year ended June 30, 2019 was $71,249 for the primary government, and interest expense for the year ended December 31, 2018 was $88,858 for the discrete component unit, excluding $1,298 of amortization expense of financing fees, which has been reported as a component of interest expense on the statement of activities. Note 6 - Agent Defined Benefit Pension Plan Description Plan Description Lansing Housing Commission participates in an agent multiple-employer defined benefit pension plan administered by the Municipal Employees' Retirement System of Michigan (MERS) that covers all employees of the Commission. MERS was established as a statewide public employee pension plan by the Michigan Legislature under PA 135 of 1945 and is administered by a nine-member retirement board. MERS issues a publicly available financial report, which includes the financial statements and required supplemental information of this defined benefit plan. This report can be obtained at www.mersofmich igan.com or in writing to MERS at 1134 Municipal Way, Lansing, MI 48917. Benefits Provided The Plan provides certain retirement, disability, and death benefits to plan members and beneficiaries. PA 427 of 1984, as amended, established and amends the benefit provisions of the participants in MERS. The MERS plan covers employees in the general open division; employees hired after May 1, 2012; and exempt employees hired before May 1, 2012. Retirement benefits for employees in the open general division are calculated as 2.25 percent of the employee's final three-year average salary times the employee's years of service. Normal retirement age is 60 with early retirement at 55 with 15 years of service. Early retirement age with reduced benefits is 50 with 25 years of service. The vesting period is eight years. Employees are eligible for nonduty disability benefits after eight years of service and for duty-related disability benefits upon hire. Disability retirement benefits are determined in the same manner as retirement benefits, but are payable immediately without an actuarial reduction. Death benefits equal 80 times the employee's final full-year salary. An employee who leaves service may withdraw his or her contributions plus any accumulated interest. Retirement benefits for employees hired after May 1, 2012 are calculated as 1.70 percent of the employee's final three-year average salary times the employee's years of service. Normal retirement age is 60. Early retirement age with reduced benefits is at 50 with 25 years of service or 55 with 15 years of service. The vesting period is eight years. Employees are eligible for nonduty disability benefits after eight years of service and for duty-related disability benefits upon hire. Disability retirement benefits are determined in the same manner as retirement benefits, but are payable immediately without an actuarial reduction. Death benefits for a surviving spouse equal 80 percent of the deceased member's accrued retirement allowance, computed in the same manner as a service retirement allowance, based on service and final average compensation at the time of death. An employee who leaves service may withdraw his or her contributions plus any accumulated interest. Retirement benefits for exempt employees hired before May 1, 2012 are calculated as 2.25 percent of the employee's final three-year average salary times the employee's years of service. Normal retirement age is 60 with early retirement at 55 with 15 years of service. Early retirement age with reduced benefits is 50 with 25 years of service. The vesting period is eight years. Employees are eligible for nonduty disability benefits after eight years of service and for duty-related disability benefits upon hire. Disability retirement benefits are determined in the same manner as retirement benefits, but are payable immediately without an actuarial reduction. Death benefits equal 80 times the employee's final full-year salary. An employee who leaves service may withdraw his or her contributions plus any accumulated interest. Benefit terms provide for annual cost of living adjustments to each employee's retirement allowance subsequent to the employee's retirement date. The annual adjustments are 3 percent, noncompounding. 23 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 6 - Agent Defined Benefit Pension Plan Description (Continued) Benefit terms, within the parameters established by MERS, are generally established and amended by authority of the board of commissioners, generally after negotiations of these terms with the affected unions. Benefit terms may be subject to binding arbitration in certain circumstances. Employees Covered by Benefit Terms At the December 31, 2018 measurement date, the following employees were covered by the benefit terms: Inactive plan members or beneficiaries currently receiving benefits 41 Inactive plan members entitled to but not yet receiving benefits 13 Active plan members 24 Total employees covered by MERS 78 Contributions State law requires public employers to make pension contributions in accordance with an actuarial valuation. The Commission hires an independent actuary for this purpose and annually contributes the amount determined to finance the costs of benefits earned by employees during the year, with an additional amount to finance any unfunded accrued liability. The employer may establish contribution rates to be paid by its covered employees. For the year ended June 30, 2019, the average employee contribution rate was 5.0 percent of annual pay for all divisions, and the Commission's average contribution rate was 22.42 percent in the open general division and 0.65 percent under the new hires division of annual payroll. Net Pension Liability The Commission has chosen to use the December 31 measurement date as its measurement date for the net pension liability. The June 30, 2019 fiscal year end reported net pension liability was determined using a measure of the total pension liability and the pension net position as of the December 31, 2018 measurement date. The December 31, 2018 measurement date total pension liability was determined by an actuarial valuation performed as of that date. Changes in the net pension liability during the measurement year were as follows: Increase (Decrease) Total Pension Plan Net Net Pension Changes in Net Pension Liability Liability Position Liability Balance at December 31,2017 $ 9,088,660 $ 8,632,982 $ 455,678 Service cost 72,132 - 72,132 Interest 700,146 - 700,146 Differences between expected and actual experience 77,954 - 77,954 Contributions-Employer - 145,613 (145,613) Contributions-Employee - 62,196 (62,196) Net investment loss - (323,275) 323,275 Benefit payments, including refunds (701,709) (701,709) - Administrative expenses - (16,423) 16,423 Miscellaneous other charges (21,160) (22,040) 880 Net changes 127,363 (855,638) 983,001 Balance at December 31,2018 $ 9,216,023 $ 7,777,344 $ 1,438,679 The plan's fiduciary net position represents 84.4 percent of the total pension liability. 24 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 6 - Agent Defined Benefit Pension Plan Description (Continued) Pension Expense and Deferred Outflows of Resources and Deferred Inflows of Resources Related to Pensions For the year ended June 30, 2019, the Commission recognized pension expense of$10,364. At June 30, 2019, the Commission reported deferred outflows of resources and deferred inflows of resources related to pensions from the following sources: Deferred Deferred Outflows of Inflows of Resources Resources Difference between expected and actual experience $ 81,490 $Net difference between projected and actual earnings on pension plan investments 590,761 - Employer contributions to the plan subsequent to the measurement date 137,197 - Total $ 809,448 $ - Amounts reported as deferred outflows of resources and deferred inflows of resources related to pensions will be recognized in pension expense as follows. These amounts are exclusive of the employer contributions to the plan made subsequent to the measurement date $(137,197), which will impact the net pension liability in fiscal year 2020, rather than pension expense. Years Ending June 30 Amount 2020 $ 263,642 2021 97,601 2022 112,484 2023 198,524 Actuarial Assumptions The total pension liability in the December 31, 2018 actuarial valuation was determined using an inflation assumption of 2.5 percent; assumed salary increases of 3.75 percent (in the long term, plus a merit and longevity increase ranging from 0 to 11 percent); and an investment rate of return (net of pension plan investment expenses)of 8.0 percent. Mortality rates were a blend of the RP-2014 Healthy Annuitant Mortality Tables, with rates multiplied by 105 percent; RP-2014 Employee Mortality Tables; and RP-2014 Juvenile Mortality Tables, all with a 50 percent male and 50 percent female blend. For disabled retirees, the RP-2014 Disabled Retiree Mortality Table with a 50 percent male and 50 percent female blend is used to reflect the higher expected mortality rates of disabled members. The actuarial assumptions used in the December 31, 2018 valuation were based on the results of an actuarial experience study for the period from January 1, 2009 through December 31, 2013. Discount Rate The discount rate used to measure the total pension liability was 8.0 percent. The projection of cash flows used to determine the discount rate assumed that employee contributions will be made at the current contribution rate and that employer contributions will be made at rates equal to the difference between actuarially determined contribution rates and the employee rate. 25 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 6 - Agent Defined Benefit Pension Plan Description (Continued) Investment Rate of Return Based on those assumptions, the pension plan's fiduciary net position was projected to be available to make all projected future benefit payments of current active and inactive employees. Therefore, the long- term expected rate of return on pension plan investments was applied to all periods of projected benefit payments to determine the total pension liability. The long-term expected rate of return on pension plan investments of 8.0 percent was determined using a model in which best-estimate ranges of expected future real rates of return (expected returns, net of pension plan investment expense and inflation) are developed for each major asset class. These ranges are combined to produce the long-term expected rate of return by weighting the expected future real rates of return by the target asset allocation percentage and by adding expected inflation. The target allocation and best estimates of arithmetic real rates of return as of December 31, 2018, the measurement date, for each major asset class, are summarized in the following tables: Long-term Target Allocation Expected Real Asset Class (%) Rate of Return Global equity 55.50 % 6.15 % Global fixed income 18.50 1.26 Real estate 13.50 7.22 Diversifying strategies 12.50 5.00 Sensitivity of the Net Pension Liability to Changes in the Discount Rate The following presents the net pension liability of the Commission, calculated using the discount rate of 8.0 percent, as well as what the Commission's net pension liability would be if it were calculated using a discount rate that is 1 percentage point lower (7.00 percent) or 1 percentage point higher (9.00 percent) than the current rate: 1 Percent Current Discount 1 Percent Decrease Rate Increase (7.00%) (8.00%) (9.00%) Net pension liability of the Commission $ 2,346,681 $ 1,438,679 $ 666,536 Pension Plan Fiduciary Net Position Detailed information about the plan's fiduciary net position is available in the separately issued financial report. For the purpose of measuring the net pension liability, deferred outflows of resources and deferred inflows of resources related to pensions, and pension expense, information about the plan's fiduciary net position and additions to/deductions from fiduciary net position have been determined on the same basis as they are reported by the plan. The plan uses the economic resources measurement focus and the full accrual basis of accounting. Investments are stated at fair value. Contribution revenue is recorded as contributions are due, pursuant to legal requirements. Benefit payments and refunds of employee contributions are recognized as expense when due and payable in accordance with the benefit terms. Note 7 - Other Postemployment Benefit Plan Plan Description The Commission provides retiree healthcare benefits to eligible employees and their spouses. This is a single-employer defined benefit plan administered by the Commission and is provided under a separate collective bargaining agreement on health care. The plan does not issue a publicly available financial report. 26 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 7 - Other Postemployment Benefit Plan (Continued) Benefits Provided During the year ended June 30, 2019, the board of commissioners approved a policy to change the benefits provided under the other postemployment benefit (OPEB) plan. The plan provides comprehensive medical and life insurance for retirees. For those retirees over the age of 65 as of January 1, 2019, both the retiree and spouse may be covered in retirement. Health, dental, and vision benefits will be administered through a third-party insurer, with each retiree given $100 per month ($200 per month if spouse is eligible for coverage) to purchase an individual Medicare Supplement, Medicare Part D Prescription Drug, and Medicare Advantage plans, along with dental and vision plans. For those retirees under the age of 65 as of January 1, 2019, each retiree will be given $750 per month ($1,200 per month if spouse is eligible for coverage) to purchase a plan of their choosing along with dental and vision. For active employees hired prior to January 1, 2019, the Commission will contribute $50 per month per employee, while a payroll deduction will be required of each employee of $10 per month. Both amounts will be deposited into the MERS Health Care Savings Program. Employees will be vested into the heath retirement account after eight years of service. Prior to vesting, employees leaving employment will immediately be allowed to keep and use their personal contributions plus investment gains on their health account. The Commission portion will be returned for use in satisfying other OPEB liabilities. After vesting, the entire health account is available for the employee's use for medical expenses upon retirement or termination of employment. Employees hired after January 1, 2019 will not be provided OPEB benefits. Employees Covered by Benefit Terms The following members were covered by the benefit terms: Date of member count July 1, 2017 Inactive plan members or beneficiaries currently receiving benefits 17 Active plan members 20 Total employees covered by the plan 37 Contributions Retiree healthcare costs are paid by the Commission on a "pay-as-you-go" basis. The Commission has no obligation to make contributions in advance of when the insurance premiums are due for payment. For the fiscal year ended June 30, 2019, the Commission made payments for postemployment health benefit premiums plus implicit costs for the retiree medical program of$201,577. Net OPEB Liability The Commission's net OPEB liability was measured as of June 30, 2019 and was determined by an actuarial valuation as of July 1, 2017, which used updated procedures to roll forward the estimated liability to June 30, 2019. 27 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 7 - Other Postemployment Benefit Plan (Continued) Changes in the net OPEB liability during the measurement year were as follows: Increase (Decrease) Total OPEB Plan Net Net OPEB Liability Position Liability Balance at July 1, 2018 $ 1,871,478 $ - $ 1,871,478 Service cost 11,298 - 11,298 Interest 49,023 - 49,023 Change in benefit terms (882,057) - (882,057) Change in assumptions (118,162) - (118,162) Differences between actual and expected experience 141,256 - 141,256 Contributions - 201,577 (201,577) Benefit payments (201,577) (201,577) - Balance at June 30,2019 $ 871,259 $ - $ 871,259 For the year ended June 30, 2019, the Commission recognized OPEB recovery of$952,480. Actuarial Assumptions The total OPEB liability was determined by an actuarial valuation as of July 1, 2017. The valuation used the following actuarial assumptions, applied to all periods included in the measurement, unless otherwise specified: Inflation 2.75 percent as of June 30, 2019 and for future periods Cost of living 3.50 percent annually as of June 30, 2019 and for future periods Salary increases 3.00 percent annually as of June 30, 2019 and for future periods Mortality Represented by the RP-2000 Employees Mortality Table projected generationally with scale BB and a base year 2009 for males and females The actuarial assumptions in the July 1, 2017 valuation were based on the results of an actuarial experience study for the period from July 1, 2015 through July 1, 2017. The changes in assumptions from June 30, 2018 to June 30, 2019 included a change in the discount rate from 3.25 percent to 2.75, and the expected cost of living adjustment was updated to 3.5 percent. Discount Rate The discount rate used to measure the total OPEB liability at June 30, 2019 was 2.75 percent. The discount rate was based on the S&P Municipal Bond 20-year high-grade index- SAPIHG. Sensitivity of the Net OPEB Liability to Changes in the Discount Rate The following presents the net OPEB liability of the Commission, calculated using the discount rate of 2.75 percent, depending on the plan option. The following also reflects what the Commission's net OPEB liability would be if it were calculated using a discount rate that is 1 percentage point lower (1.75 percent) or 1 percentage point higher(3.75 percent)than the current rate: 1 Percent Current Discount 1 Percent Decrease Rate Increase (1.75%) (2.75%) (3.75%) Net OPEB liability of the Commission $ 959,429 $ 871,259 $ 801,902 28 Lansing Housing Commission Notes to Financial Statements June 30, 2019 Note 7 - Other Postemployment Benefit Plan (Continued) Sensitivity of the Net OPEB Liability to Changes in the Cost of Living Cost Trend The following presents the net OPEB liability of the Commission, calculated using the cost of living trend rate of 3.50 percent, as well as what the net OPEB liability would be if it were calculated using a healthcare cost trend rate that is 1 percentage point lower (2.50 percent) or 1 percentage point higher (4.50 percent)than the current rate: 1 Percent Current Discount 1 Percent Decrease Rate Increase (2.50%) (3.50%) (4.50%) Net OPEB liability of the Commission $ 798,761 $ 871,259 $ 957,909 Note 8 - Commitments and Contingencies The Commission receives financial assistance from federal and state agencies in the form of grants. The disbursement of funds received under these programs generally requires compliance with the terms and conditions specified in the grant agreements and is subject to audit by the grantor agencies. Any disallowed claims resulting from such audits could become a liability of the Commission. However, in the opinion of management, any such disallowed claims will not have a material adverse effect on the overall financial position of the Commission at June 30, 2019. The collective bargaining three-year agreement between the Housing Commission employees and Chapter of Local 1390.11 and Michigan Council #25, AFSCME, AFL-CIO, covering approximately 31 percent of the Commission's labor force, will be in place from January 1, 2019 through December 31, 2021. Note 9 - Risk Management The Commission is exposed to various risks of loss related to property loss, torts, errors and omissions, and employee injuries (workers' compensation), as well as medical benefits provided to employees. The Commission has purchased commercial insurance for all risk of loss, including workers' compensation, employee health, and accident insurance. Settled claims relating to the commercial insurance have not exceeded the amount of insurance coverage in any of the past three fiscal years. Note 10 - Concentrations The Commission operates in a heavily regulated environment. The operations of the Commission are subject to the administrative directives, rules, and regulations of federal, state, and local regulatory agencies, including, but not limited to HUD. Such administrative directives, rules, and regulations are subject to change by an Act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related costs and the additional administrative burden to comply with the changes. For the year ended June 30, 2019, approximately 80 percent of the operating revenue reflected in the primary government basic financial statements is from HUD. 29 Required Supplemental Information 30 Lansing Housing Commission Required Supplemental Information Schedule of Changes in the Commission's Net Pension Liability and Related Ratios Last Five Fiscal Years 2019 2018 2017 2016 2015 Total Pension Liability Service cost $ 72,132 $ 91,117 $ 126,678 $ 114,272 $ 114,461 Interest 700,146 687,782 714,076 698,614 684,653 Differences between expected and actual experience 77,954 88,563 (140,946) (123,435) - Changes in assumptions - - (349,397) 405,966 - Benefit payments, including refunds (701,709) (661,395) (651,805) (635,102) (624,495) Other (21,160) (4,2682 (521) - - Net Change in Total Pension Liability 127,363 201,799 (301,915) 460,315 174,619 Total Pension Liability- Beginning of year 9,088,660 8,886,861 9,188,776 8,728,461 8,553,842 Total Pension Liability- End of year $ 9,216,023 $ 9,088,660 $ 8,886,861 $ 9,188,776 $ 8,728,461 Plan Fiduciary Net Position Contributions - Employer $ 145,613 $ 685,378 $ 693,689 $ 158,735 $ 215,191 Contributions- Member 62,196 70,951 67,424 55,586 37,167 Net investment(loss) income (323,275) 1,035,066 743,039 (104,348) 446,261 Administrative expenses (16,423) (16,381) (14,686) (15,480) (16,314) Benefit payments, including refunds (701,709) (661,395) (651,805) (635,102) (624,495) Other (22,040) (4,445) (521) - - Net Change in Plan Fiduciary Net Position (855,638) 1,109,174 837,140 (540,609) 57,810 Plan Fiduciary Net Position - Beginning of year 8,632,982 7,523,808 6,686,668 7,227,277 7,169,467 Plan Fiduciary Net Position - End of year $ 7,777,344 $ 8,632,982 $ 7,523,808 $ 6,686,668 $ 7,227,277 Commission's Net Pension Liability- Ending $ 1,438,679 $ 455,678 $ 1,363,053 $ 2,502,108 $ 1,501,184 Plan Fiduciary Net Position as a Percentage of Total Pension Liability 84.39 % 94.99 % 84.66 % 72.77 % 82.80 % Covered Payroll $ 1,072,020 $ 1,304,971 $ 1,333,333 $ 1,235,367 $ 1,164,556 Commission's Net Pension Liability as a Percentage of Covered Payroll 134.20 % 34.92 % 102.23 % 202.54 % 128.91 % See notes to schedule of commission contributions. 31 Lansing Housing Commission Required Supplemental Information Schedule of Commission Contributions Last Four Fiscal Years Years Ended December 31 2018 2017 2016 2015 Actuarially determined contribution $ 97,665 $ 133,299 $ 122,057 $ 103,079 Contributions in relation to the actuarially determined contribution 145,613 685,378 693,689 158,735 Contribution Excess $ 47,948 $ 552,079 $ 571,632 $ 55,656 Covered Payroll $ 1,072,020 $ 1,304,971 $ 1,333,333 $ 1,235,367 Contributions as a Percentage of Covered Employee Payroll 13.58 % 52.52 % 52.03 % 12.85 % See notes to schedule of commission contributions. 32 Lansing Housing Commission Required Supplemental Information Schedule of Changes in the Commission's OPEB Liability and Related Ratios Last Three Fiscal Years 2019 2018 2017 Total OPEB Liability Service cost $ 11,298 $ 53,470 $ 50,924 Interest 49,023 59,951 58,429 Changes in benefit terms (882,057) - - Differences between expected and actual experience 141,256 - - Changes in assumptions (118,162) - - Benefit payments, including refunds (201,577) (65,682) (64,552) Net Change in Total OPEB Liability (1,000,219) 47,739 44,801 Total OPEB Liability- Beginning of year 1,871,478 1,823,739 1,778,938 Total OPEB Liability- End of year $ 871,259 $ 1,871,478 $ 1,823,739 Covered Payroll $ 2,452,554 $ 2,381,121 $ 2,311,768 Total OPEB Liability as a Percentage of Covered Payroll 35.52 % 78.60 % 78.89 % See notes to schedule of commission contributions. 33 Lansing Housing Commission Required Supplemental Information Schedule of OPEB Contributions Last Three Plan Years Years Ended June 30 2018 2017 2016 Actuarially determined contribution $ 53,173 $ 148,959 $ 143,977 Contributions in relation to the actuarially determined contribution 201,577 65,682 64,552 Contribution (Excess) Deficiency $ (148,404) $ 83,277 $ 79,425 Covered Payroll $ 2,452,554 $ 2,381,121 $ 2,311,768 Contributions as a Percentage of Covered Payroll 8.22 % 2.76 % 2.79 % Notes to Schedule of Contributions Actuarial valuation information relative to the determination of contributions: Valuation date Actuarially determined contribution rates are calculated as of June 30, two years prior to the end of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Individual entry age normal cost method Asset valuation method Market value of assets as of the measurement date Inflation 2.75 percent per annum Cost of living adjustment 3.50 percent per annum Salary increase 3.00 percent per annum Investment rate of return 6.50 percent, net of OPEB plan investment expense, including inflation Retirement age 60 Mortality RP-2000 Employee Mortality Table projected generationally with scale BB and a base year 2009 for males and females Other information None See notes to schedule of commission contributions. 34 Lansing Housing Commission Notes to Schedule of Commission Contributions June 30, 2019 Pension Information Actuarial valuation information relative to the determination of contributions: Valuation date Actuarially determined contribution rates are calculated as of December 31, two years prior to the end of the fiscal year in which the contributions are reported. Methods and assumptions used to determine contribution rates: Actuarial cost method Entry age normal cost method Amortization method Level percentage of payroll, open Remaining amortization period 20 years Asset valuation method 10-year smoothed Inflation 2.50 to 3.75 percent Salary increase 3.75 percent average, including inflation Investment rate of return 8.0 percent Retirement age 60 Mortality 50 percent male to 50 percent female blend of the 2004 Group Annuity Mortality Table Other information None Benefit Changes There were no changes of benefit terms in 2018. Changes in Assumptions There were no changes of benefit assumptions in 2018. Changes in Size or Composition of the Covered Population There were no significant changes in size or composition of the covered population. OPEB Information Benefit Changes The plan has been changed to provide a monthly contribution into the MERS Care Savings Program for Active employees hired prior to January 1, 2019 and a monthly stipend to employees retired prior to January 1, 2019. Changes in Assumptions From June 30, 2018 to June 30, 2019, the assumption for the discount rate was changed from 3.25 percent to 2.75 percent, and the expected cost of living adjustment was updated to 3.50 percent. 35 Other Supplemental Information 36 Lansing Housing Commission Financial Data Schedules Year Ended June 30, 2019 14.871 Housing 14.896 6.1 Component Public Housing 14.CFP Capital Supportive Business Central Office Units- Project Total Fund Choice Housing State/Local Activities Cost Center Subtotal Eliminations Total Discretely Vouchers Program Presented Balance Sheet Assets 111.00 Cash-Unrestricted $ 1,938,042 $ - $ 632,604 $ - $ 129,463 $ - $ 1,199,392 $ 3,899501 $ - $ 3,899501 $ 40,754 113.00 Cash-Other restricted - - 106,180 - - - - 106:180 - 106:180 341,403 114.00 Cash-Tenant security deposits 133,852 - - - - - - 133,852 - 133,852 5,071 115.00 Cash-Restricted for payment ofcurrent liabilities 137,867 - - - - - - 137,867 - 137,867 - 100.00 Total Cash 2,209,761 - 738,784 - 129,463 - 1,199,392 4,277,400 - 4,277,400 387,228 122.00 Total accounts receivable-HUD other projects 30,925 - - - - - - 30,925 - 30,925 - 124.00 Accounts receivable-Other government 4,949 - - - - - - 4,949 - 4,949 - 125.00 Total accounts receivable-Miscellaneous - - - - 255,571 - 33,394 288,965 - 288,965 1,799 126.00 Accounts receivable-Tenants-Dwelling rents 47,259 - - - - - - 47,259 - 47,259 3,240 126.10 Allowance for boubtful accounts-Dwelling rents (4,726) - - - - - - (4,726) - (4,726) - 127.00 Notes-Loans-B.Mortgages Receivable-Current - - - - - - - - - - - 128.00 Accounts and notes receivable fraud recovery 4,951 - - - - - - 4,951 - 4,951 - 129.00 Accrued interest receivable 464 - - - 464 - 464 120.00 Total Receivables-Net Of Allowances For Doubtful Accounts 83,822 - - - 255,571 - 33,394 372,787 - 372,787 5,039 131.00 Investments-Unrestricted 523,004 - - - - - - 523,004 - 523,004 - 142.00 Prepaid a)penses and other assets 43,945 - 2,545 - - - 2,706 49,196 - 49,196 4,919 143.00 Inventories - - - - - - - - - - - 144.00 Interprogram-Due from - - - - - - 879,491 879,491 (879,491) - - 150.00 Total Current Assets 2,860,532 - 741,329 - 385,034 - 2,114,983 6,101,878 (879,491) 5,222,387 397,186 161.00 Land 1,364,771 - - - - - 190,000 1,554,771 - 1,554,771 685,162 162.00 Buildings 51,195,108 - - - - - 737,971 61,933,079 - 51,933,079 3,318,485 163.00 Furniture-Equipment and machinery-Dwellings 895,673 - - - - - - 895,673 - 895,673 - 164.00 Furniture-Equipment and machinery-Administration 16,576 - 27,596 - - - 364,287 408,459 - 408,459 175,949 165.00 Leasehold Improvements - - - - - - - - - - - 166.00 Accumulated depreciation (40,531,779) - (27,596) - - - (1,083,579) (41,642,954) - (41,642,954) (1,853,569) 167.00 Construction in progress 397,755 - - - - - - 397,755 - 397,755 12,510 160.00 Total Fixed Assets-Net Of Accumulated Depreciation 13,338,104 - - - - - 208,679 13,546,783 - 13,546,783 2,338,537 171.00 Total notes-Loans-And mortgages receivable-Noncurrent - - - - - 747,010 270,776 1,017,786 - 1,017,786 - 174.00 Total other assets - - - - - 110,100 - 110,100 - 110,100 4,583 176.00 Total Investment In Joint Ventures - - - - 180.00 Total Noncurrent Assets 13,338,104 - - - - 857,110 479,455 14,674,669 - 14,674,669 2,343,120 190.00 Total Assets 16,198,636 - 741,329 - 385,034 857,110 2,594,438 20,776,547 (879,491) 19,817,056 2,740,306 200.00 Deferred outflow of resources 561,419 - 147,708 - - - 100,321 809,448 - 809,448 - 290.00 Total Assets and Deferred Outflow of Resources 16,760,055 889,037 385,034 857,110 2,694,759 21,585,995 (879,491) 20,706,504 2,740,306 37 Lansing Housing Commission Financial Data Schedules Year Ended June 30, 2019 14.871 Housing 14'896 6.1 Component Publie Housing 14.CFP Capital Supportive Business Central Office Units- ProjectTotal Fund Choice Housing State/Local Activities Cost Center Subtotal Eliminations Total Discretely Vouchers Program Presented Liabilities 312.00 Accounts payable-90 Days $ 30,925 $ - $ - $ - $ - $ - $ - $ 30,925 $ - $ 30,925 $ 1,962 321.00 Accrued wage/payroll taxes payable 31,171 - 14,985 - - - 6,157 52,313 - 52,313 78,174 322.00 Accrued compensated absences-Current portion 6,110 - 2,662 - - - 1,251 10,023 - 10,023 - 325.00 Accrued interest payable - - - - - - - - - - 165,055 331.00 Total accounts payable-HUD Pha programs - - - - - - - - - - - 333.00 Accounts payable-Other government 118,496 - - - - - - 118,496 - 118,496 19,255 341.00 Tenant security deposits 133,852 - - - - - - 133,852 - 133,852 5,071 342.00 Total deferred revenue 18,352 - - - - - 3,705 22,057 - 22,057 593 343.00 Total current portion of LTD-capital projects/mortgage revenue bonds 137,867 - - - - - 57,632 195,499 - 195,499 32,947 345.00 Other Current Liabilities - - - - - - - - - - 133,187 346.00 Accrued liabilities-Other 164,152 - 8,435 - - - 6,749 179,336 - 179,336 78,035 347.00 Interprogram-Due to - - - - - 879,491 - 879,491 (879,491) - - 348.00 Loan liability-Current - - - - - - - 1 - 177,762 310.00 Total Current Liabilities 640,925 - 26,082 - - 879,491 75,494 1,621,992 (879,491) 742,501 692,041 351.00 Total LTD-Net ofcurrent-Capital projects/mortgage revenue bonds 1,428,897 - - - - - 67,354 1,496,251 - 1,496,251 2,463,271 353.00 Noncurrent liabilities-Other - - 58,615 - - - - 58,615 - 58,615 515,767 354.00 Accrued compensated absences-Noncurrent 34,626 - 15,086 - - - 7,088 56,800 - 56,800 - 357.00 Accrued pension and OPEB liabilities 1,520,660 - 521,618 - - - 267,660 2,309,938 - 2,309,938 - 350.00 Total Noncurrent Liabilities 2,984,183 - 595,319 - - - 342,102 3,921,604 - 3,921,604 2,979,038 300.00 Total Liabilities 3,625,108 - 621,401 - - 879,491 417,596 5,543,596 (879,491) 4,664,105 3,671,079 400.00 Deferred inflow of resources - - - - - - - - - - - Equity 508.40 Invested in capital assets-Net of related debt 11,771,340 - - - - - 83,693 11,855,033 - 11,855,033 (157,681) 511.40 Restricted net assets - - 47,565 - - - - 47,565 - 47,565 - 512.40 Unrestricted net assets 1,363,607 - 220,071 - 385,034 (22,381) 2,193,470 4,139,801 - 4,139,801 (773,092) 513.00 Total Equity/Net Assets 13,134,947 - 267,636 - 385,034 (22,381) 2,277,163 16,042,399 - 16,042,399 (930,773; 600.00 1 Total Liabilities and Equity/Net Assets 16,760,055 889,037 385,034 857,110 2,694,759 1 21,585,995 (879,491)1 20,706,504 1 2,740,306 38 Lansing Housing Commission Financial Data Schedules Year Ended June 30, 2019 14.871 Housing 14.896 6.1 Component Public Housing 14.CFu Capital Choice Supportive State/Local Business Central Office Subtotal Diminations Total Units- Project Total Fund Vouchers Housing Activities Cost Center Discretely Program Presented Income Statement Revenue 70300 Net tenant rental revenue $ 1,575,020 $ - $ - $ - $ - $ - $ - $ 1,575,020 $ - $ 1,575,020 $ 87,253 70400 Tenant revenue-Other 139,380 - - - - - - 139,380 - 139,380 - 70500 Total Tenant Revenue 1,714,400 - - - - - - 1,714,400 - 1,714,400 87,253 70600 Total HUD Pha operating grants 3,728,854 858,100 11,601,323 10,769 - - - 16,199,046 - 16,199,046 191,445 70610 Capital grants - 263,889 - - - - - 263,889 - 263,889 - 70710 Managementfee - - - - - - 910,210 910,210 (910,210) - - 70720 Asset managementfee - - - - - - 99,960 99,960 (99,960) - - 70730 Bookkeeping fee - - - - - - 72,164 72,164 (72,164) - - 70750 Other fees - I - - - I - - - - I - - - 70700 Total Fee Revenue 3,728,854 1,121,989 11,601,323 10,769 - - 1,082,334 17,545,269 (1,082,334) 16,462,935 - 70800 Other government grants - - - - 1,079,056 - - 1,079,056 - 1,079,056 - 71100 Total investment income-Unrestricted 8,137 - 154 - - - - 8,291 - 8,291 10,991 71200 Mortgage Interest Income - - - - - - - - - - - 71400 Total revenue fraud recovery - - 16,350 - - - - 16,350 - 16,350 - 71500 Other revenue 808,440 - 302,023 - - 13,378 181,085 1,304,926 - 1,304,926 50 71600 Gain or loss on sale offixed assets (965) - - - - - - (965) - (965) - 70000 Total Revenue 6,258,866 1,121,989 11,919,850 10,769 1,079,056 13,378 1,263,419 21,667,327 (1,082,334) 20,584,993 289,739 39 Lansing Housing Commission Financial Data Schedules Year Ended June 30, 2019 14.871 Housing 14.896 6.1 Component Ch oice State/Local Subtotal Eliminations Total Public Housing 14.CFP Capital Supportive Business Central Office Units- Project Total Fund Vouchers Housing Activities Cost Center Discretely Program Presented Expenses 91100 Administrative salaries 312,427 - 276,487 7,431 35,628 - 215,828 847,801 - 847,801 6,413 91200 Auditing fees 20,000 - 25,000 - - - 5,000 50,000 - 50,000 9,475 91300 Managementfee 492,217 214,880 203,113 - - - - 910,210 (910,210) - 31,051 91310 Bookkeeping fee 72,164 - - - - - - 72,164 (72,164) - - 91400 Advertisting and marketing - - - - - - 20 20 - 20 - 91500 Employee benefit contributions-Administrative 207,704 - 148,728 3,338 14,297 - 75,382 449,449 - 449,449 - 91600 Office a)penses 140,135 - 210,007 - 114,250 - 182,585 646,977 - 646,977 5,018 91700 Legal etyense 109,134 - - - - - 9,449 118,583 - 118,583 - 91800 Travel 1,041 - - - - - 10,889 11,930 - 11,930 - 91900 Other - - - - - - - - - - - 91000 Total Administrative 1,354,822 214,880 863,335 10,769 164,175 - 499,153 3,107,134 (982,374) 2,124,760 51,957 92000 Asset management fee 99,960 - - - - - - 99,960 (99,960) - - 92400 Tenant services-Other 79,154 - - - - - 4,684 83,838 - 83,838 - 92500 Total Tenant Services 179,114 - - - - - 4,684 83,838 - 83,838 - 93100 Water 189,849 - - - - - 840 190,689 - 190,689 12,435 93200 Electricity 227,503 - - - - - 9,974 237,477 - 237,477 36,367 93300 Gas 226,398 - - - - - 2,119 228,517 - 228,517 12,709 93400 Fuel - - - - - - - - - - - 93600 Sewer 275,052 - - - - - 685 275,737 - 275,737 10,702 93800 Other utilities expense - - - - - - - - - - - 93000 Total Utilities 918,802 - - - - - 13,618 932,420 - 932,420 72,213 94100 Ordinary maintenance and operations-Labor $ 369,592 $ - $ - $ - $ - $ - $ - $ 369,592 $ - $ 369,592 $ 2,113 94200 Ordinary maintenance and operations-Materials and other 445,421 - - - - - 300 445,721 - 445,721 734 94300 Total ordinary maintenance and operations-Contract costs 2,333,414 - 27,274 - - - 154,809 2,515,497 - 2,515,497 46,142 94500 Employee benefit contributions-Ordinary maintenance 278,911 - - - - - - 278,911 - 278,911 - 94000 Total Maintenance 3,427,338 - 27,274 - - - 155,109 3,609,721 - 3,609,721 48,989 95200 Protective services-Other contractcosts 13,784 - 259 - - - 388 14,431 - 14,431 - 96110 Properly insurance 182,110 - - - - - 1,840 183,950 - 183,950 13,059 96120 Liability insurance 72,056 - 15,860 - - - 226 88,142 - 88,142 1,525 96130 Workmens compensation 4,210 - 8,099 - - - 589 12,898 - 12,898 - 96140 All otherinsurance i18,892 - - - - - 29,525 48,417 - 48,417 910 96100 Total Insurance Premiums 277,268 23,959 - - 32,180 333,407 333,407 15,494 40 Lansing Housing Commission Financial Data Schedules Year Ended June 30, 2019 14.871 Housing 14.89E 6.1 Component Public Housing 14.CFP Capital Choice Supportive State/Local Business Central Office Subtotal Eliminations Total Units- ProjectTotal Fund Vouchers Housing Activities Cost Center Discretely Program Presented 96200 Other General Expenses - - - - - - - - - - - 96210 Compensated absences 24,162 - 21.772 - - - 3,922 49,856 - 49,856 - 96300 Payments in lieu of taxes 59,068 - - - - - - 59,068 - 59,068 19,255 96400 Bad debt-Tenant rents 65,536 - - - - - - 65,536 - 65,536 1,936 96000 Total Other General Expenses 148,766 - 21,772 - - - 3,922 174,460 - 174,460 21,191 96710 Interest of mortgage(or bonds)payable - - - - - - - - - - 90,156 96720 Intereston notes payable(short and long term) 67,026 - - - - - 4,223 71,249 - 71,249 - 96730 Amortization of bond issue costs - - - - - - - - - - 1,528 96700 Total Interest Expense And Amortization Cost 67,026 - - - - - 4,223 71,249 - 71,249 91,684 96900 Total Operating Expenses 6,386,920 214,880 936,599 10,769 164,175 - 713,277 8,426,620 (1,082,334) 7,344,286 301,528 97000 Excess revenue over operating expenses (128,054) 907,109 10,983,251 - 914,881 13,378 550,142 13,240,707 - 13,240,707 (11.789) 97100 Extraordinary Maintenance - - - - - - - - - - - 97300 Total housing assistance payments - - 10,834,579 - 861,146 - - 11,695,725 - 11,695,725 - 97350 HAP Portability-In - - - - - - - - - - - 97400 Depreciation expense 1,126,065 - - - - - 106,633 1,232,698 - 1,232,698 140,332 97500 Fraud Losses - - - - - - - - - - 97800 Dwelling units rent expense - - - - - - - - - - 98000 Total Other Nonoperating Expenses 1,126,065 - 10,834,579 - 861,146 - 106,633 12,928,423 - 12,928,423 140,332 90000 Total Expenses 7,512,985 214,880 11,771,178 10,769 1,025,321 - 819,910 21,355,043 (1,082,334) 20,272,709 441,860 10010 Operating transfers in 643,219 - - - - - - 643,219 - 643,219 - 10020 Operating transfers out - (643,219) - - - - - (643,219) - (643,219) - 10100 Total Other Financing Sources(Uses) 643,219 (643,219) - - - - - - - - - 10000 Excess(Deficiency)Of Total Revenue Over(Under)Total Expenses (610,900) 263,890 148,672 53,735 13,378 443,509 312,284 312,284 (152,121) 11020 Required annual debt principal payments 131,399 - - - - - 47,976 179,375 - 179,375 28,367 11030 Beginning equity 13,481,957 - 118,964 - 331,299 (35,759) 1,833,654 15,730,115 - 15,730,115 (778,652) 11040 Prior period adjustments-Equitytransfers-And correction oferrors - - - - - - - - - - - 11170 Administrative fee equity - - - - - - - - - - - 11180 Housing assistance payments equity - - - - - - - - - - - 11190 Unit months available 9,996 - 21,936 - - - - 31,932 - 31,932 360 11210 Number of unit months leased 9,586 - 20,105 - - - - 29,691 - 29,691 360 11270 Excess Cash - - - - - - - - - - - 11610 Land Purchases - - - - - - - - - - - 11620 Building purchases - 263,889 - - - - - 263,889 - 263,889 - 11630 Furniture and Equipment-Administrative Purchases - - - - - - - - - - - 11640 Furniture and Equipment-Dwelling Purchases - - - - - - - - - - - 11650 Leashold Improvements Purchases - - - - - - - - - - - 13901 1 Replacement housing factorfunds - - - - - - - - - - - 41 Actual Modernization U.S.Department of Housing OMB Approval No.2577-0157(exp.01131/2017) Cost Certificate and Urban Development Office of Public and Indian Housing Capital Fund Program(CFP) Public reporting burden for this collection of information is estimated to average 2 hours per response,including the time for reviewing instructions,searching existing data sources,gathering and maintaining the data needed,and completing and reviewing the collection of information.Send comments regarding this burden estimate or any other aspect of this collection of information,including suggestions for reducing this burden,to the Reports Management Officer, Paperwork Reduction Project(2577-0044 and 0157),Office of Information Technology,U.S.Department of Housing and Urban Development,Washington, D.C.20410-3600.This agency may not conduct or sponsor,and a person is not required to respond to,a collection of information unless that collection displays a valid OMB control number. Do not send this form to the above address. This collection of information requires that each Housing Authority(HA)submit information to enable HUD to initiate the fiscal closeout process.The information will be used by HUD to determine whether the modernization grant is ready to be audited and closed out.The information is essential for audit verification and fiscal close out.Responses to the collection are required by regulation.The information requested does not lend itself to confidentiality. PHA Name: Modernization Project Number: Lansing Housing Commission M128P058501-16 The PHA hereby certifies to the Department of Housing and Urban Development as follows: 1. That the total amount of Modernization Cost herein called the"Actual Modernization Cost" of the Modernization Grant, is as shown below: A. Funds Approved $ 1,372,645.00 B. Funds Disbursed $ 1,372,645.00 C. Funds Expended (Actual Modernization Cost) $ 1,372,645.00 D. Amount to be Recaptured (A—C) $ E. Excess of Funds Disbursed (B-C) $ 2. That all modernization work in connection with the Modernization Grant has been completed; 3.That the entire Actual Modernization Cost or liabilities therefor incurred by the PHA have been fully paid; 4. That there are no undischarged mechanics', laborers', contractors', or material-men's liens against such modernization work on file in any public office where the same should be filed in order to be valid against such modernization work; 5. That the time in which such liens could be filed has expired; and 6. That for any years in which the grantee is subject to the audit requirements of the Single Audit Act, 31 U.S.C. §7501 et seq.,as amended,the grantee has or will perform an audit in compliance with said requirements. 7. Please mark one: F A. This grant will be included in the PHA's next fiscal year audit per the requirements of the Single Audit Act. J B. This grant will not be included in the PHA's next fiscal year audit per the requirements of the Single Audit Act. I hereby certify that all the information stated herein,as well as any information provided in the accompaniment herewith,is true and accurate. Warning:HUD will prosecute false claims and statements.Conviction may result in criminal and/or civil penalties.(1B U.S.C.1001,1010.1012;31 U.S.C.3729,3802) Name&Title of Authorized Signatory(type or print clearly): Douglas E. Fleming: Executive Director ture xecutive Direc r(or Authorized Designee): Date: s Only The Co ertificate is approved for au rt(if box 7A is marked?: Approved for Audit(Director,Office of Public Housing) Date: X The costs shown above agree with HUD verified costs(if box 7A or 7B is marked}: Approved: (Director,Office of Public Housing) Date: X form HUD-53001 (10196) 42 ref Handbooks 7485.1 &.3