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HomeMy WebLinkAboutTSHA Audit 08-31-05TEXAS STUDENT HOUSING AUTHORITY FINANCIAL REPORT AUGUST 31, 2005 CONTENTS Page INDEPENDENT AUDITOR'S REPORT ................................................................................... 1 MANAGEMENT'S DISCUSSION AND ANALYSIS (unaudited) ................................................ 2 FINANCIAL STATEMENTS Statement of Net Assets .................................................................................................. 4 Statement of Revenues, Expenses, and Changes in Net Assets ..................................... 5 Statement of Cash Flows ................................................................................................. 6 Notes to Financial Statements ......................................................................................... 7 SUPPLEMENTAL INFORMATION Budgetary Comparison Schedule ................................................................................. 11 I I CERTIFiED PUBLIC ACCOUNTANTS AND CONSULT.A.NTS i-;01i ,,_ Jl}li INDEPENDENT AUDITOR'S REPORT To the Board of Directors Texas Student Housing Authority We have audited the accompanying financial statements of the business type activities, as listed in the accompanying table of contents, of Texas Student Housing Authority (a component unit of the Town of Westlake), as of and for the year ended August 31, 2005. These financial statements are the responsibility of the Texas Student Housing Authority's management. 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. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the business type activities of Texas Student Housing Authority at August 31, 2005 and the respective changes in it's financial position and cash flows for the year then ended in conformity with accounting principles generally accepted in the United States. Management's discussion and analysis on pages 2 and 3 are not a required part of the basic financial statements but is supplementary information required by accounting principles generally accepted in the United States of America. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the required supplementary information. However, we did not audit the information and express no opinion on it. Our audit was conducted for the purpose of forming opinions on the financial statements that collectively comprise the business type activities of Texas Student Housing Authority's basic financial statements. The budgetary comparison schedule on page 11 is presented for purposes of additional analysis and is not a required part of the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. WEAVER AND TIDWELL, L.L.P. Fort Worth, Texas November 28, 2005 MANAGEMENT'S DISCUSSION AND ANALYSIS (unaudited) TEXAS STUDENT HOUSING AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED AUGUST 31, 2005 UNAUDITED Page2 As Staff of the Texas Student Housing Authority( the "Authority"), we offer the readers of the Authority's Financial Statements this narrative overview and analysis of the financial activities of the Authority for the fiscal year ended August 31, 2005. We encourage readers to consider the information presented here in conjunction with the Authority's financial statements. The Authority is an instrumentality of the Town of Westlake and is considered a governmental entity; accordingly, the Authority has adopted Governmental Accounting Standards Board Statement 34, Basic Financial Statements-and Management Discussion and Analysis-for State and Local Governments (Statement 34). The reader should note that this financial report addresses only the financial condition of the business type activities of the Authority itself. Properties managed by the Authority are reported individually by property, under separate cover. FINANCIAL HIGHLIGHTS The Assets of the Authority exceeded its Liabilities at the close of the fiscal year by $401,168, an increase of$59,869 over the prior fiscal year. All of the assets and liabilities of the Authority are classified as current. At the end of the current fiscal year, the total of the bank balances were $479,393, an increase of $112,357 over the prior fiscal year All revenues are generated from management of the properties and scholarship activity of the Authority and totaled $504,189. Total expenses incurred were $484,455. OVERVIEW OF THE FINANCIAL STATEMENTS The discussion and analysis is intended to serve as an introduction to the Authority's basic financial statements. The Authority's report consists of three parts-Management Discussion and Analysis, the basic financial statements, and notes to the financial statements. The basic financial statements include a statement of net assets, statement of revenues, expenses, and changes in net assets, and a statement of cash flows. The statement of net assets presents information on the Authority's assets and liabilities with the difference between the two reported as net assets. The statement of revenues, expenses, and changes in net assets accounts for the Authority's revenues and expenses regardless of when cash is paid or received. The statement of cash flows reflects cash inflows and outflows by operating, non-capital financing and capital related financing activities during the year. TEXAS STUDENT HOUSING AUTHORITY MANAGEMENT'S DISCUSSION AND ANALYSIS YEAR ENDED AUGUST 31, 2005 UNAUDITED NOTES TO THE FINANCIAL STATEMENTS Page 3 The notes provide additional information that is essential to a full understanding of the data provided in the financial statements. ECONOMIC FACTORS AND NEXT YEAR'S BUDGET We anticipate that FY 2005/2006 will end with approximately the same income to the Authority as this year. Although the number of scholarship slots available has declined in two of our properties, the number of full scholarships has also declined, thus increasing revenue from additional incremental scholarships. In addition, we have been able to secure an Asset Management fee from the Bondholder on two additional properties. CONTACTING THE AUTHORITY'S FINANCIAL MANAGEMENT This financial report is designed to provide the reader with a general overview of the Authority's finances and to demonstrate the Authority's accountability for the money it receives. If you have questions about this report or need additional information, contact the Authority's Finance Manager, Pete Ehrenberg at 817-490-5723 or the Executive Director, Hank Smyth at 817-281- 5053. FINANCIAL STATEMENTS Cash Accounts receivable Prepaid expenses Total Assets Accounts payable Deferred revenue Total Liabilities Unrestricted Total net assets TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF NET ASSETS AUGUST 31, 2005 ASSETS LIABILITIES NET ASSETS The Notes to Financial Statements are an integral part of this statement. $ $ Page 4 479,393 60,676 7,537 547,606 69,836 76,602 146,438 401 '168 401 '168 Page 5 TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS YEAR ENDED AUGUST 31, 2005 OPERATING REVENUES Basic property administration Scholarship administration Total operating revenue OPERATING EXPENSES Scholarship expense Labor expenses Professional fees Oversight fee Office expense and other Total operating expenses OPERATING INCOME NON-OPERATING REVENUES (EXPENSES) Interest income Other income TOTAL NON-OPERATING INCOME CHANGE IN NET ASSETS NET ASSETS, AUGUST 31, 2004 NET ASSETS, AUGUST 31, 2005 The Notes to Financial Statements are an integral part of this statement. $ 159,807 344,382 504,189 197,431 173,126 48,836 50,000 15,062 484,455 19,734 14,808 25,327 40,135 59,869 341,299 $ 401,168 TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF CASH FLOWS YEAR ENDED AUGUST 31, 2005 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from scholarships Cash received from scholarship properties Cash paid for contract services Cash paid to others Net cash provided by operating activities CASH FLOWS FROM NON CAPITAL FINANCING ACTIVITIES CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES CASH FLOWS FROM INVESTING ACTIVITIES Interest received Investment fees Net cash provided by investing activities Net change in cash and cash equivalents CASH AND CASH EQUIVALENTS AT THE BEGINNING OF YEAR CASH AND CASH EQUIVALENTS AT END OF YEAR RECONCILIATION OF OPERATING INCOME TO NET CASH PROVIDED BY OPERATING ACTIVITIES Operating income Adjustments to reconcile operating income to net cash provided by operating activities Accounts receivable Accounts payable Prepaid expense Deferred revenue Net cash provided by operating activities The Notes to Financial Statements are an integral part of this statement. Page6 $ 385,174 102,131 167, 126) 247,957) 72,222 14,808 25,327 40,135 112,357 367,036 $ 479,393 $ 19,734 ( 57,676) 67,547 1,825 40,792 $ 72,222 TEXAS STUDENT HOUSING AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE1. GENERALSTATEMENT Page 7 Texas Student Housing Authority (the "Authority"), a higher education authority, was established on January 23, 1995, as a duly constituted authority of the Town of Westlake (the Town), Texas, pursuant to Section 53.11 of Chapter 53 of the Texas Education Code, as amended. The Authority's purpose among other things is to acquire, finance, and operate student housing facilities and to provide scholarships to students from High Schools and Community Colleges in Texas. The Authority operates several student housing projects in Texas. The accompanying financial statements do not present the projects, but the scholarship administration of the Authority. NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Authority's significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: Reporting Entity For financial reporting purposes, management has considered all potential component units. The decision to include a potential component unit in the reporting entity was made by applying the criteria set forth in GASB Statement No. 14 as amended by GASB statement No. 39. The criteria used are as follows: Financial Accountability -The primary government is deemed to be financially accountable if it appoints a voting majority of the organization's governing body and (1) it is able to impose its will on that organization or (2) there is a potential for the organization to provide specific financial benefits to, or impose specific financial burdens on, the primary government. Additionally, the primary government may be financially accountable if an organization is fiscally dependent on the primary government regardless of whether the organization has a separately elected governing board appointed by a higher level of government or a jointly appointed board. Measurement Focus and Basis of Accounting Measurements focus refers to what is being measured; basis of accounting refers to when revenues and expenditures are recognized in the accounts and reported in the financial statements. The Authority uses the economic resources measurement focus and the accrual basis of accounting. The economic resources measurement focus means all assets and liabilities (whether current or non current) are included on the statement of net assets and the operating statement present increases (revenues) and decreases (expenses) in net total assets under the accrual basis of accounting, revenues are recognized when earned, and expenses are recognized at the time the liability is incurred. In applying the requirements of GASB Statement No. 20, the Authority has chosen to apply all applicable GASB pronouncements as well as Financial Accounting Standards Board pronouncements issued on or before November 30, 1989, unless those pronouncements conflict with or contradict GASB pronouncements. TEXAS STUDENT HOUSING AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES -CONTINUED Income Taxes Page 8 The Authority is an instrumentality of the Town and, therefore, its income is not subject to federal income taxation pursuant to Section 115 of the Internal Revenue Code. Cash and Cash Equivalents The Authority considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. At August 31, 2005, the Authority had no such investments included in cash and cash equivalents. For additional disclosures on cash see Note 3. Accounts Receivable Accounts receivable are stated at amounts management expects to collect from outstanding balances. At year end management assesses the accounts receivable balance and establishes a valuation allowance based on historical experience and an evaluation of the outstanding balances. As of August 31, 2005, management has determined that all accounts doubtful of collection have been charged to operations and an allowance is not required. Capital Assets Texas Student Housing Authority utilizes space within the Town of Westlake offices and does not have capital assets at this time. NOTE 3. CASH AND INVESTMENTS The Public Funds Investment Act (Government Code Chapter 2256) contains specific provisions in the areas of investment practices, management reports and establishment of appropriate policies relating to a governmental entity's cash and investments. Disclosure Relating to Interest Rate Risk Interest rate risk is the risk that changes in market interest rates will adversely affect the fair value of an instrument. Generally, the longer the maturity of an investment the greater the sensitivity of its fair value to changes in market interest rates. Texas Student Housing Authority is not significantly exposed to interest rate risk as all investments earn a variable rate. TEXAS STUDENT HOUSING AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 3. CASH AND INVESTMENTS-CONTINUED Disclosure Relating to Credit Risk Page9 Generally, credit risk is the risk that an issuer of an investment will not fulfill its obligation to the holder of the investment. This is measured by the assignment of a rating by a nationally recognized statistical rating organization. The Public Funds Investment act has a minimum rating that is required for investments. Texas Student Housing Authority holds all of its cash and investments with commercial banks in liquid investments. Concentration of Credit Risk Texas Student Housing Authority holds no investments at August 31, 2005 and is not exposed to concentration of credit risk. Custodial Credit Risk Custodial credit risk for deposits is the risk that, in the event of the failure of a depository financial institution, a government will not be able to recover its deposits or will not be able to recover collateral securities that are in the possession of an outside party. The custodial credit risk for investments is the risk that, in the event of the failure of the counterparty to a transaction, a government entity will not be able to recover the value of its investment or collateral securities that are in the possession of another party. The Public Funds Investment Act does not contain legal or policy requirements that would limit the exposure to custodial credit risk for deposits or investments, other than the following provision for deposits: The Public Funds Investment Act requires that a financial institution secure deposits made by state or local governmental units by pledging securities in an undivided collateral pool held by a depository regulated under state law (unless so waived by the governmental unit). The market value of the pledged securities in the collateral pool must equal at least the bank balances less FDIC insurance at all times. As of August 31, 2005, the Authority's cash balances totaled $479,393 (bank balance of $479,393) of the bank balance, $100,000 was covered by federal depository insurance while the remaining amount was collateralized by a Bank Deposit Guarantee Bond from the Authority's depository in the amount of $2,000,000. NOTE 4. NET ASSETS Net assets represents the residual assets after liabilities are deducted. These assets are reported as follows. Unrestricted Net Assets consists of the portion of net assets after Invested in Capital Assets, Net of Related Debt and Restricted for net assets has been satisfied. At August 31, 2005, the Authority has no restricted net assets or capital assets. All net assets are unrestricted. TEXAS STUDENT HOUSING AUTHORITY NOTES TO THE FINANCIAL STATEMENTS NOTE 5. CONCENTRATIONS Page 10 The Authority services scholarships for Texas students attending Texas higher education facilities and is dependent upon the geographic areas and the higher education facilities in Texas. NOTE 6. RELATED PARTY TRANSACTIONS The Authority's transactions are made up significantly of payment to the Town of Westlake and payments to the Authorities properties. Total payments to the Town of Westlake and the properties were $24,102 and $197,431, respectively for the period ended August 31, 2005. In addition, the Town of Westlake charges an oversight fee to the Authority. The fee of $50,000 is included in accounts payable at August 31, 2005. The Authority also received revenue of $159,807 related to its oversight of the various properties. SUPPLEMENTAL INFORMATION TEXAS STUDENT HOUSING AUTHORITY BUDGETARY COMPARISON SCHEDULE YEAR ENDED AUGUST 31, 2005 Original and Final Budgeted amounts Actual Revenues Basic property administration $ 187,653 $ 159,807 Scholarship administration 151,170 344,382 Interest income 6,000 14,808 Other income 54,750 25,327 Total revenues 399,573 544,324 Expenditures: Scholarship expense 67,700 197,431 Labor expenses 195,000 173,126 Professional fees 50,000 48,836 Oversight fee 50,000 50,000 Office expense and other 28,800 15,062 Total expenses 391,500 484,455 Change in Net Assets over expenses 8,073 59,869 Net assets -beginning of year 341,299 341,299 Net assets -end of year $ 349,372 $ 401 '168 Page 11 Variance with Final Budget Positive (Negative) ($ 27,846) 193,212 8,808 29,423) 144,751 129,731) 21,874 1,164 13,738 92,955) 51,796 $ 51,796