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TEXAS STUDENT HOUSING AUTHORITY
FINANCIAL REPORT
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AUGUST 31, 2006
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TEXAS STUDENT HOUSING AUTHORITY
TABLE OF CONTENTS
AUGUST 31,2006
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Page
Number
FINANCIAL SECTION
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Independent Auditors' Report............................................................................................. 1
Management's Discussion and Analysis 2-3
Financial Statements:
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Statementof Net Assets................................................................................................... 4
Statement of Revenues, Expenses and Changes in Net Assets........................................ 5
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Statement of Cash Flows ................................................................................................. 6
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Notes to Financial Statements.......................................................................................... 7- 10
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SUPPLEMENTAL INFORMATION
Budgetary Comparison Schedule........................................................................................ 11
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FINANCIAL STATEMENTS
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PATTILLO, BROWN & HILL, L.L.P.
CERTIFIED PUBLIC ACCOUNTANTS ■ BUSINESS CONSULTANTS
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Texas Student Housing Authority
Westlake, Texas
We have audited the accompanying financial statements of Texas Student Housing Authority (the
"Authority") (a component unit of the Town of Westlake), as of and for the year ended August 31, 2006,
which collectively comprise the Authority's basic financial statements, as listed in the table of contents.
These financial statements are the responsibility of the Authority's management. Our responsibility is to
express an opinion on these financial statements based on our audit.
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We conducted our audit in accordance with auditing standards generally accepted in the United t
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.
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An audit also includes assessing the accounting principles used and the significant estimates made by
management, as well as evaluating the overall financial statement presentation. We believe that our E
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audit provides a reasonable basis for our opinion.
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In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Texas Student Housing Authority as of August 31, 2006, and the respective
changes in its financial position, and, where applicable, cash flows thereof for the year then ended in
conformity with accounting principles generally accepted in the United States of America.
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The management's discussion and analysis on pages 2 through 3 is not a required part of the
basic financial statements but is supplemental 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 an opinion on the financial statements that
collectively comprise the Authority's basic financial statements. The accompanying supplemental
information on page 11 is presented for purposes of additional analysis and is not a required part of the
basic financial statements. The supplemental information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all material
respects in relation to the basic financial statements taken as a whole.
L.L. P.
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November 24, 2006
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401 WEST HIGHWAY 6■P.O.BOX 20725■WACO,TX 76702-0725■(254)772-4901■FAX:(254)772-4920■www.pbhcpa.com
AFFILIATE OFFICES:BROWNSVILLE,TX(956)544-7778■HILLSBORO,TX(254)582-2583
TEMPLE,TX(254)791-3460■ALBUQUERQUE,NM(505)266-5904
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MANAGEMENT'S
DISCUSSION AND ANALYSIS
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MANAGEMENT'S DISCUSSION AND ANALYSIS
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, 2006. We encourage readers to consider the information
presented herein in conjunction with the Authority's financial statements. The Authority is a component
unit 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's Discussion and Analysis for State and Local Governments has been implemented. The
reader should note that this financial report addresses only the financial condition 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
$454,734, an increase of $53,566 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 cash balances were $517,281, an
increase of$37,888 over the prior fiscal year.
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• All revenues are generated from management of the properties and scholarship
activity of the authority and totaled $478,115. Total expenses incurred were
$481,410.
OVERVIEW OF THE FINANCIAL STATEMENTS i
This 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's Discussion and Analysis, the
basic financial statements, and notes to financial statements. The basic financial statements include a
statement of net assets, statement of revenues, expenses and changes in net assets, a statement of cash
flows and supplemental schedules.
The statement of net assets presents information on the Authority's assets and liabilities with the I
difference between the two reported as net assets.
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The statement of revenues, expenses and changes in net assets accounts for all of 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, noncapital financing and
capital related financing activities during the year.
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NOTES TO THE FINANCIAL STATEMENTS
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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 fiscal year 2006/2007 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 fi
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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 any
questions about this report, or need additional information, please contact Pete Ehrenberg at (817) 490- F
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5723, or Hank Smyth at(817) 281-5053.
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TEXAS STUDENT HOUSING AUTHORITY
STATEMENT OF NET ASSETS
AUGUST 31,2006
ASSETS
Current assets:
Cash $ 517,281
Accounts receivable 24,434
Prepaid expenses 7,537
Total current assets 549,252
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Total assets 549,252
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LIABILITIES
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Deferred revenue 94,518
Total liabilities 94,518
NET ASSETS
Unrestricted 454,734
Total net assets $ 454,734
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The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY
STATEMENT OF REVENUES,EXPENSES a
AND CHANGES IN NET ASSETS
FOR THE YEAR ENDED AUGUST 31,2006
OPERATING REVENUES
Basic property administration $ 197,587 p
Scholarship administration 280,528
Total operating revenues 478,115
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OPERATING EXPENSES
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Scholarship 197,439
Labor 186,160
Insurance 20,099
Oversight fee 50,000
Office and other 27,712 j
Total operating expenses 481,410
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OPERATING LOSS ( 3,295)
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NONOPERATING REVENUES (EXPENSES)
Interest income 31,861
Other income 25,000 f
Total nonoperating revenues (expenses) 56,861
CHANGE IN NET ASSETS 53,566
NET ASSETS,BEGINNING 401,168
NET ASSETS,ENDING $ 454,734
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The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31,2006
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from scholarships $ 375,223
Cash received from scholarship properties 115,234
Cash paid to contract services ( 191,059)
Cash paid to others ( 318,371)
Net cash used for operating activities ( 18,973)
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 31,861
Issuer fees 25,000
Net cash provided by investing activities 56,861
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NET CHANGE IN CASH AND CASH EQUIVALENTS 37,888
CASH AND CASH EQUIVALENTS,BEGINNING 479,393
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CASH AND CASH EQUIVALENTS,ENDING $ 517,281
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RECONCILIATION OF OPERATING LOSS TO
NET CASH USED FOR OPERATING ACTIVITIES
Operating loss $( 3,295)
Adjustments to reconcile operating income to
net cash provided(used)by operating activities:
Accounts receivable 36,242
Accounts payable ( 69,836)
Deferred revenue 17,916
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Net cash used for operating activities $C___18,973)
The accompanying notes are an integral part of these financial statements.
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TEXAS STUDENT HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
AUGUST 31,2006
I. GENERAL STATEMENT
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, E
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 s
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.
H. 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:
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A. Reporting Entity
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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 is 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) 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.
(continued)
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II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
B. Measurement Focus and Basis of Accounting
Measurement 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 noncurrent) 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.
C. Assets,Liabilities and Net Assets or Equity $.
Income Taxes
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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, 2006, the Authority had no such
investments included in cash and cash equivalents.
Accounts Receivable
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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, 2006, 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.
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III. DETAILED NOTES ON ALL FUNDS
A. 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 q
appropriate policies relating to a governmental entity's cash and investments.
Interest Rate Risk
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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.
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Credit Risk
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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. I
Concentration of Credit Risk
Texas Student Housing Authority holds no investments at August 31, 2006, and is not
exposed to concentration of credit risk.
Custodial Credit Risk
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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 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, 2006, the Authority's cash balances totaled $517,281 (bank balance of
$515,327). 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$415,327.
(continued)
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III. DETAILED NOTES ON ALL FUNDS (Continued)
B. Net Assets
Net assets represent the residual assets after liabilities are deducted. These assets are
reported in the following categories:
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, 2006, the Authority has no restricted net assets or capital assets.
All net assets are unrestricted.
C. Concentrations
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.
D. Related Party Transactions
The Town of Westlake charges an oversight fee to the Authority. The fee of $50,000 is
included in expenses at August 31, 2006. The Authority also received revenues of$197,587
related to its oversight of the various properties.
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SUPPLEMENTAL INFORMATION
TEXAS STUDENT HOUSING AUTHORITY
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED AUGUST 31,2006
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Budget Actual Variance
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REVENUES
Basic property administration $ 220,035 $ 197,587 $( 22,448)
Scholarship administration 196,870 280,528 83,658
Interest income 7,200 31,861 24,661
Other income 25,000 25,000
Total revenues 449,105 534,976 85,871
EXPENDITURES
Scholarship 124,960 197,439 ( 72,479) e
Labor 205,020 186,160 18,860
Insurance 27,000 20,099 6,901
Oversight fee 55,000 50,000 5,000
Office and other 17,805 27,712 ( 9,907)
Total expenditures 429,785 481,410 ( 51,625)
CHANGE IN NET ASSETS OVER EXPENSES 19,320 53,566 34,246
NET ASSETS,BEGINNING 401,168 401,168 -
NET ASSETS,ENDING $ 420,488 $ 454,734 $ 34,246
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