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HomeMy WebLinkAboutTSHA Audit 08-31-10TEXAS STUDENT HOUSING AUTHORITY FINANCIAL REPORT AUGUST 31, 2010 TEXAS STUDENT HOUSING AUTHORITY TABLE OF CONTENTS AUGUST 31, 2010 FINANCIAL SECTION Page Number Independent Auditors' Report............................................................................................. 1 Management's Discussion and Analysis............................................................................ 2-3 Financial Statements: Statement of Net Assets .................................................................................................. . 4 Statement ofRevenues, Expenses and Changes in Net Assets ....................................... . 5 Statement of Cash Flows ................................................................................................ . 6 Notes to Financial Statements ......................................................................................... . 7-10 SUPPLEMENTAL INFORMATION Budgetary Comparison Schedule........................................................................................ 11 FINANCIAL STATEMENTS IH~11 PATTILLO. B R 0 W N & HILL. T..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, 2010, 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. 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 the 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 Texas Student Housing Authority as of August 31,2010, 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. 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. fatt.iJk f3~ ~ 1/iJl L.L.P. I I January 7, 2011 1 401 WEST HIGHWAY 6 • P. 0. 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 MANAGEMENT'S DISCUSSION AND ANALYSIS . . 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, 2010. 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 $525,450, an increase of $57,270 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 $529,092, an increase of $72,948 over the prior fiscal year. • All revenues are generated from management of the properties and scholarship activity of the authority and totaled $895,146. Total expenses incurred were $837,876. OVERVIEW OF THE FINANCIAL STATEMENTS 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 difference between the two reported as net assets. 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. 2 NOTES TO THE FINANCIAL STATEMENTS 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 It is anticipated that fiscal year 2010/2011 will end with less income to the Authority as we have increased scholarships at our facility in College Station. 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 any questions about this report, or need additional information, please contact Pete Ehrenberg at (817) 490-5723. 3 ASSETS Current assets: Cash Accounts receivable Prepaid expenses Total current assets Total assets LIABILITIES Accounts payable Deferred revenue T otalliabilities NET ASSETS Unrestricted Total net assets TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF NET ASSETS AUGUST 31, 2010 The accompanying notes are an integral part of these financial statements. 4 $ 529,092 17,868 12,724 559,684 559,684 2,484 31,750 34,234 525,450 $ 525,450 TEXAS STUDENT HOUSING AUTHORITY OPERATING REVENUES Basic property administration Scholarship value Scholarship administration Total operating revenues OPERATING EXPENSES Scholarship Scholarship expense Labor Professional fees Office and other Total operating expenses OPERATING INCOME STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED AUGUST 31, 2010 NONOPERATING REVENUES (EXPENSES) Interest income Other income Total nonoperating revenues (expenses) CHANGE IN NET ASSETS NET ASSETS, BEGINNING NET ASSETS, ENDING The accompanying notes are an integral part of these financial statements. 5 $ 159,140 527,016 204,695 890,851 527,016 163,328 113,392 5,483 28,657 837,876 52,975 659 3,636 4,295 57,270 468,180 $ 525,450 TEXAS STUDENT HOUSING AUTHORITY STATEMENT OF CASH FLOWS FOR THE YEAR ENDED AUGUST 31, 2010 CASH FLOWS FROM OPERATING ACTIVITIES Cash received from scholarships and scholarship properties Cash paid to contract services Cash paid to others Net cash provided for operating activities CASH FLOWS FROM INVESTING ACTIVITIES Interest received Miscellaneous other income Net cash provided by investing activities NET CHANGE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIVALENTS, BEGINNING CASH AND CASH EQUIVALENTS, ENDING RECONCILIATION OF OPERATING GAIN TO NET CASH USED FOR OPERATING ACTIVITIES Operating gain Adjustments to reconcile operating income to net cash provided (used) by operating activities: Accounts receivable Prepaid assets Accounts payable Deferred revenue Net cash provided for operating activities The accompanying notes are an integral part of these financial statements. 6 $ 895,358 ( 5,483) { 821,222) 68,653 659 3,636 4,295 72,948 456,144 $ 529,092 $ 52,975 4,507 10,690 2,484 ( 2,003) $ 68,653 TEXAS STUDENT HOUSING AUTHORITY NOTES TO FINANCIAL STATEMENTS AUGUST 31, 2010 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, 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. II. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the Authority's significant accounting policies consistently applied m the preparation ofthe accompanying financial statements follows: A. 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 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 fmancial burdens on, the primary government. Additionally, the primary government may be fmancially 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) 7 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. Private-sector standards of accounting and financial reporting issued prior to December 1, 1989, generally are followed in both the government-wide and proprietary fund financial statements to the extent that those standards do not conflict with or contradict guidance of the Governmental Accounting Standards Board. Governments also have the option of following subsequent private-sector guidance for their business-type activities and Enterprise Funds, subject to this same limitation. The government has elected not to follow subsequent private- sector guidance. C. Assets, Liabilities and Net Assets or Equity Income Taxes 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, 2010, the Authority had no such investments included in cash and cash equivalents. 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, 2010, 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. 8 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 appropriate policies relating to a governmental entity's cash and investments. 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. Credit Risk 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. Concentration of Credit Risk Texas Student Housing Authority holds no investments at August 31, 2010, 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 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, 2010, the Authority's cash balances totaled $529,092 (bank balance of $527,591). Of the bank balance, $250,000 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$277,591. (continued) 9 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, 2010, 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 $0 is included in expenses at August 31,2010. The Authority also received revenues of$159,140 related to its oversight of the various properties. 10 SUPPLEMENTAL INFORMATION TEXAS STUDENT HOUSING AUTHORITY BUDGETARYCOMPARJSONSCHEDULE FOR THE YEAR ENDED AUGUST 31, 2010 Budget Actual Variance REVENUES Basic property administration $ 235,812 $ 159,140 $( 76,672) Scholarship value 527,016 527,016 Scholarship administration 190,740 204,695 13,955 Interest income 659 659 Other income 3,636 3,636 Total revenues 953,568 895,146 ( 58,422) EXPENDITURES Scholarships 527,016 527,016 Scholarship expense 229,530 163,328 66,202 Contract labor 137,000 113,392 23,608 Professional fees 5,500 5,483 17 Contingency fund 25,000 25,000 Insurance 13,500 13,500 Reserve Office and other 15,900 28,657 ( 12,757) Total expenditures 953,446 837,876 115,570 CHANGE IN NET ASSETS OVER EXPENSES 122 57,270 57,148 NET ASSETS, BEGINNING 468,180 468,180 NET ASSETS, ENDING $ 468,302 $ 525,450 $ 57,148 11