HomeMy WebLinkAboutTSHA Audit 08-31-16TEXAS STUDENT HOUSING AUTHORITY
A Component Unit of the Town of Westlake
FINANCIAL REPORT
AUGUST 31, 2016
C O N T E N T S
Page
INDEPENDENT AUDITOR’S REPORT.................................................................................... 1
MANAGEMENT’S DISCUSSION AND ANALYSIS (unaudited) ................................................ 4
BASIC FINANCIAL STATEMENTS
Statement of Net Position ................................................................................................ 7
Statement of Revenues, Expenses, and Changes in Net Position ................................... 8
Statement of Cash Flows ................................................................................................. 9
Notes to Financial Statements ....................................................................................... 10
SUPPLEMENTAL INFORMATION
Budgetary Comparison Schedule ................................................................................. 14
INDEPENDENT AUDITOR’S REPORT
To the Board of Directors
Texas Student Housing Authority
Report on the Financial Statements
We have audited the accompanying financial statements of Texas Student Housing Authority
(the Authority), a component unit of Town of Westlake, as of and for the year ended
August 31, 2016, and the related notes to the financial statements, which collectively comprise
the Authority’s basic financial statements as listed in the table of contents.
Management’s Responsibility for the Financial Statements
The Authority’s 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. 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 opinion.
Texas Student Housing Authority
Page 2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Authority as of August 31, 2016, and the changes in its financial
position and its cash flows for the year then ended in accordance with accounting principles
generally accepted in the United States of America.
Emphasis of Matter Regarding Going Concern
The accompanying financial statements have been prepared assuming that the Authority will
continue as a going concern. As discussed in Note 7 to the financial statements, each of the
three projects operated by the Authority are in default on their bonds, which gives the projects’
bondholders the right to accelerate and demand payment on the bonds in full. Because a
significant portion of the Authority’s revenue is dependent on the projects, this condition raises
substantial doubt about the Authority’s ability to continue as a going concern. Management’s
plans regarding these matters are also described in Note 7. The financial statements do not
include any adjustments that might result from the outcome of this uncertainty. Our opinion is
not modified with respect to this matter.
Emphasis of Matter Regarding Restatement
As discussed in Note 8 to the financial statements, beginning net position of the Authority has
been restated to correct errors in accounting for asset management fees. Our opinion is not
modified with respect to this matter.
Other Matters
Required Supplementary Information
Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis on pages 4 – 6 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 who 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 supplementary 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.
Texas Student Housing Authority
Page 3
Other Information
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 Budgetary Comparison
Schedule is presented for purposes of additional analysis and is not a required part of the basic
financial statements.
The Budgetary Comparison Schedule is the responsibility of management and was derived from
and relates 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 Budgetary Comparison Schedule
is fairly stated, in all material respects, in relation to the basic financial statements as a whole.
WEAVER AND TIDWELL, L.L.P.
Dallas, Texas
January 23, 2017
MANAGEMENT’S DISCUSSION AND ANALYSIS
(unaudited)
TEXAS STUDENT HOUSING AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2016
(UNAUDITED)
4
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, 2016. 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. 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
$1,287,900, an increase of $342,385 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 $980,614, an increase
of $299,996 over the prior fiscal year.
• All operating revenues are generated from management of the properties and
scholarship activity of the Authority and totaled $580,855. Total operating expenses
incurred were $241,645.
OVERVIEW OF THE FINANCIAL STATEMENTS
This discussion and analysis is intended to serve as an introduction to the Authority’s basic
financial statements. The Authority’s report consists of three parts: Management’s Discussion
and Analysis, the basic financial statements (including notes to financial statements), and
supplemental information. The basic financial statements include a statement of net position,
statement of revenues, expenses, and changes in net position, and a statement of cash flows.
The Authority is being treated as a going concern. Properties managed by the Authority are in
default on their bonds and are not financially able to make scheduled principal and interest
payments on their outstanding debt. This is considered an event of default by the trustees,
which gives the bondholders the right to accelerate and demand payment of the bonds in full.
Management and the property managers are in the process of developing plans to increase
occupancy and rental rates at the properties to improve their financial performance.
The statement of net position presents information on the Authority’s assets and liabilities with
the difference between the two reported as net position. The statement of revenues, expenses,
and changes in net position accounts for all of the Authority’s revenues and expenses
regardless of when cash is paid or received.
The statement of cash flows reflects cash inflows and outflows by operating, noncapital
financing, capital financing, and investing activities during the year.
TEXAS STUDENT HOUSING AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2016
(UNAUDITED)
5
Table 1 provides a summary of the statement of net position for the current and prior fiscal
years:
TABLE 1 – NET POSITION
as restated
2016 2015
Current and other assets 1,327,956$ 981,453$
Total assets 1,327,956 981,453
Other liabilities 40,056 35,938
Total liabilities 40,056 35,938
Net Position
Unrestricted 1,287,900 945,515
Total net position 1,287,900$ 945,515$
Business-type Activities
Table 2 provides a summary of the statement of revenues, expenses and changes in net
position for the current and prior fiscal years:
TABLE 2 – CHANGE IN NET POSITION
as restated
2016 2015
Total operating revenues 580,855$ 560,655$
Total operating expenses (241,645) (248,952)
Total operating income 339,210 311,703
Interest income 3,175 398
Interest expense - (15)
Total nonoperating income 3,175 383
CHANGE IN NET POSITION 342,385 312,086
NET POSITION, BEGINNING (as restated)945,515 633,429
NET POSITION, ENDING 1,287,900$ 945,515$
Business-type Activities
TEXAS STUDENT HOUSING AUTHORITY
MANAGEMENT’S DISCUSSION AND ANALYSIS
YEAR ENDED AUGUST 31, 2016
(UNAUDITED)
6
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 ending August 31, 2017 will end with more income due to
proceeds from the sale of Town Lake Apartments and collection of scholarship fees from the
Cambridge property for periods ending FY 2015 and FY 2016. We are currently operating
scholarship programs at three properties, two of which are owned by TSHA (Denton and
Cambridge) and one by Nimes Capital (Town Lake).
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 Tracy Schornack
at (817) 430-5874.
BASIC FINANCIAL STATEMENTS
TEXAS STUDENT HOUSING AUTHORITY
STATEMENT OF NET POSITION
AUGUST 31, 2016
The Notes to Financial Statements are
an integral part of this statement.
7
Cash 980,614$
Accounts receivable 347,342
Total assets 1,327,956
Accrued liabilities 2,306
Unearned revenue 37,750
Total liabilities 40,056
Unrestricted 1,287,900
Total net position 1,287,900$
NET POSITION
LIABILITIES
ASSETS
TEXAS STUDENT HOUSING AUTHORITY
STATEMENT OF REVENUES, EXPENSES, AND CHANGES IN NET POSITION
FOR THE YEAR ENDED AUGUST 31, 2016
The Notes to Financial Statements are
an integral part of this statement.
8
OPERATING REVENUES
Basic property administration 194,384$
Scholarship administration 386,333
Other income 138
Total operating revenues 580,855
OPERATING EXPENSES
Scholarship expense 112,415
Labor expenses 4,084
Professional fees 5,125
Office expense and other 120,021
Total operating expenses 241,645
OPERATING INCOME 339,210
NON-OPERATING REVENUE
Interest income 3,175
CHANGE IN NET POSITION 342,385
NET POSITION, BEGINNING (as restated)945,515
NET POSITION, ENDING 1,287,900$
TEXAS STUDENT HOUSING AUTHORITY
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED AUGUST 31, 2016
The Notes to Financial Statements are
an integral part of this statement.
9
CASH FLOWS FROM OPERATING ACTIVITIES
Cash received from scholarships and scholarship properties 536,877$
Cash paid for contract services (5,125)
Cash paid to others (234,931)
Net cash provided by operating activities 296,821
CASH FLOWS FROM INVESTING ACTIVITIES
Interest received 3,175
Net change in cash and cash equivalents 299,996
CASH AND CASH EQUIVALENTS, BEGINNING 680,618
CASH AND CASH EQUIVALENTS, ENDING 980,614$
RECONCILIATION OF OPERATING INCOME TO
NET CASH PROVIDED BY OPERATING ACTIVITIES
Operating income 339,210$
Adjustments to reconcile operating income to
net cash provided by operating activities:
Accounts receivable (46,507)
Accrued liabilities 1,451
Unearned revenue 2,667
Net cash provided by operating activities 296,821$
TEXAS STUDENT HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
10
NOTE 1. 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 three 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 the Governmental Accounting Standards Board
(GASB) Statement No. 14 as amended by GASB statements No. 39 and 61. 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.
Accordingly, the Authority reports no component units.
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 non current) are included on the
statement of net position and the operating statement presents increases (revenues)
and decreases (expenses) in net position. Under the accrual basis of accounting,
revenues are recognized when earned, and expenses are recognized at the time the
liability is incurred.
TEXAS STUDENT HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
11
NOTE 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES – CONTINUED
Measurement Focus and Basis of Accounting – Continued
GASB is the accepted standards setting body for establishing generally accepted
accounting principles (GAAP) for governments. Management uses estimates and
assumptions in preparing financial statements in accordance with GAAP. Those
estimates and assumptions affect the reported amounts of assets and liabilities, the
disclosure of contingent assets and liabilities, and the reported revenues and expenses.
Actual results could vary from the estimates that are used.
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, 2016, 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, 2016, management has
determined that all accounts doubtful of collection have been charged to operations and
an allowance is not required.
Subsequent Events
The Authority has evaluated all events or transactions that occurred after August 31,
2016, and up through January 23, 2017, the date the financial statements were issued.
NOTE 3. CASH AND CASH EQUIVALENTS
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.
TEXAS STUDENT HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
12
NOTE 3. CASH AND CASH EQUIVALENTS – CONTINUED
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, 2016, the Authority’s cash balances totaled $980,614 (bank balance of
$982,258). 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.
NOTE 4. NET POSITION
Net position represents the residual assets after liabilities are deducted. Net position is
reported as follows.
Unrestricted Net Position – consists of the residual portion of net position after net
investment in capital assets and restricted net position have been satisfied. At August
31, 2016, the Authority had no restricted net position or capital assets. All net position,
therefore, is considered to be unrestricted.
NOTE 5. 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.
TEXAS STUDENT HOUSING AUTHORITY
NOTES TO FINANCIAL STATEMENTS
13
NOTE 6. RELATED PARTY TRANSACTIONS
The Town usually charges an oversight fee to the Authority; however, the Town did not
charge a fee in fiscal year 2016. In addition, the Town charges contract labor. The amount
of $4,084 was paid to the Town during fiscal year 2016 for contract labor.
During fiscal year 2016, the Authority also received revenues of $194,384 related to its
oversight of the various properties.
NOTE 7. GOING CONCERN
The 2016 financial statements were prepared assuming the Authority will continue as a
going concern. Each of the three student housing projects operated by the Authority are in
default on their bonds, which gives the projects’ bondholders the right to accelerate and
demand payment on the bonds in full. Because a significant portion of the Authority’s
revenue is dependent on the projects, this condition raises substantial doubt about the
Authority’s ability to continue as a going concern. Management and the projects’ property
managers are in the process of developing and implementing plans to increase occupancy
and rental rates at the properties to help improve the projects’ financial performance.
NOTE 8. PRIOR PERIOD ADJUSTMENT
During 2016, it was determined that certain accounts included in the previously reported
financial statements required correction to properly recognize asset management fees
earned in previous years. As a result, the accounts receivable balance as of August 31,
2015 was understated by $299,862.
Beginning net position has been restated as follows to reflect correction of the errors:
Net position, September 1, 2015, as previously stated 645,653$
To correct accounts receivable:
- Jefferson Commons at Town Lake Project 127,200
- College Station Project 172,662
Total 299,862
Net position, September 1, 2015, as restated 945,515$
SUPPLEMENTAL INFORMATION
TEXAS STUDENT HOUSING AUTHORITY
BUDGETARY COMPARISON SCHEDULE
FOR THE YEAR ENDED AUGUST 31, 2016
14
Variance with
Original and Final Final Budget
Budgeted amounts Actual Positive (Negative)
Revenues:
Basic property administration 172,632$ 194,384$ 21,752$
Scholarship value 352,360 - (352,360)
Scholarship administration 215,810 386,333 170,523
Interest income - 3,175 3,175
Other income - 138 138
Total revenues 740,802 584,030 (156,772)
Expenses:
Scholarship 352,360 - 352,360
Scholarship expense 121,500 112,415 9,085
Labor expenses 42,791 4,084 38,707
Professional fees 6,000 5,125 875
Office expense and other 182,600 120,021 62,579
Total expenses 705,251 241,645 463,606
Change in net position 35,551 342,385 306,834
Net position - beginning (as restated)945,515 945,515 -
Net position - ending 981,066$ 1,287,900$ 306,834$