Title: LIQUIDITY
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
At June 30, 2023, the Project had $20,711 of financial assets available within one year to meet cash
needs for general expenditures including cash of $20,090 and accounts receivable of $621.
Title: CASH DEPOSITS - COLLATERALIZATION
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
The Project uses a financial institution for placement of deposits. At June 30, 2023 and 2022, all
deposits were uncollateralized by the financial institution. However, the Federal Deposit Insurance
Corporation (FDIC) insures the deposits, and all deposits were within the insurance limits of the FDIC.
Title: TENANT SECURITY DEPOSITS
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
As required by regulatory agreement with HUD, security deposits from Project tenants are deposited in
a separate account. At June 30, 2023 and 2022, $7,081 and $6,928, respectively, were on deposit
compared to liabilities of $4,224 and $4,021, respectively.
Title: REPLACEMENT RESERVE
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
Under the terms of the regulatory agreement, the Project is required to set aside specified amounts for
the replacement of property and other project expenditures as approved by HUD. Restricted funds are
held in separate accounts and generally are not available for operating purposes. During the years
ended June 30, 2023 and 2022, transfers of $3,180 and $3,180, respectively, were made. During the
years ended June 30, 2023 and 2022, no withdrawals were made from the account.
Title: RESIDUAL RECEIPTS RESERVE
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
Use of the residual receipts account is contingent on HUD's prior, written approval. During the years
ended June 30, 2023 and 2021, no withdrawals were made from this account.
Title: HUD ADVANCES
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
The United States Department of Housing and Urban Development set up a capital advance mortgage
note program under which monies are advanced to the Project to finance the cost of building the
complex. These advances bear no interest and repayment is not required as long as the housing
remains available for persons with disabilities as defined in Section 811 of the National Affordable
Housing Act of 1990 and applicable HUD regulations. Should the Project remain in accordance with
these requirements, the note will be deemed to be paid and discharged on December 1, 2035. If the
Project defaults under the terms of the agreement, the entire principal amount will become due and
payable at once. Interest per annum at a rate of 7.875% will be payable on demand with respect to the
payment of principal on default. Additionally, the Project paid $9,000 to the sponsor for repairs and
maintenance salaries.
The balance of the capital advance at June 30, 2023 and 2022 was $930,100.
Title: RELATED PARTY TRANSACTIONS
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
The Project had the following transactions with Ouachita Behavioral Health and Wellness, Inc. of Hot Springs, Arkansas (Sponsor):
Management Fees. As of June 30, 2023 and 2022, management fees payable to the
Sponsor totaled $41,028 and $45,828 respectively. Management fees paid to the Sponsor
during the year ended June 30, 2023 and 2022, were $12,480 each year. In the current
year, the Project paid $9,000 to the Sponsor for repair and maintenance salaries and
$4,800 in debt repayment.
Accounts Payable. Accounts payable include amounts owed to the Sponsor for payroll,
administrative services and expenses or costs paid by the Sponsor for the benefit of the
Project. As of June 30, 2023 and 2022, accounts payable to the sponsor totaled $266,957
and $226,149 respectively.
Title: NET ASSETS WITHOUT DONOR RESTRICTIONS
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
None of the Project Net Assets are subject to donor-imposed restrictions; therefore, all net assets are
accounted for as unrestricted net assets.
Title: RENT INCREASES
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
Under the regulatory agreement, the Project may not increase rent charged to tenants without HUD
approval. No rent increases were enacted for the years ended June 30, 2023 and 2022.
Title: FUNCTIONAL ALLOCATION OF EXPENSES
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
Expenditures incurred in connection with project operations and expenditures made for corporate
purposes have been summarized on a functional basis in the Statement of Activities.
Title: CURRENT VULNERABILITY DUE TO CERTAIN CIRCUMSTANCES
Accounting Policies: NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
A. Organization/Purpose
Reach Out II Apartments, Inc. (the Project) is a corporation organized under the laws of the State of
Arkansas for the purpose of developing and operating Reach Out II Apartments, a 21-unit project
for persons with disabilities, in Malvern, Arkansas. The Project's major program is its Section 811
Capital Advance. The Project is also subject to Section 8 Housing Assistance payment agreements
with the
U. S. Department of Housing and Urban Development (HUD), and a significant portion of the
Project's rental income is received from HUD. The Project's nonmajor program is its Section 8 rent
subsidy.
B. Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted
in the United States of America requires management to make estimates and assumptions that
affect certain reported amounts and disclosures. Accordingly, actual results could differ from those
estimates.
C. Basis of Accounting
The Project accounts for transactions on the accrual basis of accounting. Gross income is recorded
when due, and expenses are recognized as incurred.
Net assets are classified based on the existence or absence of donor-imposed restrictions.
Accordingly, net assets of the Project and changes therein are classified as follows:
Net Assets Without Donor Restrictions. These net assets are not subject to donorimposed
stipulations. The assets are available for general obligations to the Project. This
also includes assets previously restricted where restrictions have expired or been met.
Net Assets With Donor Restrictions. Assets subject to usage limitation based on donorimposed
restrictions. These restrictions may be temporary or may be based on a
particular use. Restrictions may be met by the passage of time or by the actions of the
Clinic. Certain restrictions may need to be maintained in perpetuity.
D. Receivables
Accounts receivable include amounts currently due from HUD billings and tenants. The Project
provides for collection losses based on historical collection experience together with the current
status of receivables. All known credit losses are recognized and reflected in the accounts.
E. Distributions
The Project's regulatory agreement with HUD stipulates, among other things, that the Project will
not make distributions of assets or income to any of its officers or directors. F. Property and Equipment
Property and equipment are valued at acquisition cost or fair-market value of donated assets at the
time of receipt. The Project capitalizes assets with a value of at least $ 2,500 and a life of more
than one year. Retirements are removed from book valuations based on original cost or donated
value. Property and equipment are depreciated using the straight-line method based on estimated
useful lives of related assets.
Useful Life
Fixed Assets (years)
Buildings 40
Furniture, fixtures, and equipment 5 – 7
G. Income Taxes
The Project qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue
Code. The Project’s Forms 990, Return of Organization Exempt from Income Tax, for the years
ended June 30, 2023, 2022 and 2021, are subject to examination by the Internal Revenue Service,
generally, for three years after they are filed.
H. Cash and Cash Equivalents
For the purposes of the statement of cash flows, all investment instruments with original maturities
of three months or less are considered cash equivalents.
I. Recent Accounting Pronouncements
In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842). Subsequent to the issuance
of Topic 842, additional ASUs were issued to provide additional implementation guidance, practical
expedients, targeted improvements, and revised effective dates. Under the new guidance, lessees
are required to recognize lease right of use assets and related lease liabilities on the balance sheet
for all leases with original tiers longer than 12 months. Leases will be classified as either finance or
operating, with classification affecting the pattern of expense recognition in the income statement.
Lessor accounting generally remains unchanged with minor changes. The amendments in this ASU
are effective for fiscal years beginning after December 15, 2021, with early adoption permitted. The
adoption of this ASU did not have a material impact on the Company’s financial statements.
J. Subsequent Events
The Project did not have any subsequent events through September 29, 2023, which is the date the
financial statements were available to be issued for events requiring recording or disclosure in the
financial statements for the year ended June 30, 2023.
K. Revenue Recognition
The new revenue recognition rules under ASC 606 eliminates rental revenue from the new
accounting standard. Therefore, ASC 606 has no material effect on rental revenue.
Revenue is recognized on a monthly basis as rental payments are received from tenants and
collections from HUD are booked as receivables.
De Minimis Rate Used: N
Rate Explanation: N/A
The Project’s main asset is a 21-unit apartment project. The Project’s operations are concentrated in
the multifamily real estate market. In addition, the Project operates in a heavily regulated environment.
The operations of the Project 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 cost, including the additional administrative burden, to comply with a change.