Title: NOTE 1 - BASIS OF PRESENTATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:
Accounting Policies: The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal award activity of New Hope Village Apartments under programs of the federal government for the year ended September 30, 2023.
The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Project, it is not intended to and does not present the Project’s financial position, changes in net assets, or cash flows.
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
De Minimis Rate Used: N
Rate Explanation: Management did not elect to use the 10% de minimis indirect cost rate.
USE OF ESTIMATES: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.
CASH EQUIVALENTS: Management considers all highly liquid investments with a maturity of three months or less, at the date of acquisition, to be cash and cash equivalents.
CREDIT RISK: Cash and cash equivalents are maintained at financial institutions and, at times, balances may have exceeded the federally insured limits.
ACCOUNTS RECEIVABLE: Accounts receivable are stated at the amount management expects to collect from outstanding balances. Tenant rent is due the first of each month. Late charges are assessed after the tenth of the month. Unpaid amounts are expected to be collected within 30 to 60 days. RD subsidies are requested near the beginning of the month and are usually received in the same month. Tenant rent increases are subject to RD approval. Accounts are written off once a tenant has been evicted. An allowance for doubtful accounts has not been recorded since the amount is deemed immaterial.
RESTRICTED DEPOSITS AND FUNDED RESERVES: Restricted amounts consist of the following: escrow funds which are held by financial institutions as approved by RD and tenant security deposits which are held in a separate bank account in the name of the Project. The RD Agreements require monthly payments, as specified by RD on an annual basis, for insurance premiums and real estate taxes where payments are made by the Project and are expensed by management, and into a restricted reserve for replacement account where withdrawals can be made for repair and/or replacement of, and capital improvements to, the apartment complex, subject to RD approval. The State of Maryland Landlord-Tenant Code requires management to receive security deposits from the tenants upon execution of the lease agreement and repay them to the tenant upon vacating the premises, depending on whether the tenant had any obligations to the Project at that time.PROPERTY AND EQUIPMENT: Property and equipment are recorded at cost and are depreciated on the straight-line method over the estimated useful lives of the assets, which are 15 to 40 years for buildings and improvements and 3 to 10 years for furniture and equipment. Additions and betterments are capitalized, while repairs and maintenance that do not improve or extend the useful lives of the respective assets are expensed currently.
In accordance with Accounting Standards Codification (ASC), No. 360, “Accounting for the Impairment or Disposal of Long-Lived Assets,” management reviews the rental property for impairment whenever events or changes in circumstances indicate that the carrying value of an asset may not be recovered. If the fair value is less than the carrying amount of the asset, an impairment loss is recognized for the difference. No impairment losses have been recognized during the years presented.
ADVERTISING: Advertising costs are expensed when incurred.
SUBSEQUENT EVENTS: Events and transactions subsequent to year end have been evaluated for potential recognition in the financial statements or disclosure in the notes to the financial statements. All events and transactions have been evaluated through January 5, 2024, the date the report was available for issuance.
As a result of the spread of COVID-19 (Coronavirus) and its variants, economic uncertainties have arisen which are likely to negatively impact rental income. Other financial impact could occur, though such potential impact is unknown at this time.
Title: NOTE 2 - U.S. DEPARTMENT OF AGRICULTURE - RURAL DEVELOPMENT LOANS:
Accounting Policies: The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal award activity of New Hope Village Apartments under programs of the federal government for the year ended September 30, 2023.
The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Project, it is not intended to and does not present the Project’s financial position, changes in net assets, or cash flows.
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement.
De Minimis Rate Used: N
Rate Explanation: Management did not elect to use the 10% de minimis indirect cost rate.
On July 1, 2015, the Project entered into a first mortgage through Rural Development in the amount of $771,910; 50-year term, 30-year balloon, with interest at 3.625%, subsidized to 1%, payable in monthly installments of $1,635. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2023 and 2022 was $768,220, with accrued interest of $108,040 and $95,833, respectively. Payments are deferred and payable after a 20-year period.
On July 1, 2015, the Project entered into a second mortgage through Rural Development in the amount of $85,119; 50-year term, 30-year balloon, with interest at 3.625%, subsidized to 1%, payable in monthly installments of $180. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2023 and 2022 was $84,712 with accrued interest of $11,913 and $10,567, respectively. Payments are deferred and payable after a 20-year period.
On October 24, 2016, the Project entered into a third mortgage through Rural Development in the amount of $276,989, for the purpose of rehabilitating the Project; 50-year term, 30-year balloon, with interest at 3.625%, subsidized to 1%, payable in monthly installments of $602. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2023 and 2022 was $259,040 and $262,009, respectively.
On February 27, 2017, the Project entered into a construction loan through Rural Development in the amount of $289,841, for the purpose of rehabilitating the Project; interest at 1%. Secured by a lien on the real estate and security interest in all other property. Principal amount at September 30, 2023 and 2022 was $289,841, with accrued interest of $16,637 and $14,228, respectively. Payments are deferred and payable after a 20-year period.