Note: This financial statement template is only a guide and proper application of generally accepted accounting principles is the responsibility of the preparer.
PARTNERSHIP NAME
FINANCIAL STATEMENTS
Years Ended December 31, 2016 and 2015
Partnership Name
TABLE OF CONTENTS
Page No.
Independent Auditors’ Report...... #
Financial Statements
Balance Sheets...... #
Statements of Operations...... #
Statements of Partners' Equity (Deficit)...... #
Statements of Cash Flows...... #
Notes to Financial Statements...... #
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INDEPENDENT AUDITORS' REPORT
Insert audit opinion on Firm letterhead here
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PARTNERSHIP NAME
BALANCE SHEETS
December 31, 2016 and 2015
ASSETS2016 2015
CURRENT ASSETS
Cash, rental operations$ $
Accounts receivable, tenants
Prepaid insurance
TOTAL CURRENT ASSETS
RESTRICTED DEPOSITS AND FUNDED RESERVES
Cash, replacement reserve
Cash, operating reserve
Cash, asset management reserve
Cash, tax and insurance escrow
Cash, security deposits
RENTAL PROPERTY
Land
Land improvements
Buildings
Furniture and equipment
Accumulated depreciation
OTHER ASSETS
Deferred loan costs (net of accumulated amortization of
$____ in 2016 and $____ in 2015)
Deferred tax credit fees (net of accumulated amortization of
$____ in 2016 and $____ in 2015)
$ $
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Construction loan$ $
Current maturities of mortgages payable
Accounts payable, trade
Accrued asset management fees
Accrued interest payable
TOTAL CURRENT LIABILITIES
DEPOSITS AND PREPAYMENT LIABILITIES
Tenant security deposits
LONG-TERM DEBT
Mortgages payable, net of current maturities
PARTNERS’ EQUITY
$ $
See accompanying notes.Page 1
PARTNERSHIP NAME
STATEMENTS OF OPERATIONS
Years ended December 31, 2016 and 2015
2016 2015
Revenue
Gross tenant rent potential$ $
Less: Vacancy
Net tenant rent potential
Gross commercial rent potential
Less: Vacancy
Net commercial rent potential
Interest income
Other income
Expenses
Administrative (1)
Management fee
Accounting and auditing
Bad debt expense
Repairs and maintenance (2)
Utilities (3)
Property insurance
Property and other taxes (4)
Interest expense - construction
Interest expense - mortgage
Deferred interest expense
Depreciation
Amortization
Organization costs
Asset management fee
Incentive management fee
Other expenses (5)
Net loss$ $
(1) Tenant activities, advertising, office salaries, employee benefits( including payroll taxes), office supplies, printing, subscriptions, dues, licenses and permits, training, conferences, computer, telephone, postage, fidelity insurance, travel, project legal and other related items
(2) Grounds repair and maintenance, building repairs and maintenance, elevator maintenance, painting and decorating services, grounds payroll, grounds supplies, electric maintenance and repairs, appliance repairs and supplies, plumbing repairs and services, HVAC repairs and services, painting supplies, carpet, janitorial contract and supplies, extermination and pest control, contract labor, security contract, fire protections, snow removal, pool supplies and other related line items.
(3) Water, sewer, gas, oil, fuel, electric and trash removal
(4) Property and other taxes, not including payroll taxes
(5) Those expenses not covered under the specific categories available
See accompanying notes.Page 1
PARTNERSHIP NAME
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 2016 and 2015
General Limited
Partner Partner Total
Partners' equity, December 31, 2014$ $ $
Contributions
Distributions
Net income
Partners' equity, December 31, 2015
Contributions
Distributions
Net income
Partners' equity, December 31, 2016$ $ $
Percentage interest % % 100.0%
See accompanying notes.Page 1
PARTNERSHIP NAME
STATEMENTS OF CASH FLOW
Years ended December 31, 2016 and 2015
2016 2015
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss$ $
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization
Depreciation
(Increase) decrease tenant accounts receivable
(Increase) decrease miscellaneous receivables
(Increase) decrease tax and insurance escrow deposits
(Increase) decrease prepaid expenses
Increase (decrease) prepaid rents
Increase (decrease) security deposits net
Increase (decrease) accounts payable
Increase (decrease) accrued interest payable
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits to reserve for replacements
Withdrawals from reserve for replacements
Purchase of rental property
Proceeds from the sale of rental property
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from general partners
Mortgage proceeds
Principal payments on mortgage
Contributions received
Distributions paid
Advances from affiliates
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH
CASH, BEGINNING
CASH, ENDING$ $
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest$ $
See accompanying notes.Page 1
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Partnership Name ("Partnership") was formed as a limited partnership under the laws of the State of ______on ______for the purpose of constructing, owning and operating a low income rental housing project. The project consists of _____ multifamily residential rental units located in ______.
In of , the partnership agreement was amended to admit and to permit the withdrawal of the original limited partner. The resulting ownership of the partnership, is as follows:
General Partner X.XX%
Limited PartnerXX.XX
100.00%
Summary of significant accounting policies follows:
Insert relevant accounting policies here
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE B - CAPITAL CONTRIBUTIONS
As of December 31, 2016 the partnership's general partner is required to make or, as applicable, subsequent to their contributions having been made have made capital contributions totaling $ _____. The investor limited partner has contributed the first required installment totaling $ and is required to contribute $______in ...more installment(s), as defined. or, as applicable, subsequent to the investor limited partner's total contributions having been made The investor limited partner has made all required capital contributions totaling $______.
NOTE C - CONSTRUCTION LOAN
2016 2015
The partnership has a construction loan with in ______an amount not to exceed $ ______. The terms of the loan provide for monthly payments of interest at a rate equal of . After certain conversion conditions are met, the construction loan will convert to a permanent loan no later than with a final maturity on______. The terms of the permanent loan provide for monthly installments of principal and interest in the amount of $______accruing interest at ______% per annum based upon a thirty-year amortization schedule - or, as applicable, -The construction loan will mature on ______. $ $
The loan is secured by ....
During 2016 and 2015 the partnership incurred interest costs in the amount of $ ______and $______. Of the total cost incurred, $______and $______was capitalized and the remainder of $______and $______was expensed.
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE D - LONG-TERM DEBT
Details of the long-term debt at December 31, 2016 and 2015 are as follows:
2016 2015
Mortgage payable to ______, bearing interest at ____% per annum and payable in monthly installments of $_____ until September ____, secured by a first priority lien on the project. $ $
Mortgage payable to the ______, bearing no interest with annual installments due as follows: $_____ for years 1 through 3; $_____ for years 4 through 6; $______for years 7 through 9; $______for years 10 through 12; $______for years 13 through 15; $______for years 16 through 18; $______for years 19 through 24; and $______for year 25. All remaining principal is due September 1, ____. The mortgage is secured by a second priority lien on the project.
Mortgage with the ______in the amount of $______. Interest at ___% per annum shall accrue with no payments due during the construction phase. Principal and accrued interest are to be paid annually after the construction phase and until maturity, ______, at an amount not to exceed the lower of the available cash flow, as defined, on current and accrued installments sufficient to amortize the loan over an 18-year term. Available cash flow is defined as gross revenue collections less project operating expenses, debt service on the first mortgage, operating and replacement reserve funding, payment of partnership fees, and repayment of all partnership advances to the project. As of December31, 2016, accrued interest on this loan is $______. The loan is secured by a third deed of trust on the property and its improvements. At December31, 2016, there is no available cash flow.
Less current maturities
$ $
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE D- LONG-TERM DEBT (Continued)
Total estimated maturities of the mortgages payable at December 31, 2016 are as follows:
2017$
2018
2019
2020
2021
Future years
$
During the years ended December 31, 2016 and 2015, interest costs incurred amounted to $______and $______, respectively.
NOTE E - RELATED PARTY TRANSACTIONS
Asset Management Fee
The Company is required to pay the investor member a cumulative, annual asset management fee of $______beginning with the year ended December 31, ____ (to be paid by ______), which shall be increased by ___% each year subsequent to ____. The asset management fee is payable out of cash from operations, as defined, after funding of the replacement reserve (see Note E). During the years ended December 31, 2016 and 2015, asset management fee expense amounted to $_____ and $______, respectively. Accrued fees payable amounted to $_____ and . $_____ at December31,2016 and 2015, respectively.
Incentive Management Fee
As applicable, disclose the nature and terms of the transactions, annual expense and balances payable at year end.
Due to Affiliate
Pursuant to the partnership agreement, the general partner has guaranteed to fund all deficits through the date of breakeven operations. Subsequent to breakeven operations, funding up to an additional $______of operating deficits is guaranteed for a period of beginning. After this initial period, the funding obligation shall be reduced to $______or completely eliminated if certain debt service ratios occur. Funding, if required, will be in the form of loans. These loans will bear interest at xx% per annum, compounded monthly, and will be payable from cash flow: For the years ended December 31, 2016 and 2015, respectively, the general partner loaned $______and $ ______to the partnership and $______and $ ______remained payable at year-end.
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE E - RELATED PARTY TRANSACTIONS (Continued)
Developer Agreement
The partnership has entered into a development agreement with an affiliate of the general partner. The agreement provides for a development fee in the amount of $______for services during the development and construction of the project. Development fees are earned based upon the occurrence of certain events, as defined, during development and construction. For the years ended December 31, 2016 and 2015. $______and $______had been earned of which $______and $______remained payable at year-end.
Construction Contract
The partnership has entered into a construction contract in the amount of $ ______with an affiliate of the general partner, to perform general contractor services in conjunction with the construction of the project. The term of the agreement is through completion, as defined. For the years ended December 31, 2016 and 2015, respectively, $______and $______had been incurred and $______and $______remained payable at year-end.
NOTE F - PROPERTY MANAGEMENT AGREEMENT
The partnership has entered into an agreement with ______, in connection with the management of the rental operations of the project. The property management fee is calculated as ..., as defined. For the years ended December 31, 2016 and 2015, respectively, $______and $______were charged to operations and $______and $______remained payable at year-end.
NOTE G - NET CASH FLOW
Net cash flow is to be distributed as follows:
1.
2.
3.
4.
5. ______% to the payment of outstanding operating and development deficit loans, and
6. ______% to the partners according to their percentage interests.
The above definitions will be defined in the Partnership
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE H - RESERVES
Operating Reserve Funding
The operating agreement requires the Company to fund an operating reserve account in the amount of $______on or before receipt of the ______installment of the investor member’s capital contribution. In addition, the operating reserve is to be funded to the extent of available cash generated by operations after funding the replacement reserve and paying the asset management fee with respect to the year just completed, to the extent the balance in the operating reserve is less than $______. The operating reserve is to be held in a segregated account and requires the joint signatures of the managing member and the investor member. An analysis of the operating reserve for the two years ended December31, 2016 and 2015 is as follows:
Balance, December 31, 2014$
Deposits
Interest
Withdrawals
Balance, December 31, 2015
Deposits
Interest income
Withdrawals
Balance, December 31, 2016$
Replacement Reserve Funding
The operating agreement requires the Company to fund a replacement reserve using cash flow from operations, as defined. The amount contributed to such reserve shall be $____ per rented unit per month in _____, and $______for the year ended December 31, _____, which shall be increased ___% each year subsequent to ____. Scheduled deposits to the replacement reserve are cumulative and must be funded prior to payment of the asset management fee (see Note D), and before funding of the operating reserve. Funds in the replacement reserve may be used by the managing member to make major repairs; however, withdrawals of more than $_____ require the approval of the investor member. The replacement reserve is to be held in an interest-bearing, segregated account with any interest earned added to the amount of the replacement reserve. An analysis of the replacement reserve for the year ended December 31, 2016 is as follows:
Balance, December 31, 2014$
Monthly deposits
Income
Withdrawals
Balance, December 31, 2015
Monthly deposits
Interest income
Withdrawals
Balance, December 31, 2016$
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE H - RESERVES (Continued)
Asset Management Reserve
The operating agreement requires the Company to fund an asset management reserve in the amount of $______on or before the ______installment of the investor member’s capital contribution. The asset management reserve is to be held in a segregated account and shall require joint signatures of the managing and investor members. An analysis of the asset management reserve for the two years ended December 31, 2016 and 2015 is as follows:
Balance, December 31, 2014$
Deposits
Interest
Withdrawals
Balance, December 31, 2015
Deposits
Interest income
Withdrawals
Balance, December 31, 2016$
NOTE I - COMMITMENTS AND CONTINGENCIES
Low-income Housing Vulnerability
The partnership's lowincome housing credits are contingent on its ability to maintain compliance with applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit gross rent, or to correct noncompliance within a specified time period could result in recapture of previously taken tax credits plus interest. In addition, such potential noncompliance may require an adjustment to the contributed capital by the limited partner.
Land Use Restriction Agreement
The partnership has entered into a Land Use Restriction Agreement with the ______, which restricts the use of the project to low income and very low income families, as defined, for years beginning the first year of the credit period, as defined.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of cash deposits in excess of federally insured limits. As of December 31, 2016, the Company’s bank balances exceeded federally insured limits by approximately $______.
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PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2016 and 2015
NOTE J - RECONCILIATION BETWEEN NET LOSS PER TAX RETURN AND NET LOSS PER FINANCIAL STATEMENTS
The following is a reconciliation between the partnership's net loss as stated in the partnership's Federal income tax return and the net loss based on generally accepted accounting principles (GAAP) included in the accompanying statement of operations for the year ended December 31, 2016 and 2015:
2016 2015
Net loss per Federal income tax returns$ $
Differences between tax and GAAP
Prepaid rent
Amortization
Depreciation
Other
Net loss per accompanying financial statements$ $
NOTE K - LOW INCOME HOUSING TAX CREDITS (UNAUDITED)
The partnership has received an allocation of low-income housing tax credits from the State of ______totaling $______annually. To qualify for the tax credits, the partnership must meet certain requirements, including attaining a qualified eligible basis sufficient to support the allocation. Each unit in the project has qualified and was allocated lowincome housing credits pursuant to Internal Revenue Code Section 42 ("Section 42") which regulates the use of the project as to occupant eligibility and unit gross rent, among other requirements. Each unit in the project must meet the provisions of these regulations during each of fifteen consecutive years in order to remain qualified to receive the credits.
The expected availability of the remaining tax credits is as follows:
Federal State Historic
2017$ $ $
2018
2019
2020
2021
2022
2023
2024
2025
$ $ $
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