Financial statements and report of independent certified public accountants
Nevada Housing Division
June 30, 2003
CONTENTS

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Accountants and
Management Consultants
Grant Thornton LLP
The US Member Firm of
Grant Thornton International
P.O. Box 30
R...
MANAGEMENT’S DISCUSSION AND ANALYSIS
Nevada Housing Division

                          MANAGEMENT’S DISCUSSION AND ANALYSIS

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Nevada Housing Division

                      MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED

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Nevada Housing Division

                     MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED

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Nevada Housing Division

                MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED

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COMBINED FINANCIAL STATEMENTS
Nevada Housing Division
                                                                       COMBINED BALANCE SHEET
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Nevada Housing Division

                                                  COMBINED STATEMENT OF REVENUES, EXPENSES
      ...
Nevada Housing Division

                                                                  COMBINED STATEMENT OF CASH FLOW...
Nevada Housing Division

                                                       COMBINED STATEMENT OF CASH FLOWS - CONTINU...
Nevada Housing Division

                      NOTES TO COMBINED FINANCIAL STATEMENTS

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

               NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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Nevada Housing Division

            NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED

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REQUIRED SUPPLEMENTARY INFORMATION
Nevada Housing Division

                                                     STATEMENT OF REVENUES, EXPENSES
            ...
SUPPLEMENTARY INFORMATION
Nevada Housing Division

                                                              COMBINING BALANCE SHEET
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Nevada Housing Division

                                                                          COMBINING BALANCE SHEET...
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Financial Statements and Report of

  1. 1. Financial statements and report of independent certified public accountants Nevada Housing Division June 30, 2003
  2. 2. CONTENTS Page REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS ........................................................... 3 MANAGEMENT’S DISCUSSION AND ANALYSIS ............................................................................................... 4 COMBINED FINANCIAL STATEMENTS Combined Balance Sheet ........................................................................................................................ 10 Combined Statement of Revenues, Expenses and Changes in Net Assets .................................... 11 Combined Statement of Cash Flows .................................................................................................... 12 Notes to Combined Financial Statements............................................................................................ 14 REQUIRED SUPPLEMENTARY INFORMATION Statement of Revenues, Expenses and Changes in Net Assets – Budget and Actual - General Fund ......................................................................................................................................... 28 SUPPLEMENTARY INFORMATION Combining Balance Sheet - Single-Family Program Funds............................................................... 30 Combining Balance Sheet - Multi-Unit Program Funds.................................................................... 38 Combining Statement of Revenues, Expenses and Changes in Retained Earnings - Single-Family Program Funds ............................................................................................................. 47 Combining Statement of Revenues, Expenses and Changes in Retained Earnings - Multi-Unit Program Funds .................................................................................................................. 54 Schedule of Investments......................................................................................................................... 64 Schedule of Restricted Assets - Single-Family Program Funds........................................................ 76 Schedule of Restricted Assets - Multi-Unit Program Funds............................................................. 83 COMPLIANCE SECTION Report on the Internal Control Structure Based on an Audit of Combined Financial Statements Performed in Accordance with Government Auditing Standards ...................................... 85 Report on Compliance Based on an Audit of Combined Financial Statements Performed in Accordance with Government Auditing Standards........................................................... 86 Our Responsibility Under Auditing Standards Generally Accepted in the United United States of America and Government Auditing Standards ............................................................. 87
  3. 3. Accountants and Management Consultants Grant Thornton LLP The US Member Firm of Grant Thornton International P.O. Box 30 Reno, Nevada 89504 775-786-1520 Phone 775-786-7091 Fax Report of Independent Certified Public Accountants Administrator Nevada Housing Division We have audited the accompanying combined balance sheet of Nevada Housing Division (a public agency) as of June 30, 2003, and the related combined statements of revenues, expenses and changes in net assets and cash flows for the year then ended. These financial statements are the responsibility of the Division’s management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Nevada Housing Division as of June 30, 2003, and the results of its operations and its cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. Our audit was conducted for the purpose of forming an opinion on the combined financial statements of the Division taken as a whole. The Management’s Discussion and Analysis and the Statement of Support and Revenue, Expenses and Changes in Net Assets - Budget and Actual are not required parts of the combined financial statements but are supplementary information required by the Governmental Accounting Standards Board. We have applied certain limited procedures, which consisted principally of inquiries of management regarding the methods of measurement and presentation of the supplementary information. However, we did not audit the information and express no opinion on it. The accompanying supplementary information listed in the foregoing table of contents is presented for purposes of additional analysis and is not a required part of the basic financial statements of the Division. The supplementary information is the responsibility of the management of the Division. Such information has been subjected to the auditing procedures applied in our audit of the financial statements of the Division and, in our opinion, is fairly stated, in all material respects when considered in relation to the combined financial statements taken as whole. In accordance with Government Auditing Standards, we have also issued a reported dated August 22, 2002 on our consideration of Nevada Housing Division’s internal control structure and report dated August 22, 2003 on its compliance with laws and regulations. Reno, Nevada August 22, 2003
  4. 4. MANAGEMENT’S DISCUSSION AND ANALYSIS
  5. 5. Nevada Housing Division MANAGEMENT’S DISCUSSION AND ANALYSIS For the year ended June 30, 2003 Financial Statement Highlights: The change in Net Assets [bottom line] for the Housing Division was $4,889,359. Results of operations [revenue less operating expenses] were down $2,975,915 or 37.8% versus last year’s $7,865,274. There was a decline in General Funds Operating income from $3,758,195 in 2002 to $3,432,281 in 2003, a drop of $325,914 or a decline of 8.7%. This decline is primarily attributable to two factors: [1] a $307,658 drop in investment income on General Funds, attributable to the general market decline in U.S. Treasury securities and money market yields [2] a $5,915,191 drop in mortgages yielding >6.0% interest rates. Total loans outstanding decreased from $939,690,617 to $822,860,499 down $116,830,118 or 12.4%. Single-family loans outstanding dropped from $543,250,874 to $365,919,621 or a decrease of $177,331,253 or 32.6%. Multi-unit loans increased from $373,113,024 to $439,601,835 an increase of $66,488,811 or 17.8%. Loan delinquencies on single-family mortgages went up from 4.27% of loans outstanding to 5.45% of loans outstanding. The total number of single-family mortgages outstanding dropped from 6,578 to 4,590 or a reduction of 1,988 loans or 30.2%. The average value of each single-family loan in portfolio went down from $82,586 to $79,721 or a drop of 3.5%. Gross investment earnings decreased from $20,544,172 to $19,905,882 down $638,290 or 3.1%. Net investment income dropped from $20,892,278 to $20,031,868. This is a net decrease of $860,410 or 4.1%. The yield on investments, net of gains and losses in 2003 was 3.94% versus 2002’s 4.07%, a drop of 3.2% in the yield. Total salaries and payroll expenses paid went from $1,700,219 to $1,839,953 or up $139,734 or 8.2%. This material increase was attributable to both a large increase in healthcare benefit costs and the filling of a new position. The net cash position of the Housing Division was little changed going from $141,103 in 2002 to $130,907 in fiscal 2003. Standard & Poor’s reaffirmed the Housing Division’s Issuer Credit Rating at AA- in June. Overview of Financial Statements: The combined Balance Sheet and Statement of Revenues and Expenses and Changes in Net Assets reflect the financial position and results of operations from the Housing Division’s four primary programs: General Fund, HOME Program and the Single and Multi-unit bond programs. The HOME Program is in essence a break-even operation. Two other programs of the Housing Division, the Federal Tax Credit Program and the Federal Weatherization Program also have a material operational impact on Housing Division operations [salaries and administrative expenses] but no material financial impact since they are involved in allocation of non-cash items or services. At the year-end Financial Statements time, total Housing Division debt outstanding was $1,184,163,000 versus the new Statutory Limit of $5.0 billion. 5
  6. 6. Nevada Housing Division MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED For the year ended June 30, 2003 Financial Analysis: Total Assets: The total assets at fiscal year-end were $1,352,161,315 down $123,817,886 or down 8.4%. This very material drop is primarily due to single-family loan payoffs. The five-year trend in total assets has been: 2003 2002 2001 2000 1999 $1,352,161,315 $1,475,979,201 $1,435,525,302 $1,307,724,320 $1,161,985,184 The book value of single-family program loans outstanding at fiscal year-end were down $177,331,253 or down 32.6%. Delinquencies were up to 5.45% reflecting the 2002-2003 recession experienced in Nevada. 2003 2002 2001 2000 1999 Value $365,919,621 $543,250,874 $608,159,288 $595,956,448 $540,866,630 # of loans 4,590 6,578 7,475 7,360 7,155 % delinquent 5.45% 4.27% 2.61% 2.73% 3.20% Total Liabilities: The total liabilities at fiscal year-end were $1,206,360,485 down $128,707,245 or 9.6%. The five-year trend in total liabilities has been: 2003 2002 2001 2000 1999 $1,206,360,485 $1,335,067,730 $1,299,729,105 $1,185,262,163 $1,047,680,118 The Total Asset:Total Liability ratio trend for the past five fiscal years has been: 2003 2002 2001 2000 1999 1.121X 1.105X 1.104X 1.103X 1.109X The Total Bond Liabilities [current and non-current] relative to the new $5.0 billion statutory debt limit trend has been: 2003 2002* 2001* 2000* 1999* 23.7% 65.7% 63.8% 57.7% 50.8% * subject to old $2.0 billion statutory debt limit Net Assets: The net assets of the Housing Division increased to $145,800,830 at fiscal year-end or an increase of $4,889,359 or 3.5%. The five-year trend in net assets has been: 2003 2002 2001 2000 1999 $145,800,830 $140,911,471 $135,796,197 $122,462,157 $114,305,066 6
  7. 7. Nevada Housing Division MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED For the year ended June 30, 2003 Financial Analysis: - Continued In the past four fiscal years, combined net assets from the three primary financial programs: general funds, single-family program and multi-unit program have shown the following trend: Net Assets 2003 2002 2001 2000 General Fund $85,738,908 $80,504,321 $75,289,426 $69,627,832 Single-Family 50,339,119 50,763,989 51,729,366 45,836,570 Multi-Unit 9,722,803 9,643,161 8,777,405 6,990,955 The trend in administrative expenses plus operational charges for salaries, overhead and direct expenses paid by programs was for the past four years: 2003 2002 2001 2000 Net Assets Amount % Amount % Amount % Amount % Single-Family $ 875,038 24.6 $2,090,752 52.3 $1,796,031 70.8 $2,176,950 52.2 Multi-Unit 2,680,577 75.4 1,908,905 47.7 740,283 29.2 1,990,082 47.8 Totals $3,555,615 $3,999,657 $2,536,314 $4,167,032 Administrative Budget: The Housing Division’s administrative expense budget was approved for fiscal years FY2004 and FY2005 by the 2003 Nevada Legislature, as proposed by the Governor’s Budget Office. Additionally, the 2003 Legislature through Senate Bill #78 increased the Housing Division’s Statutory debt limit up to $5.0 billion from the previous limit of $2.0 billion. The Housing Division’s administrative budget reflects numerous managerial accounting differences from a GAAP revenue and expense statement. Significant differences between financial statements and the Legislatively approved administrative budget include but are not limited to: The Housing Division budgets for revenues and expenditures only to the extent expected to effect funds of the State; Revenues and expenditures of indentures and bond certificate trusts are not funds of the State, but are included in either the Multi-unit or Single-family bond programs or General Fund in the financial statements and not reflected in the State budget; The Housing Division budgets for revenues and expenditures of the Federal HOME Program to the extent they are paid to or by the State of Nevada. The HOME Program is not included in the General Fund in the financial statements; The Division budgets for compensated absences only to the extent expected to be paid, rather than on the modified accrual basis; All amortizable bond issuance costs are reported as such on the financial statements but reported as current period revenues and expenditures on the State budget; Income on investments, mortgages and bond interest payments are reflected as such in the financial statements but are not part of the State budget; Under State budgeting procedures, there is neither a increase or decrease in net assets. 7
  8. 8. Nevada Housing Division MANAGEMENT’S DISCUSSION AND ANALYSIS - CONTINUED For the year ended June 30, 2003 Administrative Budget: - Continued Through the fiscal year-end period of June 30, 2003 the Housing Division: Had increased its administrative budgetary revenue authority by $418,941 from the original budgeted amounts for the same period. Actual expenditures increased from the original budget by $470,719. Some savings have been attributable to diminished single-family loan demand and reduced bond issuance in that program which were offset by added issuance of bonds in the multi-unit program. Budgetary reserves at year-end were $400,412. This Management Discussion and Analysis along with the accompanying Financial Statements, Notes and Supplementary Information reflect our ongoing commitment to full, fair and honest disclosure at fiscal year- end June 30, 2003. For questions regarding the accompanying Financial Statements, Notes and Supplementary Information, please visit our website at www.nvhousing.state.nv.us or contact our office at 775-687-4258. CHAS L. HORSEY /S/ LON A. DEWEESE /S/ Chas L. Horsey, Administrator Lon A. DeWeese, Chief Financial Officer 8
  9. 9. COMBINED FINANCIAL STATEMENTS
  10. 10. Nevada Housing Division COMBINED BALANCE SHEET June 30, 2003 (With comparative totals for June 30, 2002) Home Investment General Partnerships Program Funds Combined Totals ASSETS Funds Program Single-Family Multi-Unit 2003 2002 Current assets: Cash $ 129,840 $ 1,067 $ - $ - $ 130,907 $ 141,103 Investments Restricted 62,200,250 - 357,368 748,091 63,305,709 45,424,788 Unrestricted 27,122 - 26,453,580 56,504,941 82,985,643 121,018,955 Total investments 62,227,372 - 26,810,948 57,253,032 146,291,352 166,443,743 Loans receivable 425,131 - 7,321,254 3,561,814 11,308,199 99,384,437 Interest and other receivables, net 715,054 4,177,152 5,565,837 1,988,278 12,446,321 13,515,222 Total current assets 63,497,397 4,178,219 39,698,039 62,803,124 170,176,779 279,484,505 Noncurrent assets: Long-term investments Restricted 5,075,376 - 35,722,242 1,781,979 42,579,597 58,595,262 Unrestricted - - 107,156,432 211,187,149 318,343,581 286,253,534 Fair value adjustment on investments 526,261 - 1,049,072 (12,926) 1,562,407 1,436,421 Total long-term investments 5,601,637 - 143,927,746 212,956,202 362,485,585 346,285,217 Loans receivable, net of current portion 16,913,912 - 358,598,367 436,040,021 811,552,300 840,306,180 Deferred issue costs, net of amortization - - 7,744,373 135,533 7,879,906 9,889,982 Office furniture and equipment, net of accumulated depreciation of $275,799 66,745 - - - 66,745 13,317 Total noncurrent assets 22,582,294 - 510,270,486 649,131,756 1,181,984,536 1,196,494,696 Total assets $ 86,079,691 $ 4,178,219 $ 549,968,525 $ 711,934,880 $ 1,352,161,315 $ 1,475,979,201 LIABILITIES AND NET ASSETS Current liabilities: Bonds payable $ - $ - $ 12,690,000 $ 5,586,000 $ 18,276,000 $ 71,307,000 Interest payable - - 7,266,939 6,467,670 13,734,609 15,885,642 Interfund (414,508) - 459,885 (45,377) - - Accounts payable and other liabilities 755,291 4,178,219 137,582 3,391,784 8,462,876 6,147,088 Total current liabilities 340,783 4,178,219 20,554,406 15,400,077 40,473,485 93,339,730 Noncurrent liabilities: Bonds payable, net of current portion - - 479,075,000 686,812,000 1,165,887,000 1,241,728,000 Total liabilities 340,783 4,178,219 499,629,406 702,212,077 1,206,360,485 1,335,067,730 Net assets: Restricted 82,639,993 - 50,339,119 9,722,803 142,701,915 138,837,683 Unrestricted 3,098,915 - - - 3,098,915 2,073,788 Total net assets 85,738,908 - 50,339,119 9,722,803 145,800,830 140,911,471 Total liabilities and net assets $ 86,079,691 $ 4,178,219 $ 549,968,525 $ 711,934,880 $ 1,352,161,315 $ 1,475,979,201 The accompanying notes are an integral part of this statement.
  11. 11. Nevada Housing Division COMBINED STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Year ended June 30, 2003 (With comparative totals for year ended June 30, 2002) Home Investment General Partnerships Program Funds Combined Totals Funds Program Single-Family Multi-Unit 2003 2002 Operating revenues Interest and other investment income $ 1,552,180 $ - $ 8,685,121 $ 9,668,581 $ 19,905,882 $ 20,544,172 Realized and unrealized gains (losses) on investments (245,246) - 238,246 132,986 125,986 348,106 Total investment income 1,306,934 - 8,923,367 9,801,567 20,031,868 20,892,278 Interest income on mortgage loans 601,986 - 33,101,117 17,697,475 51,400,578 58,855,556 Other income 1,136,442 - 193,261 2,123,334 3,453,037 2,826,743 Federal grants - 2,015,345 - - 2,015,345 2,181,347 Total operating revenues 3,045,362 2,015,345 42,217,745 29,622,376 76,900,828 84,755,924 Operating expenses Salaries and other payroll costs 1,717,598 122,355 - - 1,839,953 1,700,219 Administrative expenses 546,825 43,943 (38,813) 923,353 1,475,308 2,078,169 Servicers' fees 19,733 - 1,453,369 8,031 1,481,133 1,805,488 Interest on bonds payable - - 36,392,448 26,842,507 63,234,955 67,796,377 Amortization of issue costs - - 2,119,454 11,619 2,131,073 1,485,078 Interfund operating charge (2,671,075) - 913,851 1,757,224 - - Federal grant expenses - 1,849,047 - - 1,849,047 2,025,319 Total operating expenses (386,919) 2,015,345 40,840,309 29,542,734 72,011,469 76,890,650 CHANGE IN NET ASSETS 3,432,281 - 1,377,436 79,642 4,889,359 7,865,274 Transfers 1,802,306 - (1,802,306) - - (2,750,000) Net assets at beginning of year 80,504,321 - 50,763,989 9,643,161 140,911,471 135,796,197 Net assets at end of year $ 85,738,908 $ - $ 50,339,119 $ 9,722,803 $ 145,800,830 $ 140,911,471 The accompanying notes are an integral part of this statement.
  12. 12. Nevada Housing Division COMBINED STATEMENT OF CASH FLOWS Year ended June 30, 2003 (With comparative totals for the year ended June 30, 2002) Home Investment General Partnerships Program Funds Combined Totals Funds Program Single-Family Multi-Unit 2003 2002 Cash flows from operating activities: Cash received from mortgage loans $ 27,060,775 $ - $ 223,175,487 $ 37,933,601 $ 288,169,863 $ 183,218,802 Cash payments to purchase mortgage loans (20,457,876) - (11,706,802) (86,535,377) (118,700,055) (106,720,752) Cash receipts (payments) for goods and services 1,478,285 (1,066) (2,332,881) 1,656,394 800,732 (2,915,233) Interfund 289,077 - (241,272) (47,805) - - Net cash provided by (used in) operating activities 8,370,261 (1,066) 208,894,532 (46,993,187) 170,270,540 73,582,817 Cash flows from noncapital financing activities: Proceeds from sale of bonds - - - 128,830,000 128,830,000 223,745,000 Principal payments and purchase of bonds - - (227,560,000) (30,142,000) (257,702,000) (187,664,000) Interest payments on bonds - - (39,351,868) (26,034,120) (65,385,988) (68,510,418) Issue costs - - (120,997) - (120,997) (618,540) Operating transfer 1,802,306 - (1,802,306) - - (2,750,000) Federal grants received - 2,015,345 - - 2,015,345 2,181,347 Cash paid to other governments and organizations - (2,015,345) - - (2,015,345) (2,181,347) Net cash provided by (used in) noncapital financing activities 1,802,306 - (268,835,171) 72,653,880 (194,378,985) (35,797,958) Cash flows from capital and related financing activities: Acquisition of equipment (59,732) - - - (59,732) (14,287) Net cash used in investing activities (59,732) - - - (59,732) (14,287) Cash flows from investing activities: Proceeds (purchase) of short-term investments (net) (18,759,744) - 3,436,324 (7,190,616) (22,514,036) (8,339,681) Proceeds from sale of long-term investments 7,074,375 - 444,850,261 38,983,128 490,907,764 416,636,640 Purchase of long-term investments - - (397,248,333) (67,067,386) (464,315,719) (466,930,028) Income received on investments 1,563,404 - 8,902,387 9,614,181 20,079,972 20,863,386 Net cash used in investing activities (10,121,965) - 59,940,639 (25,660,693) 24,157,981 (37,769,683) NET INCREASE (DECREASE) IN CASH (9,130) (1,066) - - (10,196) 889 Cash at beginning of year 138,970 2,133 - - 141,103 140,214 Cash at end of year $ 129,840 $ 1,067 $ - $ - $ 130,907 $ 141,103
  13. 13. Nevada Housing Division COMBINED STATEMENT OF CASH FLOWS - CONTINUED Year ended June 30, 2003 (With comparative totals for year ended June 30, 2002) Home Investment General Partnerships Program Funds Combined Totals Funds Program Single-Family Multi-Unit 2003 2002 Reconciliation of change in net assets to net cash provided by (used in) operating activities: Change in net assets $ 3,432,281 $ - $ 1,377,436 $ 79,642 $ 4,889,359 $ 7,865,274 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Amortization of issue costs - - 2,119,454 11,619 2,131,073 1,485,078 Depreciation 6,304 - - - 6,304 9,591 Income on investments (1,552,180) - (8,685,121) (9,668,581) (19,905,882) (20,544,172) Realized and unrealized (gains) losses on investments 245,246 - (238,246) (132,986) (125,986) (348,106) Interest on bonds payable - - 36,392,448 26,842,507 63,234,955 67,796,377 Change in assets and liabilities: Loans receivable 5,987,676 - 177,331,253 (66,488,811) 116,830,118 15,112,840 Other receivables (334,014) (60,774) 843,054 446,545 894,811 2,234,269 Interfund 289,077 - (241,272) (47,805) - - Accounts payable and other liabilities 295,871 59,708 (4,474) 1,964,683 2,315,788 (28,334) Net cash provided by (used in) operating activities $ 8,370,261 $ (1,066) $ 208,894,532 $ (46,993,187) $ 170,270,540 $ 73,582,817 The accompanying notes are an integral part of this statement.
  14. 14. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS June 30, 2003 NOTE A - AUTHORIZING LEGISLATION The Nevada Housing Division (the “Division”) is a separate agency of the Department of Business and Industry of the State of Nevada, pursuant to the Nevada Housing Finance Law, as amended, in Chapter 319 of the Nevada Revised Statutes. The Division was created for the purpose of making available additional funds to assist private enterprise and governmental agencies in providing safe and sanitary housing facilities for low and moderate income households. The Division is currently authorized to issue its bonds, notes, and other obligations in an aggregate amount not to exceed $5,000,000,000, which shall not constitute a debt of the State of Nevada or any political subdivision thereof. These funds may be used to make loans to and purchase mortgage loans from mortgage lenders, and to make temporary loans and advances in anticipation of insured mortgage loans or to finance permanent mortgage loans for the construction or rehabilitation of multi- unit residential housing. NOTE B - THE REPORTING ENTITY AND NATURE OF FUNDS 1. All Funds All funds are treated as proprietary funds. For financial reporting purposes, the Division is a component unit of the State of Nevada. The specified reserve funds and any monies not used for the specific purpose set forth for each program may be used only for the following limited purposes as may be individually set forth in each program’s documents. a. To invest funds as authorized by various bond resolutions and trust agreements. b. To pay interest, principal and redemption premiums at or prior to maturity or redemption. c. To establish and maintain reserves to secure the bonds. d. To pay reasonable and necessary operating expenses of the program. e. After all program requirements are satisfied, excess funds may be used for any lawful purpose of the Division. Substantially all program fund assets are pledged in trust for the benefit of the bondholders. The following describes the general and program funds maintained by the Division, all of which conform with the authorizing legislation, general bond and note certificates and trust indentures. 14
  15. 15. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE B - THE REPORTING ENTITY AND NATURE OF FUNDS - Continued 2. General Funds A state enterprise fund was authorized by enabling legislation and has been used to account for all transactions required by the state budget and appropriation statutes. It is funded principally from authorized transfers from the various programs and from investment income. The enabling legislation also authorized the Division to maintain such other funds as may be deemed necessary to account for other lawful activities of the Division. Special funds have been established and were funded with authorized transfers from the various programs and other investment income. As of June 30, 2003, the Division had designated certain general fund assets totaling $82,639,993, to a reserve trust fund for the following purposes: to invest in certain securities; to pay interest and principal of certain bonds if there are insufficient funds in the program’s fund; and to pay operating expenses of the fund as specified by the Administrator. 3. Home Investment Partnerships Program HOME Investment Partnerships Program (HOME) is a federally funded grant program for affordable housing. It is designed as a partnership among the federal government, state and local governments, and those in the private sector (profit and non-profit) who build, own, manage, finance, and support low- income housing initiatives. The Division has been designated the administrator of the program for the State of Nevada. The Division distributes monies through grants and loans to local governments, funds projects directly, and monitors compliance with grant guidelines. The program has four components: (1) Homebuyer Assistance, (2) Homeowner Rehabilitation, (3) Rental Rehabilitation, and (4) Tenant- Based Assistance. 4. Single-Family Program Funds There were 47 single-family mortgage purchase programs existing as of June 30, 2003, under 23 general bond certificates. Various funds are prescribed to account for the proceeds from the sale of the bonds and for the debt service requirements established by the bond certificate documents. In addition to providing reserves, the bond sale proceeds must be used to purchase from Nevada lending institutions mortgage loans originated under the program which are made on single-family residences, or to purchase existing mortgage loans from the portfolios of lending institutions under circumstances requiring the lending institutions to reinvest the proceeds from such purchase in new mortgage loans on single-family residences to persons or families of low and moderate income in the State of Nevada. 5. Multi-Unit Program Funds There were 71 multi-unit programs existing as of June 30, 2003, under 68 general bond certificates or trust indenture documents. In addition to providing reserves, the bond sale proceeds must be used to provide financing and purchase mortgage loans or mortgage backed securities for various multi-unit rental housing projects located in Nevada to be rented to low to moderate income families, elderly persons, and other special needs groups. 15
  16. 16. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE C - SUMMARY OF ACCOUNTING POLICIES A summary of the Division’s significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. 1. Accrual Accounting for Enterprise Funds Since the Division’s funds are considered to be enterprise funds for financial reporting purposes, the Division follows the accrual basis of accounting, wherein revenues are recorded as earned and expenses are recorded as incurred. 2. Fund Accounting Transactions of the Division, including interfund cash transfers, are recorded in the respective funds based upon their purposes as established by the Nevada legislature and by the certificates and legal documents executed by the Division. Revenue and expenses applicable to each fund are recorded in the respective funds. 3. Mortgages Purchased Mortgages purchased are carried at their unpaid principal balance, less discount when applicable. 4. Investments Investments are carried at fair value. Realized and unrealized gains and losses are reflected in the statement of revenues, expenses and changes in net assets. The Division’s investments are categorized by the level of custodial credit risk assumed by the Division and are defined as follows: Category 1: Investments that are insured or registered or for which securities are held by the Division or its agent in the Division’s name. Category 2: Uninsured and unregistered investments for which the securities are held by the counter party’s trust department or agent in the Division’s name. Category 3: Uninsured and unregistered investments for which the securities are held by the counter party, or by the counter party’s trust department or agent, but not in the Division’s name. 5. Bond Costs and Accreted Values Payable Bond and note issue costs are deferred and amortized principally on a bonds outstanding method. Interest is generally payable semiannually, except for the accreted value on municipal multiplier and GAINS bonds, on which interest is payable at maturity. Accordingly, the accretion of value on these bonds is reflected in the financial statements as a component of bonds payable. 16
  17. 17. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE C - SUMMARY OF ACCOUNTING POLICIES - Continued 6. Allowance for Possible Loss on Loans Loans receivable are collateralized by real property; obligations of the United States of America or of certain specified agencies or instrumentalities thereof; or FHA insured, Veterans Administration (VA) guaranteed or certain privately insured mortgages; or letters of credit, or guarantees from AA or AAA rated lenders. Periodic evaluation of loans receivable is made to determine if a charge against operations for possible loan losses will be required. No allowance was considered necessary at June 30, 2003. 7. Operating Expense Allocation General and administrative expenses of operating the Division are allocated among the various programs. The amounts allocated are limited by bond program indentures and certificates. 8. Interfund Accounts The general bond certificates or trust indentures, which establish the various programs, provide for certain transfers of cash from one fund to another and from a program to the Division’s general operating accounts. It is frequently not practicable nor possible to effect a transfer as of the balance sheet date. Thus, there are a number of amounts due from or due to the various funds or programs at any given time. 9. Combined Financial Statements All of the various programs are required by documents to have a number of specific funds established to account for transactions. Therefore, each column contains the total amounts for the various funds and accounts required, and the combined financial statements contain the total of all funds of the Division. Since the assets of certain funds are restricted by the legislative authority, the general bond and note certificates or trust indentures, the totaling of the funds and accounts, including assets therein, is for financial reporting purposes in accordance with generally accepted accounting principles and does not indicate that combined assets are available in any manner other than that provided by the legislature or the general bond and note certificates or trust indentures. 10. Comparative Data Comparative total data for the prior year represent summarized totals only and have been presented in the accompanying combined financial statements in order to provide an understanding of changes in the Division’s combined financial position and operations and is not meant to be a complete financial statement presentation. 11. Cash and Investments For purposes of cash flows, the Division considers all short-term highly liquid investments to be investments regardless of the maturity date. 12. Accrued Interest Receivable Interest is accrued based upon the principal amount outstanding. Accrued interest income is discontinued on loans when, in the opinion of management, collection of such interest income becomes doubtful. When payment of interest is provided for pursuant to the terms of loan insurance or guarantees, accrual of interest on delinquent loans is continued. 17
  18. 18. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE C - SUMMARY OF ACCOUNTING POLICIES - Continued 13. Bond Redemptions During the year ended June 30, 2003, the Division redeemed a total of $257,702,000 of debt, pursuant to provisions of the related agreements, which permit surplus revenues, resulting primarily from mortgage loan payments, to be used to retire the obligations. The accelerated amortization of costs of issuance resulting from these surplus revenue redemptions is included in amortization of issue costs. 14. Arbitrage Rebate Arbitrage rebate to the Internal Revenue Service is recognized in the statement of earnings as a reduction of interest income on investments. 15. Proprietary Accounting and Financial Reporting Governmental Accounting Standards Board (GASB) Statement No. 20 requires the Division to apply all applicable GASB pronouncements and, unless they conflict with or contradict GASB pronouncements, all Financial Accounting Standards Board (FASB) Statements and Interpretations, Accounting Principles Board Opinions, and Accounting Research Bulletins issued on or before November 30, 1989. As permitted by the Statement, the Division has elected not to apply FASB pronouncements issued after that date. 16. Using Estimates In preparing the financial statements in conformity with generally accepted accounting principles, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. 17. Accounting for Compensated Absences Compensated absences are accounted for in accordance with Governmental Accounting Standards Board (GASB) Statement 16, Accounting for Compensated Absences, which requires that a liability for compensated absences relating to services already rendered and that are not contingent on a specified event be accrued as employees earn the rights to the benefits. Compensated absences relating to future services or that are contingent on a specified event will be accounted for in the period those services are rendered or those events take place. 18. Accounting and Financial Reporting for Certain Grants Grants are accounted for in accordance with Governmental Accounting Standards Board (GASB) Statement 24, Accounting and Financial Reporting for Certain Grants and Other Financial Assistance, which requires that cash pass through grants received by a governmental entity be reported as revenues and expenditures in the Division’s financial statements. 19. New Accounting Pronouncements In March 2003, the Governmental Accounting Standards Board issued GASB Statement No. 40, Deposit and Investment Risk Disclosures (an amendment of GASB Statement No. 3) effective for financial statements with periods beginning after June 15, 2004. We are currently evaluating the impact of the adoption of this pronouncement, but do not expect the impact to be material to the Division’s financial statements. 18
  19. 19. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE D - INVESTMENTS Investments at fair value consist of the following at June 30, 2003: General Combined Funds Single-Family Multi-Unit Total Short-term investments $62,227,372 $ 26,810,948 $ 54,590,722 $143,629,042 Investment agreements - 141,226,807 3,736,754 144,963,561 U.S. Government and agency securities 5,601,637 2,700,939 211,881,758 220,184,334 $67,829,009 $170,738,694 $270,209,234 $508,776,937 Each program’s documents and the trust agreements allow the Division to invest funds in (a) direct and general obligations of the United States or any of its states; (b) obligations which are guaranteed by the United States; (c) obligations of various agencies and instrumentalities of the United States; (d) insured or secured certificates of deposit and interest bearing time deposits; (e) repurchase agreements with certain institutions; (f) public housing bonds issued by public agencies or municipalities; (g) certain commercial or finance company paper; (h) interests in short-term investment trust funds restricted to investment obligations described above; or (i) general obligations of investment providers under investment agreements. Investment agreements are with banks or holding companies rated in the top categories by nationally recognized rating agencies. Nevada Housing Division’s investments consist of securities which are a Category 3 level of risk, based on risk categories established by the Governmental Accounting Standards Board, which includes uninsured and unregistered investments for which the securities are held by the counterparty or by its agent or trust department, but not in the Division’s name. NOTE E - LOANS RECEIVABLE Under the various single-family mortgage purchase programs and for single-family mortgages purchased from the general funds, mortgage loans receivable have initial terms which may extend to 30 years. The various multi-unit mortgage loans receivable are represented by notes collateralized by deeds of trust and general obligations of lending institutions. Mortgage loans receivable consist of the following: Interest General Combined Rates Funds Single-Family Multi-Unit Total Single-Family Mortgage Programs 4.5%-10.98% $17,471,550 $366,768,647 $ - $384,240,197 Multi-Unit Programs 4.125%-11.25% - - 439,601,835 439,601,835 Less unamortized discount (132,507) (849,026) - (981,533) $17,339,043 $365,919,621 $439,601,835 $822,860,499 19
  20. 20. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE F - BONDS PAYABLE Bonds payable consist of the following: Original Maturity Date Amount Outstanding Single-Family Bonds: 1986 Issue A, 6.90%-8.625% April 1, 2016 $ 53,580,066 $ 15,540,000 1988 Issue A, 5.20%-9.375% October 1, 2019 80,000,000 1,000,000 1988 Issue B, 6.50%-8.375% October 1, 2020 28,965,000 415,000 1989 Issue A, 6.65%-8.65% April 1, 2021 30,000,000 1,285,000 1989 Issue B-1, 6.30%-9.5% October 1, 2021 25,000,000 1,310,000 1989 Issue B-2, 6.35%-9.65% October 1, 2021 20,000,000 535,000 1990 Issue A, 6.40%-9.35% October 1, 2021 25,000,000 1,530,000 1990 Issue B, 6.60%-9.65% April 1, 2022 30,000,000 1,635,000 1990 Issue C, 6.70%-9.6% October 1, 2022 59,915,000 1,240,000 1991 Issue A, 5.65%-9.45% April 1, 2022 35,000,000 2,060,000 1992 Issue A, 4.50%-8.75% October 1, 2023 25,000,000 2,510,000 1993 Issue B, 4.05%-7.9% October 1, 2025 20,000,000 8,255,000 1993 Issue C, 3.70%-7.55% October 1, 2025 25,400,000 9,015,000 1994 Issue A, 4.65%-6.25% October 1, 2026 15,000,000 5,330,000 1994 Issue B, 5.05%-6.95% October 1, 2026 28,995,000 7,360,000 1994 Issue C, 4.45%-6.75% October 1, 2026 30,000,000 8,795,000 1994 Issue D, 4.75%-6.80% April 1, 2027 30,000,000 8,485,000 1994 Issue E, 5.00%-7.05% April 1, 2027 30,000,000 7,615,000 1995 Issue A, 5.20%-6.70% April 1, 2027 30,000,000 6,455,000 1995 Issue B, 5.00%-6.625% April 1, 2027 30,000,000 9,525,000 1995 Issue C, 4.70%-6.40% April 1, 2027 30,000,000 11,000,000 1995 Issue D, 4.30%-6.20% April 1, 2027 33,430,000 18,730,000 1996 Issue A, 4.80%-6.25% April 1, 2028 25,000,000 10,010,000 1996 Issue B, 4.40%-6.30% April 1, 2028 25,000,000 10,405,000 1996 Issue C, 4.65%-6.60% April 1, 2028 30,000,000 10,325,000 1996 Issue D, 4.50%-6.35% April 1, 2028 30,000,000 13,240,000 1996 Issue E, 4.35%-6.20% October 1, 2028 25,000,000 11,565,000 1997 Issue A, 4.30%-6.15% April 1, 2029 23,750,000 12,095,000 1997 Issue A, 7.00%, Taxable October 1, 2014 1,250,000 585,000 1997 Issue B, 4.70%-6.15% April 1, 2029 23,750,000 9,460,000 1997 Issue B, 7.07%, Taxable April 1, 2012 1,250,000 410,000 1997 Issue C, 4.10%-6.43% April 1, 2029 30,615,000 17,530,000 1998 Issue A, 4.10%-5.92% April 1, 2030 30,000,000 19,630,000 1998 Issue B, 4.10%-6.09% April 1, 2030 30,000,000 19,890,000 1998 Issue C, 3.80%-5.25% October 1, 2030 14,000,000 11,260,000 1999 Issue A, 3.75%-5.30% April 1, 2030 30,000,000 22,600,000 1999 Issue B, 3.80%-5.25% April 1, 2031 27,000,000 21,945,000 1999 Issue B, 5.63% October 1, 2021 3,000,000 1,790,000 1999 Issue C, 4.30%-5.85% April 1, 2031 25,000,000 18,875,000 1999 Issue D, 4.60%-6.30% October 1, 2031 35,000,000 21,120,000 2000 Issue A, 4.90%-7.75% April 1, 2032 30,000,000 18,410,000 2000 Issue B, 5.05%-6.15% April 1, 2032 31,500,000 17,455,000 20
  21. 21. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE F - BONDS PAYABLE - Continued Original Maturity Date Amount Outstanding Single-Family Bonds: - Continued 2000 Issue B, 7.62%, Taxable April 1, 2022 $ 3,500,000 $ 2,285,000 2000 Issue C, 4.45%-5.98% April 1, 2032 29,650,000 22,315,000 2000 Issue C, 7.67%, Taxable April 1, 2022 3,295,000 2,685,000 2000 Issue D, 4.50%-7.00% April 1, 2032 15,000,000 11,440,000 2001 Issue A, 3.20%-5.50% October 1, 2032 23,400,000 14,095,000 2001 Issue B, 2.95%-5.65% October 1, 2032 35,000,000 23,865,000 2001 Issue C, 2.60%-5.25% October 1, 2032 15,000,000 13,795,000 2002 Issue A, 3.10% - 5.65% April 1, 2033 30,000,000 3,060,000 Total single-family bonds 1,341,245,066 491,765,000 Multi-Unit Bonds: 1978 Southgate Apartments Project, 6.00% February 15, 2018 2,921,600 1,860,000 1979 A Program, 5.40%-6.80% April 1, 2012 13,875,000 4,420,000 1979 B Program, 7.00% April 1, 2012 4,055,000 1,990,000 1985 A Fannie Mae Program, 4.80% April 1, 2004 15,920,000 5,250,000 1989 A Home Suites, Variable March 15, 2020 6,100,000 5,100,000 1991 A Park Vista, Variable October 1, 2010 39,000,000 38,285,000 1994 A Saratoga Palms East 1, 5.20%-7.20% October 1, 2026 11,900,000 11,090,000 1994 B Lake Tonopah, 5.75%-6.20% October 1, 2026 11,400,000 10,685,000 1995 B Saratoga Palms North 1, 5.70%-6.55% October 1, 2025 9,060,000 8,285,000 1995 C Paseo Del Prado, 6.25% October 1, 2008 4,450,000 4,225,000 1996 B Mesquite Bluffs, Variable May 1, 2028 7,075,000 6,705,000 1995 B Saratoga Palms North 2, 5.90%-6.50% April 1, 2028 10,250,000 9,685,000 1996 Arville Granada, 5.90%-6.60% October 1, 2023 14,490,000 13,380,000 1996 Saratoga Palms East 2, 5.70%-6.35% October 1, 2028 10,750,000 10,160,000 1996 Oakmont Flamingo, Variable October 1, 2026 9,500,000 9,500,000 1996 Oakmont Flamingo, Variable, Taxable October 1, 2026 1,175,000 1,175,000 1996 Oakmont Fort Apache, Variable October 1, 2026 7,800,000 7,800,000 1996 Oakmont Fort Apache, Variable, Taxable October 1, 2026 1,520,000 1,520,000 1997 Fremont Meadows, Variable October 1, 2027 3,350,000 3,240,000 1997 Austin Crest, 5.50%-5.80% April 1, 2031 15,750,000 15,145,000 1997 Maryland Villas, Variable, Taxable October 1, 2030 735,000 735,000 1997 Maryland Villas, Variable October 1, 2030 4,165,000 4,165,000 1997 Judith Villas, Variable, Taxable October 1, 2030 975,000 975,000 1997 Judith Villas, Variable October 1, 2030 5,525,000 5,525,000 1997 Joshua Villas, Variable, Taxable October 1, 2030 1,200,000 800,000 1997 Joshua Villas, Variable October 1, 2030 6,800,000 4,800,000 1998 Cheyenne Pointe, 6.46%, Taxable April 1, 2010 1,545,000 1,165,000 1998 Cheyenne Pointe, 5.45%-5.50% April 1, 2030 8,755,000 8,755,000 1998 Boulder Creek, 6.44%, Taxable October 1, 2011 2,245,000 1,780,000 1998 Boulder Creek, 5.375%-5.50% April 1, 2031 12,725,000 12,725,000 1998 Vintage Hills, 7.64%, Taxable October 1, 2010 1,460,000 1,163,000 1998 Vintage Hills, 5.79% October 1, 2030 7,740,000 7,740,000 21
  22. 22. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE F - BONDS PAYABLE - Continued Original Maturity Date Amount Outstanding Multi-Unit Bonds: - Continued 1998 Spanish Hills, 6.26%, Taxable April 1, 2014 $ 1,845,000 $ 1,560,000 1998 Spanish Hills, 5.25%-5.35% October 1, 2031 6,655,000 6,655,000 1998 South Valley, 6.24%, Taxable April 1, 2013 2,620,000 2,245,000 1998 South Valley, 5.25%-5.375% October 1, 2031 11,380,000 11,380,000 1998 Capistrano Pines, 6.29%, Taxable April 1, 2012 1,445,000 1,190,000 1998 Capistrano Pines, 5.25% October 1, 2031 8,185,000 8,185,000 1998 Casa Sorrento, 6.29%, Taxable October 1, 2011 1,645,000 1,310,000 1998 Casa Sorrento, 5.25% October 1, 2031 9,335,000 9,335,000 1998 Autumn Ridge, 6.04%, Taxable April 1, 2009 1,160,000 875,000 1998 Autumn Ridge, 5.25%-5.35% October 1, 2026 6,600,000 6,600,000 1998 Campaige Place, 4.60%-5.55% October 1, 2028 8,000,000 7,755,000 1998 Hilltop Villas, Variable, Taxable April 1, 2031 570,000 570,000 1998 Hilltop Villas, Variable April 1, 2031 3,220,000 3,220,000 1998 Stewart Villas, Variable, Taxable April 1, 2031 585,000 585,000 1998 Stewart Villas, Variable April 1, 2031 3,310,000 3,310,000 1999 Studio Three, Variable, Taxable October 1, 2030 2,050,000 1,755,000 1999 Studio Three, Variable October 1, 2030 8,500,000 8,500,000 1999 Diamond Creek, 7.60%, Taxable April 1, 2014 3,250,000 2,915,000 1999 Diamond Creek, 5.90%-6.05% April 1, 2032 16,245,000 16,245,000 1999 Bonanza Gardens, 7.88%, Taxable October 1, 2011 915,000 695,000 1999 Bonanza Gardens, 6.30% April 1, 2030 5,185,000 5,185,000 1999 Parkway Silverado, Variable, Taxable October 15, 2032 2,240,000 2,240,000 1999 Parkway Silverado, Variable October 15, 2032 12,710,000 12,710,000 1999 Apache Pines, Variable, Taxable October 15, 2032 2,085,000 1,960,000 1999 Apache Pines, Variable October 15, 2032 11,815,000 11,815,000 1999 Palo Verde, 8.02%, Taxable April 1, 2011 1,050,000 900,000 1999 Palo Verde, 7.25% April 1, 2031 5,950,000 5,950,000 2000 Whispering Palms, 6.20% April 1, 2022 4,375,000 4,025,000 2000 Whispering Palms, 6.30% April 1, 2032 5,240,000 4,950,000 2000 Summerhill, 4.50%-6.00% October 1, 2030 10,200,000 9,850,000 2000 City Center Apts., Variable, Taxable April 1, 2032 2,000,000 1,870,000 2000 City Center Apts., Variable April 1, 2032 9,350,000 9,350,000 2000 Horizon Pines Sr. Apts., Variable April 15, 2033 8,750,000 8,750,000 2000 Banbridge, Variable, Taxable October 1, 2032 700,000 660,000 2000 Banbridge, Variable October 1, 2032 3,960,000 3,960,000 2000 Horizon Sr. Apts., Variable October 15, 2033 10,840,000 10,840,000 2000 Orchard Club, 7.10%, Taxable April 1, 2012 1,835,000 1,835,000 2000 Orchard Club, 5.85%-5.95% April 1, 2034 16,500,000 16,500,000 2000 Vintage Desert Rose, 7.15%, Taxable October 1, 2007 430,000 430,000 2000 Vintage Desert Rose, 5.15%-5.80% April 1, 2033 8,170,000 8,170,000 2000 Rancho Mesa, 7.30%, Taxable October 1, 2008 1,190,000 890,000 2000 Rancho Mesa, 5.75% April 1, 2031 11,260,000 11,260,000 2000 CitiVista, 5.45%-5.70% October 1, 2033 8,250,000 8,250,000 2001 Ambrosia Sr. Apts., 5.45% April 1, 2034 9,190,000 9,190,000 2001 Ambrosia Sr. Apts., 6.06% Taxable April 1, 2010 810,000 810,000 22
  23. 23. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE F - BONDS PAYABLE - Continued Original Maturity Date Amount Outstanding Multi-Unit Bonds: - Continued 2001 Centennial Park, 5.45% October 1, 2036 $ 5,100,000 $ 5,100,000 2001 Centennial Park, 6.470%, Taxable April 1, 2013 800,000 685,000 2001 Lake Vista, 3.35%-5.5% April 1, 2033 2,750,000 2,750,000 2001 Parkside Gardens, 5.48%-6.430% April 1, 2037 11,270,000 11,130,000 2001 Villanova, 5.40%-5.56% April 15, 2023 19,900,000 19,900,000 2001 Silver Creek, 5.40%-5.56% April 15, 2023 13,540,000 13,540,000 2002 City Center Las Vegas, Variable April 1, 2035 14,000,000 14,000,000 2002 Silver Pines, Variable October 15, 2035 11,800,000 11,800,000 2002 Parkway Plaza, Variable April 15, 2035 11,265,000 11,765,000 2002 Parkway Plaza, Variable, Taxable April 15, 2035 1,985,000 1,985,000 2002 Oakmont at Reno, Variable April 15, 2027 4,350,000 4,350,000 2002 St. Rose Seniors, Variable October 15, 2035 14,770,000 14,770,000 2002 Bluffs at Reno, Variable October 15, 2035 17,850,000 17,850,000 2002 Bluffs at Reno, Variable, Taxable October 15, 2035 3,150,000 3,150,000 2002 Sunset Canyon, 5.20%-5.61% April 1, 2036 10,965,000 10,965,000 2002 Sunset Canyon, 5.11%, Taxable April 1, 2017 1,935,000 1,935,000 2002 Los Pecos, 2.9%-5.15% April 1, 2036 8,800,000 8,800,000 2002 Los Pecos, 5.56% Taxable April 1, 2036 2,200,000 2,200,000 2002 Whittell Pointe, 5.15% April 1, 2036 7,045,000 7,045,000 2002 Whittell Pointe, 5.25% Taxable April 1, 2016 1,245,000 1,245,000 2002 Wood Creek, 5.25% October 1, 2034 7,580,000 7,580,000 2002 Wood Creek, 4.0%-5.41%, Taxable October 1, 2014 1,340,000 1,340,000 2003 Silver Terrace, Variable October 15, 2035 5,150,000 5,150,000 2003 Silver Terrace, Variable, Taxable October 15, 2035 910,000 910,000 2003 Pinewood, 4.95%-5.05% April 1, 2036 26,985,000 26,985,000 2003 Pinewood, 3.83%, Taxable October 1, 2013 4,765,000 4,765,000 2003 Community Gardens, 3.10%-5.10% October 1, 2038 7,435,000 7,435,000 2003 Cedar Village, 3.10%-5.10% October 1, 2038 6,205,000 6,205,000 Total multi-unit bonds 730,901,600 692,398,000 Combined total $ 2,072,146,666 $ 1,184,163,000 23
  24. 24. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE F - BONDS PAYABLE - Continued A substantial portion of the bonds have serial maturities and/or provisions for early redemption at the option of the Division. Scheduled bond maturities at June 30, 2003, for the following periods, are: Combined Single-Family Multi-Unit Totals Years ending June 30, 2004 $ 12,690,000 $ 5,586,000 $ 18,276,000 2005 13,720,000 6,161,000 19,881,000 2006 14,595,000 7,156,000 21,751,000 2007 15,090,000 7,943,000 23,033,000 2008 15,275,000 12,627,000 27,902,000 2009-2013 85,845,000 48,484,000 134,329,000 2014-2018 97,440,000 106,076,000 203,516,000 2019-2023 99,020,000 136,461,000 235,481,000 2024-2028 97,935,000 133,846,000 231,781,000 2029-2033 40,155,000 131,503,000 171,658,000 2034-2038 - 96,415,000 96,415,000 2039-2043 - 140,000 140,000 $491,765,000 $692,398,000 $1,184,163,000 The single-family bonds are payable from, and secured by, a pledge of: 1. The proceeds derived from the sale of bonds. 2. The rights and interest of the Division in all mortgage loans purchased by the Division under the various bond certificates. 3. Revenues, which primarily include (a) mortgage repayments and the net income, if any, derived by the Division from premises owned by the Division as a result of foreclosure or other action taken in the event of a default on such a mortgage loan; (b) curtailments, consisting generally of all amounts representing monthly principal payments with respect to mortgage loans which are received in advance of the scheduled amortization thereof; and (c) all earnings realized by the investment of monies in all funds and accounts. 4. All funds and accounts created by the various bond certificates, including the bond reserve fund, the mortgage loan reserve fund and monies and securities therein. The multi-unit bonds are payable from, and secured by, a pledge of: 1. The proceeds derived from the sale of bonds. 2. All earnings realized from the investment of bond proceeds. 3. After permanent financing: (a) all revenues received from the development including housing assistance payments and rental payments made by tenants; (b) the notes receivable, collateralized by deeds of trust; and (c) the rights of the Division to the FHA insurance, draws on bank letters of credit, private mortgage insurance, hazard insurance and condemnation proceeds. 24
  25. 25. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE G - RESTRICTED ASSETS Substantially all investments in the Single-Family and Multi-Unit Mortgage Purchase Funds are held by trustees and are restricted as to use as required by the various bond certificates or trust indentures. Such restricted assets are included in funds and accounts within the program funds as established by the bond certificates. Such funds typically include, among others, bond reserve funds, capital reserve funds, debt service funds, and mortgage loan reserve funds. Restricted investments and interest receivable included in the various programs of the Division as of June 30, 2003 are as follows: General Combined Fund Single-Family Multi-Unit Totals Investments $67,801,887 $37,128,682 $2,517,144 $107,447,713 Interest receivable 54,992 535,751 620 591,363 $67,856,879 $37,664,433 $2,517,764 $108,039,076 NOTE H - DEFINED BENEFIT PENSION PLAN 1. Plan Description The Nevada Housing Division contributes to the Public Employees’ Retirement System (PERS), a cost- sharing, multiple-employer, defined benefit pension plan administered by the State of Nevada. PERS provides retirement and disability benefits, annual cost-of-living adjustments, and death benefits to plan members and beneficiaries. The State of Nevada issues a publicly available financial report that includes financial statements and required supplementary information for PERS. That report may be obtained by writing to the Public Employees’ Retirement System of Nevada, 693 West Nye Lane, Carson City, Nevada 89703 or by calling (775) 687-4200. 2. Funding Policy Under the plan, the Division employees choose to contribute 10.89% of the employee’s gross salary which the employer matches, or the employee may choose to have the employer pay the total contribution which is then 20.91% of the employee’s gross salary. The employee choosing to participate in the employer-paid pension plan is paid a lower salary. The actuarially determined funding requirement contribution rate for the fiscal year was 20.91%. The contribution requirements of plan members and the Division are established and may be amended by the Nevada State Legislature. The Division’s contributions to PERS for the years ended June 30, 2003, 2002 and 2001 were $166,431, $156,198 and $152,411, respectively, and were equal to the required contributions for each year. 25
  26. 26. Nevada Housing Division NOTES TO COMBINED FINANCIAL STATEMENTS - CONTINUED June 30, 2003 NOTE I - OPERATING LEASE The following is a schedule of future minimum rental payments to be made under noncancellable operating leases for the Division’s office facilities. The Carson City lease will expire in September, 2004; the Las Vegas office lease will expire August 31, 2004. Years ending June 30, 2004 $146,957 2005 27,148 $174,105 Total rent expense for the year ended June 30, 2003 was $134,608. 26
  27. 27. REQUIRED SUPPLEMENTARY INFORMATION
  28. 28. Nevada Housing Division STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS - BUDGET AND ACTUAL GENERAL FUND Year ended June 30, 2003 Budget to GAAP Budgeted Amounts Actual Amounts Differences Actual Amounts Original Final Budgetary Basis Over (Under) GAAP Basis Operating revenues Interest and other investment income $ - $ - $ - $ 1,552,180 (1) $ 1,552,180 Realized and unrealized gains (losses) on investments - - - (245,246) (1) (245,246) Total investment income - - - 1,306,934 1,306,934 Interest income on mortgage loans 601,986 (1) 601,986 Other income 283,067 561,008 627,805 508,637 (1) 1,136,442 Federal grants 3,117,768 3,258,768 2,240,889 (2,240,889) (2) - Total operating revenues 3,400,835 3,819,776 2,868,694 176,668 3,045,362 Operating expenses Salaries and other payroll costs 1,865,810 1,865,810 1,827,556 (109,958) (3) 1,717,598 Administrative expenses 580,632 706,935 243,498 303,327 (1) 546,825 Servicers' fees - - - 19,733 (1) 19,733 Interfund operating charge (1,421,158) (1,421,158) (1,421,158) (1,249,917) (1) (2,671,075) Reserve 55,996 400,412 - - - Attorney general 140,835 140,835 140,835 (140,835) (1) - Federal grant expenses 2,228,490 2,228,490 2,119,599 (2,119,599) (2) - Total operating expenses 3,450,605 3,921,324 2,910,330 (3,297,249) (386,919) CHANGE IN NET ASSETS (49,770) (101,548) (41,636) 3,473,917 3,432,281 Transfer - - - 1,802,306 (1) 1,802,306 Net assets at beginning of year 49,770 101,548 101,548 80,402,773 80,504,321 Net assets at end of year $ - $ - $ 59,912 $ 85,678,996 $ 85,738,908 Explanation of Differences: (1) The Division budgets for revenues and expenditures only to the extent expected to effect funds of the State of Nevada. Revenues and expenditures of the general reserve trust and loan servicing function of the Division are not funds of the State, but are included in the General Fund in the financial statements. (2) The Division budgets for revenues and expenditures of the HOME Program to the extent they are paid to/from the State of Nevada. The HOME Program, however, is not included in the General Fund in the financial statements. (3) The Division budgets for compensated absences only to the extent expected to be paid, rather than on the modified accrual basis.
  29. 29. SUPPLEMENTARY INFORMATION
  30. 30. Nevada Housing Division COMBINING BALANCE SHEET SINGLE-FAMILY PROGRAM FUNDS - CONTINUED June 30, 2003 Parity Program 1988A Program 1986A 1993R 1995D Total 1988A-PH1 1988A-PH3 Total Mortgage Mortgage Mortgage Parity Mortgage Mortgage 1988A ASSETS Purchase Purchase Purchase Program Purchase Purchase Program Current assets: Investments Restricted $ 357,368 $ - $ - $ 357,368 $ - $ - $ - Unrestricted 1,266,328 19,868,034 71,861 21,206,223 - 58,063 58,063 Total investments 1,623,696 19,868,034 71,861 21,563,591 - 58,063 58,063 Loans receivable 200,524 957,764 184,696 1,342,984 43,221 34,073 77,294 Interest and other receivables, net 75,093 261,467 94,802 431,362 18,302 14,427 32,729 Total current assets 1,899,313 21,087,265 351,359 23,337,937 61,523 106,563 168,086 Noncurrent assets: Long-term investments Restricted 1,651,867 10,750,000 - 12,401,867 16,800 53,200 70,000 Unrestricted - - 2,299,150 2,299,150 281,173 256,822 537,995 Fair value adjustment on investments 1,049,072 - - 1,049,072 - - - Total long-term investments 2,700,939 10,750,000 2,299,150 15,750,089 297,973 310,022 607,995 Loans receivable, net of current portion 3,567,246 6,539,343 9,510,175 19,616,764 1,041,205 784,556 1,825,761 Deferred issue costs, net of amortization 186,693 - 254,654 441,347 17,865 18,682 36,547 Total noncurrent assets 6,454,878 17,289,343 12,063,979 35,808,200 1,357,043 1,113,260 2,470,303 Total assets $ 8,354,191 $ 38,376,608 $ 12,415,338 $ 59,146,137 $ 1,418,566 $ 1,219,823 $ 2,638,389 LIABILITIES AND NET ASSETS Current liabilities: Bonds payable $ 100,000 $ - $ 680,000 $ 780,000 $ 10,000 $ 30,000 $ 40,000 Interest payable 333,752 - 280,639 614,391 4,966 15,534 20,500 Interfund 24,476 4,341 90,284 119,101 30 95 125 Accounts payable and other liabilities - - - - - - - Total current liabilities 458,228 4,341 1,050,923 1,513,492 14,996 45,629 60,625 Noncurrent liabilities: Bonds payable, net of current portion 15,440,000 - 18,050,000 33,490,000 230,000 730,000 960,000 Total liabilities 15,898,228 4,341 19,100,923 35,003,492 244,996 775,629 1,020,625 Net assets Restricted (7,544,037) 38,372,267 (6,685,585) 24,142,645 1,173,570 444,194 1,617,764 Total liabilities and net assets $ 8,354,191 $ 38,376,608 $ 12,415,338 $ 59,146,137 $ 1,418,566 $ 1,219,823 $ 2,638,389
  31. 31. Nevada Housing Division COMBINING BALANCE SHEET SINGLE-FAMILY PROGRAM FUNDS - CONTINUED June 30, 2003 1989B Program 1988B 1989A 1989B 1989B-2 Total 1990A 1990B 1990C Mortgage Mortgage Mortgage Mortgage 1989B Mortgage Mortgage Mortgage ASSETS Purchase Purchase Purchase Purchase Program Purchase Purchase Purchase Current assets: Investments Restricted $ - $ - $ - $ - $ - $ - $ - $ - Unrestricted 1,080 3,142 5,765 5,394 11,159 5,006 4,633 5,305 Total investments 1,080 3,142 5,765 5,394 11,159 5,006 4,633 5,305 Loans receivable 48,268 83,989 53,073 25,932 79,005 61,054 58,748 38,174 Interest and other receivables, net 26,792 26,459 22,933 8,842 31,775 24,378 26,034 16,922 Total current assets 76,140 113,590 81,771 40,168 121,939 90,438 89,415 60,401 Noncurrent assets: Long-term investments Restricted 29,050 77,100 78,600 32,100 110,700 91,800 106,275 80,600 Unrestricted 343,450 530,440 351,560 224,122 575,682 353,625 439,810 227,162 Fair value adjustment on investments - - - - - - - - Total long-term investments 372,500 607,540 430,160 256,222 686,382 445,425 546,085 307,762 Loans receivable, net of current portion 1,352,334 1,678,772 1,629,396 836,537 2,465,933 1,537,345 1,748,977 1,243,971 Deferred issue costs, net of amortization 12,695 26,971 29,400 14,415 43,815 34,318 33,547 31,325 Total noncurrent assets 1,737,529 2,313,283 2,088,956 1,107,174 3,196,130 2,017,088 2,328,609 1,583,058 Total assets $ 1,813,669 $ 2,426,873 $ 2,170,727 $ 1,147,342 $ 3,318,069 $ 2,107,526 $ 2,418,024 $ 1,643,459 LIABILITIES AND NET ASSETS Current liabilities: Bonds payable $ 10,000 $ 55,000 $ 50,000 $ 20,000 70,000 $ 50,000 $ 60,000 $ 100,000 Interest payable 8,671 23,493 25,296 10,566 35,862 29,338 32,041 24,335 Interfund 98 418 49,411 26,569 75,980 497 531 - Accounts payable and other liabilities - 5,241 40,574 8,724 49,298 31,307 28,745 - Total current liabilities 18,769 84,152 165,281 65,859 231,140 111,142 121,317 124,335 Noncurrent liabilities: Bonds payable, net of current portion 405,000 1,230,000 1,260,000 515,000 1,775,000 1,480,000 1,575,000 1,140,000 Total liabilities 423,769 1,314,152 1,425,281 580,859 2,006,140 1,591,142 1,696,317 1,264,335 Net assets Restricted 1,389,900 1,112,721 745,446 566,483 1,311,929 516,384 721,707 379,124 Total liabilities and net assets $ 1,813,669 $ 2,426,873 $ 2,170,727 $ 1,147,342 $ 3,318,069 $ 2,107,526 $ 2,418,024 $ 1,643,459

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