EX-99 6 regency.txt EXHIBIT 99.24 SIGNIFICANT SUBREGENCY COURT REGENCY COURT PARTNERS A California Limited Partnership (CI-WA Project No. 92-002-S) ANNUAL EXAMINATION ----------------- December 31, 2003 ----------------- CONTENTS Page INDEPENDENT AUDITOR'S REPORT 1-2 FINANCIAL STATEMENTS: Balance Sheets 3-4 Statements of Operations and Changes in Partners' Equity 5 Statements of Changes in Partners' Equity 6 Statements of Cash Flows 7-8 Notes to Financial Statements 9-14 SUPPLEMENTARY INFORMATION: Supplemental Schedule of Expenses 15 Supplemental Data Required by CHFA 16-18 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS 19-20 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS 21 CERTIFICATION OF GENERAL PARTNER 22 1730 Havens Point Place Carlsbad, California 92008-3611 Jack Gilk Telephone: 760.434.8845 Facsimile: 760.434.8865 Email: jack@gilkcpa.com Certified Public Accountant Partners Regency Court Partners Costa Mesa, California INDEPENDENT AUDITOR'S REPORT I have audited the accompanying balance sheet of Regency Court Partners, a California Limited Partnership (CHFA Project No. 92-002-S) as of December 31, 2002 and 2003, and the related statements of operations and changes in partners' equity, and cash flows for the years then ended. These financial statements are the responsibility of the partnership's management. My responsibility is to express an opinion on these financial statements based on my audits. I conducted my audits in accordance with auditing standards generally accepted in the United States, Government Auditing Standards issued by the Comptroller General of the United States, and the standards for financial and compliance audits contained in California Housing Finance Agency Audited Financial Statements Handbook (revised December 1991). Those standards require that I plan and perform the audits 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. I believe that my audits provide a reasonable basis for my opinion. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Regency Court Partners, a California Limited Partnership (RHCP Project No. 92-002-S) as of December 31, 2002 and 2003, and the results of its operations and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. My audit was conducted for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying supplementary information shown on pages 15 to 18 is presented for the purpose of additional analysis and is not a required part of the basic financial statements of Regency Court Partners (RHCP Project No. 92-002-S). Such information has been subjected to the auditing procedures applied in the audit of the basic financial statements and, in my opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. Regency Court Partners CHFA Project No. 92-002-S Independent Auditor's Report, December 31, 2003 Page 2 -------------------------------------------------------------------------------- In accordance with Government Auditing Standards, I have also issued a report dated January 19, 2004 on my consideration of Regency Court Partners' internal control structure and a report dated January 19, 2004 on its compliance with laws and regulations. The accompanying financial statements have been prepared assuming that the Partnership will continue as a going concern. As discussed in Note 2 to the financial statements, the Partnership has suffered recurring losses and an ongoing need for capital infusion to meet normal financial obligations that raise substantial doubt about its ability to continue as a going concern. Management's plans in regard to these matters are also described in Note 2. The accompanying financial statements do not include any adjustments that might result from the outcome of this uncertainty. January 19, 2004 /s/Jack Gilk V 33-0724657 -------------------------------------------------------------------------------- See the accompanying notes tofinancial statements. 2
REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) -------------------------------------------------------------------------------------------------------------- BALANCE SHEETS, DECEMBER 31, 2002 AND 2003 -------------------------------------------------------------------------------------------------------------- ASSETS 2003 2002 --------------- --------------- Current Assets: Operating cash and equivalents $ 26,132 $ 27,629 Tenant security deposit cash 25,297 24,703 Tenant accounts receivable 2,420 70 Prepaid expenses 16,435 14,211 Restricted tax impound funds 41,071 56,381 Restricted hazard insurance impound funds 17,716 15,438 Restricted earthquake insurance impound funds 18,040 15,646 --------------- --------------- Total current assets 147,111 154,078 --------------- --------------- Property, Building and Equipment, At Cost: Building and improvements 7,703,983 7,703,983 Equipment 3,572 3,572 --------------- --------------- 7,707,555 7,707,555 Accumulated depreciation (1,592,667) (1,396,376) --------------- --------------- Property, building, and equipment - net 6,114,888 6,311,179 --------------- --------------- Other Assets: Replacement reserve 98,996 112,546 Rent up reserve 53,209 52,471 Unamortized deferred costs 13,207 19,811 --------------- --------------- Total other assets 165,412 184,828 --------------- --------------- $ 6,427,411 $ 6,650,085 =============== =============== See the accompanying notes to financial statements. --------------------------------------------------------------------------------------------------------------
3
Regency Court Partners CHFA Project No. 92-002-S Balance Sheets, December 31, 2002 and 2003 Page 2 ------------------------------------------------------------------------------------------------------------- LIABILITIES AND PARTNERS' EQUITY 2003 2002 --------------- --------------- Current Liabilities: Current portion of mortgage payable $ 82,446 $ 77,002 Accounts payable - 5,745 Tenant security trust liability 25,067 24,457 Accrued interest 23,090 23,531 Accrued property tax 58,896 48,447 Unearned rental income 791 81 --------------- --------------- Total current liabilities 190,290 179,263 --------------- --------------- Long-term Debt: Accrued property tax 254,175 227,748 Accrued interest 246,828 219,828 Accrued expenses 212,187 189,370 Mortgage payable, less current portion 3,962,731 4,045,177 Other note payable 894,900 894,900 --------------- --------------- Total long-term debt 5,570,821 5,577,023 --------------- --------------- Partners' equity 666,300 893,799 --------------- --------------- $6,427,411 $6,650,085 =============== =============== See the accompanying notes tofinancial statements. --------------------------------------------------------------------------------------------------------------
4
REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) -------------------------------------------------------------------------------------------------------------- STATEMENTS OF OPERATIONS AND CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 -------------------------------------------------------------------------------------------------------------- 2003 2002 --------------- ---------------- Revenue: Tenant rents $ 607,083 $ 578,821 Rental assistance 131,092 117,227 --------------- ---------------- Gross potential rents 738,175 696,048 Excess rents - 2,273 Less vacancies (12,432) (12,422) --------------- ---------------- Net rental income 725,743 685,899 Laundry and vending income 6,500 7,500 Tenant charges income 160 580 Interest income 4,917 5,241 --------------- ---------------- Total revenues 737,320 699,220 --------------- ---------------- Expenses: Payroll and related costs 102,653 89,113 Administrative 85,493 82,529 Utilities 67,471 61,682 Operating and maintenance 106,225 63,256 Insurance and taxes 93,540 48,366 Interest 306,542 311,656 Depreciation and amortization 202,895 202,895 --------------- ---------------- Total expenses 964,819 859,497 --------------- ---------------- Net loss before extraordinary item (227,499) (160,277) Extraordinary item - reduction of prior years property tax accrual - 85,605 --------------- ---------------- Net Loss (227,499) (74,672) Partners' equity - beginning 893,799 968,471 --------------- ---------------- Partners' equity - ending $ 666,300 $ 893,799 =============== ================ See the accompanying notes to financial statements. --------------------------------------------------------------------------------------------------------------
5
REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) ------------------------------------------------------------------------------------------------------------ STATEMENTS OF CHANGES IN PARTNERS' EQUITY FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 ------------------------------------------------------------------------------------------------------------ Old New General General Limited Partner Partner Partner Total ------------ ------------- ------------- -------------- Balance - December 31, 2001 $ 729,544 $ (8,058) $ 246,985 $ 968,471 Net Loss - 2002 - (747) (73,925) (74,672) ------------ ------------- ------------- -------------- Balance - December 31, 2002 729,544 (8,805) 173,060 893,799 Net Loss - 2003 - (2,275) (225,224) (227,499) ------------ ------------- ------------- -------------- Balance - December 31, 2003 $ 729,544 $ (11,080) $ (52,164) $ 666,300 ============ ============= ============= ============== Profit and loss percentage at December 31, 2003 0% 1% 99% 100% ============= ============= ============= =============== See the accompanying notes to financial statements. -----------------------------------------------------------------------------------------------------------
6
REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) ------------------------------------------------------------------------------------------------------------ STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2002 AND 2003 ------------------------------------------------------------------------------------------------------------ 2003 2002 ---------------- ---------------- Cash flows from operating activities: Tenant rental receipts $ 576,787 $553,048 Rental assistance 131,092 117,227 Interest receipts 199 343 Other receipts 6,660 8,080 Payments to suppliersand employees: Administrative expenses (29,121) (30,030) Management fees (38,643) (33,586) Utilities (67,471) (61,682) Salaries and wages (65,915) (53,809) Operating and maintenance (106,045) (71,149) Real estate tax (13,711) - Payroll taxes (6,167) (5,633) Property insurance (39,585) (29,838) Miscellaneous taxes and insurance (20,776) (14,445) Interest on mortgage (279,983) (285,066) Tenant security deposits 16 1,160 ---------------- ---------------- Net cash provided by operating activities 47,337 94,620 ---------------- ---------------- Cash flows from investing activities: Deposits to reserve, including interest (38,122) (34,885) Withdrawals from reserve 51,672 27,967 Reserve interest 2,111 4,898 Funding of other impounds - net 12,507 2,712 ---------------- ---------------- Net cash used in investing activities 28,168 692 ---------------- ---------------- Cash flow used in financing activities Mortgage principal payments (77,002) (71,918) ---------------- ---------------- Net increase (decrease) in cash (1,497) 23,394 Cash at beginning of year 27,629 4,235 ---------------- ---------------- Cash at end of year $ 26,132 $ 27,629 ================ ================ See the accompanying notes to financial statements. ---------------------------------------------------------------------------------------------------------------
7
Regency Court Partners CHFA Project No. 92-002-S Statements of Cash Flows, December 31, 2002 and 2003 Page 2 --------------------------------------------------------------------------------------------------------------- Reconciliation of Net Loss to Net Cash Provided by Operating Activities 2003 2002 ---------------- ------------------ Net Loss $ (227,499) $ (74,672) Adjustments to reconcile net loss to net cash Provided by operating activities: Depreciation and amortization 202,895 202,895 Decrease (increase) in: Security deposit cash (594) 940 Receivables (2,350) 41 Prepaids (2,224) (3,796) Increase (decrease) in: Payables 180 (7,892) Security deposit liability 610 220 Accrued interest 26,559 26,590 Other accruals 53,768 40,958 Unearned income 710 (161) Reserve and impound interest earned (4,718) (4,898) Extraordinary items - (85,605) ---------------- ------------------ Net cash provided by operating activities $ 47,337 $ 94,620 ================ ================== See the accompanying notes to financial statements. ---------------------------------------------------------------------------------------------------------------
8 REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) -------------------------------------------------------------------------------- NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2003 -------------------------------------------------------------------------------- 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization: Regency Court Partners is a California limited partnership formed in 1992 to acquire an interest in real property located in Monrovia, California and to construct and operate thereon an apartment complex of 115 units for low-income senior citizens. Mortgage financing was provided by the California Housing Finance Agency (CHFA). Such projects are regulated under the terms of a Regulatory Agreement with CHFA, including rent charges, operating methods and other matters. Capitalization and Depreciation: Assets are recorded at cost and depreciated for financial accounting purposes using the straight-line method over their estimated useful lives. The principal estimated useful lives used in computing the depreciation provisions are 40 years for building and 10 years for equipment The policy of the project is to charge amounts expended for maintenance, repairs, and minor replacements to expense, and to capitalize expenditures for major replacements and betterments. Deferred Costs: Deferred costs, comprised substantially of tax credit fees, are amortized over their estimated useful life of ten years. Cash and Cash Equivalents: For purposes of reporting cash flows, cash includes unrestricted cash in bank, cash on hand, savings accounts, and all certificates of deposit with original maturities of three months or less. The Partnership maintains its cash in bank deposit accounts, which at times may exceed federally insured limits. The Partnership has not experienced any losses in such accounts. The Partnership believes it is not exposed to any significant credit risk on cash and cash equivalents. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles reqiires management to make estimates and assumptions that affect: (1) the reported amounts of assets and liabilities and disclosure of contingencies at the date of the financial statements, and (2) the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. -------------------------------------------------------------------------------- 9 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 2 -------------------------------------------------------------------------------- Rental Income and Unearned Rents: The Partnership rents apartment units on a month to month basis and recognizes revenues when earned. Advance receipts of rents are classified as liabilities until earned. Income Taxes: No provision is made for income taxes since such taxes, if any, are the liability of the individual partners. 2. GOING CONCERN AND PROPERTY TAX LIABILITY The accompanying financial statements have been prepared assuming the Partnership will continue as a going concern which contemplates the realization of assets and the satisfaction of liabilities in the normal course of business. A number of factors including recurring losses and a working capital deficiency raise substantial doubt about the Partnership's ability to continue as a going concern. The Partnership has applied for property tax exemption, under the California welfare organization exemption, for 1999 and 1998 property tax. The Partnership has also requested that property taxes from June 1995 through December 1997, be abated. The Partnership believes that it will receive the abatement for 1999, 1998 and future taxes due to the non-profit status of its general partner. In addition, the Partnership is optimistic about receiving an abatement for the property taxes for the period June 1995 through December 1997, as it had a non-profit general partner during that time period. Communications with governmental authorities indicate application processing is three to five years behind. However, authorities state that tax exemption will likely be granted. These financial statements reflect a long-term accrued property tax liability of $254,175 as of December 31, 2003 for unpaid property taxes. The liability is expected to be reduced when future tax exemptions are received. However, cash generated from the Partnership's operations has not been sufficient enough to pay such tax liability. If an abatement for prior years' taxes is not obtained, the Partnership will seek to negotiate a 5 year payment plan during which to pay those taxes. If the Partnership is unsuccessful, it may request additional funds from the limited partner to satisfy this obligation. However, the limited partner is under no obligation to contribute any additional amounts. The Partnership believes the abatement of property taxes, if obtained, will enable the Partnership to fund its on-going operations. -------------------------------------------------------------------------------- 10 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 3 -------------------------------------------------------------------------------- The Partnership's continued existence is dependent upon its ability to resolve its liquidity problems, principally by, obtaining an abatement of real property taxes and/or obtaining additional equity capital. While pursuing the tax abatement and/or additional equity funding, the Partnership roust continue to operate on limited cash flow generated internally. The financial statements do not include any adjustments relating to the recoverability and classification of liabilities thaHt might be necessary should the Partnership be unable to continue as a going concern. The Partnership's continuation as a going concern is dependent upon its ability to generate sufficient cash flow to meet its obligations on a timely basis, to comply with the terms of its financing agreement, to obtain additional financing or refinancing as may be required, and ultimately to attain profitability. 3. EXTRAORDINARY ITEMS During 2002, the partnership received adjusted property tax bills for the periods 1998-1999 through 2001-2002. The portion of the tax bill which relates to voted indebtedness and which will not be abated is due and payable, and accordingly has been set up as a current liability. That portion related to the general tax levy on property is expected to be exempted under the California welfare organization exemption, and has been classified as a long-term debt until receipt of the exemption. The books have been adjusted $85,605 to reflect the new tax bills. This reduction to the accrued tax liability has been treated as an extraordinary item. 4. RESTRICTED FUNDS As required by the Regulatory Agreement with CHFA, the Partnership is required to make monthly impound deposits to cover insurance premiums, property taxes and to maintain an operating reserve and reserve for replacements. These restricted funds are held by, and expenditures are subject to, supervision and approval by CHFA. The operating reserve is funded by a letter of credit. -------------------------------------------------------------------------------- 11 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 4 -------------------------------------------------------------------------------- 5. MORTGAGE PAYABLE
California Housing Finance Agency 6.85% real estate mortgage payable in monthly installments of $29,749, including interest. Final payment is due in the year 2025. The mortgage may not be paid in advance without approval of CHFA, nor may the building be sold, demolished or alterations made without CHFA's prior approval. $4,045,177 Less current portion (82,446) ----------- $3,962,731 =========== Principal amounts maturing for the next five years are: 2004 $82,446 2005 88,274 2006 94,514 2007 101,196 2008 108,349 6. OTHER NOTE PAYABLE Community Development Commission, County of Los Angeles (CDC) 3% construction loan secured by second trust deed on buildings and improvements. Payments made to the extent there are residual receipts. In the event that residual rental receipts are available in any year, 70% thereof shall be paid to the holder of the construction loan and the remaining 30% balance will be paid to the CDC as rent on the ground lease. Upon payment of $750,000 of the outstanding balance, 3.4% of the residual rental receipts shall be paid to the CDC as repayment of principal and interest All unpaid amounts will be due and payable in the year 202. Accrued interest is $246,828 at December 31, 2003. $ 894,900
-------------------------------------------------------------------------------- 12 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 5 -------------------------------------------------------------------------------- 7. RELATED PARTY TRANSACTIONS The Regulatory Agreement with CHFA limits the maximum annual distributions to partners. Such distributions are payable only from surplus cash (as defined), but accumulate and may be distributed to the extent surplus cash is generated from future operations. No surplus cash was available at December 31, 2003 and 2002. Capital Contributions: The limited partner, WNC Housing Tax Credit Fund IV, L.P. Series I, a 99% limited partner, is required to make a capital contribution of $1,691,585, in amounts and at times as stated in the Limited Partnership Agreement. The limited partner's cash contributions may be reduced to account for reduced tax benefits, if any. As of December 31, 2003, the limited partner has contributed $1,641,782. Profit or Loss Allocations: All items included in the calculation of income or loss not arising from a sale or refinancing, and all tax credits, shall be allocated 99% to the limited partner and 1% to the general partner. Cash Distributions: Residual rental receipts, as defined, shall be distributed as follows: (i) 70% to the CDC until $750,000 of the construction loan has been repaid; 3.4% thereafter; (ii) 30% to the CDC as payment under the ground lease; (iii)The remaining residual rental receipts shall be distributed to the Partners in proportion to their partnership interests. Distribution of sale or refinancing proceeds, as defined, shall be made in accordance with the Limited Partnership Agreement. A monthly asset management fed is payable to the general partner. Fees of $22,817 and $22,370 were incurred for the years 2003 and 2002 respectively. An affiliate of the former general partner provided previous property management services to the Partnership. Included in long-term accrued expenses at December 31, 2003 and December 31, 2002 is $$8,000 of management fees payable to such entity. -------------------------------------------------------------------------------- 13 Regency Court Partners CHFA Project No. 92-002-S Notes to Financial Statements, December 31, 2003 Page 6 -------------------------------------------------------------------------------- An affiliate of the limited partner provides property management services to the Partnership. Property management fees were $35,780 and $33,926 for the years 2003 and 2002, respectively. 8. COMMITMENTS AND CONTINGENCIES Purchase Option: On January 4, 1994, the Partnership executed a Disposition and Development Agreement with the CDC. The Disposition and Development Agreement grants the Partnership the option to purchase the Rental Property under construction commencing on the first day of the 15th year of the ground lease and ending on the last day of the 20th year of the ground lease. The purchase price will be the future value of the CDC's original interest in the Rental Property under construction based on an 8% annually compounded return, legs any payments made by the Partnership related to interest. Ground Lease: On January 4, 1994, the Partnership executed a Ground Lease Agreement with the CDC. Future minimum rental payments on the ground lease are based on 30% of residual rental receipts, as defined, and will be paid annually through 2049. No payments were made during the years ended December 31, 2003 and 2002. 9. CURRENT VULNERABILITY WE TO CERTAIN CONCENTRATIONS The Partnership's sole asset is a 115-unit apartment complex. The Partnership's operations are concentrated in the multifamily real estate market In addition, the Partnership operates in a heavily regulated environment. The operations of the project are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to CHFA. Such administrative directives, rules and regulations are subject to change by an act of congress, the State of California or an administrative change mandated by CHFA. Such changes may occur with little notice or inadequate funding to pay for related costs, including the additional administrative burden, to comply with a change. -------------------------------------------------------------------------------- 14 SUPPLEMENTARY INFORMATION
REGENCY COURT PARTNERSCHFA Project No. 92-002-S (A California Limited Partnership) -------------------------------------------------------------------------------------------------------------- SUPPLEMENTAL SCHEDULE OF EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2002 and 2003 -------------------------------------------------------------------------------------------------------------- 2003 2002 ---------------- ---------------- On-site manager salary $ 24,816 $ 23,646 Office salaries 10,434 10,238 Maintenance salaries 27,604 22,986 Payroll taxes and workers' compensation 17,115 11,779 Employee benefits 6,460 4,960 Employee rent-free apartment 16,224 15,504 ---------------- ---------------- Subtotal payroll and related expenses 102,653 89,113 ---------------- ---------------- Advertising 412 302 Renting expenses 1,458 229 Office expenses 2,749 2,931 Management fee 35,780 33,925 Asset management fee 22,817 22,370 Legal - - Audit fee 5,700 5,300 Telephone 3,982 3,753 Educational and social programs 11,520 11,520 Miscellaneous administrative 1,075 2,199 ---------------- ---------------- Subtotal administrative expenses, 85,493 82,529 ---------------- ---------------- Electricity 17,282 19,723 Water and Sewer 27,532 25,565 Gas utilities 22,657 16,394 ---------------- ---------------- Subtotal utilities expenses 67,471 61,682 ---------------- ---------------- Maintenance supplies 9,024 7,226 Maintenance supplies - replacement reserve 53,804 25,154 Grounds supplies 468 62 Contract maintenance and repairs 6,416 4,458 Grounds contract 11,524 9,751 Exterminating 1,730 1,540 Trash removal 6,686 5,158 Heating repair 6,542 1,789 Decorating and painting 7,325 4,570 Miscellaneous operating and maintenance 2,706 3,548 ---------------- ---------------- Subtotal operating and maintenance expenses 106,225 63,256 ---------------- ---------------- Property and comprehensive insurance 26,197 19,734 Earthquake insurance 13,388 10,105 Property taxes 50,587 15,187 Miscellaneous taxes and licenses 3,368 3,340 ---------------- ---------------- Subtotal insurance and taxes 93,540 48,366 ---------------- ---------------- Interest 306,542 311,656 ---------------- ---------------- Depreciation and amortization 202,895 202,895 ---------------- ---------------- Total operating and maintenance expenses $ 964,819 $ 859,497 ================ ================ --------------------------------------------------------------------------------------------------------------
15 REGENCY COURT PARTNERSCHFA Project No. 92-002-S (A California Limited Partnership) -------------------------------------------------------------------------------- SUPPLEMENTAL DATA REQUIRED BY CHFA FOR THE YEAR ENDED DECEMBER 31, -------------------------------------------------------------------------------- 2003 CASH ON HAND AND IN BANKS --- Unrestricted accounts: Cash on hand $ 300 Checking account 3,594 Operating deposit 1,700 Operating savings 20,538 ---------- Balance, December 31, 2003 $26,132 ---------- Restricted accounts: Tenant security deposits - checking $ 3,512 Tenant security deposits - savings 21,785 ---------- Balance, December 31, 2003 $ 25,297 ---------- Tenant security deposits are held in a separate federally insured interest bearing bank account in the name of Regency Court Partners. Interest earned is retained for project operations. The balance of the Security Deposit account is more than the liability for security deposits. ACCOUNTS RECEIVABLE Accounts receivable at December 31, 2003 consists of $1,740 due from tenants, of which $1,160 is past due. MORTGAGE IMPOUND ACCOUNTS
Property Earthquake Taxes Insurance Insurance Balance, December 2002 $ 56,381 $ 15,438 $ 15,646 Transfers ( 1,600) 1,600 Insurance deposits (4 x 2,585) - 10,340 - Insurance deposits (8 x 2,160) - 17,280 - Insurance deposits (5 x 980) - - 4,900 Insurance deposits (7 x 1,205) - - 8,435 Tax or insurance payments (13,710) (26,949) (12,541) Interest earned - 1,607 - --------- ---------- ----------- Balance, December 31, 2003 $ 41,071 $ 17,716 $ 18,040 ========= ========== =========== -------------------------------------------------------------------------------------------------------
16
Regency Court Partners CHFA Project No. 92-002-S Supplemental Data Required by CHFA, December 31, 2003 Page 2 ------------------------------------------------------------------------------------------------------------ RESERVE FOR REPLACEMENTS In accordance with the provisions of the Regulatory Agreement, restricted cash and investments are held by the California Housing Finance Agency to be used for replacements of property with the approval of CHFA as follows: Balance December 31, 2002 112,546 Monthly deposits 33,000 Interest earned to December 31, 2003 2,372 Withdrawals (48,922) -------------- Balance confirmed by mortgagee - December 31, 2003 $ 98,996 ============== BUILDINGS AND IMPROVEMENTS Buildings and Improvements Equipment Total Balance, January 1 $ 7,703,983 $ 3,572 $ 7,707,555 Additions - - - ------------ --------------- -------------- Balance, December 31 7,703,983 3,572 7,707,555 Less accumulated depreciation (1,589,095) (3,572) (1,592,667) ------------ --------------- -------------- Net $ 6,114,888 $ - $ 60,114,888 ============ =============== ============== ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable are payable to suppliers and are being paid on a current basis. Non-current accrued expenses at December 31, 2003 and 2002 includes amounts payable to Alken Management Company ($88,000 for prior management services) and the Los Angeles County Sanitation ($79,000 for initial hook-up fees). As of December 31, 2003 there has been no resolution to these accrued expenses. GROSS POTENTIAL RENTS Gross potential rent includes: Tenant rental payments $578,427 Housing assistance payments 131,092 Manager's rent-free apartment 16,224 Vacancy loss 12,432 Excess assistance payments - ------------ Total gross potential rent $738,175 ============ ------------------------------------------------------------------------------------------------------------ 17
Regency Court Partners CHFA Project No. 92-002-S Supplemental Data Required by CHFA, December 31, 2003 Page 3 -------------------------------------------------------------------------------------------- MANAGEMENT FEE The management fee has been calculated at 5% of collected rental income amounting to $35,780. In addition is a general partner asset management fee of $22,817. SURPLUS CASH COMPUTATION Add: Cash on hand and in banks $ 26,132 Other receivables 2,420 Tenant security deposits 25,297 ----------------- Total 53,849 ----------------- Less current obligations: Accounts payable and accrued expenses (due within 30 days) - Tenant security deposits 25,067 Accrued interest 23,090 Prepaid revenue 791 ----------------- Total 48,948 ----------------- Surplus cash (deficiency), end of year $ 4,901 ================= Current year owner distribution allowed under the Regulatory Agreement with CHFA $ - ================= ACCUMULATED LIMITED DISTRIBUTIONS There are no allowable accumulated distributions at December 31, 2003. --------------------------------------------------------------------------------------------
18 1730 Havens Point Place Carlsbad, California 92008-3611 Jack Gilk Telephone: 760.434.8845 Facsimile: 760.434.8865 Email: jack@gilkcpa.com Certified Public Accountant Partners Regency Court Partners Costa Mesa, California INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROLS OVER FINANCIAL REPORTING BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFOMRED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS I have audited the financial statements of Regency Court Partners, a California Limited Partnership (CHFA Project No. 92-002-S) as of and for the year ended December 31, 2003, and have issued my report thereon dated January 19, 2004, which contains an explanatory paragraph regarding the Partnership's ability to continue as a going concern. I conducted my audit in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan arid perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. The management of the Project is responsible for establishing and maintaining an internal control structure. In fulfilling this responsibility, estimates and judgments by management are required to assess the expected benefits and related costs of internal control structure policies and procedures. The objectives of an internal control structure are to provide management with reasonable, but not absolute, assurance that assets are safeguarded against loss from unauthorized use or disposition, that transactions are executed in accordance with management authorization and recorded properly to permit the preparation of financial statements in accordance with accounting principles generally accepted in the United States, and that the state-assisted program is managed in compliance with applicable laws and regulations. Because of inherent limitations in any internal control structure, errors, irregularities, or instances of noncompliance may nevertheless occur and not be detected. Also, projection of any evaluation of the structure to future periods is subject to the risk that procedures ma become inadequate because of changes in conditions or that the effectiveness of the design and operation of policies and procedures may deteriorate. In planning and performing my audit for the year ended December 31, 2003, I obtained an understanding of the design of relevant internal control structure policies and procedures and determined whether they had been placed in operation, and I assessed control risk in order to determine my auditing procedures for the purpose of expressing my opinions on the Project's basic financial statements and on its compliance with specific requirements applicable to its major state-assisted program and not to provide assurance on the internal control structure. -------------------------------------------------------------------------------- 19 Regency Court Partners CHFA Project No. 92-002-S Independent Auditor's Report on Internal Controls, December 31, 2003 Page 2 -------------------------------------------------------------------------------- I performed tests of controls to evaluate the effectiveness of the design and operation of internal control structure policies and procedures that I considered relevant to preventing or detecting material noncompliance with specific requirements applicable to the Project's state-assisted program. My procedures were less in scope than would be necessary to render an opinion on internal control structure policy and procedures. Accordingly, I do not express such an opinion. My consideration of the internal control structure would not necessarily disclose all matters in the internal control structure that might be material weaknesses under standards established by the American Institute of Certified Public Accountants. A material weakness is a reportable condition in which the design or operation of one or more of the internal control structure elements does not reduce to a relatively low level the risk that errors or irregularities in amounts that would he material in relation to the financial statements being audited or that noncompliance with laws and regulations that would be material to a state-assisted program may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. I noted no matters involving the internal control structure and its operations that I consider to be material weaknesses as defined above. This report is intended solely for he information of the partners, management and their staff, and the California Housing Finance Agency and is not intended to be and should not be used by anyone other than these specified parties. /s/Jack Gilk January 19, 2004 33-0724657 -------------------------------------------------------------------------------- 20 1730 Havens Point Place Carlsbad, California 92008-3611 Jack Gilk Telephone: 760.434.8845 Facsimile: 760.434.8865 Email: jack@gilkcpa.com Certified Public Accountant Partners Regency Court Partners Costa Mesa, California INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE WITH LAWS AND REGULATIONS BASED N AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS I have audited the financial statements of Regency Court Partners, a California Limited Partnership (CHFA Project No. 92-002-S) as of and for the year ended December 31, 2003, and have issued my report thereon dated January 19, 2004 which contains an explanatory paragraph regarding the Partnership's ability to continue as a going concern. I conducted my audit in accordance with auditing standards generally accepted in the United States and Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statement re free of material misstatement. Compliance with laws, regulations and contracts applicable to the project is the responsibility of the project's manager nt. As part of obtaining reasonable assurance about whether the financial statements are free of material misstatement, I performed tests of the project's compliance with certain provisions of laws, regulations and contracts. However, my objective was not to provide an opinion on overall compliance with such provisions. Accordingly, I do not express such an opinion. I also considered those compliance matters comprehended in theCalifornia Housing Finance Agency "Audited Financial Statements Handbook." (Revised December 1991) The results of my tests of compliance indicate that, with respect to the items tested, the project complied, in all material respects, with the provisions referred to in the second and third paragraphs of this report. With respect to items not tested, nothing came to my attention that caused me to believe that the project had not complied, in all material respects, with those provisions. This report is intended solely for the information of the partners, management and their staff, and the California Housing Finance Agency and is not intended to be and should not be used by anyone other than these specified parties. /s/ Jack Gilk January 19, 2004 33-0724657 -------------------------------------------------------------------------------- 21 REGENCY COURT PARTNERS CHFA Project No. 92-002-S (A California Limited Partnership) ------------------------------------------------------------------------------- CERTIFICATION OF GENERAL PARTNER, DECEMBER 31, 2003 ------------------------------------------------------------------------------- We hereby certify that we have examined the accompanying financial statements and supplemental data of Regency Court Partners, CHFA Project No. 92-002-S and, to the best of our knowledge and belief, the same is complete and accurate. Officers: --------------- ------- (signature) (date) --------------- ------- (signature) (date) TIN: 95-4409236 -------------------------------------------------------------------------------- 22