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ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) AUDITED FINANCIAL STATEMENTS Year ended December 31, 2018 ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) TABLE OF CONTENTS Page Independent Auditor’s Report 1 Management’s Discussion and Analysis 3 Financial Statements Statement of Net Position 9 Statement of Activities 10 Balance Sheets – Governmental Funds 11 Statements of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds 12 Notes to Financial Statements 13 Additional Reports Schedule of Expenditures of Federal Awards 21 Notes to Schedule of Expenditures of Federal Awards 22 Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 23 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 25 Schedule of Findings and Questioned Costs 27 ---PAGE BREAK--- A member of UHY International, a network of independent accounting and consulting firms INDEPENDENT AUDITOR’S REPORT Board of Directors Albany Community Development Agency Report on the Financial Statements We have audited the accompanying financial statements of the governmental activities and each major fund of the Albany Community Development Agency (the “Agency”), a blended component unit of the City of Albany as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise the Agency’s basic financial statements as listed in the table of contents. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility 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 the standards applicable to financial audits contained in 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the respective financial position of the governmental activities and each major fund of the Agency as of December 31, 2018, and the respective changes in financial position thereof for the year then ended in accordance with accounting principles generally accepted in the United States of America. ---PAGE BREAK--- Page 2 Report on Summarized Comparative Information We have previously audited the Agency’s 2017 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated July 10, 2018. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2017 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management’s discussion and analysis on pages 3 through 8 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, which considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management’s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audit was conducted for the purpose of forming an opinion on the financial statements that collectively comprise the Agency’s basic financial statements. The accompanying schedule of expenditures of federal awards is presented for purposes of additional analysis as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relate directly to the underlying accounting and other records used to prepare the basic financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the basic financial statements or to the basic financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal awards is fairly stated, in all material respects, in relation to the basic financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 7, 2019, on our consideration of the Agency’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, grants agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Agency’s internal control over financial reporting and compliance. Albany, New York June 7, 2019 ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 3 This management discussion and analysis is offered to assist readers in understanding the financial operations of Albany Community Development Agency (ACDA) in conjunction with the financial statements presented on Page 9 for the year ended December 31, 2018. This Discussion and Analysis will provide comparative analysis of data between 2017 and 2018 and the years then ended. Introduction: ACDA is a public benefit corporation, and is governed by a board of directors as established under General Municipal Law. ACDA is a component entity of the City of Albany and utilizes City of Albany employees to execute its mission to provide suitable living environments and economic opportunities for low to moderate income residents within the City of Albany. As can be seen in the chart below, the majority of revenue comes from U.S. Department of Housing and Urban Development (“HUD”) entitlements (approximately 80%). The HUD entitlement funds are awarded to the City of Albany and ACDA is then contracted by the City to administer them. ACDA was awarded a Lead Hazard Reduction Demonstration Grant in the amount of $3 million for the three year period from November 2016 through November 2019. During 2018 Lead grant revenue represented approximately 13% of overall revenue. This is similar to 2017 where the Lead grant revenue represented approximately 12% of overall revenue. New for 2018 is the New York State grant revenue which relates to a $300,000 grant that got under way during 2018 for a housing program as further described below. ACDA operates based on HUD’s National Program Objectives. Funding decisions are determined through a process which involves public participation. Included in this process is the submittal of a publically reviewed Consolidated Plan every 5 years that states broad goals and objectives. ACDA’s current Consolidated Plan is through 2020. Each year an Annual Plan, also subject to public review and comment, is developed and adopted as based on the Consolidated Plan. Any significant changes are required to go through a public review and amendment process. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 4 Financial Highlights: • ACDA’s financial statements are prepared on a calendar year basis, whereas the Federal Aid awards (known as entitlements) that are the significant sources of revenue are provided on a program year of June 1 to May 31. The Lead Hazard Reduction grant covers a three year period which does not match a calendar year or Federal Aid award period. • Entitlements based on a calendar years are broken out as follows: While entitlements are awarded on a program year, the financials presented represent when those entitlements are earned, which may be in a different time frame. With respect to CDBG and HOME changes between 2017 and 2018, this partially relates to the use of other non-entitlement funded program monies for housing cases. Additionally, ACDA has seen a decline in use of some housing programs and as a result has undertaken a marketing campaign targeting qualified homeowners within the City of Albany. • During 2017 the Agency was awarded $300,000 through NYS Affordable Housing Corporation for the Affordable Home Ownership Development Program. No expenditures were incurred and no amounts drawn during 2017. Guidelines were developed and released during 2017 for the program related to these funds (known as HORP). Just under $85,000 was expended on HORP cases during 2018. • Public service expenditures have decreased approximately 43% between 2017 and 2018. This was a planned decrease. ACDA implemented a three year funding policy per program which impacted 2018 for several previously funded programs that were considered no longer eligible for additional funding. • Public improvement expenditures materially increased in 2018 over 2017 primarily as a result of funding approximately $283,000 for Arbor Hill Park improvements. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 5 • During 2016 ACDA collected over $4 million of program income in payment of two significant loan balances. ACDA has subsequently been able to fund projects that meet ACDA’s purpose for assisting low to moderate income individuals, both directly and indirectly, from those monies. The more material examples of such expenditures during 2018 include $250,000 for Ida Yarbrough Phase II and $100,000 for a commercial façade program. The use of these funds reduces overall unrestricted net assets. Overview of the Financial Statements: The financial statements presented include both general purpose statements as well as government statements. Net position increases when revenues exceed expenditures and decreases when expenditures exceed revenues. ACDA has no objective to accumulate profits, however, due to timing differences related primarily to the receipt of program income or non-Federal revenue receipts and expenditures, net position can fluctuate. For Federal funds, ACDA adheres to Federal guidelines with respect to only having access to funds when valid incurrence of expenditures has taken place and whereby funds drawn from funding sources must be disbursed timely. During 2016, as described elsewhere in this Management Discussion and Analysis, ACDA received significant repayments on loans that were included as program income. This resulted in an unusually large increase to ACDA’s net position as of December 31, 2016. Several commitments, such as the vacant building program and commercial façade program, have been made from these program income monies. As those monies are expended future periods will show a decrease, such as occurred during the years ended December 31, 2017 and December 31, 2018, to the net position of ACDA. Administration includes functions such as accounting, clerical functions, overall operational management, and budgeting. HUD institutes maximum percentage caps for administrative expenses by type of funding that range from 3% on HOPWA monies to 20% for CDBG monies. For both years presented ACDA administrative costs were within the HUD requirements. It is important for a reader of ACDA’s financial statements to read the Statements themselves, the notes to the Statements, and this Discussion and Analysis in order to have a full understanding of ACDA’s financial condition. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 6 Condensed Financial Information: The following condensed financial information summarizes ACDA’s net position at December 31, 2018 and 2017 revenues and expenses for the years then ended: 2018 2017 Current and Other Assets 5,441,000 $ 6,777,000 $ Mortgage Loans Receivable, Net 6,251,000 5,997,000 Capital Assets, Net 1,825,000 1,883,000 Total Assets 13,517,000 $ 14,657,000 $ Deferred Outflows of Resources - $ - $ Current Liabilities 1,424,000 $ 2,035,000 $ Deferred Revenues 6,158,000 5,851,000 Due to NYS Housing Trust Fund 3,000 17,000 Other Liabilities 255,000 505,000 Total Liabilities 7,840,000 $ 8,408,000 $ Deferred Inflows of Resources - $ - $ Net Position 5,677,000 $ 6,249,000 $ Revenues: Grant Revenue 3,938,000 $ 5,185,000 $ Program Income 114,000 182,000 Other 141,000 4,000 Expenses: Program Related 4,488,000 5,079,000 Administrative 277,000 535,000 Total Governmental Activities (572,000) $ (243,000) $ Change in Net Position (572,000) (243,000) Net Position, Beginning of Year 6,249,000 6,492,000 Net Position, End of Year 5,677,000 $ 6,249,000 $ Financial Analysis ACDA’s most significant asset other than cash is mortgage loans receivable which at December 31, 2017, represented approximately 41% of total assets and at December 31, 2018 represented approximately 46% of total assets. Cash represents a significant portion of total assets for both years; however cash did decrease about 10% from the 2017 year-end balance. While some of this represents timing differences, the majority relates to the use of the program income monies collected in 2016 as described elsewhere. Mortgage loans receivable primarily represent the amounts outstanding in mortgages that encourage homeownership and rehabilitation of housing for low to moderate income individuals. Loans are in the form of grants and deferred pro-rated loans where upon meeting certain conditions, such as length of ownership or occupancy and income levels, the loans are forgiven ratably over time, or when an ability to repay the loan exists, traditional type loans are established. With respect to the deferred (forgiven) loans, in the event of non-compliance a pro-rated portion of the loan is to be repaid to ACDA. In the event of default on a repayable loan, the remaining balance on the loan becomes immediately due. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 7 ACDA’s most significant liability is unearned revenues. Unearned revenues consist almost entirely of outstanding deferred loans as outlined above. An overview of the mortgage programs are arrayed in the table below: Type of Assistance Information about the Terms Home Owner Assistance Program (HOAP) Assists low-income owner occupants in rehabilitating their homes to meet local housing standards and codes. Maximum assistance is $30,000 per building. Home Acquisition Program (HAP) Decreases the barriers to homeownership for low-income households for those who currently do not own a home and desire to purchase and rehabilitate a 1 to 4 unit building, condominium or cooperative unit. Minimum assistance is $1,000 and maximum assistance is $14,900 for down payment and/or closing costs. Senior Housing Rehabilitation Program (SRP) Provides low-to-moderate income persons over the age of 62 owning homes in the City of Albany up to $5,000 for substantial repairs to housing. Assistance is in the form of a deferred grant to be forgiven over a 3 year period unless the occupant must vacate the property to reside in a nursing home or becomes deceased, in which case the grant is immediately forgiven. Rehabilitation Assistance Program (RAP) Provides low-to-moderate income persons owning homes in the City of Albany up to $5,000 for substantial repairs to housing. Assistance is in the form of a deferred grant to be forgiven over a 3 year period. Rehabilitation Assistance Program II (RAP II) Similar to RAP as described above; however, is available for those with incomes up to 125% of the HUD guidelines. Tenant Assistance Rehabilitation Program (TARP) Provides owners of buildings with low-income tenants’ assistance of between $1,000 per unit and $4,000 per bedroom per unit via prorated deferred loans with a length of between 5 and 15 years. TARP requires owner funds be invested as well. Choose Albany Encourage diverse home ownership within the City of Albany. Assistance is up to $6,000. Loans are repayable at 0% interest over 10 years and are subject to certain conditions. Vacant Building Rehabilitation Program (VBRP) Assists with the rehabilitation of vacant/abandoned residential properties with up to $50,000 of gap funding provided in the form of a grant/forgivable loan. Home Owner Rehabilitation Program (HORP) Provides up to $30,000 per building for low to moderate income owner- occupied housing within Neighborhood Strategy Area’s (NSAs) with rehabilitation or improvements. Lead-Based Paint Program Identifies and controls LEAD-based paint hazards in eligible rental and owner-occupied housing units. Fixed assets consist primarily of land and buildings. Included in land and buildings are condominium units used to provide temporary housing for income eligible households. Properties are retained in order to reclaim substandard neighborhoods and discourage the use of vacant sites for negative activities. Due from Federal government represents the amount the Federal government would owe ACDA for expenditures incurred but not yet reimbursed by entitlement. Program income is income generated outside the entitlement monies which can then be utilized to further the mission of ACDA. The primary sources of program income consist of repayments of mortgage loans and rental income. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 8 ACDA’s entitlement program budgets are approved by the City of Albany Common Council. ACDA practices zero-based budgeting whereby expected income is fully budgeted for expenditure. Typically approximately 80% of expenditures are for program and project related purposes. The three year lead grant budget was set in place and approved by HUD during their award process in 2016. As part of the $3 million grant ACDA must provide lead match of $750,000. Capital Asset Activity and Long-term Debt Activity ACDA did not have significant changes to capital assets or incur long-term debt during 2017 or 2018. Currently Known Facts, Decisions, and Conditions During 2019, a new program known as the Albany ACCESS program, targeting low to moderate income individuals with disabilities who are in need of disability related housing improvements (owner occupied or rental) has been implemented. The HUD entitlements for Program Year 45 (June 1, 2019– May 31, 2020) will be: • $3,338,647 for CDBG (essentially even to Program Year 44) • $879,669 for HOME decrease from Program Year 44) • $285,840 for ESG increase from Program Year 44) • $679,993 for HOPWA increase from Program Year 44) ---PAGE BREAK--- See notes to financial statements. Page 9 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) STATEMENT OF NET POSITION December 31, 2018 2017 2018 (For Comparative Purposes Only) ASSETS Cash and cash equivalents 3,860,986 $ 4,285,456 $ Mortgage loans receivable, net of allowance for loan losses of $2,150,293 in 2018 and $2,203,718 in 2017 6,250,560 5,997,047 Due from federal government 997,902 1,918,634 Due from New York State 8,070 - Due from the City of Albany 9,965 9,965 Capital assets, net of depreciation 1,824,970 1,883,073 Other assets 564,604 562,917 Total assets 13,517,057 $ 14,657,092 $ DEFERRED OUTFLOWS OF RESOURCES - $ - $ LIABILITIES Accounts payable and accrued liabilities 947,896 $ 1,298,927 $ Long-term obligations 255,167 506,247 Unearned revenues 6,157,902 5,850,950 Due to New York State Housing Trust Fund 3,209 17,040 Due to the City of Albany 475,538 735,170 Total liabilities 7,839,712 $ 8,408,334 $ DEFERRED INFLOWS OF RESOURCES - $ - $ NET POSITION Net invested in capital assets 1,755,480 $ 1,616,013 $ Unrestricted 3,921,865 4,632,745 Total net position 5,677,345 $ 6,248,758 $ ---PAGE BREAK--- See notes to financial statements. Page 10 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) STATEMENT OF ACTIVITIES For the Year Ended December 31, 2018 2017 (For Charges for Operating Comparative Expenses Services Grants 2018 Lead Paint Abatement Program 644,741 $ - $ 644,741 $ - $ - $ Housing 2,066,390 - - (2,066,390) (2,349,397) Public service 269,605 - - (269,605) (475,071) Public service - neighborhood revitalization 119,438 - - (119,438) (288,841) Housing direct delivery 917,286 - - (917,286) (1,078,484) Economic development 282,053 - - (282,053) (297,014) Homeless 242,638 - - (242,638) (297,538) Public improvements 490,643 - - (490,643) (156,257) Administration 277,215 - - (277,215) (534,909) Environmental restoration 5,428 - - (5,428) (27,025) Interest expense 17,239 - - (17,239) (31,948) Depreciation 76,196 - - (76,196) (77,543) 5,408,872 $ - $ 644,741 $ (4,764,131) $ (5,614,027) $ General revenues: Grants not restricted to specific programs 3,937,555 $ 5,184,904 $ Program income 114,648 182,378 Other 140,515 3,535 Total general revenues 4,192,718 5,370,817 Change in net position (571,413) (243,210) Net position - beginning 6,248,758 6,491,968 Net position - ending 5,677,345 $ 6,248,758 $ Program Revenues Governmental Activities Purposes Only) ---PAGE BREAK--- See notes to financial statements. Page 11 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) BALANCE SHEETS - GOVERNMENTAL FUNDS December 31, 2018 Total Governmental Funds Total 2017 Special Governmental (For General Revenue Funds Comparative Fund Fund 2018 Purposes Only) ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS Cash and cash equivalents 3,860,986 $ - $ 3,860,986 $ 4,285,456 $ Mortgage loans receivable, net of allowance for loan losses of $2,150,293 in 2018 and $2,203,718 in 2017 6,247,351 3,209 6,250,560 5,997,047 Due from federal government 997,902 - 997,902 1,918,634 Due from New York State 8,070 - 8,070 - Due from the City of Albany 9,965 - 9,965 9,965 Other assets 41,691 - 41,691 40,004 Total assets 11,165,965 3,209 11,169,174 12,251,106 DEFERRED OUTFLOWS OF RESOURCES - - - - Total assets plus deferred outflows of resources 11,165,965 $ 3,209 $ 11,169,174 $ 12,251,106 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable and accrued liabilities 899,311 $ - $ 899,311 $ 1,253,449 $ Unearned revenues 6,157,902 - 6,157,902 5,850,950 Due to the City of Albany 475,538 - 475,538 735,170 Due to New York State Housing Trust Fund - 3,209 3,209 17,040 Total liabilities 7,532,751 3,209 7,535,960 7,856,609 DEFERRED INFLOWS OF RESOURCES - - - - Fund Balances Nonspendable: Prepaids (included in other assets) 3,622 - 3,622 2,878 Committed for: ACCESS program 250,000 - 250,000 - Strategic acquisition 40,148 - 40,148 - Choose Albany Program 48,665 - 48,665 83,112 Neighborhood Commercial Façade Program 216,089 - 216,089 166,089 West Hill Neighborhood Strategic Plan 35,000 - 35,000 35,000 Dream Center - - - 11,800 Vacant Buildings 949,849 - 949,849 996,245 Rehabilitation Assistance Program 270,264 - 270,264 282,400 Land Bank 50,000 - 50,000 50,000 Unassigned 1,769,577 - 1,769,577 2,766,973 Total fund balances 3,633,214 - 3,633,214 4,394,497 Total liabilities, deferred inflows of resources and fund balances 11,165,965 $ 3,209 $ 1,824,970 1,883,073 522,913 522,913 (48,585) (45,478) (255,167) (506,247) Net position of governmental activities 5,677,345 $ 6,248,758 $ Capital assets used in governmental activities are not financial resources and, therefore, are not reported in the funds. Long-term obligations are not due and payable currently and, therefore, are not reported in the funds. Non-current liabilities are not due and payable currently and, therefore, are not reported in the funds. Amounts reported for governmental activities in the statement of net position are different because: Other assets used in governmental activities that are not financial resources and, therefore, are not reported in the funds. ---PAGE BREAK--- See notes to financial statements. Page 12 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) STATEMENTS OF REVENUES, EXPENDITURES AND CHANGES IN FUND BALANCE - GOVERNMENTAL FUNDS For the Year Ended December 31, 2018 Total Governmental Funds Total 2017 Special Governmental (For General Revenue Funds Comparative Fund Fund 2018 Purposes Only) REVENUES Grant income 4,582,296 $ - $ 4,582,296 $ 5,896,410 $ Program income 114,648 - 114,648 182,378 Other 140,515 - 140,515 3,535 Total revenues 4,837,459 - 4,837,459 6,082,323 EXPENDITURES Grant programs: Lead Paint Abatement Program 644,741 - 644,741 711,506 Housing 2,066,390 - 2,066,390 2,349,397 Public service 269,605 - 269,605 475,071 Public service - neighborhood revitalization 119,438 - 119,438 288,841 Housing direct delivery 917,286 - 917,286 1,078,484 Economic development 282,053 - 282,053 297,014 Homeless 242,638 - 242,638 297,538 Public improvements 490,643 490,643 156,257 Environmental restoration 5,428 - 5,428 27,025 Debt service 268,319 - 268,319 266,558 Administration 292,201 - 292,201 534,460 Total expenditures 5,598,742 - 5,598,742 6,482,151 Excess of expenditures over revenues (761,283) - (761,283) (399,828) Transfer between funds - - - - Net change in fund balance (761,283) - (761,283) (399,828) Beginning fund balance 4,394,497 - 4,394,497 4,794,325 Ending fund balance 3,633,214 $ - $ 3,633,214 $ 4,394,497 $ Reconciliation of the change in fund balances - total governmental funds to the change in net position of governmental activities: Net change in fund balances - total governmental funds (761,283) $ (399,828) $ Amounts reported for governmental activities in the statement of activities are different because: Governmental funds report capital outlays as expenditures. However, in the statement of activities the cost of those assets are allocated over their estimated useful lives and reported as depreciation expense. Capital outlays 18,093 Depreciation expense (76,196) (58,103) (77,543) Governmental funds do not report gains (losses) on disposal of other assets - - Governmental funds do not report non-current liabilities (3,107) (449) The issuance of long-term debt (e.g. notes, bonds) provides current financial resources to government funds, while the repayment of the principal of long-term debt consumes the current financial resources of governmental funds. Principal payments on long-term debt 251,080 234,610 Change in net position of governmental activities (571,413) $ (243,210) $ ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 13 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Organization The Albany Community Development Agency (Agency) is a Public Benefit corporation established by the City of Albany (City, Albany) and governed by a board of directors as established under General Municipal Law. The City also participates in the fiscal management of the Agency. Because the City has the ability to significantly influence Agency operations, the Agency is deemed to be a blended component unit of the City. Accordingly, the Agency is included as part of the City’s financial reporting entity. The objectives of the Agency are to provide a suitable living environment and to expand economic opportunities for persons of low and moderate income. In 1974, the Agency (previously known as the Urban Renewal Agency) was designated by the City to undertake a community development program on behalf of the City and to administer the federal community development block grant program. When created, the Agency was established as a New York State Public Authority and as such is subject to the applicable provisions of the New York State Public Authority Accountability Act. Basis of Presentation For financial reporting purposes, the Agency follows the provisions of Governmental Accounting Standards Board (GASB) Statements. It requires classification of net position into three components – net invested in capital assets; restricted; and unrestricted. These classifications are defined as follows: Net invested in capital assets – This category groups all capital assets into one component of net position. Accumulated depreciation and the outstanding balances of debt that are attributable to the acquisition of these assets reduce this category. Unrestricted – This category represents the net position of the Agency, which is not restricted for any project or other purpose. Restricted – This category represents funds restricted by the funding source or law. The Agency has no restricted net position at December 31, 2018. Summarized Comparative Information The basic financial statements include certain prior-year summarized comparative information in total but not at the level of detail required for a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Agency’s financial statements for the year ended December 31, 2017, from which the summarized information was derived. Government-Wide Statements The Agency’s basic financial statements include both government-wide (reporting the Agency as a whole) and fund financial statements (reporting the Agency’s major funds). In the government-wide Statement of Net Position, governmental activities are reported on a full accrual, economic resource basis, which recognizes all long-term assets and receivables as well as long-term debt and obligations. The Agency’s net position is reported in two parts – net invested in capital assets and unrestricted net position. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 14 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Government-Wide Statements (Continued) The government-wide Statement of Activities reports both the gross and net cost of each of the Agency’s functions, which are supported by general government revenues. The Statement of Activities reduces gross expenses (including depreciation) by related program revenues and general operating grants. This government-wide focus is more on the sustainability of the Agency as an entity and the change in the Agency’s net position resulting from the current year’s activities. Fund Financial Statements The financial transactions of the Agency are reported in individual funds in the fund financial statements. Each fund is accounted for by providing a separate set of self-balancing accounts that comprises its assets, liabilities, reserves, fund equity, revenues, and expenditures. The various funds are reported by generic classification within the financial statements. The Agency uses Governmental Funds to report its activities in the financial statements. The focus of the governmental funds’ measurement (in the fund statements) is upon determination of financial position and changes in financial position (sources, uses, and balances of financial resources) rather than upon net income. The following is a description of the governmental funds used by the Agency: General Fund: The General Fund is the general operating fund of the Agency. It is used to account for all financial resources except those required to be accounted for in another fund. Activities include funds received from the U.S. Department of Housing and Urban Development (HUD) under the Community Block Grant Program (CDBG), the Rental Housing Rehabilitation Program, the HOME Investment Program, the Housing for Persons with Aids Program, Lead Paint Abatement Program and Emergency Shelter Grant Programs. Special Revenue Fund: The Special Revenue Fund is used to account for proceeds of specific revenue sources that are legally restricted to expenditures for specified purposes. The activities in this fund are related to grant proceeds from the New York State Housing Trust Fund Corporation Basis of Accounting Basis of accounting refers to the point at which revenues or expenditures/expenses are recognized in the accounts and reported in the financial statements. It relates to the timing of the measurements made regardless of the measurement focus applied. Accrual: The government-wide financials are presented on the accrual basis of accounting. Revenues are recognized when earned and expenses are recognized when incurred. Modified Accrual: The governmental funds financial statements are presented on the modified accrual basis of accounting. Under the modified accrual basis of accounting, revenues are recorded when susceptible to accrual; i.e., both measurable and available. Available means collectible within the current period or within 60 days after year end. Due to the nature of the Agency’s operations, there are no significant differences between the accrual basis and the modified accrual basis of accounting, except for the expensing of capital assets and debt principal payments. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 15 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Accounting (Continued) The Agency’s financial statements are prepared in accordance with generally accepted accounting principles (GAAP). The Governmental Accounting Standards Board (GASB) is responsible for establishing GAAP for state and local governments through its pronouncements (Statements and Interpretations). Governments are also required to follow the pronouncements of the Financial Accounting Standards Board (FASB) issued through November 30, 1989 (when applicable) that do not conflict with or contradict GASB pronouncements. The more significant accounting policies established in GAAP and used by the City are discussed below. Fund Balance Classifications Governmental fund balances are classified as follows: Nonspendable - This classification includes amounts that cannot be spent because they are either not in spendable form or are legally or contractually required to be maintained intact. Restricted - This classification includes amounts for which constraints have been placed on the use of the resources either externally imposed by creditors (such as through a debt covenant), grantors, contributors, or laws or regulations of other governments, or imposed by law through constitutional provisions or enabling legislation. Committed - This classification includes amounts that can be used only for specific purposes pursuant to constraints imposed by formal action of the Agency Board. Assigned - This classification includes amounts that are constrained by the Agency’s intent to be used for a specific purpose but are neither restricted nor committed. This intent can be expressed by the Agency Board or through the Agency Board delegating this responsibility to the Agency director through the budgetary process. This classification also includes the remaining positive fund balance for all governmental funds except for the General Fund. Unassigned - This classification includes the residual fund balance for the General Fund. The Unassigned classification would also include negative residual fund balance of any other governmental fund that cannot be eliminated by offsetting of Assigned fund balance amounts. The Agency would typically use restricted fund balances first, followed by Committed resources, and then Assigned resources, as appropriate opportunities arise, but reserves the right to selectively spend Unassigned resources first to defer the use of these other classified funds. Budget Basis of Accounting Budgetary controls for the Agency are established in accordance with the Housing and Urban Development program years which cover periods other than the Agency fiscal year. Consequently, no Statement of Budgeted and Actual Revenues, Expenditures, and Changes in Fund Equity is presented in these financial statements. Cash and Cash Equivalents Cash includes cash and cash equivalents with original maturities of 90 days or less. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 16 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Mortgage Loans Receivable and Allowance for Loan Losses The Agency uses the allowance method for uncollectible mortgage loans and other receivables. When the allowance account is increased, the offset is a reduction of unearned revenue which has the effect of reducing the amount of funds expected to be collected and available for new loans. The Agency recorded a total allowance for uncollectible mortgage loans of approximately $2,150,000 and $2,204,000 at December 31, 2018 and 2017, respectively. The Agency’s allowance is estimated based on delinquency rates, current economic conditions, borrowers’ outstanding balances, and an analysis of borrower’s financial condition. A number of the Agency’s borrowers have experienced financial difficulties. In some cases, projected growth and overall economic conditions have substantially changed since loan origination. The Agency is also involved in repayment negotiations with borrowers who are experiencing severe financial difficulties. Once a loan has been identified as delinquent, the Agency forwards the loan to its legal counsel for collection. The Agency has a set policy for pursuing delinquent borrowers. If legal counsel determines that the loan proceeds will not be collected, the loan is submitted to the Agency’s Director so that it can be approved for write-off. Capital Assets Capital assets are reported at historical cost or estimated historical cost. Contributed assets are reported at fair value as of the date received. Additions, improvements, and other capital outlays greater than $500 that significantly extend the useful life of an asset are capitalized. Other costs incurred for repairs and maintenance are expensed as incurred. Depreciation on all assets is provided on the straight-line basis over the following estimated useful lives: Buildings 27.5 years Furniture and equipment 5-7 years Unearned Revenue Unearned revenue consists principally of mortgage loan principal amounts to be collected in future periods and loan amounts that are being forgiven annually as described in Note 3. Loan payments are also unearned until new loans or eligible expenditures occur. At that time, revenues and corresponding expenses are recognized. When the allowance for loan losses is increased, a corresponding decrease in the amount of unearned revenue is made in the same period, the effect of which is to reduce the overall amount of funds available for future loans. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 17 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Pension and Other Postemployment Benefits (OPEB) GASB Statement Number 68, Accounting and Financial Reporting for Pensions establishes standards for the recognition of the net pension liability, deferred outflows and deferred inflows of resources, pension expense, and information about and changes in the fiduciary net position on the same basis as reported by the respective defined benefit pension plan. GASB Statement Number 75, Accounting and Financial Reporting for Postemployment Benefits Other Than Pension establishes standards for the recognition, measurement, and display of OPEB (retiree health insurance) expenses and related liabilities and note disclosures. The City does not pass-through OPEB costs to the Agency, as all Agency employees are employees of the City. The City does, however, pass-through salary, employee health insurance and pension costs for these employees to the Agency. As part of the City’s implementation of the GASB Statements it includes the net pension liability, deferred outflow and inflow of resources, OPEB liability and related expenses for all City employees working at the Agency in the City’s financial statements. Therefore, no accrual for the Agency’s net pension liability, deferred outflow and inflow of resources, OPEB liability and related expenses has been included in these financial statements. NOTE 2 — CASH AND CASH EQUIVALENTS The Agency’s investment policies are governed by State statutes. Cash and cash equivalents of the Agency must be deposited in FDIC-insured commercial banks or trust companies located within the State. The Chief Fiscal Officer is authorized to use demand accounts and certificates of deposit. Permissible investments include obligations of U.S. agencies, repurchase agreements, and obligations of New York State or its localities. Collateral is required for demand deposits and certificates of deposit not covered by federal deposit insurance. Obligations that may be pledged as collateral are obligations of the United States and its agencies and obligations of the State and its municipalities and school districts. At December 31, 2018, the carrying amounts of the Agency’s deposits were approximately $3,861,000 for the General Fund. All deposits in excess of FDIC limits are adequately collateralized at December 31, 2018. NOTE 3 — MORTGAGE LOANS RECEIVABLE, NET The Agency lends monies received through Federal grants (principally HUD CDBG and HOME) to individuals, businesses, and non-profit agencies at low interest rates to fund the acquisition and rehabilitation of low income housing and other community development projects in the City. Loan disbursements are recorded as grant expenditures and loan repayments are recorded as program income. Mortgage loans receivable and the related unearned revenue account consist of principal to be collected in future periods or principal amounts that are forgiven annually in accordance with grant provisions. Interest rates and loan periods are determined using criteria established by the granting agency. Interest rates on these loans range between 0% and 8% and loan periods are either for a period of up to 15 years or unearned and forgiven as long as the beneficiary is in compliance with the loan agreement. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 18 NOTE 3 — MORTGAGE LOANS RECEIVABLE, NET (Continued) Funds received from the were used to establish loans with various not-for-profit organizations, for use in the acquisition and rehabilitation of low income housing. In accordance with applicable grant provisions, loan disbursements are reflected as Due to New York Housing Trust Fund Corporation Funds disbursed to participants generally do not bear interest and are repayable over a period of 15 to 25 years. In accordance with loan agreements, annually, on the anniversary date of completion of the project, one fifteenth or twenty-fifth of the loan is forgiven as long as the beneficiary is in compliance with the loan agreement. In 2011, the Agency initiated a Choose Albany revolving loan fund utilizing general funds. The revolving loan fund promotes home ownership in Albany and will be for 8% of the purchase price up to $15,000. The loan can be utilized for down payment assistance or closing costs. The loans have a ten year term with zero percent interest. The balance of mortgage loans receivable, net of the related allowance, is comprised of the following at December 31, 2018: December 31, Program 2018 HUD, net of allowance 3,374,684 $ HUD, forgivable grant loans, net of allowance 2,749,482 net of allowance 3,209 Choose Albany, net of allowance 123,185 6,250,560 $ NOTE 4 — DUE FROM FEDERAL GOVERNMENT Due from federal government represents grant-eligible expenses incurred by the Agency through December 31, 2018 that have yet to be reimbursed by applicable federal grant funding programs. NOTE 5 — CAPITAL ASSETS Property and equipment is comprised of the following: 2018 Additions Deletions 2018 Land 385,567 $ - $ - $ 385,567 $ Furniture and equipment 232,694 3,168 - 235,862 Buildings 2,637,865 14,925 - 2,652,790 3,256,126 18,093 - 3,274,219 Less: accumulated depreciation - furniture and equipment 210,215 2,230 - 212,445 Less: accumulated depreciation - buildings 1,162,838 73,966 - 1,236,804 Net property and equipment 1,883,073 $ (58,103) $ - $ 1,824,970 $ Balance January 1, Balance December 31, ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 19 NOTE 6 — LONG-TERM OBLIGATIONS Long-term obligations of the Agency include notes payable, bonds payable, and capital lease obligations. The following is a summary of long-term obligation transactions of the Agency for the year ended December 31, 2018: 2018 Increases Decreases 2018 Capitalized lease obligation 160,000 $ - $ (160,000) $ - $ Note payable 26,000 - (26,000) - Note payable 81,060 - (11,570) 69,490 Note payable 239,187 - (53,510) 185,677 506,247 $ - $ (251,080) $ 255,167 $ January 1, December 31, Capital lease for the Agency’s facility located at 200 Henry Johnson Boulevard. The lease had a sixteen year term and the agreement required the Agency to remit semi-annual payments to the Capitalize Albany Corporation through 2018. The lease was fully retired in 2018. As part of the capitalized lease obligation, described in above, the Agency executed a note payable to CAC to pay for all previously unreimbursed tenant expenses. The note had a sixteen year term and the agreement required the Agency to remit semi-annual payments to CAC through 2018. The note was fully retired in 2018. Note payable from CAC to fund improvements made to one of the Agency’s properties located at 388 Clinton Avenue. The note is collateralized by a mortgage agreement on the building located at 388 Clinton Avenue. The note is being amortized over a period of twenty years, with principal and interest payments through March 2024. The interest rate for the first five years of the note is fixed at and is subject to change every five years thereafter to prime plus During 2011, the Agency borrowed the sum of $500,000 from the Capitalize Albany Corporation to purchase property at 25 Delaware Avenue. The note is collateralized by a mortgage agreement on the property located at 25 Delaware Avenue. The note is being paid over a period of ten years, with principal and interest payments. The balance is due in full at the time of sale or change in ownership of the property. The interest rate is 5.75%. The property acquired was recorded as property held for sale and included in other assets in the statement of net position. A summary of future minimum debt payments is as follows at December 31, 2018: Capitalized Total Lease Total Total Debt Notes Obligations Principal Interest Service 2019 68,734 $ - 68,734 $ 11,919 $ 80,653 $ 2020 72,602 - 72,602 8,051 80,653 2021 76,691 - 76,691 3,962 80,653 2022 19,165 - 19,165 1,108 20,273 2023 14,304 - 14,304 487 14,791 2023-2024 3,671 - 3,671 26 3,697 255,167 $ - $ 255,167 $ 25,553 $ 280,720 $ ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2018 Page 20 NOTE 7 — COMMITMENTS AND CONTINGENCIES Federal and State Grant Funding The Agency receives a major portion of its annual revenues through Federal and New York State grants. Any significant reduction in grant funding levels could have a negative impact on the Agency and the services it offers. The Agency’s grant funding is typically awarded for specific programs or purposes and is subject to review and audit by the grantor agencies or their designee. Such audits could lead to a request for reimbursement to the grantor agency for expenditures disallowed under terms of the applicable grant. Management believes that all grant funds were expended in accordance with applicable terms and does not expect any significant disallowance claims will be made by grantor agencies. ---PAGE BREAK--- See notes to schedule of federal financial awards. Page 21 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2018 Federal Expenditures CFDA Federal to Federal Grantor/Program Title Number Expenditures Subrecipients U.S. Department of Housing and Urban Development Pass-Through City of Albany: Community Development Block Grants/Entitlement Grants 14.218 2,708,315 $ 433,608 $ Emergency Shelter Grant Program 14.231 243,024 214,045 HOME Investment Partnerships Program 14.239 546,033 138,343 Housing Opportunities for Persons with AIDS 14.241 635,098 611,514 Pass-Through NYS Division of Housing and Community Renewal: Lead-Based Paint Hazard Control in Privately-Owned Housing 14.900 644,741 - Total U.S. Department of Housing and Urban Development 4,777,211 $ 1,397,510 $ ---PAGE BREAK--- Page 22 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2018 NOTE 1 — BASIS OF PRESENTATION Reporting Entity The accompanying Schedule of Federal Financial Expenditures presents the activity of federal financial assistance programs administered by the Agency, an entity as defined in the financial statements. Pass-Through Programs Where the Agency receives funds from a government entity other than the federal government (pass-through), the funds are accumulated based upon the Catalog of Federal Domestic Assistance (CFDA) number advised by the pass-through grantor. Identifying numbers, other than CFDA numbers, which may be assigned by pass-through grantors, are not maintained in the Agency’s financial management system. NOTE 2 — BASIS OF ACCOUNTING The basis of accounting varies by federal program consistent with the underlying regulations pertaining to each program. The amounts reported as federal expenditures generally were obtained from the appropriate federal financial reports for the applicable program and periods. The amounts reported in the federal financial reports are prepared from records maintained for each program. NOTE 3 — INDIRECT COSTS Indirect costs are included in the reported expenditures to the extent such costs are included in the federal financial reports used as the source for the data presented. The Agency has not elected to utilize the 10% de minimis indirect cost rate in Part 200.514 of the Uniform Guidance. NOTE 4 — MATCHING COSTS Matching costs, such as the Agency’s share of certain program costs, are not included in the Schedule of Expenditures of Federal Awards. NOTE 5 — SUB-RECIPIENTS The Agency provided federal awards in the amount of $1,397,510 to sub-recipients during the year ended December 31, 2018. ---PAGE BREAK--- Page 23 A member of UHY International, a network of independent accounting and consulting firms INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS The Board of Directors Albany Community Development Agency We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Albany Community Development Agency (Agency), as of and for the year ended December 31, 2018, and the related notes to the financial statements, which collectively comprise Albany Community Development Agency’s basic financial statements, and have issued our report thereon dated June 7, 2019. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Agency’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Agency’s internal control. Accordingly, we do not express an opinion on the effectiveness of Agency’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Albany Community Development Agency’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. ---PAGE BREAK--- Page 24 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Albany, New York June 7, 2019 ---PAGE BREAK--- Page 25 A member of UHY International, a network of independent accounting and consulting firms INDEPENDENT AUDITOR’S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE The Board of Directors Albany Community Development Agency Report on Compliance for Each Major Federal Program We have audited Albany Community Development Agency’s (Agency) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Agency’s major federal programs for the year ended December 31, 2018. The Agency’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of the Agency’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Agency’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Agency’s compliance. Opinion on Each Major Federal Program In our opinion, the Agency complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2018. ---PAGE BREAK--- Page 26 Report on Internal Control Over Compliance Management of the Agency is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Agency’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Agency’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Albany, New York June 7, 2019 ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY) SCHEDULE OF FINDINGS AND QUESTIONED COSTS December 31, 2018 Page 27 Section I—Summary of Auditor’s Results Financial Statements Type of auditor’s report issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified Internal control over financial reporting: • Material weakness(es) identified? yes X no • Significant deficiency(ies) identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major federal programs: • Material weakness(es) identified? yes X no • Significant deficiency(ies) identified? yes X none reported Type of auditor’s report issued on compliance for major federal programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR Section 200.516(a)? yes X no Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster 14.218 Community Development Block Grants/ Entitlement Grants Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? X yes no Section II—Financial Statement Findings None Reported Section III—Federal Award Findings and Questioned Costs None Reported Section IV—Status of Prior Year Findings None Reported