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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, 2016 ---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 8 Statement of Activities 9 Balance Sheets – Governmental Funds 10 Statements of Revenues, Expenditures and Changes in Fund Balance – Governmental Funds 11 Notes to Financial Statements 12 Additional Reports Schedule of Expenditures of Federal Awards 20 Notes to Schedule of Expenditures of Federal Awards 21 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 22 Independent Auditor’s Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance 24 Schedule of Findings and Questioned Costs 26 ---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, 2016, 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, 2016, 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 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated July 8, 2016. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2015 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 7 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 September 5, 2017, 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 September 5, 2017 ---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 8 for the year ended December 31, 2016. This Discussion and Analysis will provide comparative analysis of data between 2015 and 2016 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. Typically ACDA revenues are primarily entitlement funds from the U.S. Department of Housing and Urban Development (“HUD”) which represent approximately 99% and 97% of grant revenue for 2016 and 2015, respectively. The HUD entitlement funds are awarded to the City of Albany and ACDA is then contracted by the City to administer them. During 2016, ACDA received a large repayment of an outstanding loan. This loan repayment in the amount of $4.04 million is considered program income for 2016 and represents approximately 45% of total income for 2016. Other smaller sources of revenue are funded through Federal and some non-Federal sources. 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. 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. • Entitlements based on a calendar years are broken out as follows: Entitlement 2015 2016 % Change Community Development Block (CDBG) $3,342,000 $3,194,000 4% decrease Home Investment Partnership (HOME) 408,000 558,000 37% increase Emergency Solutions (ESG) 291,000 337,000 16% increase Housing Opportunities for Persons with Aids (HOPWA) 494,000 480,000 3% decrease • ACDA issued repayable loans for low income housing projects. Full repayment of two of these loans as related to the Bleecker housing projects in the amount of $4.04 million occurred in 2016. • ACDA was awarded a 3 year HUD LHRD (Lead Hazard Reduction Demonstration) grant that began on 11/1/16 in the amount of $3 million. For 2016 $34,983 of LHRD expenditures were incurred. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 4 • Expenditures trend with the revenues to which they relate. Highlights for 2016 include: o A new program known as the Rehabilitation Assistance Program, or RAP, was started in 2015. During 2015 approximately $22,000 was expended on this program. With a full year of the program for 2016, $312,000 of expenditures representing 67 cases occurred. o During 2016 Community Housing Development Organization (CHDO) expenditures were $209,000 which represents a 282% increase over 2015 expenditures primarily as the result of Habitat for Humanity’s Orange Street project. o The Blight to Betterment project, for which $100,000 was committed in 2015 took place during 2016. o During 2015 $454,000 was expended on 3 one time public facilities projects. During 2016 one such project for a skate park in the amount of $90,000 took place. o During 2014 the Board had committed monies for low income housing tax credit projects on Sheridan Avenue. The final $100,000 of the $300,000 committed was paid during 2016. • During 2015 $300,000 was Board committed for Arbor Hill Park upgrades. Nothing was expended for this project during 2015 or 2016. • $150,000, of which $75,000 will be from CDBG funds, was Board committed during 2015 for a commercial façade improvement program. No expenditures for this project were incurred during 2015 and approximately $37,000 of non-CDBG funds was expended during 2016. • During 2016 ACDA collected approximately $4.04 million of program income in payment of two significant loan balances. As a result, program income for 2016 is over $4 million more than that of 2015. • During 2016 approximately $300,000 was committed to the Albany County Land Bank none of which was expended during 2016. • During 2016 HOME monies were committed for $300,000 for the rehabilitation of Clinton Avenue properties. No monies on this project were spent during 2016. • The TARP (Tenant Assistance Rehabilitation Program) was re-instituted during 2016 with funding in the amount of $200,000. While eligible projects began in 2016, no expenditures were incurred by ACDA during 2016. • $1 million was committed to the City-wide vacant and abandoned property initiative during 2016. This initiative will begin in 2017. • $300,000 was committed to a RAP II program during 2016. 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. ---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, as described elsewhere in this Management Discussion and Analysis, ACDA received significant repayments on loans that were included as program income during 2016. This results in an unusually large increase to ACDA’s net position as of December 31, 2016. As noted in the Financial Highlights, several commitments have been made from these program income monies and as those monies are expended future periods will show a decrease 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. Condensed Financial Information: The following condensed financial information summarizes ACDA’s net position at December 31, 2016 and 2015 and revenues and expenses for the years then ended: 2016 2015 Current and Other Assets 7,131,000 $ 2,530,000 $ Mortgage Loans Receivable, Net 4,584,000 9,170,000 Capital Assets, Net 1,961,000 2,022,000 Total Assets 13,676,000 $ 13,722,000 $ Deferred Outflows of Resources - $ - $ Current Liabilities 1,287,000 $ 1,137,000 $ Deferred Revenues 5,085,000 8,883,000 Due to NYS Housing Trust Fund 71,000 132,000 Other Liabilities 741,000 966,000 Total Liabilities 7,184,000 $ 11,118,000 $ Deferred Inflows of Resources - $ - $ Net Position 6,492,000 $ 2,604,000 $ Revenues: Grant Revenue 4,568,000 $ 4,666,000 $ Program Income 4,285,000 237,000 Other - 1,000 Expenses: Program Related 4,367,000 4,274,000 Administrative 598,000 665,000 Total Governmental Activities 3,888,000 $ (35,000) $ Change in Net Position 3,888,000 (35,000) Net Position, Beginning of Year 2,604,000 2,639,000 Net Position, End of Year 6,492,000 $ 2,604,000 $ ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 6 Financial Analysis ACDA’s most significant asset other than cash is mortgage loans receivable which at December 31, 2016, represents approximately 34% of total assets. Cash at December 31, 2016, represented 35% of total assets whereas at December 31, 2015, cash represented less than 7% of total assets. This is the result of collecting on a significant loan receivable during 2016. This is demonstrated through mortgage loans receivable at December 31, 2015 representing approximately 67% of total assets, which is almost double the percentage noted for December 31, 2016. 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. 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 in the form of a 5 to 15 year deferred loans secured by a mortgage. 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 the acquisition and $30,000 for the rehabilitation. 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 $4,000 and $20,000 per unit via a prorated deferred loans with a length of between 5 and 15 years. TARP requires owner funds be invested as well. Choose Albany Encourages diverse home ownership within the City of Albany. Maximum assistance is 8% of the purchase price up to $15,000. Loans are repayable at 0% interest over 10 years and are subject to certain conditions. ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) MANAGEMENT’S DISCUSSION AND ANALYSIS Page 7 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. 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. 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. Capital Asset Activity and Long-term Debt Activity ACDA did not have significant changes to capital assets or incur long-term debt during 2015 or 2016. Currently Known Facts, Decisions, and Conditions The HUD entitlements for Program Year 43 (June 1, 2017 – May 31, 2018) will be: • $3,090,397 for CDBG increase from Program Year 42) • $665,059 for HOME (1.9% increase from Program Year 42) • $272,769 (preliminary) for ESG (1.5% decrease from Program Year 42) • $562,763 for HOPWA (13.9% increase from Program Year 42) ---PAGE BREAK--- See notes to financial statements. Page 8 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) STATEMENT OF NET POSITION December 31, 2016 2015 2016 (For Comparative Purposes Only) ASSETS Cash and cash equivalents 4,828,480 $ 921,020 $ Mortgage loans receivable, net of allowance for loan losses of $2,158,991 in 2016 and $2,171,094 in 2015 4,584,222 9,169,779 Due from federal government 974,561 960,653 Due from the City of Albany 9,965 9,965 Capital assets, net of depreciation 1,960,616 2,021,968 Other assets 1,317,675 638,389 Total assets 13,675,519 $ 13,721,774 $ DEFERRED OUTFLOWS OF RESOURCES - $ - $ LIABILITIES Accounts payable and accrued liabilities 638,777 $ 699,620 $ Long-term obligations 740,857 966,189 Unearned revenues 5,085,414 8,883,178 Due to New York State Housing Trust Fund 71,268 132,257 Due to the City of Albany 647,235 436,035 Total liabilities 7,183,551 $ 11,117,279 $ DEFERRED INFLOWS OF RESOURCES - $ - $ NET POSITION Net invested in capital assets 1,509,467 $ 1,393,191 $ Unrestricted 4,982,501 1,211,304 Total net position 6,491,968 $ 2,604,495 $ ---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 ACTIVITIES For the Year Ended December 31, 2016 2015 (For Charges for Operating Comparative Expenses Services Grants 2016 Lead Paint Abatement Program 34,983 $ - $ 34,983 $ - $ - $ Housing 1,717,872 - - (1,717,872) (1,346,192) Public service 448,981 - - (448,981) (399,218) Public service - neighborhood revitalization 19,350 - - (19,350) (10,291) Housing direct delivery 1,073,216 - - (1,073,216) (1,118,402) Economic development 360,410 - - (360,410) (306,311) Homeless 345,929 - - (345,929) (315,563) Public facilities 90,000 - - (90,000) (454,005) Public improvements 156,257 - - (156,257) (156,257) Administration 598,050 - - (598,050) (665,098) Environmental restoration 33,997 - - (33,997) (38,429) Interest expense 45,092 - - (45,092) (55,158) Depreciation 77,051 - - (77,051) (74,167) 5,001,188 $ - $ 34,983 $ (4,966,205) $ (4,939,091) $ General revenues: Grants not restricted to specific programs 4,568,349 $ 4,666,274 $ Program income 4,284,899 237,144 Other 430 1,114 Total general revenues 8,853,678 4,904,532 Change in net position 3,887,473 (34,559) Net position - beginning 2,604,495 2,639,054 Net position - ending 6,491,968 $ 2,604,495 $ Program Revenues Governmental Activities Purposes Only) ---PAGE BREAK--- See notes to financial statements. Page 10 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) BALANCE SHEETS - GOVERNMENTAL FUNDS December 31, 2016 Total Governmental Funds Total 2015 Special Governmental (For General Revenue Funds Comparative Fund Fund 2016 Purposes Only) ASSETS AND DEFERRED OUTFLOWS OF RESOURCES ASSETS Cash and cash equivalents 4,828,480 $ - $ 4,828,480 $ 921,020 $ Mortgage loans receivable, net of allowance for loan losses of $2,158,991 in 2016 and $2,171,094 in 2015 4,512,954 71,268 4,584,222 9,169,779 Due from federal government 974,561 - 974,561 960,653 Due from the City of Albany 9,965 - 9,965 9,965 Other assets 794,762 - 794,762 115,476 Total assets 11,120,722 71,268 11,191,990 11,176,893 DEFERRED OUTFLOWS OF RESOURCES - - - - Total assets plus deferred outflows of resources 11,120,722 $ 71,268 $ 11,191,990 $ 11,176,893 $ LIABILITIES, DEFERRED INFLOWS OF RESOURCES AND FUND BALANCES Liabilities Accounts payable and accrued liabilities 593,748 $ - $ 593,748 $ 654,662 $ Unearned revenues 5,085,414 - 5,085,414 8,883,178 Due to the City of Albany 647,235 - 647,235 436,035 Due to New York State Housing Trust Fund - 71,268 71,268 132,257 Total liabilities 6,326,397 71,268 6,397,665 10,106,132 DEFERRED INFLOWS OF RESOURCES - - - - Fund Balances Nonspendable: Prepaids (included in other assets) 5,124 - 5,124 3,086 Committed for: Choose Albany Program 82,900 - 82,900 91,830 Neighborhood Commercial Façade Program 23,800 - 23,800 75,000 West Hill Neighborhood Strategic Plan 35,000 - 35,000 45,000 Public access coordinator 38,400 - 38,400 - Swan Park 30,000 - 30,000 - Dream Center 135,000 - 135,000 - Washington Park Skate Park - - - 90,000 City High-Speed Internet Grant - - - 20,000 Unassigned 4,444,101 - 4,444,101 745,845 Total fund balances 4,794,325 - 4,794,325 1,070,761 Total liabilities, deferred inflows of resources and fund balances 11,120,722 $ 71,268 $ 1,960,616 2,021,968 522,913 522,913 (45,029) (44,958) (740,857) (966,189) Net position of governmental activities 6,491,968 $ 2,604,495 $ 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 11 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, 2016 Total Governmental Funds Total 2015 Special Governmental (For General Revenue Funds Comparative Fund Fund 2016 Purposes Only) REVENUES Grant income 4,603,332 $ - $ 4,603,332 $ 4,666,274 $ Program income 4,284,899 - 4,284,899 237,144 Other 430 - 430 1,114 Total revenues 8,888,661 - 8,888,661 4,904,532 EXPENDITURES Grant programs: Lead Paint Abatement Program 34,983 - 34,983 - Housing 1,717,872 - 1,717,872 1,332,593 Public service 448,981 - 448,981 399,218 Public service - neighborhood revitalization 19,350 - 19,350 10,291 Housing direct delivery 1,073,216 - 1,073,216 1,118,402 Economic development 360,410 - 360,410 306,311 Homeless 345,929 - 345,929 298,977 Public facilities 90,000 - 90,000 454,005 Public improvements 156,257 156,257 156,257 Environmental restoration 33,997 - 33,997 38,429 Debt service 270,424 - 270,424 267,390 Administration 613,678 - 613,678 646,100 Total expenditures 5,165,097 - 5,165,097 5,027,973 Excess of expenditures over revenues 3,723,564 - 3,723,564 (123,441) Transfer between funds - - - - Net change in fund balance 3,723,564 - 3,723,564 (123,441) Beginning fund balance 1,070,761 - 1,070,761 1,194,202 Ending fund balance 4,794,325 $ - $ 4,794,325 $ 1,070,761 $ 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 3,723,564 $ (123,441) $ 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 15,699 Depreciation expense (77,051) (61,352) (62,565) Governmental funds do not report gains (losses) on disposal of other assets - (60,129) Governmental funds do not report non-current liabilities (71) (656) 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 225,332 212,232 Change in net position of governmental activities 3,887,473 $ (34,559) $ ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2016 Page 12 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, 2016. 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, 2015, 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, 2016 Page 13 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, 2016 Page 14 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, 2016 Page 15 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 $2,159,000 and $2,171,000 at December 31, 2016 and 2015, 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, 2016 Page 16 NOTE 1 — SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Other Postemployment Benefits (OPEB) - GASB Statement No. 45 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 45, Accounting and Financial Reporting by Employers for Postemployment Benefits Other Than Pensions 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, 2016, the carrying amounts of the Agency’s deposits were approximately $4,828,000 for the General Fund. All deposits in excess of FDIC limits are adequately collateralized at December 31, 2016. NOTE 3 — MORTGAGE LOANS RECEIVABLE, NET The Agency lends monies received through Federal grants (principally HUD CDBG) 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, 2016 Page 17 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, 2016: December 31, Program 2016 HUD, net of allowance 2,313,967 $ HUD, forgivable grant loans, net of allowance 2,009,077 net of allowance 71,268 Choose Albany, net of allowance 189,910 4,584,222 $ NOTE 4 — DUE FROM FEDERAL GOVERNMENT Due from federal government represents grant-eligible expenses incurred by the Agency through December 31, 2016 that have yet to be reimbursed by applicable federal grant funding programs. NOTE 5 — CAPITAL ASSETS Property and equipment is comprised of the following: 2016 Additions Deletions 2016 Land 385,567 $ - $ - $ 385,567 $ Furniture and equipment 233,746 1,408 (2,460) 232,694 Buildings 2,623,574 14,291 - 2,637,865 3,242,887 15,699 (2,460) 3,256,126 Less: accumulated depreciation - furniture and equipment 204,860 3,865 (2,460) 206,265 Less: accumulated depreciation - buildings 1,016,059 73,186 - 1,089,245 Net property and equipment 2,021,968 $ (61,352) $ - $ 1,960,616 $ 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, 2016 Page 18 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, 2016: 2016 Increases Decreases 2016 Capitalized lease obligation 455,000 $ - $ (145,000) $ 310,000 $ Note payable 71,000 - (22,000) 49,000 Note payable 102,777 - (10,628) 92,149 Note payable 337,412 - (47,704) 289,708 966,189 $ - $ (225,332) $ 740,857 $ January 1, December 31, Capital lease for the Agency’s facility located at 200 Henry Johnson Boulevard. The lease has a sixteen year term and the agreement requires the Agency to remit semi-annual payments to the Capitalize Albany Corporation through 2018. The interest portion of future minimum lease payments is $18,100 and the net present value of the lease payments at December 31, 2016 is $310,000. 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 has a sixteen year term and the agreement requires the Agency to remit semi-annual payments to CAC through 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, 2016: Capitalized Total Lease Total Total Debt Notes Obligations Principal Interest Service 2017 84,616 $ 150,000 $ 234,616 $ 35,373 $ 269,989 $ 2018 91,074 160,000 251,074 20,927 272,001 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 2022-2024 37,140 - 37,140 1,621 38,761 430,857 $ 310,000 $ 740,857 $ 81,853 $ 822,710 $ ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) NOTES TO FINANCIAL STATEMENTS December 31, 2016 Page 19 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. Subsequent Events During 2017, The Agency entered into additional commitments of $1 million for a vacant building city-wide initiative and $300,000 for additional funds for the Rehabilitation Assistance Program. ---PAGE BREAK--- See notes to schedule of federal financial awards. Page 20 ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY, NEW YORK) SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS December 31, 2016 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 3,363,949 $ 652,261 $ Emergency Shelter Grant Program 14.231 336,708 317,425 HOME Investment Partnerships Program 14.239 607,040 309,000 Housing Opportunities for Persons with AIDS 14.241 479,689 465,708 Pass-Through NYS Division of Housing and Community Renewal: Lead-Based Paint Hazard Control in Privately-Owned Housing 14.900 34,983 - Total U.S. Department of Housing and Urban Development 4,822,369 $ 1,744,394 $ ---PAGE BREAK--- Page 21 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, 2016 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. 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 $1,744,394 to sub-recipients during the year ended December 31, 2016. ---PAGE BREAK--- Page 22 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, 2016, 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 September 5, 2017. 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 23 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 September 5, 2017 ---PAGE BREAK--- Page 24 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, 2016. 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, 2016. ---PAGE BREAK--- Page 25 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 September 5, 2017 ---PAGE BREAK--- ALBANY COMMUNITY DEVELOPMENT AGENCY (A BLENDED COMPONENT UNIT OF THE CITY OF ALBANY) SCHEDULE OF FINDINGS AND QUESTIONED COSTS December 31, 2016 Page 26 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