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