Note: This financial statement template is only a guide and
proper application of generally accepted accounting
principles is the responsibility of the preparer.
PARTNERSHIP NAME
FINANCIAL STATEMENTS
Years Ended December 31, 2014 and 2013
Partnership Name
TABLE OF CONTENTS
Page No.
Independent Auditors’ Report ...................................................................................
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Financial Statements
Balance Sheets ........................................................................................................
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Statements of Operations .........................................................................................
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Statements of Partners' Equity (Deficit) ....................................................................
#
Statements of Cash Flows ........................................................................................
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Notes to Financial Statements ..................................................................................
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Page 2
INDEPENDENT AUDITORS' REPORT
Insert audit opinion on Firm letterhead here
Page 1
PARTNERSHIP NAME
BALANCE SHEETS
December 31, 2014 and 2013
ASSETS
2014
CURRENT ASSETS
Cash, rental operations
Accounts receivable, tenants
Prepaid insurance
2013
$
$
$
$
$
$
$
$
TOTAL CURRENT ASSETS
RESTRICTED DEPOSITS AND FUNDED RESERVES
Cash, replacement reserve
Cash, operating reserve
Cash, asset management reserve
Cash, tax and insurance escrow
Cash, security deposits
RENTAL PROPERTY
Land
Land improvements
Buildings
Furniture and equipment
Accumulated depreciation
OTHER ASSETS
Deferred loan costs (net of accumulated amortization of
$____ in 2014 and $____ in 2013)
Deferred tax credit fees (net of accumulated amortization of
$____ in 2014 and $____ in 2013)
LIABILITIES AND MEMBERS’ EQUITY
CURRENT LIABILITIES
Construction loan
Current maturities of mortgages payable
Accounts payable, trade
Accrued asset management fees
Accrued interest payable
TOTAL CURRENT LIABILITIES
DEPOSITS AND PREPAYMENT LIABILITIES
Tenant security deposits
LONG-TERM DEBT
Mortgages payable, net of current maturities
PARTNERS’ EQUITY
See accompanying notes.
Page 2
PARTNERSHIP NAME
STATEMENTS OF OPERATIONS
Years ended December 31, 2014 and 2013
2014
Revenue
Gross tenant rent potential
Less: Vacancy
Net tenant rent potential
$
2013
$
Gross commercial rent potential
Less: Vacancy
Net commercial rent potential
Interest income
Other income
Expenses
Administrative
Management fee
Accounting and auditing
Bad debt expense
Repairs and maintenance
Utilities
Property insurance
Property and other taxes
Interest expense - construction
Interest expense - mortgage
Deferred interest expense
Depreciation
Amortization
Organization costs
Asset management fee
Incentive management fee
Other expenses
(1)
(2)
(3)
(4)
(5)
Net loss
$
$
(1) Tenant activities, advertising, office salaries, employee benefits( including payroll taxes), office supplies, printing,
subscriptions, dues, licenses and permits, training, conferences, computer, telephone, postage, fidelity insurance, travel,
project legal and other related items
(2) Grounds repair and maintenance, building repairs and maintenance, elevator maintenance, painting and decorating
services, grounds payroll, grounds supplies, electric maintenance and repairs, appliance repairs and supplies, plumbing
repairs and services, HVAC repairs and services, painting supplies, carpet, janitorial contract and supplies, extermination
and pest control, contract labor, security contract, fire protections, snow removal, pool supplies and other related line items.
(3) Water, sewer, gas, oil, fuel, electric and trash removal
(4) Property and other taxes, not including payroll taxes
(5) Those expenses not covered under the specific categories available
See accompanying notes.
Page 3
PARTNERSHIP NAME
STATEMENTS OF PARTNERS' CAPITAL
Years ended December 31, 2014 and 2013
General
Partner
Partners' equity, December 31, 2012
Limited
Partner
Total
$
$
$
$
$
$
Contributions
Distributions
Net income
Partners' equity, December 31, 2013
Contributions
Distributions
Net income
Partners' equity, December 31, 2014
Percentage interest
See accompanying notes.
%
%
100.0%
Page 4
PARTNERSHIP NAME
STATEMENTS OF CASH FLOW
Years ended December 31, 2014 and 2013
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Net loss
Adjustments to reconcile net loss to net cash provided by
(used in) operating activities:
Amortization
Depreciation
(Increase) decrease tenant accounts receivable
(Increase) decrease miscellaneous receivables
(Increase) decrease tax and insurance escrow deposits
(Increase) decrease prepaid expenses
Increase (decrease) prepaid rents
Increase (decrease) security deposits - net
Increase (decrease) accounts payable
Increase (decrease) accrued interest payable
2013
$
$
$
$
$
$
NET CASH PROVIDED (USED)
BY OPERATING ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES
Deposits to reserve for replacements
Withdrawals from reserve for replacements
Purchase of rental property
Proceeds from the sale of rental property
NET CASH PROVIDED (USED)
BY INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES
Loans from general partners
Mortgage proceeds
Principal payments on mortgage
Contributions received
Distributions paid
Advances from affiliates
NET CASH PROVIDED (USED)
BY FINANCING ACTIVITIES
NET INCREASE (DECREASE) IN CASH
CASH, BEGINNING
CASH, ENDING
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid during the year for interest
See accompanying notes.
Page 5
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE A - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Partnership Name ("Partnership") was formed as a limited partnership under the laws of the State of
_____________ on _______________ for the purpose of constructing, owning and operating a low
income rental housing project. The project consists of _____ multifamily residential rental units
located in ______________.
In
of
, the partnership agreement was amended to admit and
to permit the withdrawal of the original limited partner. The resulting ownership of the partnership, is
as follows:
General Partner
Limited Partner
X.XX%
XX.XX
100.00%
Summary of significant accounting policies follows:
Insert relevant accounting policies here
Page 6
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE B - CAPITAL CONTRIBUTIONS
As of December 31, 2014 the partnership's general partner is required to make - or, as applicable,
subsequent to their contributions having been made - have made capital contributions totaling $
_____. The investor limited partner has contributed the first required installment totaling $ and
is required to contribute $__________ in ...more installment(s), as defined. - or, as applicable,
subsequent to the investor limited partner's total contributions having been made - The
investor limited partner has made all required capital contributions totaling $________.
NOTE C - CONSTRUCTION LOAN
2014
The partnership has a construction loan with in ___________ an
amount not to exceed $ __________. The terms of the loan
provide for monthly payments of interest at a rate equal of .
After certain conversion conditions are met, the construction
loan will convert to a permanent loan no later than with a final
maturity on__________. The terms of the permanent loan
provide for monthly installments of principal and interest in the
amount of $__________ accruing interest at ______ % per
annum based upon a thirty-year amortization schedule - or, as
applicable, -The construction loan will mature on __________.
$
2013
$
The loan is secured by ....
During 2014 and 2013 the partnership incurred interest costs in the amount of $ ______ and
$_______. Of the total cost incurred, $____________ and $___________was capitalized and the
remainder of $______________ and $_________ was expensed.
Page 7
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE D - LONG-TERM DEBT
Details of the long-term debt at December 31, 2014 and 2013 are as follows:
2014
Mortgage payable to ______________________, bearing
interest at ____% per annum and payable in monthly
installments of $_____ until September ____, secured by a first
priority lien on the project.
2013
$
$
$
$
Mortgage payable to the ______________________, bearing no
interest with annual installments due as follows: $_____ for
years 1 through 3; $_____ for years 4 through 6; $______ for
years 7 through 9; $______ for years 10 through 12; $______
for years 13 through 15; $______ for years 16 through 18;
$______ for years 19 through 24; and $______ for year 25. All
remaining principal is due September 1, ____. The mortgage is
secured by a second priority lien on the project.
Mortgage with the _____________ in the amount of $_________.
Interest at ___% per annum shall accrue with no payments due
during the construction phase. Principal and accrued interest are
to be paid annually after the construction phase and until maturity,
________________, at an amount not to exceed the lower of the
available cash flow, as defined, on current and accrued
installments sufficient to amortize the loan over an 18-year term.
Available cash flow is defined as gross revenue collections less
project operating expenses, debt service on the first mortgage,
operating and replacement reserve funding, payment of
partnership fees, and repayment of all partnership advances to the
project. As of December 31, 2014, accrued interest on this loan is
$_________. The loan is secured by a third deed of trust on the
property and its improvements. At December 31, 2014, there is no
available cash flow.
Less current maturities
Page 8
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE D- LONG-TERM DEBT (Continued)
Total estimated maturities of the mortgages payable at December 31, 2014 are as follows:
2015
2016
2017
2018
2019
Future years
$
$
During the years ended December 31, 2014 and 2013, interest costs incurred amounted to $________
and $_______, respectively.
NOTE E - RELATED PARTY TRANSACTIONS
Asset Management Fee
The Company is required to pay the investor member a cumulative, annual asset management fee of
$______ beginning with the year ended December 31, ____ (to be paid by __________), which shall
be increased by ___% each year subsequent to ____. The asset management fee is payable out of
cash from operations, as defined, after funding of the replacement reserve (see Note E). During the
years ended December 31, 2014 and 2013, asset management fee expense amounted to $_____ and
$______, respectively.
Accrued fees payable amounted to $_____ and . $_____ at
December 31, 2014 and 2013, respectively.
Incentive Management Fee
As applicable, disclose the nature and terms of the transactions, annual expense and balances payable
at year end.
Due to Affiliate
Pursuant to the partnership agreement, the general partner has guaranteed to fund all deficits
through the date of breakeven operations. Subsequent to breakeven operations, funding up to an
additional $__________ of operating deficits is guaranteed for a period of beginning. After this initial
period, the funding obligation shall be reduced to $___________ or completely eliminated if certain
debt service ratios occur. Funding, if required, will be in the form of loans. These loans will bear
interest at xx% per annum,
compounded monthly, and will be payable from cash flow: For the
years ended December 31, 2014 and 2013, respectively, the general partner loaned
$______________ and $ ______________ to the partnership and $___________________ and $
_______________ remained payable at year-end.
Page 9
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE E - RELATED PARTY TRANSACTIONS (Continued)
Developer Agreement
The partnership has entered into a development agreement with an affiliate of the general partner.
The agreement provides for a development fee in the amount of $________ for services during the
development and construction of the project. Development fees are earned based upon the
occurrence of certain events, as defined, during development and construction. For the years ended
December 31, 2014 and 2013. $______ and $_______ had been earned of which $_______ and
$________ remained payable at year-end.
Construction Contract
The partnership has entered into a construction contract in the amount of $ _____________ with an
affiliate of the general partner, to perform general contractor services in conjunction with the
construction of the project. The term of the agreement is through completion, as defined. For the
years ended December 31, 2014 and 2013, respectively, $________________ and $____________
had been incurred and $_________ and $___________________ remained payable at year-end.
NOTE F - PROPERTY MANAGEMENT AGREEMENT
The partnership has entered into an agreement with _____________, in connection with the
management of the rental operations of the project. The property management fee is calculated as
..., as defined. For the years ended December 31, 2014 and 2013, respectively, $_____________
and $___________ were charged to operations and $_________________ and $_____________
remained payable at year-end.
NOTE G - NET CASH FLOW
Net cash flow is to be distributed as follows:
1.
2.
3.
4.
5. _________ % to the payment of outstanding operating and development deficit loans, and
6. _________% to the partners according to their percentage interests.
The above definitions will be defined in the Partnership
Page 10
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE H - RESERVES
Operating Reserve Funding
The operating agreement requires the Company to fund an operating reserve account in the amount of
$_______ on or before receipt of the ________ installment of the investor member’s capital
contribution. In addition, the operating reserve is to be funded to the extent of available cash generated
by operations after funding the replacement reserve and paying the asset management fee with
respect to the year just completed, to the extent the balance in the operating reserve is less than
$________. The operating reserve is to be held in a segregated account and requires the joint
signatures of the managing member and the investor member. An analysis of the operating reserve for
the two years ended December 31, 2014 and 2013 is as follows:
Balance, December 31, 2012
Deposits
Interest
Withdrawals
Balance, December 31, 2013
Deposits
Interest income
Withdrawals
$
Balance, December 31, 2014
$
Replacement Reserve Funding
The operating agreement requires the Company to fund a replacement reserve using cash flow from
operations, as defined. The amount contributed to such reserve shall be $____ per rented unit per
month in _____, and $_______ for the year ended December 31, _____, which shall be increased
___% each year subsequent to ____. Scheduled deposits to the replacement reserve are cumulative
and must be funded prior to payment of the asset management fee (see Note D), and before funding of
the operating reserve. Funds in the replacement reserve may be used by the managing member to
make major repairs; however, withdrawals of more than $_____ require the approval of the investor
member. The replacement reserve is to be held in an interest-bearing, segregated account with any
interest earned added to the amount of the replacement reserve. An analysis of the replacement
reserve for the year ended December 31, 2014 is as follows:
Balance, December 31, 2012
Monthly deposits
Income
Withdrawals
Balance, December 31, 2013
Monthly deposits
Interest income
Withdrawals
$
Balance, December 31, 2014
$
Page 11
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE H - RESERVES (Continued)
Asset Management Reserve
The operating agreement requires the Company to fund an asset management reserve in the amount
of $_______ on or before the ______ installment of the investor member’s capital contribution. The
asset management reserve is to be held in a segregated account and shall require joint signatures of
the managing and investor members. An analysis of the asset management reserve for the two years
ended December 31, 2014 and 2013 is as follows:
Balance, December 31, 2012
$
Deposits
Interest
Withdrawals
Balance, December 31, 2013
Deposits
Interest income
Withdrawals
Balance, December 31, 2014
$
NOTE I - COMMITMENTS AND CONTINGENCIES
Low-income Housing Vulnerability
The partnership's low-income housing credits are contingent on its ability to maintain compliance with
applicable sections of Section 42. Failure to maintain compliance with occupant eligibility, and/or unit
gross rent, or to correct non-compliance within a specified time period could result in recapture of
previously taken tax credits plus interest. In addition, such potential non-compliance may require an
adjustment to the contributed capital by the limited partner.
Land Use Restriction Agreement
The partnership has entered into a Land Use Restriction Agreement with the __________, which
restricts the use of the project to low income and very low income families, as defined, for years
beginning the first year of the credit period, as defined.
Concentration of Credit Risk
Financial instruments that potentially subject the Company to concentrations of credit risk consist of
cash deposits in excess of federally insured limits. As of December 31, 2014, the Company’s bank
balances exceeded federally insured limits by approximately $_______.
Page 12
PARTNERSHIP NAME
NOTES TO FINANCIAL STATEMENTS
December 31, 2014 and 2013
NOTE J - RECONCILIATION BETWEEN NET LOSS PER TAX RETURN AND NET LOSS PER
FINANCIAL STATEMENTS
The following is a reconciliation between the partnership's net loss as stated in the partnership's
Federal income tax return and the net loss based on generally accepted accounting principles
(GAAP) included in the accompanying statement of operations for the year ended December 31,
2014 and 2013:
2014
2013
Net loss per Federal income tax returns
Differences between tax and GAAP
Prepaid rent
Amortization
Depreciation
Other
$
$
Net loss per accompanying financial statements
$
$
NOTE K - LOW INCOME HOUSING TAX CREDITS (UNAUDITED)
The partnership has received an allocation of low-income housing tax credits from the State of
__________ totaling $____________ annually. To qualify for the tax credits, the partnership must
meet certain requirements, including attaining a qualified eligible basis sufficient to support the
allocation. Each unit in the project has qualified and was allocated low-income housing credits
pursuant to Internal Revenue Code Section 42 ("Section 42") which regulates the use of the project
as to occupant eligibility and unit gross rent, among other requirements. Each unit in the project must
meet the provisions of these regulations during each of fifteen consecutive years in order to remain
qualified to receive the credits.
The expected availability of the remaining tax credits is as follows:
Federal
2015
2016
2017
2018
2019
2020
2021
2022
2023
State
Historic
$
$
$
$
$
$
Page 13