oakbrook i manor housing partners, lllp hud ...hud project no.: 101-10558 financial statements,...

OAKBROOK I MANOR HOUSING PARTNERS, LLLP HUD PROJECT NO.: 101-10558

Financial Statements, Supporting Data Required by HUD,

Independent Auditors' Reports And Certificates of Officers

For the year ended December 31, 2012

OAKBROOK I MANOR HOUSING PARTNERS, LLLP HUD PROJECT NO. 101-10558

Independent Auditors' Report

Financial Statements:

Balance Sheet Statement of Operations

Table of Contents

Statement of Changes in Partners' Capital (Deficit) Statement of Cash Flows Notes to the Financial Statements

Supplementary Information:

Balance Sheet - HUD Basis Statement of Profit and Loss - HUD Basis Statement of Equity - HUD Basis Statement of Cash Flows - HUD Basis Computation of Surplus Cash, Distributions, and

Residual Receipts - December 31,2012 Supporting Data Required by HUD Schedule of Changes in Fixed Asset Accounts

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

Report on Compliance for Each Major HUD Program and Report on Internal Control Over Compliance Required by the Consolidated Audit Guide for Audits of HUD Programs

Certificates of Officers

Schedule of Findings and Questioned Costs

Page

3-4

5 6 7 8

9-17

18-19 20-22

23 24-25

26 27-28

29

30-31

32-33

34-35

36

INDEPENDENT AUDITORS' REPORT

To the Partners of Oakbrook I Manor Housing Partners, LLLP:

We have audited the accompanying financial statements of Oakbrook I Manor Housing Partners, LLLP, which comprise the balance sheet as of December 31, 2012, and the related statements of operations, changes in partners' capital (deficit), and cash flows for the year then ended, and the related notes to the financial statements.

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 from 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 opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Oakbrook I Manor Housing Partners, LLLP, as of December 31, 2012, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

PO BOX 7833. SAN FRANC I SCO. CA 94120-7833 TELEPHONE (415) 356-8000 FACSIMILE (415) 356-8001 http: //www. novoco.com

Other Matters

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplementary information, which includes HUD-required financial data templates, is presented for purposes of additional analysis as required by the Consolidated Audit Guide for Audits of HUD Programs issued by the U.S. Department of Housing and Urban Development, Office of the Inspector General, and is not a required part ofthe financial statements.

The supplementary information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements . Such information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplementary information is fairly stated, in all material respects, in relation to the financial statements as a whole

In accordance with Government Auditing Standards, we have also issued our report dated Report Date on our consideration of Oakbrook I Manor Housing Partners, LLLP's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant 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 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 Oakbrook I Manor Housing Partners, LLLP's internal control over financial reporting and compliance.

sa~~i~l-if February 8, 2013 Lead Auditor: Richard B. Hutchins Employer's Identification Number: 94-3108253

OAKBROOK I MANOR HOUSING PARTNERS, LLLP BALANCE SHEET December 31,2012

ASSETS Cash and cash equivalents Restricted cash Fixed assets, net Other assets, net

Total assets

LIABILITIES AND PARTNERS' CAPITAL

Liabilities Accounts payable and accrued liabilities Tenant security deposits payable Note payable - U.S. Bank, N.A. Accrued interest Due to related parties:

Due to Logan Property Management Developer fee payable Accrued interest - developer fee payable Asset management fee payable Partnership administration fee payable

Total liabilities

Partners' capital

Total liabilities and partners' capital

see accompanying notes 5

$ 33,095 449,388

6,113,714 304,593

$ 6,900,790

$ 29,556 30,619

5,396,076 25,071

5,858 107,797 123,879

6,000 240,000

5,964,856

935,934

$ 6,900,790

OAKBROOK I MANOR HOUSING PARTNERS, LLLP STATEMENT OF OPERA nONS

For the year ended December 31,2012

REVENUE

Rental revenue Other income

Total operating revenue

OPERA TING EXPENSES

General and administrative Wages and salaries

Utilities Taxes and insurance

Property management fees

Repairs and maintenance Professional fees

Total operating expenses

Net operating income

OTHER INCOME AND (EXPENSES)

Interest income Interest expense

Depreciation expense

Amortization expense Asset management fee

Nonprofit fee

Partnership administration fee

Net other income and (expenses)

Net loss


$ 965,432 31,767

997,199

40,179 105,256

100,429 23,252

39,284 93,622

12,820 414,842

582,357

38 (331,920) (293,973)

(12,809)

(3,000)

(7,500) (40,000)

(689,164)

$ (106,807)

OAKBROOK I MANOR HOUSING PARTNERS, LLLP STATEMENT OF CHANGES IN PARTNERS' CAPITAL (DEFICIT)


General Limited Partners Partners

Balance, January 1,2012 $ (169) $ 1,042,910

Net loss

Balance, December 31,2012 $


(11) (106,796)

(180) $ 936,114

Total Partners' Capital

$ 1,042,741

(106,807)

$ 935,934

OAKBROOK I MANOR HOUSING PARTNERS, LLLP STA TEMENT OF CASH FLOWS


CASH FLOWS FROM OPERATING ACTIVITIES Net loss Adjustments to reconcile net loss to net cash

provided by operating activities: Depreciation and amortization Decrease in other assets Increase in restricted cash - operating Increase in accounts payable and accrued liabilities Increase in tenant security deposits payable Increase in accrued interest - developer fee payable Increase in partnership administration fee payable

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES Decrease in restricted cash

Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on note payable - U.S. Bank, N.A. Payment of developer fee payable Increase in due to Logan Property Management

Net cash used in financing activities

NET INCREASE IN CASH AND CASH EQUIV ALENTS

CASH AND CASH EQUIVALENTS AT BEGINNING OF YEAR

CASH AND CASH EQUIVALENTS AT END OF YEAR

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid for interest


$ (106,807)

306,782 1,391

(1,198) 1,726 1,198

13,281 40,000

256,373

2,109 2,109

(73,342) (184,500)

2,472 (255,370)

3,112

29,983

$ 33,095

$ 318,639

1. General


NOTES TO THE FINANCIAL STATEMENTS December 31,2012

Oakbrook I Manor Housing Partners, LLLP (the "Partnership") is a Delaware limited liability limited partnership that was formed on March 20, 2006 to acquire, rehabilitate, and operate a 107-unit apartment project known as Oakbrook Manor I Apartments (the "Project"), located in Fort Collins, Colorado. The Project rents all of the units to low-income seniors and is operated in a manner necessary to quality for low-income housing tax credits as provided under Section 42 of the Internal Revenue Code.

The Partnership was comprised of one general partner, Amerland/Oakbrook I, LLC (the "Managing General Partner"), a Delaware limited liability company, and one limited partner, Ruben Islas ("Islas"). On June 1, 2006, Islas withdrew from the Partnership, Brothers Redevelopment, Inc. (the "Administrative General Partner"), a Colorado nonprofit corporation (collectively with the Managing General Partner, the "General Partners"), was admitted as a general partner, and U.S.A. Institutional Tax Credit Fund LII-A L.P. (the "Limited Partner"), a Delaware limited partnership, and The Richman Group Capital Corporation (the "Special Limited Partner"), a Delaware corporation (collectively, the "Limited Partners"), were admitted to the Partnership as limited partners.

Pursuant to the Amended and Restated Agreement of Limited Liability Limited Partnership (the "Partnership Agreement") dated June 1, 2006, the Limited Partner is required to make capital contributions totaling $2,798,280 over four installments. These contributions are subject to adjustments based on the amount of low-income housing tax credits ultimately allocated to the Project in addition to other occurrences as further described in the Partnership Agreement. During 2008, the capital contributions required by the Limited Partner were adjusted downward by $35,943 due to a credit shortfall as defined in the Partnership Agreement. As of December 31, 2012, Limited Partner capital contributions totaled $2,762,337.

Profits and losses are allocated in accordance with the Partnership Agreement. Profits from operations and losses from non-recourse deductions and low-income housing tax credits in any one year are allocated 99.99% to the Limited Partner, 0.00% to the Special Limited Partner, and 0.01% to the General Partners. All other losses are allocated, to the extent allowable under Section 704(b) of the Internal Revenue Code, 99.99% to the Limited Partner, 0.00% to the Special Limited Partner, and 0.01 % to the General Partners.

2. Summary of significant accounting policies and nature of operations

Basis of accounting The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America.

9



2. Summary of significant accounting policies and nature of operations (continued)

Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

Economic concentrations The Partnership operates one property located in Fort Collins, Colorado. Future operations could be affected by changes in economic or other conditions in that geographical area or by changes in federal low-income housing subsidies or the demand for such housing. In addition, the Partnership operates in a heavily regulated environment. The operations of the Partnership are subject to the administrative directives, rules and regulations of federal, state and local regulatory agencies, including, but not limited to, the U.S. Department of Housing and Urban Development ("HUD"). Such administrative directives, rules and regulations are subject to change by an act of Congress or an administrative change mandated by HUD. Such changes may occur with little notice or inadequate funding to pay for the related cost, including the additional administrative burden, to comply with a change.

Cash and cash equivalents Cash and cash equivalents include all cash balances on deposit with financial institutions and highly liquid investments with a maturity of three months or less at the date of purchase.

Restricted cash is not considered cash equivalents and includes cash held with financial institutions for refunds of tenant security deposits, funding of operating deficits, repairs and improvements to the buildings which extends their useful lives, bond trustee funds, and annual insurance and property tax payments.

The carrying amounts of cash and restricted cash approximate their fair values.

Concentration of credit risk The Partnership places its temporary cash investments with high credit quality financial institutions. At times, the account balances may exceed the institutions' federally insured limits. The Partnership has not experienced any losses in such accounts.

Accounts receivable Management considers receivables to be fully collectible. If amounts become uncollectible, they are· charged to operations in the period in which that determination is made. Accounting principles generally accepted in the United States of America require that the allowance method be used to recognize bad debts; however, the effect of using the direct write-off method is not materially different from the results that would have been obtained under the allowance method.

10


NOTES TO THE FINANCIAL STATEMENTS December 31, 2012


Revenue recognition Rental revenue attributable to residential leases is recorded when due from residents, generally upon the first day of each month. Leases are for periods of up to one year, with rental payments due monthly. Other income includes fees earned for late payments, cleaning, damages, laundry facilities, and other charges and is recorded when earned.

Depreciation Fixed assets are recorded at cost. Buildings and capital expenditures related to the rehabilitation of the Project are depreciated over their estimated useful lives of 27.5 years under the straightline method. Land improvements are depreciated over useful lives of 15 years under the 150% declining balance method. Personal property is depreciated over 5 years under the 200% declining balance method. Depreciation expense for the year ended December 31, 2012 was $293,973.

Amortization Amortization is computed on a straight-line basis. Financing costs are amortized over the 26-year average term to maturity of the underlying bonds. Compliance monitoring fees are amortized over 15 years. Amortization expense for the year ended December 31, 2012 was $12,809.

Income taxes Income taxes on partnership income are levied on the partners at the partner level. Accordingly, all profits and losses of the Partnership are recognized by each partner on its respective tax return.

The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the Partnership to report information regarding its exposure to various tax positions taken by the Partnership. The Partnership has determined whether any tax positions have met the recognition threshold and have measured the Partnership's exposure to those tax positions. Management believes that the Partnership has adequately addressed all relevant tax positions and that there are no unrecorded tax liabilities. Federal and state tax authorities generally have the right to examine and audit the previous three years of tax returns filed. Any interest or penalties assessed to the Partnership are recorded in operating expenses. No interest or penalties from federal or state tax authorities were recorded in the accompanying financial statements.

11




Impairment of long-lived assets The Partnership reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying value may not be recoverable. Recoverability is measured by a comparison of the carrying amount of the asset to the future net undiscounted cash flow expected to be generated and any estimated proceeds from the eventual disposition. If the long-lived assets are considered to be impaired, the impairment to be recognized is measured at the amount by which the carrying amount of the asset exceeds the fair value as determined from an appraisal, discounted cash flow analysis or other valuation technique. There was no impairment loss recognized for the year ended December 31, 2012.

Fair value measurements The Partnership applies the accounting provisions related to fair value measurements. These provisions define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date, establish a hierarchy that prioritizes the information used in developing fair value estimates and require disclosure of fair value measurements by level within the fair value hierarchy. The hierarchy gives the highest priority to quoted prices in active markets (Level 1 measurements) and the lowest priority to unobservable data (Level 3 measurements), such as the reporting entity's own data. These provisions also provide valuation techniques, such as the market approach (comparable market prices), the income approach (present value of future income or cash flows) and the cost approach (cost to replace the service capacity of an asset or replacement cost).

A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The three levels of valuation hierarchy are defined as follows:

Levell: Observable inputs such as quoted prices (unadjusted) for identical assets or liabilities in active markets.

Level 2: Inputs other than quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument.

Level 3: Unobservable inputs that reflect the Partnership's own assumptions.

Subsequent events Subsequent events have been evaluated through February 8, 2013, which is the date the financial statements were available to be issued. There were no subsequent events requiring disclosure.

12


3. Restricted cash


The Partnership's restricted cash balance is comprised of the following at December 31, 2012:

4. Fixed assets

Replacement reserves Tenant security deposits Insurance escrow Operating reserves Bond fund Expense fund Surplus fund

Total restricted cash

$

$

95,868 30,619 16,411

230,252 39,729 34,149

2,360 449,388

The Partnership's fixed assets balance is comprised of the following at December 31, 2012:

5. Other assets

Land Buildings Land improvements Personal property

Total fixed assets Less: accumulated depreciation

Fixed assets, net

$ 502,895 6,824,317

775,900 255,850

8,358,962 (2,245,248)

$ 6,113,714

The Partnership's other assets balance is comprised of the following at December 31,2012:

Accounts receivable Prepaid expenses Bond issuance costs Permanent loan fees Tax credit fees

Total other assets Less: accumulated amortization

Other assets, net

13

$

$

10,231 5,210

319,200 13,494 38,941

387,076 (82,483) 304,593



6. Housing assistance payments

During 1977, the prior owner of the Project was originally awarded a Section 8 Housing Assistance Payment ("HAP") contract with HUD pursuant to the United States Housing Act of 1937 and the U.S. Department of Housing and Urban Development Act. In June 2006, the prior owner assigned the June 15, 2004 through June 14, 2009 Housing Assistance Payments Basic Renewal Contract with HUD to the Partnership. The Section 8 contract was amended to extend for twenty two years, effective June 15,2004, and will expire on June 14,2026.

7. Contingencies

Pursuant to the Partnership's Section 8 contract with HUD, the maximum amount of the commitment for housing assistance payments under the contract was $830,400 per annum, subject to adjustment as defined.

Under the HAP Amendment of Renewal Contract, HUD agrees to renew the contract after 22 years, subject to Congressional appropriation. HUD also agrees to increase rents annually by an Operating Cost Adjustment Factor ("OCAF"). No assurance can be provided that Congress will appropriate sufficient funds to make payments under this contract. No provision or adjustment has been made to the accompanying financial statements for this contingency as its ultimate resolution and related impact on the Partnership are not known and cannot be estimated at this time. During the year ended December 31,2012, HUD increased rents by an OCAF amount; the maximum allowable rent potential cannot exceed $81,764 per month.

8. Notes payable

Note payable - U.S. Bank, N.A. In June 2006, the Colorado Housing and Finance Authority (the "Issuer") was allocated $5,700,000 of bond volume cap on behalf of the Project. The Issuer then issued, on behalf of the Project, $5,700,000 of Multifamily Housing Revenue Bonds, Series 2006 (the "Bonds").

On June 1, 2006, the Partnership entered into a loan agreement with the Issuer for $5,700,000, which consisted of two principal balances: $5,255,000 (the "NOI Note") and $445,000 (the "HAP Note") (collectively, the "Notes"). Subsequent to the bond allocation, the Issuer entered into an Assignment Agreement dated June 1,2006, with U.S. Bank, N.A. (the "Trustee") for the purpose of effectuating the sale of the Bonds to the Trustee.

14



8. Notes payable (continued)

Under the terms of the NOI Note, interest accrues at 5.86% per annum. The Partnership is required to make monthly payments of interest only on the principal balance commencing on August 1, 2006 and continuing on the first day of each month thereafter until August 1, 2008. Commencing on August 1, 2008 and continuing on the first day of each month thereafter, the Partnership makes equal monthly principal and interest payments of $29,471. The NOI Note will be amortized over 35 years and will mature on February 1, 2039. The NOI Note is secured by a first deed of trust on the Project. As of December 31, 2012, the principal balance on the NO! Note was $5,025,220 and accrued interest was $25,071. During the year ended December 31, 2012, interest expense on the NOI Note was $296,314.

Under the terms of the HAP Note, interest accrues at 5.86% per annum. The Partnership is required to make monthly payments of interest only on the principal balance commencing on August 1, 2006 and continuing on the first day of each month thereafter until August 1, 2008. Commencing on August 1, 2008 and continuing on the first day of each month thereafter, the Partnership makes equal monthly principal and interest payments of $3,402. The HAP Note will mature on June 1,2026 and is secured by a first deed of trust on the Project. As of December 31, 2012, the principal balance on the HAP Note was $370,856 and accrued interest was $0. During the year ended December 31,2012, interest expense on the HAP Note was $22,325.

Estimated aggregate annual principal payments are due as follows:

Year ending December 31, 2013 2014 2015 2016 2017 Thereafter

Total

9. Transactions with related parties

Due to Logan Property Management

$ 80,406 85,246 90,378 95,818

101,587 4,942,641

$ 5,396,076

During 2012, Logan Property Management ("LPM"), an affiliate of the Managing General Partner, paid certain expenses on behalf of the Partnership. Any amount paid on behalf of the Partnership that was not reimbursed as of December 31, 2012 has been included as a liability on the accompanying balance sheet. As of December 31, 2012, $5,858 was due to LPM. Such amounts are non-interest bearing and will be repaid as funds become available.

15



9. Transactions with related parties (continued)

Developer fee Pursuant to the Development Agreement dated June 1, 2006, Islas Development, LLC (the "Developer"), an affiliate of the Managing General Partner, is entitled to a developer fee in an amount not to exceed the lesser of the applicable maximum allowable developer fee as specified by the Colorado Housing and Finance Authority or $884,991 for services rendered in connection with the development of the Project. Interest accrues on the deferred developer fee at a rate of 6% per annum, compounding annually, after receipt of all four installments from the Limited Partner (see Note 1). As of December 31, 2012, the amount owed to the Developer was $107,797 and accrued interest was $123,879. During the year ended December 31, 2012, interest expense on the Developer fee was $13,281.

Property management fee In June 2012, the Partnership renewed its Property Management Agreement with LPM. Pursuant to the agreement, the Partnership is obligated to pay LPM a monthly management fee of 4% of monthly gross income. During the year ended December 31, 2012, LPM earned and was paid $39,284 under this agreement.

Asset management fee Pursuant to the Partnership Agreement, the Limited Partner is entitled to receive an annual cumulative asset management fee in an amount equal to the greater of $3,000 or 10% of the difference between the amount of Net Cash Flow distributable and any Net Cash Flow paid, as defined in the Partnership Agreement. During the year ended December 31, 2012, the Limited Partner earned and was paid $3,000 under this agreement. As of December 31,2012, the Limited Partner was owed $6,000.

Nonprofit fee Pursuant to a Memorandum of Understanding, the Administrative General Partner is entitled to receive an annual nonprofit fee in the amount of $7,500 per annum (as adjusted annually by the CPI). The fee is payable from available cash flow after all priority payments as defined in the Partnership Agreement. During the year ended December 31, 2012, the Administrative General Partner earned and was paid $7,500.

Partnership administration fee Pursuant to the Partnership Agreement, the Managing General Partner is entitled to receive an annual cumulative partnership administration fee in an amount equal to 4% of the gross receipts of the Partnership, but not less than $40,000 per year, beginning upon Substantial Completion, as defined in the Partnership Agreement. The fee is payable from available cash flow after all priority payments, as defined in the Partnership Agreement. During the year ended December 31,2012, the Managing General Partner earned $40,000 under this agreement. As of December 31,2012, $240,000 remained payable to the Managing General Partner.

16



10. Federal low-income housing tax credits

The Partnership expects to generate an aggregate of $2,762,610 of federal low-income housing tax credits (the "Tax Credits"). Generally, such credits are expected to become available for use by its partners pro rata over a ten-year period that began in 2006. In order to qualify for these credits, the Project must comply with various federal and state requirements. These requirements include, but are not limited to, renting to low-income tenants at rental rates which do not exceed specified percentages of area median gross income for the first 15 years of operation. The Partnership has also agreed to maintain and operate the Project as low-income housing for another 15 years after the above period ends. Because the Tax Credits are subject to complying with certain requirements, there can be no assurance that the aggregate amount of Tax Credits will be realized and failure to meet all such requirements may result in generating a lesser amount of Tax Credits than the expected amount.

As of December 31,2012, the Partnership had generated $1,795,034 of Tax Credits.

The Partnership anticipates generating Tax Credits as follows:

Year ending December 3 1, 2013 2014 2015 2016

Total

$

$

17

276,261 276,261 276,261 138,793 967,576

SUPPLEMENTARY INFORMATION SUPPORTING DATA REQUIRED BY HUD


BALANCE SHEET - HOD BASIS

CURRENT ASSETS 1120 Cash - operations 1140 Accounts receivable - operations 1200 Prepaid expenses

1i00T Total current assets

1191 Tenant deposits held in trust

December 31,2012

ASSETS

RESTRICTED DEPOSITS AND FUNDED RESERVES 13 10 Escrow deposits 1320 Replacement reserve 1330 Other reserves 1355 Bond reserves

1300T Total deposits

FIXED ASSETS 1410 Land

1420 Buildings 1460 Furnishings

1400T Total fixed assets

1495 Accumulated depreciation 1400N Net fixed assets

OTHER ASSETS 1520 Intangible assets, net of accumulated amortization of $82,483

1500T Total other assets

I OOOT TOTAL ASSETS

see independent auditors' report 18

$

$

33,095 10,231 5,210

48,536

30,619

16,411 95,868

230,252 76,238

418,769

502,895

7,600,217 255,850

8,358,962

2,245,248 6,113,714

289,152 289,152

6,900,790


CURRENT LIABILITIES

BALANCE SHEET - HUD BASIS (CONTINUED) December 31,2012

LIABILITIES AND EQUITY

2110 Accounts payable - operations 2113 Accounts payable - entity 2123 Partnership administration fee payable 2123 Asset management fee payable 2131 Accrued interest payable - bonds 2132 Accrued interest payable - developer fee 2170 Bonds payable - short-term 2210 Prepaid revenue

2122T Total current liabilities

DEPOSIT LIABILITIES 2191 Tenant deposits held in trust - contra

LONG-TERM LIABILITIES 2320 Bonds payable - first mortgage

Less: current portion 2320 Bonds payable - first mortgage

2323 Other loans and notes payable - surplus cash

2300T Total long-term liabilities

2000T Total liabilities

3130 Total equity

2033T TOTAL LIABILITIES AND EQUITY


$ 29,306 5,858

240,000 6,000

25,071 123,879 80,406

250 510,770

30,619

5,396,076 (80,406)

5,315,670

107,797

5,423,467

5,964,856

935,934

$ 6,900,790

Rental income 5120 5121

5100T

Vacancies 5220

5200T 5152N


STATEMENT OF PROFIT AND LOSS - HUD BASIS For the year ended December 31,2012

Rent revenue - gross potential Tenant assistance payments Total rental revenue

Apartments Total vacancies Net rental revenue (rent revenue less vacancies)

Financial Revenue 5440 Revenue from investments - replacement reserve

5400T Total financial revenue

Other revenue 5910 Laundry and vending 5920 Tenant charges 5990 Miscellaneous (specify)

5900T Total other revenue 5000T Total revenue

Administrative expenses 6203 Conventions and meetings 6250 Other renting expense 6311 Office expenses 6320 Management fee 6330 Manager or superintendent salaries 6331 Administrative rent free unit 6340 Legal expenses - project 6350 Audit expense 6351 Bookkeeping fees/accounting services 6390 Miscellaneous administrative expenses

6263T Total administrative expenses

Utilities expenses 6450 6451 6452 6453

6400T

Electricity Water Gas Sewer Total utilities expenses


$ 351,231 632,682 983,913

18,481 18,481

965,432

38 38

8,435 3,187

20,145 31,767

997,237

137 10,215 15,813 39,284 41,140 10,196

570 9,750 2,500 9,638

139,243

45,198 23,854 11,968 19,409

100,429


STATEMENT OF PROFIT AND LOSS - HUD BASIS (CONTINUED) For the year ended December 31, 2012

Operating and maintenance expenses 6510 Payroll 6515 Supplies

Contracts 6520 6525 6530 6590

Garbage and trash removal Security payroll/contract

6500T Miscellaneous operating and maintenance expenses (specify) Total operating and maintenance expenses

Taxes and insurance 6711 Payroll taxes 6720 Property and liability insurance (hazard) 6722 Workmen's compensation 6723 Health insurance and other employee benefits 6790 Miscellaneous taxes, licenses, permits, and insurance

6700T Total taxes and insurance

Financial expenses 6820 Interest on first mortgage payable 6830 Interest on notes payable 6890 Miscellaneous financial expenses

6800T Total financial expenses

Operating results 6000T Total costs of operation before depreciation 5060T Profit before depreciation 6600 Depreciation expenses 6610 Amortization expenses

5060N Operating loss

Corporate or Mortgagor revenue/expenses 7190 Other expenses (specify)

7100T Net entity expenses

3250 Net loss


$

31,752 18,980 32,706

8,189 4,773

28,974 125,374

8,916 20,565

6,120 7,132 2,687

45,420

318,639 13,281 4,376

336,296

746,762 250,475 293,973

12,809 (56,307)

(50,500) (50,500)

(106,807)

Part II


STATEMENT OF PROFIT AND LOSS - HUD BASIS (CONTINUED) For the year ended December 31,2012

S1000-010 Total first mortgage (or bond) principal payments required during the audit period (12 monthly payments). This applies to all direct loans, HUD-held and HUD-insured first mortgages.

S1000-020 The total of all monthly reserve for replacement deposits (usually 12 months) required during the audit period even if deposits have been temporarily waived or suspended.

S1000-030 Replacement Reserves, or Residual receipts and Releases which are included as

$ 73,342

$ 26,751

expense items on this Profit and Loss statement. =$=====

S 1 000-040 Project Improvement Reserve Releases under the Flexible Subsidy Program that are included as expense items on this Profit and Loss Statement. =$=====


OAKBROOK I MANOR HOUSING PARTNERS, LLLP HUD PROJECT NO. 101-lO558

STATEMENT OF EQUITY - HUD BASIS For the year ended December 31, 2012

S 11 00-0 1 0 Beginning of year balance

3250 Net loss

3130 End of year balance


$ 1,042,741

(106,807)

$ 935,934


STATEMENT OF CASH FLOWS - HUD BASIS For the year ended December 31, 2012

CASH FLOWS FROM OPERATING ACTIVITIES S 1200-010 Rental income received S1200-020 Interest receipts S1200-030 Other operating receipts S 1200-040 Total receipts

CASH PAID FOR: S1200-050 Administrative expenses

S1200-070 Management fee expense

S1200-090 Utilities expenses

S1200-100 Salaries and wages expense

S1200-110 Operating and maintenance expenses S1200-140 Property insurance expense S1200-150 Miscellaneous taxes and insurance expense S1200-180 Interest on first mortgage S1200-220 Miscellaneous financial S1200-225 Asset management fee S1200-225 Nonprofit fee S1200-230 Total disbursements

S 1200-240 Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES S1200-245 Net deposits to the mortgage escrow accounts S 1200-250 Net deposits to the reserve for replacement account

S1200-255 Net withdrawals from other reserves S1200-350 Net cash provided by investing activities

CASH FLOWS FROM FINANCING ACTIVITIES S1200-360 S1200-455 S1200-455 S1200-460

S1200-470

S1200-480

S1200T

Principal payments - first mortgage Payment of developer fee payable Increase in due to Logan Property Management

Net cash used in financing activities

NET INCREASE IN CASH & EQUIVALENTS

BEGINNING OF YEAR CASH

END OF YEAR CASH


$ 965,747 38

31,767 997,552

(58,819) (39,284)

(100,429)

(95,060) (92,141) (19,244)

(2,687)

(318,639) (4,376) (3,000) (7,500)

(741,179)

256,373

(863)

(26,789) 29,761 2,109

(73,342)

(184,500) 2,472

(255,370)

3,112

29,983

$ 33,095


STATEMENT OF CASH FLOWS - HUD BASIS (CONTINUED) For the year ended December 31, 2012

RECONCILIA TION OF NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

3250 NET LOSS

ADJUSTMENTS TO RECONCILE NET LOSS TO NET CASH PROVIDED BY OPERATING ACTIVITIES

6600 Depreciation expense 6610 Amortization expense

Changes in asset and liability accounts

Decrease (increase) in assets S 1200-500 Decrease in accounts receivable - other S 1200-520 Decrease in prepaid expenses S 1200-530 Increase in cash restricted for tenant security deposits

Increase (decrease) in liabilities S 1200-540 Increase in accounts payable S1200-580 Increase in tenant security deposits held in trust S1200-590 Increase in prepaid revenue

S 1200-605 Increase (decrease) in entity/construction liability accounts: S 1200-606 Partnership administration fee payable S 1200-606 Accrued interest - developer fee payable

S1200-610 NET CASH PROVIDED BY OPERATING ACTIVITIES


$ (106,807)

293,973 12,809

70 1,321

(1,198)

1,481 1,198

245

40,000 13,281

$ 256,373


COMPUTATION OF SURPLUS CASH - HUD BASIS For the year ended December 31, 2012

COMPUTATION OF SURPLUS CASH, DISTRIBUTIONS, AND RESIDUAL RECEIPTS

SI300-010

S1300-040

S1300-050 SI300-075

2210 2191

S 1300-140

S1300-150

S 1300-200

Cash (Accounts 1120,1170, and 1191)

Total cash

Accrued bond interest payable Accounts payable (due within 30 days) Prepaid revenue Tenant deposits held in trust

Less total current obligations

Surplus cash (deficiency)

Amount available for distribution during next fiscal period


$ 63,714

63,714

25,071 29,306

250 30,619

85,246

$ (21,532)

$


SUPPORTING DATA REQUIRED BY HUD For the year ended December 31,2012

SCHEDULE OF CHANGES IN REPLACEMENT RESERVE

BALANCE~ JANUARY 1,2012 Monthly deposits Interest

BALANCE, DECEMBER 31, 20 12 (confirmed by Berkadia)

Deposits Suspended or Waived indicator

DETAIL OF ACCOUNTS - STATEMENT OF PROFIT AND LOSS

MISCELLANEOUS OTHER REVENUE (ACCOUNT 5990) Utility reimbursement Cable income Reserve and escrow refunds Other income

Miscellaneous other revenue

$

$

$

$

MISCELLANEOUS OPERATING AND MAINTENANCE EXPENSES (ACCOUNT 6590)

69,079 26,751

38

95,868

NO

2,028 10,700 7,397

20

20,145

Carpet clean/repair $ 2,059 Appliance repairs 1,556 Interior repairs/upgrade 4,487 Common area cleaning 330 Asphalt/paving 5,024 Electrical costs 4,660 Water heaters 1,036 Carpet/flooring 9,198 Access gates 624

Miscellaneous operating and maintenance expenses


$ 28,974


SUPPORTING DATA REQUIRED BY HUD For the year ended December 31,2012

DETAIL OF ACCOUNTS - STATEMENT OF PROFIT AND LOSS (CONTINUED)

MISCELLANEOUS ENTITY EXPENSES (ACCOUNT 7190) Asset management fee Nonprofit fee Partnership administration fee

Miscellaneous entity expenses


$

$

3,000 7,500

40,000

50,500

1410 Land

1420 Buildings

1460 Furnishings

TOTAL


SCHEDULE OF CHANGES IN FIXED ASSET ACCOUNTS For the year ended December 31, 2012

Beginning Balance Additions Deductions

$ 502,895 $ $

7,600,217

255,850

8,358,962 $ $ ====

Accumulated depreciation (1,951,275) $ (293,973) =$====

Net book value $ 6,407,687


Ending Balance

$ 502,895

7,600,217

255,850

8,358,962

(2,245,248)

$ 6,113,714

~ NOVOGRADAC .... + & COMPANY LLP ®

....,. CERTIFIED PUBLIC ACCOUNTANTS

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 A UDITING STANDARDS


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 Oakbrook I Manor Housing Partners, LLLP, which comprise the balance sheet as of December 31, 2012, and the related statements of operations, changes in partners' capital (deficit), and cash flows for the year then ended and the related notes to the financial statements, and have issued our report thereon dated February 8, 2013.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Oakbrook I Manor Housing Partners, LLLP ' 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 opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Oakbrook I Manor Housing Partners, LLLP's internal control. Accordingly, we do not express an opinion on the effectiveness of Oakbrook I Manor Housing Partners, LLLP'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.

30

PO BOX 7833. SAN FRANClSCO , CA 94120·7833 TELEPHONE (415) 356·8000 FACS[MILE (415) 356·8001 http: //ww w.novoco.com

Compliance and Other Matters As part of obtaining reasonable assurance about whether Oakbrook I Manor Housing Partners, LLLP'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 A uditing Standards.

Other Matters We noted certain matters that we reported to the management of Oakbrook I Manor Housing Partners, LLLP in a separate letter dated February 8, 2013.

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.

N~~~LL~ San Francisco, California February 8, 2013

31

REPORT ON COMPLIANCE FOR EACH MAJOR HUD PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE CONSOLIDATED A UDIT GUIDE FOR A UDITS OF HUD PROGRAMS


Report on Compliance for Each Major HUD Program We have audited Oakbrook I Manor Housing Partners, LLLP's compliance with the compliance requirements described in the Consolidated Audit Guide for Audits of HUD Programs (the "Guide") that could have a direct and material effect on Oakbrook I Manor Housing Partners, LLLP's major U.S. Department of Housing and Urban Development ("HUD") program for the year ended December 31, 2012. Oakbrook I Manor Housing Partners, LLLP's major HUD program and the related direct and material compliance requirements are as follows:

Name of Major HUD Program

Section 8 Housing Assistance Payments

Management's Responsibility

Direct and Material Compliance Requirements

cash receipts, cash disbursements, tenant application, eligibility, and recertification, units leased to extremely low-income families, tenant security deposits, management functions, and fair housing and non-discrimination

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its HUD program.

Auditor's Responsibility Our responsibility is to express an opinIOn on compliance for Oakbrook I Manor Housing Partners, LLLP's major HUD program based on our audit of the 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 Guide. Those standards and the Guide require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the compliance requirements referred to above that could have a direct and material effect on a major HUD program occurred. An audit includes examining, on a test basis, evidence about Oakbrook I Manor Housing Partners, LLLP'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 a major HUD program. However, our audit does not provide a legal determination of Oakbrook I Manor Housing Partners, LLLP's compliance.

32

PO BOX 7833 , SAN FRANC I SCO , CA 94 1 20 - 7833 TELEPHONE (415) 356-8000 FACSIM ILE (415) 356 - 800 1 http: //www .novoco.com

Opinion on Each Major HUD Program In our opinion, Oakbrook I Manor Housing Partners, LLLP complied, in all material respects, with the compliance requirements referred to above that could have a direct and material effect on its major HUD program for the year ended December 31,2012.

We noted certain matters that we are required to report to management of Oakbrook I Manor Housing Partners, LLLPin a separate written communication. These matters are described in our management letter dated February 8, 2013 .

Report on Internal Control Over Compliance Management of Oakbrook I Manor Housing Partners, LLLP is responsible for establishing and maintaining effective internal control over compliance with the compliance requirements referred to above. In planning and performing our audit of compliance, we considered Oakbrook I Manor Housing Pal1ners, LLLP's internal control over compliance with the requirements that could have a direct and material effect on its major HUD program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for a major HUD program and to test and report on internal control over compliance in accordance with the Guide, 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 Oakbrook I Manor Housing Partners, LLLP'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 compliance requirement of a HUD 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 compliance requirement of a HUD 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 compliance requirement of a HUD 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. 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.

Purpose of this Report 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 Guide. Accordingly, this report is not suitable for any other purpose.

!I/~ ;£ ~ A~ •• LL~ San Francisco, California ~~ February 8, 2013

33


December 31, 2012

General Partner Certification

I hereby certify that I have examined the accompanying financial statements and supplemental data of Oakbrook I Manor Housing Partners, LLLP and, to the best of my knowledge and belief, the same is complete and accurate.

By Ruben Islas, Managing Member Amerland/Oakbrook I, LLC

Taxpayer Identification Number 20-0027732

34

Date


December 31,2012

Management Agent's Certification

We hereby certify that we have examined the accompanying financial statements and supplemental data of Oakbrook I Manor Housing Partners, LLLP and, to the best of our knowledge and belief, the same is complete and accurate.

By Martha Enriquez, President Logan Property Management, Inc.

Taxpayer Identification Number 20-1902673

35

Date


December 31,2012

Schedule of Findings and Questioned Costs

Current Audit Matters

None

Prior Audit Matters

None

Questioned Costs None

36

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