4370.4 REV-1

APPENDIX 1

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FINANCIAL STATEMENTS PACKAGE

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-1 6/92

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4370.4 REV-1

APPENDIX 1

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SAMPLE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678-ABC

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

The following set of financial statements illustrates what might be
found

on an actual HUD project. Use them to familiarize yourself with
financial

statements.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-2

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

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INDEX TO THE FINANCIAL STATEMENTS

FHA PROJECT NO. : 123-45678-ABC

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

AUDITOR/AUDITEE REPORTS

SCHEDULE A-1 - Schedule of Funds in Banks and on Hand as of December 31,

1991

SCHEDULE A-2 - Schedule of Changes in Fixed Assets Account for the Year

Ended December 31, 1991

SCHEDULE A-3 - Schedule of Accounts Payable as of December 31, 1991

EXHIBIT B - Statement of Income for the Year Ended December 31, 1991

EXHIBIT C - Statement of Changes in Owner\'s Equity (Deficit) for the

Year Ended December 31, 1991

EXHIBIT D - Statement of Cash Flows for the Year Ended December 31, 1991

SCHEDULE D-1 - Computation of Surplus Cash and Residual Receipts as of

December 31, 1991

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-3 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

AUDITOR\'S REPORT ON THE FINANCIAL STATEMENTS

XYZ & Company, CPA

123 Main Street

Anytown, USA

J. Doe

West Oakdale Apartments

528 North America Dr.

Anytown, USA

We have audited the accompanying balance sheet of West Oakdale
Apartment,

HUD Project No. 123-45678, as of December 31, 1991, and the related

statements of income, retained earnings, and cash flows for the year
then

ended. These financial statements are the responsibility of the

Partnership\'s management. Our responsibility is to express an opinion
on

these financial statements based on our audit.

We conducted our audit in accordance with generally accepted auditing

standards and Government Auditing Standards, issued by the Comptroller

General of the United States. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement. An audit
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. We

believe that our audit provides a reasonable basis for our opinion.

In our opinion, the financial statements referred to above present
fairly,

in all material respects, the financial position of West Oakdale
Apartment

at December 31, 1991, and the results of its operations and its cash
flows

and its analysis of net worth for the year then ended in conformity with

generally accepted accounting principles.

Our audit was conducted for the purpose of forming an opinion on the

financial statements taken as a whole. The supporting information
included

in the report are presented for the purposes of additional analysis and
are

not a required part of the basic financial statements of the West
Oakdale

Apartment. Such information has been subjected to the auditing
procedures

applied in the audit of the basic financial statements and, in our
opinion,

is fairly presented in all material respects in relation to the
financial

statements taken as a whole.

XYZ and Company

February 12, 1992 Certified Public

Accountants

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-4

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4370.4 REV-1

APPENDIX 1

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AUDITOR\'S REPORT ON THE INTERNAL CONTROL STRUCTURE

XYZ & Company, CPA

123 Main Street

Anytown, USA

J. Doe

West Oakdale Apartments

528 North America Dr.

Anytown, USA

We have audited the financial statements of West Oakdale Apartments as
of

and for the year ended December 31, 1991, and have issued our report

thereon dated February 12, 1992. We have also audited West Oakdale

Apartments compliance with requirements applicable to major HUD-assisted

programs and have issued our report thereon dated February 12, 1992.

We conducted our audit in accordance with generally accepted auditing

standards and Government Auditing Standards, issued by the Comptroller

General of the United States. Those standards require that we plan and

perform the audit to obtain reasonable assurance about whether the

financial statements are free of material misstatement.

In planning and performing our audits for the year ended December 31,
1991,

we considered the West Oakdale Apartments internal control structure in

order to determine our auditing procedures for the purpose of expressing

our opinions on the West Oakdale Apartments basic financial statements
and

on its compliance with requirements applicable to major programs and not
to

provide assurance on the internal control structure.

In connection therewith, we also have obtained an understanding of those

internal accounting control and administrative control procedures

comprehended in the U.S. Department of Housing and Urban Development
(HUD)

Consolidated Audit Guide for Audits of HUD Programs, IG Handbook 2000.4.

Our study included tests of compliance with such procedures.

The management of the Project is responsible for establishing and

maintaining an internal control structure. In fulfilling this

responsibility, estimates and judgements 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 and that transactions are executed in accordance with

management\'s authorization and recorded properly to permit the
preparation

of financial statements in accordance with generally accepted accounting

principles and that Federal financial assistance programs are managed in

compliance with applicable laws and

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-5 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

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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

may become inadequate because of changes in conditions or that the

effectiveness of the design and operation of policies and procedures may

deteriorate.

For the purpose of this report, we have classified the significant
internal

control structure policies and procedures in the following categories:

accounting managerial, and systems.

For all of the internal control structure categories listed above, we

obtained an understanding of the design of relevant policies and
procedures

and determined whether they have been placed in operation and we
assessed

control risk.

We performed tests of controls to evaluate the effectiveness of the
design

and operation of internal control structure policies and procedures that
we

considered relevant to preventing or detecting material noncompliance.
Our

procedures were less in scope than would be necessary to render an
opinion

on internal control structure policy and procedures. Thus, we do not

express our opinion on those policies and procedures.

We noted certain matters involving the internal control structure and
its

operations that we consider to be reportable conditions under standards

established by the American Institute of Certified Public Accountants.

Reportable conditions involve matters coming to our attention relating
to

significant deficiencies in the design or operation of the internal
control

structure that, in our judgement, could adversely affect the
organization\'s

ability to administer Federal financial assistance programs in
accordance

with applicable laws and regulations.

A material weakness is a reportable condition in which the design or

operation of the specific internal control structure elements does not

reduce to a relatively low level the risk that noncompliance with laws
and

regulations that would be material in relation to the financial
statements

being audited may occur and not be detected within a timely period by

employees in the normal course of performing their assigned functions.

Our consideration of the internal control structure would not
necessarily

disclose all matters in the internal control structure that might be

reportable conditions and, accordingly, would not necessarily disclose
all

reportable conditions that are also considered to be material weaknesses
as

defined above. However, we believe none of the reportable conditions

described above is a material weakness.

We also noted other matters involving the internal control structure and

its operation that we have reported to the management of the West
Oakdale

Apartments in a separate communication dated January 31, 1992.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-6

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4370.4 REV-1

APPENDIX 1

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This report is intended for the information of the mortgagor,
management,

and the Department of Housing and Urban Development. This restriction is

not intended to limit the distribution of this report, which is a matter

of public record.

XYZ and Company

Certified Public Accountants

February 12, 1992

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-7 6/92

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4370.4 REV-1

APPENDIX 1

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AUDITOR\'S REPORT ON COMPLIANCE

XYZ & Company, CPA

123 Main Street

Anytown, USA

J. Doe

West Oakdale Apartments

528 North America Dr.

Anytown, USA

We have audited the financial statements of West Oakdale Apartments as
of

and for the year ended December 31, 1991 and have issued our report
thereon

dated (date of report). In addition, we have audited the (Entity\'s)

compliance with the common and specific program requirements that are

applicable to each of its major HUD-assisted programs, for the year(s)

ended December 31, 1991. The management of the West Oakdale Apartments
is

responsible for compliance with those requirements. Our responsibility
is

to express an opinion on compliance with those requirements based on our

audit.

We conducted our audit in accordance with generally accepted auditing

standards and Government Auditing Standards, issued by Comptroller
General

of the United States. Those standards require that we plan and perform
the

audit to obtain reasonable assurance about whether material
noncompliance

with the requirements referred to above occurred. An audit includes

examining, on a test basis, evidence about the West Oakdale Apartments

compliance with those requirements. We believe that our audit provides a

reasonable basis for our opinion.

The results of our audit procedures disclosed instances of noncompliance

with the requirements referred to above, which are described in the

accompanying schedule of findings and questioned costs. We considered

these instances of noncompliance in forming our opinion on compliance,

which is expressed in the following paragraph.

In our opinion, the West Oakdale Apartments complied, in all material

respects, with the requirements described above that are applicable to
its

major HUD-assisted programs for the year ended December 31, 1991.

February 12, 1992

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6/92 A-8

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4370.4 REV-1

APPENDIX 1

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AUDITOR\'S COMMENTS ON AUDIT RESOLUTION MATTERS

Per HUD letter of November 10, 1991 all prior audit findings have been

successfully resolved.

February 12, 1992 XYZ and Company, CPA

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-9 6/92

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4370.4 REV-1

APPENDIX 1

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AUDITEE\'S RESPONSE, OR CORRECTIVE ACTION PLAN

Name and Number of Project: West Oakdale Apartments - 123-45678

Auditor/Audit Firm: XYZ and Company

Audit Period: December 1, 1991 - December 31, 1991

Section I - Internal Control Structure Review

A. Comments on Findings and Recommendations

West Oakdale Apartments concurs with the findings of the

auditor.

B. Actions Taken or Planned

None Required

C. Status of Corrective Action or Prior Findings

Per letter of November 10, 1991 from HUD West Oakdale

Apartments has corrected all prior audit findings.

Section II - Compliance Review

A. Comments on Findings and Recommendations

(See Section I.A. above.)

B. Actions Taken or Planned

None Required

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6/92 A-10

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4370.4 REV-1

APPENDIX 1

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West Oakdale Apartments

FHA Project

123-45678

CERTIFICATE OF OWNER/MANAGEMENT AGENT

I hereby certify that I have examined the accompanying financial
statements

and supplemental data of West Oakdale Apartments and, to the best of my

knowledge and belief, the same is complete and accurate.

J. P. Doe February 12, 1992

CERTIFICATE OF MANAGEMENT AGENT

We hereby certify that we have examined the accompanying financial

statements and supplement data of West Oakdale Apartments and to the
best

of our knowledge and belief the same is complete and accurate. The

financial statements were prepared by A - B Management Co.

A - B Management

J. Jones February 10, 1992

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A-11 6/92

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4370.4 REV-1

APPENDIX 1

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Exhibit A STATEMENT OF FINANCIAL POSITION (BALANCE SHEET)

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENT\'S

AS OF DECEMBER 31, 1991

ASSETS

CURRENT ASSETS

1120 Funds in Banks and On Hand \$13,859

(Schedule A-1)

Accounts Receivable:

1130 Tenants (Note 2) \$270

1140 Federal Housing Assistance 45

Section 8

Other (Note 2) 749 1,064

\_\_\_\_\_

1240 Prepaid Expenses - property

insurance 2,465

Funds held in impound by

Department of Housing and

Urban Development for:

1310 Taxes (Note 3) \$5,713

1320 Reserve for replacements

(including painting reserve) 12,882 18,595

( Note 4) \_\_\_\_\_\_ \_\_\_\_\_\_

TOTAL CURRENT ASSETS \$35,983

FIXED ASSETS (Schedule A-2) (Note 1) 731,259

\_\_\_\_\_\_\_\_

TOTAL ASSETS \$767,242

========

LIABILITIES AND OWNER\'S EQUITY

CURRENT LIABILITIES

2110 Accounts Payable (Schedule A-3) 5,551

2130 Accrued Interest Payable (net of

interest and MIP subsidy of \$3,143) 1,287

2140 Sponsor\'s Dividend Payable

(Schedule D-2) 2,035

2191 Security Deposits 4,671

2320 Mortgage Payable - current

portion (Note 5) 5,902

\_\_\_\_\_

TOTAL CURRENT LIABILITIES \$19,446

2140 SPONSORS DIVIDEND PAYABLE - DEFERRED (Schedule D-2) 8,364

2320 MORTGAGE PAYABLE (Note 5) 753,520

\_\_\_\_\_\_\_\_

TOTAL LIABILITIES \$781,330

3130 OWNER\'S EQUITY (DEFICIT) (Exhibit C) (14,088)

TOTAL LIABILITIES AND OWNER\'S EQUITY \$767,242

========

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6/92 A-12

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4370.4 REV-1

APPENDIX 1

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Schedule A-1 SCHEDULE OF FUNDS IN BANKS AND ON HAND

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENT\'S

AS OF DECEMBER 31, 1991

Cash in Office (petty cash fund) \$50

Bank of U.S.A. 1,318

Region Savings and Loan Associations - unrestricted 7,754

Thrifty Savings and Loan Associations:

Tenant\'s security deposit account:

Restricted - (contra) \$4,671

Unrestricted 66 4,737

\_\_\_\_\_\_\_

\_\_\_\_\_\_

TOTAL FUNDS IN BANKS AND ON HAND \$13,859

=======

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-13 6/92

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4370.4 REV-1

APPENDIX 1

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Schedule A-2 SCHEDULE OF CHANGES IN FIXED ASSETS ACCOUNT

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE, APARTMENTS

FOR THE YEAR ENDED DECEMBER 31, 1991

ASSETS

Balance Balance

FIXED ASSETS 12/31/90 Additions Deductions 12/31/91

1410 Land \$155,000 \$155,000

1420 Building 762,529 762,529

1430 Building Equipment 613 \$744 1,357

-portable

1460 Furnishings 10,670 4,692 15,362

1470 Maintenance 1,072 1,072

Equipment

\_\_\_\_\_\_\_\_ \_\_\_\_\_\_ \_\_\_\_\_\_\_\_

TOTAL \$929,844 \$5,436 \$935,320

======== ====== ========

DEPRECIATION RESERVE

Balance Balance

FIXED ASSETS 12/31/90 Additions Deductions 12/31/91

1410 Land

1420 Building \$167,079 \$30,501 \$197,580

1430 Building Equipment 61 197 258

-portable

1460 Furnishings 1,949 3,223 5,172

1470 Maintenance 957 94 1,051

Equipment

\_\_\_\_\_\_\_\_ \_\_\_\_\_\_\_ \_\_\_\_\_\_\_\_

TOTAL \$170,046 \$34,015 \$204,061

======== ======= ========

Net Book Value

FIXED ASSETS 12/31/91

1410 Land \$155,000

1420 Building 564,949

1430 Building Equipment-portable 1,099

1460 Furnishings 10,190

1470 Maintenance Equipment 21

\_\_\_\_\_\_\_\_

TOTALS \$731,259

========

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6/92 A-14

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4370.4 REV-1

APPENDIX 1

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Schedule A-3 SCHEDULE OF ACCOUNTS PAYABLE

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

Andrew Buller and Associates (hazard insurance

premium, August 17, 1991-1992) \$2,372

A-B Management Company 424

A-B Management Company - clients\' trust 136

Local Electric Company 1,226

State Gas Company 458

City of Anytown 426

Ajax Hardware, Inc. 294

Acme Disposal Company 84

Others 131

\_\_\_\_\_

TOTAL ACCOUNTS PAYABLE TO BE

PAID FROM PROJECT FUNDS \$5,551

\_\_\_\_\_\_

Current \$5,460

30-60 days 91

\_\_\_\_\_\_

\$5,551

======

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A-15 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

Exhibit B

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Statement of Income

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

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\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

form HUD-92410 (7/91)

ref. Handbook 4370.2

Page 1 of 2

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-16

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

Exhibit B

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Statement of Income (Continued)

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

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\* GRAPHICS MATERIAL IN ORIGINAL DOCUMENT OMITTED \*

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\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

form HUD-92410

Page 2 of 2

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-17 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Exhibit C

STATEMENT OF CHANGES IN OWNER\'S EQUITY (DEFICIT)

FHA PROJECT NO. 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

FOR THE YEAR ENDED DECEMBER 31, 1991

OWNER\'S EQUITY, DECEMBER 31, 1991 \$8,982

NET (LOSS) FOR YEAR (Exhibit B) (16,792)

SPONSOR\'S DIVIDEND (6,278)

\_\_\_\_\_\_\_\_

OWNER\'S EQUITY (DEFICIT)

DECEMBER 31, 1991 (\$14,088)

=========

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-18

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Exhibit D

Statement of Cash Flows for the Year Ended

December 31, 1991

West Oakdale Apartments

Cash flows from operating activities:

Rental receipts \$96,809

Interest receipts 879

Other receipts (Laundry) 936

Administrative (350)

Management fees (17,182)

Utilities (1,152)

Salaries and wages (10,000)

Operating and maintenance (20,000)

Real estate taxes (8,581)

Mortgage insurance (3,810)

Payroll taxes (1,000)

Property insurance (2,720)

Miscellaneous taxes and insurance (395)

Interest on mortgage note (15,630)

Miscellaneous financial (262)

Tenant security and other deposits 35

Forfieted security deposits 512

\_\_\_\_\_\_\_

Net cash provided (used)

by operating activities \$18,089

Cash flows from investing activities:

Purchase of depreciable assets (\$5,436)

Decrease (increase) in:

Reserve for replacement of

depreciable assets net (2,783)

Reserve for taxes and

insurance 1,894

Decrease in other deposits (115)

\_\_\_\_\_\_\_\_

Net cash provided (used)

by investing activities (6,440)

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-19 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

Cash flows from financing activities:

Mortgage principal payments (5,504)

Cash distributions paid to partners (4,623)

Decrease in Accounts Payable (225)

\_\_\_\_\_\_\_\_

Net cash provided (used) by

financing activities (10,352)

Net increase (decrease) in cash 1,297

Cash - beginning of period 12,562

\_\_\_\_\_\_\_

Cash - end of period \$13,859

=======

Reconciliation of net income (loss to net

cash provided by operating activities:

Net income (loss) (16,792)\*

Adjustments to reconcile net income (loss)

to net cash provided (used) by

operating activities

Depreciation 34,015 \*

Interest earned on Bonds 879 \*

Decrease (increase) in:

Accounts receivable - rent subsidy 1,750

Accounts receivable - tenants (1,152)\*\*

Prepaid property insurance (200)\*\*

Prepaid mortgage insurance (800)\*\*

Prepaid property taxes (758)\*\*

Increase (decrease) in:

Accounts payable - trade (225)\*\*

Accounts payable - management agent 300

Accrued interest payable 1,372

Tenant security deposit payable 300

Rents received in advance (600)\*\*

\_\_\_\_\_\_\_\_\_\_

Net cash provided (used) by

operating activities \$18,089

==========

\* These amounts are taken from the Statement of Income.

\*\* These amounts are arrived at by comparing current year-end balances

with prior year-end balances.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-20

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

Exhibit D-1 APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

\* \*

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\* GRAPHICS MATERIAL IN ORIGINAL DOCUMENT OMITTED \*

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\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*\*

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

HUD-93486 (12-80)

A-21 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 1 - ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING

POLICIES

The Project, owned by John J.P. Doe, an individual, consists of real

property located in San Francisco, California and an apartment complex
of

46 units operated thereon under Section 236 of the National Housing Act.

Such projects are regulated by HUD as to rent charges and operating

methods. The regulatory agreement limits annual distributions of net

operating receipts to \"surplus cash\" available at the end of each
year.

The maximum distributable amount for the year ended December 31, 1991
was

\$6,278 and \"surplus cash\" amounted to \$2,035. Undistributed amounts
are

cumulative and may be distributed in subsequent years if future
operations

provide \"surplus cash\" in excess of current requirements. The
cumulative

amount distributable at December 31, 1991 was \$10,399, limited to
\"surplus

cash.\"

The following significant accounting policies have been followed in the

preparation of the financial statements:

Land and building are stated at recognized \"actual cost\" per U.S.

Department of Housing and Urban Development Form No. 2580 (adjusted

for subsequent legal fee of \$5,989). Capitalized costs include

interest during construction. Depreciation is provided using the

straight-line method over the estimated useful lives of the assets.

No income tax provision has been included in the financial statements

since income or loss is required to be reported by the owner on his

income tax return.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-22

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 2 - ACCOUNTS RECEIVABLE

Number of

Tenants Amount Due

Tenants:

December 3 \$110

October 1 95

September 1 65

\_\_\_\_

TOTAL \$270

====

Others:

XYZ Agency, Inc. \$634

Other 115

\_\_\_\_\_

\$749

=====

NOTE 3 - MORTGAGE ESCROW DEPOSITS

Estimated amount required for future payment of:

City and County taxes \$1,434

Amount on deposit in excess of estimated payments 4,279

\_\_\_\_\_\_

TOTAL CONFIRMED BY MORTGAGEE \$5,713

======

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-23 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 4 - RESERVE FOR REPLACEMENTS (INCLUDING PAINTING RESERVE)

In accordance with the provisions of the regulatory agreement,
restricted

cash is held by Department of Housing and Urban Development to be used
for

replacement of property and exterior painting with the approval of HUD
as

follows:

Reserve for Replacements:

Balance, December 31, 1990 \$5,152

Monthly Deposits:

\$215.69 x 12 \$2,588

Extra 340 2,928 \$8,080

Withdrawals:

February 8, 1991:

Carpets - capitalized 1,428

Door - expenses 33 1,461

May 6,1991:

Drapes - capitalized 318

Disposal - expensed 21 339 (1,800) \$6,280

Painting Reserve:

Balance, December 31, 1990 4,946

Monthly Deposits (\$138 x 11) 1,518 6,464

Transferred to HUD (6,464)

Monthly Deposits (\$138 x 1) 138 6,602

BALANCE, DECEMBER 31,1991, CONFIRMED BY MORTGAGEE \$12,882

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-24

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 4 - RESERVE FOR REPLACEMENTS (INCLUDING PAINTING RESERVE)

(CONTINUED)

The following information pertains to Reserve for Replacement
reimbursement

requests that were authorized:

Amount of Purpose of Account Fiscal Year

Request Request Charged Affected

\$354 (1) Refrigerator 1430 December 31, 1991

823 (2) Carpets and Drapes 1460 December 31, 1991

\(1\) Form HUD 9250 - approved October 17, 1991 (applied to January,
1992

payment)

\(2\) Form HUD 9250 - approved December 13, 1991 (applied to February,
1992

payment)

NOTE 5 - MORTGAGE PAYABLE - DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT

The Project has obtained a mortgage loan insured by FHA under the
interest

reduction provisions of Section 236 of the National Housing Act. The

Section 236 program is a federally assisted program designed to provide

housing for families with low and moderate incomes. The annual payments

of principal and interest for 1992 total \$58,874, less interest and MIP

subsidy of \$37,714, for net annual payments of \$21,160. The annual MIP

premium for 1992 will be \$3,781. The January, 1992 mortgage payment

consists of the following:

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-25 6/92

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4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 5 - MORTGAGE PAYABLE - DEPARTMENT OF HOUSING AND URBAN

DEVELOPMENT (CONTINUED)

Principal \$476.22

Interest at 7% 4,429.96

Property taxes 772.11

Mortgage insurance premium 315.31

Replacement reserve payment 430.31 \*

Painting reserve payment 166.67

Interest and MIP subsidy (3,143.06)

Reserve for replacement withdrawal (353.60)

\_\_\_\_\_\_\_\_\_\_

NET PAYMENT \$3,093.92

\* This represents the current monthly payment of \$323.00 plus
December,

1991 shortage of \$107.31.

NOTE 6 - RENT INCREASE

Approval was received for a rent increase to \$103,800 per year
effective

September 1, 1991 from \$96,360.

NOTE 7 - MANAGER\'S SALARY

The amount includes \$1,648 (seven months at \$180 and November and
December,

1991 at \$194) for manager\'s apartment. The current manager, J. Jones,
(as

of January 26, 1992) occupies Apartment #5 at a current monthly rental
of

\$194.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-26

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 8 - MANAGEMENT FEES

Includes \$596 special fee adjustment for December 31, 1990 (\$7,179 x
8.3%).

NOTE 9 - FINANCIAL EXPENSES

Interest on mortgage payable \$53,341

Insurance on mortgage 3,810

Less: Interest and MIP subsidy (37,741) \$19,410

\_\_\_\_\_\_\_\_

Interest - County of San Francisco 262

\_\_\_\_\_\_\_

TOTAL FINANCIAL EXPENSES \$19,672

=======

NOTE 10 - COMMITMENTS AND CONTINGENCIES

The Project has entered into a management contract with A-B Management

Company to manage the apartment complex. A-B Management Company receives

7 1/2% of gross receipts as a management fee. The contract expires on

February 29, 1992. Managing agent on January 23, 1992 sent to FNMA and

HUD approval to extend agreement for one year to February 28, 1993; it
has

been signed by the managing agent and the sponsor.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-27 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTE 11 - COMPENSATION OF OWNER

None

NOTE 12 - RENT SUPPLEMENT CONTRACT

A Section 8 Housing Assistance Payments Program contracted with the U.S.

Department of Housing and Urban Development has been entered into,

effective October 1, 1988 and ending September 30, 1992. It provides for

an annual maximum commitment of \$68,796 per annum. Collections on this

contract were as follows:

Contract Collections

October 1, 1988 - September 30, 1989 \$68,796 \$14,021

October 1, 1989 - September 30, 1990 68,796 28,471

October 1, 1990 - September 30, 1991 68,796 40,026

October 1, 1991 - September 30, 1992 68,796 11,144\*

\_\_\_\_\_\_\_ \_\_\_\_\_\_\_

\$275,184 \$93,662

\*To December 31, 1991.

NOTE 13 - RELATED ENTITY

The Project uses services provided by Service Maintenance Corporation, a

company wholly owned by Able Smith, who is a partner in A-B Management

Company, the managing agent of the Project.

The total amount of services rendered by Service Maintenance Corporation

during 1991 was \$17,507. Some of the services provided are gardening,

general repairs and maintenance, plumbing repairs, drain service,
painting,

masonry, heavy electrical, plastering, purchase of carpets and drapes,
and

consultation on repairs and maintenance.

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

6/92 A-28

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

NOTES TO THE FINANCIAL STATEMENTS

FHA PROJECT NO.: 123-45678

PROJECT NAME: WEST OAKDALE APARTMENTS

AS OF DECEMBER 31, 1991

NOTE 14 - DEPRECIATION

The following details the depreciation expense for the period ending

December 31, 1991.

Buildings \$30,501

Building Equipment-portable 197

Furnishings 39223

Maintenance Equipment 94

\_\_\_\_\_\_\_

\$34,015

=======

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

A-29 6/92

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

4370.4 REV-1

APPENDIX 1

\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_\_

AUDIT COMPLIANCE AND INTERNAL CONTROL QUESTIONNAIRE

NOTE A - ITEM 3d (FIDELITY BOND)

The managing agent manages sixty properties (forty-five HUD projects)
with

potential collections for two months aggregating \$1,973,242. He carried
a

fidelity bond of \$200,000, or 10.14%. Your office has indicated that
this

provision should be figured on the aggregate. We have therefore listed

this as a condition not in compliance.

REPLY

The managing agent has been in contact with John Smith, Office of

Multifamily Housing Management, HUD Central, Washington, D.C. as to the

aggregate requirement of two times potential collections of the largest

project managed; this would amount to \$197,930, and therefore the
current

\$200,000 would be adequate. Mr. Smith has stated that a resolution to

this matter will be forthcoming and that the field will be notified.

NOTE B - ITEMS 6a, 6b, 6c and 6d (TENANT ELIGIBILITY)

Our sampling of tenants\' files disclosed that a portion did not contain

original FHA Form 3131, current recertification forms, or evidence of

independent verification of family income.

REPLY

The managing agent\'s staff is currently working to bring all tenant
files

into a condition of compliance with these requirements.

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6/92 A-30