louisiana housing council authorities group insurance risk...

Louisiana Housing Council Authorities Group Self Insurance

Risk Management Agency March 31, 2014

Table of Contents

Independent Auditor's Report Page 3

Management's Discussion and Analysis Page 5

Basic Financial Statements Balance Sheets Page 8 Statements of Revenues,

Expenses, and Changes in Net Position Page 9 Statements of Cash Flows Page 10

Notes to Financial Statements Page 12

Required Supplementary Information Schedule 1-10 Year Claims Development Information

Workers' Compensation Fund 3 Health Fund Page 24 General Liability Fund Page 25 Property Fund Page 26

Supplementary Information Combining Balance Sheets Page 28 Combining Statements of Revenues,

Expenses, and Changes in Net Position Page 30 Financial Indicator Table Page 32

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With. Government Auditing Standards Page 34

Independent Auditor's Report on Compliance for Each Major Program and on Internal Control over Compliance Required by OMB Circular A-133 Page 36

Schedule of Expenditures of Federal Awards Page 38

Notes to Schedule of Expenditures of Federal Awards Page 39

Schedule of Current Year Findings and Questioned Costs Page 40

Schedule of Prior Year Findings and Questioned Costs Page 43

HAWTHORN, WAYMOUTH & CARROLL, L.L.P.

LOUIS c, MCKNIGHT, HI, G.P.A. CHARLES R. REVEY, JR., C.R.A, DAVID J. BROUSSARD, C.R.A. NEAL 0. KING, C.R.A. KARIN S. LEJEUNE, C.R.A. AlA-CE S. SCHMITT, C.P.A.

iJtHIIHtU PUBLIU ALIUOyN iAN i S 8555 UNITED PLAZA BLVD., SUITE 200

BATON ROUGE, LOUISIANA 70809 (225] 923-3000 ® FAX (225) 923-3008

Independent Auditor's Report

Insurance Committee Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency Church Point, Louisiana

Report on the Financial Statements

We have audited the accompanying financial statements of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency, which comprise the balance sheets as of March 31, 2014 and 2013, and the related statements of revenues, expenses, and changes in net position and cash flows for the years 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 audits. We conducted our audits 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 Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency as of March 31, 2014 and 2013, and the changes in its net position and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

other Matters

Required Supplementary Information

Accounting principles generally accepted in the United States of America require that the management's discussion and analysis on pages 5 through 7 and the schedule 1-10 year claims development information on pages 23 through 26, be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management's responses to our inquiries, the financial statements, and other knowledge we obtained during our audit of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance.

Supplementary Information

Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The combining balance sheets on pages 28 and 29, combining statements of revenues, expenses, and changes in net position on pages 30 and 31, and financial indicator tables on pages 32 and 33 are presented for purposes of additional analysis and are not a required part of the financial statements. Such 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. The 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 information is fairly stated in all material respects in relation to the financial statements as a whole.

Other Information

Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the financial statements. Such 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. The 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 information is fairly stated, in all material respects, in relation to the financial statements as a whole.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated September 26, 2014, on our consideration of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency'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 Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's internal control over financial reporting and compliance.

V

September 26, 2014

Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency Management's Discussion and Analysis

March 31, 2014

The following is management's discussion and analysis of the financial performance of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency (the Agency) for the fiscal year ended March 31, 2014. It is presented as a narrative overview and analysis for the purpose of assisting the reader in interpreting the key elements of the financial statements, notes to the financial statements, and supporting schedules for the current year,

Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency is an association of City and Parish Public Housing Authorities in the State of Louisiana that pools its funds to purchase certain types of insurance coverage. The Agency was originally formed in 1994 and currently offers coverage for Workers' Compensation, Fire and Extended Coverage (Property), and General Liability. Each line of coverage is a separate fund within the Agency and has different membership, with the General Liability Fund having the broadest membership of 117 Authorities. Additional coverages offered by LHC include Public Officials Liability, Health, Long Term Disability, Life, and Pension.

A committee of 7 members, along with an Insurance Coordinator (who is contracted by the LHC Executive Committee), serves as the insurance committee. This committee makes the decisions regarding the insurance operations, and results are shown herein. The Agency and its insurance program are currently administered by Arthur J. Gallagher Risk Management Services, Inc. at the direction of the committee.

Financial Highlights

(in Millions) Percentage

At March At March At March Increase 31.2014 31,2013 31.2012 tDecreasel

Cash and Investments 9.84 12.51 11.73 (21.3%) Reserves for Unpaid Claims 2.55 1.72 1.19 48.3% Net Position 7.20 9.14 9.61 (21.2%)

Fiscal Fiscal Fiscal Percentage Year Year Year Increase 2014 2013 2012 (Decrease)

Premium Income 11.83 12.25 11.15 (3.4%) Premiums Ceded and Insurance

Policies Purchased 8.58 8.01 6.43 7.1% Investment Income and

Change in Unsold Investments 0.03 0.07 0.14 (57.1%) Net Claims Expense 4.52 3.86 3.32 17.1% Administrative, Legal and Overhead Fees 0.24 0.63 0.83 (61.9%) Net Income (Loss) Prior to Dividends (1.44) 0.22 1.48 (754.5%) Policyholder Dividends 0.50 0.70 1.80 (28.6%) Net Income (Loss) (1.94) (0.48) (0.32) (304.2%)

As shown above, cash and investments have decreased by 21.3%, which was the result of disbursements of $500,000 on a policyholder dividend and of approximately $1,200,000 on a CDBG Grant paid in 2014. Property premiums earned decreased by $414,000 (3.4%), while premiums ceded increased by $570,000 (7.1%). These fluctuations were primarily driven by an increase in total insured values from the prior year by $242,282,717, or 17.96%, and a decrease in property rate of 6.75%. The value increase was driven primarily by an increase in "square footage" valuation per unit up to $90.

Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency

Management's Discussion and Analysis March 31, 2014

Financial Highlights (Continued)

Property claims expenses increased from 2013 to 2014 due to two large claims that pierced the Fund's SIR of $175,000. One was a large fire loss; the other was a large hail loss that was reported. In addition, General Liability claims also increased by approximately $690,000. This increase is primarily a result of an increase in reserves for open claims which increased by approximately $230,000 for prior open claims, and the addition of the current year reserved losses of approximately $460,000. LHC's insurance programs have a combined $7.2 million in total fund equity as of March 31, 2014.

Net claims incurred increased by approximately $660,000, which was primarily a result of an increase in property and general liability claims expense from 2013 to 2014. The table below shows claims expense by each self-insured fund over the past three years.

Fiscal Year Fiscal Year Fiscal Year 2014 2013 2012

Workers' Compensation $ 6,897 $ (5,470) $ (5,846) Health 2,681,644 2,525,073 2,545,470 Property Fund 895,987 837,056 598,909 General Liability 936,478 505,196 180,817

Total claims expense, net $ 4,521,006 $ 3,861,855 $3,319,350

Investment income for fiscal year 2014 was approximately $26,000 or about 0.8% earned on average cash and investments, compared to approximately $67,000 and 1.0% earned from fiscal year 2013. The trend in investment earnings is consistent with the overall investment environment for the current fiscal year.

The overall net income (loss) prior to dividends for the 2014 fiscal year was approximately ($1,437,000) versus $220,000 for the 2013 fiscal year. This decrease in net income was driven mostly by the decrease in net premiums earned and the increase in claims expenses discussed above.

Basic Financial Statements

The basic financial statements include information for Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency. The statements are presented in accordance with Governmental Accounting Standards Board (GASB) accounting principles and include the Balance Sheets; Statements of Revenues, Expenses, and Changes in Net Position; and Statements of Cash Flows.

The Balance Sheets present the assets and liabilities of the Agency and insurance programs. The difference between total assets and liabilities is represented as net position and is a useful indicator of the surplus generated for all years of operation. The change in net position is a useful measure of whether the financial position is improving or deteriorating.

The Statements of Revenues, Expenses, and Changes in Net Position present the results of the insurance operations for the past two fiscal years. This statement shows the revenues generated by the funds along with the associated expenses. The revenues in excess of expenses or expenses in excess of revenues are represented as the change in net position from one year to another.

The Statements of Cash Flows presents information showing how cash changed throughout the fiscal years as a result of operations.


Management's Discussion and Analysis March 31, 2014

Other Receivables

The balance sheets contain an asset referred to as "Other Receivables." The balance in this account is comprised of the items detailed in the following table.

March 31, March 31, March 31, 2014 2013 2012

Pension Forfeiture Credits Receivable $ 114,525 $ 112,051 $ 104,794 Policyholder Dividends Receivable 281,308 197,392 93,558 Miscellaneous Receivables (3,769) - 15,516

Total other receivables $ 392,064 $ 309,443 $ 213,868

As detailed above, the most significant changes from year to year were in policyholder dividends due to the Agency from its workers compensation coverage provider, Louisiana Workers' Compensation Corporation (LWCC). The dividend was declared by LWCC for the 2013 calendar year but was not received by the Agency until after March 31,2014.

Unearned Premiums

When premiums are pre-collected for a renewal or insurance carrier premium installment, a liability must be established to reflect that as of that point in time, those collections were made for activity that was to happen subsequent to the date of the financial statements.

Other Payables

The Balance Sheets as of March 31, 2014 and 2013 contain "Other Payables" of approximately $500,000 and $1.8 million, respectively. These amounts represent dividends that were approved by the insurance committee prior to fiscal year end but not paid as of March 31, 2014 and 2013, respectively, as well as grant funds held by the Agency to be distributed to its members.

Contacting the Agency's Insurance Coordinator

This financial report is intended to provide a general overview of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency for interested parties. Questions concerning information provided herein, or requests for additional financial information, should be addressed to the Louisiana Housing Council's Insurance Coordinator:

Ms. Gertrude Broach 405 South David

Church Point, LA 70525


Balance Sheets March 31, 2014 and 2013

2014 2013 Assets

Cash and cash equivalents Investments, at fair value

Short-term securities Government securities Corporate bonds

Premiums receivable Reinsurance receivables, net Prepaid expenses Other receivables Escrow funds Accrued interest

Total assets

$ 2,542,208 $ 4,224,449

203,195 7,011,346

80,451

141,390 341,643 392,064 10,000 18,286

10,740,583

94,274 8,187,260

10,457

9,717 160,965 309,443 36,897 36,183

$ 13,069,645

Liabilities Accounts payable Unpaid claims liability Deposits Unearned premiums Pension funds payable Pension forfeitures payable Other payables

Total liabilities

132,778 2,545,331

76,491 107,393 61,820 114,525 501,116

3,539,454

22,156 1,721,929

104,677 85,855 65,981

112,051 1,818,975

3,931,624

Net Position Unrestricted 7,201,129 9,138,021

Total liabilities and net position $ 10,740,583 $ 13,069,645

The accompanying notes are an integral part of these financial statements.


Statements of Revenues, Expenses, and Changes in Net Position

2014 2013

Revennes Premiums earned $ 11,831,152 $ 12,245,496

Premiums ceded (8,577,281) (8,007,044)

Net premiums earned 3,253,871 4,238,452

Pension funds received 703,138 745,946

Investment income 26,380 67,318

LHC fee 125,401 112,504

Grant income 1,137,886 460,349

Other revenue 302,800 251,791

Total revenues 5,549,476 5,876,360

Expenses Claims expenses 5,649,499 4,055,721

Less reinsurance proceeds (1,128,493) (193,866)

Net incurred claims expenses 4,521,006 3,861,855

Administrative fees 122,324 122,361

Insurance coordinator fees 20,004 20,004

Claims administrator fees 233,168 218,765

Pension funds transferred 702,496 745,234

Fees paid to LHC 125,401 112,504

Loss prevention costs - 3,150

Bank service charges/other 73,958 88,896

Legal fees 41,625 14,732

Actuarial fees 8,500 4,500

Policyholder dividends 500,000 699,558

Grant expenses 1,137,886 460,349

Total expenses 7,486,368 6,351,908

Net Income (Loss) (1,936,892) (475,548)

Net Position Beginning of year 9,138,021 9,613,569

End of year $ 7,201,129 $ 9,138,021



Statements of Cash Flows Years Ended Mareh 31, 2014 and 2013

2014 2013

Cash Flows From Operating Activities Premiums received $ 11,841,609 $12,286,072

Premiums paid (8,583,931) (7,854,556)

Reinsurance proceeds 1,023,591 825,798

Pension funds received 700,664 738,689

Investment activity (986,542) 148,007

Claims paid (4,852,867) (3,523,127)

Pension funds paid (706,657) (737,564)

Payments for fees and bank charges (514,357) . (686,294)

Policyholder dividends paid (698,442) (1,804,236)

Grant funds received 18,438 1,579,798

Grant funds distributed to members (1,137,886) (460,349)

Other receipts 1,316,559 347,322

Net cash provided by (used in) operating activities (2,579,821) 859,560

Cash Flows From Investing Activities Proceeds from sale and maturity of

investment securities 13,082,696 1,130,657

Purchase of investment securities (12,185,116) (146,055)

Net cash provided by investing activities 897,580 984,602

Net Increase (Deerease) in Cash and Cash Equivalents (1,682,241) 1,844,162

Cash and Cash Equivalents, beginning of year 4,224,449 2,380,287

Cash and Cash Equivalents, end of year $ 2,542,208 $ 4,224,449


10


Statements of Cash Flows Years Ended March 31, 2014 and 2013

2014 2013

Reconciliation of Net Income (Loss) to Net Cash Provided by (Used in) Operating Activities

Net income (loss) $(1,936,892) $(475,548)

Adjustments to reconcile net income (loss) to

net cash provided by (used in) operating activities

Net depreciation in fair value of investments 35,062 84,439

Realized (gain) loss on investments 53,900 (2,983)

(Increase) Decrease in assets: Receivables (203,837) 584,486

Accrued interest 17,897 (737)

Prepaid expenses (180,678) 152,488

Escrow funds 26,897 (2,990)

Increase (Decrease) In liabilities:

Unpaid claims liability 823,402 532,594

Unearned premiums 21,538 (7,553)

Accounts payable 110,622 (27,045)

Pension funds payable (4,161) 413

Pension forfeitures payable 2,474 7,257

Other payables (1,317,859) 14,739

Deposits (28,186) -

Net cash provided by (used in)

operating activities $(2,579,821) $ 859,560


11

Louisiana Housing Council Authorities Group Self Insurance Risk Management Ageney

Notes to Finaneial Statements March 31, 2014

Note 1-Public Entity Risk Pools

In April, 1984, the Governmental Accounting Standards Board (GASB) was established as an arm of the Financial Accounting Foundation to promulgate standards of financial accounting and reporting with respect to activities and transactions of state and local entities.

In November, 1989, the GASB issued Statement No. 10 "Accounting and Financial Reporting for Risk Financing and Related Insurance Issues" (GASB 10) to establish accounting and financial reporting standards for risk financing and insurance-related activities of state and local governmental entities, including public entity risk pools.

In February, 1996, the GASB issued Statement No. 30 "Risk Financing Omnibus, An Amendment of GASB Statement No. 10."

A "public entity risk pool" is defined in GASB 10 as a "cooperative group of governmental entities joining together to finance an exposure, liability, or risk." There are four basic types of public entity risk pools which can serve one or several of the following functions:

Risk-Sharing Pool

An arrangement by which governments pool risks and funds and share in the control of losses.

Insurance-Purchasing Program

An arrangement by which governments pool funds or resources to purchase commercial insurance products.

Banking Pool

An arrangement by which monies are made available for pool members in the event of loss on a loan basis.

Claims-Servicing or Account Pool

An arrangement by which a pool manages separate accounts for each pool member from which the losses of that member are paid.

Risk-Sharing Pools Insurance-Purchasing Programs

Flealth Fund Long-Term Disability Fund Property Fund Life Insurance Fund

General Liability Fund Public Officials Liability Fund Workers' Compensation Fund

In 1981, the Louisiana Legislature enacted Louisiana Revised Statutes (LRS) 33:1351 through 33:1360, the "Local Housing Authority Self Insurance Act of 1981." LRS 33:1354 authorizes the Louisiana Housing Council, Inc. (LHC) to administer an inter-local risk management agency, with the insurance committee of the LHC constituting the board of trustees for such agency. LHC is an association for the housing authorities of Louisiana and is incorporated as a nonprofit corporation under the laws of the State of Louisiana.

12

Louisiana Housing Council Authorities Group Self Insuranee Risk Management Agency

Notes to Financial Statements March 31, 2014

Note 1-Public Entity Risk Pools (Continued)

Participation in Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency (the "Agency") is open to all housing authorities which are members of the Louisiana Housing Council, Inc. These housing authorities join together to acquire commercial insurance coverage at lower costs. Participation is voluntary and participants may withdraw by giving proper notice. The Agency's general objectives are to formulate, develop and administer, on behalf of the member housing authorities, a program of inter-local risk management to obtain lower costs for that coverage.

Risk-Sharing Pools

Participating housing authorities transfer risk of loss to the funds in the risk-sharing pool. If the assets of the Agency are exhausted, participants will be responsible for their respective outstanding claims.

The Health Fund had fifty-four and fifty-one housing authorities participating as of March 31, 2014 and 2013, respectively. Benefit Management Systems performs the claims processing for the Health Fund.

The General Liability Fund had one hundred twenty-eight and one hundred twenty-six housing authorities participating as of March 31, 2014 and 2013, respectively. Louisiana Claims Administration performs claims processing for the General Liability Fund and maintains a "Loss Fund" account for payment of claims.

The Property Fund had one hundred twenty-four and one hundred twenty-three housing authorities participating as of March 31, 2014 and 2013, respectively. Louisiana Claims Administration performs claims processing for the Property Fund and maintains a "Loss Fund" account for payment of claims.

Fund underwriting and rate-setting policies have been established by the LHC Insurance Committee, which is the governing body of the Agency.

Insurance-Purchasing Programs

The insurance-purchasing pools include the Workers' Compensation Fund, Long-Term Disability Fund, Life Insurance Fund and the Public Officials Liability Fund, which are comprised of members of the Louisiana Housing Council, Inc. The Funds receive premiums from the housing authorities and pool the funds to purchase commercial insurance products.

Note 2-Summary of Significant Accounting Policies

A. Basis of Accounting

The Agency is considered an enterprise fund and, accordingly, uses the accrual method of accounting. Revenues are recorded in the period in which they are earned and expenses are recorded in the period in which they are incurred.

13



Note 2-Summary of Significant Accounting Policies (Continued)

B. Cash and Cash Equivalents

For purposes of the statements of cash flows, the Agency considers all cash on hand, financial institution deposits, and highly liquid debt instruments purchased with a maturity of three months or less that are not included in an investment portfolio to be cash equivalents.

C. Investments

Investments are reported at fair value. Fair value is based on the market value on the last business day of the fiscal year. Purchases and sales of securities are reflected on the trade date. Interest income is recorded as earned on the accrual basis. See Note 6 for further discussion regarding fair value measurements.

D. Premium Income and Receivables

Premiums are recognized as income over the term of the policies as they become earned on a pro-rata basis. Any adjustments to annual premiums are considered to be a change in estimate and are recognized in the year they become known. The costs associated with new and renewal contracts as acquisition costs are immaterial to the financial statements and are expensed when incurred.

Accounts receivable are stated at the amount management expects to collect from balances outstanding at year-end. Management evaluates accounts receivable on a periodic basis and determines the necessity of an allowance for doubtful accounts based on history of past write-offs, collections, and current conditions. Receivables are written off when it is determined that all collection efforts have been exhausted. At March 31, 2014 and 2013, the allowance for doubtful accounts was $56,236.

E. Unpaid Claims Liabilitv

(I) Flealth Fund, Property Fund, and General Liability Fund

These funds establish claims liabilities based on estimates of the ultimate cost of claims (including future claim adjustment expenses) that have been reported but not settled and of claims that have been incurred but not reported. The length of time for which such costs must be estimated varies depending on the coverage involved. Estimated amounts of reinsurance recoverable on unpaid claims are deducted from the liability for unpaid claims. Because actual claims costs depend on such complex factors as inflation, changes in doctrines of legal liability, and damage awards, the process used in computing claims liability does not necessarily result in an exact amount. Claims liabilities are recomputed periodically using a variety of actuarial and statistical techniques to produce current estimates that reflect recent settlements, claims frequency, and other economic and social factors. A provision for inflation in the calculation of estimated future costs is implicit in the calculation. The carrying amount of liabilities for claims losses and claims expense is presented at actual amounts expected to be spent and are not discounted to present value. Investment earnings are not taken into account in determining claims liability.

(II) All Other Insurance Funds

These funds buy insurance from various commercial insurance companies to cover all claims; therefore, no reserve for unpaid claims liability has been established.

14



Note 2-Summary of Significant Accounting Policies (Continued)

F. Excess and Reinsurance Policies

The funds in the risk-sharing pools purchase excess and reinsurance policies to reduce exposure to large losses on insured events. Under excess policies, once claims reach the provided specific or aggregated stop loss limit, the liability transfers to the excess insurer. Reinsurance policies permit recovery of a portion of losses, although they do not discharge the primary liability of the individual funds as direct insurer of the risks. Funds do not report reinsured risks as liabilities unless it is probable that those costs will not be covered by reinsurers. The Agency evaluates the financial condition of its reinsurers and monitors concentrations of credit risk arising from similar geographic regions, activities, or economic characteristics of the reinsurers to minimize their exposure to significant losses from reinsurer insolvencies.

G. Income Taxes

The Agency is exempt from federal income taxes under Sections 7701 and 115 (1) of the lnternal Revenue Code.

IT. Use of Estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting periods. Actual results could differ from those estimates. Significant estimates made by management which might affect these financial statements include, but are not limited to, the unpaid claims liability for all risk-sharing pools.

I. Reclassifications

Certain amounts in the prior period presented have been reclassified to conform to the current period financial statement presentation. These reclassifications have no effect on previously reported net income or net position.

Note 3-Agency Pool

The Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency sponsors an Agency Pool, which includes only the Pension Fund. This fund receives the contributions from the housing authorities and remits them to the custodian.

Note 4-Cash, Cash Equivalents and Investments

A. Agency

Cash and cash equivalents are stated at cost, which approximates market value. Under state law, the Agency may deposit funds within a fiscal agent bank selected and designated by the Board. Further, the Agency may purchase time certificates of deposit of any bank domiciled or having a branch office in the State of Louisiana, invest in savings accounts or shares of savings and loan associations and savings banks and in share accounts and share certificate accounts of federally or state chartered credit unions.

15


Notes to Financial Statements Mareh 31, 2014

Note 4-Cash, Cash Equivalents and Investments (Continued)

A. Agency (Continued)

Under Louisiana Revised Statutes, the Agency may invest in obligations of the U.S. Treasury, obligations of U.S. Agencies which are guaranteed by the U.S. government or U.S. government agencies, repurchase agreements, certificates of deposit as mentioned above, investment grade commercial paper, investment grade corporate notes and bonds, and other investments as required by the terms of bond trust indentures.

B. Cash and Cash Equivalents

At March 31, 2014 and 2013, the carrying amount of the Agency's cash and cash equivalents was $2,542,208 and $4,224,449, respectively. At March 31, 2014 and 2013, the Agency had $2,150,302 and $3,967,586 in deposits (collected bank balances), respectively. As of March 31, 2013, $500,000 was covered by the Federal Deposit Insurance Corporation (FDIC). The remaining balance was unsecured. The deposits as of March 31, 2014 were fully secured from risk by the FDIC and pledged securities.

C. Investments

(I) Interest Rate Risk

The Agency does not have a formal investment policy that limits investment maturities as a means of managing its exposure to fair value losses arising from increasing interest rates. The following table summarizes the Agency's segmented time distribution investment maturities in years by investment type as of March 31, 2014 and 2013.

Investment Maturity in Years

Fair Less Investment Tvoe Value than I I -5 6-10 10+

March 31, 2014 U.S. Treasury Notes $ 444,902 $ - $ 444,902 $ - $ -U.S. Government Agency Bonds 863,141 - 863,141 ~ -U.S. Government Agency Notes 5,703,303 - 1,810,673 - -Corporate Bonds 80,451 - 80,451 1,491,386 2,401,244

$ 7,091,797 $ - $3,199,167 $1,491,386 $2,401,244

March 31, 2013 U.S. Treasury Notes $ 737,342 $ 686,629 $ 50,713 $ $ -U.S. Government Agency Bonds 1,782,397 281,117 1,501,280 - -U.S. Government Agency Notes 5,667,521 1,982,759 3,684,762 - -

$ 8,187,260 $ 2,950,505 $ 5,236,755 $ - $ -

(II) Credit Risk

The following table is provided for use in determining the Agency's level of exposure to credit risk as of M

S&P Fair Value Fair Value Rating at 2014 at 2013

Government $7,011,346 $ 8,187,260

Unrated $ 80,451 $ -

16

Louisiana Housing Council Authorities Group Self Insuranee Risk Management Ageney

Notes to Financial Statements Mareh 31, 2014

Note 4-Cash, Cash Equivalents and Investments (Continued)

C. Investments (Continued)

(III) Custodial Credit Risk

For an investment, custodial credit risk is the risk that, in the event of the failure of the counterparty, the Agency will not be able to recover the value of its investments or collateral securities that are in the possession of an outside party. The Agency's investments are held by the custodial bank as an agent for the Agency, in the Agency's name and are thereby not exposed to custodial credit risk.

(IV) Concentration of Credit Risk

The Agency places no limit on the amount that may be invested in any one issuer. The Agency has no investments in any single organization (other than those issued or guaranteed by the U.S. Government) that represent five percent or more of the Agency's total assets.

Note 5-Unpaid Claims Liability

The funds shown below have established liabilities for both reported and unreported insured events, which include estimates of future payments of losses and related claim adjustment expenses, both allocated and unallocated.

Changes in these liabilities for the year ended March 31, 2014 are as follows:

Workers' Compensation

Fund Health Fund

March 31. 2014 Unpaid claims and claims adjustment

expenses at March 31, 2013

Incurred claims and claims adjustment expenses of the current period

Increases (decreases) in provision for insured events of prior years

Total incurred claims and claims adjustment expense

Payments for claims and claims adjustment expenses attributable to:

Insured events of current year Insured events of prior years

Total payments and claims adjustment expenses

Total unpaid claims and claims adjustment expense at March 31, 2014

$ 364,588

2,782,884

(101,240)

2,681,644

2,544,286 263,348

2,807,634

$ 238,598

Property General Liability

Fund Fund Total

$ 349,831 $1,007,510 $1,721,929

887,449 525,247 4,195,580

6,475 411,231 316,466

893,924 936,478 4,512,046

483,772 9,177 3,037,235 210,037 178,024 651,409

693,809 187,201 3,688,644

$ 549,946 $1,756,787 $2,545,331

17


Notes to Finaneial Statements March 31, 2014

Note 5-Unpaid Claims Liability (Continued)

Changes in these liabilities for the year ended March 31, 2013 are as follows (Continued):

Workers' General Compensation Health Property Liability

Fund Fund Fund Fund Total March 31. 2013

5,470 $ 291,180 $ 273,148 619,537 $1,189,335 Unpaid claims and claims adjustment

expenses at March 31, 2012

Incurred claims and claims adjustment expenses of the current period

Increases (decreases) in provision for insured events of prior years

Total incurred claims and claims adjustment expense

Payments for claims and claims adjustment expenses attributable to:

Insured events of current year Insured events of prior years

Total payments and claims adjustment expenses

Total unpaid claims and claims adjustment expense at March 31, 2013

Note 6-Fair Value Measurements

The Agency follows FASB ASC 820, Fair Value Measurements, which defines fair value as the price that would be received to sell an asset or paid to transfer a liability (i.e. the "exit price") in an orderly transaction between market participants at the measurement date. FASB ASC 820 establishes a hierarchical framework which prioritizes and ranks the level of market price observability used in measuring investments at fair value. Market price observability is impacted by a number of factors, including the type of investment and the characteristics specific to the investment.

The Agency utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible. The Agency determines fair value based on assumptions that market participants would use In pricing an asset or liability in the principal or most advantageous market. When considering market participant assumptions in fair value measurements, the following fair value hierarchy distinguishes between observable and unobservable inputs, which are categorized in one of the following levels:

Level 1: Quoted prices (unadjusted) in active markets which are accessible at the measurement date.

Level 2: Prices based on observable inputs corroborated by market data but no quoted active markets.

- 2,344,051 1,030,840 300,000 3,674,891

(5,470) 181,022 (193,784) 205,196 186,964

(5,470) 2,525,073 837,056 505,196 3,861,855

2,042,839 689,104 22,925 2,754,868 - 408,826 71,269 94,298 574,393

2,451,665 760,373 117,223 3,329,261

$ - $ 364,588 $ 349,831 $1,007,510 $1,721,929

18

Louisiana Housing Conncil Authorities Group Self Insurance Risk Management Agency


Note 6- Fair Value Measuremens (Continued)

Level 3: Prices based on unobservable inputs, including situations where there is little, if any, market activity for the assets or liabilities. The inputs used in the determination of fair value require significant management judgment or estimation.

In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment's level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment, and considers factors specific to the investments.

Assets measured at fair value on a recurring basis at March 31, 2014 and 2013 are comprised of the following:

Investments, at fair value Short-term securities Government securities Corporate bonds

2014

: 203,195 7,011,346

80,451

2013

> 94,274 8,187,260

: 7,294,992 $ 8,281,534

March 31. 2014 Investments

Money Market Mutual Funds U.S. Treasury Notes U.S. Government Agency Bonds U.S. Government Agency Notes Corporate Bonds

Level 1

203,195 444,903 863,140

5,703,303 80,451

Level 2 Level 3 Total

$ 203,195 444,903 863,140

5,703,303 80,451

$ 7,294,992 $ $ 7,294,992

March 31. 2013 Investments

Money Market Mutual Funds U.S. Treasury Notes U.S. Government Agency Bonds U.S. Government Agency Notes

94,274 737,342

1,782,397 5,667,521

94,274 737,342

1,782,397 5,667,521

$ 8,281,534 $ 8,281,534

Generally, for all investments and assets held in trust, fair value is determined by reference to quoted market prices and other relevant information generated by market transactions.

19



Note 7-Reinsurance/Excess Policy Coverage

A. Health Fund

At March 31,2014 and 2013, the Fund had reinsurance with each participant having a lifetime maximum coverage of $2,000,000. The self-insured retention is $60,000 for each individual. Premiums ceded to reinsurers during the years ended March 31, 2014 and 2013 were $435,643 and $441,531, respectively, and the amount deducted from claims was $1,128,493 and $193,866, respectively. All of the reinsurance activity was with a single reinsurer. The anticipated recoverable amount as of March 31, 2014 was $105,503 and at March 31, 2013 was $601.

B. Propertv Fund

At March 31, 2014 and 2013, the Fund had excess insurance with a self-insured retention of $175,000 for each specific event and aggregate stop losses of $1,750,000 for the policy periods with the exception of named windstorms in tiers 1 & 2, which had a SIR of 5% of the building values at the time of loss subject to a $250,000 minimum deductible. Premiums ceded to excess insurers during the years ended March 31, 2014 and 2013, were $6,657,783 and $6,120,122, respectively. The policy period runs from April to March 3H' of each year. Reinsurance activity was with multiple reinsurers. The anticipated recoverable amount as of March 31, 2014 was $35,887 and at March 31, 2013 was $9,116.

C. General Liabilitv Fund

At March 31, 2014 and 2013, the General Liability Fund had excess insurance with a self-insured retention of $50,000 for each specific event and an aggregate stop loss of $520,000 and $558,250, respectively, for the policy periods. Premiums ceded to excess insurers during the years ended March 31, 2014 and 2013 were $560,000 and $576,200, respectively. The policy period runs from April L' to March 3H' of each year. Reinsurance activity was with a single reinsurer. At March 31, 2014 and 2013, there were no anticipated recoverable amounts.

Note 8-ReIated Party Transactions

The Louisiana Housing Council, Inc. (LHC) provides benefits and services to the housing authorities, as well as access to lower cost insurance, through administration of the Agency. The Property, General Liability, and Public Officials Liability Funds pay a fee to LHC based on housing authorities' participation in the pool of property, general liability, and public officials liability policies. These fees are recognized when the policies are billed. Total fees for the years ended March 31, 2014 and 2013 were $125,401 and $112,504, respectively.

The Agency pays consulting fees to a member of its board of directors for assistance with insurance related issues. These fees were $20,004 for the years ended March 31, 2014 and 2013.

The Agency purchases public official's liability insurance and a fiduciary bond from Arthur J. Gallagher Risk Management Services, Inc., the Plan Administrator, to cover its board of directors. Total amounts paid for these policies were $26,290 and $22,729 for the years ended March 31, 2014 and 2013, respectively.

20



Note 9-Administrative Services

Arthur J. Gallagher Risk Management Services, Inc. is a third-party service agent that performs the risk management and administrative functions of the Agency. Fees for their services are based on different criteria for each type of insurance coverage. Total fees expensed for the years ended March 31, 2014 and 2013 were $122,324 and $122,361, respectively.

Note IG-Pension Forfeitures Payable

The Agency's Pension Fund has a forfeiture account with balances of $114,525 and $112,051 at March 31, 2014 and 2013, respectively. These amounts will be allocated to the housing authority participants.

Note ll-Contiugencies

During the normal course of business, the Agency becomes involved in various insurance related claims and legal actions. Management of the Agency establishes estimated liabilities for reported and unreported contingencies. Management believes that the outcome of claims and any related legal proceedings will be provided for by the estimated insurance liabilities and will not have a material adverse effect on the Agency's financial position or results of operations.

Note 12-Subsequent Events

The Agency evaluated all subsequent events through September 26, 2014, the date the financial statements were available to be issued. As a result, the Agency noted no subsequent events that require adjustment to, or disclosure in, these financial statements.

21

Required Supplementary Information

22

Louisiana Housing Council Authorities Gronp Self Insurance Risk Management Agency

Schedule 1 - 10 Year Claims Development Information Workers' Compensation l^ind

Year Ended March 31

Seven years later Eight ye^ later Nine years later TCT years later

Increase in estimated net incurred claims and expenses from end of policy year

297,022 297,022

5,596

2014 2013 2012 2011 2010 2009 2008 2007 2006 2005 Required contribution and investment revenue

Earned $887,237 $939,067 $ 929.770 $ 930,590 S 765294 $929211 $ 873.407 $738,143 $ 758206 $ 700.098 Ceded (570,43^ (534,557) (564,501) (549,432) (526,865) (564.185) (571,192) (399.438) (318,486) (338.()76)

Net earned 316,798 404,510 365,269 381,158 238,429 365,126 307,715 338.705 439,820 362.022

Unallocated expenses 624,646 85,769 69,692 67,460 84,342 921.159 32233 32,859 33,632 62,089

^timated claims and expenses end of policy year Incurred ~ - - - - - - 291,426 113,987 Ceded - - - - - - - - _

Net incurred - - - - - - - 291.426 113,987

Nrt paid,.cumulative as of End of pol icy year - - - - - - - - 40,411 13.291 One year latisr _ - - - - — - 161,417 40,027 Two years later - - - - - - 269,486 64,021 Tluee years later - - - _ - 258219 121251 Four years later - - - 291,768 122.588 Five years later - - 297,022 122,588 Six years later - - 297,022 177288 'Seven years later - 297.022 17.2288 Eight years later 297,022 17.7. 588 Nine years later 122;588 Ten years later

Re^timated ceded claims and expenses - - - - - - - - - -

Re-estimated net incurred claims and expenses End of policy year - - - - - - - - 291.426 113,987 One year later — — — - — — 365,000 122,044 Two years later - -• - - - - 362293 175,122 Three years later . - - - - - 321,790 133,983 Four years later - - - - 335,003 129,453 Five ycMS later - - 305239 126,021 iSix years later - - 301,477 124.426

123,446 122,588 122,588

8,601

The preceding table is Supplementary Information required by Governmental Accounting Standards Board Statement Number 30 (CASE 3.0). The Schedule illustrates How the Fund's earned revenue (net of reinsurance) pliis investment income compare to related costs of loss (net of assumed reinsurance) plus other co^ at the end of each year. The Agency moved to a '"first-dollar" plan for the 2007 fiscal year and, therefore, does not have any incurred claims or expense from that year forward.


Schedule 1-10 Year Claims Development Information Health Fund

Year Ended March 31 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Required contribution and investment revenue Earned $ 3324,676 $3,167,786 $3321,076 $3,126313 $2,953,774 $2,958,031 $2311340 $2,497,743 $2,239,622 $3159.351 reded (563,634) (441331) (470,231) (413,668) (371,493) (341,793) (340340) (278,664) (331,553) (333,720)

Net earned 2,761,042 2.726355 2,750,845 2,712,545 2382381 2,616338 2,571,000 2319,079 1,908,069 1,825,631

Unallocated expenses 194321 I8O3O8 174371 163378 141393 125,468 149356 143.873 116,526 95380

Estimated claims and expenses end of policy year Incurred 3311377 2.537317 2;608,662 2,472,361 2,112348 2,003,639 2.051,410 2394365 2,068,509 l,m,!24 Ceded (1,128,493) (193.866) (63,192) (256,531) 012,460) (384,590) (264,084) (134,614) (90,826) (66.431)

Net incurred 2,782,884 2344,051 2,545,470 2315,830 1399,888 1,619,049 1,787326 2359,651 1.977,683 1,777,693

Net paid, cumulate as of End of policy year 2,544386 2,042,839 2.306,620 2,178.586 1,789,696 1.421,613 1,533.938 2,031,819 1,625,136 1,461,395 One year later 2306.187 2,715,446 .2.404,553 1,901363 131^021 1,750,434 2360367 2.019,043 1,704,827 Two years later 2.715,446 2,404,553 1,901363 i.514,021 1,750,434 2360.767 2,019,043 1,704,827 TTiree years later 2,404,553 1.901363 1,514,021 1,750,434 2360,767 2.019.043 1,704,827 Four years later 1,901363 1,514,021 1,750,434 2360,767 2,019,043 1,704.827 Five years later 1314.021 1,750,434 2360,767 2,019,043 1.704.827 Six years later 1,750,434 2360.767 • 2.019,043 1,704,827 Seven years later 2360,767 2,019,043 1,704.827 Eight years later 2,019,043 1.704,827 Nine years later 1.704.827 TCT years later

Re-estimated ceded claims and expenses - - - 256.531 112,460 384390 264;084 134,614 90.826 66,431

Re-estimated net incnrred claims and expenses End of policy year 2,782,844 2344,051 2,534,424 2330,315 2.079.174 1,619,049 1,787326 2359,651 1,977.683 1,777,693 One year later 2306,187 2,715,446 2,404,553 1301,363 1,514,021 1.750.434 2360,767 2,019,043 1,704,827 Two years later 2.715,446 2,404,553 1301363 1,514,021 1,750,434 2360.767 2,019,043 1.704,827 Three years later 2,404,553 1301363 1,514,021 1.750.434 2360.767 2,019,043 1.704,827 Four years later 1,901363 1,514,021 i.750.434 ?,766,767 2,019,643 1,704,827 Five years later 1,514,021 1,750,434 2360.767 2,019,043 1.704.827 Six years later 1,750,434 2360,747 3019,043 1.704,827 Seven years later 2360,747 3019,043 1.704,827 Eight years later 2,019,043 1,704,827 Nine years, later 1,704,827 Ten years later

Increase (Decrease) id estimate net incnrred claims and npenses from end of policy year - (37.864) 181.022 . 74338 (177,811) (105,028) (36,892) 1,116 41,360 (73866)

The preceding table is Supplementary Infonhation required by Governmental Accounting Standards Bo^d Statement Number 30 (GASH 30). The Schedule illustrates hotv the Funds' earned revenue (net of reinsurance) plus investment income compare to related costs of loss (net of assumed reinsurance) plus other costs at the end of each year.

Louisiana Housing Conhcil Authorities Group Self Insurance Risk Management Agency

Schedule 1 -10 Year Claims Development Information General Liability Fund

Year Ended March 31 2014 2013 2012 20II 2010 2009 2008 2007 2006 200S

Required contribution and investment revenue Earned $1,199328 $1306,198 $1,146357 $1,420,738 $1,408,488 $1,279352 $1399.639 $1,245,164 $1305,413 $1,156,125 Ceded (560.000) (576300) (524,584) (525,000) (521,000) • (547370) (570,000) (570,000) (550,433) (596,967)

Net earned 639328 629.998 621,773 895,738 887,488 731382 729,639 675364 654,980 559,158

Unallocated expenses 163337 163,729 142,187 132,011 220,857 420,853 229307 181384 113,733 107,151

Estimated claims and expenses, end of policy year Incurred 525347 300300 119349 268,416 186.490 218,100 294,781 500,000 278349 317399 Crded - _ _ - - - - _ - -

Net iricimed 525347 300300 119,349 268,416 186,490 218,100 294,781 500,000 278,249 317399

Net paid, cumulative as of End of policy y w 9.177 ??,925 I5;891 11342 27337 31,442 4,980 109,148 32.868 58367 One year later 41,401 43,901 165,119 iljlQ 59.905 52,075 212.096 109,879 147,171 Two years later 115,741 123,918 118,156 62,472 88.016 292,917 165364 273,824 Thi« years later 163,587 229,134 62,667 90391 399,798 183.487 400,884 Four years later 267,786 54,805 90.742 410,800 183,487 467.877 Five yearsiatcr 55.492 95,115 428,580 183,487 450,000 Six years laiw 103.815 428380 184341 450,000 Seven years iatcr 42^27 184341 450.000 Eightye^ later 184341 450,000 Nine ycius later 450,000 Ten years later

Re-^timated ceded claims and expenses - - - - - - 47,095 80.821 18.123 66,993

Re-estimated net incurred claims and expenses End of pol icy year One year later Two years 1^ Three years latCT Four years later Five ycare later Six years later Seven years later Eight years later Nine yeare later Ten years later

Increase (Decrease) in estimated net incurred claims and expenses from end of policy year

525^7 300,000 264,668

119349 268,416 186,490 218,100 294,781 500,000 278,249 317,399 368,465 396,087 197,836 169362 318.516 500,000 253,907 397.116 486319 329,722 241348 142328 238,734 487382 240,462 465,186

489,726 328,139 122,767 165,891 485347 218398 482310 369,729 89,681 159,551 473,551 223,544 450.000

88,377 161301 285;140

. 428,580 428,580 428.327

217,944 217351 184341 184341

450.000 450,000 450,000 450,000 450,000

(35332) 366.870 221.310 18333? (129,723) (12,641) (71,673) (94,008) 132,601

The preceding table is Supplementary Information required by Govenmaental Accounting Standards Board Statement Number 30 (GASB 30). The Schedule illustrates how the Funds' earned revenue (net ofreinsurance)plus investment income compare to related costs of loss (net of ^sumed reinsurance) plus other costs at the end of each year.


Schedule 1-10 Year Claims Development Information Property Fund

Year Ended March 31 2014 2013 2012 2011 2010 2009 2008 2007 2006 2005

Required contribatioo and investment revenue Earned $7,776,578 $7,017,866 $ 5,644.860 $ 6.701,934 $6.508346 $4,885,649 $ 4,858,011 $3,936471 $ 3,506,505 $3,456,144 Ceded (6,657,783) (6,120,122) (4,530450) (5,008.017) (4,999398) (3,281.716) (2,926316) (2,399,495) (1.413318) (1,571,443)

Net earned i;i 18.795 897,744 1,114310 1,693,917 1408.848 1,603.933 1,931,695 1,537,076 2,093,187 1,884.701

Unallocated eipenses 1,275,942 142,636 427,039 281,101 632,504 1,162,790 147,067 125358 100,180 64,502

Estimated claims and expenses, end of policy year Incurred 887,449 1,030,840 593,976 737.155 1,077,007 1.180313 1300,000 1300.000 1360,000 955,577 O-dfd - - - - - - _ - -

Net incurred 887.449 1,030,840 593,976 737,155 1,077.007 1,180313 1300,000 1300,000 1300,000 955,577

Net paid, cumulative as of End of policy year 483,772 689,104 357,788 498,653 609321 606,620 882.831 858,936 1,050,486 451.440 One year later 909,195 397,125 749,108 955.166 797,188 1300.000 1300,000 1300.000 9^,886 Two years later 397,125 763,178 959,925 833.817 1,300,000 1300,006 1306,606 965486 Three years later 763,178 969,925 948,483 1300,600 1300,000 1300,000 965486 Four ye^ later 959,925 956345 1300.000 1300,000 1306,060 965486 Five years later 956345 1300,060 1366.666 1300,000 965486 Six years later 1300,000 1300,000 1300,000 965.586 Seven years later 1360,066 1306,000 965486 Eight years later 1360,600 965,586 Nine years, later 965486 Ten years later

Re-estimatcd ceded claims and expenses - - - - - - -

Re-estimatcd net incurred claims and expenses End of policy year 887,449 1,030,840 593,976 737,155 1,077.007 1.180313 1300.000 1300.000 1300,000 955,577 One year later 1.055,464 405320 786.068 991387 865,608 1300.000 1300,060 1366,006 982 307 Two years later 397,125 763,178 959,925 846324 1300,006 1300,600 1300.000 972,828 Three years later 763,178 969,979 948,483 1300,000 1300,000 1300,000 970,414 Four "years later 959,925 956,345 1300.000 1300.000 1300,060 966,552 Fiveyears later 956,345 1300,000 1300,000 1300,000 965,586 Six ye^ later 1300,000 1300,000 1300,000 965,586 Seven years later 1360.000 1300,000 965,586 Eight years later 1300,000 965,586 Nine years later 965486 ten years later

Increase (Decrease) in estimated net incurred daims and expenses from end of policy year - 24,624 (196,851) 26,023 (117,082) (223,968) - - - 10,009

The preceding table is Supplementary Information required by Governmental Accountihg Standards Board Statement Number 30 (CASE 30). The Schedule illustrates how the Funds' earned revenue (net of reinsurance) plus investment income compare to related costs of loss (net of assumed reinsurance) plus other costs at the end of each year.

Supplementary Information

27


Combining Balance Sheels March 31,2014

oe

Workers' Long- Public Compen Term Life General Oflicials

sation Health DisabUity Insurance Pension Property T liability Liability 2014 Fund Fund Fund Fund Fund Fund Fund Fund Totals

Assets Cash and cash equivalents $ 441.992 $ 654.730 $ - $ - $ 61,637 $ 796,680 $ 587,169 $ - $ 2,542,208 Investments, at fair value

Short-term securities 44,982 6,483 - - - 53,904 97,826 203,195 Govenunent securities 969,188 2,067^606 - — - 1,607.165 2,367,387 - 7,011,346 Corporate bonds 17^209 21,511 - - - 13,982 27,749 - 80,451

Premiums receivable - - - - - - - -Due to/from other LHC funds 181,600 (39,757) - - - (94,371) (47,472) - -Reinsurance receivables, net - 105.503 - - - 35,887 - - 141,390 Prepaid expenses 178,029 58,102 - - - - - 105,512 341,643 Other receivables 283,480 3,379 - - 114,764 (9,559) - — 392,064 Escrow funds - - — - - 5,000 5,000 - 10,000 Accrued interest 2,934 5,679 - - 3,334 6,339 - 18,286

Total assets $2,119,414 $2,883,236 $ - $ $ 176,401 $ 2,412,022 $3,043,998 $ 105,512 $ 10,740,583

Liabilities Accounts payable $ 131,684 $ 218 $ - $ - $ 56 $ - $ 820 $ - $ 132,778 Unpaid claims liability - 238,598 - - - 549,946 1,756,787 - 2,545,331 Deposits 1,602 - - - - 74,889 - - 76,491 Unearned premiums 1,881 - - - - - - 105,512 107,393 Pension funds payable - - - - 61,820 - - - 61,820 Pension forfeitures payable - - - - 114.525 - - - 114,525 Other payables 500,000 — — - - - 1,116 - 501,116

Total liabilities 635,167 238,816 - - 176,401 624,835 1,758,723 105,512 3,539,454

Net Position Unrestricted 1,484,247 2,644,420. — — - 1,787,187 1,285,275 - 7,201,129

Total liabilities wd net position $2,119,414 $2,883,236 $ - $ — $ 176,401 $.2,412;022 $ 3,043,998 $ 105,512 $ 10,740,583


Combining Balance Sheets March 31,2013

Workers' Long- Public Compen Terra Life General Officials

sation Health Disability Insurance Pension Property Liability Liability 2013 Fjind Fund Fund Fund Fund Fund Fund Fund Totals

Assets Cash and cash equivalents $ 365,649 $ 994,241 $ - $ - $ 64,563 $ 1,801,621 $ 998,375 $ - $ 4,224.449 Investments, at feir value

Short-term securities 15,774 16,328 — - — 39,702 22,470 — 94,274 Government securities 1,012,749 2;082,934 — - - 2,633,513 2,458,064 - 8,187,260

Premiums receivable ~ 690 — — 1,475 8,292 - — 10,457 Due to/from other LHC funds 175,994 (39,757) - - - (94,371) (41,866) - -Reinstnance receivables, net - 601 — - - 9,116 - - 9,717 Prepaid expenses 16,709 60,282 - - - - 83,974 160,965 Other receivables 197,392 - — — 112,051 — — — 309,443 Escrow funds 26,897 - - — - 5,000 5i000 - 36,897 Accrued interest 5,041 9,429 — — - 9,772 11,941 — 36,183

Total assets $ 1,816,205 $ 3,124,748 $ $ - $ 178,089 $4,412,645 $ 3,453,984 $ 83,974 $ 13,069,645

Liabilities Accounts payable $ 20i628 $ 217 $ - $ - S 57 $ - $ 1,254 $ - $ 22.156 Unpaid claims liability - 364,588 — - - 349,831 1.007,510 — 1,721,929 Deposits 1,601 — - - - 103,076 - - 104.677 Unearned premiums 1,881 - - - - - 83,974 85.855 Pension funds payable - - — - 65,981 - - - 65.981 Pension forfeitures payable - - - - 112,051 - - 112,051 Other payables . — — — - - 1,119,417 699,558 - 1,818,975

Total liabilities 24,110 364,805 - - 178,089 1,572,324 1,708,322 83,974 3,931,624

Net Position Unrestricted 1,792,095 2,759,943 — - - 2,840,321 1,745,662 - 9,138,021

Total liabilities and net position $ 1,816,205 $3,124,748 $ - $ - $ 178,089 $4,412,645 $3,453,984 . $ 83,974 $ 13,069.645

Louisiana Housing Council Authorities Groiip Self Insurance Risk Management Agency

Combining Statements of Revenues, . Expenses, and Changes in Net Position Year Ended March 31,2014

Revenues Praniiims earned Premiums ceded

Net premiums earned Pension funds received Investment income LHG fees Grant income Other revenue

Total revenues

Expenses Claims expenses Less reinsurance proceeds

Net incurred claims expenses Administrativefees Insurance coordinator fees Claims administrator fees Pension funds tranrferred Fees paid to LHC Loss prevention costs

service charges/other Professional fees Actuarial fees Policyholder dividends Grant expenses

Total expense

Net Income (Loss)

Net Position Beginning of year

End of year

Workers* Compen

sation Fund

$ 597^510 (570,439)

27,071

4,755 3,650

281,322

6.897

6,897 20,000 20,004

3,650

42,197 29,648 2,250

500,000

624,646

(307,848)

1,792.095

Health Fund

$ 3,306,264 (563.634)

2.742.630 1,084

17.328

316,798 2,761,042

3,810,137 (L 128.493) 2,681,644

13,174

170,815

10,932

2.876,565

(115,523)

2,759,943

Long-Terra Life

Disability Insurance Fund Fu^

$ - $ -

Pension Fund

$ -

703,138

703,138

642 702,496

703,138

$ 1,484,247 $2.644,420 $ - $ - $ -

Public General Officials

Property Liability Liability 2014 Fund Fund Fund Totals

$ 6,536,988 $1,164,965 $ 225,425 $.11,831,152 (6,657,783) (560,000) (225,425) (8,577,281)

(120.795) 604,965 - 3,253,871 - - - 703,138

3;653 16;888 - 26,380 98,051 17,475 6,225 125,401

1,137,886 — _ 1,137,886 - - 4.150 302,800

1,118,795 639.328 10,375 5,549,476

895,987 936,478 5,649,499 - - - (1,128.493)

895.987 936,478 - 4,521,006 85,000 4,150 122,324

_ _ _ 20,004 24,755 36,956 — 233,168 - - - 702,496 98,051 17,475 6,225 125,401

9,328 .11,501 _ 73.958 2,922 9,055 - 41.625 3,000 3,250 - 8,500

- - - 500,000 1.137,886 - - 1,137,886 .

2,171,929 1,099,715 10,375 7.486,368

(1,053.134) (460,387) - (1,936,892)

2,840,321 1.745.662 _ 9,138,021

$ 1,787,187 $1,285,275 $ - $ 7,201,129


Combining Statements of Revenues, Expenses, and Changes in Net Position Year Ended March 31,2013

Workers' Long- Public Compen- Term Life General Officials

sation Health Disability Insurance Pension Property Liability Liability 2013 Fund Fund Fund Fund Fund Fund Fund Fund Totals

Revenues Premiums earned $ 733,832 $3,139,981 $ 36,398 $ 89,147 $ - $ 6,869,686 $ 1,167,363 $ 209,089 $ 12,245,496 Premiums ceded (534,557) (441,531) (36398) (89,147) - (6,120,122) (576,200) (209,089) (8,007,044)

Net premiums earned 199,275 2,698.450 - - - 749,564 591,163 - 4,238,452 Pension funds received - - - - 745,946 - - - 745.946 Investment income 7,843 12,355 - — - 25,700 21,420 - 67,318 LHCfees - - - 89,014 17,415 6,075 112,504 Grant income - - - - - 460,349 - - 460,349 Other revenue 197,392 15,450 1,432 - - 33,467 - 4,050 251,791

Total revenues 404,510 2,726.255 1,432 745,946 1,358,094 629,998 10,125 5,876,360

Expenses Claims expenses (benefits) (5,470) 2,718,939 - - - 837,056 505,196 - 4.055,721 Less reinsurance proceeds - (193,866) - - — - - (193,866)

Net incurred claims expenses (benefits) (5,470) 2,525,073 - — - 837,056 505,196 - 3,861,855 Administrative fees 20,000 11,879 1,432 - - 85,000 4,050 122,361 Insurance coordinator fees 20,004 - - - - - - - 20,004 Claims administrator fees - 159,149 - — 712 23,206 35,698 - 218,765 Pension funds transferred - — _ - 745,234 - - 745,234 Fees paid to LHC — — - - - 89,014 17,415 6,075 112,504 Loss prevention costs - - - - - 3,150 - - 3,150 Bank service charges/other 42,943 9,482 - - - 12,813 23,658 - 88,896 Legal fees 822 - - — - 13,453. 457 - 14,732 Actuarial fees 2,000 - - - - 1,000 1,500 - 4,500 Policyholder dividends - - - - - 699,558 - 699,558 Grant expenses - , - - — 460,349 - - . 460,349

Total expenses 80,299 2.705,583 1,432 745,946 1,440,041 1,368,482 10,125 6,351,908

Net Income (Loss) 324,211 20,672 - - - (81,947) (738,484) - (475,548)

Net Position Beginning of year 1.467,884 2,739,271 — — — 2,922,268 2,484,146 - 9.613,569

End of year $ 1,792,095 $ 2,759.943 S - $ - $ - $2i840,321 $ 1,745,662 ,$ - S 9,138,021


Financial Indicator Table Year Ended March 31,2014

Loss Ratio = Incurred Losses and Loss Adjustment Expense 4,521,006

Net Premiums Earned 3,253,871

LossRatio= 138,94%

Expense Ratio = Expenses (excluding expenses related to losses) 2,889,976


Expense Ratio = 88.82%

Combined Ratio = Loss Ratio + Expense Ratio 1.39 + 0.89 Combined Ratio = 2.28

Net Investment Income Ratio = Net Investment Income

Net Premiums Earned

26,380

3,253,871

Net Investment Income Ratio = 0.01

Operating Ratio = Combined Ratio - Net Investment Income Ratio 2.28-0.01 Operating Ratio = 2.27

Yield on Invested Assets = Net Investment Income

Investments

26,380

7,294,992

Yield on Invested Assets = 0.36%

Change in Net Position = Increase (Decrease) in Net Position

Previous Year's Net Position

(1,936,892) Change in Net Position = (21.20)%

9,138,021

Return on Net Position = Net Income (Loss)


(1,936,892) Return on Net Position = (21.20)%

9,138,021

Net Premium Written to Net Position = Net Premiums Written

Net Position

Net Premium 3,253,871 Written to Net Position = 45.19%

7,201,129

Current Liability = Cash and Cash Equivalents + Investments 9,837,200 Current Liability = 3.71

Unearned Premium + Unpaid Claims Liability 2,652,724

32


Financial Indicator Table Year Ended March 31,2013

Loss Ratio = Incurred Losses and Loss Adjustment Expense 3,861,855


Loss Ratio = 91.11%

Expense Ratio = Expenses (excluding expenses related to losses) 2,107,190


Expense Ratio = 49.72%

Combined Ratio = Loss Ratio + Expense Ratio 0.91+0.50 Combined Ratio = 1.41

Net Investment Income Ratio = Net Investment Income

Net Premiums Earned

67,318

4,238,452

Net Investment Income Ratio = 0.02

Operating Ratio = Combined Ratio - Net Investment Income Ratio 1.41-0.02 Operating Ratio = 1.39

Yield on Invested Assets = Net Investment Income

Investments

67,318

8,281,534

Yield on Invested Assets = 0.81%

Change in Net Position = Increase (Decrease) in Net Position


(475,548) Change in Net Position = (4.95)%

9,613,569

Return on Net Position = Net Income (Loss)


(475,548) Return on Net Position = (4.95)%

9,613,569

Net Premium Written to Net Position = Net Premiums Written

Net Position

Net Premium 4,238,452 Written to Net Position = 46.38%

9,138,021

Current Liability = Cash and Cash Equivalents + Investments 12,505,983

Unearned Premium + Unpaid Claims Liability 1,807,784

Current Liability = 6.92

33


LOUIS c, MCKNIGHT, HI, C.P.A. CHARLES R, PEVEY, JR., C.P.A. DAVID J. BROUSSARD, C.P.A. NEAL D. KING, C.P.A. KARIN S. LEJEUNE, C.P.A. ALYCE S. SCHMITT, C.P.A.

]ERTIFIED PUBLIC ACCOUNTS 8555 UNITED PLAZA BLVD., SUITE 200

BATON ROUGE, LOUISIANA 70809 [225] 923-3000 • FAX (225) 923-3008

Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an

Audit of Financial Statements Performed in Accordance vritb Government Auditing 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 Audit Standards issued by the Comptroller General of the United States, the financial statements of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency, which comprise the balance sheets as of March 31, 2014 and 2013, and the related statements of revenues, expenses, and changes in net position, and cash flows for the years then ended, and the related notes to the financial statements, and have issued our report thereon dated September 26, 2014.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's internal control over financial reporting (intemal 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 Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's intemal control. Accordingly, we do not express an opinion on the effectiveness of the Agency's intemal 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 combination of deficiencies, in intemal 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 intemal control that is less severe than a material weakness, yet important enough to merit attention by those charged with govemance.

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 intemal 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.

34

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

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.

X September 26, 2014

35


LOUIS c. MCKNIGHT, HI, C.P.A, CHARLES R. PEVEY, JR., C.P.A. DAVID J. BROUSSARD, C.P.A. NEAL D. KING, C.P.A. KARIN S. LEJEUNE, C.P.A. ALYCE S. SCHMITT, C.P.A.

8555 UNITED PLAZA BLVD., SUITE 200 BATON ROUGE, LOUISIANA 70809

(225) 923-3000 « FAX (225) 923-3008

Independent Auditor's Report on Compliance for Each Major Program and on Internal

Control over Compliance Required by OMB Circular A-I33


Report on Compliance for Each Major Federal Program

We have audited Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's major federal program for the year ended March 31, 2014. Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's major federal program is identified in the summary of auditor's results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility

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

Auditor's Responsibility

Our responsibility is to express an opinion on compliance for Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for the major federal program. However, our audit does not provide a legal determination of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's compliance.

36

Opinion on the Major Federal Program

In our opinion, Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended March 31, 2014.

Other Matters

The results of our auditing procedures disclosed an instance of noncompliance, which is required to be reported in accordance with OMB Circular A-133 and which is described in the accompanying schedule of findings and questioned costs as item 2014-01. Our opinion on the major federal program Is not modified with respect to this matter.

Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's response to the noncompliance finding identified in our audit is described in the accompanying schedule of findings and questioned costs. Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's response was not subjected to the auditing procedures applied in the audit of compliance and, accordingly, we express no opinion on the response.

Report on Internal Control Over Compliance

Management of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-I33, 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 Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency's internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of OMB Circular A-133. Accordingly, this report is not suitable for any other purpose.

September 26, 2014

37


Schednie of Expenditures of Federal Awards March 31, 2014

Federal Federal Grantor/Pass-Through Grantor/ CFDA Federal

Program Title or Cluster Title Number Expenditures

U.S. Department of Housing and Urban Development Passed through State of Louisiana Division of Administration,

Office of Community Development Community Development Block Grants 14.228 $1.137,886

Total Expenditures of Federal Awards $1.137.886

The accompanying notes are an integral part of this schedule.

38


Notes to Schedule of Expenditures of Federal Awards Year Ended March 31, 2014

Note 1-Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency under programs of the federal government for the year ended March 31,2014. The information in this Schedule is presented in accordance with the requirements of OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Because the Schedule presents only a selected portion of the operations of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency, it is not intended to and does not present the financial position, changes in net position, or cash flows of Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency.

Note 2-Summary of Significant Accounting Principles

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following cost principles contained in OMB Circular A-122, Cost Principles for Non-profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement.

Note 3-Subrecipients

Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency provided a total of $1,137,886 of its federal awards to sub-recipients during the fiscal year ended March 31, 2014.

Note 4-Non-cash Assistance

No federal awards were expended in the form of non-cash assistance during the fiscal year ended March 31, 2014.

39


Schedule of Current Year Findings and Questioned Costs March 31, 2014

Section 1 - Summary of Auditor's Results

Financial Statements

Type of Auditor's report issued: Unmodified

Internal control over financial reporting * Material weakness(es) identified:

Yes X No * Significant deficiencies identified that are not considered to be material weaknesses:

Yes X None reported

Noncompliance material to financial statements noted: Yes X No

Federal Awards

Internal control over major programs * Material weakness(es) identified:

Yes X No * Significant deficiencies identified that are not considered to be material weaknesses:

Yes X None reported

Type of auditor's report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with Section 510(a) of Circular A-133: X Yes No

Identification of major programs:

CFDA Numbers Federal Program or Cluster 14.228 Community Development Block Centers

Dollar threshold used to distinguish between type A and type B programs: $300.000

Auditee qualified as low-risk auditee: Yes X No

Section 11 - Financial Statement Audit Findings

Significant Deficiencies

None.

40



Section 111 - Federal Awards Findings

Finding 2014-01: CFDANo. 14.228, Community Development Block Grants

Condition: Louisiana Housing Council Authorities Group Self Insurance Risk Management Agency drew down Federal funds without immediate disbursement.

Criteria: Part 6 of the March 2013 Compliance Supplement states that the drawdown of Federal cash should only be for immediate needs.

Cause: The timeframe for housing authority assessments and performance of due diligence resulted in the time delay between the Federal draw down and its related disbursement.

Effect: Louisiana Housing Council Authorities Croup Self Insurance Risk Management Agency is not in compliance with OMB guidelines.

Auditor's Recommendation: Louisiana Housing Council Authorities Croup Self Insurance Risk Management Agency should only draw down Federal cash to meet immediate needs.

Management's Response: At the request of the LHC Insurance Committee, the Agency is contesting the finding outlined above, #2014-01: CFDA No. 14.228, Community Development Block Grants.

The Condition, "Louisiana Housing Council Authorities Croup Self Insurance Risk Management Agency drew down Federal funds without immediate disbursement," and Criteria, ".... Federal cash should only be for immediate needs," do not apply to the grant designated above.

The Grant was for reimbursement of deductibles incurred during Hurricanes Custav and Ike, incurred and paid by the PHAs in 2008, five years prior to the CDBC funds disbursement.

• Agency submitted a request to the State for payment January 3, 2013. This was done per the State's instructions and implication that the State would sign off on payment January 7, 2013.

• On January 11, 2013, the State first gave notice that a "detailed monitoring plan" requiring an affidavit and/or site visit would be necessary. Agency decided to do both.

• January 14, 2013, the State advised that ".. .the plan is for LHC to submit the monitoring plan before funds are paid."

• The monitoring plan was submitted January 31,2013.

• The State signed off on the request for payment February I, 2013.

41



Section III - Federal Awards Findings (Continued)

Finding 2014-01: CFDA No. 14.228, Community Development Block Grants (Continued)

Management's Response (Continued):

• EFT date of payment was February 22, 2013 to LHC's CDBG account.

• Agency was notified of the payment February 26, 2013.

• The first disbursement was made that same day, February 26, 2013 - to East Baton Rouge Housing Authority.

• The State advised Agency to submit the documentation globally, not per individual PHA and further that June 30, 2013 was the close of the program. It took until June 28,2013 to receive every affidavit and accompanying inspection report from the sub-recipients.

• Further, June 11, 2013, after receiving the information outlined in the monitoring plan, the State requested that additional information be provided for documentation purposes. This was accomplished June 18, 2013. Final disbursements were subsequently made on June 28, 2013.

In summary, at the time payment was requested, Agency - per the State - had provided the information necessary to allow the drawdown and provide for a timely disbursement to the sub-recipients. Following the drawdown request, the State both authorized the drawdown and changed the documentation requirements. This created additional delays in Agency's ability to disburse funds. Agency feels because of the State's actions, the finding is unreasonable. Agency disbursed funds in both a timely and prudent fashion. Agency complied with the State's direction and instruction at every step.

42


Schedule of Prior Year Findings and Questioned Costs March 31, 2014

Section 11 - Financial Statement Audit Findings

Significant Deficiencies

2013-01 Pledged Securities for Public Funds on Deposit

Condition: During the period from January 1, 2013 to March 31, 2013, the Agency had public funds on deposit with a financial institution in excess of amounts insured by the Federal Deposit Insurance Corporation (FDIC) which were not adequately secured by pledged securities as required by Louisiana R.S. 49:321.

Cause: Effective January 1, 2013, the amount of deposits in non-interest bearing accounts insured by the FDIC decreased from an unlimited amount to $250,000 per depositor. After this change, the Agency's accounts, which collectively exceeded this coverage, were not properly secured by pledged securities through the end of the fiscal year.

Effect: Due to the lack of pledged securities, the Agency's deposits may be at risk in the case of insecurity of the financial institution.

Recommendation: The Agency should ensure that the financial institution begin to pledge securities to its deposits in excess of FDIC insurance.

Management's Response: As noted in the cause, this condition was triggered by the FDIC change in coverage for non-interest bearing accounts. The IRMA set up these non-interest bearing accounts in 2010 at the request of Merrill Lynch with the approval of the board in order to facilitate processing of routine cash transactions which Merrill Lynch could no longer support on their platform due to its merger with Bank of America. Merrill Lynch has issued a full letter addressed to the IRMA Board addressing this situation. As described in the letter, this situation has been resolved and the cash balances are being closely monitored to ensure that they are fully covered by the FDIC allowance.

Status: This finding has been resolved.

43

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