Denham Springs/Livingston Housing and Mortgage Authority...DENHAM SPRINGS/LIVINGSTQN HOUSING AND...

DENHAM SPRINGS/LIVINGSTQN HOUSINGAND MORTGAGE FINANCE AUTHORITY

DECEMBER 31,2007

DENHAM SPRINGS, LOUISIANA

Under provisions of state law, this report is a publicdocument. Acopy of the report has been submitted tothe entity and other appropriate public officials. Thereport is available for public inspection at the BatonRouge office of the Legislative Auditor and, whereappropriate, at the office of the parish clerk of court.

Release Date

CONTENTS

Independent Auditor's Report Page 1 - 2

Management's Discussion and Analysis 3-7

Balance Sheet 8

Statement of Revenues, Expenses and Changesin Net Assets 9

Statement of Cash Flows 10-11

Notes to Financial Statements 12-20

Supplementary Information:

Schedule of Assets, Liabilities, and Net Assets by Program(Schedule 1) 21

Schedule of Revenues, Expenses and Changes inNet Assets by Program (Schedule 2) 22

Schedule of Cash Flows by Program (Schedule 3) 23 -24

Independent Auditor's Report on Internal Control overFinancial Reporting and on Compliance and Other MattersBased on an Audit of Financial Statements Performedin Accordance with Government Auditing Standards 25-26

Randy J. Bonnecaze, CPA*Joseph D. Richard, Jr., CPA*Ronnie E. Stamper, CPA*Fernand P. Genre, CPA*Stephen M. Huggins, CPA*Monica L. Zumo, CPA*Ronald L. Gagnet, CPA*Douglas J. Nelson, CPA*Celeste D. Viator, CPA*Laura E. Monroe, CPA*R. David Wascotf, CPA*

M Professional Accounts Corporation

Certified Public Accountants

1175 Del Este Avenue, Suite BDenham Springs, LA 70726

Phone: (225) 665-8297Fax: (225) 667-3813

Members American Institute ofCertified Public Accountants

2322 Tremont DriveBaton Rouge, LA 70809

www.htbcpa.com

June 17, 2008

INDEPENDENT AUDITOR'S REPORT

To the Board of DirectorsDenham Springs/Livingston Housing and

Mortgage Finance Authority

We have audited the accompanying financial statements of the Denham Springs/Livingston Housing andMortgage Finance Authority (the Authority) as of and for the year ended December 31,2007, as listed inthe foregoing table of contents. These financial statements are the responsibility of the Authority'smanagement. Our responsibility is to express an opinion on these financial statements based on our audit.

We conducted our audit in accordance with auditing standards generally accepted in the United States ofAmerica 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 performthe audit to obtain reasonable assurance about whether the financial statements are free of materialmisstatement. An audit includes examining, on a test basis, evidence supporting the amounts anddisclosures in the financial statements. An audit also includes assessing the accounting principles used andsignificant estimates made by management, as well as evaluating the overall financial statementpresentation. We believe that our audit provides a reasonable basis for our opinion.

hi our opinion, the financial statements referred to above present fairly, in all material respects, thefinancial position of the Denham Springs/Livingston Housing and Mortgage Finance Authority as ofDecember 31,2007, and the changes in financial position and cash flows thereof for the year then ended inconformity with accounting principles generally accepted in the United States of America.

In accordance with Government Auditing Standards, we have also issued a report dated June 17,2008 onour consideration of the Authority's internal control over financial reporting and our tests of its compliancewith certain provisions of laws, regulations, contracts and grant agreements and other matters. The purposeof that report is to describe the scope of our testing of internal control over financial reporting andcompliance and the results of that testing and not to provide an opinion on the internal control overfinancial reporting or on compliance. That report is an integral part of an audit performed in accordancewith Government Auditing Standards and should be considered in assessing the results of our audit.

The Management's Discussion and Analysis on pages 3 through 7 is not a required part of the basicfinancial statements but is supplementary information required by accounting principles generally acceptedin the United States of America. We have applied certain limited procedures, which consisted principallyof inquires of management regarding the methods of measurement and presentation of the supplementaryinformation. However, we did not audit the information and express no opinion on it.

Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole.The supplementary information included in Schedules 1 through 3 as listed in the table of contents ispresented for purposes of additional analysis and are not a required part of the basic financial statements.Such information has been subjected to the auditing procedures applied in the audit of the basic financialstatements and, in our opinion, such information is fairly stated in all material respects in relation to thebasic financial statements taken as a whole.

Respectfully submitted,

MANAGEMENT'S DISCUSSION AND ANALYSIS

The Management's Discussion and Analysis of Denham Springs / Livingston Housing & Mortgage FinanceAuthority's (the "Authority") financial performance presents a narrative overview and analysis of theAuthority's financial activities for the year ended December 31,2007. This document focuses on the currentyear's activities, resulting changes, and currently known facts in comparison with the prior year's information.Please read this document in conjunction with the Authority's financial statements, which begin on page 8.

FINANCIAL HIGHLIGHTS

« During 2007, low mortgage loan interest rates continued to cause a significant amount of the Authority'smortgage loans to first time home buyers to be prepaid. Prepayments from mortgage loans (as theunderlying collateral for the Mortgage Backed Securities) are used to retire bonds prior to their maturity.Fewer assets results in lower mortgage related interest income and fewer bonds results in lower bondinterest expense. However, in 2007 the Authority added to both the mortgage related assets (therebyincreasing interest income) and bonds outstanding (thereby increasing bond interest expense) inconnection with the Authority's issuance of $ 14.375 million April, 2007 bond issue and mortgage lendingprogram.

• Total Assets increased by $ 14.611 million primarily due to the addition of new mortgage related assetsfrom the Authority's 2007 mortgage lending program which began in April, 2007. Total Liabilitiesincreased $14.816 million primarily due to the addition of $14.375 million in bonds in April, 2007, thepremium of $623,875 on the 2007 bond issue, and the addition of $143,750 of Deferred Servicing ReleaseFees related to the 2007 bonds.

• The Authority's assets exceeded its liabilities at the close of fiscal year 2007 by $4,172,825, whichrepresents a $204,440 decrease from 2006. The decrease was caused by the net unrealized losses oninvestments at December 31, 2007 of $434,031.

• The Authority's gross revenue (exclusive of the "Net Realized and Unrealized Gains / Losses onInvestments") increased $386,816 due primarily to the increase of interest earned on investments whichinclude the Mortgage Backed Securities (the "MBS's") acquired in connection with and as collateral forthe Authority's 2007 mortgage revenue bonds, and commitment fee income collected on the 2007 bondissue.

• There was a $(362,662) decrease in the change in net assets from the prior year due primarily to thedecrease the fair value of investments in 2007 compared to 2006. Net Income was $265,252 in 2007 ascompared to a Net Income of $185,934 in 2006 (excluding the effect of the change in the fair value ofinvestments), an increase of $79,318.

OVERVIEW OF THE FINANCIAL STATEMENTS

These basic financial statements consist of three sections - Management's Discussion and Analysis (thissection), the basic financial statements (including the notes to the financial statements), and the supplementalinformation.

Basic Financial Statements

The basic financial statements include information on a combined basis for the Authority as a whole, in aformat designed to make the statements easier for the reader to understand. The statements include theBalance Sheet; the Statement of Revenues, Expenses, and Changes in Net Assets; and the Statement of CashFlows.

The Balance Sheet presents the assets and liabilities separately. The difference between total assets and totalliabilities is net assets and may provide a useful indicator of whether the financial position of the Authority isimproving or deteriorating. Schedules of Assets, Liabilities and Net Assets by Program is on page 21.

The Statement of Revenues, Expenses, and Changes in Net Assets presents information showing how theAuthority's net assets changed as a result of the current year operations. Regardless of when cash is affected,all changes in net assets are reported when the underlying transactions occur. As a result, there aretransactions included that will not affect cash until future fiscal periods. Schedules of Revenues, Expensesand Changes in Net Assets by Program is on page 22.

The Statement of Cash Flows presents information showing how the Authority's cash changed as a result ofthe current year's operations. The cash flow statement is prepared using the direct method and includes thereconciliation of net income (loss) to net cash provided by (used in) operating activities (indirect method) asrequired by Statement No. 34 of the Governmental Accounting Standards Board. Schedules of Cash Flow byProgram is on pages 23 and 24.

FINANCIAL ANALYSIS OF THE AUTHORITY

Denhain Springs/Livingston Housing andMortgage Finance Authority

Statement of Net Assetsas of December 31, 2007 and 2006

Cash & Cash EquivalentsGuaranteed Investment Contracts

and Investments

Other Assets

2007

$ 771,007

18,161,371

1,248,185

2006

$ 626,423

4,031,555

911,431

Increase(Decrease)

$ 144,584

14,129,816

336,754

Total Assets

Other Liabilities

Long-Term Debt Outstanding

Total Liabilities

Net Assets:Restricted

Unrestricted

Total Net Assets

20,180,563 5,569,409 14,611,154

216,756

15,790,982

16,007,738

277,553

3,895,272

$ 4,172,825

17,231

1,174,913

1,192,144

238,169

4,139,096

$ 4,377,265

199,525

14,616,069

14,815,594

39,384

(243,824)

$ (204,440)

Restricted net assets represent those net assets that are not available for general use due to the terms of thevarious bond trust indentures under which assets are held and pledged as security for the bonds of theAuthority's Mortgage Revenue Bond Programs. Conversely, unrestricted net assets are those assets for whichthere are no such limitations.

Net assets of the Authority decreased by $(204,440) from December 31,2006 to December 31,2007. Thisdecrease in net assets can be attributed to the net loss of $(204,440) which is due mainly to realized andunrealized losses in the fair value of securities of $(469,692). Without giving consideration to these decreasesin the fair value of securities, the Authority experienced a gain of $265,252 which is an increase of $79,318over the gain of $185,934 in 2006.

Denham Springs/Livingston Housing andMortgage Finance Authority

Condensed Statement of Changes in Net AssetsFor the Years Ended December 31, 2007 and 2006

$

$

2007

382,570587,010

(204,440)

$

$

2006

437,734279,512

158,222

Increase(Decrease)

$

$

(55,164)307,498

(362,662)

RevenuesExpenses - Operating

Change in Net Assets

Revenue

The Authority's revenues decreased by $5 5,164 primarily due to a net decrease in the fair value of investmentswhich caused net realized and unrealized losses of $(469,692) in 2007 compared to $(27,712) in 2006.Operating expenses increased primarily as a result of increased bond interest payments of $318,756 due to theissuance of the 2007 mortgage revenue bonds.

The Authority's total revenues exclusive of "Net Realized and Unrealized Gains (Losses) on Investments"increased by $386,816 from 2006 to 2007 primarily caused by the investment of the 2007 bond proceeds.

Debt

The Authority had $15,790,982 in bonds outstanding at the end of 2007, compared to $ 1,174,913 at the end of2006, as shown in the table below.

December 31,2007 and 2006

Mortgage Revenue Bonds

2007

$ 15,790,982

2006

$ 1,174,913

Increase(Decrease)

$ 14,616,069

The net increased debt level resulted from the $382,806 in early retirement of bonds in the 1997 and 2000programs from payments and prepayments of mortgage related assets and the issuance of $14.375 millionof new bonds and premiums on the bonds of $623,875 in April, 2007.

The Authority's bond rating continues to carry the AAA rating for the debt of its Mortgage Revenue Bonds.

The Authority has accounts payable and accrued interest payable of $216,756 outstanding at 2007 year-endcompared with $17,231 at the 2006 year-end. The significant increase is due to the addition of $143,750 in"Deferred Servicing Release Fees" in connection with the April, 2007, $ 14.375 million bond issue.

ECONOMIC FACTORS AND NEXT YEAR'S BUDGET

The Authority's appointed officials considered the following factors and indicators when setting next year'sbudget. These factors and indicators include:

• The potential for the continuation of relatively low conventional mortgage loan interest rates continuinginto 2008 for the fifth (5th) consecutive year still stimulating early mortgage loans payoffs (as a result ofproperty sales and mortgage loan refinancings) could result in a net decrease in the Authority's mortgagerelated assets.

• Offsetting the payoffs of existing mortgage related assets, the Authority added new MBS's to its mortgagerelated assets portfolio with the new mortgage loan activity generated on its 2007 mortgage lendingprogram which commenced in April, 2007.

CONTACTING THE DENHAM SPRINGS / LIVINGSTON HOUSING & MORTGAGE FINANCEAUTHORITY MANAGEMENT

This Financial report is designed to provide Louisiana's citizens and taxpayers, as well as the Authority'scustomers and creditors with a general overview of the Denham Springs / Livingston Housing & MortgageFinance Authority's finances and to show the Authority's accountability for the money it receives. If you haveany questions about this report or need additional financial information, please contact:

Stacy Jones 225-665-5406ChairmanPO Box 2281Denham Springs, LA. 70727-2281

DENHAM SPRINGS/LIVINGSTON HOUSING ANDMORTGAGE FINANCE AUTHORITY

BALANCE SHEET

AS OF DECEMBER 31, 2007

ASSETS

Cash and Cash Equivalents $ 771,007FNMA Securities 761,101GNMA Securities 3,540,175FHLMC Securities 5,831,327FGIC Capital Market Investment 54,960DEPFA Bank Investment Agreement 7,973,808Accrued Interest Receivable 80,890Deferred Financing Costs - Net of Amortization 262,115Due from Escrow 905,180

Total Assets $ 20,180,563

LIABILITIES AND NET ASSETS

Liabilities:Accrued Interest Payable $ 73,006Deferred Servicing Release Fees 143,750Bonds Payable - Net 15,790,982

Total Liabilities 16,007,738

Net Assets:Restricted for Debt Service 277,553Unrestricted 3,895,272

Total Net Assets 4,172,825

Total Liabilities and Net Assets $ 20,180,563

The accompanying notes are an integral part of this statement.


STATEMENT OF REVENUES, EXPENSES ANDCHANGES IN NET ASSETS

FOR THE YEAR ENDED DECEMBER 31, 2007

Operating Revenues:Interest Earned on Other Investments $ 780,387Commitment Fee Income 71,875Net Realized and Unrealized Gains (Losses) on Investments (469,692)

Total Operating Revenues 382,570

Operating Expenses:InterestAmortization of Deferred Financing CostsGrantAdministrative FeesOperating ExpensesProfessional Fees

The accompanying notes are an integral part of this statement.9

Total Operating Expenses 587,010

Change in Net Assets (204,440)

Net Assets - Beginning of Year 4,377,265

Net Assets - End of Year $ 4,172,825


STATEMENT OF CASH FLOWS


Cash Flows From Operating Activities:Cash Receipts for:

Investment Income on Other InvestmentsCash Payments for:

Interest on DebtOther Operating Expenses

Net Cash Used in Operating Activities

Cash Flows From Investing Activities:Purchase of InvestmentsProceeds from Maturities, Sales and Paydowns

of Investments

Net Cash Used in Investing Activities

Cash Flows From Noncapital Financing Activities:Bond RedemptionsProceeds from Bond IssuanceServicing Release Fees

Net Cash Provided by Noncapital Financing Activities

Net Increase in Cash and Cash Equivalents

Cash and Cash Equivalents at Beginning of Year

Cash and Cash Equivalents at End of Year

747,126

(733,520)(47,473)

(33,867)

(15,529,476)

929,967

(14,599,509)

(364,665)14,998,875

143,750

14,777,960

144,584

626,423

771,007

(CONTINUED)10


STATEMENT OF CASH FLOWS (CONTINUED)


Cash Flows From Operating Activities:Operating Loss $ (204,440)

Adjustments to Reconcile Operating Income to NetCash Provided by (Used in) Operating Activities:

Amortization of Deferred Financing Costs 7,824Net Amortization of Bond Discount (Premium) (16,754)Net Realized and Unrealized (Gains)

Losses on Investments 469,692

Changes in Assets and Liabilities:(Increase) Decrease in Accrued Interest Receivable (52,915)(Increase) Decrease in Due from Other Funds (4,932)(Increase) Decrease in Other Assets (293,049)Increase (Decrease) in Due to Other Funds 4,932Increase (Decrease) in Accrued Interest Payable 55,775

Net Cash Used in Operating Activities $ (33,867)

The accompanying notes are an integral part of this statement.11


NOTES TO FINANCIAL STATEMENTS

DECEMBER 31,2007

(1) Summary of Significant Accounting Policies

(A) Organization of Authority -

The Denham Springs/Livingston Housing and Mortgage Finance Authority (the "Authority")is a public trust created pursuant to provisions of the Louisiana Revised Statutes of 1950, asamended, by a Trust Indenture dated February 12,1979. The Authority's primary purpose is toprovide means of financing the cost of residential home ownership, development andrehabilitation which will provide decent, safe and sanitary housing for low and moderateincome residents of Livingston Parish at prices they can afford, through the Authority'spurchase of mortgage loans made to such persons by certain mortgage lenders.

On September 11,1979, the Authority issued, through underwriters, Single Family MortgageRevenue Bonds, 1979 Series A, totaling $35,000,000 to fund the purchase of such mortgageloans. This original issue was governed by a Bond Trust Indenture dated June 1, 1979. OnApril 1,1987 the debt was restructured according to the terms of the First Supplemental TrustIndenture. On June 16,1992, the Authority issued, through underwriters, 1992 Series A, 1992Series B, and 1992 Series C Bonds totaling $25,475,000, for the purpose of advancerefunding the balance on the original 1979 Series A Bonds. Each 1992 Series Bond issuedwas governed by individual indentures dated June 1, 1992. On October 31, 2003, theAuthority redeemed the 1992 Series A and 1992 Series C Bonds and defeased the 1992 SeriesB Bonds.

On February 22, 1995, the Authority issued an additional $10,000,000 of Single FamilyMortgage Revenue Bonds Series 1995. The proceeds of these bonds were to be used to financethe purchase of (A) fully modified, mortgage-backed securities guaranteed by theGovernmental National Mortgage Association (GNMA) and backed by pools of FHA-insuredmortgage loans or VA-guaranteed mortgage loans and (B) single pool, mortgage-backedsecurities guaranteed by the Federal National Mortgage Association (FNMA) and backed bypools of conventional mortgage loans. As discussed in the following paragraph these bondswere refunded with the proceeds of the issuance of the Series 1997 Bonds.

On January 15, 1997, the Authority issued $10,000,000 Single Family Mortgage RevenueRefunding Bonds - Series 1997 to refund the Single Family Mortgage Revenue Bonds - Series1995. The assets securing the Series 1995 bonds including the 1995 GNMA Securities and the1995 FNMA Securities were transferred to the Trustee on the date the new bonds were issued.Funds securing the 1995 bonds were then made available to finance the purchase ofadditional securities backed by mortgage loans made to finance the purchase of single-familyresidences located in the Parish of Livingston, Louisiana to be owned and occupied by low andmoderate income families residing in the parish. The Series 1997 Bonds are governed by aseparate indenture dated January 15, 1997.

12


NOTES TO FINANCIAL STATEMENTS fCONTINUED)

DECEMBER 31,2007

On June 30, 2000, the Authority issued $5,010,000 Series 2000A Single Family MortgageRevenue and Refunding Bonds and $1,140,000 Series 2000B Single Family MortgageRevenue Bonds. The Series 2000 Bonds are governed by a separate indenture dated June 1,2000. $360,000 of the proceeds of the Series 2000A Bonds were used to refund a like amountof the Series 1997 Bonds. The remaining proceeds of the Series 2000A and all of the proceedsof the Series 2000B will be used to finance the purchase of fully modified mortgage backedsecurities guaranteed as to timely payment of principal and interest by GNMA and/or Single-pooled, mortgage-backed securities issued and guaranteed by Fannie Mae. hi each case theabove securities will be backed by pools of qualifying primary residence mortgage loans madeby one or more of the participating mortgage lending institutions to qualified persons orfamilies of low and moderate income residing within the stated eligible loan area.

Due to the interest rate environment experienced since the issuance of the Series 2000A and2000B bonds, in June 2001 the Authority exercised a conversion feature included in theoriginal bond indenture. This conversion feature allowed a portion of the bonds to beconverted to Series A-l and Series B-l bonds which bear interest at a lower rate than theoriginal issue in order for the mortgage loans to be made at the lower prevailing marketinterest rates. Therefore, under the conversion feature, $ 1,305,000 of the Series 2000A bondswere converted to Series 2000A-1 bonds and $295,000 of Series 2000B bonds were convertedto Series 2000B-1 bonds.

In April 2007, the Authority issued $14,375,000 of Series 2007 (Go Zone) Single FamilyMortgage Revenue Bonds to purchase GNMA, FNMA and/or FHLMC securities backed byand based on the mortgage loans made by certain mortgage lending institutions made in theeligible loan area to finance owner-occupied single family residential immovable propertylocated in Livingston Parish to be owned and occupied by low and moderate income familiesor persons residing in the eligible loan area. The lending institutions assemble these loans intopools in order to permit GNMA, FNMA, and/or FHLMC securities to be issued and thereforeto be purchased by the Authority with proceeds of the Series 2007.

The Authority is managed by a Board of Trustees appointed by the City Council of DenhamSprings. The Authority's Board of Trustees is empowered under the bond trust indenture andthe bond program agreement to contract with outside parties to conduct the day-to-dayoperations of the Authority and the programs it initiates. The Authority employs the Bank ofNew York Trust Company and Regions Morgan Keegan Trust as its Program Administratorsto provide administrative staff support for the Board of Trustees and its committees, generaloffice administration for the Authority and program administration and supervision for itsmortgage purchase bond program. Under its original single family mortgage purchase bond

13


NOTES TO FINANCIAL STATEMENTS (CONTINUED)

DECEMBER 31,2007

program, the Authority utilized area financial institutions to originate and service the mortgageloans acquired. In addition, the Bank of New York Trust Company and Regions MorganKeegan Trust have been designated as the Trustee of the bond programs and has the fiduciaryresponsibility for the custody and investment of funds.

Although located within the boundaries of the City of Denham Springs, the City does notsignificantly influence the operations of the Authority nor is the Authority held accountableto the City of Denham Springs for fiscal matters.

The bonds issued by the Authority are general obligations of the Authority and are notobligations of the State of Louisiana or any other political subdivision thereof.

Based on criteria outlined in Statement No. 14 and Statement No. 39 of the GovernmentalAccounting Standards Board the Denham Springs/Livingston Housing and Mortgage FinanceAuthority is considered a related party to the City of Denham Springs.

(B) Measurement Focus, Basis of Accounting, and Financial Statement Presentation -

Measurement Focus - On January 1,2003, the Authority adopted the provisions of StatementNo. 34 ("Statement 34") of the Governmental Accounting Standards Board "Basic FinancialStatements - and Management's Discussion and Analysis -for State and Local Governmentand Statement No. 37, "Basic Financial Statements - and Management's Discussion andAnalysis -for State and Local Governments " (an amendment to Statement No. 34). Thesestatements established standards for external financial reporting for all state and localgovernmental entities which includes a statement of net assets, a statement of activities andchanges in net assets and a statement of cash flows.

The proprietary fund utilizes an "economic resources" measurement focus. The accountingobjectives of this measurement focus are the determination of operating income, changes innet assets (or cost recovery), financial position, and cash flows. All assets and liabilities(whether current or noncurrent) associated with their activities are reported. Proprietary fundequity is classified as net assets. The Authority has no governmental or fiduciary funds.

Basis of Accounting - The Authority uses the accrual basis of accounting. Revenues arerecognized when they are earned, and expenses are recognized at the time liabilities areincurred or economic asset used.

14


NOTES TO FINANCIAL STATEMENTS (CONTINUED!

DECEMBER 31,2007

The accounts of the Authority are organized on the basis of individual programs. Theprograms, which are administered by a trustee bank, provide for a separate set of self-balancing accounts which account for bonds issued, debt service and bond redemptionrequirements, investments, and related revenues and operating expenses. These individualprograms are aggregated in the financial statements to comprise the fund of the Authority.

The Authority's accounts are organized into a single proprietary fund. The enterprise fund (aproprietary fund) is used to account for operations (a) that are operated in a manner similar toprivate business where the intent of the governing body is that the cost (expense, includingdepreciation) of providing goods and services to the general public is financial or recoveredprimarily through user charges or (b) where the governing body has decided that the periodicdetermination of revenues earned, expenses incurred and/or changes in net assets isappropriate for capital maintenance.

The Authority1 s principal operating revenues are the interest and appreciation (depreciation)related to investments and moitgages/mortgage-backed securities.

Under the provisions of GASB Statement 20, "Accounting and Financial Reporting forProprietary Fund Accounting," the Authority follows pronouncements of the GASB and haselected not to follow Financial Accounting Standards Board guidance issued subsequent toNovember 30, 1989.

Estimates

The preparation of financial statements in conformity with generally accepted accountingprinciples requires management to make estimates and assumptions that affect the reportedamounts of assets and liabilities and disclosure of contingent assets and liabilities at the date ofthe financial statements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.

Investments

In accordance with GASB No. 31, investments are recorded at fair value. Fluctations in thefair value of investments are recorded as gains (losses) in the Statements of Revenues,Expenses and Changes in Net Assets.

Amortization

Bond issuance costs, including the underwriters' discount on the sale of the bonds and therestructuring expenses, are amortized ratably over the life of the bonds based upon the prin-cipal amounts outstanding.

15



DECEMBER 31, 2007

Statements of Cash Flows

For purposes of reporting cash flows, cash and cash equivalents include certificates of depositand all highly liquid debt instruments with maturities of three months or less when purchased.

(2) Bonds Payable -

The outstanding bonds payable at December 31, 2007 consist of the following:

1997 Series Single Family Mortgage Revenue Refunding BondsMaturing Serially though February 1, 2012 with InterestRate of 6.20% Payable Semiannually $ 435,000

2000 Series A and A-l, Single Family Mortgage Revenue and RefundingBonds Maturing Serially through April 1, 2009, with Interest at 7.17%Payable Monthly 333,875

Add: Unamortized Bond Premium- 23,232

Total 2000 Series 357,107

2007 Series (Go Zone) Single Family Mortgage Revenue BondsMaturing Serially through November 1,2040, with Interest at5.00% Payable Monthly 14,375,000

Add: Unamortized Bond Premium 623,875

Total 2007 Series 14,998,875

Total Bonds Payable $ 15,790,982

The Series 2000 A and A-l are structured such that the monthly remittances from the mortgageloans and FNMA investment in mortgage-backed securities will be passed on to bondholders asmonthly principal and interest redemptions of bonds payable.

16



DECEMBER 31,2007

A schedule of Changes in Long-Term Debt for the year 2007 is as follows:

Balances at January 1, 2007 $Additions:

Valued at ParPremium

Deletions:Cash PaymentsAmortization of Premium

Balances at December 3 1 , 2007 $

Debt Service requirements to maturity,

2008 $20092010201120122013-2017201 8 -ThereafterAdd (Less) Unamortized

Premium

Total Bond Principal and InterestLess: Portion Representing Interest

Total Principal Outstanding atDecember 3 1,2007 $

1997Series

540,000

--

(105,000)-

435,000

2000Series A

$ 634,913

--

(259,665)(18,141)

$357,107

2007Series



DECEMBER 31,2007

Computation of annual principal redemptions for Series 2000 A and for Series 2007 are determinedby applying the 0% PSA Prepayment Model. The PSA Prepayment Model was developed by thePublic Securities Association and is based on various assumptions. Actual principal redemptionsmay vary.

(3) Cash and Investments -

The Authority's programs maintain deposits at the Trustee bank. The balances of these deposits atDecember 31, 2007, were entirely insured. The Authority also has funds, classified as "Cash andCash Equivalents" on the Balance Sheet, which represent interests in money market mutual funds.

The Authority's investments at December 31, 2007 are recorded at market value as summarizedbelow:

Amortized Fair UnrealizedCost Value Gains (Losses)

FNMA Mortgaged Backed Securities $ 771,317 $ 761,101 $ (10,216)

GNMA Mortgage Backed Loan Pool $ 3,657,958 $ 3,540,175 $ (117,783)

FHLMC Mortgage Backed Securities $ 6,160,175 $ 5,831,327 $ (328,848)

FGIC Capital Market Investment $ 54,960 S 54,960

DEPFA Bank Investment Agreement $ 7,973,808 $ 7,973,808 $

The FNMA mortgaged backed securities are restricted for debt service on the program's bonds andpayment of various program expenses. These securities are held by the Trustee bank in the Trustee'sname and are pledged to secure the Authority's investments.

The FGIC Capital Market Investment and the DEPFA Bank Investment Agreement, as authorized bythe Series 1997 Bond Indenture and the Series 2007 Bond Indenture, are restricted to pay debtservice requirements and provide funds for future mortage loan backed pools.

18



DECEMBER 31,2007

Included in the caption "Net Realized and Unrealized Gains (Losses)" on the Individual andCombined Statements of Revenues, Expenses and Changes in Fund Balance are as follows: realizedgains of $-0-, realized losses of $(35,661) and the net change in unrealized gains (losses) atDecember 31, 2007 as compared to December 31, 2006 of ($434,031).

As of December 31, 2007, the Authority's investments had the following maturities:

Investment Maturities (in Years')Amortized Fair Less More

Investment Type Cost Value Than 1 1-5 6-10 Than 10

U.S. Agencies $10,589,450 $10,132,603 $ - $ 20,661 $143,579 $9,968,363Guaranteed Investment

Contracts 8.028.768 8,028.768 8.028,768 - - -

Total $18,618,218 $18,161,371 $ 8,028,768 $ 20,661 $143,579 $9,968,363

Interest Rate Risk. Investments of the Authority's various bond programs are limited to thoseauthorized in the various bond indentures. The Authority does not have a formal investment policyfor its residual agency fund that limits investment maturities as a means of managing its exposure tofair value losses arising from changing interest rates. However, as a means of limiting its exposure tofair value changes arising from fluctuations in interest rates, the Authority does attempt to ladder thematurities of its investments. The Authority typically buys and holds its investments until maturity oruntil called. Investments of the residual fund are based on recommendations of the ProgramAdministrators to the members of the Board of Trustees.

Credit Risk. The Authority limits investments in commercial paper and corporate bonds to the toptwo ratings issued by nationally recognized statistical rating organizations (NRSROs). As ofDecember 31,2007, the Authority held no investments in commercial paper or corporate bonds. TheAuthority's investments in U.S. Agencies carry the explicit guarantee of the U.S. government. TheAuthority's investments in guaranteed investment contracts are not rated.

Custodial Credit Risk - Deposits, hi the case of deposits, this is the risk that in the event of a bankfailure, the Authority's deposits may not be returned to it. The Authority does not have a depositpolicy for custodial credit risk. As of December 31,2007, none of the Authority's bank balance of$771,432 was exposed to custodial credit risk because it was either completely covered by FDICinsurance or was invested in U.S. treasury money market funds.

19



DECEMBER 31,2007

Concentration of Credit Risk. The Authority places no limit on the amount the Authority mayinvest in any one issuer. More than 5% of the Authority's investments are in FNMAs, GNMAs,FHLMCs and guaranteed investment contracts.

(4) Compensation Paid Board Members -

Richard Waldrep $ 150J.W. Day 75Gerald Hughes 150Stacy Jones, Chairman 15 0Neil Juneau 75Joan Landry 75

$ 675

(5) Prior Year's Defeasance of Debt -

On June 16, 1992, the Authority applied proceeds from sales of investments of the 1979SeriesABond issue and proceeds from issuance of 1992 Series A and 1992 Series B Bond issues to advancerefund the outstanding portion of the 1979 Series A Bonds. The Authority placed sufficientproceeds in an irrevocable trust to provide for all future debt service payments on the old debt.Accordingly, the trust account assets and the liability for the defeased debt are not included in theAuthority's financial statements. At December 31,2007, the balance of the defeased portion of thebonds is $17,910,000.

On October 31, 2003, the Authority completed a redemption of the outstanding balances of theSeries 1992 Class A-l and Series 1992 Class C Bonds. The Class A Bonds were refunded at parand the total balance redeemed was $282,543. The Class C Bonds were redeemed with a callpremium of 2%. The total balance refunded of these bonds was $2,593,207 plus the call premiumof $51,864.

In addition, on that same date, the Authority also completed a defeasance of the outstandingbalance of the Class B-2 Bonds. Since these bonds are not callable until 2014, the Authorityplaced $ 181,962 of funds in an irrevocable trust with an escrow agent to provide for all future debtpayments on these bonds. As a result, these bonds are considered to be defeased and, accordingly,the liability for these bonds has been removed from these financial statements. At December 31,2007, the par balance of the defeased portion of the bonds is $300,000.

20

SUPPLEMENTARY INFORMATION


SCHEDULE OF ASSETS, LIABILITIES AND NET ASSETS BY PROGRAM

AS OF DECEMBER 31, 2007

ASSETS

Cash and Cash EquivalentsFNMA SecuritiesGNMA SecuritiesFHLMC SecuritiesFGIC Capital Market InvestmentDEPFA Bank Investment AgreementDue from Other FundsAccrued Interest ReceivableDeferred Financing Costs - Net of AmortizationDue from Escrow

Total Assets

LIABILITIES AND NET ASSETS

Liabilities:Due to Other FundsAccrued Interest PayableDeferred Servicing Release FeesBonds Payable - Net

Total Liabilities

Net Assets:Restricted for Debt ServiceUnrestricted

Total Net Assets

Total Liabilities and Net Assets

1997Series

28,044 $110,331617,158

-54,960-

5,25413,739

829,486 $

238,981 $11,233-

435,000

685,214

144,272-

144,272

2000Series

60,496 $52,032

369,882---

2,3077,548

492,265 $

$1,877-

357,107

358,984

133,281-

133,281

2007Series

63,736-

2,437,1914,306,468

-7,973,808

61,361240,828

15,083,392

59,896143,750

14,998,875

15,202,521

.

(119,129)

(119,129)

$ 829,486 $ 492,265 $ 15,083,392

21

Schedule 1

ResidualFund

618,731598,738115,944

1,524,859

238,98111,968

905,180

$ 4,014,401 $

EliminationAdjustment

$-----

(238,981)---

(238,981) $

Total

771,007761,101

3,540,1755,831,327

54,9607,973,808

-80,890

262,115905,180

20,180,563

$ (238,981) $73,006

143,750- 15,790,982

(238,981) 16,007,738

4,014,401

4,014,401

277,5533,895,272

4,172,825

$ 4,014,401 $ (238,981) $ 20,180,563


SCHEDULE OF REVENUES, EXPENSES, AND CHANGESIN NET ASSETS BY PROGRAM


Operating Revenues:Interest Earned on Other InvestmentsCommitment Fee IncomeNet Realized and Unrealized Gains (Losses) on Investments

Total Operating Revenues

Operating Expenses:InterestAmortization of Deferred Financing CostsGrantAdministrative FeesOperating ExpensesProfessional Fees

Total Operating Expenses

Operating Income (Loss)

Non-Operating Revenue (Expense):Transfers In (Out)

Change in Net Assets

Net Assets - Beginning of Year

Net Assets - End of Year

1997Series

51,579 $

10,671

62,250

38,2261,930

22555500

40,936

21,314

2000Series

36,691

(150)

36,541

12,3245,894

253--

18,471

18,070

-

21,314

122,958

18,070

115,211

$ 144,272 $ 133,281

22

Schedule 2

2007 ResidualSeries Fund Total

479,827 $ 212,290 $ 780,38771,875 - 71,875

(451,933) (28,280) (469,692)

99,769 184,010 382,570

481,163 --30,0006,7332,6067,101

46,440

531,7137,82430,0007,2112,6617,601

587,010481,163

(381,394) 137,570 (204,440)

262,265 (262,265) -

262,265 (262,265) -

(119,129) (124,695) (204,440)

4,139,096 4,377,265

$ (119,129) $ 4,014,401 $ 4,172,825


SCHEDULE OF CASH FLOWS BY PROGRAM


1997 2000Series Series

Cash Receipts for:Investment Income on Investments and Commitment Fees $ 58,979 $ 37,853

Cash Payments for:Interest on Debt (39,551) (31,874)Other Operating Expenses (780) (253)

Net Cash Provided by (Used in) Operating Activities 18,648 5,726

Cash Flows From Investing Activities:Purchase of InvestmentsProceeds from Maturities, Sales and Paydowns

of Investments 108,084 254,665

Net Cash Provided by (Used in) Investing Activities 108,084 254,665

Cash Flows From Noncapital Financing Activities:Bond Redemptions (105,000) (259,665)Proceeds from Bond IssuanceServicing Release FeesOperating Transfers In (Out) - Net - -

Net Cash Provided by (Used in) NonCapitalFinancing Activities (105,000) (259,665)

Net Increase in Cash and Cash Equivalents 21,732 726

Cash and Cash Equivalents at.Beginning of Year 6,312 59/770

Cash and Cash Equivalents at End of Year S 28,044 $ 60,496

(CONTINUED)23

Schedule 3

2007Series

$ 490,341 $

(662,095)

(171,754)

(15,186,935)

17,535

(15,169,400)

14,998,875143,750262,265

15,404,890

63,736

-

ResidualFund

159,953 $

(46,440)

113,513

(342,541)

549,683

207,142

(262,265)

(262,265)

58,390

560,341

Total

747,126

(733,520)(47,473)

(33,867)

(15,529,476)

929,967

(14,599,509)

(364,665)14,998,875

143,750

14,777,960

144,584

626,423

63,736 $ 618,731 $ 771,007


SCHEDULE OF CASH FLOWS BY PROGRAM (CONTINUED)


Cash Flows From Operating Activities:Operating Income (Loss) $

Adjustments to Reconcile Operating Income(Loss) to Net Cash Provided by (Used In)Operating Activities:

Amortization of Deferred Financing CostsNet Amortization of Bond Discount (Premium)Net Realized and Unrealized (Gains)

Losses on Investments

Changes in Assets and Liabilities:(Increase) Decrease in Accrued

Interest Receivable(Increase) Decrease in Due from Other Funds(Increase) Decrease in Other AssetsIncrease (Decrease) in Due to Other FundsIncrease (Decrease) in Accrued Interest

Payable

Net Cash Provided by (Used in) Operating Activities $

1997Series

2000Series

21,314 $

1,9301,386

(10,671)

2,468

4,932

(2,711)

18,070

5,894(18,140)

150

1,162

(1,410)

18,648 $ 5,726

24

Schedule 3(Continued)

2007 ResidualSeries Fund Total

$ (381,394) $ 137,570 $ (204,440)

7,824(16,754)

451,933 28,280 469,692

(61,361) 4,816 (52,915)(4,932) (4,932)

(240,828) (52,221) (293,049)4,932

59,896 - 55,775

$ (171,754) $ 113,513 $ (33,867)

INDEPENDENT AUDITOR'S REPORT ONINTERNAL CONTROL OVER FINANCIAL

REPORTING AND ON COMPLIANCE AND OTHERMATTERS BASED ON AN AUDIT OF

FINANCIAL STATEMENTS PERFORMED IN ACCORDANCEWITH GOVERNMENT AUDITING STANDARDS

Randy J. Bonnecaze, CPA*Joseph D. Richard, Jr., CPA*Ronnie E. Stamper, CPA*Fernand P. Genre, CPA*Stephen M. Huggins, CPA1*Monica L. Zumo, CPA*Ronald L. Gagnet, CPA*Douglas J. Nelson, CPA*Celeste D. Viator, CPA*Laura E. Monroe, CPA*R. David Wascotn, CPA*

M Professional Accounting Corporation

Certified Public Accountants

1175 Del Este Avenue, Suite BDenham Springs, LA 70726

Phone: (225) 665-8297Fax: (225) 667-3813

Members American Institute ofCertified Public Accountants

2322 Tremont DriveBaton Rouge, LA 70809

www.htbcpa.com

June 17, 2008

To the Board of DirectorsDenham Springs/Livingston Housing and

Mortgage Finance Authority

We have audited the financial statements of the Denham Springs/Livingston Housing and MortgageFinance Authority (the Authority) as of and for the year ended December 31, 2007, and have issued ourreport thereon dated June 11, 2008. We conducted our audit in accordance with auditing standardsgenerally accepted in the United States of America and the standards applicable to financial auditscontained in Government Auditing Standards, issued by the Comptroller General of the United States.

Internal Control Over Financial Reporting

In planning and performing our audit, we considered the Authority's internal control over financialreporting as a basis for designing our auditing procedures for the purpose of expressing our opinion on thefinancial statements, but not for the purpose of expressing an opinion on the effectiveness of theAuthority's internal control over financial reporting. Accordingly, we do not express an opinion on theeffectiveness of the Authority's internal control over financial reporting

A control deficiency exists when the design or operation of a control does not allow management oremployees, in the normal course of performing their assigned functions, to prevent or detect misstatementson a timely basis. A significant deficiency is a control deficiency, or combination of control deficiencies,that adversely affects the entity's ability to initiate, authorize, record, process, or report financial datareliably in accordance with generally accepted accounting principles such that there is more than a remotelikelihood that a misstatement of the entity's financial statements that is more than inconsequential will notbe prevented or detected by the entity's internal control.

A material weakness is a significant deficiency, or combination of significant deficiencies, that results inmore than a remote likelihood that a material misstatement of the financial statements will not be preventedor detected by the entity's internal control.

25

Our consideration of internal control over financial reporting was for the limited purpose described in thefirst paragraph of this section and would not necessarily identify all deficiencies in internal control thatmight be significant deficiencies or material weaknesses. We did not identify any deficiencies in internalcontrol over financial reporting that we consider to be material weaknesses, as defined above.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Authority's financial statements are free ofmaterial 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 thedetermination of financial statement amounts. However, providing an opinion on compliance with thoseprovisions was not an objective of our audit and, accordingly, we do not express such an opinion. Theresults of our tests disclosed no instance of noncompliance or other matters that would be required to bereported under Government Auditing Standards.

This report is intended solely for the information of the Board of Directors, management and the LouisianaLegislative Auditor and is not intended to be and should not be used by anyone other than these specifiedparties. Under Louisiana Revised Statue 24:513, this report is distributed by the Legislative Auditor as apublic document.

Respectfully submitted,

26

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