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					HOUSING AUTHORITY
 OF THE CITY AND
  COUNTY OF SAN
   FRANCISCO,
   CALIFORNIA

          Basic
Financial Statements and
Supplemental Information

      Year ended
   September 30, 2010
                                 TABLE OF CONTENTS
                                                                             Page

INDEPENDENT AUDITORS' REPORT                                                 1

MANAGEMENT’S DISCUSSION AND ANALYSIS (Required Supplementary
  Information)                                                                3

BASIC FINANCIAL STATEMENTS

     Balance Sheet                                                            9

     Statement of Revenues, Expenses and Changes in Net Assets               10

     Statement of Cash Flows                                                 11

     Combining Balance Sheet for Discrete Component Units                    13

     Combining Statement of Revenues, Expenses and Changes                   14
       In Net Assets for Discrete Component Units

     Notes to Basic Financial Statements                                     15

REQUIRED SUPPLEMENTARY INFORMATION

     Schedule of Pension and Other Post Employment Benefits                  49

SUPPLEMENTAL INFORMATION

     Financial Data Schedule                                                 51

     Schedules of Actual Program Costs and Advances                          54

SINGLE AUDIT SECTION

     Schedule of Expenditures of Federal Awards and Local Assistance         57

     Note to the Schedule of Expenditures of Federal Awards
        and Local Assistance                                                 58

     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           59

     Report on Compliance with Requirements that Could Have a Direct and
        Material Effect on Each Major Program and on Internal Control Over
        Compliance in Accordance with OMB Circular A-133                     61

     Schedule of Findings and Questioned Costs                               63

     Summary Schedule of Prior Year Audit Findings                           70

     Corrective Action Plan                                                  75
8035 Spyglass Hill Road                                                          255 S. Orange Ave. Suite 745
Melbourne, FL 32940                                                                         Orlando, FL 32801
Phone: 321-757-2020                    www.bermanhopkins.com                             Phone: 407-841-8841
Fax: 321-242-4844                                                                           Fax: 407-841-8849




                                  INDEPENDENT AUDITORS' REPORT


    Board of Commissioners
    Housing Authority of the City and County of San Francisco, California
    San Francisco, California

    We have audited the accompanying financial statements of the business-type activities and the
    aggregate discretely presented component units of the Housing Authority of the City and County of
    San Francisco, California (the “Authority”), as of and for the year ended September 30, 2010, which
    collectively comprise the Authority’s basic financial statements as listed in the table of contents.
    These financial statements are the responsibility of the Authority’s management. Our responsibility
    is to express opinions on these financial statements based on our audit. We did not audit the
    following discretely presented component units: Plaza East Associates, L.P., Hayes Valley
    Apartments L.P., Hayes Valley Apartments II, L.P., and Bernal Housing Associates, L.P., which
    together represent 100% of the total assets and revenues of the aggregate discretely presented
    component units. Those financial statements were audited by other auditors whose reports have
    been furnished to us, and our opinion, insofar as it relates to the amounts included for Plaza East
    Associates, L.P., Hayes Valley Apartments L.P., Hayes Valley Apartments II, L.P., and Bernal
    Housing Associates, L.P., is based solely on the reports of the other auditors.

    We conducted our audit in accordance with auditing standards generally accepted in the United
    States of America and the standards applicable to financial audits contained in Government
    Auditing Standards, issued by the Comptroller General of the United States. Those standards
    require that we plan and perform the audit to obtain reasonable assurance about whether the
    financial statements are free of material misstatement. The financial statements of Plaza East
    Associates, L.P., Hayes Valley Apartments L.P., Hayes Valley Apartments II, L.P., and Bernal
    Housing Associates, L.P., were not audited in accordance with Government Auditing Standards. An
    audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the
    financial statements. An audit also includes assessing the accounting principles used and
    significant estimates made by management, as well as evaluating the overall financial statement
    presentation. We believe that our audit and the reports of the other auditors provide a reasonable
    basis for our opinions.

    In our opinion, based on our audit and the reports of the other auditors, the financial statements
    referred to above present fairly, in all material respects, the respective financial position of the
    business-type activities and the aggregate discretely presented component units of the Authority as
    of September 30, 2010, and the respective changes in financial position, and cash flows, where
    applicable, thereof for the year then ended in conformity with accounting principles generally
    accepted in the United States of America.




                                                     1
In accordance with Government Auditing Standards, we have also issued our report dated
June 29, 2011 on our consideration of the Authority’s internal control over financial reporting and
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 the internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the results of our audit.

Accounting principles generally accepted in the United States of America require that the
management’s discussion and analysis, and schedule of pension and other post employment
benefits, as listed in the table of contents, 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 basic 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 assurance.

Our audit was conducted for the purpose of forming opinions on the financial statements that
collectively comprise the Authority’s financial statements as a whole. The accompanying financial
data schedule and schedules of actual program costs and advances are presented for purposes of
additional analysis as required by the U.S. Department of Housing and Urban Development, and
are not a required part of the financial statements of the Authority. The accompanying schedule of
expenditures of federal awards and local assistance is presented for purposes of additional
analysis as required by the U.S. Office of Management and Budget Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations, and is also not a required part of the
financial statements of the Authority. The information is the responsibility of management and is
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 taken as a whole.

June 29, 2011                                            Berman Hopkins Wright & LaHam
Melbourne, Florida                                             CPAs and Associates, LLP




                                                  2
       The Housing Authority of the City and County of San
                     Francisco, California
                           Management’s Discussion and Analysis

                           For the Year Ended September 30, 2010

The Housing Authority of the City and County of San Francisco, California (the “Authority”)
management’s discussion and analysis report is designed to (a) assist the reader in focusing on
significant financial issues, (b) provide an overview of the Authority’s financial activity, (c)
identify changes in the Authority’s financial position (its ability to address the next and
subsequent year challenges), and (d) identify individual program issues or concerns.

This financial report is designed to provide an overview of the Authority’s total financial picture
for the fiscal year ending September 30, 2010, for those with an interest. Questions concerning
any of the information provided in this report or requests for additional information should be
addressed to the Finance Department, San Francisco Housing Authority, 1815 Egbert Avenue
San Francisco, California 94124.

Financial Highlights

   The Authority’s net assets increased by $7,626,166 or 4.1% during the fiscal year.

   The Authority’s operating revenue increased by $21,452,209 or 11.9% during the fiscal year.

   The Authority’s operating expenses increased by $14,991,820 or 7.9% during the fiscal
    year.

   At the close of the current fiscal year, the Authority’s assets exceeded its liabilities by
    $192,335,272.

Overview of the Financial Statements

The financial statements included in this annual report are those of a special-purpose
government agency engaged in a single business-type activity prepared on an accrual basis.
Over time, significant changes in the Authority’s net assets serve as a useful indicator of
whether its financial health is improving or deteriorating. To fully assess the financial health of
any authority, the reader must also consider other non-financial factors such as changes in
family composition, fluctuations in the local economy, Department of Housing and Urban
Development mandated program administrative changes, and the physical condition of capital
assets.




                                                3
Overview of the Financial Statements (continued)

The following statements are included:

      Balance Sheet - this statement reports the Authority’s assets, liabilities and net assets
       at the end of the fiscal year. You can think of the Authority’s net assets as the difference
       between what the Authority owns (assets) and what the Authority owes (liabilities).

      Statement of Revenues, Expenses, and Changes in Net Assets - this statement
       presents information showing how the Authority’s net assets increased or decreased
       during the current fiscal year. All changes in net assets are reported as soon as the
       underlying event giving rise to the change occurs, regardless of when the cash is
       received or paid. Thus, revenues and expenses are reported in this statement for some
       items that will result in cash inflows and cash outflows in future periods.

      Statement of Cash Flows - this statement presents information showing the total cash
       receipts and cash disbursements of the Authority during the current fiscal year. The
       statement reflects the net changes in cash resulting from operations plus any other cash
       requirements during the current year (i.e. capital additions, debt service, prior period
       obligations, etc.). In addition, the statement reflects the receipt of cash that was
       obligated to the Authority in prior periods and subsequently received during the current
       fiscal year (i.e. accounts receivable).

      Notes to the Basic Financial Statements - notes to the basic financial statements
       provide additional information that is essential to a full understanding of the data
       provided. These notes provide greater understanding on the overall activity of the
       Authority and how values are assigned to certain assets and liabilities and the longevity
       of these values. In addition, the notes reflect the impact (if any) of any uncertainties the
       Authority may face.

In addition to the basic financial statements listed above, our report includes supplemental
information. This information provides additional detail on the Authority’s various programs and
the required information mandated by regulatory bodies that fund the Authority’s various
programs.




                                                4
Financial Analysis

                                           Balance Sheet
                                                                  2009
                                                2010            restated        Total Change
  Current assets                           $    30,826,357    $ 31,207,057     $      (380,700)
  Capital assets, net                           87,256,115       77,768,970         9,487,145
  Other noncurrent assets, net                 104,959,616     105,268,111            (308,495)
        Total assets                       $   223,042,088    $ 214,244,138    $      8,797,950
  Current liabilities                      $    13,308,876    $ 12,685,182     $       623,694
  Noncurrent liabilities                        17,397,940      16,849,850             548,090
      Total liabilities                         30,706,816       29,535,032           1,171,784
  Invested in capital assets,
    net of related debt                         87,256,115       77,768,970           9,487,145
  Restricted net assets                        114,338,344       13,324,726         101,013,618
  Unrestricted net assets                       (9,259,187)      93,615,410        (102,874,597)
        Total net assets                       192,335,272     184,709,106            7,626,166
        Total liabilities and net assets   $   223,042,088    $ 214,244,138    $      8,797,950

Current Assets decreased by $380,700 primarily due to a reduction in cash of $1,800,000
offset by increases in receivables of $1,500,000. The decrease in cash was largely attributable
to the cost of operations being greater than the subsidy received.

Net Capital Assets had an increase of $9,487,145. This increase is a result of capital
improvements undertaken by the Authority and administrative equipment purchases, offset by
the current depreciation expense.

Other Noncurrent Assets decreased by $308,495 primarily due to payments collected on the
note receivable.
Net Assets are the difference between an organization’s assets and its liabilities is its net
assets. Net assets are categorized as one of three types.

        Invested in capital assets, net of related debt - capital assets, net of accumulated
         depreciation and related debt is due to the capital asset and long-term debt activity.

        Restricted - the Authority’s net assets whose use is subject to constraints imposed by
         law or agreement. The increase of $101,013,618 in restricted net assets is primarily
         attributable to the reclassification in the current year of the net assets in the HOPE VI
         program consisting of the notes receivable, investment in joint ventures and accrued
         interest receivable, which were presented as unrestricted net assets in prior years.

        Unrestricted - the Authority’s net assets that are neither invested in capital assets nor
         restricted, which change principally due to operations. These resources are available to
         meet the Authority’s ongoing obligations to its residents and creditors.




                                                 5
Financial Analysis (continued)

                Statement of Revenues, Expenses and Change in Net Assets
                                                          2009
                                          2010          restated        Net Change
  Operating revenues
   HUD revenue                       $ 173,786,226 $ 149,109,905 $ 24,676,321
   Other government grants                10,097,402     12,323,655       (2,226,253)
   Tenant revenue, net                    15,588,231     16,817,617       (1,229,386)
   Other operating revenue                 1,677,170      1,445,643          231,527
    Total operating revenues                201,149,029      179,696,820         21,452,209
  Operating expenses
   Administrative                            19,924,181       19,237,100            687,081
   Tenant services                            1,351,425        1,308,629             42,796
   Utilities                                 12,060,208       11,838,613            221,595
   Maintenance                               26,654,007       23,233,019          3,420,988
   Protective services                        3,234,150        2,520,163            713,987
   General                                    6,487,147        4,341,964          2,145,183
   Depreciation                               5,307,915        4,049,188          1,258,727
   Housing assistance payments              129,902,320      123,400,857          6,501,463
      Total operating expenses              204,921,353      189,929,533         14,991,820
  Operating income (loss)                    (3,772,324)      (10,232,713)        6,460,389
  Nonoperating revenues (expenses)
   Interest income                                906,373        855,010             51,363
   Other                                                -        327,895           (327,895)
     Total nonoperating revenues                  906,373       1,182,905          (276,532)
     Changes in net assets before
      capital contributions                  (2,865,951)       (9,049,808)        6,183,857
  Contributions and distributions
   HUD capital grants                        13,111,115        16,553,478        (3,442,363)
   Transfers to component unit               (2,618,998)       (2,549,853)          (69,145)
      Change in net assets                    7,626,166        4,953,817          2,672,349
  Total net assets - beginning              184,709,106      182,053,469          2,655,637
  Prior period adjustment                             -       (2,298,180)         2,298,180
  Total net assets - ending            $    192,335,272     $ 184,709,106    $    7,626,166
Total Operating Revenues increased by $21,452,209 for the 2010 fiscal year. This increase of
operating revenue is due primarily to increases in HUD operating grants, HUD ARRA
(Stimulus), administrative fee grants, and grants from the City and County of San Francisco.

Operating Expenses are categorized by the Authority as administrative, tenant services,
utilities, maintenance, protective services, general, depreciation and housing assistance
payments. The increase of $14,991,820 in total operating expenses is primarily attributable to
the increase in housing assistance payments of $6,501,463 due to an increase in lease-up, an
increase in maintenance expense to improve physical conditions of the development by
$3,420,988 and an increase in general expenses of $2,145,183 for the 2010 fiscal year.



                                              6
Financial Analysis (continued)

Nonoperating Revenues (Expenses) decreased by $276,532 mainly due to the effect of the
gain on disposal of capital assets in 2009 fiscal year offset by increases in interest income.

CAPITAL ASSETS

The Authority’s capital assets as of September 30, 2010, amounts to $87,256,115 (net of
accumulated depreciation). The investment in capital assets includes land, buildings and
improvements, furniture and equipment, construction in progress, and accumulated
depreciation. The total increase in the Authority’s capital assets for the current fiscal year was
$12,845,693, as a result of construction in progress and administrative equipment, offset by the
depreciation expense.


                                                2010              2009           Total Change
    Land                                  $     11,678,889     $ 8,320,341       $   3,358,548
    Buildings and improvements                 148,212,816      134,465,133         13,747,683
    Furniture, equipment, and machinery          8,064,417        7,655,185            409,232
    Construction in progress                     2,681,822        2,043,677            638,145
    Accumulated depreciation                   (83,381,829)     (78,073,914)        (5,307,915)
    Total                                 $     87,256,115     $ 74,410,422      $   12,845,693

LONG-TERM DEBT

At September 30, 2010, the Authority’s noncurrent liabilities consisted principally of $8,070,000
of Multifamily Housing Revenue Refunding Bonds that were issued to finance the Valencia
Gardens development, deferred revenue on a long term lease of $4,959,165, accrued
compensated absences of $1,727,087, and a deposit received for the Shelter Plus Care
program of $300,000. The only noncurrent liability that had a significant change in the year
ending September 30, 2010 was the other postemployment benefits liability of $2,341,688,
which increased $838,287 during the year.

ECONOMIC FACTORS

It is expected that the factors listed below will affect the financial condition of the Authority for
the fiscal year ending September 30, 2011 and beyond:

   During fiscal year ended September 30, 2010, HUD provided 103% funding level for the
    public housing operating subsidy. HUD indicated a funding level of 95.6% for the fiscal year
    ending September 30, 2011 and coupled with the reduction of $1.4 million as a result of
    failing the “Stop Loss” provisions, operating subsidy is expected to decrease by about $2.6
    million.

   The Authority is a “decliner” agency under the Operating Fund Rule currently being
    implemented. The Authority did not pass Year 1 and Year 2 of the “Stop Loss” provisions of
    the rule which resulted in operating subsidy loss of $6 million up to fiscal year ending
    September 30, 2011. Currently, the Authority submitted its data for Year 3 “Stop Loss” and
    is awaiting result of HUD’s review. The Authority could experience a more significant
    reduction in operating subsidy if it continues to fail this provision of the rule.



                                                 7
ECONOMIC FACTORS (continued)

   There isn’t expected to be any significant reduction of funding in the Capital Fund program
    from fiscal year 2010 to fiscal year 2011; however, we expect to have a 20% reduction in
    funding level for fiscal year 2012.

   The funding for the Section 8 program reduced by 11% in administrative fee and 1% in
    housing assistance payments subsidy from fiscal year 2010 to fiscal year 2011.

   The Authority was awarded an additional $15.3 million grant under the American Recovery
    and Reinvestment Act of 2009 Competitive Grant program (ARRA). The entire grant of
    $33.2 million in ARRA funding was used to modernize existing housing stocks during the
    fiscal years ending September 30, 2010 and 2011.

   The Authority terminated its contract with the San Francisco Department of Human Services
    for the administration of its Shelter Plus Care program effective July 1, 2011. This will result
    in a loss of administrative fee income of approximately $500,000 per year.




                                                 8
           The Housing Authority of the City and County of San Francisco, California

                                              BALANCE SHEET

                                            September 30, 2010




                        ASSETS
                                                                                              Total Discrete
                                                                 Total Primary               Component Units
CURRENT ASSETS                                                   Government               (December 31, 2009)
 Cash and cash equivalents - unrestricted                      $       1,719,095           $           191,846
 Cash and cash equivalents - restricted                               13,450,027                     2,462,365
 Receivables, net                                                      2,028,330                     1,030,333
 Due from HUD                                                          7,155,155                             -
 Due from other governments                                            1,852,996                             -
 Prepaid expenses                                                          80,884                       93,777
 Accrued interest receivable, net                                      4,539,870                             -
        Total current assets                                             30,826,357                 3,778,321
NONCURRENT ASSETS
 Capital assets, net                                                     87,256,115               65,262,020
 Investment in joint venture                                             28,570,728                        -
 Notes, loans and mortgages receivable                                   76,387,383                        -
 Other noncurrent assets                                                      1,505                1,706,541
        Total assets                                           $       223,042,088         $      70,746,882


           LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
 Current portion of long-term debt                             $            330,000        $          46,938
 Accounts payable                                                         4,096,452                  442,097
 Due to HUD                                                               1,776,765                        -
 Accrued interest payable                                                         -                   20,920
 Accrued salaries and benefits                                              591,119                        -
 Accrued liabilities                                                        653,037                        -
 Tenant security deposits                                                 1,201,625                  271,773
 Deferred revenue - HUD subsidy                                           2,424,475                   51,223
 FSS escrow                                                                 966,635                         -
 Other current liabilities                                                1,268,768                  129,896
        Total current liabilities                                        13,308,876                  962,847
NONCURRENT LIABILITIES
 Accrued compensated absences                                             1,727,087                         -
 Deferred revenue - lease                                                 4,959,165                         -
 Long-term debt                                                           8,070,000               48,492,593
 Other noncurrent liabilities                                               300,000                  528,635
 Other post-employment benefits ("OPEB") liability                        2,341,688                        -
        Total liabilities                                                30,706,816               49,984,075
NET ASSETS
 Invested in capital assets, net of related debt                        87,256,115                16,722,489
 Restricted net assets                                                 114,338,344                 2,190,592
 Unrestricted net assets                                                (9,259,187)                1,849,726
        Total net assets                                               192,335,272                20,762,807
        Total liabilities and net assets                       $       223,042,088         $      70,746,882

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

                                                        9
                    The Housing Authority of the City and County of San Francisco, California

                    STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS

                                               Year ended September 30, 2010



                                                                                                             Total Discrete
                                                                                    Total Primary           Component Units
OPERATING REVENUES                                                                  Government            (December 31, 2009)
 HUD operating revenues                                                        $         173,786,226      $                 -
 Other government operating grants                                                        10,097,402                        -
 Tenant revenue, net                                                                      15,588,231                2,611,785
 Other operating revenue                                                                   1,677,170                  109,196
        Total operating revenues                                                         201,149,029                2,720,981
OPERATING EXPENSES
 Administrative                                                                           19,924,181                1,383,867
 Tenant services                                                                           1,351,425                        -
 Utilities                                                                                12,060,208                  853,662
 Maintenance                                                                              26,654,007                2,438,200
 Protective services                                                                       3,234,150                  291,076
 General                                                                                   6,487,147                  434,166
 Depreciation                                                                              5,307,915                2,500,546
 Housing assistance payments                                                             129,902,320                        -
        Total operating expenses                                                         204,921,353                7,901,517
OPERATING INCOME (LOSS)                                                                    (3,772,324)             (5,180,536)
NONOPERATING REVENUES (EXPENSES)
 Mortgage interest income, net                                                                626,517                       -
 Interest income - unrestricted                                                               252,245                  13,163
 Interest income - restricted                                                                  27,611                       -
 Interest expense                                                                                   -              (1,072,455)
        Total nonoperating revenues (expenses)                                                906,373              (1,059,292)
Change in net assets before capital contributions
 and transfers                                                                             (2,865,951)             (6,239,828)
CAPITAL AND PARTNER CONTRIBUTIONS
 AND TRANSFERS
 HUD capital grants                                                                        13,111,115                       -
 Partner contributions                                                                              -                 550,000
 Transfers from primary government                                                                  -               2,661,437
 Transfers to component unit                                                               (2,618,998)                      -
        Change in net assets                                                                7,626,166              (3,028,391)
Total net assets - beginning                                                             184,709,106              23,791,198
Total net assets - ending                                                      $         192,335,272      $       20,762,807




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

                                                                 10
    The Housing Authority of the City and County of San Francisco, California

                            STATEMENT OF CASH FLOWS

                            Year ended September 30, 2010

CASH FLOWS FROM OPERATING ACTIVITIES
 HUD operating grants received                                                $ 178,053,784
 Other government grants received                                                 8,395,721
 Collections from tenants                                                        15,520,195
 Collections from other sources                                                   1,512,693
 Payments to employees                                                          (34,787,471)
 Payments to suppliers                                                          (36,659,396)
 Housing assistance payments                                                   (129,930,612)
       Net cash provided by operating activities                                      2,104,914

CASH FLOWS FROM CAPITAL AND
 RELATED FINANCING ACTIVITIES
 HUD capital grants received                                                       13,111,115
 Collections of accrued interest                                                      100,000
 Collections on note receivable                                                       310,000
 Payments on long-term debt                                                          (310,000)
 Transfers to component units                                                      (2,618,998)
 Purchase of property and equipment                                               (14,795,060)
      Net cash used in capital and related financing activities                    (4,202,943)
CASH FLOWS FROM INVESTING ACTIVITIES
 Interest received - unrestricted                                                      252,247
 Interest received - restricted                                                         27,611
       Net cash provided by investing activities                                       279,858
NET DECREASE IN CASH                                                              (1,818,171)
     Cash and cash equivalents at beginning of year                               16,987,293
       Cash and cash equivalents at end of year                               $ 15,169,122


AS PRESENTED IN THE ACCOMPANYING BALANCE SHEET:
 Cash and cash equivalents - unrestricted                                     $    1,719,095
 Cash and cash equivalents - restricted                                           13,450,027
                                                                              $ 15,169,122




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

                                             11
  The Housing Authority of the City and County of San Francisco, California

                   STATEMENT OF CASH FLOWS (continued)

                          Year ended September 30, 2010

RECONCILIATION OF OPERATING LOSS TO NET
 CASH PROVIDED BY OPERATING ACTIVITIES
 Operating loss                                                           $     (560,887)
 Adjustments to reconcile operating loss to
   net cash provided by operating activities
  Depreciation                                                                 5,307,915
  Provision for bad debt, net of recoveries                                    1,815,708
  (Increase) decrease in assets:
    Receivables, net                                                          (2,067,580)
    Due from HUD                                                                 990,734
    Due from other governments                                                (1,701,681)
    Prepaid expenses                                                              51,864
    Other noncurrent assets                                                       (1,505)
  Increase (decrease) in liabilities:
    Accounts payable                                                          (1,415,473)
    Due to HUD                                                                   852,349
    Accrued salaries and benefits                                             (1,568,454)
    Accrued liabilities                                                             (441)
    Tenant security deposits                                                      19,359
    Deferred revenue                                                           2,424,475
    FSS escrow                                                                   (28,292)
    Other current liabilities                                                    359,973
    Other post-employment benefits ("OPEB") liability                            838,287
      Net cash provided by operating activities                           $    5,316,351




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

                                           12
                                               The Housing Authority of the City and County of San Francisco, California

                                                   COMBINING BALANCE SHEET FOR DISCRETE COMPONENT UNITS

                                                                             September 30, 2010




                             ASSETS                                                         Discrete Component Units - As of December 31, 2009

                                                                Bernal Housing           Hayes Valley            Hayes Valley           Plaza East         Total Discrete
CURRENT ASSETS                                                 Associates, L.P.        Apartments, L.P.        Apartments II, L.P.    Associates, L.P.   Component Units
 Cash and cash equivalents - unrestricted                     $          13,107        $        40,532         $        133,922      $           4,285   $         191,846
 Cash and cash equivalents - restricted                                 497,254                818,902                  956,902               189,307            2,462,365
 Receivables, net                                                       102,587                260,690                  377,131               289,925            1,030,333
 Prepaid expenses                                                        21,728                 20,279                   22,481                29,289               93,777
         Total current assets                                             634,676                1,140,403               1,490,436            512,806           3,778,321
NONCURRENT ASSETS
 Capital assets, net                                                  23,048,158                5,683,677              10,087,864          26,442,321          65,262,020
 Other noncurrent assets                                                  33,752                  111,550                 373,723           1,187,516           1,706,541
         Total assets                                         $       23,716,586       $        6,935,630      $       11,952,023    $     28,142,643    $     70,746,882


             LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
 Current portion of long-term debt                             $               -       $           20,416       $           26,522   $              -    $         46,938
 Accounts payable                                                        150,614                   23,216                   18,556            249,711             442,097
 Accrued interest payable                                                      -                    8,545                   12,375                  -              20,920
 Tenant security deposits                                                 58,103                   63,087                   82,312             68,271             271,773
 Deferred revenue                                                         15,468                    9,102                   22,637              4,016              51,223
 Other current liabilities                                                 8,610                   47,935                   10,983             62,368             129,896
         Total current liabilities                                       232,795                  172,301                  173,385            384,366             962,847
NONCURRENT LIABILITIES
 Long-term debt                                                       20,201,045                4,436,206               7,806,992          16,048,350          48,492,593
 Other noncurrent liabilities                                                  -                  304,909                  21,926             201,800             528,635
         Total liabilities                                            20,433,840                4,913,416               8,002,303          16,634,516          49,984,075
NET ASSETS
 Invested in capital assets, net of related debt                       2,847,113                1,227,055               2,254,350          10,393,971          16,722,489
 Restricted net assets                                                   439,151                  755,815                 874,590             121,036           2,190,592
 Unrestricted net assets                                                  (3,518)                  39,344                 820,780             993,120           1,849,726
         Total net assets                                              3,282,746                2,022,214               3,949,720          11,508,127          20,762,807
         Total liabilities and net assets                     $       23,716,586       $        6,935,630       $      11,952,023    $     28,142,643    $     70,746,882

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

                                                                                       13
                                                The Housing Authority of the City and County of San Francisco, California

                                        COMBINING STATEMENT OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS
                                                          FOR DISCRETE COMPONENT UNITS

                                                                       Year ended September 30, 2010




                                                                                                Discrete Component Units - Year ended December 31, 2009

                                                                         Bernal Housing           Hayes Valley            Hayes Valley           Plaza East         Total Discrete
OPERATING REVENUES                                                       Associates, L.P.       Apartments, L.P.       Apartments II, L.P.     Associates, L.P.   Component Units
 Tenant revenue, net                                                    $        455,888        $      747,438          $       963,925        $       444,534    $      2,611,785
 Other operating revenue                                                           6,377                 25,422                  50,798                 26,599             109,196
         Total operating revenues                                                 462,265                 772,860                 1,014,723            471,133          2,720,981
OPERATING EXPENSES
 Administrative                                                                   344,978                 268,197                  339,466             431,226          1,383,867
 Utilities                                                                        207,097                 153,017                  165,646             327,902            853,662
 Maintenance                                                                      856,370                 360,493                  686,861             534,476          2,438,200
 Protective services                                                                    -                  83,306                   90,516             117,254            291,076
 General                                                                           82,311                  49,219                  218,101              84,535            434,166
 Depreciation                                                                     830,807                 254,013                  402,245           1,013,481          2,500,546
         Total operating expenses                                               2,321,563              1,168,245                  1,902,835          2,508,874          7,901,517
OPERATING INCOME (LOSS)                                                        (1,859,298)               (395,385)                 (888,112)        (2,037,741)        (5,180,536)
NONOPERATING REVENUES (EXPENSES)
 Interest income - unrestricted                                                        736                  5,852                     6,268                307             13,163
 Interest expense                                                                  (22,365)              (300,633)                 (497,093)          (252,364)        (1,072,455)
         Total nonoperating revenues (expenses)                                    (21,629)              (294,781)                 (490,825)          (252,057)        (1,059,292)
Change in net assets before capital contributions and transfers                (1,880,927)               (690,166)            (1,378,937)           (2,289,798)        (6,239,828)
CAPITAL AND PARTNER CONTRIBUTIONS
 AND TRANSFERS
 Partner contributions                                                            550,000                       -                        -                   -            550,000
 Transfers from primary government                                                944,431                 320,382                  410,884             985,740          2,661,437
         Change in net assets                                                    (386,496)               (369,784)                 (968,053)        (1,304,058)        (3,028,391)
Total net assets - beginning                                                    3,669,242              2,391,998                  4,917,773         12,812,185         23,791,198
Total net assets - ending                                               $       3,282,746       $      2,022,214        $         3,949,720    $    11,508,127    $    20,762,807




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

                                                                                         14
        Housing Authority of the City and County of San Francisco, California

                            Notes to Basic Financial Statements

                                      September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     1. Reporting entity

     The Housing Authority of the City and County of San Francisco, California (the “Authority”),
     is a public body organized in 1938 under the laws of the State of California for the purpose
     of engaging in the development, acquisition, leasing and administration of low-cost housing
     for individuals meeting criteria established by the U.S. Department of Housing and Urban
     Development (“HUD”). The governing body of the Authority is its Board of Commissioners
     (the “Board”) composed of seven members appointed by the Mayor of the City and County
     of San Francisco (the “City and County”). The Mayor of the City and County has the
     authority to appoint the Board, but not to remove them from office. The Authority is not a
     component unit of the City, as defined in Governmental Accounting Standards Board
     Statement No. 14, as amended, The Reporting Entity, (“GASB No. 14”) as the Board
     independently oversees the Authority’s operations.

     The definition of the reporting entity as defined by GASB No. 14 is based primarily on the
     notion of financial accountability. A primary government is financially accountable for the
     organizations that make up its legal entity. It is also financially accountable for legally
     separate organizations if its officials appoint a voting majority of an organization’s governing
     body and either it is able to impose its will on that organization or there is a potential for the
     organization to provide specific financial benefits to, or to impose specific financial burdens
     on, the primary government.

     Blended component units

     Some component units, despite being legally separate from the primary government, are so
     integrated with the primary government that they are in substance part of the primary
     government and are therefore blended with the primary government. The Authority’s
     operations include four blended component units, which are included in the basic financial
     statements and consist of legally separate entities for which the Authority is financially
     accountable and that have the same governing board as the Authority. The blended
     component units are as follows:

                Plaza East Housing Corporation
                Hayes Valley Housing Corporation
                Bernal Housing Corporation
                SFHA Housing Corporation

     All of the above component units are related California not-for-profit corporations created
     as instrumentalities of the Authority for the purpose of providing and developing
     affordable housing opportunities.




                                                15
        Housing Authority of the City and County of San Francisco, California

                            Notes to Basic Financial Statements

                                     September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
     1. Reporting entity (continued)
     Discretely presented component units
     The following component units meet the criteria for discrete presentation in the Authority’s
     basic financial statements. A separate “Discrete Component Unit” column is presented to
     clearly distinguish their balances and transactions from those of the primary government.

                Hayes Valley Apartments L.P. (“Hayes Valley I”)
                Hayes Valley Apartments II L.P. (“Hayes Valley II”)
                Plaza East Associates, L.P. (“Plaza East”)
                Bernal Housing Associates, L.P. (“Bernal Housing”)

     All of the above component units are for-profit, limited partnerships. These partnerships
     were established to develop and operate apartment complexes. In total, these properties
     provide 547 housing units, of which 469 are ACC units, receiving public housing funding
     through the Authority. Although they do not follow government accounting, for presentation
     purposes certain transactions may be reflected differently in these financial statements than
     in separately issued information in order to conform to the presentation of the primary
     government. Hayes Valley Housing Corporation (“HVHC”), a blended component unit of
     the Authority, is one of the general partners of Hayes Valley I and Hayes Valley II. The
     managing general partner for Plaza East is Plaza East Housing Corporation (“PEHC”), a
     blended component unit of the Authority. The managing general partner for Bernal
     Housing is Bernal Housing Corporation (“BHC”), a blended component unit of the Authority.
     The Authority is accountable for HVHC, PEHC and BHC’s underlying financial interest.
     Separately issued financial statements for the year ended December 31, 2009, for each
     discretely presented component unit, can be obtained by contacting the Authority at 1815
     Egbert Ave., San Francisco, California 94124.

     2. Government-wide and fund financial statements
     The government-wide financial statements report information about the reporting
     government as a whole excluding fiduciary activities. The statements distinguish between
     governmental and business-type activities. Governmental activities generally are financed
     through taxes, intergovernmental revenues, and other nonexchange revenues. Business-
     type activities rely to a significant extent on fees and charges for support.
     Governments use fund accounting, whereby funds are organized into three major
     categories: governmental, proprietary and fiduciary. Each fund is accounted for by
     providing a separate set of self-balancing accounts that constitute its assets, liabilities, fund
     equity, revenues and expenditures/expenses.

     For financial reporting purposes, the Authority reports all of its operations as a single
     business activity in a single enterprise fund. Therefore, the government-wide and the fund
     financial statements are the same.




                                                16
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                    September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     2. Government-wide and fund financial statements (continued)

     Enterprise funds are proprietary funds. Proprietary funds distinguish operating revenues
     and expenses from nonoperating items. Operating activity generally arises from providing
     services in connection with a proprietary fund’s principal activity. The operating revenues
     of the Authority consist primarily of rental charges to tenants and operating grants from the
     Department of Housing and Urban Development (“HUD”), and include, to a lesser extent,
     certain operating amounts of capital grants that offset operating expenses.
     Operating expenses for the Authority include the cost of administrative, maintenance,
     tenant services, general, utilities, protective services, depreciation and housing assistance
     payments. All revenues and expenses not meeting this definition are reported as
     nonoperating revenues and expenses, except for capital contributions and transfers, which
     are presented separately.
     When restricted resources meet the criteria to be available for use and unrestricted
     resources are also available for use, it is the Authority’s policy to use restricted resources
     first, and then unrestricted resources, as needed.
     3. Measurement focus and basis of accounting
     Measurement focus is a term used to describe which transactions are recorded within the
     various financial statements. The proprietary fund utilizes an economic resources
     measurement focus. The accounting objectives of this measurement focus are the
     determination of operating income, changes in net assets (or cost recovery), financial
     position, and cash flows. All assets and liabilities (whether current or noncurrent)
     associated with their activities are reported. Proprietary fund equity is classified as net
     assets.
     Basis of accounting refers to when transactions are recorded regardless of the
     measurement focus applied. The basis of accounting used is similar to businesses in the
     private sector; thus, these funds are maintained on the accrual basis of accounting.
     Revenues are recognized when earned and expenses are recorded when the liability is
     incurred or economic asset used.

     For financial reporting purposes, the Authority considers its HUD grants associated with
     operations as operating revenue because these funds more closely represent revenues
     generated from operating activities rather than nonoperating activities. HUD grants
     associated with capital acquisition and improvements are considered capital contributions
     and are presented after nonoperating activity on the accompanying statement of revenues,
     expenses and changes in net assets.




                                              17
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     4. Summary of programs

     The accompanying basic financial statements include the activities of several housing
     programs subsidized by HUD and other federal entities at the Authority. A summary of
     each significant program is provided below.

     Low Rent Housing Programs

     The Low Rent Public Housing Programs include the following: asset management projects
     (“AMPs”), which collect operating subsidy, Public Housing Capital Fund, Capital Fund
     Recovery Grants, Hope VI, and various other related HUD grants including the Community
     Development Block Grant.

     The purpose of the public housing program is to provide decent and affordable housing to
     low-income families at reduced rents. The developments are owned, maintained and
     managed by the Authority. The developments/units are acquired, developed and
     modernized under HUD’s Development, Hope VI and Capital Fund programs.

     Funding of the program’s operations and development is provided by annual federal
     contributions or appropriations, operating subsidies and tenant rentals (determined as a
     percentage of family income, adjusted for family composition and other allowances).

     Central Office Cost Center

     The Central Office Cost Center (“COCC”) is a business unit within the Authority that
     generates revenue through fee for service from other Authority programs and activities.

     Housing Assistance Payments (“HAP”) Programs

     HAP Programs utilize existing privately owned family rental housing units to provide decent
     and affordable housing to low-income families. HAP programs include Moderate
     Rehabilitation, Veterans Affairs Supportive Housing (“VASH”), Disaster Voucher, and the
     Housing Choice Voucher (“Voucher”) programs. The Moderate Rehabilitation program
     allows for the rehabilitation of housing units, which then must be rented to low-income
     individuals for a contracted period of time. The program provides owners with sufficient
     rental income to pay for rehabilitation costs. Developers must obtain their own financing
     and HUD subsidizes rents once the units are occupied. The Disaster Voucher program
     provides temporary rental assistance to certain HUD-assisted families and special
     needs/homeless families displaced as a result of Hurricanes Katrina and Rita. Funding for
     the Housing Choice Voucher program is provided by federal housing assistance
     contributions from HUD for the difference between the approved landlord contract rent and
     the rent paid by the tenant. In addition, the Authority receives an administrative fee to cover
     operating expenses.

     The Housing Opportunities for Persons with AIDS (“HOPWA”) program is funded through
     federal pass through assistance contributions through the City and County.

                                               18
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
     4. Summary of programs (continued)

     Local Programs
     Other Federal programs through which the Authority received funding passed through from
     HUD and other Federal entities during the current year include: the Shelter Plus Care
     (“SPC”) program, which provides rental assistance for hard-to-serve homeless persons with
     disabilities in connection with supportive services funded outside the program; HOPE SF,
     which is a grant the Authority entered into with the City and County of San Francisco to
     rebuild select housing sites, increase affordable housing and ownership opportunities;
     Mayor’s Office of Community Development (“MOCD”) and Mayor’s Office of Housing
     (“MOH”) Programs, which are grants the Authority entered into with the City and County as
     the recipient of CDBG from HUD to improve the housing stock and finance specific capital
     improvements; and Special Purpose Grant/Technical Assistance, which is a program that
     provides assistance to transfer skills and knowledge in planning, developing and
     administering the Community Development Block Grant (“CDBG”) programs to modernize
     and revitalize public housing projects.

     5. Assets, liabilities and net assets
          a) Cash and cash equivalents
              For purposes of the statement of cash flows, the Authority considers all
              unrestricted highly liquid investments with an initial maturity of three months or
              less to be cash equivalents.

          b) Receivables, net and accrued interest receivable, net
              Receivables consist of revenues earned during the fiscal year and not yet
              received. Amounts due from HUD and other governments represent reimbursable
              expenses or grant subsidies earned that have not been collected as of
              September 30, 2010; these amounts are considered fully collectible. As of
              September 30, 2010, there are allowances for uncollectible amounts for tenant,
              fraud and interest receivable in the amounts of $2,523,477, $164,935 and
              $4,639,866, respectively. Allowances for tenant and fraud receivables are
              determined by management based on the specific accounts and prior experience.
              The allowance for interest receivable has been determined by management to be
              50% of the total receivable amount.




                                             19
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                    September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     5. Assets, liabilities and net assets (continued)

          c) Capital assets, net

              The Authority’s policy is to capitalize assets with a value in excess of $5,000 and
              a useful life in excess of one year. The Authority capitalizes the costs of site
              acquisition and improvement, structures, equipment and direct development costs
              meeting the capitalization policy. Assets are valued at historical cost, or
              estimated historical cost if actual historical cost is not available, and contributed
              assets are valued at fair market value on the date contributed.

              Depreciation has been provided using the straight-line method over the
              estimated useful lives, which range as follows:

                         Buildings                                        40 years
                         Building improvements                           15-20 years
                         Furniture and equipment                          3-7 years

          d) Accrued compensated absences

              Employees earn vacation at rates ranging from 10 days per year for the first 5
              years of service up to a maximum of 27.5 days per year after 19 years of service.
              There is no requirement that vacation be taken in the year earned; however, there
              is a 50-day limit on the number of days an employee may accrue. Sick leave for
              employees is earned at rates ranging from 13 days per year for the first 9 years of
              service to 15 days per year for 10 or more years of service. Employees may
              accrue sick leave to a maximum of 130 days. In addition, the Authority must carry
              as a liability the payroll taxes due until the leave times are used or cashed out.
              Upon separation from service, employees are paid for any earned vacation days
              and eligible employees hired prior to September 30, 1984, are paid for any
              earned sick leave. In accordance with the provisions of GASB Statement No. 16,
              Accounting for Compensated Absences, the estimated liability for vested leave
              benefits is recorded when it is earned as an expense and the cumulative unpaid
              amount is reported as a liability.




                                              20
        Housing Authority of the City and County of San Francisco, California

                              Notes to Basic Financial Statements

                                        September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     5. Assets, liabilities and net assets (continued)

          e) Deferred revenue

               Deferred revenue consists of $2,424,475 of October 2010 HUD operating
               subsidy that was received in September 2010 and $4,959,165 of a prepayment
               received on a long-term ground lease for land adjacent to a public housing
               property.

          f)   Eliminations

               i)     Interprogram due to/from

               In the normal course of operations, certain programs may pay for common costs
               or advance funds for operational shortfalls that create interprogram receivables or
               payables. The interprogram receivables and payables net to zero and are
               eliminated for the presentation of the Authority as a whole. For the year ended
               September 30, 2010, offsetting amounts of $13,262,592 were eliminated.

               ii)    Fee for service

               The Authority’s COCC internally charges fees to the AMPs of the Authority.
               These charges include management fees, bookkeeping fees, and asset
               management fees. For financial reporting purposes $14,299,510 of fee for
               service charges have been eliminated for the year ended September 30, 2010.

               iii)   Internal rent charges
               The Authority internally charges rent to programs within the Authority. For
               financial reporting purposes $256,200 of internal rent charges have been
               eliminated for the year ended September 30, 2010.




                                                 21
        Housing Authority of the City and County of San Francisco, California

                             Notes to Basic Financial Statements

                                      September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     5. Assets, liabilities and net assets (continued)

          g)    Net assets

               In accordance with GASB No. 34, total equity as of September 30, 2010, is
               classified into three components of net assets:

               i)     Invested in capital assets, net of related debt

               This category consists of capital assets (including restricted capital assets), net of
               accumulated depreciation and reduced by any outstanding balances of bonds,
               mortgages, notes or other borrowings that are attributable to the acquisition,
               construction, and improvements of those assets.

               ii)    Restricted net assets

               This category consists of net assets restricted in their use by (1) external groups
               such as grantors, creditors or laws and regulations of other governments; or (2)
               law through constitutional provisions or enabling legislation. The balance sheet of
               the Authority reports $114,338,344 of restricted net assets which consists of the
               following: $72,527,253 of mortgage notes and interest receivable restricted by
               HUD guidelines, $28,570,728 of Hope VI funds spent in excess of amounts
               loaned (see Note B-4), $2,955,241 of escrow reserves, and $10,285,122 of
               unspent housing assistance payments in the Housing Choice Voucher and VASH
               programs (see Note B-10-c).

               iii)   Unrestricted net assets

               This category includes all of the remaining net assets that do not meet the
               definition of the other two categories.

     6. Tenant revenue and interest income

     As provided by GASB Statement No. 34 and related guidance, tenant revenue and interest
     income is presented in the financial statements net of the bad debt expense for
     uncollectible amounts of $1,815,708 and $626,516, respectively.

     7. Application of FASB standards

     GASB Statement No. 20, Accounting and Financial Reporting for Proprietary Funds and
     Other Governmental Entities that use Proprietary Fund Accounting, offers the option of
     following all Financial Accounting Standards Board (“FASB”) standards issued after
     November 30, 1989, unless the latter conflicts with or contradicts GASB pronouncements,
     or not following FASB standards issued after such date. The Authority has elected the
     option to follow FASB pronouncements issued after November 30, 1989, except for those
     that conflict with or contradict GASB pronouncements.


                                                22
        Housing Authority of the City and County of San Francisco, California

                              Notes to Basic Financial Statements

                                      September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     8. Use of estimates

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

     9. Budgets

     Budgets are prepared on an annual basis for each major program and are used as a
     management tool throughout the accounting cycle. Budgets are not, however, legally
     adopted nor required in the basic financial statement presentation.

     10. Income taxes

     Organizations that followed the provisions of FSP FIN 48-3, which delayed the
     implementation of FIN 48 (FASB ASC 740-10-65), Accounting for Uncertainty for Income
     Taxes, were required to implement those provisions for the fiscal year ended 2010. The
     Authority qualifies as a tax-exempt governmental entity and, accordingly, no provision for
     Federal or State income tax is required. In addition, the blended and discrete
     component units had no tax liability due as of and for the year ended December 31,
     2009.

     11. Leasing activities

     The Authority is the lessor of dwelling units to low-income and market rate residents. The
     low-income rents under the leases are determined generally by the resident’s income as
     adjusted for eligible deductions regulated by HUD, although the resident may opt for a flat
     rent. Leases may be cancelled by the lessee at any time or renewed every year. The
     Authority may cancel the leases only for cause. A significant majority of the capital assets
     are used in these leasing activities. Revenues associated with these leases are recorded
     in the accompanying financial statements and related schedules within tenant revenue.




                                              23
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                      September 30, 2010


NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

     12. Hope VI leasing activities

        a. North Beach Housing Associates (North Beach)

        The Authority leased the land for 75 years on which the North Beach property is built,
        located in San Francisco, California, for an annual rent amount of $800,000 beginning
        January 1, 2005 (see Note B-14). The rent is payable in arrears starting on July 1, 2006
        and on July 1 of each succeeding year until the termination of the lease, to the extent of
        70% of residual receipts from the preceding year. Additional base rent is also payable
        to the extent of cash flow generated by North Beach in excess of $114,500 in a
        particular year to be increased by 3% annually. For the year ended September 30,
        2010, the Authority received the ground lease rent of $226,944.

        b. Valencia Gardens Housing Limited Partnership (Valencia Gardens)

        The Authority leased the land for 65 years on which the Valencia Gardens complex is
        built, located in San Francisco, California, for an annual rent amount of $200,000 (see
        Note B-14). The rent is payable in arrears starting on July 1, 2006 and on July 1 of each
        succeeding year until the termination of the lease to the extent of 33% of residual
        receipts from the preceding year. Additional base rent is also payable of the lesser of
        $100,000 from residual receipts or such amounts as may be permissible under
        Multifamily Housing Program regulations. Any unpaid base rent shall not accrue. For
        the year ended September 30, 2010, the Authority did not receive any amounts for the
        ground lease rent.

NOTE B - DETAILED NOTES

     1. Deposits

     As of September 30, 2010, the Authority’s cash and cash equivalents consist of demand
     deposits of $15,169,122, which includes an overnight repurchase agreement of
     $9,998,598.
     In accordance with GASB No. 40, the Authority’s exposure to deposit and investment
     risk is disclosed as follows:
     Interest Rate Risk. Interest rate risk is the risk that changes in interest rates will
     adversely affect the fair value of an investment. The Authority’s policy is to manage its
     exposure to declines in fair values by limiting the weighted average maturity of its
     investment portfolio. As of September 30, 2010, the Authority had no investments, and
     therefore was not exposed to interest rate risk.
     Credit Risk. Credit risk is the risk that an issuer or other counterparty to an investment
     will not fulfill its obligations. It is the Authority’s policy to follow the HUD regulations by
     only having direct investments and investments through mutual funds to direct
     obligations, guaranteed obligations, or obligations of the agencies of the United States of
     America. As of September 30, 2010, the Authority mitigated their exposure to credit risk
     by following HUD regulations.
                                               24
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                    September 30, 2010


NOTE B - DETAILED NOTES (continued)

     1. Deposits (continued)

     Custodial Credit Risk. Custodial credit risk is the risk that in the event of a bank failure,
     the Authority’s deposits or investments may not be returned. The Authority does have a
     deposit and investment policy for custodial credit risk, which requires collateral to be
     held in the Authority’s name by its agent or by the bank’s trust department. The
     California Government Code requires California banks to secure deposits of public
     institutions not covered by federal deposit insurance by pledging government securities
     as collateral. The market value of pledged securities must equal 110% of the deposits.
     The collateral must be held at the pledged bank’s trust department or other bank, acting
     as the pledging bank’s agent. Of the deposits in financial institutions, $250,000 was
     insured by the Federal Depository Insurance Corporation. The remaining amounts were
     fully collateralized by the financial institution with governmental securities held either by
     the financial institution’s trust department or other banks acting as the financial
     institution’s agent, but were not in the Authority’s name.
     Restricted Cash
     As of September 30, 2010, restricted cash consists of:

               Voucher HAP reserves                                $    8,326,526
               Tenant security deposits                                 1,201,625
               Section 8 FSS escrow                                       966,635
               Escrow reserves                                          2,955,241
                                                                   $   13,450,027

     2. Receivables, net

     As of September 30, 2010, receivables, net as presented in the accompanying balance
     sheet consist of:

             Tenant accounts receivable                                  $    3,710,967
             Fraud recovery                                                     330,639
             Non-dwelling rent receivable                                       278,761
             Insurance claim receivable                                         137,743
             Other miscellaneous receivables                                    258,632
                                                                              4,716,742
             Allowance for doubtful accounts - tenants                       (2,523,477)
             Allowance for doubtful accounts - fraud                           (164,935)
                                                                         $    2,028,330




                                               25
         Housing Authority of the City and County of San Francisco, California

                              Notes to Basic Financial Statements

                                          September 30, 2010


NOTE B - DETAILED NOTES (continued)

     3. Notes receivable and accrued interest receivable, net

     The Authority has entered into six limited partnerships under its Hope VI program for the
     purpose of developing low-income and mixed income housing financed by HUD and private
     tax credit investors. As part of the project financing structure, the six limited partnerships
     received HUD Hope VI funds through the Authority or its component unit housing
     corporations, and issued seven promissory notes payable to the Authority in return for long-
     term leases on the Authority’s low income land sites. The following is a summary of those
     transactions.
                                         Balance at                                        Balance at
                                         October 1,                                       September 30,         Current
                                           2009              Additions       Reductions       2010              Portion
      Notes receivable:
       Hayes Valley I                $     1,600,000     $               -   $       -    $    1,600,000    $             -
       Hayes Valley II                     3,250,000                     -           -         3,250,000                  -
       Bernal Housing                     20,107,760                     -           -        20,107,760                  -
       Plaza East                         13,464,813                     -           -        13,464,813                  -
       North Beach                        13,848,535                     -           -        13,848,535                  -
       Valencia Gardens                   24,426,275                     -    (310,000)       24,116,275                  -
         Total notes receivable      $ 76,697,383        $               -   $(310,000)   $ 76,387,383      $             -
      Accrued interest receivable:
       Hayes Valley I                      1,231,449           201,398               -         1,432,847         1,432,847
       Hayes Valley II                     2,215,928           349,003               -         2,564,931         2,564,931
       Bernal Housing                        186,087            20,298        (100,000)          106,385           106,385
       Plaza East                          2,012,895           266,889               -         2,279,784         2,279,784
       North Beach                         2,380,342           415,445               -         2,795,787         2,795,787
       Valencia Gardens                            -                 -               -                 -                 -
         Subtotal                          8,026,701         1,253,033        (100,000)        9,179,734         9,179,734
         Less allowance                   (4,013,348)         (626,516)              -        (4,639,864)       (4,639,864)
         Total accrued interest      $     4,013,353     $ 626,517           $(100,000)   $    4,539,870    $   4,539,870

            a.   Hayes Valley I

                 The Authority issued a 57-year $1,600,000 promissory note, also referred to as
                 the second mortgage loan, dated November 25, 1996, and maturing on
                 November 24, 2053 to Hayes Valley. Based on the note’s simple interest rate of
                 12% per annum through December 31, 1997 and compound interest rate of
                 7.02% per annum thereafter, the Authority has accrued interest of $1,432,847 as
                 of September 30, 2010. The principal and accrued interest is payable only from
                 net available project cash flow, net project proceeds or project condemnation
                 proceeds, as defined in the promissory note. The Authority has established an
                 allowance for uncollectible interest representing 50% of accrued interest at
                 September 30, 2010.


                                                        26
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                   September 30, 2010


NOTE B - DETAILED NOTES (continued)
     3. Notes receivable and accrued interest receivable, net (continued)
          b.   Hayes Valley II
               The Authority issued a 57-year, $3,250,000 promissory note, also referred to as
               the second mortgage loan, dated December 1, 1997 and maturing on
               December 1, 2054 to Hayes Valley II. Based on the note’s simple interest rate of
               12% per annum through December 31, 1998 and compound interest rate of
               6.31% per annum thereafter, the Authority has accrued interest of $2,564,931 as
               of September 30, 2010. The principal and interest is payable only from net
               available project cash flow, net project proceeds or project condemnation
               proceeds, as defined in the promissory note. The Authority has established an
               allowance for uncollectible interest representing 50% of accrued interest at
               September 30, 2010.
          c.   Bernal Housing
               The Authority issued a 55-year, $2,465,501 promissory note, also referred to as
               the predevelopment loan, dated November 23, 1999 and maturing on
               November 22, 2054 to Bernal Housing Associates (“Bernal”). Due to a partial
               early repayment of $2,380,861 on the loan and an adjustment increase of
               $250,000, the principal balance was reduced to $334,640. Based on the note’s
               compound interest rate of 0.1% per annum, the Authority has calculated a
               cumulative accrued interest amount of $14,002 as of September 30, 2010. The
               principal and accrued interest is payable only from net available project cash
               flow, net project proceeds or project condemnation proceeds, as defined in the
               promissory note. The Authority has established an allowance for uncollectible
               interest representing 50% of accrued interest at September 30, 2010.
               The Authority issued a 55-year, $4,287,500 promissory note, also referred to as
               the construction/permanent loan, dated November 23, 1999 and maturing on
               November 22, 2054 to Bernal. Based on the note’s compound interest rate of
               0.1% per annum, the Authority has accrued interest of $39,081 as of September
               30, 2010. The principal and accrued interest is payable only from net available
               project cash flow, net project proceeds or project condemnation proceeds, as
               defined in the promissory note. The Authority has established an allowance for
               uncollectible interest representing 50% of accrued interest at September 30,
               2010.
               The Authority issued a 55-year, $15,500,000 promissory note, also referred to as
               the permanent loan, dated November 23, 1999 and maturing on November 22,
               2054 to Bernal. Based on the note’s compound interest rate of 0.1% per annum,
               the Authority has accrued interest of $53,304 as of September 30, 2010. The
               principal and accrued interest is payable only from net available project cash
               flow, net project proceeds or project condemnation proceeds, as defined in the
               promissory note. During the fiscal year ended September 30, 2010, Bernal paid
               $100,000 in accrued interest. The Authority has established an allowance for
               uncollectible interest representing 50% of accrued interest at September 30,
               2010.
                                             27
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                    September 30, 2010


NOTE B - DETAILED NOTES (continued)
     3. Notes receivable and accrued interest receivable, net (continued)
        d. Plaza East
             Plaza East Housing Corporation, a blended component unit, issued a 65-year,
             $2,700,000 Applicable Federal Rate (“AFR”) promissory note dated September 18,
             2000 and maturing on September 17, 2065 to Plaza East Associates, L.P. (“Plaza
             East”). Based on the note’s simple interest rate of 10% per annum through
             December 31, 2001 and compound interest rate of 6.09% per annum thereafter, the
             Authority has accrued interest of $1,899,553 as of September 30, 2010. The
             principal and interest is payable only from net available project cash flow, net
             project proceeds or project condemnation proceeds, as defined in the promissory
             note. The Authority has established an allowance for uncollectible interest
             representing 50% of accrued interest at September 30, 2010.
             The Authority, through SFHA Housing Corporation, a blended component unit,
             issued a 65-year, $10,764,813 promissory note dated September 18, 2000 and
             maturing on September 17, 2065 to Plaza East. Based on the note’s simple
             interest rate of 10% per annum through December 31, 2001 and no interest
             payable thereafter, the Authority has accrued interest of $380,230, as of September
             30, 2010. The principal and interest is payable only from net available project cash
             flow, net project proceeds or project condemnation proceeds, as defined in the
             promissory note. The Authority has established an allowance for uncollectible
             interest representing 50% of accrued interest at September 30, 2010.

        e. North Beach
             The Authority issued a 55-year, $13,848,535 promissory note dated December 1,
             2002 and maturing on November 30, 2057 to North Beach Development
             Associates, LLC (“North Beach”). This note was an amendment of the residential
             promissory note for $4,911,097 and the commercial loan of $313,001, both dated
             November 28, 2001 to finance the development of the North Beach affordable
             rental property pursuant to the Hope VI construction/permanent loan agreement.
             Based on the note’s simple interest rate of 3% per annum, the Authority has
             calculated a cumulative accrued interest amount of $2,795,787 as of September 30,
             2010. The principal and accrued interest is payable only from net available project
             cash flow, net project proceeds or project condemnation proceeds, as defined in the
             promissory note. The Authority has established an allowance for uncollectible
             interest representing 50% of accrued interest at September 30, 2010.
        f.   Valencia Gardens
             The Authority established a partnering agreement with Mission Housing
             Development Corporation (“MHDC”), a California non-profit public benefit
             corporation, which gives MHDC the exclusive right to develop and revitalize the
             Valencia Gardens development funded by the Hope VI grant agreement between
             the Authority and HUD. The Authority issued a 55-year, $15,716,275 permanent
             loan to finance the construction and development of the Valencia Gardens
             development, dated September 1, 2004 and maturing on August 31, 2059.
                                              28
         Housing Authority of the City and County of San Francisco, California

                             Notes to Basic Financial Statements

                                      September 30, 2010


NOTE B - DETAILED NOTES (continued)

     3. Notes receivable and accrued interest receivable, net (continued)

         f.   Valencia Gardens (continued)

              This permanent loan does not provide for the payment of interest, however, if a
              default occurs, interest at 10% on the principal balance shall accrue. The principal
              and accrued interest, if any, is payable only from the net available project cash flow,
              net project proceeds or project condemnation proceeds, as defined in the
              promissory note.

              In addition, the Authority has a note receivable of $8,400,000 from Valencia
              Gardens for repayment of the Multifamily Housing Revenue Bonds that were
              loaned. The interest and payment terms are identical to those of the bonds issued
              (see Note B-6-a).

     4. Investment in joint venture

     The HUD grant funds advanced to the entities noted in Note B-3 in excess of promissory
     notes is recorded as investment in joint ventures of $14,258,463, $5,023,159, $1,665,626,
     $4,529,460, and $3,094,020 for Hayes Valley, Bernal, Plaza East, North Beach and
     Valencia Gardens, respectively, totaling $28,570,728 as of September 30, 2010.

     5. Capital assets, net

     A summary of changes in capital assets is as follows:

                                        Balance at                                          Balance at
                                        October 1,      Transfers in/     Transfers out/   September 30,
                                          2009           Additions          Deletions          2010
      Non-depreciable:
         Land                          $ 11,678,889     $           -     $            -   $ 11,678,889
         Construction in progress         2,043,677           638,145                  -      2,681,822
      Total non-depreciable              13,722,566           638,145                  -     14,360,711
      Depreciated:
         Buildings and improvements     134,465,133         13,747,683                 -    148,212,816
         Furniture and equipment          7,655,185            409,232                 -      8,064,417
      Total depreciated                 142,120,318         14,156,915                 -    156,277,233
      Total capital assets              155,842,884         14,795,060                 -    170,637,944
      Accumulated depreciation:
         Buildings and improvements      (71,405,565)       (4,938,926)                -     (76,344,491)
         Furniture and equipment          (6,668,349)         (368,989)                -      (7,037,338)
      Less accumulated depreciation      (78,073,914)       (5,307,915)                -     (83,381,829)
      Capital assets, net              $ 77,768,970     $    9,487,145    $            -   $ 87,256,115



                                                29
         Housing Authority of the City and County of San Francisco, California

                             Notes to Basic Financial Statements

                                       September 30, 2010


NOTE B - DETAILED NOTES (continued)

     6. Noncurrent liabilities

     A summary of changes in noncurrent liabilities is as follows:

                                    Balance at                                      Balance at
                                    October 1,                                     September 30,       Current
                                      2009             Additions        Reductions     2010            Portion
      Bonds payable                $ 8,710,000     $               -   $ (310,000) $ 8,400,000        $ 330,000
      Accrued compensated
      absences                        1,891,649        1,002,920          (993,849)       1,900,720    173,633
      OPEB liability                  1,503,401          838,287                 -        2,341,688          -
      Deferred revenue - lease        4,959,165                -                 -        4,959,165          -
      Due to government entities        300,000                -                 -          300,000          -
         Total                     $ 17,364,215    $ 1,841,207         $ (1,303,849)   $ 17,901,573   $ 503,633

         a. Multifamily Housing Revenue Bonds (Valencia Gardens)

             On October 1, 2004, the Authority issued Multifamily Housing Revenue Bonds,
             Series 2004 (“Permanent Bonds”) in the principal amount of $40,000,000 to provide
             permanent financing for the Valencia Gardens Development. The Permanent
             Bonds shall mature on September 1, 2049 and are secured by a deed of trust on
             the property. Proceeds from the sale of the Permanent Bonds were not received by
             the Authority, but were deposited with a trustee in accordance with a loan
             agreement (dated October 1, 2004) between the Authority and Valencia Gardens
             Housing, L.P. The loan agreement stipulates that Valencia Gardens Housing, L.P.
             agrees to repay on behalf of the Authority, the loan in the amounts and at times
             necessary to enable the trustee, on behalf of the Authority, to pay when due all
             principal, interest and premium, if any, payable with respect to the Permanent
             Bonds whether at maturity or by redemption or acceleration or otherwise. The loan
             agreement shall be in full force and effect from the date of execution, and shall
             continue in effect as long as any of the Permanent Bonds are outstanding. The
             interest rate on the Permanent Bonds is determined periodically by a Remarketing
             Agent. As of September 30, 2010, the Permanent Bonds has a balance of
             $8,400,000.




                                                  30
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                    September 30, 2010


NOTE B - DETAILED NOTES (continued)

     6. Noncurrent liabilities (continued)

        a. Multifamily Housing Revenue Bonds (Valencia Gardens) (continued)

        The future principal maturities for the bonds payable at September 30 are as follows:

                                    Year            Principal
                                    2011        $       330,000
                                    2012                350,000
                                    2013                370,000
                                    2014                360,000
                                    2015                415,000
                                  2016-2020          2,490,000
                                  2021-2025          1,535,000
                                  2026-2030             840,000
                                  2031-2035          1,180,000
                                  2036-2037             530,000
                                                $    8,400,000

     7. Pension plan
     Plan description: Union member employees of the Authority are eligible for pension
     benefits in accordance with their respective union contracts. The Authority is required to
     fund the union pension plans through union dues which call for contributions ranging from
     $4.85 to $18.03 per work hour. Total union pension costs were $2,041,817 for the year
     ended September 30, 2010.

     Beginning March 1, 1961, all non-union employees of the Authority are required to
     participate in the California State Public Employees Retirement System (“PERS”) Plan, an
     agent multi-employer defined benefit pension plan that acts as a common investment and
     administrative agent for participating public entities within the state of California. Benefit
     provisions and all other requirements are established by State statutes within the Public
     Employee’s Retirement Law. Copies of the PERS annual financial report may be obtained
     from their executive office: 400 P Street, Sacramento, California 95814.

     Eligibility: Authority employees who retire at or after age 50 with five years of service are
     entitled to an annual retirement benefit payable monthly for life. This monthly benefit is
     based on years of service, average salary during the last twelve consecutive months of
     work or another consecutive 12-month period, if higher, and age at retirement. Vesting
     occurs after five years of service. PERS also provides death and disability benefits.




                                              31
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE B - DETAILED NOTES (continued)

     7. Pension plan (continued)

     Funding Policy: Participants are required to contribute 7% of their annual covered salary.
     The Authority makes the contribution required of their employees on their behalf. The
     Authority is required to contribute at an actuarially determined rate that is necessary to fund
     the benefit for its members. The Authority’s required contribution rate for the year ended
     September 30, 2010 based on the PERS actuarial determination was 9.97% and the
     amount was $1,511,204. The contribution requirements are established and may be
     amended by the PERS Board of Administration.

     Effective March 1, 2002, under a Memorandum of Understanding (“MOU”) between the
     Authority and the San Francisco Municipal Employee’s Association (“MEA”), the Authority
     contributes the entire 7% participant’s contribution of certain covered MEA employees.
     Effective September 30, 2005, under another MOU between the Authority and the Service
     Employees International Union Local 1021 (“SEIU Local 1021”), the Authority contributes
     the entire 7% participant’s contribution of all covered SEIU Local 1021 employees. The total
     of the 7% participant’s contributions for employees covered by the MEA and the SEIU
     Local 1021 MOUs that was paid by the Authority amounted to $812,737 for the year ended
     September 30, 2010.

     Annual pension costs: For the fiscal year ended September 30, 2010, the Authority’s
     annual pension costs of $1,378,253 for PERS were equal to the Authorities required
     contributions. The Authority made payments to PERS totaling $2,344,148, which
     included contributions made to PERS by the Authority on behalf of its employees of
     $812,737 and amounts contributed by employees of $153,156. The Authority’s annual
     pension cost for PERS was equal to the Authority’s required and actual contributions which
     were determined as part of the June 30, 2007, June 30, 2008 and June 30, 2009 actuarial
     valuations using the entry age normal cost method. Three-year trend information is as
     follows:


                                                     Percentage of
                   Fiscal Year Annual Pension            APC            Net Pension
                     Ended       Cost (APC)           contributed         Obligation
                     9/30/2008 $ 1,553,257                   100%       $            -
                     9/30/2009 $ 1,498,536                   100%       $            -
                     9/30/2010 $ 1,378,253                   100%       $            -




                                               32
        Housing Authority of the City and County of San Francisco, California

                            Notes to Basic Financial Statements

                                       September 30, 2010


NOTE B - DETAILED NOTES (continued)

     7. Pension plan (continued)

     Funded Status and Funding Progress: The schedule below shows the balance of the
     actuarial accrued liability attributable to the Authority, and the unfunded amount as of
     September 30, 2010:

                                                                                                    UL as % of
       Actuarial   Actuarial Value                        Unfunded        Funded   Annual Covered    Covered
       Valuation     of Assets       Accrued Liability   Liability (UL)    Ratio       Payroll        Payroll
         Date            (a)               (b)               (b-a)         (a/b)        ( c)         ([b-a]/c)
       6/30/2007   $ 84,422,007      $ 87,184,213        $ 2,762,206       97%      $ 13,340,021       21%
       6/30/2008   $ 89,076,261      $ 92,061,114        $ 2,984,853       97%      $ 13,770,160       22%
       6/30/2009   $ 91,597,742      $ 97,692,648        $ 6,094,906       94%      $ 13,768,652       44%

     Actuarial Methods and Assumptions: Actuarial valuations involve estimates of the value
     of reported amounts and assumptions about the probability of events in the future.
     Amounts determined regarding the funded status of the pension and the annual required
     contributions by the Authority are subject to continual revision as actual results are
     compared to past expectations and new estimates are made about the future. The
     required schedule of funding progress presented as required supplementary information
     provides multi-year trend information that shows whether the actuarial value of plan
     assets is increasing or decreasing over time relative to the actuarial accrued liability for
     benefits.

     The following summarizes other significant methods and assumptions used in valuing
     the AAL and benefits under the plan.

      Actuarial valuation date                    6/30/09
      Amortization method                         Level percent of payroll
      Remaining amortization period               24 years as of valuation date
      Asset valuation method                      15 year smoothed market
      Actuarial assumptions:
       Rate of return                             7.75%
       Projected salary increases                 3.55% to 14.45% dependent on age, service and
                                                  type of employment
       Inflation                                  3%
       Payroll growth                             3.25%
       Individual salary growth rate              A merit scale varying by duration of employment
                                                  coupled with an assumed inflation growth rate of
                                                  3% and an annual production growth of 0.25%




                                                  33
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                    September 30, 2010


NOTE B - DETAILED NOTES (continued)

     8. Other postemployment benefits other than pension

     Plan Description: The Authority participates in an agent multiple-employer defined
     benefit healthcare plan (the “Plan”) that provides postretirement coverage for the lifetime
     of the retiree with continuation to eligible surviving spouses whose benefits continue
     under PERS. Benefits are provided through the PERS Public Employees’ Health Care
     Fund, which covers both active and retired members. Benefits and contributions are
     established by the Memorandums of Understanding (the “Agreements”) between the
     Authority and the San Francisco Municipal Executives’ Association and the SEIU Local
     1021 and may only be amended by an approved change to the Agreements.
     Contributions are subject to minimum contribution levels established by the Plan. The
     Plan is included in a comprehensive annual financial report that includes financial
     statements and other required supplemental information. The report may be obtained by
     contacting the Plan administrator.

     Eligibility: To be eligible to receive retiree medical benefits, participants must be 50
     years of age and have 5 years of covered PERS service or by qualifying for disability
     retirement status.

     Funding Policy: The Authority contributes to the Plan 80% of the negotiated medical
     premiums per the Agreement. For fiscal year 2010, the Authority contributed $605,313
     to the plan. The postretirement medical benefits are currently funded on a pay-as-you-go
     basis. No assets have been segregated and restricted to provide postretirement
     benefits.

     Annual OPEB Cost and Net OPEB Obligation:               The Authority’s annual other
     postemployment benefit (“OPEB”) cost (expense) is calculated on the annual required
     contribution of the employer (“ARC”), an amount actuarially determined in accordance
     with the parameters of GASB Statement 45. The ARC represents a level of funding
     that, if paid on an ongoing basis, is projected to cover normal cost each year and to
     amortize any unfunded actuarial liabilities (or funding excess) over a period not to
     exceed thirty years.

     The Authority’s annual OPEB cost for the fiscal year 2010 and the related information for
     each plan are as follows (dollar amounts in thousands):

               Annual required contribution                    $ 1,461,571
               Interest on net OPEB obligation                      75,170
               Adjustment to annual required contribution          (93,141)
               Annual OPEB cost                                   1,443,600
               Contributions made                                   605,313
               Increase in net OPEB obligation                      838,287
               Net OPEB obligation - beginning of year            1,503,401
               Net OPEB obligation - end of year               $ 2,341,688

                                             34
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                      September 30, 2010


NOTE B - DETAILED NOTES (continued)

     8. Other postemployment benefits other than pension (continued)

        The Authority’s annual OPEB cost, the percentage of annual OPEB cost contributed
        to the plan and the net OPEB obligation for fiscal years 2008, 2009 and 2010 were
        as follows:

                                                    Percentage of
                 Fiscal                             Annual OPEB
                  Year            Annual                Cost          Net OPEB
                 Ended           OPEB Cost           Contributed      Obligation
               9/30/2008         $ 1,280,391             39.8%       $ 771,391
               9/30/2009         $ 1,271,170             42.4%       $ 1,503,401
               9/30/2010         $ 1,443,600             41.9%       $ 2,341,688

        Funded Status and Funding Progress: The schedule below shows the balance of
        the actuarial accrued liability (“AAL”) attributable to the Authority, all of which was
        unfunded as of September 30, 2010:

                                                                                            UAAL as
                     Actuarial       Actuarial                                Estimated       % of
         Actuarial   Value of        Accrued         Unfunded AAL   Funded     Covered      Covered
         Valuation    Assets      Liability (AAL)       (UAAL)       Ratio      Payroll      Payroll
           Date         (a)              (b)             (b-a)       (a/b)       ( c)       ([b-a]/c)
         6/30/2008   $       -     $ 12,022,086      $ 12,022,086    0%      $ 21,987,515     55%
         9/30/2010   $       -     $ 14,182,116      $ 14,182,116    0%      $ 22,251,205     64%

        Actuarial valuations involve estimates of the value of reported amounts and
        assumptions about the probability of events in the future. Amounts determined
        regarding the funded status of the plan and the annual required contributions by the
        Authority are subject to continual revision as actual results are compared to past
        expectations and new estimates are made about the future. The required schedule
        of funding progress presented as required supplementary information provides multi-
        year trend information that shows whether the actuarial value of plan assets is
        increasing or decreasing over time relative to the actuarial accrued liability for
        benefits.
        Actuarial Methods and Assumptions: Projections of benefits are based on the
        substantive plan (the “Plan” as understood by the employer and plan members) and
        include the types of benefits in force at the valuation date and the pattern of sharing
        benefit costs between the Authority and the plan members to that point. Actuarial
        calculations reflect a long-term perspective and employ methods and assumptions
        that are designed to reduce short-term volatility in actuarial accrued liabilities and the
        actuarial value of assets.



                                                    35
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                   September 30, 2010


NOTE B - DETAILED NOTES (continued)

     8. Other postemployment benefits other than pension (continued)

        The actuarial cost method used in the valuation to determine the Actuarial Accrued
        Liability (AAL) and the Actuarial Required Contribution (ARC) was the Projected Unit
        Credit Method with service prorated. Under this method, the total present value of
        benefits is determined by projecting the benefit to be paid after the expected
        retirement date (or other event) and discounting those amounts to the valuation date.
        The normal cost is computed by dividing the total present value of benefits by the
        participant’s total service (actual plus expected service) at retirement. The AAL
        under this method represents the total present value of benefits multiplied by the
        ratio of the participant’s actual service to date and divided by expected service at
        retirement. The AAL for participants currently receiving payments and deferred
        vested participants is calculated as the actuarial present value of future benefits
        expected to be paid. No normal cost for these participants is payable. The AAL and
        normal cost were calculated at the measurement date, which is the beginning of the
        applicable fiscal year using standard actuarial techniques.

        The following summarizes other significant methods and assumptions used in
        valuing the AAL and benefits under the plan.

         Actuarial valuation date                 9/30/10
         Amortization method                      30 year level dollar, open period
         Remaining amortization period            28 years

         Actuarial assumptions:
          Discount rate                           5%
          Return on Assets                        5%
          Health care cost trend period           Grades down over four years
          Health care cost trend rates            8% initial to 5% ultimate
          Mortality table                         1994 Group Annuity Mortality Tables

        Further, the valuation assumes that the Authority will continue to fund the liability on
        a pay-as-you-go basis and that the Authority’s policy is that its per-capita contribution
        for retiree benefits will remain at the 2010 level. As a result, the retiree contributions
        will be increased to the extent necessary so that they are sufficient to provide for the
        difference between the gross costs and the fixed Authority contributions.




                                             36
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                   September 30, 2010


NOTE B - DETAILED NOTES (continued)

     9. Risk management

     The Authority is exposed to various risks of loss related to torts; theft of, damages to,
     and destruction of assets; errors and omissions; injuries to employees, and natural
     disasters. As part of the Authority’s risk management program, certain commercial
     insurance policies are purchased, and the Authority participates in an insurance pool
     and a risk retention group for property insurance and workers compensation. The
     insurance pool and risk retention group are reinsured through other reinsurance
     companies and are not retrospectively rated and do not pass on risk of loss to
     participants.

     The Bay Area Housing Authority Risk Management Agency (BAHARMA) was formed
     under a joint powers agreement between the Housing Authority of the City and County of
     San Francisco, California and Oakland Housing Authority. BAHARMA provides no
     pooling or sharing of risk between its two members. Its purpose is to provide
     administrative and risk management services to the participating housing authorities for
     their worker’s compensation self-insurance funds. BAHARMA maintains excess
     insurance coverage for claims over $500,000 up to $5,000,000 per occurrence to reduce
     its members’ exposure to large losses in its workers’ compensation program. Claims are
     paid from the retained earnings of BAHARMA and from contributions remitted from the
     Authority and the Oakland Housing Authority. The Authority’s and Oakland Housing
     Authority’s allocated share of the BAHARMA assets and liabilities at September 30,
     2010 was 49.5% and 50.5%, respectively.

     10. Commitments and contingencies

        a. Legal

            In the normal course of operations, the Authority is party to various pending or
            threatened legal actions. As of the date of this report, the Authority expects all
            instances to be fully covered by insurance.

        b. Grants and contracts

            The Authority participates in various federally and locally-assisted grant programs
            that are subject to review and audit by the grantor agencies. Entitlements to
            these resources are generally conditional upon compliance with the terms and
            conditions of grant agreements and applicable federal and other regulations,
            including the expenditure of resources for allowable purposes. Any disallowance
            resulting from a review or audit may become a liability of the Authority; however,
            as of the date of this report, no such liabilities are reflected in the accompanying
            basic financial statements.




                                             37
        Housing Authority of the City and County of San Francisco, California

                         Notes to Basic Financial Statements

                                  September 30, 2010


NOTE B - DETAILED NOTES (continued)

     10. Commitments and contingencies (continued)

        c. Housing assistance payment reserves
            The Authority is no longer required to complete a settlement statement, HUD
            Form 52681, for the Voucher program. As a result, in accordance with GASB
            Statement No. 33 and PIH Notice 2008-9, the amount of current year program
            subsidy received in excess of associated qualifying expenses is presented as net
            program income or loss with the cumulative excess funding being reflected in
            restricted net assets in the basic financial statements. As of September 30,
            2010, unspent cumulative excess funding of $8,326,526 for Voucher and
            $1,958,596 for the VASH program are subject to possible future recapture.

        d. Payment in lieu of taxes (“PILOT”)

            A cooperative agreement between the City and County and the Authority dated
            January 21, 1965 exempts all public housing developments of the Authority from
            all real and personal property taxes and special assessments collected by the
            local tax collector. During the period of this exemption, the Authority agrees to
            make alternate payments to the City and County. Such payments are referred to
            as payments in lieu of taxes (“PILOT”). As specified in the agreements, the
            Authority’s PILOT equals total rent charged less utilities multipliled by 10%.

            In order to ease the financial burden on the Authority, the Board of Supervisors
            waived the PILOT obligation during the fiscal years 1982 through 1990. The
            Authority, through the Office of the Mayor, requested that the Board of
            Supervisors waive its PILOT obligations related to the fiscal years 1991-1996.
            These requests have been forwarded to the Board of Supervisors for approval.
            The Board of Supervisors has not yet acted on the PILOT waiver request for the
            fiscal years 1991 through 1996. The Authority has not communicated with the
            City and County about waiving the payment of PILOT for the fiscal years 1997
            through 2010. It is uncertain whether the Authority will be required to pay the
            PILOT. However, to date, the Authority has not received any subsequent
            invoices for payment from the Office of the Controller for the City and County of
            San Francisco. Should payment be required, the obligation to the City and
            County would be $10,627,335 for the fiscal years 1991 through 2010. The
            management of the Authority believes the waivers will be approved and PILOT
            for the fiscal year will not be required by the City and County. Furthermore, the
            Authority has been making payments to the City and County of San Francisco
            that management considers a tax or assessment for police services that would
            offset this contingent liability. Accordingly, no provision for PILOT has been
            made in the accompanying financial statements.




                                           38
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE B - DETAILED NOTES (continued)

     10. Commitments and contingencies (continued)

        e. Funds awarded
            The Authority receives funding from HUD through Hope VI, Capital Fund Recovery
            Grants and the Public Housing Capital Fund Program to help subsidize the cost of
            redevelopment of projects, project repairs, improvements, component unit
            developments, and certain operating costs. Remaining unspent awards as of
            September 30, 2010, are as follows:

               Public Housing Capital Fund Program                               $   18,365,207
               Capital Fund Stimulus Formula Recovery Act Funded Grant                6,797,658
               Capital Fund Stimulus Competitive Recovery Act Funded Grant           15,169,647
               Total remaining unspent awards                                    $   40,332,512

        As of September 30, 2010, all Hope VI funds were spent.

     11. Concentrations
     For the year ended September 30, 2010, approximately 86% of revenues and 46% of
     receivables reflected in the basic financial statements are from HUD.

     The Authority operates in a heavily regulated environment. The operations of the Authority
     are subject to the administrative directives, rules and regulations of federal, state and local
     regulatory agencies, including, but not limited to HUD. Such administrative directives, rules
     and regulations are subject to change by an act of congress or an administrative change
     mandated by HUD. Such changes may occur with little notice or inadequate funding to pay
     for the related costs and the additional administrative burden to comply with the changes.

     12. Financial data schedule

     As required by HUD, the Authority prepares its financial data schedule in accordance with
     HUD requirements in a prescribed format. The schedule’s format excludes depreciation
     expense, housing assistance payments and extraordinary maintenance expense from
     operating activities, includes investment revenue, HUD capital grants revenue, gains and
     losses on the disposal of fixed assets and interest expense in operating activities, differs in
     classifications of current and noncurrent assets, and reflects tenant and interest revenue
     separate from bad debt expense, which differs from the presentation of the basic financial
     statements.




                                                39
         Housing Authority of the City and County of San Francisco, California

                            Notes to Basic Financial Statements

                                    September 30, 2010


NOTE B - DETAILED NOTES (continued)

      13. Subsequent events

         a. On December 22, 2010, the Authority entered into a $29.7 million, 2-year service
            agreement with Ameresco, a leading provider of energy efficiency solutions, to
            implement an Energy Services Capital Improvement Project for utility-related
            capital needs at the developments. The project leverages public sector funds
            through the issuance of $34.2 million of both federally-taxable and tax-exempt
            bonds.

         b. Construction of the Hunters View development is scheduled to start in August
            2011. It is the first public housing project to be revitalized under the HOPE SF
            program, a partnership between the Mayor’s Office of Housing and the Authority
            aimed at revitalizing distressed public housing developments. The project has
            developed a financing plan that leverages available federal, state, local and
            private funding. The affordable rental housing portion has a total development
            cost of about $79 million. The Authority utilizes the non-HOPE VI HUD Funding
            that includes the Capital Fund Formula Grant (ARRA) for $6 million,
            Replacement Housing Factor Fund of $1,029,323 and the Neighborhood
            Initiatives Grant of $1,058,400.

         c. In preparing these financial statements, the Authority has evaluated events and
            transactions for potential recognition or disclosure through June 29, 2011, the
            date the financial statements were available to be issued.

      14. Related parties

      As mentioned in Note A-12, Note B-3-e and Note B-3-f, the Authority has entered into
      ground leases and loans associated with the development of North Beach Place (“NBP”)
      and Valencia Gardens Housing, LP, (“VGH”). North Beach Development Associates
      invests in real estate and constructs, operates and leases property. The property consists
      of a 341 unit rental apartment complex known as NBP. NBP was placed in service in 2004
      and fully leased in 2005. VGH was organized to develop, own and operate an apartment
      complex of 260 units for low income housing.

      NBP and VGH are not considered to be component units of the Authority as of
      September 30, 2010.




                                              40
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                    September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS

     The following partnerships are considered discrete component units of the Authority and
     are presented in accordance with GASB No. 14. Certain items may have changed for
     presentation purposes from the separately issued audited financial statements to conform
     to the Authority’s presentation. The following footnotes are presented pursuant to GASB
     No. 14, which states that the reporting entity’s financial statements should make those
     component unit disclosures that are essential to fair presentation of the financial reporting
     entity’s basic financial statements. The following footnotes are those that are material to
     the Authority and are not meant to be a full representation of each component unit’s
     required disclosures. A copy of each component unit’s separately issued audited financial
     statements can be obtained from the Authority’s management.

     1. Bernal Housing Associates, L.P. (“Partnership”)

        a. Credit risk

            The Partnership maintains its cash in bank accounts, which, at times, may exceed
            federally insured limits. The Partnership has not experienced any losses in such
            accounts. The Partnership believes it is not exposed to any significant credit risk.

        b. Syndication fee

            Pursuant to the Partnership Agreement, the Managing General Partner, Bernal
            Housing Corporation, was paid a syndication fee in the amount of $450,000 for its
            services in negotiating the terms of the investment by the Investor Limited Partner.
            The syndication fee was required to be paid out of the capital contributions of the
            Investor Limited Partner to the extent those funds were not required to pay for
            project costs. As of December 31, 2009, the entire amount was paid from
            contributions of the Investor Limited Partner.

        c. Incentive management fee

            Pursuant to the Partnership Agreement, the Managing General Partner will be paid
            an incentive management fee for services in managing the project. In consideration
            for such services, the Partnership shall pay a fee, solely from Net Cash Flow, and
            such fee shall not be cumulative. No such fee was accrued or paid by the
            Partnership during 2009.

        d. Ground lease

            The Partnership has executed a 75-year ground lease agreement with the
            Authority.    The lease is subject to various use restrictions and operating
            requirements, as defined in the agreement, including the requirement that all 160 of
            the units be continuously set aside during the term of the Regulatory and Operating
            Agreement for occupancy by public housing eligible households. The terms of the
            lease provide rent of $10 per year throughout the term of the Regulatory
            Agreement. Upon expiration of the lease, all improvements, alterations, additions,
            equipment and fixtures shall become the property of the Authority without cost or
            charge.
                                              41
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS (continued)

     1. Bernal Housing Associates, L.P. (“Partnership”) (continued)

        e. Long-term debt

            i.   Permanent loan

                 A permanent loan of $15,500,000 was provided by the Authority. Under the
                 terms of the loan, interest shall accrue at 0.1%, compounded annually. Interest
                 and principal are payable from net available cash flow, as defined in the Hope
                 VI permanent loan agreement dated November 23, 1999 (the “Hope VI
                 Agreement”). Pursuant to the Hope VI Agreement, the loan matures on
                 November 23, 2054. The Authority and HUD have entered into an Urban
                 Revitalization Demonstration Program Implementation Grant Agreement
                 effective August 12, 1994 providing for a grant to be made by HUD to the
                 Authority to assist in the financing of the construction of the project. Pursuant to
                 the terms of the Hope VI Agreement, the Authority has loaned the funds to the
                 Partnership as permanent financing for the project in order to repay the loan
                 funded through the issuance of the bonds. The permanent loan is secured by a
                 first leasehold deed of trust in favor of the Authority. As of December 31, 2009,
                 the permanent loan principal balance was $15,500,000. During 2009, accrued
                 interest of $100,000 was paid from contributions of the Investor Limited Partner.
                 As of December 31, 2009, accrued interest was $41,600.

            ii. Construction loan

                 A construction loan of up to $4,287,500 was provided by the Authority. Under
                 the terms of the loan, interest shall accrue at 0.1%, compounded annually.
                 Interest and principal are payable from net available cash flow, as defined in the
                 loan agreement. The loan is secured by a second deed of trust on the project,
                 and matures on November 23, 2054. As of December 31, 2009, the principal
                 balance was $4,273,120. As of December 31, 2009, accrued interest was
                 $35,857.

            iii. Predevelopment loan

                 A predevelopment loan of $2,465,501 was provided by the Authority. Under the
                 terms of the loan, interest shall accrue at 0.1%, compounded annually. Interest
                 and principal are payable from net available cash flow, as defined in the loan
                 agreement. The loan is secured by a third deed of trust on the project and
                 matures on November 23, 2054. As of December 31, 2009, the principal
                 balance was $334,640 and accrued interest was $15,828.




                                               42
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                    September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS (continued)

     2. Hayes Valley Apartments, L.P. (“Partnership”)

        a. Credit risk

            The Partnership maintains its cash in bank accounts, which, at times, may exceed
            federally insured limits. The Partnership has not experienced any losses in such
            accounts. The Partnership believes it is not exposed to any significant credit risk.

        b. Hope VI grant funds

            Pursuant to the Hope VI Grant and the Hope VI Plus Grant, the Partnership has
            utilized $5,400,000 and $150,000, respectively, of grant funds advanced by the
            Authority. Accordingly, construction costs have been reduced by $5,550,000.

        c. Ground lease

            The Partnership has executed a ground lease agreement with the Authority. The
            agreement is subject to various use restrictions and operating requirements, as
            defined in the agreement, including the requirements that 51 of the units be
            continuously set aside for occupancy by public housing eligible households and 33
            units that will not be reserved as public housing units be restricted for occupancy by
            tax credit eligible households. The terms of the agreement provide rent of $10 per
            year throughout the 57-year term. Upon expiration of the agreement, all
            improvements, alterations, additions, equipment and fixtures shall become the
            property of the Authority without cost or charge.

        d. Long-term debt

           i.   Construction/permanent loan

                Construction and permanent financing is provided by the Authority under a loan
                commitment of $1,600,000. The nonrecourse loan is secured by a second
                leasehold deed of trust on the property. The loan bears interest at an annual
                rate of 7.02%. At initial closing of the construction loan, the Partnership paid the
                Authority, solely from syndication proceeds, $235,000 as prepaid interest. All
                further interest, and all principal, are payable only from net available cash flow
                of the project, or from Net Proceeds or Condemnation Proceeds, as defined in
                the loan agreement. Payments are applied first to accrued interest and then
                against outstanding principal. Unpaid accrued interest compounds annually
                and is added to principal at the end of each fiscal year. Interest expense
                amounted to $188,852 in 2009 and total accrued interest added to principal
                amounted to $1,279,050 at December 31, 2009. The loan matures on
                November 25, 2053.




                                              43
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                    September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS (continued)

     2. Hayes Valley Apartments, L.P. (“Partnership”) (continued)

          ii.   Mortgage note

                During 2008, a loan provided under a loan commitment of $1,633,600 by
                Midland Loan Services was refinanced with Gershman Investment Corp. under
                a new loan commitment of $1,601,300. The nonrecourse loan is insured by
                HUD under Section 221(d)(4) of the National Housing Act and is secured by a
                first deed of trust on the property. The loan bears interest at an annual rate of
                6.5%. Monthly principal and interest payments amount to $10,196. The
                balance of principal and interest, if any, remaining shall be due and payable
                January 1, 2038.

     3. Hayes Valley Apartments II, L.P. (“Partnership”)

        a. Credit risk

            The Partnership maintains its cash in bank accounts, which, at times, may exceed
            federally insured limits. The Partnership has not experienced any losses in such
            accounts. The Partnership believes it is not exposed to any significant credit risk.

        b. Hope VI grant funds

            Pursuant to the Hope VI Grant and the Hope VI Plus Grant, the Partnership has
            utilized $3,326,000 and $146,324, respectively, of grant funds advanced by the
            Authority. Accordingly, construction costs have been reduced by $3,472,324.

        c. Ground lease

            The Partnership has executed a ground lease agreement with the Authority. The
            agreement is subject to various use restrictions and operating requirements, as
            defined in the agreement, including the requirements that 66 of the units be
            continuously set aside for occupancy by public housing eligible households and 44
            units that will not be reserved as public housing units be restricted for occupancy by
            tax credit eligible households. The terms of the agreement provide rent of $10 per
            year throughout the 57-year term. Upon expiration of the agreement, all
            improvements, alterations, additions, equipment and fixtures shall become the
            property of the Authority without cost or charge.




                                             44
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS (continued)

     3. Hayes Valley Apartments II, L.P. (“Partnership”) (continued)

        d. Long-term debt

            i.   Mortgage loan

                 Construction and permanent financing was originally provided by Midland Loan
                 Services under a loan commitment of $2,324,500. The nonrecourse loan was
                 insured by HUD under Section 221(d)(4) of the National Housing Act and is
                 secured by a first deed of trust on the property. The loan bore interest at an
                 annual rate of 8.2%. Interest alone was payable monthly on the first day of
                 January 1998, and on the first day of each month thereafter to and including
                 May 1, 1999. Monthly principal and interest payments of $16,512 began in
                 June 1999. The balance of principal and interest, if any, remaining shall be due
                 and payable on May 1, 2039. In May 2009, the mortgage note was refinanced
                 with a new mortgage financing of $2,297,200, provided by Gershman
                 Investment Corp. The mortgage note remains insured by HUD, bears interest
                 at an annual rate of 6.5%, and is secured by a security deed to the property.
                 Beginning July 1, 2009, monthly principal and interest payments of $14,520 are
                 payable through June 1, 2039.

            ii. Authority loan

                 Construction and permanent financing is also provided by the Authority under a
                 loan commitment of $3,250,000. The nonrecourse loan is secured by a second
                 leasehold deed of trust on the property. The loan bore interest at an annual rate
                 of 12% through December 31, 1998, and thereafter bears interest at an annual
                 rate of 6.31%. At initial closing of the construction loan, the Partnership paid the
                 Authority, solely from syndication proceeds, $300,000 as prepaid interest. All
                 further interest, and all principal, are payable only from net available cash flow
                 of the project, or from net proceeds or condemnation proceeds, as defined in
                 the loan agreement. Payments are applied first to accrued interest and then
                 against outstanding principal; unpaid accrued interest compounds annually and
                 is added to principal at the end of each fiscal year. Accrued interest added for
                 the year ended December 31, 2009 amounted to $329,356 and total accrued
                 interest amounted to $2,298,944 at December 31, 2009. The loan matures
                 December 1, 2054.

     4. Plaza East Associates, L.P. (“Partnership”)

        a. Credit risk

            The Partnership maintains its cash in bank accounts, which, at times, may exceed
            federally insured limits. The Partnership has not experienced any losses in such
            accounts. The Partnership believes it is not exposed to any significant credit risk.


                                               45
        Housing Authority of the City and County of San Francisco, California

                           Notes to Basic Financial Statements

                                     September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS (continued)

     4. Plaza East Associates, L.P. (“Partnership”) (continued)

        b. Working capital reserve

            Plaza East Housing Corp. (a blended component unit of the Authority), the
            Managing General Partner, has advanced funds to the Partnership for the purpose
            of funding the Working Capital Reserve. The balance due at December 31, 2009
            was $165,000 and is included in other noncurrent liabilities on the balance sheet.

        c. Ground lease

            The Partnership has executed a 75-year ground lease agreement with the
            Authority. The agreement is subject to various use restrictions and operating
            requirements, as defined in the agreement, including the requirement that all 192 of
            the units be continuously set aside during the term of the Regulatory and Operating
            Agreement for occupancy be public housing eligible households. The terms of the
            agreement provide for rent of $10 per year throughout the term of the regulatory
            agreement. Upon expiration of the agreement, all improvements, alterations,
            additions, equipment and fixtures shall become the property of the Authority without
            cost or charge.

        d. Long-term debt

            i.   Plaza East Housing Corporation note

                 Construction and permanent financing is being provided by Plaza East Housing
                 Corporation under a loan commitment of $2,700,000. The nonrecourse loan is
                 secured by a first leasehold deed of trust on the property. Interest accrued on
                 the loan at an annual rate of 10% through December 31, 2001. Thereafter,
                 interest accrues at an annual rate of 6.09%. At initial closing of the construction
                 loan, the Partnership paid Plaza East Housing Corporation, solely from
                 syndication proceeds, $270,000 as prepaid interest. All further interest, and all
                 principal, are payable only from net available cash flow of the project, or from
                 net proceeds or condemnation proceeds, as defined in the loan agreement.
                 Payments are applied first to accrued interest and then against outstanding
                 principal; unpaid accrued interest compounds annually. Unpaid accrued
                 interest added to principal at December 31, 2009 was $1,696,274. The loan
                 matures in September 2065.




                                               46
        Housing Authority of the City and County of San Francisco, California

                          Notes to Basic Financial Statements

                                   September 30, 2010


NOTE C - DISCRETELY PRESENTED COMPONENT UNITS (continued)

     4. Plaza East Associates, L.P. (“Partnership”) (continued)

        d. Long-term debt (continued)

            ii. SFHA Housing Corporation note

                Construction and permanent financing is also provided by SFHA Housing
                Corporation under a loan commitment of $11,064,813. The nonrecourse loan is
                secured by a second leasehold deed of trust on the property. Interest accrued
                on the loan at an annual rate of 10% through December 31, 2001. No interest
                shall accrue on the loan thereafter. The Partnership paid SFHA Housing
                Corporation, from development sources other than public housing funds,
                $443,000 for interest through December 31, 2001. All further interest, and all
                principal, are payable only from net available cash flow of the project, or from
                net proceeds or condemnation proceeds, as defined in the SFHA Loan
                Agreement. Payments are applied first to unpaid accrued interest, if any, and
                then against outstanding principal. Unpaid accrued interest at December 31,
                2009 was $380,230. The loan matures in September 2065.




                                             47
REQUIRED SUPPLEMENTARY INFORMATION




                48
                             The Housing Authority of the City and County of San Francisco, California

                               SCHEDULE OF PENSION AND OTHER POST EMPLOYMENT BENEFITS

                                                     Year ended September 30, 2010


                                                        Actuarial                                           Estimated          UAAL as %
                 Actuarial      Actuarial Value         Accrued           Unfunded AAL        Funded         Covered           of Covered
Benefit          Valuation        of Assets          Liability (AAL)         (UAAL)            Ratio          Payroll             Payroll
Plan*              Date               (a)                   (b)               (b-a)            (a/b)            ( c)             ([b-a]/c)
Pension          6/30/2007      $ 84,422,007         $ 87,184,213          $ 2,762,206         97%         $ 13,340,021            21%
Pension          6/30/2008      $ 89,076,261         $ 92,061,114          $ 2,984,853         97%         $ 13,770,160            22%
Pension          6/30/2009      $ 91,597,742         $ 97,692,648          $ 6,094,906         94%         $ 13,768,652            44%

OPEB             6/30/2008       $              -     $ 12,022,086        $ 12,022,086           0%        $ 21,987,515            55%
OPEB             9/30/2010       $              -     $ 14,182,116        $ 14,182,116           0%        $ 22,251,205            64%


* While the annual required contribution (ARC) is calculated using the aggregate actuarial cost method. Information in this schedule is
  calculated using the entry age actuarial cost method as a surrogate for the funding progress of the Plan.




                                                                     49
SUPPLEMENTAL INFORMATION




           50
                                                                                                                                                                          The Housing Authority of the City and County of San Francisco, California

                                                                                                                                                                                                         FINANCIAL DATA SCHEDULE

                                                                                                                                                                                                        Year ended September 30, 2010
PHA: CA001 FYE: 09/30/2010

                                                                                                                                                                                                                                                      Community          Community                                                                                    Captial Fund
                                                                                                                                                                                                                 Disaster                            Development        Development                             Housing          Section 8          Captial Fund       Stimulus
                                                                                                             Revitalization of     Veterans Affairs                                                              Housing                             Block Grant/       Block Grant/                          Opportunities    Consolidated      Stimulus Formula     Competitive
                                                                                            COCC           Severely Distressed       Supportive         Housing Choice                        Section 8 New     Assistance        Shelter Plus        Entitlement        Technical         Section 8 Disaster for Persons       Moderate          Recovery Act       Recovery Act                                             Total Component            REAC Total
Line Item                                                                 Total AMPs                         Public Housing           Housing          Voucher Program                        Construction        Grant              Care               Grants           Assistance        Voucher Program     with AIDS       Rehabilitation        Funded            Funded                              Total Primary      Units (Discretely      (Primary Government
   No.                        Account Description                           14.850         Operating             14.866               14.VSH               14.871           State/Local          14.182          97.109             14.238              14.218             14.227               14.DVP          14.241            14.856              14.885            14.884           Elimination       Government            Presented)         and Component Units)
       111   Cash - Unrestricted                                                      -       1,719,095                        -                   -                  -                   -                -                 -                   -                  -                  -                    -              -                -                    -                   -                 -          1,719,095            191,846                  1,910,941
       113   Cash - other restricted                                                  -               -               2,955,241                    -          8,326,526                   -                -                 -                   -                  -                  -                    -              -                 -                   -                   -                 -         11,281,767          2,190,592                 13,472,359
       114   Cash - Tenant Security Deposits                                  1,201,625               -                        -                   -                  -                   -                -                 -                   -                  -                  -                    -              -                 -                   -                   -                 -          1,201,625            271,773                  1,473,398
       115   Cash - Restricted for payment of current liability                       -               -                        -                   -            966,635                   -                -                 -                   -                  -                  -                    -              -                 -                   -                   -                 -            966,635                     -                 966,635
       100   Total Cash                                                       1,201,625       1,719,095               2,955,241                    -          9,293,161                   -                -                 -                   -                  -                  -                    -              -                 -                   -                   -                 -         15,169,122          2,654,211                 17,823,333

      122    Accounts Receivable - HUD Other Projects                         4,490,539              -                        -                    -                  -                   -                -                 -              -                       -          77,843                      -              -          488,268            1,989,397           109,108                    -         7,155,155                    -                7,155,155
      124    Accounts Receivable - other government                             442,910              -                        -                    -                  -                   -                -                 -      1,380,270                       -               -                      -         29,816                -                    -                 -                    -         1,852,996                    -                1,852,996
      125    Accounts Receivable - Miscellaneous                                278,761        339,743                        -                    -             56,632                   -                -                 -              -                       -               -                      -              -                -                    -                 -                    -           675,136              675,670                1,350,806
      126    Accounts Receivable - Tenants - Dwelling Rents                   3,710,967              -                        -                    -                  -                   -                -                 -              -                       -               -                      -              -                -                    -                 -                    -         3,710,967              354,663                4,065,630
    126.1    Allowance for Doubtful Accounts - Dwelling Rents                (2,523,477)             -                        -                    -                  -                   -                -                 -              -                       -               -                      -              -                -                    -                 -                    -        (2,523,477)                   -               (2,523,477)
    126.2    Allowance for Doubtful Accounts - Other                                  -              -               (4,639,866)                   -                  -                   -                -                 -              -                       -               -                      -              -                -                    -                 -                    -        (4,639,866)                   -               (4,639,866)
      128    Fraud recovery                                                           -              -                        -                    -            330,639                   -                -                 -              -                       -               -                      -              -                -                    -                 -                    -           330,639                    -                  330,639
    128.1    Allowance for doubtful accounts - fraud                                  -              -                        -                    -           (164,935)                  -                -                 -              -                       -               -                      -              -                -                    -                 -                    -          (164,935)                   -                 (164,935)
      129    Accrued interest receivable                                              -              -                9,179,736                    -                  -                   -                -                 -              -                       -               -                      -              -                -                    -                 -                    -         9,179,736                    -                9,179,736
      120    Total Receivables, net of allowances for doubtful accounts       6,399,700        339,743                4,539,870                    -            222,336                   -                -                 -      1,380,270                       -          77,843                      -         29,816          488,268            1,989,397           109,108                    -        15,576,351            1,030,333               16,606,684

      142 Prepaid Expenses and Other Assets                                      49,024          29,310                      -                   -                2,411             139                    -                 -              -                    -                  -                     -               -                -                    -                 -                  -              80,884               93,777                  174,661
      144 Interprogram due from                                               1,893,943       3,089,140              1,027,015           1,958,596            2,556,931          82,208                    -                 -        923,375              263,548                  -                13,687           3,025        1,451,124                    -                 -        (13,262,592)                  -                    -                        -
      150 Total Current Assets                                                9,544,292       5,177,288              8,522,126           1,958,596           12,074,839          82,347                    -                 -      2,303,645              263,548             77,843                13,687          32,841        1,939,392            1,989,397           109,108        (13,262,592)         30,826,357            3,778,321               34,604,678

      161    Land                                                            11,528,244         150,645                        -                   -                  -                   -                -                 -                   -               -                  -                      -               -                 -                   -                   -                 -        11,678,889            6,891,306                18,570,195
      162    Buildings                                                      147,045,070         400,429                        -                   -                  -                   -                -                 -                   -               -            767,317                      -               -                 -                   -                   -                 -       148,212,816           80,184,210               228,397,026
      164    Furniture, Equipment & Machinery - Administration                1,047,755       6,457,779                        -                   -            558,883                   -                -                 -                   -               -                  -                      -               -                 -                   -                   -                 -         8,064,417            2,655,507                10,719,924
      166    Accumulated Depreciation                                       (76,320,748)     (6,749,717)                       -                   -           (311,364)                  -                -                 -                   -               -                  -                      -               -                 -                   -                   -                 -       (83,381,829)         (24,469,003)             (107,850,832)
      167    Construction In Progress                                           395,845               -                        -                   -                  -                   -                -                 -                   -       2,285,977                  -                      -               -                 -                   -                   -                 -         2,681,822                    -                 2,681,822
      160    Total Fixed Assets, Net of Accumulated Depreciation             83,696,166         259,136                        -                   -            247,519                   -                -                 -                   -       2,285,977            767,317                      -               -                 -                   -                   -                 -        87,256,115           65,262,020               152,518,135

      171    Notes, loans, and mortgages receivable - Noncurrent                      -              -              76,387,383                     -                 -                    -                -                 -                   -               -                  -                      -               -                 -                   -                   -                 -        76,387,383                   -                76,387,383
      174    Other Assets                                                         1,505              -                       -                     -                 -                    -                -                 -                   -               -                  -                      -               -                 -                   -                   -                 -             1,505           1,706,541                 1,708,046
      176    Investment in joint ventures                                             -              -              28,570,728                     -                 -                    -                -                 -                   -               -                  -                      -               -                 -                   -                   -                 -        28,570,728                   -                28,570,728
      180    Total Non-Current Assets                                        83,697,671        259,136             104,958,111                     -           247,519                    -                -                 -                   -       2,285,977            767,317                      -               -                 -                   -                   -                 -       192,215,731          66,968,561               259,184,292


      190 Total Assets                                                       93,241,963       5,436,424            113,480,237           1,958,596           12,322,358          82,347                    -                 -      2,303,645            2,549,525            845,160                13,687          32,841        1,939,392            1,989,397           109,108        (13,262,592)        223,042,088          70,746,882               293,788,970
                                                                                                                                                                                                                                                                                                                                                                                                                         -
      312    Accounts Payable <= 90 Days                                         15,400       3,892,618                      -                     -            138,796                   -               -                  -               -              24,230                  -                      -              -                -                    -                 -                  -           4,071,044              442,097                4,513,141
      313    Accounts Payable >90 Days Past Due                                  25,408               -                      -                     -                  -                   -               -                  -               -                   -                  -                      -              -                -                    -                 -                  -              25,408                    -                   25,408
      321    Accrued Wage/Payroll Taxes Payable                                 177,718         169,742                      -                     -             58,311                   -               -                  -           1,975                   -                  -                      -          1,332            8,408                    -                 -                  -             417,486                    -                  417,486
      322    Accrued Compensated Absences                                        52,294          90,952                      -                     -             30,387                   -               -                  -               -                   -                  -                      -              -                -                    -                 -                  -             173,633                    -                  173,633
      325    Accrued interest payable                                                 -               -                      -                     -                  -                   -               -                  -               -                   -                  -                      -              -                -                    -                 -                  -                   -               20,920                   20,920
      331    Accounts Payable - HUD PHA Programs                              1,537,297               -                      -                     -                  -                   -               -                  -               -                   -             65,262                      -              -          152,487               21,719                 -                  -           1,776,765                    -                1,776,765
      341    Tenant Security Deposits                                         1,201,625               -                      -                     -                  -                   -               -                  -               -                   -                  -                      -              -                -                    -                 -                  -           1,201,625              271,773                1,473,398
      342    Deferred Revenues                                                2,399,612          24,863                      -                     -                  -                   -               -                  -               -                   -                  -                      -              -                -                    -                 -                  -           2,424,475               51,223                2,475,698
      343    Current portion of L-T debt - capital projects                           -               -                330,000                     -                  -                   -               -                  -               -                   -                  -                      -              -                -                    -                 -                  -             330,000               46,938                  376,938
      345    Other current liabilities                                          535,980               -                      -                     -          1,217,805                   -               -                  -               -             481,618                  -                      -              -                -                    -                 -                  -           2,235,403              129,896                2,365,299
      346    Accrued Liabilities - Other                                        450,467          67,339                      -                     -                  -                   -               -                  -               -                   -                  -                      -              -           26,123                    -           109,108                  -             653,037                    -                  653,037
      347    Interprogram due to                                             11,246,948               -                      -                     -                  -                   -           6,011                  -               -                   -             37,235                      -              -            4,720            1,967,678                 -        (13,262,592)                  -                    -                        -
      310 Total Current Liabilities                                          17,642,749       4,245,514                330,000                     -          1,445,299                   -           6,011                  -           1,975             505,848            102,497                      -          1,332          191,738            1,989,397           109,108        (13,262,592)         13,308,876              962,847               14,271,723

      351    Long-term debt, net of current - capital projects                        -               -              8,070,000                     -                 -                    -                -                 -              -                       -                  -                   -               -                 -                   -                   -                 -         8,070,000          48,492,593                56,562,593
      353    Noncurrent Liabilities - Other                                   4,959,165               -                      -                     -                 -                    -                -                 -        300,000                       -                  -                   -               -                 -                   -                   -                 -         5,259,165             528,635                 5,787,800
      354    Accrued compensated Absences - Non Current                         647,046         809,567                      -                     -           270,474                    -                -                 -              -                       -                  -                   -               -                 -                   -                   -                 -         1,727,087                   -                 1,727,087
      357    Accrued Pension and OPEB Liabilities                             1,405,011         234,171                      -                     -           702,506                    -                -                 -              -                       -                  -                   -               -                 -                   -                   -                 -         2,341,688                   -                 2,341,688
      350    Total Noncurrent Liabilities                                     7,011,222       1,043,738              8,070,000                     -           972,980                    -                -                 -        300,000                       -                  -                   -               -                 -                   -                   -                 -        17,397,940          49,021,228                66,419,168


      300 Total Liabilities                                                  24,653,971       5,289,252              8,400,000                     -          2,418,279                   -           6,011                  -        301,975              505,848            102,497                      -          1,332          191,738            1,989,397           109,108        (13,262,592)         30,706,816          49,984,075                80,690,891

    508.1    Invested in capital assets, net of related debt                 83,696,166         259,136                      -                   -              247,519               -                    -                 -              -            2,285,977            767,317                     -               -                -                     -                   -                 -        87,256,115          16,722,489               103,978,604
    511.1    Restricted Net Assets                                                    -               -            104,053,222           1,958,596            8,326,526               -                    -                 -              -                    -                  -                     -               -                -                     -                   -                 -       114,338,344           2,190,592               116,528,936
    512.1    Unrestricted Net Assets                                        (15,108,174)       (111,964)             1,027,015                   -            1,330,034          82,347               (6,011)                -      2,001,670             (242,300)           (24,654)               13,687          31,509        1,747,654                     -                   -                 -        (9,259,187)          1,849,726                (7,409,461)
      513    Total Equity                                                    68,587,992         147,172            105,080,237           1,958,596            9,904,079          82,347               (6,011)                -      2,001,670            2,043,677            742,663                13,687          31,509        1,747,654                     -                   -                 -       192,335,272          20,762,807               213,098,079


      600 Total Liabilities and Equity                                       93,241,963       5,436,424            113,480,237           1,958,596           12,322,358          82,347                    -                 -      2,303,645            2,549,525            845,160                13,687          32,841        1,939,392            1,989,397           109,108        (13,262,592)        223,042,088          70,746,882               293,788,970




                                                                                                                                                                                                                             51
                                                                                                                                                                     The Housing Authority of the City and County of San Francisco, California

                                                                                                                                                                                                    FINANCIAL DATA SCHEDULE

                                                                                                                                                                                                   Year ended September 30, 2010
PHA: CA001 FYE: 09/30/2010

                                                                                                                                                                                                                                                Community          Community                                                                                   Captial Fund
                                                                                                                                                                                                           Disaster                            Development        Development                             Housing          Section 8         Captial Fund       Stimulus
                                                                                                     Revitalization of     Veterans Affairs                                                                Housing                             Block Grant/       Block Grant/                          Opportunities    Consolidated     Stimulus Formula     Competitive
                                                                                    COCC           Severely Distressed       Supportive         Housing Choice                           Section 8 New    Assistance        Shelter Plus        Entitlement        Technical         Section 8 Disaster for Persons       Moderate         Recovery Act       Recovery Act                                             Total Component          REAC Total
Line Item                                                          Total AMPs                        Public Housing           Housing          Voucher Program                           Construction       Grant              Care               Grants           Assistance        Voucher Program     with AIDS       Rehabilitation       Funded            Funded                              Total Primary      Units (Discretely    (Primary Government
   No.                   Account Description                         14.850        Operating             14.866               14.VSH               14.871              State/Local          14.182         97.109             14.238              14.218             14.227               14.DVP          14.241            14.856             14.885            14.884           Elimination       Government            Presented)       and Component Units)
    70300 Net Tenant Rental Revenue                                   17,403,939               -                       -                   -                     -                   -                -                -                   -                  -                  -                    -              -                -                   -                   -                 -         17,403,939          2,697,943               20,101,882
    70500 Total Tenant Revenue                                        17,403,939               -                       -                   -                     -                   -                -                -                   -                  -                  -                    -              -                -                   -                   -                 -         17,403,939          2,697,943               20,101,882

   70600 HUD PHA Grants                                               41,565,458               -                       -         1,375,039          120,029,294                      -                -           830                      -                  -         742,663                      -               -      9,288,896              784,046                 -                    -       173,786,226                    -            173,786,226
   70610 HUD PHA Capital Grants                                        6,361,731               -                       -                 -                    -                      -                -             -                      -                  -               -                      -               -              -            6,640,276           109,108                    -        13,111,115                    -             13,111,115

   70710   Management Fee                                                      -      7,942,938                        -                   -                     -                   -                -                -                   -                  -                  -                   -               -                -                   -                   -      (7,942,938)                   -                   -                       -
   70720   Asset Management Fee                                                -         89,760                        -                   -                     -                   -                -                -                   -                  -                  -                   -               -                -                   -                   -         (89,760)                   -                   -                       -
   70730   Book-Keeping Fee                                                    -      1,304,330                        -                   -                     -                   -                -                -                   -                  -                  -                   -               -                -                   -                   -      (1,304,330)                   -                   -                       -
   70740   Front Line Service Fee                                              -      4,962,482                        -                   -                     -                   -                -                -                   -                  -                  -                   -               -                -                   -                   -      (4,962,482)                   -                   -                       -
   70700   Total Fee Revenue                                                   -     14,299,510                        -                   -                     -                   -                -                -                   -                  -                  -                   -               -                -                   -                   -     (14,299,510)                   -                   -                       -

   70800   Other government grants                                       369,028              -                      -                     -                 -                       -                -                -      6,498,052                       -                  -                   -      3,230,322                -                    -                   -               -          10,097,402                   -              10,097,402
   71100   Investment Income - Unrestricted                              232,113         20,132                      -                     -                 -                       -                -                -              -                       -                  -                   -              -                -                    -                   -               -             252,245              13,163                 265,408
   71200   Mortgage interest income                                            -              -              1,253,033                     -                 -                       -                -                -              -                       -                  -                   -              -                -                    -                   -               -           1,253,033                   -               1,253,033
   71400   Fraud recovery                                                      -              -                      -                     -            51,027                       -                -                -              -                       -                  -                   -              -                -                    -                   -               -              51,027                   -                  51,027
   71500   Other revenue                                                 792,562        577,063                193,000                     -           312,783                       -                -                -          1,410                       -                  -                   -          1,057            4,468                    -                   -        (256,200)          1,626,143           3,320,633               4,946,776
   72000   Investment income - restricted                                      -              -                  7,115                     -            20,496                       -                -                -              -                       -                  -                   -              -                -                    -                   -               -              27,611                   -                  27,611

   70000 Total Revenue                                                66,724,831     14,896,705              1,453,148           1,375,039          120,413,600                      -                -           830         6,499,462                       -         742,663                      -      3,231,379       9,293,364            7,424,322           109,108        (14,555,710)        217,608,741           6,031,739             223,640,480

   91100   Administrative salaries                                     3,345,055      3,990,737                       -                    -          2,483,639                      -                -                -        103,215                       -                  -                   -         89,501         402,954                    -                    -                -         10,415,101             476,523              10,891,624
   91200   Auditing fees                                                  63,085         45,738                       -                    -             31,958                      -                -                -          2,604                       -                  -                   -              -          14,330                    -                    -                -            157,715              36,690                 194,405
   91300   Management Fee                                              5,398,225              -                       -                    -          1,451,166                      -                -                -         52,696                       -                  -                   -         54,098         202,706              784,046                    -       (7,942,937)                 -                   -                       -
   91310   Book-Keeping Fee                                              460,850              -                       -                    -            666,503                      -                -                -         36,228                       -                  -                   -         36,318         104,436                    -                    -       (1,304,335)                 -                   -                       -
   91500   Employee benefit contributions - administrative             1,816,993      2,109,498                       -                    -          1,132,062                      -                -                -         36,081                       -                  -                   -         32,503         155,801                    -                    -                -          5,282,938             145,125               5,428,063
   91600   Office Expenses                                                     -          1,900                   5,800                    -            204,467                      -                -                -         16,013                       -                  -                   -          7,688          28,032                    -                    -                -            263,900             668,899                 932,799
   91700   Legal Expense                                                 464,509        548,301                       -                    -             21,463                      -                -                -              -                       -                  -                   -              -           2,175                    -                    -         (429,661)           606,787                   -                 606,787
   91800   Travel                                                         57,990        291,120                       -                    -             74,828                      -                -                -              -                       -                  -                   -              -             155                    -                    -                -            424,093                   -                 424,093
   91900   Other                                                       1,227,656      1,250,087                       -                    -            520,456                      -                -                -          7,356                       -                  -                   -              -          24,292                    -                    -         (256,200)         2,773,647              56,630               2,830,277

   92000 Asset Management Fee                                             89,760               -                       -                   -                     -                   -                -                -                   -                  -                  -                   -               -                -                   -                   -          (89,760)                  -                   -                       -

   92100 Tenant services - salaries                                      741,301         29,147                        -                   -            14,314                       -                -                -               -                      -                  -                   -               -                -                   -                   -                 -           784,762                    -                784,762
   92300 Employee benefit contributions - tenant services                124,775          5,775                        -                   -             5,017                       -                -                -               -                      -                  -                   -               -                -                   -                   -                 -           135,567                    -                135,567
   92400 Tenant Services - Other                                         418,624         10,897                        -                   -                 -                       -                -                -           1,575                      -                  -                   -               -                -                   -                   -                 -           431,096                    -                431,096

   93100   Water                                                       1,914,393         16,814                        -                   -             3,709                       -                -                -                   -                  -                  -                   -               -               -                    -                   -                 -         1,934,916             207,132               2,142,048
   93200   Electricity                                                 3,704,158        140,954                        -                   -            40,805                       -                -                -                   -                  -                  -                   -               -           7,519                    -                   -                 -         3,893,436             114,814               4,008,250
   93300   Gas                                                         2,737,789          3,160                        -                   -             1,947                       -                -                -                   -                  -                  -                   -               -               -                    -                   -                 -         2,742,896             134,151               2,877,047
   93600   Sewer                                                       3,425,474              -                        -                   -             5,934                       -                -                -                   -                  -                  -                   -               -               -                    -                   -                 -         3,431,408                   -               3,431,408
   93800   Other utilities expense                                        29,059         28,493                        -                   -                 -                       -                -                -                   -                  -                  -                   -               -               -                    -                   -                 -            57,552             397,565                 455,117

   94100   Ordinary Maintenance and Operations - Labor                 6,860,407      3,050,348                        -                   -           136,712                       -                -                -               -                      -                  -                   -               -             955                    -                   -                -         10,048,422             362,603              10,411,025
   94200   OMO - Materials and Other                                   2,558,469        163,906                        -                   -             4,809                       -                -                -             525                      -                  -                   -               -           8,030                    -                   -                -          2,735,739             627,617               3,363,356
   94300   Ordinary Maintenance and Operations - Contract Costs       10,128,870        214,682                        -                   -            58,273                       -                -                -           3,468                      -                  -                   -               -           4,984                    -                   -       (4,532,817)         5,877,460           1,447,980               7,325,440
   94500   Employee Benefit Contributions - Ordinary Maintenance       4,279,721      1,997,818                        -                   -            59,826                       -                -                -               -                      -                  -                   -               -               -                    -                   -                -          6,337,365                   -               6,337,365

   95100 Protective Services - labor                                      45,401          2,897                        -                   -             1,835                       -                -                -              48                      -                  -                   -             48                -                    -                   -                 -            50,229                   -                  50,229
   95200 Protective Services - Other Contract Costs                    3,030,215         39,516                        -                   -            91,960                       -                -                -          10,096                      -                  -                   -          3,596            8,538                    -                   -                 -         3,183,921             291,076               3,474,997




                                                                                                                                                                                                                       52
                                                                                                                                                                                      The Housing Authority of the City and County of San Francisco, California

                                                                                                                                                                                                                     FINANCIAL DATA SCHEDULE

                                                                                                                                                                                                                    Year ended September 30, 2010
PHA: CA001 FYE: 09/30/2010

                                                                                                                                                                                                                                                                Community          Community                                                                                    Captial Fund
                                                                                                                                                                                                                             Disaster                          Development        Development                             Housing          Section 8          Captial Fund       Stimulus
                                                                                                                        Revitalization of     Veterans Affairs                                                               Housing                           Block Grant/       Block Grant/                          Opportunities    Consolidated      Stimulus Formula     Competitive
                                                                                                       COCC           Severely Distressed       Supportive         Housing Choice                         Section 8 New     Assistance        Shelter Plus      Entitlement        Technical         Section 8 Disaster for Persons       Moderate          Recovery Act       Recovery Act                                             Total Component            REAC Total
Line Item                                                                           Total AMPs                          Public Housing           Housing          Voucher Program                         Construction        Grant              Care             Grants           Assistance        Voucher Program     with AIDS       Rehabilitation        Funded            Funded                              Total Primary      Units (Discretely      (Primary Government
   No.                       Account Description                                      14.850          Operating             14.866               14.VSH               14.871            State/Local          14.182          97.109             14.238            14.218             14.227               14.DVP          14.241            14.856              14.885            14.884           Elimination       Government            Presented)         and Component Units)
    96110   Property Insurance                                                           1,147,570          21,710                        -                   -             24,886                -                    -              -              1,020                    -                  -                    -        2,244             3,253                     -                   -               -            1,200,683                     -               1,200,683
    96120   Liability Insurance                                                            977,000                -                       -                   -             82,565                -                    -              -              7,239                    -                  -                    -              -         11,348                      -                   -               -            1,078,152                     -               1,078,152
    96140   All other Insurance                                                              5,081            1,836                       -                   -              1,568                -                    -              -                    -                  -                  -                    -              -                -                    -                   -               -                8,485            230,251                    238,736
    96200   Other General Expenses                                                       4,270,478         301,579                 796,721                    -            365,285           20,034                    -         12,243                    -                  -                  -                    -              -         49,565                      -                   -               -            5,815,905            203,915                  6,019,820
    96210   Compensated Absences                                                           369,008         475,162                        -                   -            158,750                -                    -              -                    -                  -                  -                    -              -                 -                   -                   -               -            1,002,920                     -               1,002,920
    96400   Bad Debt - Tenant Rents                                                      1,815,708                -                       -                   -                   -               -                    -              -                    -                  -                  -                    -              -                 -                   -                   -               -            1,815,708             86,158                  1,901,866
    96600   Bad Debt - Other                                                                     -                -                626,516                    -                   -               -                    -              -                    -                  -                  -                    -              -                 -                   -                   -               -              626,516                     -                 626,516
    96710   Interest of Mortgage (or Bonds) Payable                                              -                -                       -                   -                   -               -                    -              -                    -                  -                  -                    -              -                 -                   -                   -               -                    -          1,072,455                  1,072,455
    96900   Total Operating Expenses                                                    61,507,624      14,742,075               1,429,037                    -          7,644,737           20,034                    -         12,243            278,164                    -                  -                    -      225,996        1,029,073               784,046                    -     (14,555,710)          73,117,319          6,559,584                 79,676,903

   97000 Excess Operating Revenue over Operating Expenses                               5,217,207          154,630                 24,111           1,375,039          112,768,863          (20,034)                   -        (11,413)         6,221,298                    -         742,663                      -      3,005,383        8,264,291            6,640,276           109,108                    -       144,491,422             (527,845)             143,963,577

   97100    Extraordinary Maintenance                                                     993,718          279,090                      -                   -              181,286                -                    -              -                  -                    -                  -                   -              -            2,052                    -                    -               -           1,456,146                    -                1,456,146
   97200    Casualty Losses - Non-Capitalized                                             198,875                -                      -                   -                    -                -                    -              -                  -                    -                  -                   -              -                -                    -                    -               -             198,875                    -                  198,875
   97300    Housing Assistance Payments                                                         -                -                      -           1,350,227          111,777,568                -                    -              -          5,916,966                    -                  -                   -      2,975,900        7,881,659                    -                    -               -         129,902,320                    -              129,902,320
   97400    Depreciation Expense                                                        5,211,909           66,210                      -                   -               29,796                -                    -              -                  -                    -                  -                   -              -                -                    -                    -               -           5,307,915            2,500,546                7,808,461
   90000    Total Expenses                                                             67,912,126       15,087,375              1,429,037           1,350,227          119,633,387           20,034                    -         12,243          6,195,130                    -                  -                   -      3,201,896        8,912,784              784,046                    -     (14,555,710)        209,982,575            9,060,130              219,042,705

   10010    Operating transfers in                                                       5,881,412                -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -         5,881,412                      -               5,881,412
   10020    Operating transfers out                                                     (5,881,412)               -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -        (5,881,412)                     -              (5,881,412)
   10030    Operating transfers from/to primary government                                       -                -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -                 -                      -                       -
   10040    Operating transfers from/to component unit                                           -                -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -                 -                      -                       -
   10070    Extraordinary Items, net gain/loss                                                   -                -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -                 -                      -                       -
   10100    Total other financing sources (Uses)                                                 -                -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -                 -                      -                       -


   10000 Excess (deficiency) of total revenue over (under) total expenses               (1,187,295)       (190,670)                24,111              24,812              780,213          (20,034)                   -        (11,413)           304,332                    -         742,663                      -         29,483          380,580            6,640,276           109,108                    -         7,626,166           (3,028,391)               4,597,775

   11020 Debt Principal Payments - Enterprise Funds                                             -                -                      -                   -                    -                -                    -              -                  -                 -                     -                  -               -                -                    -                    -                 -                 -             166,594                   166,594
   11030 Beginning Equity                                                              63,025,903          337,842            105,056,126           1,933,784            9,090,492          102,381               (6,011)        44,787          1,697,338         2,043,677                     -             13,687           2,026        1,367,074                    -                    -                 -       184,709,106          23,791,198               208,500,304


   11040 Total Prior Period Adjustments, Equity transfer and correction of errors       6,749,384                 -                       -                   -             33,374                    -                -        (33,374)                   -                  -                  -                   -               -                 -         (6,640,276)         (109,108)                   -                  -                     -                       -

   11170    Administrative Fee Equity                                                           -                 -                       -                  -           1,577,553                    -                -                 -               -                    -                  -                   -              -                -                     -                   -                 -         1,577,553                    -                1,577,553
   11180    Housing Assistance Payments Equity                                                  -                 -                       -                  -           8,326,526                    -                -                 -               -                    -                  -                   -              -                -                     -                   -                 -         8,326,526                    -                8,326,526
   11190    Unit Months Available                                                          72,598                 -                       -              2,100              90,912                    -                -                 -           6,298                    -                  -                   -          3,359           13,920                     -                   -                 -           189,187                5,640                  194,827
   11210    Number of Unit Months Leased                                                   69,163                 -                       -              1,159              87,918                    -                -                 -           6,298                    -                  -                   -          3,359           12,408                     -                   -                 -           180,305                5,332                  185,637

   11270 Excess Cash                                                                   (12,754,614)               -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -       (12,754,614)                     -             (12,754,614)

   11620 Building Purchases                                                            12,133,768                 -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -        12,133,768                      -             12,133,768
   11640 Furniture & Equipment - Administrative Purchases                                 977,347                 -                       -                   -                   -                   -                -                 -                 -                  -                  -                   -               -                 -                   -                   -                 -           977,347                      -                977,347




                                                                                                                                                                                                                                         53
                                  The Housing Authority of the City and County of San Francisco, California

                                SCHEDULE OF ACTUAL CAPITAL FUND PROGRAM COSTS AND ADVANCES

                                                             Year ended September 30, 2010




PROGRAM                                       CFP 2006              CFP 2007         CFP 2008          CFP 2009         CFP 2010           TOTAL
BUDGET                                    $ 13,571,332          $ 13,963,770     $ 13,661,652      $ 13,618,427     $ 13,568,787       $ 68,383,968
ADVANCES
 Cash receipts - prior years              $ 13,223,471          $ 10,211,306     $ 10,681,248      $            -   $              -   $ 34,116,025
 Cash receipts - current year                  347,861             2,443,759        2,069,860          10,577,793                  -     15,439,273
  Cumulative as of September 30, 2010         13,571,332            12,655,065       12,751,108        10,577,793                  -       49,555,298
COSTS
 Prior years                                  13,339,729            11,370,369       12,028,521         1,286,034                  -       38,024,653
 Current year                                    231,603             1,949,844          646,115        10,777,425                  -       13,604,987
   Cumulative as of September 30, 2010        13,571,332            13,320,213       12,674,636        12,063,459                  -       51,629,640
RECEIVABLE (PAYABLE) DUE
 FROM (TO) HUD                            $              -      $     665,148    $      (76,472)   $    1,485,666   $              -   $    2,074,342
SOFT COSTS
 Prior years                              $    6,707,779        $    6,736,669   $    6,482,167    $        1,430   $              -   $ 19,928,045
 Current year                                          -               302,797          296,595         6,643,864                  -      7,243,256
  Cumulative as of September 30, 2010          6,707,779             7,039,466        6,778,762         6,645,294                  -       27,171,301
HARD COSTS
 Prior years                                   6,631,950             4,633,700        5,546,354         1,284,604                  -       18,096,608
 Current year                                    231,603             1,647,047          349,520         4,133,561                  -        6,361,731
  Cumulative as of September 30, 2010          6,863,553             6,280,747        5,895,874         5,418,165                  -       24,458,339
CUMULATIVE HARD AND SOFT
 COSTS                                    $ 13,571,332          $ 13,320,213     $ 12,674,636      $ 12,063,459     $              -   $ 51,629,640

The following RHF grants have been awarded and are unspent as of September 30, 2010:

                                         CFP 2006 RHF           $     230,070
                                         CFP 2007 RHF                 452,443
                                         CFP 2008 RHF                 461,179
                                         CFP 2009 RHF                 232,064
                                         CFP 2010 RHF                 235,123
                                                                $    1,610,879




                                                                           54
                                 The Housing Authority of the City and County of San Francisco, California

             SCHEDULE OF ACTUAL CAPITAL FUND STIMULUS RECOVERY ACT FUNDED PROGRAM COSTS AND ADVANCES

                                                      Year ended September 30, 2010


                                                         CA39S001              CA001               CA001               CA001
                                                          501-09             00095509R           00095609R           00095709E           TOTAL

                                                         STIMULUS            STIMULUS         STIMULUS            STIMULUS            STIMULUS
PROGRAM                                                  FORMULA            COMPETITIVE      COMPETITIVE         COMPETITIVE         COMPETITIVE
BUDGET                                               $    17,876,716    $       8,502,006    $      3,995,994    $      2,780,755    $   15,278,755
ADVANCES
 Cash receipts - prior years                         $             -    $                -   $               -   $               -   $            -
 Cash receipts - current year                              9,089,661                     -                   -                   -                -
  Cumulative as of September 30, 2010                      9,089,661                     -                   -                   -                -
COSTS
 Prior years                                               3,654,736                     -                   -                 -                 -
 Current year                                              7,424,322                     -                   -           109,108           109,108
   Cumulative as of September 30, 2010                    11,079,058                     -                   -           109,108           109,108
RECEIVABLE DUE FROM HUD                              $     1,989,397    $                -   $               -   $       109,108     $     109,108
SOFT COSTS
 Prior years                                         $      332,249     $                -   $               -   $               -   $            -
 Current year                                               784,046                      -                   -                   -                -
  Cumulative as of September 30, 2010                      1,116,295                     -                   -                   -                -
HARD COSTS
 Prior years                                               3,322,487                     -                   -                 -                 -
 Current year                                              6,640,276                     -                   -           109,108           109,108
  Cumulative as of September 30, 2010                      9,962,763                     -                   -           109,108           109,108
CUMULATIVE HARD AND SOFT
 COSTS                                               $    11,079,058    $                -   $               -   $       109,108     $     109,108




                                                                       55
SINGLE AUDIT SECTION




         56
         The Housing Authority of the City and County of San Francisco, California

     SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS AND LOCAL ASSISTANCE

                               Year ended September 30, 2010


          Federal Grantor/Pass-Through Grantor/                 CFDA           Federal
                 Program or Cluster Title                      Number        Expenditures
FEDERAL AWARDS
Direct from the U.S. Department of Housing and Urban
  Development ("HUD"):
 Section 8 Housing Choice Voucher Program                      14.871       $ 121,404,333
 Low Rent Public Housing Program                               14.850          34,322,202
 Public Housing Capital Fund Program                           14.872          13,604,987
 Section 8 Moderate Rehabilitation Program                     14.856           9,288,896
 Capital Fund Stimulus Formula Recovery Act Funded             14.885           7,424,322
 Capital Fund Stimulus Competitive Recovery Act Funded         14.884             109,108
 Community Development Block Grants/Technical
    Assistance Program                                         14.227              742,663
 Disaster Housing Assistance Grant                             97.109                  830
                                                                               186,897,341
Pass through from the City and County of San Francisco
 Shelter Plus Care                                             14.238            6,498,052
 Housing Opportunities for Persons with AIDS                   14.241            3,230,322
TOTAL EXPENDITURES OF FEDERAL AWARDS                                           196,625,715
 Grant from the Redevelopment Agency
  of the City and County of San Francisco                                            369,028
TOTAL EXPENDITURES OF FEDERAL AWARDS
 AND LOCAL ASSISTANCE                                                       $ 196,994,743




                                              57
        Housing Authority of the City and County of San Francisco, California

       NOTE TO THE SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS
                        AND LOCAL ASSISTANCE

                             Year ended September 30, 2010


NOTE 1 - BASIS OF PRESENTATION

     The accompanying schedule of expenditures of federal awards and local assistance
     includes the federal grant activity of the Housing Authority of the City and County of San
     Francisco, California and is presented on the accrual basis of accounting. The
     information on this schedule is presented in accordance with the requirements of OMB
     Circular A-133, Audits of States, Local Governments and Non-Profit Organizations.
     Therefore, some amounts presented in this schedule may differ from amounts presented
     in, or used in the preparation of, the basic financial statements.

     In accordance with HUD regulations, HUD considers the Annual Budget Authority for the
     Section 8 Housing Choice Voucher program (“HCV”) and the Veterans Affairs
     Supportive Housing program (“VASH”), both CFDA No. 14.871, to be considered an
     expenditure for the purposes of this schedule. Therefore, the amount in this schedule is
     the total amount received directly from HUD and not the total expenditures paid by the
     Authority. The $121,404,333 total for CFDA No. 14.871, as presented above, consists of
     $120,029,294 from HCV and $1,375,039 from VASH.




                                             58
8035 Spyglass Hill Road                                                            255 S. Orange Ave. Suite 745
Melbourne, FL 32940                                                                           Orlando, FL 32801
Phone: 321-757-2020                     www.bermanhopkins.com                              Phone: 407-841-8841
Fax: 321-242-4844                                                                             Fax: 407-841-8849

               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

    To the Board of Commissioners
    Housing Authority of the City and County of San Francisco, California
    San Francisco, California

    We have audited the financial statements of the business-type activities and the aggregate
    discretely presented component units of the Housing Authority of the City and County of San
    Francisco, California (the “Authority”), as of and for the year ended September 30, 2010, which
    collectively comprise the Authority’s basic financial statements and have issued our report thereon
    dated June 29, 2011. Our report was modified to include a reference to other auditors. We
    conducted our audit in accordance with auditing standards generally accepted in the United States
    of America and the standards applicable to financial audits contained in Government Auditing
    Standards, issued by the Comptroller General of the United States. Other auditors audited the
    financial statements of the Authority’s following discretely presented component units: Hayes
    Valley Apartments L.P., Hayes Valley Apartments II, L.P., Plaza East Associates, L.P., and Bernal
    Housing Associates, L.P., as described in our report on the Authority’s financial statements. The
    financial statements of these entities were not audited in accordance with Government Auditing
    Standards.

    Internal Control Over Financial Reporting

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

    Our consideration of internal control over financial reporting was for the limited purpose described
    in the preceding paragraph and was not designed to identify all deficiencies in internal control over
    financial reporting that might be significant deficiencies or material weaknesses and therefore, can
    be no assurance that all deficiencies, significant deficiencies, or material weaknesses have been
    identified. However, as described in the accompanying schedule of findings and questioned costs,
    we identified certain deficiencies in internal control over financial that we consider to be material
    weaknesses.

    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 internal control such that there is a reasonable
    possibility that a material misstatement of the entity’s financial statements will not be prevented, or
    detected and corrected on a timely basis. We consider the deficiency described in the
    accompanying schedule of findings and questioned costs to be a material weakness, finding 10-1.



                                                     59
Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Authority’s financial statements are
free of 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.

We noted certain matters that we reported to management of the Authority in a separate letter
dated June 29, 2011.

The Authority’s response to the findings identified in our audit is described in the accompanying
corrective action plan. We did not audit the Authority’s response and, accordingly, we express no
opinion on it.

This report is intended solely for the information and use of management, the Board of
Commissioners, and federal awarding agencies and pass-through entities and is not intended to be
and should not be used by anyone other than these specified parties.

June 29, 2011                                   Berman Hopkins Wright & LaHam
Melbourne, Florida
                                                  CPAs and Associates, LLP




                                                60
8035 Spyglass Hill Road                                                           255 S. Orange Ave. Suite 745
Melbourne, FL 32940                    www.bermanhopkins.com                                 Orlando, FL 32801
Phone: 321-757-2020                                                                       Phone: 407-841-8841
Fax: 321-242-4844                                                                            Fax: 407-841-8849


        REPORT ON COMPLIANCE WITH REQUIREMENTS THAT COULD HAVE A DIRECT AND
        MATERIAL EFFECT ON EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER
                  COMPLIANCE IN ACCORDANCE WITH OMB CIRCULAR A-133

  Board of Commissioners
  Housing Authority of the City and County of San Francisco, California
  San Francisco, California

  Compliance

  We have audited the Housing Authority of the City and County of San Francisco, California’s (the
  “Authority”) 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 each of the Authority’s major
  federal programs for the year ended September 30, 2010. The Authority’s major federal programs are
  identified in the summary of auditor’s results section of the accompanying schedule of findings and
  questioned costs. Compliance with the requirements of laws, regulations, contracts and grants applicable
  to each of its major federal programs is the responsibility of the Authority’s management. Our
  responsibility is to express an opinion on the Authority’s compliance based on our audit.

  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 the
  Authority’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.
  Our audit does not provide a legal determination of the Authority’s compliance with those requirements.

  As described in items 10-3, 10-4, 10-5, 10-6 and 10-7 in the accompanying schedule of findings and
  questioned costs, the Authority did not comply with the requirements regarding Eligibility, Allowable
  Activities/Costs, and certain Special Tests and Provisions (Housing Quality Standards Inspections,
  Housing Quality Standards Enforcement and the Waiting List) that are applicable to its Section 8 Housing
  Choice Voucher program. Compliance with such requirements is necessary, in our opinion, for the
  Authority to comply with the requirements to that program.

  In our opinion, because of the effects of the noncompliance described in the preceding paragraph, the
  Authority did not comply, in all material respects, with the requirements referred to above that could have
  a direct and material effect on the Section 8 Housing Choice Voucher program.




                                                    61
As described in items 10-2 and 10-6 in the accompanying schedule of findings and questioned
costs, the Authority did not comply with the requirements regarding Eligibility and Special Tests and
Provisions (the Waiting List) that are applicable to its Low Rent Public Housing program.
Compliance with such requirements is necessary, in our opinion for the Authority to comply with the
requirements applicable to that program.

In our opinion, except for the noncompliance described in the preceding paragraphs, the Authority
complied, in all material respects, with the compliance requirements referred to above that could
have a direct and material effect on each of its major federal programs for the year ended
September 30, 2010.

Internal Control Over Compliance

Management of the Authority is responsible for establishing and maintaining effective internal
control over compliance with requirements of laws, regulations, contracts and grants applicable to
federal programs. In planning and performing our audit, we considered the Authority’s internal
control over compliance with the requirements that could have a direct and material effect on a
major federal program to determine the auditing procedures for the purpose of expressing our
opinion on compliance and to test and report on internal control over compliance in accordance
with OMB Circular A-133, 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 the Authority’s internal control over compliance.

Our consideration of internal control over compliance was for the limited purpose described in
the preceding paragraph and was not designed to identify all deficiencies in internal control over
compliance that might be significant deficiencies or material weaknesses and therefore, there
can be no assurance that all deficiencies, significant deficiencies or material weaknesses have
been identified. However, as discussed below, we identified certain deficiencies in internal
control over compliance that we consider to be material weaknesses.

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. We consider the deficiencies in internal control over compliance
described in the accompanying schedule of findings and questioned costs as items 10-2, 10-3,
10-5, 10-6 and 10-7 to be material weaknesses.

The Authority’s response to the findings identified in our audit is described in the accompanying
corrective action plan. We did not audit the Authority’s response and, accordingly, we express no
opinion on it.

This report is intended solely for the information and use of the Board of Commissioners,
management, others within the Authority, and federal awarding agencies and pass-through entities
and is not intended to be and should not be used by anyone other than these specified parties.

June 29, 2011                                         Berman Hopkins Wright & LaHam
Melbourne, Florida
                                                          CPAs and Associates, LLP
                                                 62
           Housing Authority of the City and County of San Francisco, California

                   SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                    September 30, 2010


A. SUMMARY OF AUDITORS’ RESULTS

  Financial Statements
      Type of auditors’ report issued: Unqualified

     Internal control over financial reporting:
         Material weakness identified? Yes (10-1)
         Significant deficiency identified that is not considered to be a material weakness? No

     Noncompliance material to financial statements noted? No

  Federal Awards
     Internal control over major programs:
         Material weakness identified? Yes (10-2, 10-3, 10-5, 10-6, and 10-7)
         Significant deficiency identified that is not considered to be a material weakness? No

     Type of auditors’ report issued on compliance for major programs:

            Low Rent Public Housing - Qualified (10-2 and 10-6)
            Section 8 Housing Choice Voucher Program - Adverse (10-3, 10-4, 10-5, 10-6,
             and 10-7)
            Housing Opportunities for Persons with AIDS - Unqualified

     Audit findings that are required to be reported in accordance with section 510(a) of Circular
     A-133 are included in this schedule.

  The programs tested as major programs are as follows:

           Low Rent Public Housing - CFDA Number 14.850
           Section 8 Housing Choice Voucher Program - CFDA Number 14.871
           Housing Opportunities for Persons with AIDS - CFDA Number 14.241

  The threshold for distinguishing types A and B programs was $3,000,000

  Did the auditee qualify as a low-risk auditee? No




                                              63
          Housing Authority of the City and County of San Francisco, California

                   SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                     September 30, 2010


B. FINDINGS - FINANCIAL STATEMENTS AUDIT

10-1   Financial Reporting
       Material Weakness in Internal Control

       Condition: The current audit for the year end September 30, 2010, included several
       material adjustments, which collectively are identified as a material weakness in
       accordance with the Statement on Auditing Standards No. 115 (“SAS 115”). There were
       certain items which should have been detected in the processing and recording of financial
       information.

       Criteria: In accordance with SAS 115, these material adjustments should be considered a
       material weakness because it has a material impact to the financial statements.

       Effect: The financial information originally reported was materially misstated and numerous
       audit adjustments were necessary.

       Cause: During the year, the Authority converted to new accounting software which
       required a certain amount of dedicated time and effort. Controls were not in place to
       ensure the proper recording of all financial information in a timely and accurate manner.

       Auditors’ Recommendation: We recommend that the Authority perform a review of
       invoices after year end to ensure that all liabilities are properly reported. Furthermore,
       timely reconciliations of credit cards and bank reconciliations of outstanding items are
       needed on a timely basis.




                                               64
          Housing Authority of the City and County of San Francisco, California

                   SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                       September 30, 2010


C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS

10-2   Eligibility
       Low Rent Public Housing, CFDA Number 14.850
       Material Weakness in Internal Control
       Material Noncompliance

       Condition: Out of a total tenant population of approximately 5,764 tenant files, 60 files were
       tested and the following deficiencies were noted:

             4 files did not have annual recertifications completed timely,
             1 file was missing the flat rent option form,
             7 files did not properly include and then exclude food stamps,
             2 files had incorrect calculations of income,
             1 file lacked independent third party verification of income,
             7 files lacked proper birth certificates or social security cards, and
             1 file did not have a signed U.S. citizen declaration.

       Criteria: 24 CFR 960.259 requires the Authority to obtain and document third party
       verification of income and other factors that affect the determination of rent. 24 CFR
       982.516. requires internal controls be in place to ensure compliance with HUD
       requirements, as well as, complete and accurate tenant records.

       Effect: The Authority could be charging the incorrect amount of rent or could be housing
       ineligible tenants.

       Cause: The Authority did not implement or does not have procedures and controls in place
       to ensure proper compliance with regards to tenant eligibility requirements, rent calculations
       and third party verifications.

       Auditors’ Recommendation: The Authority needs to correct the deficiencies noted in the
       tested files and perform a quality control review of a larger sample of the population. In
       addition, the Authority should develop procedures, systems and controls to ensure proper
       compliance with regards to tenant eligibility requirements, income calculations and third
       party verifications. In addition, staff needs to be continually trained in regards to the rules
       and regulations to properly administer eligibility.




                                                 65
          Housing Authority of the City and County of San Francisco, California

                   SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                       September 30, 2010


C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS
   (continued)

10-3   Eligibility
       Section 8 Housing Choice Voucher Program, CFDA Number 14.871
       Material Weakness in Internal Control
       Material Noncompliance

       Condition: Out of a total tenant population of approximately 7,326 tenant files, 38 files were
       tested and the following deficiencies were noted:

             3 files requested to be tested were unable to be located by the Authority,
             13 files did not have annual recertifications completed during the year,
             2 files did not have annual recertifications completed timely,
             1 file did not have a signed U.S. citizen declaration,
             1 file lacked proper birth certificates and social security cards,
             9 files had incorrect utility allowances,
             1 file had incorrect calculation of income,
             2 files were missing third party verification of income,
             1 file did not properly report third party verification of assets,
             1 file did not properly include and then exclude food stamps,
             8 files did not have inspections completed timely, and
             1 file had incorrect HAP payments.

       Criteria: 24 CFR 982.516 requires internal controls to be in place to ensure compliance
       with HUD requirements, as well as, complete and accurate tenant files. The Authority’s
       administrative plan also requires following proper procedures for determination of HAP and
       verification of income.

       Effect: The Authority is not in compliance with HUD requirements regarding eligibility and
       tenant recertifications, which could result in incorrect HAP payments to landlords.

       Cause: Procedures to ensure compliance with HUD requirements are not being followed.

       Auditors’ Recommendations: The Authority needs to correct the deficiencies noted in the
       tested files and consider the impact of our results over the entire population. In addition,
       the Authority should develop procedures, systems and controls to ensure proper
       compliance with regards to tenant eligibility requirements, income calculations and third
       party verifications. In addition, staff needs to be continually trained in regards to the rules
       and regulations to properly administer eligibility. Some of the items above raise an
       additional concern, such as the incorrect HAP payments and the files that could not be
       located for inspection, as it could be an indicator of unallowed HAP payments.




                                                 66
          Housing Authority of the City and County of San Francisco, California

                   SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                      September 30, 2010


C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS
   (continued)

10-4   Allowable Activities/Costs
       Section 8 Housing Choice Voucher Program, CFDA Number 14.871
       Veterans Affairs Supportive Housing Program, CFDA 14.871 - non-major program
       Material Noncompliance

       Condition: It was noted that as of September 30, 2010, the Authority did not have any cash
       on hand to cover the restricted VASH reserves of $1,958,596, as required by 24 CFR
       982.157.

       In prior years and the current year, the Authority loaned Section 8 Housing Choice Voucher
       and VASH program funds to other Authority programs. Per the requirements of 24 CFR
       982.157, the interprogram borrowings are not allowed. As of September 30, 2010, the
       balance due to the Section 8 Housing Choice Voucher program was $2,556,931 and the
       balance due to the VASH program was $1,958,596.

       Criteria: In accordance with 24 CFR 982.157, the Authority must maintain a system to
       ensure that the Authority will be able to make housing assistance payments for all
       participants within the amounts contracted. In addition, program receipts may only be used
       for housing assistance payments and administrative fees.

       Questioned Costs: $4,515,527

       Effect: The Authority does not have sufficient cash available to cover the restricted
       reserves of housing assistance payment equity. The Authority is also not in compliance
       with HUD requirements to only use program receipts for housing assistance payments and
       administrative fees.

       Auditors’ Recommendation: We recommend that the Authority maintain funds sufficient to
       cover the restricted reserves of housing assistance payment equity. In addition, we
       recommend that the Authority use Section 8 Housing Choice Voucher and VASH program
       funding in accordance with 24 CFR 982.157.

10-5   Special Tests and Provisions - Housing Quality Standards Inspections
       Section 8 Housing Choice Voucher Program, CFDA Number 14.871
       Material Weakness in Internal Control
       Material Noncompliance

       Condition: During our testing of Housing Quality Standards (“HQS”) inspections, we noted
       that out of the 40 inspections sampled, the Authority was unable to provide the actual
       inspection forms for 25 of the tenants selected. Of the 25 samples the Authority was
       unable to provide actual inspections for; the Authority provided us with inspection letters to
       the residents stating that an inspection had been performed for 18 of the samples, with the
       Authority unable to provide any documentation for 7 of the tenants selected.



                                                67
          Housing Authority of the City and County of San Francisco, California

                    SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                       September 30, 2010


C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS
   (continued)

10-5   Special Tests and Provision - Housing Quality Standards Inspections (continued)

       Criteria: In accordance with 24 CFR 982.405, the Authority must inspect the unit leased to
       a family prior to the initial term of the lease, at least annually during assisted occupancy and
       at other times as needed, to determine if the unit meets the HQS.

       Effect: The Authority is not in compliance with the HUD requirements regarding HQS
       inspections, which could result in tenants living in unsafe units.

       Cause: The Authority does not have controls in place to ensure that HQS inspections are
       being performed in a timely manner.

       Auditors’ Recommendation: We recommend that the Authority develop procedures,
       systems and controls to ensure proper compliance and documentation with regards to HQS
       inspections. All inspections need to be maintained for proof of inspection, the letters to the
       resident regarding the inspections is not sufficient proof of inspections.

10-6   Special Tests and Provisions - Waiting List
       Low Rent Public Housing, CFDA Number 14.850
       Section 8 Housing Choice Voucher Program, CFDA Number 14.871
       Material Weakness in Internal Control
       Material Noncompliance

       Condition: We were unable to properly test the waiting list for the Low Rent Public Housing
       and Section 8 Housing Choice Voucher programs. The Authority was unable to provide us
       with sufficient documentation to perform our tests of the waiting list.

       Criteria:

              In accordance with 24 CFR Part 5, Subparts E and F, Part 945 and 960.201
               through 960.215, the Authority should follow the policies and procedures
               documented in its Admissions and Continued Occupancy Policy (“ACOP”) for
               selecting applicants from the waiting list.
              In accordance with 24 CFR Part 5, Subparts E and F, and Part 982.204, the
               Authority must maintain information that permits the Authority to select participants
               from the waiting list in accordance with the Authority’s Section 8 Administrative
               Plan.

       Effect: It could not be determined that the Authority is housing applicants in the proper
       order on the waiting list.

       Cause: The Authority was unable to provide sufficient documentation to ensure the waiting
       list is properly maintained and conforms to the required standards.

       Auditors’ Recommendation: The Authority should implement systems and controls to
       adequately maintain a waiting list that ensures applicants are housed, or given the
       opportunity to be housed in the proper order. The Authority should print the waiting list to
       an electronic file each month to ensure that documentation exists.
                                                 68
          Housing Authority of the City and County of San Francisco, California

                   SCHEDULE OF FINDINGS AND QUESTIONED COSTS

                                      September 30, 2010


C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAMS
   (continued)

10-7   Special Tests and Provisions - HQS Enforcement
       Section 8 Housing Choice Voucher Program, CFDA Number 14.871
       Material Weakness in Internal Control
       Material Noncompliance

       Condition: During our testing of HQS Enforcement, we were provided a list of
       approximately 100 units who were under abatement status as of September 30, 2010. Out
       of the 6 units selected for testing, 3 of the files showed that no abatement of Housing
       Assistance Payments (“HAP”) had taken place. In addition, one of the files selected was
       on abatement even though there was a passed inspection in the file.

       Criteria: In accordance with 24 CFR 982.619, the Authority may not make any housing
       assistance payments if the contract unit does not meet the HQS, unless any defect is
       corrected within the required period specified by the Authority and the Authority verifies the
       correction.

       Effect: The Authority may be paying HAP to landlords whose units have failed HQS
       standards. Secondly, the Authority may be incorrectly withholding HAP payments to
       landlords who passed the most recently completed inspection.

       Cause: The Authority does not have controls in place to ensure that HQS is being enforced
       and that abatements are being handled properly.

       Auditors’ Recommendation: We recommend that the Authority develop proper procedures
       and strengthen internal controls relating to HQS inspections and any applicable
       abatements. A list of failed re-inspections should be regularly reviewed to verify that units
       that have failed are having HAP properly abated and those that have passed re-inspection
       are properly taken off of abatement.




                                                69
          Housing Authority of the City and County of San Francisco, California

                SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

                                      September 30, 2010


SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

09-1   Condition: During the review and testing of 25 payroll samples, it was noted 3 instances
       where temporary employees did not have temporary employment contracts on file for the
       extension period of temporary employment with the Authority.

       Auditors’ Recommendation:     It is recommended that management strengthen its
       procedures of monitoring the employment period of temporary employees and updating
       temporary employment contracts, as necessary.

       Current Year Status: Cleared.

09-2   Condition: During the testing of collectability of tenant accounts receivable, the following
       was noted:

             Numerous high balance receivables (over $1,000) that have been long overdue
              or delinquent for over 12 months;
             3 instances where a tenant who entered into a repayment agreement with the
              Authority either by court stipulation or in-house stipulation did not comply with the
              such agreement and no further action was done by the Authority; and
             18 instances where the tenant who has an outstanding rent balance was neither
              in legal nor entered into a repayment agreement with the Authority.

       Auditors’ Recommendation: It is recommended that management take the following
       actions to improve tenants’ accounts receivable collection:

             Update the Rent Collections Policy and Procedures to align with the Authority’s
              experience with handling tenants that are subject to stipulation agreements or
              eviction procedures; and
             Strict adherence by the Authority to the Updated Rent Collections Policy and
              Procedures.

       Current Year Status: Reported as a management comment in fiscal year 2010.




                                               70
          Housing Authority of the City and County of San Francisco, California

                SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

                                     September 30, 2010


SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS (continued)

09-3   Condition: During the review of testing of 40 Conventional Housing tenant files for
       continued occupancy, the following was noted:

             3 instances where the authorization for the release of information was not on file;
             1 instance where the authorization for the release of information was not signed by
              the tenant;
             5 instances where the 3rd party verification of income was not performed;
             5 instances where the rent calculation worksheet was not on file;
             5 instances where the rent calculation was incorrect;
             6 instances where the annual recertification was not performed within the HUD-
              mandated 12-month timeframe;
             2 instances where the tenant was over-housed; and
             1 instance where data input on the Form HUD-50058 was entered as annual
              recertification instead of interim recertification.

       Auditors’ Recommendation: It is recommended that management take the following
       actions to ensure compliance with HUD regulations:

             Strengthen its file retention procedures to ensure that all essential documents are
              properly retained in files;
             Strengthen its procedures for performing timely annual tenant re-examinations and
              documenting those re-examinations through a complete set of documents obtained
              from the tenant and/or other sources;
             Strengthen its procedures over tenant income calculations during annual or interim
              re-examinations; and
             Training and retraining of eligibility workers to ensure that they understand the
              significance of compliance with the eligibility requirements of the Conventional
              Housing Program.

       Current Year Status: Repeated, see Finding 10-2.

09-4   Condition: During the review and testing of 20 admissions from the Conventional Housing
       waiting list, the following was noted:

             1 instance where the application for Conventional Housing was not on file;
             1 instance where the application for Conventional Housing was not entered in a
              timely manner;
             1 instance where the income verification used for rent calculation was 145 days old;
             1 instance where the rent calculation worksheet was not on file;
             1 instance where an applicant was housed using an incorrect priority of admission
              from the waiting list; and
             Numerous inactive/already housed applicants were not purged from the waiting list
              making it unnecessarily long.



                                               71
          Housing Authority of the City and County of San Francisco, California

                SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

                                     September 30, 2010


SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS (continued)

       Auditors’ Recommendation: It is recommended that management take the following
       actions for complying with HUD regulations:

             Strengthen its file retention procedures to ensure that all essential documents are
              properly completed and retained in files;
             Strengthen its procedures over timely input of applicant’s information into the
              waiting list;
             Adhere to policies on tenant selection and placement of new tenants on the waiting
              list; and
             Periodically review, update, and purge the waiting list database.

       Current Year Status: Repeated, see Finding 10-6.

09-5   Condition: The Authority has no certification for Section Eight Management Assessment
       Program (“SEMAP”) for fiscal year 2009.

       Auditors’ Recommendation: The Authority needs HUD representatives to schedule and
       complete a confirmatory review in order to remove the “Troubled Agency” status.

       Current Year Status: HUD did not require SEMAP in 2010 due to recent results of the 2009
       RIM review.

09-6   Condition: During the review and testing of 40 Section 8 Housing Assistance Payments
       (“HAP”) and related tenant files, the following was noted:

             6 instances where the required annual re-examination was not performed within the
              HUD mandated 12-month timeframe;
             2 instances where the annual Housing Quality Standards (“HQS”) inspection was
              not performed timely;
             1 instance where Authorization for the Release of Information, Statement of
              Understanding, Statement of Family Obligation and Grounds for Termination were
              not on file;
             2 instances where the tenant’s rent was incorrectly calculated;
             3 instances where the tenant’s file was not available for review; and
             3 instances where the inspection file was not available for review.

       Auditors’ Recommendation: It is recommended that management take the following
       actions for complying with HUD regulations for Section 8 Program administration:

             Strengthen its administrative procedures over annual or interim unit inspections;
              and
             Strengthen its procedures for performing timely annual tenant re-examinations and
              documenting those re-examinations through a complete set of documents obtained
              from the tenant and/or other sources.

       Current Year Status: Repeated, see Finding 10-3.

                                              72
          Housing Authority of the City and County of San Francisco, California

                SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

                                      September 30, 2010


SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS (continued)

09-7   Condition: During the review and testing of the Utility Allowance Schedule (“UAS”) that was
       effective September 14, 2009, the following was noted:

             Other Electric allowance rate for 5-bedroom unit was not properly calculated;
             Domestic Water Heating allowance rates for 4 and 5-bedroom units were not
              properly calculated;
             Space Heating - Natural Gas allowance rates for all types of units were not properly
              calculated; and
             Space Heating - Electric allowance rates for all types of units were not properly
              calculated.

       Auditors’ Recommendation: It is recommended that management strengthen review
       procedures to ensure the accuracy of UAS.

       Current Year Status: Repeated, see Finding 10-3.

09-8   Condition: The review and test of the 10 samples selected for Housing Quality Standards
       Inspections (“HQS”) and Quality Control Re-inspections (“QCR”) was not able to be
       completed. In addition, the total number of QCR inspections performed by the Authority for
       fiscal year 2009 did not exceed the 5% inspection threshold of total housing vouchers.

       Auditors’ Recommendation: It is recommended that management perform the following:

             Strengthen its file retention procedures to ensure that all essential documents are
              properly completed and retained in files; and
             Conduct HQS/QCRs in a timely manner to ensure fulfillment of the minimum
              threshold for HQS and QCRs.

       Current Year Status: Repeated, see Finding 10-5.

09-9   Condition: During the review and testing of 5 abatement files in the Section 8 program, the
       following was noted:

             4 instances where HAP was not abated in a timely or an accurate manner;
             1 instance where the Authority failed to locate the inspection report; and
             4 instances where the Authority failed to locate the notification of change forms.

       Auditors’ Recommendation: It is recommended that management strengthen its abatement
       procedures to ensure that HQS deficiencies are corrected in a timely manner by the
       landlord.

       Current Year Status: Repeated, see Finding 10-7.




                                                73
          Housing Authority of the City and County of San Francisco, California

                 SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS

                                       September 30, 2010


SUMMARY SCHEDULE OF PRIOR YEAR AUDIT FINDINGS (continued)

09-10 Condition: During the review and testing of 20 admissions from the Section 8 waiting list,
      the following was noted:

              15 instances where the entire tenant file was missing;
              3 instances where the preference point was not supported;
              1 instance where tenant income information used to compute HAP was outdated;
              20 instances where the rankings of samples were significantly lower compared to
               the previous months report; and
              4 instances where inactive applicants (already housed or no longer qualified) were
               not purged from the waiting list.

       Auditors’ Recommendation: It is recommended that management perform the following:

              Strengthen its file retention procedures to ensure that all essential documents are
               properly completed and retained in files; and
              Conduct system review of the ranking of a sample of applicants to ensure that
               ranking in the waiting list database is proper.

       Current Year Status: Repeated, see Finding 10-6.

09-11 Condition: During the review and testing of 10 Family Self-Sufficiency (“FSS”) files, the
      following was noted:

              2 instances where the FSS family escrow balances were not updated in accordance
               with their contract status;
              10 instances where the Authority failed to apply correct interest rates for 6 months
               and did not enter interest rates to CCS for 3 months; and
              1 instance where forfeited escrow account balances was not recorded in the
               general ledger in a timely manner.

       Auditors’ Recommendation: It is recommended that management establish an effective
       communication between the FSS Program Manager and the Finance department in order
       to timely communicate the correct interest rate for FSS calculation purposes.

       Current Year Status: Reported as a management comment in fiscal year 2010.

09-12 Condition: During the review and testing of 10 Housing Opportunities for Persons with
      AIDS (“HOPWA”) files, one instance was noted where HAP was overstated by $167.

       Auditors’ Recommendation:       It is recommended that management strengthen its
       procedures reviewing tenants’ annual re-examination prepared by staff.

       Current Year Status: Cleared.




                                                74
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       Date: 2011.08.12 19:34:39 -04'00'

				
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