THE NHP FOUNDATION AND ITS AFFILIATED ENTITIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED YEARS ENDED DECEMBER 31, 2018 and 2017
The following is a summary of NHPF’s investment in housing funds accounted for under the equity method:
Investment in NHPF/UA, LLC and Investment in NHPF/UA II, LLC In accordance with the accounting guidance for the consolidation of variable interest entities, NHPF determines when it should include the assets, liabilities, and activities of variable interest entities (“VIE”) in its financial statements, and when it should disclose information about its relationship with a VIE. The analysis that must be performed to determine which entity should consolidate a VIE focuses on control and economic factors. A VIE is a legal structure used to conduct activities or hold assets, which must be consolidated by a company if it is the primary beneficiary because it has: (1) the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance; and (2) the obligation to absorb losses or received benefits that could potentially be significant to the VIE. If multiple unrelated parties share such power, as defined, no party will be required to consolidate the VIE. Further, the guidance requires continual reconsideration of the primary beneficiary of a VIE.
Based on this guidance the following entities meet the definition of a VIE:
NHPF/UA, in which NDFD invests NHPF/UA II, in which NDFD invests
However, management does not consolidate the above interests, as they are not considered to be the primary beneficiary since multiple unrelated parties share the power to direct the activities that are considered most significant to the economic performance of these entities. NDFD currently records the amount of the investments in NHPF/UA and NHPF/UA II as an asset on the statements of financial position, recognizes its share of income or losses in the statements of activities, and discloses how it accounts for this investment in its financial statements. NDFD’s balance in investment in NHPF/UA and NHPF/UA II represent the maximum exposure to loss. NDFD’s exposure is assessed by the condition and financial performance of the underlying projects as well as the strength of the general partners and their guarantees. Investment in Housing Partnership Equity Trust, LLC NHPF is a member of Housing Partnership Network (HPN). HPN is a collaborative membership organization composed of significant housing and community development not-for-profit organizations that support its members through policy initiatives, capital initiatives and other programs to promote the long-term development, preservation and operation of affordable and workforce housing throughout the United States. Twelve HPN members, including NHPF, are investing members in Housing Partnership Equity Trust, LLC (HPET) and collectively hold a
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