SAINT LEONARD'S SOCIETY OF NOVA SCOTIA (OPERATING AS SHELTER NOVA SCOTIA) Financial Statements Year Ended March 31, 2016

Transcription

1 Financial Statements

2 Index to Financial Statements INDEPENDENT AUDITOR'S REPORT 1-2 Page FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Revenues and Expenditures 4 Statement of Changes in Net Assets 5 Statement of Cash Flows 6 Notes to Financial Statements 7-13

3 Chartered Accountants INDEPENDENT AUDITOR'S REPORT To the Members of Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia) We have audited the accompanying financial statements of Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia), which comprise the statement of financial position as at March 31, 2016 and the statements of revenues and expenditures, changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. (continues) 101 Ilsley Avenue, Unit Argyle St., Suite 720 Dartmouth, Nova Scotia B3B 1S8 Halifax, Nova Scotia B3J 3N6 Tel: Fax: (teammember)@ltdca.com Tel: Fax: A MEMBER OF NEXIA INTERNATIONAL 1

4 Independent Auditor's Report to the Members of Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia) (continued) Basis for Qualified Opinion In common with many not-for-profit organizations, Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia) derives revenue from fundraising activities the completeness of which is not susceptible to satisfactory audit verification. Accordingly, verification of these revenues was limited to the amounts recorded in the records of Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia). Therefore, we were not able to determine whether any adjustments might be necessary to fundraising revenue, excess of revenues over expenses, and cash flows from operations for the year ended March 31, 2016 and current assets and net assets as at March 31, Qualified Opinion In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia) as at March 31, 2016 and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Halifax, Nova Scotia June 3, 2016 CHARTERED ACCOUNTANTS 2

5 Statement of Financial Position March 31, 2016 ASSETS (Note 6) CURRENT Cash $ - $ 130,992 Accounts receivable (Note 3) 354, ,482 Prepaid expenses 2,689 2, , ,163 CAPITAL ASSETS (Note 4) 5,199,157 5,351,081 ASSETS HELD IN TRUST 85, ,526 $ 5,642,136 $ 5,716,770 LIABILITIES AND NET ASSETS CURRENT Bank Indebtedness $ 43,735 $ - Short term debt (Note 6) 765, ,230 Accounts payable and accrued liabilities (Note 5) 140, ,995 Current portion of long term debt (Note 7) 38,351 36,508 Deferred revenue (Note 8) 120,168 67,507 1,108,118 1,001,240 LONG TERM DEBT (Note 7) 533, ,933 DEFERRED CAPITAL CONTRIBUTIONS (Note 9) 2,597,858 2,687,195 AMOUNTS HELD IN TRUST 85, ,526 4,324,808 4,363,894 NET ASSETS 1,317,328 1,352,876 LEASE COMMITMENTS (Note 10) $ 5,642,136 $ 5,716,770 ON BEHALF OF THE BOARD Director Director 3

6 Statement of Revenues and Expenditures For the REVENUE Correctional Services Canada $ 1,062,995 $ 1,031,442 Province of Nova Scotia 1,469,322 1,298,120 Other federal contributions 436, ,080 Fundraising and donations 151,099 75,896 Other income 25,348 74,796 In kind food donations - 118,935 Rent revenue 136, ,608 3,281,856 3,045,877 EXPENSES Dues, fees, and publications 3,374 2,650 Equipment rental and maintenance 53,253 28,126 Food 68, ,730 Fundraising 17,973 19,945 Household supplies 30,666 25,492 Insurance 22,390 18,376 Interest and service charges 32,733 31,488 Interest on long term debt 29,038 29,836 Legal and audit 7,064 6,658 Municipal taxes 30,486 33,872 Office and miscellaneous 64,531 60,588 Program costs 38,200 54,415 Rent - 38,678 Repairs, maintenance, and security 156, ,311 Salaries and wages 2,478,849 2,133,916 Sub-contracts 32,611 - Telephone, fax, and internet 30,170 24,156 Training 31,132 6,419 Travel and meals 13,476 7,370 Utilities 110,592 98,277 3,250,897 2,980,303 EXCESS OF REVENUE OVER EXPENSES FROM OPERATIONS 30,959 65,574 OTHER INCOME (EXPENSES) Amortization of capital assets (Note 4) (155,844) (115,543) Amortization of deferred capital contributions (Note 9) 89,337 67,773 (66,507) (47,770) EXCESS (DEFICIENCY) OF REVENUE OVER EXPENSES $ (35,548) $ 17,804 4

7 Statement of Changes in Net Assets NET ASSETS - BEGINNING OF YEAR As previously reported $ 1,410,207 $ 1,335,072 Prior period adjustment (Note 12) (57,331) - As restated 1,352,876 1,335,072 Excess (deficiency) of revenue over expenses (35,548) 17,804 NET ASSETS - END OF YEAR $ 1,317,328 $ 1,352,876 5

8 Statement of Cash Flows OPERATING ACTIVITIES Excess (deficiency) of revenue over expenses $ (35,548) $ 17,804 Items not affecting cash: Amortization of capital assets 155, ,543 Amortization of deferred capital contributions (89,337) (67,773) 30,959 65,574 Changes in non-cash working capital: Accounts receivable (227,160) (79,579) Accounts payable and accrued liabilities 8,639 44,359 Deferred revenue 52,661 67,507 Prepaid expenses - 10,576 (165,860) 42,863 Cash flow from (used by) operating activities (134,901) 108,437 INVESTING ACTIVITY Purchase of capital assets (3,920) (911,846) FINANCING ACTIVITIES Repayment of long term debt (35,906) (35,108) Deferred capital contributions received - 898,660 Cash flow from (used by) financing activities (35,906) 863,552 INCREASE (DECREASE) IN CASH FLOW (174,727) 60,143 Deficiency - beginning of year (634,238) (694,381) DEFICIENCY - END OF YEAR $ (808,965) $ (634,238) DEFICIENCY CONSISTS OF: Cash $ - $ 130,992 Short term debt (765,230) (765,230) Bank indebtedness (43,735) - $ (808,965) $ (634,238) 6

9 Notes to Financial Statements NATURE OF OPERATIONS Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia) (the "society") was incorporated under the Societies Act of Nova Scotia on May 2, The society provides support service, overnight shelter and housing for half-way transition to community placement for those who need it. It is exempt under the Income Tax Act as a non-profit organization and registered charity. The society conducts programs and services and operates from the following locations: Sir Sanford Fleming House (SSFH), at Brunswick Street, Halifax Nehiley House, at 3170 Romans Avenue, Halifax Barry House, at 2704/2706 Gottingen Street, Halifax Metro Turing Point (MTP), at 2170 Barrington Street, Halifax Cunard Street Apartments, at 5506 Cunard Street, Halifax Herring Cove Apartments, 191 Herring Cove Rd, Halifax About 33% ( %) of revenue contributions come from Correctional Services Canada (CSC) and about 41% ( %) comes from the Nova Scotia Department of Community Services (DCS). 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation The financial statements were prepared in accordance with Canadian accounting standards for notfor-profit organizations (ASNFPO). Capital assets Capital assets are stated at cost less accumulated amortization. Capital assets are amortized over their estimated useful lives on a declining balance basis at the following rates: Buildings 2.5% Computer hardware 30% Location equipment 20% Office equipment 20% Capital assets are amortized at one half of the normal annual rate in the year of acquisition, no amortization is recorded in the year of disposal. Capital assets acquired during the year but not placed into use are not amortized until they are placed into use. (continues) 7

10 Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Impairment of long lived assets The society tests for impairment whenever events or changes in circumstances indicate that the carrying amount of the assets may not be recoverable. Recoverability is assessed by comparing the carrying amount to the projected future net cash flows the long-lived assets are expected to generate through their direct use and eventual disposition. When a test for impairment indicates that the carrying amount of an asset is not recoverable, an impairment loss is recognized to the extent the carrying value exceeds its fair value. Deferred revenue Current contributions to operations received for use over the next 12 months are recorded as deferred revenue and recognized in the period the revenue is intended to be used. Revenue recognition Saint Leonard's Society of Nova Scotia (operating as Shelter Nova Scotia) follows the deferral method of accounting for contributions. Contributions are recognized when the expenditures for which the contributions were received are incurred and when the collection of the contributions is reasonably assured. Rental income is recognized as revenue in the period it becomes receivable per the related lease. Donations are recognized as revenue when received. Contributed services Volunteers contribute a significant amount of their time each year. Because of the difficulty in determining their fair value, contributed services are not recognized in the financial statements. Donated goods The fair value of donated goods, if any, are recorded when the amount can be reasonably estimated. When the amounts cannot be estimated, the nature of significant donated goods are disclosed. Government assistance The forgivable loan, recorded in deferred capital contributions, from the Department of Community Services is amortized over 15 years. Other government assistance for acquiring capital assets is deferred and amortized on the same basis and according to the same rates as the related capital assets or to income as eligible expenditures are incurred. (continues) 8

11 Notes to Financial Statements 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Financial instruments policy Financial instruments are recorded at fair value when acquired or issued except for related party transactions which are recorded at the exchange amount. In subsequent periods, financial assets with actively traded markets are reported at fair value, with any unrealized gains and losses reported in income. All other financial instruments are reported at amortized cost, and tested for impairment at each reporting date. Transaction costs on the acquisition, sale, or issue of financial instruments are expensed when incurred. Measurement uncertainty The preparation of financial statements in conformity with Canadian generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amount of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Such estimates are periodically reviewed and any adjustments necessary are reported in earnings in the period in which they become known. Actual results could differ from these estimates. The most significant estimates in these financial statements include the allowance for doubtful accounts and the estimated useful lives of the capital assets. 2. FINANCIAL INSTRUMENTS The society is exposed to various risks through its financial instruments and has a comprehensive risk management framework to monitor, evaluate and manage these risks. The Society's financial instruments consist of cash, accounts receivable, bank indebtedness, accounts payable and long term debt. The following analysis provides information about the society's risk exposure and concentration as of March 31, Credit risk Credit risk arises from the potential that a counter party will fail to perform its obligations. The society is exposed to credit risk from contributors. An allowance for doubtful accounts is established based upon factors surrounding the credit risk of specific accounts, historical trends and other information. Due to the nature of contributions, the society does not have significant issues collecting receivables, resulting in a minimal exposure to credit risk. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The society is exposed to this risk mainly in respect of its receipt of funds from its contributors and other related sources, long-term debt, and accounts payable and accrued liabilities. Market risk Market risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, interest rate risk and other price risk. The society is mainly exposed to interest rate risk. (continues) 9

12 Notes to Financial Statements 2. FINANCIAL INSTRUMENTS (continued) Interest rate risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the society manages exposure through its normal operating and financing activities. The society is exposed to interest rate risk primarily through its floating interest rate bank indebtedness and credit facilities. 3. ACCOUNTS RECEIVABLE Accounts receivable - trade $ 33,050 $ 57,369 Grants receivable 264,286 48,120 HST receivable 57,306 21,993 $ 354,642 $ 127, CAPITAL ASSETS Cost Accumulated Net book Net book amortization value value Land $ 584,462 $ - $ 584,462 $ 584,462 Buildings 5,329, ,468 4,552,798 4,692,579 Computer hardware 38,255 32,015 6,240 8,429 Office equipment 69,292 59,194 10,098 12,622 Location equipment 195, ,953 45,559 52,989 $ 6,216,787 $ 1,017,630 $ 5,199,157 $ 5,351, ACCOUNTS PAYABLE Payable to HRM $ 20,242 $ 35 Accounts payable 120, ,960 $ 140,634 $ 131,995 10

13 Notes to Financial Statements 6. SHORT TERM DEBT The demand operating loan with a credit limit of $120,000, of which $20 ( $220) was outstanding at year end, bears interest at the Credit Union's prime rate plus 1.25%. The operating line of credit with a credit limit of $910,000, of which $765,210 ( $765,210) was outstanding at year end, bears interest at the Credit Union's prime rate plus 1%. The bank indebtedness is secured by a general security agreement over all assets of the society, a registered assignment of rents and a collateral mortgage in the amount of $500,000 providing Credit Union Atlantic a first charge over 2706 Gottingen Street and a second charge over 3170 Romans Avenue and assignment of fire insurance. 7. LONG TERM DEBT Credit Union loan bearing interest at 4.5% per annum, repayable in monthly blended payments of $1,371. The loan matures on December 28, 2018 and is secured by first mortgage on Romans Avenue property. $ 62,510 $ 75,818 Credit Union loan bearing interest at 4.75% per annum, repayable in monthly blended payments of $932. The loan matures on August 20, 2017 and is secured by first mortgage on the Brunswick Street property. 127, ,907 NSHDC loan bearing interest at 4.89% per annum, repayable in monthly blended payments of $3,108. The loan matures on January 1, 2026 and is secured by first mortgage on the Barrington Street property. 381, , , ,441 Amounts payable within one year (38,351) (36,508) $ 533,184 $ 570,933 Principal repayment terms are approximately: 2017 $ 38, , , , ,945 Thereafter 373,168 $ 571,535 The above properties held as security on long term debt have a combined net book value of $3,676,

14 Notes to Financial Statements 8. DEFERRED REVENUE Improvements at Barry House $ 30,000 $ 30,000 Halifax Connect - 9,507 Herring Cove 79,668 - Halifax Assistance Fund - 10,000 Community Garden Project 10,500 8,000 $ 120,168 $ 57, DEFERRED CAPITAL CONTRIBUTIONS Deferred capital contributions are grants received as contributions toward the cost of specific assets. They are deferred as revenue and recognized over time on the same basis that the related capital asset is amortized, with the exception of the Cunard Street forgivable loan, which is amortized over 15 years. Beginning Balance Receipts Amortized as Revenue Ending Balance Barry House, renovations $ 270,245 $ - $ 6,756 $ 263,489 Sir Sanford Fleming House roof replacement 9, ,566 Metro Turning Point renovations 151,835-3, ,039 Cunard Street apartments 976,809-24, ,389 Cunard Street forgivable loan 379,835-31, ,182 Herring Cove Road property 898,659-22, ,193 $ 2,687,195 $ - $ 89,337 $ 2,597, COMMITMENTS The society has a long term lease with respect to office equipment. Future minimum lease payments in each of the next three years are $12,696, and $3,174 in the fourth year. 11. ECONOMIC DEPENDENCE The society's ability to continue operations is dependent on government funding. Should this funding change management is of the opinion that continued viable operations would be doubtful. 12

15 Notes to Financial Statements 12. PRIOR PERIOD ADJUSTMENT During the current year it was determined that accrued liabilities as of March 31, 2015 relating to wages were understated in the amount of $57,331. The effect of this prior period adjustment for the fiscal 2015 year was that the accrued liabilities increased by $57,331 and excess of revenue over expenditures and net assets decreased by $57,