Habitat for Humanity of Jacksonville, Inc. (a non-profit organization) Jacksonville, Florida. Financial Statements June 30, 2012 and 2011

Transcription

1 Jacksonville, Florida Financial Statements

2 Table of Contents Page No. Independent Auditors' Report 1 Statements of Financial Position 2 Statements of Activities 3 Statements of Functional Expenses 4 Statements of Cash Flows 5 6 Independent Auditors' 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 16

3

4 Statements of Financial Position ASSETS Cash and cash equivalents $ 962,708 $ 513,538 Certificates of deposit 502, ,278 Pledges receivable 95,000 - Mortgage notes receivable, net 11,225,113 10,357,773 Construction inventory 790, ,015 Deposit - 5,149 Prepaid and other assets 66,394 45,930 Due from related party - 57,879 Property and equipment - net of accumulated depreciation 797, ,485 Land held for future use 1,358,725 1,233,977 Total assets $ 15,798,190 $ 14,304,024 LIABILITIES AND NET ASSETS Accounts payable $ 135,897 $ 261,498 Accrued expenses 27,239 20,817 Mortgage purchase liability 703, ,989 Line of credit 1,792,983 1,742,983 Due to related party 10,000 - Notes payable 228, ,120 Deferred revenue 10,000 - Deposits and payments on houses awaiting closing 11,278 14,300 Total liabilities 2,919,276 2,734,707 Net assets - unrestricted 12,878,914 11,569,317 Total liabilities and net assets $ 15,798,190 $ 14,304,024 The accompanying notes are an integral part of this statement

5 Statements of Activities For the years ended Revenues Program service revenue $ 3,854,303 $ 4,943,433 Contributions and sponsorships 2,760,150 2,141,856 Grants - other 275, ,195 Grants - City of Jacksonville - 77,700 Interest income 4,711 9,204 Other income 43,983 62,649 Total revenues 6,939,013 7,573,036 Expenses Program services 4,987,332 7,392,377 Management and general 329, ,691 Fundraising 312, ,188 Total expenses 5,629,416 7,981,256 Change in net assets 1,309,597 (408,220) Net assets - beginning of year 11,569,317 11,977,537 Net assets - end of year $ 12,878,914 $ 11,569,317 The accompanying notes are an integral part of this statement

6 Statement of Functional Expenses For the years ended Supporting Services Program Management Fund Services and General Raising Total Total Salaries $ 861,463 $ 166,113 $ 150,125 $ 1,177,701 $ 1,164,832 Employee benefits 63,907 15,123 11,358 90, ,833 Payroll taxes 79,828 13,323 12, ,717 98,338 Total salaries and related expenses 1,005, , ,049 1,373,806 1,368,003 Construction and supplies 2,248,092 1,839-2,249,931 3,871,986 Mortgage discounts, net of amortization 813, ,482 1,410,575 Rent 253,978 3,076 1, , ,894 Professional fees 112,826 52,643 57, , ,911 Tithe 28, , ,832 Office and premises 82,176 22,296 23, , ,279 Interest 61, ,401 84,466 Depreciation 67, ,137 81,239 Insurance 93,744 24, ,079 88,920 Vehicle expenses 53, ,272 58,663 Maintenance 25, ,904 48,434 Telephone and communications 13,279 14,485 1,121 28,885 36,096 Special events 1,485 1,024 50,818 53,327 18,691 Warranty 21, ,703 9,261 Other 105,101 14,486 3, , ,007 Total expenses $ 4,987,332 $ 329,215 $ 312,869 $ 5,629,416 $ 7,981,257 The accompanying notes are an integral part of this statement

7 Statements of Cash Flows For the years ended Cash flows from operating activities Increase (decrease) in unrestricted net assets $ 1,309,597 $ (408,220) Adjustments to reconcile increase in unrestricted net assets to net cash provided by operating activities: Depreciation 67,137 81,239 Discounts on mortgages 813,482 1,410,575 Changes in assets and liabilities Grants receivable - 100,000 Pledges receivable (95,000) - Construction inventory (41,894) 615,783 Deposits 5,149 - Other receivables and prepaid expenses (20,464) 7,140 Accounts payable (125,601) 154,245 Accrued expenses 6,422 (41,227) Mortgage purchase liability 345,817 38,322 Due to/from related party 67,879 1,278 Deferred revenue 10,000 (20,779) Deposits and payments on houses awaiting closing (3,022) (15,550) Net cash provided by operating activities 2,339,502 1,922,806 Cash flows from investing activities Net change in certificate of deposits (1,564) (4,497) Changes in mortgage notes receivable - net of discounts (1,680,822) (2,404,597) Purchase of property, plant and equipment (24,151) - Purchase of land held for future use, net (124,748) (49,439) Net cash used in investing activities (1,831,285) (2,458,533) Cash flows from financing activities Proceeds from long-term debt 62,458 94,552 Net change on line of credit 50,000 (67,209) Repayment of long-term debt (171,505) (24,326) Net cash provided (used) in financing activities (59,047) 3,017 Net increase (decrease) in cash and cash equivalents 449,170 (532,710) Cash and cash equivalents, beginning of year 513,538 1,046,248 Cash and cash equivalents, end of year $ 962,708 $ 513,538 Supplemental disclosure of cash flow information Cash paid for interest $ 61,239 $ 84,466 See notes to the financial statements

8 1. Organization and Purpose (the Organization) was established March 28, 1988, to provide affordable housing for low income families in the Jacksonville, Florida area who have demonstrated a housing need, have the ability to repay a non-interest bearing mortgage, and have the willingness to volunteer 300 hours of their time to the project. These houses are constructed with the assistance of volunteer labor. The Organization also operates a store at which donated supplies that are not designated for Organization homes are sold. 2. Summary of Significant Accounting Policies Basis of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting. The significant accounting policies followed are described below. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities as net assets released from restrictions. The Organization has no permanently restricted net assets. Mortgages Receivable The Organization has a policy of selling affordable housing with interest free mortgages. Therefore, mortgages receivable do not have a stated interest rate. Receivables are assessed individually for collectibility based on the surrounding facts and circumstances and management s past history. The Organization does not maintain an allowance for uncollectible mortgages receivable because the houses are sold at below market prices and the Organization has the ability to foreclose on properties and resell them to collect any past due amounts. All mortgages and contracts for deed are due based on the notes terms. Management believes all mortgages and contracts for deed receivable are realizable through either collection or foreclosure proceeds, if not collected. Property, Plant and Equipment The Organization s policy is to capitalize property and equipment costing $500 or more. Acquisition of property and equipment are capitalized at cost, or if donated, at fair value at the date of donation. Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. When assets are sold or retired their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the statement of activities. Depreciation is computed using accelerated methods over the useful lives of the assets

9 Donated Materials, Long-lived Assets, Facilities & Services Donated materials are recorded as contributions at their estimated fair value at the date of donation. Long-lived assets or the use facilities are recorded as contributions in the period received at fair value. Contribution of services are recognized in the financial statements if the services enhance or create non-financial assets or require specialized skills and are provided by individuals possessing those skills. Deferred Revenue Deferred revenue consists of money received from homeowner s for specific improvements. Income Taxes The Organization is a not-for-profit corporation exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code of 1986 (IRC). As such, the Organization is not taxed on income derived from its exempt functions. However, the Organization is subject to tax on unrelated business income, which is generated from the Organization s investment income and other activities not related to their stated exempt purposes. The Organization had no deferred income tax assets or liabilities as of June 30, The Organization has evaluated its tax positions for all open tax years. Currently, the tax years open and subject to examination by the Internal Revenue Service are the 2008, 2009 and 2010 tax years. However, the Organization is not currently under audit nor has the Organization been contacted by any jurisdiction. Based on the evaluation of the Organization s tax positions, management believes all tax positions taken would be upheld under an examination. Therefore, no provision for the effects of uncertain tax positions have been recorded for the fiscal year ended June 30, Cash and Cash Equivalents For purposes of the Statements of Cash Flows, cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Inventories Inventories consist of construction supplies and homes. The construction supplies are valued at the lower of cost or market. Cost is determined on the first-in, first out method. Donated items are recorded at estimated fair value at the date of donation. Home inventory consists of houses and lots purchased by the Organization for the rehabilitation and resale. The houses and lots are valued at the lower of specific acquisition and carrying costs or estimated net value. Any additional costs to rehabilitate the homes are added to the carrying cost of the home. Notes Payable Notes payable are recorded at their outstanding principal amounts

10 Valuation To best reflect economic realities and comply with certain grant requirements, the selling price of new homes is at approximate appraisal value. The mortgage receivable due from the homeowner is adjusted to reflect the value of significant volunteer credits in the form of internal down payment assistance, thus meeting the requirements of the national organization. Repurchased homes Repurchased homes acquired through or in lieu of loan foreclosure are initially recorded at the lesser of outstanding loan balance less the outstanding discount on the loan or the fair value. Any writedown on the asset to fair value at the date of acquisition is charged to loss on the statement of activities. Cost of significant property improvements are added to the cost of the home, whereas costs relating to holding the property are expensed. Functional Classification of Expenses The Organization allocated its expenses on a functional basis among its various programs including fundraising activities and support services. Expenses and support services that can be identified with a specific program are allocated directly according to their natural expenditure classification. Other expenses that are common to several programs are allocated based on various relationships. Revenue and Cost Recognition The Organization recognizes revenue from all homebuilding activities at the closing of the sale using the deposit method. During construction, all direct material and labor costs and those indirect costs related to acquisition and construction are capitalized, and all customer deposits are treated as liabilities. Capitalized costs are charged to earnings upon closing. Costs incurred in connection with completed homes and general and administrative costs are charged to expense as incurred. Date of Managements Review Subsequent events have been evaluated through November 28, the date these financial statements were available to be issued. 3. Mortgage Notes Receivable The Organization provides 100% financing on homes purchased over a 15 to 30 year period at no interest. Generally Accepted Accounting Principles require that contractual rights to receive money in the future be recorded at the present value of the consideration given in exchange. The value of the house given in exchange for the mortgage note is deemed to be the present value of all future mortgage principal payments using an imputed interest rate. The difference between the face amount of the note and its present value is accounted for as a discount, recorded on the statements of financial position reducing mortgage notes receivable, and amortized over the life of the note by the interest method. Present value is calculated using rates determined for the year the mortgage was executed. Rate used for the years ending was 7.50% and 7.69% respectively. The Organization has an underwriting agreement with a commercial bank, whereby the bank acts as an underwriter and loan processor. At closing, the bank issues payment to the Organization. After - 8 -

11 finalization and approval, the Organization purchases the mortgage from the bank dollar for dollar, plus certain closing costs. Loans awaiting final approval for payment to the bank are reflected as a mortgage purchase liability on the statements of financial position Mortgage notes receivable $ 24,397,576 $ 23,080,404 Less: Unamortized discount (13,172,463) (12,722,631) $ 11,225,113 $ 10,357,773 All notes are collateralized by a first mortgage lien on the real property sold. In the event of a default by the mortgagor, the property may be repossessed to satisfy any outstanding obligations. In addition, all mortgages are non-assumable without prior written approval of the Organization. Since all houses are collateralized by a first mortgage lien and a high demand for affordable housing in the area, the Organization has made no allowance for uncollectible mortgages. Periodically the Organization will sell mortgage receivables at a discount of face value. No mortgages were sold during the years ended. The Organization is obligated to swap out any of the mortgages sold if any become significantly in arrears. As of, the Organization had 226 and 274 delinquent loans, respectively, with approximately delinquent amount of $595,000 and $459,000, respectively. The total principal balance for the delinquent mortgages as of is approximately, $9,581,600 and $12,699,200, respectively. Included in mortgage notes receivable at the end of were 14 mortgages totaling $769,128 and $805,070, respectively, on houses completed and closed but for which clear title has not been obtained. The title issues relate to land deeded by a governmental entity. During the year ended June 30, 2008, the Organization closed these mortgages without title insurance, indemnifying the homeowners of any potential future issues, which the Organization believes are remote. 4. Construction Inventory All construction costs, including materials and subcontract labor paid by the Organization as well as the value of those items donated to the Organization, are considered work in progress until a mortgage is signed on the house. At, there were 3 and 2 completed but unclosed houses as well as 19 and 19 homes in process, respectively. There were 6 and 5 repurchased homes at, respectively. The detail of the construction inventory is as follows: - 9 -

12 Construction supplies $ 60,071 $ 69,916 Construction in process 403, ,969 Repurchased homes 326, ,484 $ 790,148 $ 847, Property and Equipment Major classes of property and equipment are as follows: Land and buildings $ 991,396 $ 1,107,214 Office equipment 362, ,804 Vehicles 273, ,355 Construction equipment 164, ,429 1,792,133 1,883,801 Less accumulated depreciation (994,874) (954,316) $ 797,260 $ 929, Deposits and Payments on Houses Awaiting Closing As stated in Note 1, families must meet certain requirements before they can sign a mortgage on a house. Currently, if the house is completed before all closing requirements are met, then the family is allowed to rent the house while working to meet the requirements. Families receive a rent credit at the time the house is closed, at which time it is applied to reduce the mortgage. In addition, down payments of $500 are collected on all houses and are applied to reduce the mortgage at closing. At, the Organization had collected $11,278 and $14,300 in deposits, respectively, that will be applied when mortgages are signed. 7. Line of Credit The Organization has a line of credit with EverBank, allowing for borrowings up to $4,000,000, subject to a borrowing base calculation, with interest at one month LIBOR rate plus 2.5%, with a floor rate of 3% and a ceiling rate of 5%, currently at 3% at June 30, 2012, with interest payable monthly. The line of credit is collateralized by mortgage receivables and inventories of the Organization. At, the Organization had drawn $1,792,983 and $1,742,983 on the line of credit, respectively

13 8. Notes Payable The Organization had the following notes payable at : payable in 48 monthly principal payments of $629 beginning July 2011 and maturing July payable in 48 monthly principal payments of $395 beginning July 2011 and maturing July $ 22,664 $ 30,212 14,244 18,985 payable in 48 monthly principal payments of $104 beginning January 2009 and maturing December ,880 payable in 48 monthly principal payments of $260 beginning January 2009 and maturing December ,580 4,700 payable in 48 monthly principal payments of $104 beginning January 2009 and maturing December ,880 payable in 48 monthly principal payments of $416 beginning January 2009 and maturing December ,528 7,520 payable in 48 monthly principal payments of $156 beginning January 2009 and maturing December ,

14 payable in 48 monthly principal payments of $475 beginning July 2011 and maturing December payable in 48 monthly principal payments of $78 beginning July 2012 and maturing June payable in 48 monthly principal payments of $312 beginning June 2009 and maturing December payable in 48 monthly principal payments of $1,562 beginning June 2009 and maturing December ,588 14,288 3,750 3,750 1,896 5,640 9,396 28,140 payable in 48 monthly principal payments of $1,041 beginning January 2010 and maturing December payable in 48 monthly principal payments of $601 beginning July 2012 and maturing June payable in 48 monthly principal payments of $386 beginning July 2012 and maturing June payable in 48 monthly principal payments of $215 beginning January 2013 and maturing December payable in 48 monthly principal payments of $740 beginning July 2013 and maturing June ,770 31,262 28,889 28,889 18,568 18,568 10,321 10,321 35,555 24,

15 payable in 48 monthly principal payments of $138 beginning January 2014 and maturing December payable in 48 monthly principal payments of $258 beginning July 2014 and maturing June ,667-12,389 - Unsecured with $47,250 of available funds, non-interest bearing note payable to affiliate, payable in 48 monthly principal payments of $984 beginning July 2013 and maturing June Note issued in connection with the purchase of vehicle, interest at 6.00%, payable in monthly installments of $540, balance due January ,615-15,441 - City of Jacksonville Neighbor Stabilization Program payable at sale of the home funded under the program , , ,120 Less current portion 67, ,233 Long-term portion $ 160,706 $ 167,887 Principal payments on notes payable for each of the next five years are as follows: 2013 $ 67, , , , ,010 Thereafter $ 4, ,

16 9. Lease Commitments The Organization has various operating leases for office equipment and vehicles. The Organization uses the terms of the lease contract to record the leases. Estimated lease payments under non cancelable operating leases for the next five year and in the aggregate are as follows: 2013 $ 16, , , $ 1,594 43, Concentrations of Credit Risk Since the Organization's home sales are concentrated within one geographic location (Duval County) to individuals who may otherwise not qualify for home mortgage financing, there is a significant concentration of credit risk associated with the Organization's mortgage notes receivable. In an effort to minimize this risk, it is the Organization's policy to require credit reports, employment verifications and police checks on all potential homeowners. Additional protection is provided by the recorded first mortgage lien on the real property during the period the mortgage is outstanding and the non-assumable nature of the mortgage without prior written approval of the Organization. The risk is further addressed by the loans being carried at a significant discount as discussed in Note Affiliation The Organization is an affiliate of Habitat for Humanity International, Inc. 12. Related Parties The Organization entered into a development project with Habitat Resources of Duval County, Inc. (Resources). Resources is developing real property on land currently owned by the Organization. In the year ending June 30, 2011 Resources developed and completed the project totaling 14 houses. The Organization paid $48,240 in developer fees to Resources. The Organization assumed all liability on a line-of-credit previously entered by both organizations. This resulted in a $500,000 increase in the obligation due the bank and an offsetting decrease in the amount owed to Resources. Resources owed the Organization $0 at June 30, 2012 and the Organization owed Resources $57,879 at June 30, Several officers of the Organization and board members of the Organization serve on the board of the related party

17 13. Retirement Plan The Organization has a 401(k) retirement plan. The Organization matches 50% of the employee contributions up to 6%. An employee is vested after two years. The total employer contributions for were $20,652 and $15,296, respectively. 14. Separate Cash Accounts Certain grants require separate cash accounts and/or accounting. The Organization maintains the appropriate accounts and/or accounting. 15. In-kind Donations In-kind donations are valued at fair market value. Total in-kind donations were $125,683 and $403,108 for the years ended, respectively. Donations were primarily land, construction supplies and related professional services

18

19