FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION ANNUAL REPORT DECEMBER 31, 2018

Transcription

1 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION ANNUAL REPORT DECEMBER 31, 2018

2 TABLE OF CONTENTS Financial Statements Independent Auditors Report 1-2 Statements of Financial Position 3 Statements of Activities 4 Statement of Functional Expenses 5 Statements of Cash Flow 6 Notes to Financial Statements 7-14 Supplemental Information Schedules of Economic Development Zone Revenues and Expenses 15 Independent Auditors Report on Internal Controls Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 16-17

3

4

5 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2018 AND 2017 ASSETS Current Assets Cash and Cash Equivalents $ 44,061 $ 45,520 Accounts and Accrued Interest Receivable 9,417 - Prepaid Expenses 2,458 - Loans Receivable - Current Portion 254, ,655 Total Current Assets 310, ,175 Other Assets Restricted Cash and Cash Equivalent 2,745,720 2,816,617 Loans Receivable - Long Term Portion 774, ,451 Reserve for Uncollectible Loans Receivable (278,108) (278,108) Capital Assets, Net 1,874 3,123 Total Other Assets 3,244,139 3,235,083 Total Assets $ 3,555,059 $ 3,520,258 LIABILITIES AND NET ASSETS Current Liabilities Accounts Payable $ 42 $ 42 Total Current Liabilities Other Liabilities Unearned Revenue 196, ,398 Total Other Liabilities 196, ,398 Total Liabilities 196, ,440 Net Assets Net Assets without Donor Restrictions 657, ,178 Net Assets with Donor Restrictions 2,701,221 2,680,640 Total Net Assets 3,358,393 3,189,818 Total Liabilities and Net Assets $ 3,555,059 $ 3,520,258 The accompanying notes are an integral part of these financial statements. 3

6 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED DECEMBER 31, 2018 AND Changes in Net Assets without Donor Restrictions: Revenues and Support: Local Government Funding $ 1,459 $ 1,573 Interest Income 13,865 2,821 Other Income 355 1,272 Total Revenues and Support without Donor Restrictions 15,679 5,666 Net Assets Released from Restrictions: Satisfaction of Program Restrictions 39,034 8,826 Satisfaction of Program Restrictions Loan Funds 132, ,760 Total Net Assets Released from Restrictions 171, ,586 Total Revenues and Support without Donor Restrictions 187, ,252 Expenses and Losses Programs 32,426 3,522 Management and General 6,608 5,304 Total Expenses and Losses 39,034 8,826 Increase in Net Assets without Donor Restrictions 147, ,426 Changes in Net Assets with Donor Restrictions Net Assets Released from Restrictions (171,349) (112,586) Loan Interest Income with Donor Restrictions 59,615 46,649 Program Income with Donor Restrictions 132, ,760 Decrease (Increase) in Provisions for Bad Debt - - Increase in Net Assets with Donor Restrictions 20,581 37,823 Increase in Net Assets 168, ,249 Net Assets at Beginning of Year 3,189,818 3,042,569 Net Assets at End of Year $ 3,358,393 $ 3,189,818 The accompanying notes are an integral part of these financial statements. 4

7 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2018 Summary Management & Total Total Programs General Consultant Services $ 1,200 $ - $ 1,200 $ - Professional Services 2,185 1,350 3,535 3,678 Marketing Legal Fees 1,059 1,059 2,118 - Miscellaneous 1, , Telephone Office Expenses - 1,941 1,941 - Bank Service Fees Insurance , Computer Expenses ,583 Grants Paid to Others 25,000-25,000 - Depreciation , Total Functional Expenses $ 32,426 $ 6,608 $ 39,034 $ 8,826 The accompanying notes are an integral part of these financial statements. 5

8 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED DECEMBER 31, 2018 AND Cash Flows from Operating Activities: Cash Received from Others $ 355 $ 1,272 Interest Received 61,605 49,470 Cash Paid to Suppliers (37,785) (8,200) Net Cash Provided by Operating Activities 24,175 42,542 Cash Flows from Investing Activities: Purchases of Capital Assets - (3,748) Loans Advanced (325,000) (85,000) Loan Payments Received 228, ,250 Net Cash Provided (Used) by in Investing Activities (96,531) 98,502 Net Increase (Decrease) in Cash (72,356) 141,044 Cash at Beginning of Year 2,862,137 2,721,093 Cash at End of Year $ 2,789,781 $ 2,862,137 Reconciliation of Changes in Net Assets to Net Cash Provided (Used) by Operating Activities: Change in Net Assets $ 168,575 $ 147,249 Bad Debt Expense (Recovery) - - Depreciation 1, Capitalized Interest - - Change in Operating Assets - (Increase) Decrease Accounts and Accrued Interest Receivable (9,417) - Prepaid Expenses (2,458) - Change in Operating Liabilities - Increase (Decrease) Accounts Payable - 1 Unearned Revenue (133,774) (105,333) Net Cash Provided (Used) by Operating Activities $ 24,175 $ 42,542 The accompanying notes are an integral part of these financial statements. 6

9 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES ORGANIZATION The County of Franklin Industrial Development Agency (IDA) created a Local Development Corporation known as the Franklin County Local Development Corporation (LDC) (the Organization) in The County of Franklin Industrial Development Agency assigned all of the loan repayments from the County Community Development Block Grant (CDBG) Projects to the Agency for the purpose of establishing a county wide revolving loan fund. Upon the formation of the Corporation, the County of Franklin IDA assigned all its rights in the CDBG assignment to the Corporation for collection and administration. The Corporation is committed to serving new and existing businesses and industries, and to assist with the creation and retention of quality jobs through direct and collaborative funding of projects for the economic well-being of Franklin County. BASIS OF ACCOUNTING The accrual method is used for both financial reporting and income tax purposes. Expenses are recorded when incurred and revenues are recorded when realized in accordance with the accrual basis of accounting. NET ASSETS Net assets, revenues, gains, and losses are based on the existence or absence of donor or grant imposes restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Net Assets without Donor Restrictions Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions are temporary in nature. The governing board has designated, from net assets without donor restrictions, net assets for an operating reserve. Net Assets with Donor Restrictions - Net assets subject to donor- (or certain grantor-) imposed restrictions. Some donor-imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. The Organization reports contributions restricted by donors as increases in net assets without donor restrictions if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donor-restricted contributions are reported as increased in net assets with donor restriction, depending on the nature of the restrictions. When a restriction expires, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statement of activities as net asset released from restriction. COMPARATIVE FINANCIAL INFORMATION The financial statements include certain prior-year summarized comparative information in total but not by net asset classification. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended December 31, 2017, from which the summarized information was derived. 7

10 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) CASH AND CASH EQUIVALENTS For purposes of the statement of cash flows, the Organization considers all highly liquid investments available for current use with an initial maturity of six months or less to be cash equivalents. RESTRICTED AND UNRESTRICTED REVENUE AND SUPPORT Revenue is recognized when earned. Program service fees and payments under cost-reimbursable contracts received in advanced are deferred to the applicable period in which the related services are performed or expenditures are incurred, respectively. Contributions are recognized when cash, securities or other assets, an unconditional promise to give, or notification of a beneficial interest is received. Conditional promises to give are not recognized until the conditions on which they depend have been substantially met. No significant contributions of such goods or services were received during the years ended December 31, 2018 and PROPERTY AND EQUIPMENT The Organization capitalizes all expenditures in excess of $2,500 for property and equipment at cost. Equipment is stated at cost or, if donated, at approximate fair market value at date of donation. Depreciation is computed on a straight-line basis over the estimated useful lives of the assets. Routine repairs and maintenance are expensed as incurred. BAD DEBT LOSS AND RECOVERIES A reserve method for bad debts has been reflected in these financial statements based upon management s specific identification of outstanding loan receivables that have a potential for collection issues based on historical payment status of the borrowers. The reserve for uncollectible accounts is $278,108 at December 31, 2018 and 2017 and represents approximately 27% and 30% of loans outstanding at December 31, 2018 and 2017, respectively. FUNCTIONAL EXPENSES The cost of programs and supporting services activities have been summarized on a functional basis in the statement of activities. The statements of functional expenses present the natural classification detail of expenses by function. Accordingly, certain costs have been allocated among the programs and supporting services benefited. TAX STATUS The Internal Revenue Service has determined that Franklin County Local Development Corporation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an Organization other than a private foundation under Section 509(a)(2). ESTIMATES The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that effect reported amounts of assets and liabilities and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates. 8

11 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) DONATED ASSETS AND SERVICES The estimated fair value of the full use of facilities owned by others and the estimated fair value of contributed services over which the agency exercises control, which constitute a part of the normal services that would otherwise be performed by paid personnel, have not been reflected in the accompanying financial statements. Also, the value of other donated services is not reflected in the accompanying financial statements. CHANGE IN ACCOUNTING PRINCIPLE On August 18, 2016, FASB issued Accounting Standards Update (ASU) , Not-for-Profit Entities (Topic 958) Presentation of Financial Statements of Not-for-Profit Entities. The update addresses the complexity and understandability of net asset classification, deficiencies in information about liquidity and availability of resources, and the lack of consistency as in the type of information provided about expenses and investment return. The Organization has implemented ASU during the year ended December 31, NOTE 2 - LIQUIDITY AND AVAILABILITY Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of the balance sheet date, comprise the following: Cash and cash equivalents - Unrestricted $ 44,061 Loans Receivable Current Portion 254,984 $ 299,045 The Organization has certain donor-restricted assets limited to use which are available for general expenditure within one year in the normal course of operations. Accordingly, these assets have been included in the qualitative information above. The Organization has other assets limited to use for donor-restricted purposes and debt service, comprise the following: Restricted Cash and Cash Equivalent $ 2,745,720 $ 2,745,720 These assets are limited to use, which are more fully described in Note 4 and are not available for general expenditures within the next year. 9

12 NOTE 3 - CONCENTRATION OF CREDIT RISK FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) The Organization maintains its cash balances in Malone, New York and certificates of deposit at a financial institution in Willsboro, New York. The balances at the financial institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. At various times there were balances in the bank that were over the FDIC limit. However, the Organization has a collateralized pledge account to cover all deposits that exceed the FDIC limit. Therefore, at December 31, 2018 and 2017, the Organization had no uninsured cash balances. NOTE 4 - RESTRICTED CASH AND CASH EQUIVALENTS The Organization s funds are restricted for the purpose of making new loans and grants as part of the revolving loan fund. The following schedule summarizes restricted cash and equivalents: Cash $ 743,470 $ 2,816,617 Certificate of Deposit 3 month, matures 1/23/19 502,250 - Certificate of Deposit 6 month, matures 1/25/19 500,000 - Certificate of Deposit 9 month, matures 4/25/19 1,000,000 - Total $ 2,745,720 $ 2,816,617 NOTE 5 - LOANS RECEIVABLE Details of the Organization s loans receivable at December 31, 2018 and 2017 are as follows: Loan to Cherie Whitten dba The Hub Original Balance $55,000, made July 24, 2017, monthly payment of $ interest rate at 6.00%, maturing August $ 50,245 $ 52,377 Loan to Cherie Whitten dba The Hub Original Balance $30,000, made May 22, 2017, monthly payment of $ interest rate at 6.00%, maturing June ,564 27,631 Loan to Branch Commercial Development Original Balance $250,000, made May 27, 2010, monthly payment of $2,682.29, interest rate at 5.25%, maturing May ,931 73,002 10

13 NOTE 5 - LOANS RECEIVABLE (continued) FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) Loan to Asept Pak, Inc. Original Balance $250,000, made September 21, 2009, monthly payment of $2,349.28, interest rate at 5.25%, maturing September , ,941 Loan to Asept Pak, Inc. Original Balance $400,000, made February 16, 2007, monthly payments of $4,525.66, interest at 5.25%, final maturity February , ,917 Loan to Asept Pak, Inc. Original Balance $735,000, made December 31, 2008, monthly payments of $12,000, interest rate at 4.80%, maturity date March , ,145 Loan to 2 Soup Gurus, LLC dba JC Soups Original Balance $75,000, made August 24,2018, monthly payments $861.16, interest rate at 6.75%, maturing August ,061 - Loan to MCM Development Malone, LLC Original Balance $250,000, made in three installments $125,000 on January 19, 2018, $62,500 on April 2, 2018, and $62,500 on May 18, Interest only payments at a rate of 6.50% until 12 months after completion of construction, at which time payments of $2, will be due, maturing 10 years after the month principal and interest payments begin. 250,000 - Loan to Wise Buys Original Balance $250,000, made July 30, 2004, monthly payments $1,000, interest rate at 0.00%, maturity date July ,593 12,093 Total $ 1,029,637 $ 933,106 11

14 NOTE 6 - CAPITAL ASSETS FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) The details of the property and equipment, as recorded on the books at December 31, 2018 and 2017: Equipment: Office Equipment $ 12,637 $ 12,637 Computer Equipment 11,300 11,300 Total Equipment 23,937 23,937 Less: Accumulated Depreciation (22,063) (20,814) Capital Assets, Net $ 1,874 $ 3,123 NOTE 7 - NET ASSETS WITH DONOR RESTRICTIONS Net assets with donor restrictions at December 31, 2018 and 2017 represent the amount of the Revolving Loan Fund which was created by County of Franklin IDA to stimulate the growth of private sector industrial employment in Franklin County, New York. The revolving loan fund provides financial assistance to: (1) small industries who wish to expand or to build new facilities; (2) small industries who must modernize their physical plant or equipment and machinery to maintain their competitive position; and (3) Canadian industrial firms who seek to locate new plants or facilities in the County. NOTE 8 - COMMITMENTS AND CONTINGENCIES The Organization has received grants, which are subject to audit by agencies of the state and federal governments. Such audits may result in disallowance and a request for a return of funds. Franklin County Local Development Corporation appears to be concerned with regards to the following receivables, and their potential for loss: Asept Pak, Inc. Business is currently operational, but had fallen behind making payments in the past. During 2018 the borrower made 12 full payments on the loans. Of the total balance that is outstanding, management has estimated an approximate allowance at 35% of the outstanding balance at December 31, Wise Buys The Company is no longer operational; however the guarantors have made payments based on an agreement filed in During 2018, there were 3 payments totaling $2,500 made. Management is working with the guarantors to continue payments. Management has assessed an allowance equaling the outstanding balance at December 31, The HUB The Company has two loans and has fallen behind on payments during the year. During 2018, there were 5 payments totaling $4,200 on the principal made. Management is working with the guarantors through a proposed restructuring. Management has assessed an approximate allowance at 35% of the outstanding balance at December 31,

15 NOTE 9 - UNEARNED REVENUE FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) The Organization s unearned revenue consists of original HUD loans transferred from the County of Franklin IDA and unearned Economic Development Zone (EDZ) revenue. As the loan is repaid or expenses are incurred with the EDZ, revenue is recognized. NOTE 10 - CONCENTRATION The Organization s loan portfolio totaling $1,029,638 has one obligor with outstanding loans totaling $577,243 or 56.6% of the portfolio at December 31, The Organization s loan portfolio totaling $933,106 has one obligor with outstanding loans totaling $768,003 or 82.3% of the portfolio at December 31, NOTE 11 - RELATED PARTY TRANSACTIONS The County of Franklin Industrial Development Agency (the IDA ) is a public benefit corporation that was created in 1970 by the Franklin County Board of Legislators under the provisions of Article 18A of the General Municipal Law to encourage economic growth and prosperity in Franklin County, New York. The Franklin County Local Development Corporation (the LDC ) was started in 1989 to develop and cultivate a strong economic environment, which supports business and nurtures growth and new investment in the County. The Franklin County Civic Development Corporation (the CDC ) is a corporation established in 2010 to meet the civic bonding needs of colleges, medical and research facilities, libraries, and other not-for-profit corporations to assist with financing needs. The respective Boards of the IDA, LDC, and CDC are substantially the same and activities are closely related. NOTE 12 - ECONOMIC DEVELOPMENT MERGER AGREEMENT In November 2018, the Organization entered into a four year merger agreement with the Franklin County Legislature Office of Economic Development to provide economic development services for an annual fee of $77,700. NOTE 13 - FUNCTIONAL EXPENSES The financial statements report certain categories of expenses that are attributed to more than one program or supporting function. Therefore, expenses require allocation on a reasonable basis that is consistently applied. Accordingly certain expenses, such as professional services, telephone, insurance, fees, and legal expenses are allocated between programs and management and general on the basis of estimates of time and effort. 13

16 NOTE 14 - TAX UNCERTAINTIES FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION NOTES TO FINANCIAL STATEMENTS December 31, 2018 with Comparative Totals for 2017 (CONTINUED) FASB ASC 740, Income Taxes, requires entities to disclose in their financial statements the nature of any uncertainties in their tax position. Tax years including 2015 and later are subject to examination by tax authorities. Areas that IRS and state tax authorities consider when examining tax returns of a charity include, but may not be limited to, tax-exempt status and the existence and amount of unrelated business income. Franklin County Local Development Corporation does not believe that it has any uncertain tax positions with respect to these or other matters, and has not recorded any unrecognized tax benefits or liability for penalties or interest. Franklin County Local Development Corporation is not aware of any circumstances or events that make it reasonably possible that tax benefits may increase or decrease within 12 months of the date of these financial statements. NOTE 15 - SUBSEQUENT EVENTS Franklin County Local Development Corporation has evaluated events and transactions that occurred between December 31, 2018 and March 14, 2019, which is the date the financial statements were available to be issued, for possible disclosure and recognition in the financial statements. 14

17 FRANKLIN COUNTY LOCAL DEVELOPMENT CORPORATION SCHEDULES OF ECONOMIC DEVELOPMENT ZONE REVENUES AND EXPENSES FOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017 Total Total Revenues Franklin County $ 1,459 $ 1,573 New York State - - Miscellaneous - - Total Income 1,459 1,573 Expenses Consulting - - Professional Services Marketing Telephone Miscellaneous - - Total Expenses 1,459 1,573 Net Income (Loss) $ - $ - See paragraph on supplemental information included in the independent auditors' report. 15

18

19