FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT HABITAT FOR HUMANITY OF WESTCHESTER, INC. June 30, 2014

Transcription

1 FINANCIAL STATEMENTS AND REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT HABITAT FOR HUMANITY OF WESTCHESTER, INC.

2 CONTENTS Page Report of Independent Certified Public Accountant 3 Financial Statements Statement of Financial Position 5 Statement of Activities 6 Statement of Functional Expenses 7 Statement of Cash Flows 8 Notes to Financial Statements 9-14

3 WR Accounting and Managerial Services C E R T I F I E D P U B L I C A C C O U N T A N T REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANT Board of Directors HABITAT FOR HUMANITY OF WESTCHESTER, INC I have audited the accompanying statement of financial position of Habitat for Humanity of Westchester, Inc. (a nonprofit Organization) as of June 31, 2014 and 2013, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility My responsibility is to express an opinion on these financial statements based on my audits. I conducted the audits in accordance with auditing standards generally accepted in the United States of America and in accordance with International Standards on Auditing. Those standards require that I 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. Accordingly, I express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. I believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for my audit opinion. 226 N Wantagh Ave rd Ave Bethpage, NY Astoria, NY o o f f wramos@wrtax.com

4 Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Habitat for Humanity of Westchester, Inc. as of and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Bethpage, NY February 23, 2015

5 STATEMENT OF FINANCIAL POSITION ASSETS Assets Cash and cash equivalents $ 141,278 $ 197,359 Non-Interest bearing mortgage loans 2,861,912 2,116,422 Discount on non-interest bearing mortgage loans (1,385,777) (1,040,799) Construction in progress Homes 1,546,352 2,932,589 Inventory - - Accounts receivable 46,868 36,365 Note receivable 6,798 4,478 Unconditional promises to give 15,000 24,269 Property and equipment, net of accumulated depreciation 752, ,936 Prepaid expenses 34,557 35,497 Security deposits 17,808 20,300 Other receivables 56,565 32,680 Total assets $ 4,093,445 $ 5,083,096 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 365,719 $ 268,597 Line of credit - Customers bank 350,000 - Security deposit Loans payable 657, ,015 Other liabilities 13,792 - Totals liabilities 1,388,179 1,197,612 Net Assets Net assets - Unrestricted 2,705,266 3,885,484 Total liabilities and net assets $ 4,093,445 $ 5,083,096 The accompanying notes are an integral part of these statements -5-

6 STATEMENT OF ACTIVITIES For the year ending Unrestricted Restricted Total Total Revenues Contributions Religious $ 44,097 - $ 44,097 $ 33,575 Individuals 289, , ,081 Hurricane relief 630, , ,229 Corporations 412, , ,335 Schools 24,312-24,312 38,097 Foundations 238, , ,450 Fraternal 11,879-11,879 4,550 Agencies 221, ,946 31,218 Banks 28,500-28, ,800 In Kind 25,385-25,385 1,426 Other 3,697-3,697 13,354 Total contributions 1,931,248 1,931,248 2,091,115 Transfers to homeowners 900, , ,000 Fund raising events 202, ,390 55,060 Mortgage discount amortization 92,340-92,340 78,412 1,194,730-1,194, ,472 Other revenue and (loss) Interest and dividend income Rental income - 50,824 50,824 22,950 Restore 15,712-15,712 39,925 Other revenue (loss) 8,512-8,512 60,690 Total other income 24,496 50,824 75, ,841 TOTAL REVENUES AND OTHER SUPPORT 3,150,474 50,824 3,201,298 2,598,428 Expenses Program expenses 3,631,551-3,631,551 2,192,995 Management and general 607, , ,622 Fund raising expenses 142, ,051 17,110 TOTAL EXPENSES 4,381,516-4,381,516 2,625,727 Change in net assets (1,231,042) 50,824 (1,180,218) (27,299) Transfers between funds 50,824 (50,824) NET ASSETS- BEGINNING OF YEAR 3,885,484-3,885,484 3,912,783 NET ASSETS- END OF YEAR $ 2,705,266 $ 2,705,266 $ 3,885,484 The accompanying notes are an integral part of these statements -6-

7 STATEMENT OF FUNCTIONAL EXPENSES For the year ending Program Management Fund Raising Operating expenses Expenses and General Expenses Total Total Cost of homes transferred 1,576, ,576, ,574 Payroll and related expenses 538, ,066 64, , ,416 Travel expenses 29,340 38, ,583 71,942 Interest - 35,952-35,952 31,771 Telephone 15,288 6,066-21,354 14,356 Insurance 35,605 8,901-44,506 42,354 Advertising - 33,104-33,104 - Utilities 5,382 4,698-10,079 14,692 Occupancy Costs 32, ,225 27,657 Fund raising cost ,290 37,290 13,465 Office expenses 2,501 70, ,098 62,820 Professional fees 17,383 84, ,457 37,270 Postage and shipping 385 3,928 3,445 7,758 12,435 Printing and publications 1,713 5,225 35,917 42,855 36,480 Depreciation - 39,676-39,676 31,139 Bank charges 102 7,854-7,955 8,543 Mortgage discount 437, , ,234 Other program expenses 23, ,802 23,971 Hurricane relief 523, , ,895 Neighborhod Revitaliation 310, ,318 - Brush with Kindness 44, ,917 54,681 Food for Volunteers 9, ,235 11,282 Tithe to Habitat for Humanity International 27, ,550 20,750 Total operating expenses $ 3,631,551 $ 607,914 $ 142,051 $ 4,381,516 $ 2,625,727 The accompanying notes are an integral part of these statements -7-

8 STATEMENT OF CASH FLOWS For the year ending Cash flows from operating activities: Change in net assets (1,179,202) (27,299) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation 39,676 31,139 Accretion of discounts on mortgage notes recevable 344,978 58,822 Change in operating assets and liabilities: Inventory - 57,347 Accounts receivable (10,503) 129,576 Security deposit 3,192 (7,492) Note receivable (2,320) (4,478) Other assets 13,417 (24,270) Unconditional promises to give (15,000) 33,750 Prepaid expenses (76) (7,891) Construction in progress 1,386, ,903 Other receivables ,444 Accounts payable and accrued expenses 97,122 (111,434) Loan payables (271,047) (49,791) Net cash provided by operating activities 407, ,326 Cash flows from investing activities Acquisition of Vehicles (67,825) (21,600) Acquisition of Trailers - (1,000) Net cash used by investing activities (67,825) (22,600) Cash flows from financing activities Line of credit 350,000 (15,000) Non-Interest bearing mortgage loans (745,490) (122,176) Net cash used by financing activities (395,490) (137,176) NET (DECREASE)/INCREASE IN CASH AND CASH EQUIVALENTS (56,081) 66,550 Cash and cash equivalents Beginning of year 197, ,809 End of year 141, ,359 SUPPLEMENTAL INFORMATION Cash paid for interest $ 35,952 The accompanying notes are an integral part of these statements -8-

9 NOTES TO FINANCIAL STATEMENTS NOTE 1 NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES. Organization Habitat for Humanity of Westchester, Inc. ( Habitat ) is a not-for-profit organization under Internal Revenue Code section 501 (c)(3) whose purpose is to develop housing for the benefit of and in cooperation with persons of low to moderate income in Westchester County, New York and then to sell the houses to such persons with no mortgage interest and no profit so as to achieve the long-term goal of eliminating poverty housing and homelessness in partnership with all people as co-workers. Income Tax Status The Organization is exempt from federal income tax under Section 501 (c)(3) of the Internal Revenue Code. The organization prepares its financial statements in accordance with generally accepted accounting principles promulgated in the United States of America (U.S. GAAP) for NFPs. The significant accounting and reporting policies used by the organization are described subsequently to enhance the usefulness and understandability of the financial statements. Statements of Cash Flows For purposes of the statements of cash flows, Habitat considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. Support and Revenue All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for the future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. When a temporary restriction expires, assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Donated Services The organization periodically receives contributions in a form other than cash or investments. If the organization receives a contribution of land, buildings, or equipment, the contributed asset is recognized as an asset at its estimated fair value at the date of gift, provided that the value of the asset and its estimated useful life meets the organization s capitalization policy. Donated use of facilities is reported as contributions and as expenses at the estimated fair value of similar space for rent under similar conditions. If the use of the space is promised unconditionally for a period greater than one year, the contribution is reported as a contribution and an unconditional promise to give at the date of gift, and the expense is reported over the term of use. Donated supplies are recorded as contributions at the date of gift and as expenses when the donated items are placed into service or distributed Transfers to Homeowners Transfers to homeowners are recorded at the gross mortgage amount plus down payment received. Noninterest bearing mortgages have been discounted based upon prevailing market rates for low income housing at the inception of the mortgages. Utilizing a straight-line basis, this discount will be recognized as interest income over the term of the mortgage. -9-

10 NOTES TO FINANCIAL STATEMENTS NOTE 1 - NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (cont.) Reclassification Certain prior year amounts have been reclassified to conform to the current year presentation for comparative purposes. These reclassifications have not had any impact on net income. Home Construction Costs Costs incurred in conjunction with home construction are capitalized until title transfers to the purchaser. Following is a summary of home building activity: Homes Cost Homes under construction, July 1 9 $ 2,932,693 Additional costs incurred on beginning inventory 384,858 New homes started during the year 2 78,213 Neighborhood Revitalization (310,318) Homes transferred during the year 5 (1,539,094) Homes under construction, June 30 6 $ 1,546,352 As homes are completed and ownership is transferred, the total cost accumulated on the balance sheet under the Construction in Progress account is expensed to the Statement of Activities Program expenses under Cost of Homes Transferred. The total cost of homes transferred at is $1,813,806, which includes cost related to and classified under Neighborhood Revitalization. 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 in determining the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the day of the financial statements and reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Financial Statement Presentation and Contributions The cost of providing the organization s programs and other activities is summarized on a functional basis in the statement of activities and statement of functional expenses. Expenses that can be identified with a specific program or support service are charged directly to that program or support service. Costs common to multiple functions have been allocated among the various functions benefited. General and administrative expenses include those costs that are not directly identifiable with any specific program, but which provide for the overall support and direction of the organization. Fundraising costs are expensed as incurred, even though they may result in contributions received in future years. The organization generally does not conduct its fundraising activities in conjunction with its other activities. In the few cases in which it does, such as when the annual report or donor acknowledgements contain requests for contributions, joint costs have been allocated between fundraising and management -10-

11 NOTES TO FINANCIAL STATEMENTS NOTE 2 - NON-INTEREST BEARING MORTGAGE LOANS Mortgage receivables consist of thirty four 20 year mortgages collateralized by the related property. The monthly payment does not include interest. The mortgages have been discounted using the prevailing market rate for low income housing at the inception of the mortgage. Utilizing a straight-line basis, this discount will be recognized as interest income over the term of the mortgages. Habitat for Humanity of Westchester, Inc. retains the right of first refusal if the mortgagor wishes to sell the property. When the property is sold the mortgagor retains an amount equal to: a) during the first eight years, the total of all mortgage payments made, and b) thereafter the amount of all mortgage payments multiplied by a cost-ofliving increase. The cost of living increase is calculated as: the consumer price index in effect for the month proceeding the month in which the repurchase is closed divided by the consumer price index in effect when the homeowner issued the mortgage. In 2010, management decided to use the services of, 'AmeriNational Community Services', to help manage and collect with its mortgage receivables. NOTE 3 - UNCONDITIONAL PROMISES TO GIVE This represents money pledged to the organization but not received as of. NOTE 4 - HABITAT FOR HUMANITY INTERNATIONAL Habitat annually remits a portion of its contributions (excluding in-kind contributions) to Habitat for Humanity International. These funds are used to construct homes in economically depressed areas around the world. The amounts transferred as of and 2013 were $27,550 and $20,750, respectively. NOTE 5 - LOANS PAYABLE Maryknoll Fathers and Brothers During 1999, Catholic Foreign Mission Society of America Inc. a/k/a/ Maryknoll Fathers and Brothers lent $50,000 to Habitat. The Loan is a non interest bearing and is for 20 years. Monthly payments of $ commenced June 1, 1999 and will be paid until May 1, 2019, unless sooner paid. It is the understanding of both parties that Habitat for Humanity will make a sincere effort to repay this loan as soon as possible not withstanding the maturity dates of the note. The balance due at and 2013 was $0 and $1,500, respectively. City of Yonkers Habitat entered into a loan agreement with the city of Yonkers whereas the proceeds of the construction loan shall be used solely for the acquisition, construction and related miscellaneous cost associated with property located West of Riverdale Avenue in Yonkers for development of affordable housing. The balance due at and 2013 was $0 and $200,000, respectively. -11-

12 NOTES TO FINANCIAL STATEMENTS NOTE 5 - LOANS PAYABLE (cont.) Habitat for Humanity International, Inc Habitat entered into an accelerated asset recovery program whereas Habitat for Humanity International gave a 10 year note in the amount of $269,600 at 5.500% interest with mortgage receivables pledged as collateral. Loan proceeds will be used to fund program expenses. Balance due at and 2013 was $215,319 and $237,925, respectively. Toyota Financial Habitat entered into a purchase agreement with DCH TOYOTA CITY for the purchase of a 2010 Toyota Highlander HYBD. Balances due at and 2013 were $7,701 and $15,021, respectively. Pepino Capital LLC Habitat purchased the building where it maintains its executive offices at 524 Main Street New Rochelle, NY. The Original mortgage to Pepino Capital LLC was in the amount of $390,000 with monthly payments at 4% per annum in the amount of $2,363. Balances due at and 2013 was $334,448 and $349,069, respectively. Total interest expense related to the mortgage at is $13,698. SUMMARY OF LONG TERM DEBT 2014 Mortgage Payable Pepino Capital LLC $ 334,448 Loan Payable Donor 100,500 Note payable Toyota Financial 7,701 Loan Payable Accelerated asset recovery program 215,319 Total Loans payable $ 657,

13 NOTES TO FINANCIAL STATEMENTS NOTE 6 - RENTAL INCOME Rental income is collected on homes that are completed, but not transferred, and occupied by the intended purchaser. As the purchaser completes the purchase of the home, rental income collected from the respective purchaser is fully applied to the initial down payment in the form of a stipend. Stipends applied to the initial down payment are shown as a separate line item under program expenses. Total rental activity as of Rental income Amount Natalya Johnson $ 9,600 Irene Ondo 9,600 Joseph Gonzalez 6,693 Macarthur Wade 6,693 Sherlon Quarles 6,694 Felipe Diaz 4,850 Jose Soto 6,694 Late charges - Total $50,824 NOTE 7 LINES OF CREDIT AND FINANCING ARRANGEMENTS Habitat for Humanity has a line of credit with Customers Bank in the amount of $500,000 Balances due at and 2013 was $350,000 and $0, respectively. NOTE 8 DONATED GOODS AND SERVICES Habitat records, as both, in-kind support and expenses, the value of donated goods and services received in support of its program. These in-kind contributions primarily include donated plumbing supplies and construction raw materials and miscellaneous supplies used in construction. The total value of donated goods and services for the year ended Junes 30, 2014 totaled $112,135 of which $86,750 is recorded under Hurricane Relief and June 30, 2013 totaled $307,426 of which $306,000 is classified under Hurricane relief. -13-

14 NOTES TO FINANCIAL STATEMENTS NOTE 9 PURCHASE OF BUILDING On September 29, 2010, Habitat entered into a contract to purchase the building where its executive offices are located at 524 Main Street New Rochelle, NY at a total cost of $674,397 with a mortgage on the building for $390,000 payable to PEPINO CAPITAL LLC. Monthly payments are $2, Note will be payable at a rate of 4% annum for 20 years. Future principal payments are as follows: Years ending December 31, Amount , , , , ,903 Thereafter 251,666 $ 334,