Project Renewal, Inc. and Affiliates

Transcription

1 Project Renewal, Inc. and Affiliates Consolidated Financial Statements

2 Independent Auditors Report Board of Trustees Project Renewal, Inc. We have audited the accompanying consolidated financial statements of Project Renewal, Inc. and Affiliates (the Corporation ), which comprise the consolidated statement of financial position as of, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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. Auditors Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated 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 auditors 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, we 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PKF O CONNOR DAVIES, LLP 665 Fifth Avenue, New York, NY I Tel: or I Fax: I PKF O Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

3 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Project Renewal, Inc. and Affiliates as of, and the consolidated changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited the Corporation s 2015 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated December 31, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015 is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating schedules of financial position and activities are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. November 28, 2016

4 Consolidated Statement of Financial Position (with comparative amounts at June 30, 2015) ASSETS Cash and cash equivalents $ 7,056,029 $ 3,726,317 Investments 51,703 52,479 Restricted cash 983,937 1,428,373 Accounts and grants receivables, net 11,702,671 7,577,386 Pledges receivable, net 1,229,088 1,013,086 Rent receivable, net 153, ,116 Due from affiliates, net 145,759 59,773 Prepaid expenses 630, ,562 Tax credit monitoring fees, net 51,702 11,292 Security deposits and other assets, net 129, ,069 Mortgage receivable 12,500,000 12,500,000 Assets held for others 135, ,338 Investments in rental property, net 34,249,343 20,087,246 Deferred debt issuance costs, net 584, ,238 Property and equipment, net 14,926,238 25,384,961 $ 84,530,786 $ 73,422,236 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 7,686,076 $ 4,785,131 Accrued payroll and related liabilities 2,114,767 1,168,037 Accrued interest 1,630,695 1,052,371 Construction payable 489, ,463 Due to affiliates 1,756,862 1,786,914 Deferred revenue 8,251,203 3,751,730 Deferred developer's fee revenue 2,300,000 2,300,000 Deferred rent 540, ,745 Loans payable 37,289,905 33,335,480 Enforcement note payable 12,500,000 12,500,000 Total Liabilities 74,560,241 61,977,871 Net Assets Unrestricted Operating 962,226 1,034,334 Non-controlling limited partners' interests in consolidated affiliates 6,757,568 8,330,135 Total Unrestricted Net Assets 7,719,794 9,364,469 Temporarily restricted 2,250,751 2,079,896 Total Net Assets 9,970,545 11,444,365 $ 84,530,786 $ 73,422,236 See notes to consolidated financial statements 3

5 Consolidated Statement of Activities Year Ended (with summarized totals for the year ended June 30, 2015) 2016 Unrestricted Temporarily Restricted Total 2015 Total REVENUE AND SUPPORT Grants $ 49,112,179 $ - $ 49,112,179 $38,289,213 Third party revenue 4,489,840-4,489,840 5,096,457 Social purpose ventures 6,186,667-6,186,667 5,168,105 Rental income 2,652,167-2,652,167 2,441,133 Special events, net of direct benefit to donors of $194,444 and $167, , ,376 1,023,035 Contributions 299,756 1,854,165 2,153,921 1,656,443 Developer's fee income 285, , ,500 Miscellaneous income 817, , ,728 Net assets released from restrictions 1,683,310 (1,683,310) - - Total Revenue and Support 66,472, ,855 66,643,399 54,811,614 EXPENSES Program Services Outreach 491, , ,702 Treatment and transitional housing 36,046,387-36,046,387 26,732,712 Medical services 8,321,312-8,321,312 7,317,369 Employment services 7,908,829-7,908,829 6,876,056 Permanent housing 7,695,903-7,695,903 8,026,388 Total Program Services 60,463,816-60,463,816 49,425,227 Supporting Services Management and general 7,195,157-7,195,157 6,244,796 Fundraising 600, , ,232 Total Supporting Services 7,795,903-7,795,903 6,860,028 Total Expenses 68,259,719-68,259,719 56,285,255 Increase (Decrease) in Net Assets Before Capital Contributions from Non-Controlling Limited Partners (1,787,175) 170,855 (1,616,320) (1,473,641) Captial contributions from non-controlling limited partners 142, ,500 4,762,119 Change in Net Assets (1,644,675) 170,855 (1,473,820) 3,288,478 NET ASSETS Beginning of the year 9,364,469 2,079,896 11,444,365 8,155,887 End of the year $ 7,719,794 $ 2,250,751 $ 9,970,545 $ 11,444,365 See notes to consolidated financial statements 4

6 Consolidated Statement of Functional Expenses Year Ended (with summarized totals for the year ended June 30, 2015) Program Services Supporting Services Treatment and Transitional Medical Employment Permanent Management Outreach Housing Services Services Housing Total and General Fundraising Total Total Salaries $ 265,430 $ 15,693,087 $ 4,935,426 $ 2,665,775 $ 2,392,612 $ 25,952,330 $ 3,336,869 $ 218,053 $ 29,507,252 $ 26,871,309 Employee benefits and payroll related taxes 66,755 3,992,530 1,290, , ,944 6,658, ,092 57,016 7,563,099 7,343,865 Total Salaries and Related Expenses 332,185 19,685,617 6,225,939 3,361,024 3,006,556 32,611,321 4,183, ,069 37,070,351 34,215,174 Food and kitchen supplies - 1,404, ,704,262 78,953 5,187,857 8,617-5,196,474 4,285,478 Client supplies 4, , , , ,399 1,319,082 6,372 31,094 1,356,548 1,318,881 Lab fees 1,540 1,041 25,270-4,052 31,903 4,573-36,476 79,254 Office rent and occupancy expense 22,507 2,224, , ,715 2,164,967 4,753, ,740-5,363,795 5,095,064 Utilities 2, ,939 2,672 23, , ,403 50, ,720 1,011,716 Facility maintenance 1,584 1,040,341 66,400 18, ,269 1,279,113 14,694-1,293,807 1,571,257 Telephone 5, ,396 63,263 14,125 40, ,045 34, , ,280 Office expense , ,323 52,902 87,984 1,203, ,957 89,669 1,741,084 1,167,685 Staff travel 1,449 27,135 35,865 21,358 5,879 91,686 77,612 1, , ,934 Printing - 4,381 6,729 6,113 1,048 18,271 3,323 22,297 43,891 38,231 Professional fees - 71, ,420 41, , , , ,893 1,516,012 1,607,482 Security fees - 6,598, ,598, ,598, ,457 Temporary help 96, , ,531 35, ,401 1,220,732 92,203-1,312, ,092 Vehicle expense 13, , ,741 93,224 4, ,466 30, , ,762 Insurance 7, , , , , ,378 98,646-1,058, ,324 Recruiting 1,584 2,554 43,656 7, ,857 37,175-93,032 27,604 Bad debt expense ,390 37, ,390 54,310 Data processing ,518-4, , , ,837 Depreciation and amortization - 866,197 52,316 1, ,322 1,913, ,842-2,218,644 1,866,858 Interest expense - 559, , , , ,343 Miscellaneous - 103,974 29,475 39,111 49, ,581 93, , ,232 Total Expenses $ 491,385 $ 36,046,387 $ 8,321,312 $ 7,908,829 $ 7,695,903 $ 60,463,816 $ 7,195,157 $ 600,746 $ 68,259,719 $ 56,285,255 See notes to consolidated financial statements 5

7 Consolidated Statement of Cash Flows Year Ended (with comparative amounts for the year ended June 30, 2015) CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (1,473,820) $ 3,288,478 Adjustments to reconcile change in net assets to net cash from operating activities Depreciation and amortization 2,218,644 1,866,858 Bad debt expense 37,390 54,310 Unrealized loss (gain) on investments 776 (8,090) Non-cash loan principal repayment (356,981) (4,193,212) Non-cash loan principal borrowings 3,781,046 8,257,420 Non-cash increase in property and equipment (4,136,972) (4,713,879) Deferred rent (104,938) (114,331) Change in Operating Assets and Liabilities Restricted cash 444,436 (1,020,214) Accounts and grant receivables (4,172,056) (409,898) Pledges receivable (216,002) 182,534 Rent receivable (21,380) (16,220) Prepaid expenses (287,650) (22,668) Tax credit monitoring fees (43,460) - Security deposits and other assets 357,165 (157,788) Assets held for others (21,433) 125,497 Due to / from affiliates (116,038) 634,238 Accounts payable and accrued expenses 2,900,945 (599,735) Accrued payroll and related liabilities 946,730 71,373 Accrued interest 578, ,681 Deferred revenue 4,499, ,005 Net Cash From Operating Activities 4,814,199 3,900,359 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (788,047) (4,870,227) Investment in rental property (1,134,514) 6,796 Net Cash From Investing Activities (1,922,561) (4,863,431) CASH FLOWS FROM FINANCING ACTIVITIES Debt issuance costs (92,286) - Repayment of loan payables - (7,503,488) Borrowings on loans payable 530,360 10,627,396 Net Cash From Financing Activities 438,074 3,123,908 Change in Cash and Cash Equivalents 3,329,712 2,160,836 CASH AND CASH EQUIVALENTS Beginning of year 3,726,317 1,565,481 End of year $ 7,056,029 $ 3,726,317 SUPPLEMENTAL SCHEDULE OF NON-CASH FINANCING ACTIVITIES Loan principal repayment $ (356,981) $ (4,193,212) Loan principal borrowings 3,781,046 8,257,420 Interest expense (243,159) (402,774) Grant income 1,403,523 1,499,902 Rent expense (447,457) (447,457) Property and equipment (4,136,972) (4,713,879) See notes to consolidated financial statements 6

8 1. Organization and Related Parties Project Renewal, Inc. and Affiliates (the Corporation ) operate facilities in New York State that offer a variety of services in accessible settings to homeless and formerly homeless people suffering from mental illness, alcoholism, and substance abuse. Project Renewal, Inc. receives substantial grant awards from various Federal, New York State and City agencies. The consolidated financial statements include the following entities: Project Renewal Housing Development Fund Corporation ("PRI HDFC"), whose sole member is Project Renewal, Inc., provides housing for low income persons with mental illness and/or chemical dependency in the Bronx called the Fletcher Place Residence (the "Project"). Washington OMH Corporation ("Washington OMH GP"), is the general partner of Washington Fletcher OMH L.P. ("Washington Fletcher"), a limited partnership controlled by PRI HDFC. Washington OMH has a 0.01% interest in Washington Fletcher. Washington Fletcher owns investments in real property and the provision of low-income housing through the construction, renovation, rehabilitation, operation and leasing of an apartment complex. The apartment complex is an 80- unit, multifamily rental housing development in the Bronx, for low-income residents. Occupancy commenced in December Bronx Boulevard Housing Development Fund Corporation ( Bronx Boulevard HDFC ), whose sole member is Project Renewal, Inc., is developing housing for men with mental illness. PRI Villa Avenue Housing Development Fund Corporation ( PRI Villa HDFC ), whose sole member is Project Renewal, Inc., developed housing for low income persons with substance and mental illness in the Bronx, New York, called Villa Avenue Residence. PRI Villa Avenue GP, Inc., the general partner of PRI Villa Avenue L.P., a limited partnership controlled by PRI Villa HDFC. PRI Villa Avenue GP, Inc. has a 0.01% interest in PRI Villa Avenue L.P. PRI Villa Avenue L.P. owns investments in real property and the provision of low-income housing through the construction, and operation of an apartment complex. The apartment complex is a 56-unit, multifamily rental housing development in the Bronx, New York, for low-income residents. Construction was completed in August 2015 and occupancy commenced in October Other related entities which are not included: Project Renewal Fund Inc. ( PRF ) a not-for-profit entity that is the sole member of Project Renewal, Inc. and other non-profit entities. The Corporation shares certain common facilities and management personnel with Manhattan Bowery Management Corporation ( MBMC"), a not-for-profit entity. PRF is the sole member of MBMC. 7

9 1. Organization and Related Parties (continued) MRG Partners, L.P. ( MRG"), operates the Geffner House (formally the Holland House), a low-income rental housing project. The general partner is Starting Homes, Inc., a for-profit corporation controlled by a housing development fund corporation that is owned by PRF. St. Nicholas House L.P. ("St. Nicholas") operates the St. Nicholas House project for occupancy by low income tenants. The general partner is St. Nicholas House GP Corporation, a for-profit corporation controlled by a housing development fund corporation that is owned by PRF. North Star Housing, Inc. ("NSH"), a not-for-profit entity develops and manages affordable housing. PRF is the sole member of NSH. 2. Principles of Consolidation These financial statements are prepared on a consolidated basis and include the activities for the year ended of entities controlled by Project Renewal, Inc. through its sole membership in not-for-profit entities or its controlling interest in for-profit entities. The assets, liabilities, and net assets of Washington Fletcher OMH L.P. and PRI Villa Avenue L.P. have been consolidated into Washington OMH GP and PRI Villa Avenue GP, respectively, due to the controlling influence the general partners have over the limited partnerships. The consolidated entity is collectively referred to as the Corporation. All intercompany transactions and balances have been eliminated in consolidation. 3. Summary of Significant Accounting Policies Basis of Presentation The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( U.S. GAAP ). Use of Estimates The preparation of financial statements in accordance with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents consist of highly liquid investments with maturities of three months or less at the time of purchase. 8

10 3. Summary of Significant Accounting Policies (continued) Fair Value Measurements U.S. GAAP requires the Corporation to classify its investments in a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets. Level 1 inputs have the highest reliability and are related to assets with unadjusted quoted prices in active markets. Level 2 inputs relate to assets with other than quoted prices in active markets that can be corroborated by observable market data. Level 3 inputs are unobservable inputs and are used to the extent that observable inputs do not exist. Allowance for Doubtful Accounts An allowance for doubtful accounts is established for amounts where there exists doubt as to whether an amount will be fully collected. The determination of this allowance is an estimate based on the Corporation s historical experience, review of account balances and expectations relative to collections. Deferred Debt Issuance Costs Deferred debt issuance costs represent costs incurred to obtain long term debt. Amortization of these costs is provided over the life of the loans. The Corporation has incurred debt issuance costs at and 2015 of $806,851 and $714,565. At and 2015, accumulated amortization was $222,299 and $200,327. Property and Equipment and Investments in Rental Property Property and equipment and investments in rental property are stated at cost and depreciated using the straight-line method over the estimated useful lives of the assets as follows: Buildings and building improvements Equipment, furniture and fixtures Automobiles years 4-7years 5-7 years The Corporation capitalizes all purchases of property and equipment greater than $5,000. Impairment of Long-Lived Assets The Corporation reviews long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of the asset to aggregate future net cash flows (undiscounted and without interest) expected to be generated by the asset. If such assets are considered impaired, the impairment to be recognized is measured by the amount by which the carrying amounts of the assets exceed the fair value. No impairment loss has been recognized during the years ended and

11 3. Summary of Significant Accounting Policies (continued) Deferred Developer s Fee Revenue Deferred developer s fee revenue refers to fees not yet earned for services in connection with the development and construction of the Fletcher Street project. Revenue will be recognized as certain milestones are achieved and receipts will be used for the establishment of required reserves. Non-Controlling Limited Partners Interests Capital contributions from non-controlling limited partners in the consolidated statement of activities represent the capital contributions of the Limited Partnerships allocated to limited partners for that period. Non-controlling limited partners interests in the consolidated statement of financial position represent the cumulative capital contributions and the limited partners interest in profits or losses of the Limited Partnerships. Net Asset Presentation The classification of the Corporation's net assets and its support, revenue and expenses is based on the existence or absence of donor-imposed restrictions. Accordingly, the Corporation s net assets and changes therein are classified and reported as unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. The classes of net assets are defined as follows: Permanently Restricted - Net assets resulting from contributions and other inflows of assets whose use by the Corporation is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Corporation. Temporarily Restricted - Net assets resulting from contributions and other inflows of assets whose use by the Corporation is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the Corporation pursuant to those stipulations. When such stipulations end or are fulfilled, such temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statement of activities. Unrestricted - The part of net assets that is neither permanently nor temporarily restricted by donor-imposed stipulations. Contributions and Pledges Contributions and unconditional promises to give are recorded as support when pledges are made and are classified as unrestricted, temporarily restricted, or permanently restricted support. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using rates applicable to the years in which the promises are received and consider market and credit risk as applicable. Amortization of the discounts are included in contribution revenue in the consolidated statement of activities. 10

12 3. Summary of Significant Accounting Policies (continued) Recognition of Revenue Grant revenue is recognized in amounts equal to expenses incurred. Upon termination, the unexpended cash funds received under the terms of the grant provisions revert to the grantor. Advances received in excess of expenditures incurred for grants in progress are reported as deferred revenue. Grant revenue received for the purchase of equipment is recorded as deferred revenue. The Corporation recognizes the revenue as the asset is depreciated over the useful life of the related asset. Third party revenues are derived from services provided under contracts with national social insurance programs and managed care organizations where the Corporation is reimbursed by an entity other than the beneficiary of the services provided. The revenue is recognized when it is earned. Social purpose ventures revenues are derived from programs designed to end the cycle of homelessness by preparing formerly homeless individuals to succeed in culinary and food preparation industries. Tuition revenue received in advance is recorded as deferred revenue. All revenue is recognized as it is earned. If a student withdraws during the first week, the tuition is reimbursed in full. The reimbursement rate gradually decreases until the end of the fifth week at which point the student is not entitled to any reimbursement. Rental income is recognized as rentals become due. Rental payments received in advance are deferred until earned. All leases between the Corporation and tenants are operating leases with terms between one and two years. Contract Disallowances The contractual agreements with various funding sources include provisions for claims and program audits in subsequent years. These audits may result in disallowance and repayment of costs previously reimbursed by the funding sources. Management estimates potential disallowances based on past experiences. Accordingly, management has established a contingency reserve to cover the cost of future disallowances, if any. At and 2015, the contingency reserve amounted to approximately $200,600 and $250,600, and is reflected in accounts payable and accrued expenses in the accompanying consolidated statement of financial position. Functional Allocation of Expenses The costs of providing various program and other activities have been summarized on a functional basis in the consolidated statement of activities and presented in the consolidated statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 11

13 3. Summary of Significant Accounting Policies (continued) Reclassification Certain reclassifications have been made to the 2015 information to conform to the 2016 presentation. Income Taxes Project Renewal, Inc. is exempt from federal income taxes pursuant to Section 501(c)(3) of the Internal Revenue Code and from state and local taxes under comparable laws. PRI HDFC, Bronx Boulevard HDFC, PRI Villa HDFC, Washington OMH GP and PRI Villa Avenue GP, Inc. are for-profit Corporations subject to Federal income tax and applicable state and local taxes. The Corporation recognizes the effect of income tax positions only when they are more likely than not to be sustained. Management has determined that the Corporation had no uncertain tax positions that would require financial statement recognition or disclosure. The Corporation is no longer subject to examinations by the applicable taxing jurisdictions for the periods prior to fiscal Prior Year Summarized Comparative Information The consolidated financial statements include certain prior year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with U.S. GAAP. Accordingly, such information should be read in conjunction with the Corporation s consolidated financial statements for the year ended June 30, 2015, from which the summarized information was derived. Subsequent Events Management has evaluated subsequent events for disclosure and/or recognition in the consolidated financial statements through the date that the consolidated financial statements were available to be issued, which is November 28, Concentration of Credit Risk The Corporation maintains its cash in bank deposit accounts with major financial institutions, which, at times, may exceed federally insured limits. The Corporation has not experienced any losses in such accounts and believes its cash balances are not exposed to any significant risk. 12

14 5. Restricted Cash The Corporation receives funding for PRI Villa Avenue, L.P. which is to be used for the inspection and contingency of the construction project (note 14). The funds are related to debt agreements and were deposited into an escrow account held by New York City Housing Development Corporation. At and 2015, the remaining balances were $432,898 and $991,827. In addition, at and 2015, the Corporation had $551,039 and $436,546 held in escrow accounts for real estate tax and insurance payments. 6. Assets Held for Others Assets held for others consist of custodial and other funds required to be maintained in separate accounts for specific purposes or future periods. The corresponding liability is reflected in accounts payable and accrued expenses. 7. Investments Investments in the consolidated statement of financial position are stated at fair value at and 2015 and consist of mutual funds based on Level 1 inputs for fair value. The cost of these investments was $10, Accounts and Grants Receivable Accounts and grants receivable at and 2015 consist of the following: Accounts receivable $ 1,544,523 $ 1,314,560 Grants Receivable Federal 1,273,150 1,508,092 New York State 918,436 1,008,339 New York City 8,064,941 3,844,774 Total 11,801,050 7,675,765 Less: Allowance for doubtful accounts (98,379) (98,379) Accounts and grants receivable, net $ 11,702,671 $ 7,577,386 Accounts receivable represent amounts due to the Corporation from other not-for-profit agencies and private companies for services provided by one of the Corporation s social purpose ventures. At and 2015, approximately 55% and 61% of grants receivable due from New York City were due from a single agency. 13

15 9. Pledges Receivable Pledges receivable at and 2015 consist of the following: Total pledges receivable $ 1,263,088 $ 1,047,086 Less: Allowance for doubtful accounts (34,000) (34,000) Pledges receivable, net $ 1,229,088 $ 1,013, Investments in Rental Property Investments in rental property at and 2015 consist of the following: Washington OMH GP 2016 PRI Villa Avenue GP Total Land and land improvements $ 1,235,040 $ 1,325,000 $ 2,560,040 Building and building improvements 21,943,813 13,679,438 35,623,251 Equipment - 432, ,627 Furniture and fixtures 548,600 78, ,983 Construction-in-progress - 4,038 4,038 Total 23,727,453 15,519,486 39,246,939 Accumulated depreciation (4,497,968) (499,628) (4,997,596) Investments in Rental Property, net $ 19,229,485 $ 15,019,858 $ 34,249,343 Washington OMH GP 2015 PRI Villa Avenue GP Total Land and land improvements $ 1,235,040 $ - $ 1,235,040 Building and building improvements 21,835,065-21,835,065 Furniture and fixtures 548, ,600 Total 23,618,705-23,618,705 Accumulated depreciation (3,531,459) - (3,531,459) Investments in Rental Property, net $ 20,087,246 $ - $ 20,087,246 Depreciation expense for the years ended and 2015 was $1,466,137 and $965,

16 11. Property and Equipment Property and equipment at and 2015 consist of the following: Land $ 4,666,250 $ 2,191,250 Buildings 14,509,676 14,509,676 Equipment 4,694,905 4,658,958 Automobiles 1,867,930 1,867,930 Building and leasehold improvements 1,831,927 1,799,597 Construction-in-progress 1,249,592 13,524,107 Total 28,820,280 38,551,518 Accumulated depreciation and amortization (13,894,042) (13,166,557) Property and Equipment, Net $ 14,926,238 $ 25,384,961 During fiscal year 2016, the Corporation reclassified $1,325,000 of land and $13,168,720 of construction-in-progress to investments in rental property due to the completion and occupancy of PRI Villa Avenue (note 14). Depreciation expense for the years ended and 2015 was $727,485 and $875, Related Party Transactions Not Disclosed Elsewhere Transactions with related entities are as follows: (a) During each of the years ended and 2015, the Corporation charged MBMC rental expense of $96,000 and $94,798 and a management fee of $100,000. (b) During each of the years ended and 2015, NSH charged the Corporation $447,457 for rental expense. 15

17 12. Related Party Transactions Not Disclosed Elsewhere (continued) Amounts due (to) from related parties at and 2015 are non-interest bearing, payable on demand and consist of the following: MBMC $ (276,879) $ (288,400) NSH (590,896) (587,586) MRG 791, ,358 St. Nicholas (889,087) (907,618) Total (965,208) (1,081,246) Allowance for doubtful accounts (645,895) (645,895) Total Related Party, Net $ (1,611,103) $ (1,727,141) Management considers these transactions to be conducted at arms length. 13. Mortgage Receivable and Enforcement Note Payable The Corporation is the sponsor of the Geffner House project, which is operated and owned by MRG. The Corporation has a $12,500,000 mortgage note receivable from MRG as a result of transferring land to the Geffner House property for use in the project. This mortgage receivable is subordinated to a $12,500,000 enforcement note held by the City of New York. The enforcement note may be forgiven if the Corporation operates certain social service programs at the Geffner House site during the term of the agreement. The enforcement note shall not bear interest and matures on December 30, Once the enforcement note is satisfied, the mortgage receivable shall be forgiven. 14. Loans Payable Loans payable consist of the following at June 30: Fletcher Street Project New York State Housing Finance Agency (HFA) $ 10,965,000 $ 10,965,000 New York State Homeless Housing and Assistance Corporation (HHAC) 4,238,094 4,238,094 Bronx Boulevard The Community Preservation Corporation 10,068,905 10,425,886 PRI Villa Avenue New York City Department of Housing Preservation and Development (New York City of HPD) 4,475,000 4,475,000 NYS Office of Temporary and Disability Assistance 3,231,500 3,231,500 Bedford Green House Corporation for Supportive Housing 4,311,406 - $ 37,289,905 $ 33,335,480 16

18 14. Loans Payable (continued) Fletcher Street Project Construction on the Fletcher Street Project is being financed using the proceeds provided to PRI HDFC of (1) a construction I permanent mortgage loan from the New York State Housing Finance Agency ("HFA") in the amount not to exceed $14,250,000 to be financed with funds from the proceeds of tax exempt Affordable Housing Revenue Bonds 2009 Series B Bonds, (2) a subordinate loan from HFA in the approximate principal amount of $200,000 (together with (1) the "HFA Loan"), (3) a building and project loan from New York State Homeless Housing and Assistance Corporation in the principal amount of $4,632,300 ("HHAC Loan"), and (4) an equity investment in the amount of $8,132,569 made in connection with the sale of Federal low income housing tax credits generated by the Project. As a condition of the HFA Loan, Washington Fletcher secured an irrevocable standby letter of credit from JP Morgan Chase Bank, N.A. Also as a condition of the HFA Loan, Washington Fletcher will be required to enter into an agreement with HFA that will regulate the rents and incomes of eligible occupants of the project for a period of at least 30 years. The construction loan portion of the financing was converted to permanent financing and the letter of credit from JP Morgan Chase Bank, N.A. for the project was released on October 12, The project is eligible to receive certain operating subsidies from Washington OMH GP for management and operation of the project and provide special services to tenants. In addition, the Corporation is eligible for debt service subsidies for payments on the HFA loan. As of and 2015, HFA advanced $10,965,000, of which $10,765,000 is outstanding on the construction/permanent mortgage loan and $200,000 is outstanding on the subordinate loan. The HFA loan bears interest of 2% per year and is payable on September 30, The HFA loan bears interest of 1% per year and has a maturity date of July 1, Total interest expense accrued at and 2015 for both loans was $1,028,013 and $810,713. As of and 2015 HHAC advanced $4,238,094 to the Corporation. The HHAC loan bears interest of 1% per year and is payable in September Total interest expense accrued at and 2015 was $284,039 and $241,658. Washington Fletcher has entered into a commitment with PRI HDFC to receive a loan of $759,205. The loan has a stated interest rate of 3.5% per annum with the entire principal balance and accrued interest due on September 30, No amounts have been advanced as of and

19 14. Loans Payable (continued) Bronx Boulevard Construction on the Bronx Boulevard project was financed by JP Morgan Chase Bank, N.A. and Contact Fund loans for $10,222,649 and $404,747, respectively. The interest rate is 2.75% per annum plus the adjusted LIBOR rate for JP Morgan Chase Bank, N.A. and 1.75% plus prime rate for Contact Fund. Both loans were to mature on May 3, The Corporation obtained a six-month extension for both loans, with a new maturity date of November 3, In October 2014, the Corporation refinanced its loans with JP Morgan Chase Bank, N.A. and Contact Fund with The Community Preservation Corporation. The new loan has a principal balance of $10,627,396 and matures on November 1, The loan has an interest rate of 4.15% per annum, and requires monthly payments of $77,230, of which $65,243 is for principal and interest and $11,987 is for insurance escrow and taxes. At and 2015, the outstanding loan balance was $10,068,905 and $10,425,886 and the escrow balance was $168,548 and $103,357. PRI Villa Avenue Construction on the PRI Villa Avenue project was financed by (1) New York City Department of Housing Preservation and Development (NYC HPD) in the amount of $4,475,000, (2) New York State Office of Temporary & Disability Assistance in the amount of $3,250,000, and (3) an equity investment in the amount of $8,344,280 made in connection with the sale of Federal low income housing tax credits generated by the project. As of and 2015, NYC HPD advanced $4,475,000 to the Corporation. When the conditions outlined in the Building and Project Loan Contract are met, the construction loan will be converted to a permanent mortgage with a maturity date sixty years from the date of the conversion. The loan is non-interest bearing until the conversion date, at which interest begins to accrue at a rate of 2.5% per annum through the maturity date. As of and 2015, there was no interest accrued on this loan. As of and 2015, New York State Office of Temporary & Disability Assistance advanced $3,231,500 to the Corporation. The loan will accrue interest at a rate of 4.5% per annum once the property is ready for occupancy, which commenced in October No payments of principal are due on the loan until maturity in November As of, the Corporation accrued interest of $318,643 of which $206,443 was capitalized. 18

20 14. Loans Payable (continued) Bedford Green House On July 30, 2015, the Corporation closed on the acquisition of two adjoining sites in the Bedford Park area of Bronx, New York: Minerva Place and Jerome Avenue (collectively Bedford Green House ). The acquisitions were financed by a Pre-development and Acquisition loan from the Corporation for Supportive Housing. Bedford Green House offers over 200 units of supportive and affordable housing for families and singles. Funding for the construction of Minerva Place totals $2,800,000 which accrues interest at 6% per annum and has a maturity date of the earlier of closing of construction financing or August 1, Funding for the construction of Jerome Avenue totals $2,500,000 which accrues interest at 6% per annum and has a maturity date of the earlier of closing of construction financing or August 1, Outstanding principal and accrued interest is due on their respective dates of maturity. At, the outstanding principal balance for Phase I Minerva Place and Phase II Jerome Avenue was $1,994,679 and $2,316,727. No interest was accrued for as of. Future loan amortization payments on the loans payable are as follows for the years ending June 30: 2017 $ 4,847, ,382, ,720, , ,143 Thereafter 26,478,910 $ 37,289,905 Principal and interest payments pertaining to outstanding loans payable are not cash payments made by the Corporation. Those payments are the responsibility of each government agency or corporation as the Corporation meets the obligations of the respective contract. 15. Line of Credit The Corporation has a $3,000,000 line of credit with a financial institution expiring in July 1, Interest payments on all borrowings are due on a monthly basis. Interest is charged at the financial institution's prime rate (3.50% at and 3.25% at June 30, 2015) plus 1%. The line of credit is collateralized by all property of the Corporation, MBMC and PRF. There were no outstanding borrowings during the years ended and

21 16. Temporarily Restricted Net Assets Temporarily restricted net assets were available for the following purposes at June 30, 2016 and 2015: Treatment and transitional housing $ 24,813 $ 25,775 Medical 938,605 1,151,726 Employment services 1,252, ,445 Permanent housing 35,112 3,950 $ 2,250,751 $ 2,079,896 Net assets were released from restrictions during the years ended and 2015 by incurring expenses satisfying the restricted purposes as follows: Treatment and transitional housing $ 17,312 $ 32,905 Medical 756, ,877 Employment services 812, ,269 Permanent housing 97, ,420 $ 1,683,310 $ 1,065, Social Purpose Ventures For the years ended and 2015, the Corporation s Culinary Arts Training Program received $362,563 and $578,657 from New York State Education Department. For the years ended and 2015, the Corporation s Culinary Arts Training Program II received $88,010 and $102,123 from New York State Education Department. 18. Pension Plan The Corporation has a defined contribution pension plan under Section 401(a) of the Internal Revenue Code. The Corporation may make discretionary contributions to the plan for eligible employees. There were no pension contributions or expense for the years ended and In addition, the Corporation has a defined contribution plan under Section 403(b) of the Internal Revenue Code. The Corporation does not make any matching contributions to this plan. 20

22 19. Commitments and Contingencies Lease Commitments The Corporation rents office space at 200 Varick Street, New York under a lease agreement expiring June 30, 2020, with an option to extend the lease for an additional five years. In September 2016, the Corporation entered into a lease agreement for a shelter at 249 Varet Street in Brooklyn, New York (note 21), which commenced on September 1, 2016 and expires on June 30, In addition, the Corporation leases apartments which are subleased to tenants in the supportive housing program. Rent and occupancy expense for the years ended and 2015 was $5,363,795 and $5,095,064. Minimum future lease payments under the lease agreements are payable as follows for the years ending June 30: Contingencies 2017 $ 5,088, ,025, ,716, ,688, ,781,000 $ 19,300,617 The Corporation is a defendant in several lawsuits that have arisen in the ordinary course of business. It is management's belief that any settlements that arise from these suits will be within the limits of the Corporation's insurance policies. Therefore, no provision has been made in the accompanying consolidated financial statements. Management has determined that a portion of its billing to the New York State Office of Medicaid may have been incorrect and overstated in fiscal years 2016 and prior. If found to be accurate, this overstatement may result in monies being returned to New York State. At and 2015, approximately $1,040,000 and $786,000 is the recorded balance of the liability due to New York State Office of Medicaid, and is included in accounts payable and accrued expenses. Additionally, at approximately $108,000 is recorded in accounts payable and accrued expenses to be returned to another provider as a result of incorrect billing during 2016 and prior. 21

23 20. Change in Non-Controlling Limited Partners Interests Non- Controlling Controlling Total Interest Interest Balance, June 30, 2014 $ 4,715,696 $ (364) $ 4,716,060 Net loss (1,148,159) (115) (1,148,044) Capital contributions 4,762,119-4,762,119 Balance, June 30, ,329,656 (479) 8,330,135 Net loss (1,715,238) (171) (1,715,067) Capital contributions 142, ,500 Balance, $ 6,756,918 $ (650) $ 6,757, Men s Shelter at 249 Varet Street In September 2016, the Corporation opened the men s shelter at 249 Varet Street in Brooklyn, NY. The facility is expected to house up to 140 men over the age of 55 years old. The facility is funded by the New York City Department of Homeless Services with a budget of $7,753,000. * * * * * 22

24 Supplementary Information

25 Consolidating Schedule of Financial Position Project PRI Washington Bronx PRI Villa PRI Villa Avenue Eliminating Renewal, Inc. HDFC OMH GP Boulevard HDFC HDFC GP Entries Total ASSETS Cash and cash equivalents $ 5,423,650 $ - $ 241,471 $ 1,350,780 $ 4,392 $ 35,736 $ - $ 7,056,029 Investments 51, ,703 Restricted cash , , , ,937 Accounts and grants receivables, net 12,130, (427,500) 11,702,671 Development fee receivable 2,300, (2,300,000) - Pledges receivable, net 1,229, ,229,088 Rent receivable, net , , ,877 Due from affiliates, net 1,249,766-1,856 3, (1,110,113) 145,759 Prepaid expenses 630, ,212 Tax credit monitoring fees, net , ,410-51,702 Security deposits and other assets, net 125, , ,904 Mortgage receivable 12,500,000 15,203, (15,203,094) 12,500,000 Assets held for others 135, ,771 Investments in rental property, net ,229, ,019,858-34,249,343 Deferred debt issuance costs, net , , ,552 Property and equipment, net 1,855, ,403,459 4,667, ,926,238 $ 37,631,427 $ 15,203,094 $ 20,504,431 $ 9,930,572 $ 4,672,474 $ 15,629,495 $ (19,040,707) $ 84,530,786 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 7,541,961 $ - $ 18,713 $ 70,000 $ - $ 55,402 $ - $ 7,686,076 Accrued payroll and related liabilities 2,114, ,114,767 Accrued interest - - 1,312, ,643-1,630,695 Construction payable , ,926 Development fee payable - - 2,300, ,500 (2,727,500) - Due to affiliates 970,355 1,856 1,344, , ,188 (1,110,113) 1,756,862 Deferred revenue 7,919, , ,251,203 Deferred developer's fee 2,300, ,300,000 Deferred rent 529,317-6, , ,807 Loans payable - 15,203,094 15,203,094 10,068,905 4,311,406 7,706,500 (15,203,094) 37,289,905 Enforcement note payable 12,500, ,500,000 Total Liabilities 33,875,990 15,204,950 20,185,224 10,470,518 4,672,482 9,191,784 (19,040,707) 74,560,241 Net Assets Unrestricted Operating 1,504,686 (1,856) (592) (539,946) (8) (58) - 962,226 Non-controlling limited partners' interest in consolidated affiliates , ,437,769-6,757,568 Total Unrestricted Net Assets 1,504,686 (1,856) 319,207 (539,946) (8) 6,437,711-7,719,794 Temporarily restricted 2,250, ,250,751 Total Net Assets 3,755,437 (1,856) 319,207 (539,946) (8) 6,437,711-9,970,545 $ 37,631,427 $ 15,203,094 $ 20,504,431 $ 9,930,572 $ 4,672,474 $ 15,629,495 $ (19,040,707) $ 84,530,786 See independent auditors' report 23

26 Consolidating Schedule of Activities Year Ended Project Renewal, Inc. Temporarily Total PRI Washington Bronx PRI Villa PRI Villa Avenue Eliminating Unrestricted Restricted PRI HDFC OMH GP Boulevard HDFC HDFC GP Entries Total REVENUE AND SUPPORT Grants $ 49,103,297 $ - $ 49,103,297 $ - $ 1,373,246 $ 964,948 $ - $ 632,511 $ (2,961,823) $ 49,112,179 Third party revenue 4,489,840-4,489, ,489,840 Social purpose ventures 6,186,667-6,186, ,186,667 Rental income 2,342,680-2,342, , ,918 (576,090) 2,652,167 Special events, net of direct benefit to donors of $194, , , ,376 Contributions 299,756 1,854,165 2,153, ,153,921 Developer's fee income 285, , ,000 Miscellaneous income 644, , , , ,249 Net assets released from restrictions 1,683,310 (1,683,310) Total Revenue and Support 65,981, ,855 66,152,475-2,048, , ,013,987 (3,537,913) 66,643,399 EXPENSES Program Services Outreach 491, , ,385 Treatment and transitional housing 35,333,165-35,333, ,287-1,596,139 (1,756,204) 36,046,387 Medical services 8,321,312-8,321, ,321,312 Employment services 7,908,829-7,908, ,908,829 Permanent housing 6,295,591-6,295,591-3,182, (1,781,709) 7,695,903 Total Program Services 58,350,282-58,350,282-3,182, ,287-1,596,139 (3,537,913) 60,463,816 Supporting Services Management and general 7,195,021-7,195, ,195,157 Fundraising 600, , ,746 Total Supporting Services 7,795,767-7,795, ,795,903 Total Expenses 66,146,049-66,146, ,182, ,287-1,596,139 (3,537,913) 68,259,719 Increase (Decrease) in Net Assets Before Capital Contributions from Non-Controlling Limited Partners (164,429) 170,855 6,426 (136) (1,133,086) 92, (582,152) - (1,616,320) Capital contributions from non-controlling limited partners , ,500 Change in Net Assets (164,429) 170,855 6,426 (136) (1,133,086) 92, (439,652) - (1,473,820) NET ASSETS Beginning of the year 1,669,115 2,079,896 3,749,011 (1,720) 1,452,293 (632,502) (80) 6,877,363-11,444,365 End of the year $ 1,504,686 $ 2,250,751 $ 3,755,437 $ (1,856) $ 319,207 $ (539,946) $ (8) $ 6,437,711 $ - $ 9,970,545 See independent auditors' report 24