LIFECENTER NORTHWEST. Financial Statements. For the Years Ended December 31, 2013 and 2012

Transcription

1 Financial Statements

2 Table of Contents Independent Auditors Report 1-2 Financial Statements: Statements of Financial Position 3 Statements of Activities and Changes in Net Assets 4 Statements of Cash Flows 5 Notes to Financial Statements 6-10 Page

3 10900 NE 4th Street Suite 1700 Bellevue WA tel fax clarknuber.com Independent Auditors' Report Certified Public Accountants and Consultants Board of Directors LifeCenter Northwest Bellevue, Washington We have audited the accompanying financial statements of LifeCenter Northwest (the Organization), which comprise the statements of financial position as of December 31, 2013 and 2012, and the related statements of activities and changes in net assets and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 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.

4 Opinion Certified Public In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of December 31, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Accountants and Consultants Certified Public Accountants March 26,

5 Statements of Financial Position December 31, 2013 and 2012 Assets Current Assets: Cash and cash equivalents $ 4,819,404 $ 3,760,746 Accounts receivable 1,948,887 2,654,202 Short-term investments 201,373 Prepaid expenses 74,873 66,231 Total Current Assets 7,044,537 6,481,179 Property and Equipment: Furniture and equipment 950, ,065 Leasehold improvements 588, ,863 1,538,898 1,382,928 Accumulated depreciation and amortization (1,127,853) (961,875) Total Property and Equipment, Net 411, ,053 Long-term investments 801,997 Other long-term assets 136,700 91,270 Total Assets $ 8,394,279 $ 6,993,502 Liabilities and Net Assets Current Liabilities: Accounts payable $ 1,150,769 $ 1,473,618 Accrued medical liabilities 359, ,846 Accrued salaries and related benefits 1,014, ,668 Deferred rent, current portion 54,387 41,775 Medicare payable, current portion 1,604,508 1,321,688 Total Current Liabilities 4,183,668 4,433,595 Medicare payable, net of current portion 356, ,934 Deferred rent, net of current portion 5,583 59,972 Other liabilities 98,239 52,809 Total Liabilities 4,644,290 4,860,310 Net Assets: Unrestricted 3,749,989 2,133,192 Total Net Assets 3,749,989 2,133,192 Total Liabilities and Net Assets $ 8,394,279 $ 6,993,502 See accompanying notes

6 Statements of Activities and Changes in Net Assets Unrestricted Activities Revenue and Support: Procurement revenue $ 22,900,683 $ 21,685,108 Due to Medicare (1,015,285) (655,000) Import revenue 1,029,500 1,491,000 Contributions 317, ,613 Research and other revenue 104, ,911 Total Revenue and Support 23,337,288 22,924,632 Expenses: Procurement services 17,851,629 17,029,342 Public education 491, ,265 Total program services 18,342,740 17,469,607 Management and general 2,920,746 2,733,813 Total Expenses 21,263,486 20,203,420 Change in Net Assets Before Other Changes 2,073,802 2,721,212 Other Changes in Net Assets: Adjustment to prior year Medicare revenue realized (457,005) (302,000) Total Change in Net Assets 1,616,797 2,419,212 Net assets (deficit), beginning of year 2,133,192 (286,020) Net Assets, End of Year $ 3,749,989 $ 2,133,192 See accompanying notes

7 Statements of Cash Flows Cash Flows from Operating Activities: Change in net assets $ 1,616,797 $ 2,419,212 Adjustments to reconcile change in net assets to net cash provided by operating activities- Depreciation and amortization 198, ,821 Gain on disposal of assets (11,516) (13,744) Changes in operating assets and liabilities: Accounts receivable 705,315 (711,408) Prepaid expenses and other long-term assets (54,072) (40,205) Accounts payable, accrued liabilities, and other liabilities (499,929) 314,415 Medicare payable 325, ,934 Related party notes payable - (105,026) Deferred rent (41,777) (29,174) Net Cash Provided by Operating Activities 2,238,585 2,544,825 Cash Flows from Investing Activities: Purchase of property and equipment (176,557) (170,226) Purchase of investments (1,003,370) - Net Cash Used in Investing Activities (1,179,927) (170,226) Net Change in Cash and Cash Equivalents 1,058,658 2,374,599 Cash and cash equivalents balance, beginning of year 3,760,746 1,386,147 Cash and Cash Equivalents Balance, End of Year $ 4,819,404 $ 3,760,746 See accompanying notes

8 Notes to Financial Statements Note 1 - Organization and Significant Accounting Policies Organization - LifeCenter Northwest (the Organization), a nonprofit corporation, is the certified organ procurement organization (OPO) for Washington, Montana, Alaska, and Northern Idaho that began operations January 1, It is the mission of the Organization to provide the bridge between the loss of life and the gift of life through organ and tissue donation and transplantation. The Organization is dedicated to promoting organ and tissue donations to benefit the greatest number of people through transplantation. Basis of Presentation - Net assets, revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the Organization and changes therein are classified and reported as follows: Unrestricted Net Assets - Net assets that are not subject to donor-imposed stipulations. Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that may or will be met either by actions of the Organization and/or the passage of time. As of December 31, 2013 and 2012, the Organization had no temporarily restricted net assets. Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations that they will be maintained permanently by the Organization. Generally the donors of these assets permit the use of all or part of the income earned on related investments for general or specific purposes. As of December 31, 2013 and 2012, the Organization had no permanently restricted net assets. Contributions with donor-imposed restrictions that are met in the same year as received are reported as revenues within unrestricted net assets. Cash and Cash Equivalents - The Organization defines cash and cash equivalents to include demand deposits, savings accounts and investments with an original maturity of three months or less, excluding assets whose use is limited. The Organization maintains its cash and cash equivalent accounts at financial institutions in amounts, which at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts and management believes it is not exposed to any significant credit risk on cash deposits. Accounts Receivable and Revenue - Accounts receivable and revenue are reported at the estimated net realizable amounts from third-party payers for services rendered; there is no interest on past due accounts. There was no allowance for uncollectible amounts at December 31, 2013 and The Organization has established credit policies and, historically, the losses related to customer nonpayment have been very low as a percentage of revenues. Management regularly monitors its accounts receivable and establishes an allowance for those deemed uncollectible as needed. Approximately 66% of the accounts receivable balance at December 31, 2013, is from four customers. Approximately 63% of the accounts receivable balance at December 31, 2012, is from three customers. Additionally, approximately 62% and 59% of procurement revenues was from three customers for the years ended December 31, 2013 and 2012, respectively

9 Notes to Financial Statements Note 1 - Continued Investments - Investments consist of certificates of deposits ranging in terms of one to five years and are reported at cost plus accrued interest, which approximates fair value. Certificates of deposit that will mature within one year are classified as short-term investments and all other certificates of deposit are classified as long-term investments. Medicare Payable - Medicare payables are reported at the estimated net realizable value based on cost reports filed and past experience with the Medicare Administration and are classified as current or noncurrent based on management s best estimate of when funds will be received or paid. Medicare revenue is audited approximately one to three years after year-end by a Medicare fiscal intermediary, which normally results in adjustments to revenues previously recorded. The adjustments are recorded at the time that such amounts can first be reasonably determined, normally upon notification by Medicare. Laws and regulations governing the Medicare program are extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility that recorded estimates could materially change. Property and Equipment - Furniture and equipment, and leasehold improvements are stated at cost. The Organization capitalizes all fixed assets with a cost greater than $5,000. Furniture and equipment are depreciated using the straight-line method over estimated useful lives of three to twenty years. Leasehold improvements are amortized using the straight-line method over the shorter of the useful life or the term of the lease, three to ten years. Depreciation and amortization expense during 2013 and 2012, totaled $198,081 and $150,821, respectively. Deferred Rent - Deferred rent consists of the liability for office rent due to the cumulative difference between the total lease payments through December 31, 2013, based on the terms of the lease agreement and what the expense would be based on a straight-line basis over the life of the lease. See Note 6 for a schedule of future required lease payments. Procurement and Import Revenue - Procurement and import revenue consists of fees charged to medical facilities and other OPOs for procuring organs used in transplantation and tissue processing. The revenue is recognized after the procurement services have been completed. Contributions - The Organization records contributions according to accounting principles generally accepted in the United States of America (U.S. GAAP) for contributions received and contributions made. Accordingly, contributions including unconditional promises to give, are recorded in the period made. All contributions are available for unrestricted use unless specifically restricted by the donor. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Unconditional promises to give due in the next year are recorded at their net realizable value. Unconditional promises to give due in subsequent years are reported at the present value of their net realizable value, using risk-adjusted interest rates applicable to the years in which the promises are to be received. Federal Income Taxes - The IRS has determined the Organization is exempt from federal income taxes under provision of Section 501(a) of the Internal Revenue Code as an entity described in Section 501(c)(3) and not as a private foundation. The Organization files income tax returns with the U.S. government and is subject to income tax examinations for the current year and certain prior years based on the applicable laws and regulations

10 Notes to Financial Statements Note 1 - Continued Use of Estimates - The preparation of financial statements in conformity 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Accrued medical liabilities totaling $359,124 and $817,846 as of December 31, 2013 and 2012, respectively, have been recorded based on management's estimates of actual costs incurred for which invoices had not been received. While costs based on actual vendor invoices may differ from the estimates, management believes that any differences would not have a material impact on the Organization s financial position. Due to uncertainties in the estimation process, however, it is at least reasonably possible that management's estimate of accrued medical liabilities will change during the following year. That amount, if any, cannot be estimated. The Medicare payable discussed earlier in Note 1 is also a significant estimate. Functional Allocation of Expenses - The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of activities and changes in net assets. Accordingly, certain costs have been allocated between the program and supporting services benefited. Procurement services represents the coordination of the entire organ and tissue recovery process, including assisting with the placement of organs, evaluating donors, working with potential donor families and donor hospitals, arranging for transportation of surgical teams, arranging for transportation of recovered tissue to a nationally recognized tissue bank and coordinating hospital facilities during organ recovery and placement. Public education represents costs incurred to expand public awareness of organ and tissue donation and increase the number of organ and tissue donors. Management and general includes the functions necessary to maintain an equitable employment program, ensure an adequate working environment, provide coordination and articulation of the Organization s program strategy, maintain proper administrative functioning of the Governing Board, and manage the financial and budgetary responsibilities of the Organization. Reclassifications - Certain accounts in the 2012 financial statements have been reclassified for comparative purposes to conform to the presentation in the 2013 financial statements. The reclassifications have no effect on previously reported total assets, liabilities, net assets, or changes in net assets. Subsequent Events - The Organization has evaluated subsequent events through March 26, 2014, the date on which the financial statements were available to be issued

11 Notes to Financial Statements Note 2 - Fair Value Measurements The framework for measuring fair value is based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The framework uses a three-level valuation hierarchy based on observable and non-observable inputs. Observable inputs consist of data obtained from independent sources. Non-observable inputs reflect market assumptions. These two types of inputs are used to create the fair value hierarchy, giving preference to observable inputs. Financial assets and liabilities classified as Level 1 have fair values based on unadjusted quoted market prices for identical instruments in active markets. Financial assets and liabilities classified as Level 2 have fair values based on quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in inactive markets, and model-derived valuations whose inputs are observable. Financial assets and liabilities classified as Level 3 have fair values based on value drivers that are unobservable. Following is a description of the valuation methodologies used for assets measured at fair value. Certificates of Deposit - Valued at cost plus accrued interest, which approximates fair value (Level 2 inputs). The investments at December 31, 2013, were valued at fair value using Level 2 inputs. Note 3 - Medicare Payable Current Liability: Due to Medicare - current year cost reports $ 1,015,285 $ 655,000 Due to Medicare - prior year cost reports $ 589,223 $ 666,688 Noncurrent Liability: Due to Medicare - allowance for 2012 cost report $ 356,800 $ - Due to Medicare - allowance for 2011 cost report $ - $ 313,934 The current liability of $1,015,285 as of December 31, 2013, represents the estimated amount due to Medicare based on the 2013 cost report, anticipated to be filed in May The current liability of $589,223 as of December 31, 2013, relates to the final settlement of the 2011 cost report. At December 31, 2012, the Organization had a noncurrent liability related to the 2011 cost report of $313,934, which represented its estimate of the liability at that time. The current liability of $655,000 as of December 31, 2012, represented the estimated amount due to Medicare based on the 2012 cost report, which was filed in May The actual amount paid for the 2012 cost report was $483,211. The remaining amount of $356,800 is recorded as a noncurrent liability as of December 31, 2013, which represents management s best estimate of the potential remaining liability when an audit of the 2012 cost report is completed. As of December 31, 2013, no audit of the 2012 cost report had been performed

12 Notes to Financial Statements Note 4 - Bank Debt There were no bank borrowings at December 31, 2013 or Note 5 - Qualified Employee Benefit Plan The Organization sponsors a 403(b) qualified retirement benefit plan (the Plan). All employees may make elective deferrals under the Plan. After completing one year of service, employees are eligible for employer matching contributions in amounts determined by the Board of Directors. The Organization contributed $337,286 and $279,371 to the Plan during the years ended December 31, 2013 and 2012, respectively. The Organization also maintains a nonqualified deferred compensation plan covered under Section 457(b) of the Internal Revenue Code. Only employees specifically designated by the Governing Board are eligible. The maximum salary deferral under the 457(b) plan for the year ended December 31, 2013 and 2012, was $17,500 and $17,000, respectively. There are no matching provisions. The nonqualified deferred compensation plan is administered by the Organization. As of December 31, 2013 and 2012, there were two participants in the 457(b) plan. Total assets in the plan were $98,239 and $52,809 as of December 31, 2013 and 2012, respectively, which has been included in other long-term assets with an offsetting amount in other liabilities. Assets in the plan are held by the Organization on a nontrust basis and are subject to the claims of its creditors. Note 6 - Commitments and Contingencies At December 31, 2013, the Organization had certain noncancelable operating leases for office space and a surgical recovery suite, which expire at various dates through June Rental expenses for these leases totaled $525,528 and $532,252 for the years ended December 31, 2013 and 2012, respectively. Future minimum lease payments under these leases, are as follows: For the Year Ending December 31, 2014 $ 382, , ,506 $ 477,477 The Organization has elected to be self-insured for unemployment compensation. The costs of claims under this program are expensed as claims arise. Management has not accrued a provision for incurred-but-not-reported claims as it has been deemed to not be material. In the normal course of business, the Organization is sometimes involved in litigation, including matters that existed at December 31, 2012, which were resolved in At December 31, 2013, management is not aware of any such matters