THE GENESIS PROJECT, INC. FINANCIAL STATEMENTS AND SUPPLEMENTAL REPORTS. June 30, 2015 and 2014

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1 FINANCIAL STATEMENTS AND SUPPLEMENTAL REPORTS June 30, 2015 and 2014

2 TABLE OF CONTENTS Page Independent Auditor's Report 1 Statements of Financial Position 3 Statement of Activities Statement of Activities Statement of Functional Expenses Statement of Functional Expenses Statements of Cash Flows 8 Notes to Financial Statements 9 Supplementary Information Schedule of Budget vs. Actual Expenses 15 Schedule of Financial Awards 16 Schedule of Revenues and Expenses by Funding Source and Contract 17 Reports Required by Governmental Auditing Standards Independent Auditor's Report on Internal Control over Financial Reporting and on Compliance and other Matters Based on our Audit of Financial Statements Performed in Accordance with Government Auditing Standards 18

3 INDEPENDENT AUDITOR'S REPORT To the Board of Directors of The Genesis Project, Inc. We have audited the accompanying financial statements of The Genesis Project, Inc. (a nonprofit organization), which comprise the statements of financial position as of June 30, 2015 and 2014, 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 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 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 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, 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Genesis Project, Inc. as of June 30, 2015 and 2014, 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.

4 Other Matters Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplemental information as listed in the table of contents is presented for purposes of additional analysis and is not a required part of the basic 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the basic financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 basic financial statements taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 22, 2015, on our consideration of the organization s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering The Genesis Project, Inc. s internal control over financial reporting and compliance. Edmond, Oklahoma September 22, 2015

5 STATEMENTS OF FINANCIAL POSITION June 30, 2015 and 2014 ASSETS Current assets: Cash $ 182,682 $ 247,525 Certificate of deposit 94,680 94,680 Government claims receivable 83,529 76,319 Other receivables 4,945 4,715 Investment in community foundation 23,672 24,023 Total current assets 389, ,262 Property and equipment: Buildings 538, ,061 Furniture and equipment 85,156 68,219 Vehicles 51,964 51,964 Land 50,000 50,000 Less: accumulated depreciation (601,968) (591,689) Property and equipment, net 123,170 56,555 TOTAL ASSETS $ 512,678 $ 503,817 LIABILITIES AND NET ASSETS Accounts payable $ 11,161 $ 9,623 Accrued expenses 58,839 58,839 Total liabilities 70,000 68,462 Net assets: Unrestricted 302, ,087 Temporarily restricted 116, ,245 Permanently restricted 23,672 24,023 Total net assets 442, ,355 TOTAL LIABILITIES AND NET ASSETS $ 512,678 $ 503,817 The accompanying notes are an integral part of these financial statements. 3

6 STATEMENT OF ACTIVITIES For the year ended June 30, 2015 Temporarily Permanently Unrestricted Restricted Restricted Totals Support and revenue: Donations $ 90,433 $ 45,045 $ - $ 135,478 State contracts: DHS Funds- Contract E 990, ,020 School Lunch Program 27, ,998 Investment income 6, (351) 6,229 Net assets released from restriction 124,795 (124,795) - - Total support and revenues 1,239,495 (79,419) (351) 1,159,725 Expenses: Program services 967, ,781 Management and general 140, ,197 Fundraising 44, ,424 Total expenses 1,152, ,152,402 Increase (decrease) in net assets 87,093 (79,419) (351) 7,323 Net assets at beginning of year 215, ,245 24, ,355 Net assets at end of year $ 302,180 $ 116,826 $ 23,672 $ 442,678 The accompanying notes are an integral part of these financial statements. 4

7 STATEMENT OF ACTIVITIES For the year ended June 30, 2014 Temporarily Permanently Unrestricted Restricted Restricted Totals Support and revenue: Donations $ 64,597 $ 167,005 $ - $ 231,602 State contracts: DHS Funds- Contract E 900, ,909 School Lunch Program 26, ,170 Investment income 5,523-1,940 7,463 Net assets released from restriction 6,455 (6,455) - - Total support and revenues 1,003, ,550 1,940 1,166,144 Expenses: Program services 886, ,827 Management and general 87, ,289 Fundraising 56, ,751 Total expenses 1,030, ,030,867 Increase (decrease) in net assets (27,213) 160,550 1, ,277 Net assets at beginning of year 242,300 35,695 22, ,078 Net assets at end of year $ 215,087 $ 196,245 $ 24,023 $ 435,355 The accompanying notes are an integral part of these financial statements. 5

8 STATEMENT OF FUNCTIONAL EXPENSES For the year ended June 30, 2015 Program Management Services & General Fundraising Totals Salary and benefits $ 796,319 $ 51,922 $ 39,860 $ 888,101 Advertising and promotion 2,727 3, ,433 Cafeteria 31,533 3,105-34,638 Staff cafeteria costs 14, ,839 Insurance 20,823 16,718-37,541 Maintenance 31,929 25,801-57,730 Professional services 2,480 8,428 1,900 12,808 Staff training 1, ,743 Supplies 18,465 15,758 1,802 36,025 Utilities 29,194 10,276-39,470 Vehicle expense 4,921 3,133-8,054 Depreciation 10, ,279 Other 2,529 1, ,741 Total Functional Expenses $ 967,781 $ 140,197 $ 44,424 $ 1,152,402 The accompanying notes are an integral part of these financial statements. 6

9 STATEMENT OF FUNCTIONAL EXPENSES For the year ended June 30, 2014 Program Management Services & General Fundraising Totals Salary and benefits $ 728,334 $ 53,436 $ 38,169 $ 819,939 Advertising and promotion 4, ,532 Cafeteria 26, ,335 Staff cafeteria costs 12, ,392 Insurance 29, ,036 Maintenance 20, ,122 Professional services 9, ,331 Staff training 1, ,155 Supplies 30, ,582 49,518 Taxes and fees - 5,822-5,822 Utilities - 27,678-27,678 Vehicle expense 7, ,832 Depreciation 15, ,045 Other 2, ,130 Total Functional Expenses $ 886,827 $ 87,289 $ 56,751 $ 1,030,867 The accompanying notes are an integral part of these financial statements. 7

10 STATEMENTS OF CASH FLOWS For the years ended June 30, 2015 and Cash flows from operating activities: Change in net position $ 7,323 $ 135,277 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 10,279 15,045 Net (gain) loss on investments (812) (3,051) (Increase) decrease in government claims receivable (7,210) 2,452 (Increase) decrease in other receivable (230) (185) Increase (decrease) in accounts payable 1, Increase (decrease) in accrued expenses - (611) Net cash provided (used) by operating activities 10, ,764 Cash flows from investing activities: Purchase of certificate of deposit - (173) Capital expenditures (76,894) - Distributions from Oklahoma City Community Foundation 1,163 1,111 Net cash provided (used) by investing activities (75,731) 938 Net increase (decrease) in cash and equivalents (64,843) 150,702 Cash at beginning of year 247,525 96,823 Cash at end of year $ 182,682 $ 247,525 The accompanying notes are an integral part of these financial statements. 8

11 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Summary of Significant Accounting Policies Organization The Genesis Project, Inc. ("Genesis"), located in central Oklahoma, was incorporated September 10, 1980, under the laws of the State of Oklahoma as a not-for-profit corporation. Genesis works in connection with the Oklahoma County Juvenile Courts and the Oklahoma Department of Human Services (Child Welfare) to provide medical, psychological and residential care for battered children. Funding and support for Genesis is derived from contributions, donations of supplies and services from the public and local business community, and government funding. Financial Statement Presentation These financial statements have been prepared in conformity with generally accepted accounting principles and are presented in accordance with FASB Accounting Standards Codification Subtopic , Not-For-Profit Entities Presentation of Financial Statements. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of accounting estimates by management. Accordingly, actual results could differ from those estimates. Property and Equipment Property and equipment is stated at cost, less accumulated depreciation. The capitalization threshold is $500. Depreciation is charged to operating expense and is computed using the straight-line method over the estimated useful lives of the assets, which range from three to thirty-one years. Maintenance and repairs are charged to operations when incurred and improvements are capitalized. When assets are retired or otherwise disposed of, the cost and related accumulated depreciation are removed from the respective accounts and the resulting gain or loss is reflected in operations. Income Taxes Genesis is exempt from federal taxation pursuant to Section 501(c)(3) of the Internal Revenue Code and therefore, no provision for income taxes has been made. However, limited events or interpretations of the Internal Revenue Code could result in contingent income tax obligations to Genesis. Genesis follows accounting guidance related to the accounting for uncertainty in income tax reporting, which provides criteria for the recognition, measurement, presentation, and disclosure of uncertain tax positions. At June 30, 2015 and 2014, no uncertain tax positions taken or expected to be taken have been identified by Genesis. As of June 30, 2015, the tax years ended June 30, 2012 through June 30, 2014 are open to examination by taxing authorities. Accrued Compensated Absences Employees of Genesis are entitled to paid vacation depending on length of service and other factors. At June 30, 2015 and 2014, compensated absences of $29,780 have been accrued by Genesis. 9

12 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Summary of Significant Accounting Policies (Con't) Investments Genesis reports investments at quoted market values. Gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets. As discussed in Note 2, investments consist entirely of amounts held by the Oklahoma City Community Foundation. Subsequent Events Genesis has evaluated the effects of all subsequent events from June 30, 2015 through September 22, 2015, the date the financial statements were available to be issued. 2. Investment in Community Foundation The Oklahoma City Community Foundation (the "Foundation") has assets whose earnings have been designated by the original donor to benefit specific charitable organizations. These donations have been set up as designated funds by the Foundation in the charitable organization's name. Genesis has such a fund at the Foundation. Genesis follows the provisions in Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) , Transfers of Assets to a Not-for-Profit Organization or Charitable Trust That Raises or Holds Contributions for Others. In accordance with FASB ASC , the portions of the funds contributed by Genesis and held by the Foundation are considered reciprocal transfers, because Genesis is also a beneficiary of the funds. As a result, Genesis has recorded these funds as an investment in its June 30, 2015 and 2014 statement of financial position totaling $23,672 and $24,023 respectively. The Foundation has variance power assuring donors that if the charitable purpose of their contribution becomes impractical or impossible, the distributions will be directed to similar purposes in the community. Therefore, the portion of the funds held by the Foundation on behalf of Genesis contributed by unrelated third party donors is included in the net assets of the Foundation and is not reflected in the accompanying financial statements. 10

13 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Investment in Community Foundation (Con't) Genesis' activity for the years ended June 30, 2015 and 2014 is as follows: Reciprocal Third Party Balances Balances Totals Balance at June 30, 2013 $ 22,083 $ 71,780 $ 93,863 Distributions (1,111) (3,604) (4,715) Gains (losses) on investments and third party contributions 3,051 10,125 13,176 Balance at June 30, ,023 78, ,324 Distributions (1,163) (3,782) (4,945) Gains (losses) on investments and third party contributions 812 2,645 3,457 Balance at June 30, 2015 $ 23,672 $ 77,164 $ 100, Temporarily Restricted Net Assets Temporarily restricted net assets are available to fund capital projects. 4. Permanently Restricted Net Assets Permanently restricted net assets consist of funds contributed by Genesis and held by the Foundation. Net assets released from restriction consist of distributions from the Foundation to Genesis, calculated using five percent of the average market value over the previous twelve quarters. 11

14 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and Fair Value Measurements Genesis' investments are reported at fair value in the accompanying statements of financial position. Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy under FASB ASC are as follows: Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the organization has the ability to access. Level 2: Inputs to the valuation methodology included quoted market prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted markets prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The beneficial interest in assets held at the Foundation of $23,672 and $24,023 as of June 30, 2015 and 2014 reported as investment in community foundation in the accompanying statements of financial position, has been valued, as a practical expedient, at the fair value of Genesis' share of the Foundation's investment pool as of the measurement date. The Foundation values securities and other financial instruments on a fair value basis of accounting. The estimated fair values of certain investments of the Foundation, which includes private placements and other securities for which prices are not readily available, are determined by management of the Foundation and may not reflect amounts that could be realized upon immediate sale, nor amounts that ultimately may be realized and are considered level 3 measurements. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments. The beneficial interest in assets held at the Foundation is not redeemable by Genesis as described in Note 2. 12

15 NOTES TO FINANCIAL STATEMENTS June 30, 2015 and 2014 Financial instruments classified as level 3 in the fair value hierarchy represent Genesis' investments in financial instruments in which management has used at least one significant unobservable input in the valuation model. A reconciliation of the activities for these level 3 financial instruments is included in Note Pension Plan Effective January 1, 2010, Genesis began sponsoring a Savings Incentive March Plan for Employees. Under terms of the plan, employees may voluntarily contribute to the plan on a tax deferred basis up to Internal Service Revenue limitations. Genesis matches employee deferrals up to two percent of eligible compensation. Contributions totaling approximately $5,500 and $6,500 were made by Genesis for the years ended June 30, 2015 and 2014, respectively. Participating employees have a non-forfeitable interest at all times in their contributions and Genesis' matching contributions vest immediately. 7. Contingencies Genesis receives a substantial portion of its total revenues from contracts with the State of Oklahoma. These contracts are subject to audit by the State or its representatives. Such audits could lead to requests for reimbursement to the State for expenditures disallowed, the amount of which, if any cannot be determined at this time. Additionally, future funding could be affected by government cutbacks. 13

16 SUPPLEMENTARY INFORMATION 14

17 SCHEDULE OF BUDGET VS. ACTUAL EXPENSES For the year ended June 30, 2015 Favorable Budget Actual (Unfavorable) Salary and benefits $ 854,550 $ 888,101 $ (33,551) Advertising and promotion 3,500 6,433 (2,933) Cafeteria 38,450 49,477 (11,027) Insurance 27,056 37,541 (10,485) Maintenance 35,000 57,730 (22,730) Professional services 8,000 12,808 (4,808) Staff training 5,900 1,743 4,157 Supplies 57,000 36,025 20,975 Utilities 7,000 39,470 (32,470) Vehicle expense 10,000 8,054 1,946 Depreciation - 10,279 (10,279) Other 2,750 4,741 (1,991) Total $ 1,049,206 $ 1,152,402 $ (103,196) 15

18 SCHEDULE OF FINANCIAL AWARDS For the Year Ended June 30, 2015 Funding Program Contract Contract Contract Agency Title CFDA # Number Period Amount Revenues Expenses U.S. Dept. of Agriculture School Nutrition $ 27,998 $ 27,998 $ 27,998 (Passed through State of Oklahoma - Department of Human Services) Total U.S. Dept. of Agriculture 27,998 27,998 27,998 State of Oklahoma Department of Human Services Level E Contract Care N/A , , ,020 Total State of Oklahoma 990, , ,020 Total Financial Awards $ 1,018,018 $ 1,018,018 $ 1,018,018 16

19 SCHEDULE OF REVENUES AND EXPENSES BY FUNDING SOURCE AND CONTRACT For the year ended June 30, 2015 U.S. Department State of of Agriculture Oklahoma School Level E Private Nutrition Contract Care Funds Totals Revenues: Federal and state contracts $ 27,998 $ 990,020 $ - $ 1,018,018 Donations and other , ,707 Total revenues 27, , ,707 1,159,725 Expenses: Program services 26, , ,781 Management and general 1,382 48,855 89, ,197 Fundraising ,424 44,424 Total expenses 27, , ,384 1,152,402 Excess of revenues over expenses $ - $ - $ 7,323 $ 7,323 17

20 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors of The Genesis Project, Inc. We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of The Genesis Project, Inc. (Genesis) (a nonprofit organization), which comprise the statement of financial position as of June 30, 2015, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated September 22, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Genesis internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Genesis internal control. Accordingly, we do not express an opinion on the effectiveness of Genesis internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Genesis financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards.

21 Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Edmond, Oklahoma September 22, 201