YOUTH LIFE FOUNDATION OF TENNESSEE, INC. FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT YEARS ENDED DECEMBER 31, 2015 AND 2014

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1 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT

2 FINANCIAL STATEMENTS AND INDEPENDENT AUDITORS REPORT TABLE OF CONTENTS PAGE INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS Statements of Financial Position 2 Statements of Activities and Changes in Net Assets 3 Statements of Functional Expenses 4-5 Statements of Cash Flows 6 Notes to Financial Statements 7-10

3 To the Board of Directors Youth Life Foundation of Tennessee, Inc. INDEPENDENT AUDITORS REPORT Report on the Financial Statements We have audited the accompanying financial statements of Youth Life Foundation of Tennessee, Inc. (a Tennessee not-for-profit corporation, the Organization ), which comprise the statements of financial position as of December 31, 2015 and 2014, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended, and the related notes to the financial statements, (collectively, 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 audit to obtain reasonable assurance about whether the financial statements are free of 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 Organization 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 Organization 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 Youth Life Foundation of Tennessee, Inc. as of December 31, 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. November 5,

4 STATEMENTS OF FINANCIAL POSITION DECEMBER 31, 2015 AND 2014 ASSETS Current assets Cash $ 14,201 $ 30,876 Grants receivable - 38,638 Prepaid expenses In-kind lease, current 24,640 24,640 Total current assets 38,841 95,054 In-kind lease, long term 98, ,200 Property and equipment, net 28,105 41,602 TOTAL ASSETS $ 165,506 $ 259,856 LIABILITIES AND NET ASSETS Current liabilities Accounts payable and accrued expenses $ 22,418 $ 24,071 Total current liabilities 22,418 24,071 Net Assets Unrestricted 2,130 50,445 Temporarily restricted 140, ,340 Total Net Assets 143, ,785 TOTAL LIABILITIES AND NET ASSETS $ 165,506 $ 259,856 The accompanying notes are an integral part of these financial statements. -2-

5 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS Changes in Unrestricted Net Assets Support and Revenues Grants and corporate contributions $ 80,093 $ 126,638 Church contributions 40,780 61,250 In-kind facility contributions 36,400 47,100 Special events (net of direct benefits to donors of $1,500) 29,550 - Individual contributions 19,010 18,369 Other income Summer camp fees Interest income Total Unrestricted Support and Revenues 206, ,260 Net assets released from restrictions 69, ,171 Total Unrestricted Support, Revenues and Reclassifications 276, ,431 Functional Expenses Program services 216, ,807 Supporting services Management and general 99,835 80,566 Fundraising 9,044 10,623 Total Functional Expenses 325, ,996 (Decrease) increase in unrestricted net assets (48,315) 5,435 Changes in Temporarily Restricted Net Assets Grants and corporate contributions 25,600 75,000 Net assets released from restrictions (69,982) (125,171) Decrease in temporarily restricted net assets (44,382) (50,171) DECREASE IN NET ASSETS (92,697) (44,736) NET ASSETS - BEGINNING OF YEAR 235, ,521 NET ASSETS - END OF YEAR $ 143,088 $ 235,785 The accompanying notes are an integral part of these financial statements. -3-

6 STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2015 Supporting Services Management Program and Fund- Services General raising Total Compensation and related costs Salaries and contractors $ 105,878 $ 56,711 $ - $ 162,589 Payroll taxes 8,259 4,421-12,680 Benefits - 4,102-4, ,137 65, ,371 Rent 62,210 8,100-70,310 Depreciation 13, ,497 Professional fees - 9,904-9,904 Insurance 6,623 2,142-8,765 Fund raising event - - 8,158 8,158 Computer supplies/software 5,398 1,425-6,823 Copier 3,218 2,734-5,952 Miscellaneous 1,490 3, ,129 Telecommunications 909 3,150-4,059 Utilities 3, ,499 Student meals 3, ,328 Supplies 1, ,221 Interest - 1,825-1,825 Fees and subscriptions ,320 1,458 Bank fees ,419 Travel and food Total expenses 216,134 99,835 10, ,513 Less direct benefits to donors - - (1,500) (1,500) Total functional expenses $ 216,134 $ 99,835 $ 9,044 $ 325,013 The accompanying notes are an integral part of these financial statements. -4-

7 STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2014 Supporting Services Management Program and Fund- Services General raising Total Compensation and related costs Salaries and contractors $ 158,535 $ 44,209 $ 8,400 $ 211,144 Payroll taxes 12,882 2,237-15,119 Benefits 2,659 3,544-6, ,076 49,990 8, ,466 Rent 72,585 10,800-83,385 Depreciation 12, ,623 Professional fees - 7,825-7,825 Insurance 5,624 1,675-7,299 Fund raising event Computer supplies/software 1, ,484 Copier 2,985 2,732-5,717 Miscellaneous 1,098 1, ,701 Telecommunications 2,043 3,037-5,080 Utilities 4, ,251 Student meals 4, ,600 Supplies ,192 Interest - 2,219-2,219 Fees and subscriptions ,110 1,163 Bank fees ,055 1,153 Travel and food Total expenses 282,807 80,566 10, ,996 Less direct benefits to donors Total functional expenses $ 282,807 $ 80,566 $ 10,623 $ 373,996 The accompanying notes are an integral part of these financial statements. -5-

8 STATEMENTS OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES Decrease in net assets $ (92,697) $ (44,736) Adjustments to reconcile decrease in net assets to net cash (used in) provided by operating activities Depreciation 13,497 12,623 Amortization of in-kind lease 24,640 24,640 Decrease in operating assets Grants receivable 38,638 21,296 Prepaid expenses 900 1,905 (Decrease) increase in operating liabilities Accounts payable and accrued expenses (1,653) 4,806 Net Cash (Used In) Provided By Operating Activities (16,675) 20,534 CASH FLOWS FROM INVESTING ACTIVITIES Payments for property and equipment - (4,409) Net Cash Used In Investing Activities - (4,409) Net (Decrease) Increase in Cash (16,675) 16,125 CASH - BEGINNING OF YEAR 30,876 14,751 CASH - END OF YEAR $ 14,201 $ 30,876 Additional information: Interest paid during the year $ 1,825 $ 2,219 The accompanying notes are an integral part of these financial statements. -6-

9 NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION AND NATURE OF ACTIVITIES Youth Life Foundation of Tennessee, Inc. (the Organization ) is a Tennessee not-for-profit corporation that provides after school programming for inner city children in Nashville, Tennessee by providing Youth Life Learning Centers (the Centers ). The Organization creates a door of opportunity for children living in insecure environments. Children may enroll in the program from kindergarten through the fourth grade and are eligible to remain in the program until graduating from high school. The students are challenged to grow academically, morally, physically and socially by working with strong moral role models. In addition, the Organization has a computer lab at each of its Youth Life Learning Centers, which provides children with the opportunity to learn computer skills and assist them with their homework. In 2014, the Organization closed its Center in Memphis, Tennessee and two of its Centers in Nashville, Tennessee and continued to serve children in three Nashville Centers in 2015 The Organization s support consists primarily of funds received from individuals, foundations, corporations, churches and government entities. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities and changes therein and the disclosures of commitments and contingencies. Actual results could differ from those estimates. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are restricted by the donor for future periods or for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. When a restriction is fulfilled (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted and reported in the statements of activities and changes in net assets as net assets released from restrictions. There were no permanently restricted net assets as of December 31, 2015 and

10 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Contributions, continued Contributions are recognized when the donor makes an unconditional promise to give to the Organization. The Organization uses the allowance method to determine uncollectible unconditional contributions receivable. The allowance is based on prior years experience and management s analysis of specific promises made. Donated Services and Facilities Donated goods are recorded at estimated fair value in the period the gift is received. Donated services are recognized if they create or enhance nonfinancial assets or the donated service requires specialized skills, was performed by the donor who possesses such skills, and would have been purchased by the Organization if not provided by the donor. Such services are recognized as support and expense in the period the services are performed. Income Taxes The Organization is exempt from federal and state income taxes under Internal Revenue Code Section 501 (c) (3) and the tax laws of the state of Tennessee. Accounting principles generally accepted in the United States of America require the Organization to evaluate tax positions taken by the Organization and recognize a tax liability (or asset) if the Organization has taken an uncertain position that more likely than not would not be sustained upon examination by the IRS. The management has analyzed the tax positions taken by the Organization and has concluded that as of December 31, 2015, no uncertain positions are taken or are expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. The Organization is no longer subject to U.S. federal income tax examinations by tax authorities for years before Cash Cash includes checking and money market deposits held by financial institutions. Grants Receivable Grants receivable consist of amounts due from foundations and government contracts scheduled to be received in the next year. No allowance for uncollectible receivables was deemed necessary as of December 31, There were no grants receivable outstanding at December 31,

11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and Equipment and Depreciation It is the Organization s policy to capitalize all property and equipment over $500. Property and equipment acquisitions are recorded at cost. When depreciable assets are disposed of, the cost and related accumulated depreciation are removed from the accounts, and any gain (except on trade-in) or loss is included in the statements of activities and changes in net assets for the period. A gain on trade-in is applied to reduce the cost of the new acquisition. Depreciation is provided over the estimated useful lives of the assets ranging from three to twenty years and computed on a straight-line method. NOTE 3 - PROPERTY AND EQUIPMENT Property and equipment consist of the following: Leasehold improvements $ 161,170 $ 161,170 Automobiles 34,604 34,604 Computer software and equipment 16,312 16,312 Furniture and fixtures 4,000 4, , ,086 Accumulated depreciation (187,981) (174,484) $ 28,105 $ 41,602 Depreciation expense was $13,497 and $12,623 for 2015 and 2014, respectively. NOTE 4 - IN-KIND CONTRIBUTIONS During 2015, the Organization operated two Centers (five in 2014) under free rent agreements with unrelated third parties. The estimated fair value of donated rent for these Centers was $36,400 ($47,100 for 2014). The Organization also operates the original Youth Life Learning Center from leased facilities consisting of two units of an inner city apartment complex. The lease calls for an annual rent payment of $10 and expires in December The use of these facilities was donated to the Organization by an unrelated third party in 2001 and was recorded as a receivable at its estimated fair value at that time. At December 31, 2015, the remaining $123,200 ($147,840 for 2014) fair value of the lease is reported in the statements of financial position as a current asset of $24,640 (also $24,640 for 2014) and a long-term asset of $98,560 ($123,200 for 2014). The asset is being amortized and a related program expense is being recognized each year of $24,640. In-kind contributions of goods and venue space totaling $3,500 were provided for one of the Organization s special fundraising events in

12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) NOTE 5 - LEASING ARRANGEMENTS The Organization leased administrative office space under a month-to-month operating lease agreement with monthly payments of $900 through September 2015 at which time it consolidated operations at it s Village West Center. Total rent expense for the Centers and office space, including the value of in-kind donations (Note 4), totaled $69,140 ($82,540 for 2014). NOTE 6 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets included the following at December 31: In-kind lease $ 123,200 $ 147,840 Program expense grants 15,583 37,500 Strategic planning grant 2,175 - $ 140,958 $ 185,340 NOTE 7 - CONCENTRATIONS Of the Organization s total revenues and support for 2015, approximately 34% (51% for 2014) represents support received from one grantor (two grantors for 2014) and one related party entity (in both 2015 and 2014, see Note 8). No other revenue and support source represents 10% or more of total revenues and support. NOTE 8 - RELATED PARTY TRANSACTIONS The Organization received donations totaling $44,280 in 2015 (consisting of cash donations of $40,780 and in-kind donations of $3,500) and $61,250 in 2014 from an entity that shares a common member on their respective board of directors. NOTE 9 - EVALUATION OF SUBSEQUENT EVENTS The Organization has evaluated subsequent events through November 5, 2016 which is the date the financial statements were available to be issued. -10-