West Haven Community House Association, Inc. Financial Statements (With Supplementary Information) and Independent Auditors' Report

Transcription

1 Financial Statements (With Supplementary Information) and Independent Auditors' Report June 30, 2012 and 2011

2 Index Page Independent Auditors' Report 2 Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows Supplementary Information: Schedule of Functional Expenses 14 1

3 To the Board of Directors West Haven Community House Association, Inc. Independent Auditors' Report We have audited the accompanying statement of financial position of West Haven Community House Association, Inc. (a nonprofit organization) as of June 30, 2012, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of West Haven Community House Association, Inc.'s management. Our responsibility is to express an opinion on these financial statements based on our audit. The financial statements of West Haven Community House Association, Inc. as of and for the year ended June 30, 2011, were audited by other auditors whose report dated December 7, 2011, expressed an unqualified opinion on those statements. We conducted our audit in accordance with 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. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the 2012 financial statements referred to above present fairly, in all material respects, the financial position of West Haven Community House Association, Inc. as of June 30, 2012, and the changes in its net assets and cash flows for the year then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated Januay 31, 2013 on our consideration of West Haven Community House Association, Inc.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, 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 and should be considered in assessing the results of our audit. Our audit was conducted for the purpose of forming an opinion on the 2012 financial statements as a whole. The information on page 14 is presented for purpose of additional analysis of the 2012 financial statements, and is not a required part of the 2012 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 2012 financial statements. The information has been subjected to the auditing procedures applied in the audit of the 2012 financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the 2012 financial statements or to the 2012 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 2012 financial statements as a whole. C Glastonbury, Connecticut January 31,

4 Statements of Financial Position June 30, 2012 and 2011 Assets Current assets: Cash and cash equivalents $ 271,321 $ 230,483 Accounts receivable 62, ,440 Grants receivable 332, ,855 Prepaid expenses 40,620 35,994 Total current assets 706, ,772 Property and equipment: Buildings and improvements 4,970,093 4,928,980 Vehicles 409, ,869 Land and land improvements 326, ,839 Furniture and fixtures 159, ,280 5,865,278 5,820,968 Less accumulated depreciation and amortization (3,376,105) (3,222,930) Total property and equipment, net 2,489,173 2,598,038 Other assets: Cash and investments held for long-term purposes 432, ,717 Other assets 12,401 12, , ,118 Total assets $ 3,640,652 $ 3,753,928 Liabilities and Net Assets Current liabilities: Accounts payable and accrued expenses $ 253,428 $ 252,766 Mortgages and notes payable, current portion 102,319 92,556 Deferred revenue 42,209 61,152 Deferred grant revenue 157, ,324 Total current liabilities 555, ,798 Long-term liabilities: Mortgages and notes payable, net of current portion 988,205 1,028,080 Advances from third party 24,155 24,155 Total long-term liabilities 1,012,360 1,052,235 Total liabilities 1,568,074 1,564,033 Net assets: Unrestricted - board designated 84,427 77,825 Unrestricted - undesignated 1,620,304 1,744,881 Temporarily restricted 93, ,432 Permanently restricted 273, ,757 Total net assets 2,072,578 2,189,895 Total liabilities and net assets $ 3,640,652 $ 3,753,928 See. 3

5 Statements of Activities Years Ended June 30, 2012 and Changes in unrestricted net assets: Program revenue: Governmental grants and purchases of services $ 4,758,736 $ 4,637,742 Program service fees 1,122,077 1,034,337 Residential room and board 173, ,601 Net assets released from restrictions 21,797 50,221 Special fundraising events 43,093 52,814 Contributions 101, ,843 Program income 22,981 27,765 Investment income 314 1,239 Contributions and fundraising events designated by the Board of Directors for long-term use 6,215 2,240 Investment gains on board designated funds for endowment ,848 Miscellaneous income 42,231 26,683 Total support and revenue 6,292,376 6,117,333 Expenses: Program services: Disabled adults 2,798,319 2,748,570 Head start 1,983,446 1,946,137 Children and youth 887, ,463 Supportive services: General and administrative 669, ,461 Fundraising and other 71,936 78,067 Total expenses 6,410,351 6,312,698 Decrease in unrestricted net assets (117,975) (195,365) Changes in temporarily restricted net assets: Contributions 7,500 30,000 Investment gains - donor designated 1,720 52,962 Net assets released from restrictions (21,797) (50,221) Increase (decrease) in temporarily restricted net assets (12,577) 32,741 Changes in permanently restricted net assets: Contributions 13,235 6,510 Increase in permanently restricted net assets 13,235 6,510 Change in net assets (117,317) (156,114) Net assets, beginning of year 2,189,895 2,346,009 Net assets, end of year $ 2,072,578 $ 2,189,895 See. 4

6 Statements of Cash Flows Years Ended June 30, 2012 and Operating activities: Change in net assets $ (117,317) $ (156,114) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 239, ,648 Gain on sale of equipment (16,578) (5,174) Contributions received for long-term purposes (13,235) (6,510) Changes in operating assets and liabilities: Accounts receivable 41,221 40,833 Grants receivable 30,211 10,063 Prepaid expenses (4,626) (1,767) Other assets - - Accounts payable and accrued expenses (21,188) (111,592) Deferred revenue (18,943) (6,435) Deferred grant revenue 52,434 (5,815) Net cash provided by operating activities 171,374 12,137 Investing activities: Purchases of property and equipment (44,317) (55,221) Proceeds from sale of vehicles 18,100 7,300 Increase in investments held for long-term purposes (21,557) (72,560) Net cash used in investing activities (47,774) (120,481) Financing activities: Proceeds from long-term debt - 33,095 Payments on mortgages payable (95,997) (88,161) Contributions restricted for long-term purposes 13,235 6,510 Net cash used in financing activities (82,762) (48,556) Net increase (decrease) in cash 40,838 (156,900) Cash and cash equivalents, beginning of year 230, ,383 Cash and cash equivalents, end of year $ 271,321 $ 230,483 Supplemental disclosures of cash flow data: Cash paid during the year for interest $ 66,458 $ 74,077 Noncash investing and financing activities: Total property and equipment additions $ 132,448 $ 55,221 Amount financed (65,885) - Amounts included in accounts payable (22,246) - Cash paid $ 44,317 $ 55,221 See. 5

7 Note 1 - Organization and summary of significant accounting policies: Organization: West Haven Community House Association, Inc. (the "Organization") is a private not-for-profit organization located in West Haven, Connecticut. The Organization exists to facilitate healthy, productive, independent and meaningful lives for children, adolescents and families, and individuals with disabilities. The Organization annually provides services to 1,000 area residents. Basis of presentation: The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. They are described as follows: Unrestricted - Net assets that are not subject to explicit donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the Board of Directors. Temporarily Restricted - Net assets whose use by the Organization is subject to either explicit donor-imposed stipulations or by operation of law that can be fulfilled by actions of the Organization or that expire by the passage of time. Permanently Restricted - Net assets subject to explicit donor-imposed stipulations that they be maintained permanently by the Organization and stipulate the use of income and/or appreciation (depreciation) as either unrestricted or temporarily restricted based on donor imposed stipulations or by operation of law. Tax exempt status: The Organization is tax exempt under Section 501(c)(3) of the Internal Revenue Code. For this reason, the Organization is not subject to Federal or state income taxes and, as such, no income taxes have been recorded. The Organization has no unrecognized tax benefits at June 30, 2012 or The Organization's Federal and state information returns prior to fiscal year 2009 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. If the Organization had unrelated business income taxes it would recognize any interest and penalties associated with tax matters as part of the income tax provision and include any accrued interest and penalties with the related tax liability in the statements of financial position. 6

8 Investments: The Organization reports investments at their current fair value and reflects any gain or loss within the accompanying statements of activities. Gains and losses are considered unrestricted unless restricted by donor stipulation or law. Non-monetary investments received as gifts are immediately sold and recorded at the realized value. Property and equipment: The Organization capitalizes all expenditures for property and equipment in excess of $2,500 and with a useful life greater than three years in accordance with guidelines established by State of Connecticut granting agencies. Purchased property and equipment are carried at cost. Donated property and equipment are carried at the approximate fair value at the date of donation. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Estimated useful lives for financial reporting purposes are as follows: Asset Buildings and improvements Furniture and equipment Vehicles Land improvements 7 Estimated Useful Lives 5-40 years 3-15 years 3 years 5-30 years Expenditures for repairs and maintenance are charged to expense as incurred. For assets sold or otherwise disposed of, the cost and related accumulated depreciation are removed from the statements of financial position, and any resulting gain or loss is reflected in the statements of activities. Impairment of long-lived assets: The Organization reviews long-lived assets for impairment using an undiscounted cash flow method whenever events or circumstances indicate the carrying value of an asset may not be recoverable. If such impairment indicators are present and amounts are not fully recoverable from projected undiscounted cash flows of the related asset, then the Organization recognizes a loss to the extent that the carrying value exceeds fair value. There were no impairment losses related to long-lived assets during the years ended June 30, 2012 or Revenue recognition: Grants and contracts: The Organization manages residential facilities, supported living programs, day programs and schools for individuals with special needs. The residential facilities are reimbursed according to regulations governing Community Living Arrangements and revenue is recognized when allowable expenditures are incurred. Food and lodging costs are reimbursed by the Connecticut Department of Social Services ("DSS") and other covered expenses are reimbursed by the Connecticut Department of Developmental Services ("DDS"). Services provided by the Organization related to the day programs and supported living programs are billed through a fiscal intermediary and/or reimbursed through a direct contract with DDS. Reimbursement of certain expenses is subject to maximum per diem rate limitations and annual cost settlement regulations.

9 Contributions: Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from satisfaction of program restrictions. Gifts of long-lived assets: The Organization reports gifts of land, buildings and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, the Organization reports expirations of donor restrictions of acquired long-lived assets when placed in service. Functional expenses: The costs of providing various programs and other activities have been summarized on a functional basis in the accompanying statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Subsequent events: The Organization has evaluated subsequent events through January 31, 2013, which is the date the financial statements were available to be issued. Note 2 - Concentrations of credit risk: Cash: At times, the Organization maintains bank accounts in commercial banks with balances that exceed the Federal insurance limits. The Organization has not experienced any losses in these accounts and believes it is not exposed to any significant credit risk since the balances are maintained at a large, regional financial institution. 8

10 Funding source concentrations: The Organization's program revenue is primarily derived from contracts with DDS. Following is the funding detail from this department: June 30, 2012 June 30, 2011 Granting Agency Receivables Revenue Receivables Revenue CT Department of Developmental Services 14.5% 43.9% 13.4% 36.1% Amounts $ 57,404 $ 2,754,745 $ 62,550 $ 2,232,090 Accounts receivable: Accounts receivable are stated at unpaid balances, less an allowance for doubtful accounts. Allowances for accounts receivable are determined by management based on an assessment of their collectability. Management considers past history, current economic conditions and overall viability of the third party. Receivables are written off only when management believes amounts will not be collected. Receivables are considered past due based on the invoice date. As of June 30, 2012 and 2011, no allowance for doubtful accounts was deemed necessary. Note 3 - Fair value measurements: The Organization values its financial assets and liabilities based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy that prioritizes observable and unobservable inputs is used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in inactive markets; or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Organization utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. 9

11 Financial assets carried at fair value at June 30, 2012 and 2011 are classified in the tables below in one of the three categories described above: 2012 Level 1 Level 2 Level 3 Total Community Foundation for Greater New Haven, Inc. $ - $ - $ 412,763 $ 412,763 Cash equivalents 19, ,511 Total assets at fair value $ 19,511 $ - $ 412,763 $ 432, Level 1 Level 2 Level 3 Total Community Foundation for Greater New Haven, Inc. $ - $ - $ 390,635 $ 390,635 Cash equivalents 20, ,082 Total assets at fair value $ 20,082 $ - $ 390,635 $ 410,717 Investments held for long-term purposes are classified as Level 3 using allocations provided by the third party. Details regarding investments held for long-term purposes measured at fair value on a recurring basis using significant unobservable inputs (Level 3) are as follows: June 30, 2010 $ 324,805 Change in value 44,630 Investment income, net of fees 19,200 Contributions 2,000 June 30, ,635 Change in value (3,197) Investment income, net of fees 5,325 Contributions 20,000 June 30, 2012 $ 412,763 There have been no changes in valuation techniques and related inputs used at June 30, 2012 and The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although management believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. Note 4 - Line of credit: The Organization has a $400,000 revolving line of credit that is payable on demand. Bank advances on the credit line are payable on demand and carry an interest rate of prime plus.50%, but never at a rate lower than 5.25% (the prime rate at June 30, 2012 was 3.25%). The credit line is secured by all business assets. At June 30, 2012 and 2011, there were no outstanding amounts due under the line of credit. 10

12 Note 5 - Mortgages and notes payable: Mortgages and notes payable consist of the following at June 30, 2012 and 2011: Mortgage payable to a bank due in monthly installments of $4,198 including interest at 6.8% until November 2015 and adjusted every ten years thereafter, secured by property at 662 Campbell Avenue (West Haven, CT) and a third mortgage on 227 Elm Street (West Haven, CT), maturing November $ 442,252 $ 461,685 Mortgage payable to the Connecticut Housing Finance Authority due in monthly installments of $1,789 including interest at %, secured by property at Wood Street (West Haven, CT), maturing September In addition, the mortgage requires the Organization to make a monthly contribution of $217 to a repair and replacement reserve account. 189, ,510 Mortgage payable to a bank due in monthly installments of $2,325 including interest at 5.55% until June 2013 and adjusted every five years thereafter, secured by property and all business assets at 227 Elm Street (West Haven, CT), maturing June , ,536 Mortgage payable to a bank due in monthly installments of $1,608 including interest at 6.9% until November 2012 and adjusted every ten years thereafter, secured by properties at Savin Avenue (West Haven, CT) and 227 Elm Street (West Haven, CT), maturing November , ,601 Various notes payable due in monthly installments including interest, secured by vehicles, maturing between 2011 and 2017 and interest rates ranging between 4.9% and 6.99% 134, ,304 1,090,524 1,120,636 Less current portion (102,319) (92,556) $ 988,205 $ 1,028,080 Future principal payments under the mortgages and notes payable as of June 30, 2012 are as follows: Year Ended June 30, 2013 $ 102, , , , ,133 Thereafter 635,386 $ 1,090,524 Interest expense was $57,982 and $66,934 for the years ended June 30, 2012 and 2011, respectively. 11

13 Note 6 - Endowment: The Organization's endowment includes donor-restricted endowment funds. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Directors has interpreted the Connecticut Uniform Prudent Management of Institutional Funds Act ("CTUPMIFA") as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instruments at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Board of Directors in a manner consistent with the standard of prudence prescribed by CTUPMIFA. In accordance with CTUPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund 2. The purposes of the Organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation (depreciation) of investments 6. Other resources of the Organization 7. The investment policies of the Organization Endowment net asset composition by type of fund as of June 30, 2012 is as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ - $ 73,855 $ 273,992 $ 347,847 Board-designated 84, ,427 endowment funds $ 84,427 $ 73,855 $ 273,992 $ 432,274 12

14 Endowment net asset composition by type of fund as of June 30, 2011 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Donor-restricted endowment funds $ - $ 72,135 $ 260,757 $ 332,892 Board-designated 77, ,825 endowment funds $ 77,825 $ 72,135 $ 260,757 $ 410,717 Changes in endowment net assets for the year ended June 30, 2012 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ 77,825 $ 72,135 $ 260,757 $ 410,717 Net investment income 974 4,330-5,304 Net realized and unrealized depreciation (587) (2,610) - (3,197) Contributions 6,215-13,235 19,450 Endowment net assets, end of year $ 84,427 $ 73,855 $ 273,992 $ 432,274 Changes in endowment net assets for the year ended June 30, 2011 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ 64,737 $ 19,173 $ 254,247 $ 338,157 Net investment income 1,689 8,246-9,935 Net realized and unrealized appreciation 9,159 44,716-53,875 Contributions 2,240-6,510 8,750 Endowment net assets, end of year $ 77,825 $ 72,135 $ 260,757 $ 410,717 From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or applicable law requires the Organization to retain as a fund of perpetual duration. There were no such deficiencies as of June 30, 2012 and Note 7 - Temporarily restricted net assets: Temporarily restricted net assets are available for the following purposes as of June 30: Administration $ 12,500 $ 12,500 Kids in the Neighborhood 7,500 17,500 Graustein Discovery - 4,082 Earnings on permanently restricted net assets 73,855 72,135 Miscellaneous $ 93,855 $ 106,432 13

15 Schedule of Functional Expenses Year Ended June 30, 2012 General Disabled Head Children and Fundraising Adults Start and Youth Admnistrative and Other Total Salaries $ 1,867,737 $ 1,255,508 $ 597,905 $ 457,433 $ 3,113 $ 4,181,696 Payroll taxes and benefits 342, ,970 98,022 69, ,443 Client salaries 22, ,994 Occupancy 38, ,365 27,214 39,108 20, ,337 Program supplies 48,907 19,123 20,234-12, ,894 Food 29, ,100 30,399 3, ,948 Professional fees and consulting 76,335 26,214 9,454 9, ,009 Office supplies and expenses 31,670 23,806 17,808 50, ,097 Vehicle expenses 117,170-22, ,890 Interest 45, ,845 57,982 Repairs and maintenance 44,681-8, ,981 59,528 Staff development 4,673 18,804 11, ,922 General insurance 9,059 3,033 3,700 2,108 2,018 19,918 Parent, staff and child activities 185 7,990 6, ,281 Miscellaneous - 1,960-10,128-12,088 Telephone 8,537 3,949 2,025 2,350-16,861 Dues, licenses and subscriptions 8,466 1, ,072-17,041 Travel 5,375 5, ,788 Real estate and sewer use tax 9, ,293 Depreciation and amortization 87,159 91,100 30,379 16,602 13, ,341 Total program expenses $ 2,798,319 $ 1,983,446 $ 887,649 $ 669,001 $ 71,936 $ 6,410,351 See Independent Auditors' Report. 14