PRELIMINARY DRAFT. TRI-LAKES CARES Financial Statements For the Year Ended September 30, 2014

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2 PRELIMINARY DRAFT TRI-LAKES CARES Financial Statements For the Year Ended September 30,

3 TABLE OF CONTENTS Independent Auditors' Report Statement of Financial Position Statement of Activities and Changes in Net Assets Statement of Functional Expenses Statement of Cash Flows Notes to Financial Statements

4 INDEPENDENT AUDITORS' REPORT Board of Directors Tri-Lakes Cares Monument, Colorado We have audited the accompanying financial statements of Tri- Lakes Cares (a nonprofit organization), which comprise the statement of financial position as of September 30, 2014, and the related statements of activities, functional expenses, and cash flows for the year 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the 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 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 1365 Garden of the Gods Road, Suite 150 Colorado Springs, CO (719) Fax: (719)

5 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 Tri-Lakes Cares as of September 30, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Waugh & Goodwin, LLP Colorado Springs, Colorado November 4,

6 TRI-LAKES CARES Statement of Financial Position September 30, 2014 ASSETS CURRENT ASSETS: Cash and cash equivalents $ 221,646 Contributions receivable 12,382 Grants receivable 40,348 Inventories 72,948 Prepaid expenses 11,689 Gift cards 1,786 Total current assets 360,799 BUILDING AND EQUIPMENT - at cost: Land 85,268 Building 413,336 Equipment 39,627 Less accumulated depreciation (86,611) Building and equipment, net 451,620 OTHER ASSET: Royalty interest 1,000 Total other assets 1,000 TOTAL ASSETS $ 813,419 LIABILITIES AND NET ASSETS CURRENT LIABILITIES: Accounts payable $ 16,875 Accrued liabilities 19,391 Total current liabilities 36,266 NET ASSETS: Unrestricted 612,374 Unrestricted - board designated 100,000 Temporarily restricted 64,779 Total net assets 777,153 TOTAL LIABILITIES AND NET ASSETS $ 813,419 See Notes to Financial Statements 3

7 TRI-LAKES CARES Statement of Activities and Changes in Net Assets For the Year Ended September 30, 2014 Temporarily Unrestricted Restricted Totals REVENUE: Value of donated goods and services received $ 1,154,260 $ $ 1,154,260 Contributions 210,850 53, ,302 Grant revenue 147,049 88, ,780 Thrift store sales 205, ,165 Special events and fundraisers 3,455 3,455 Other income 3,236 3,236 Royalties 2,358 2,358 Interest income Satisfied program restrictions 176,871 (176,871) Total revenue 1,903,803 (34,688) 1,869,115 EXPENSES: Program services: Family stabilization 845, ,511 Pantry 408, ,623 Thrift store 310, ,518 Housing and utilities 99,564 99,564 Disaster relief 81,498 81,498 Total program services 1,745,714 1,745,714 Supporting services: General and administrative 75,343 75,343 Fundraising and development 70,385 70,385 Total supporting services 145, ,728 Total expenses 1,891,442 1,891,442 CHANGE IN NET ASSETS 12,361 (34,688) (22,327) NET ASSETS, beginning of year 700,013 99, ,480 NET ASSETS, end of year $ 712,374 $ 64,779 $ 777,153 See Notes to Financial Statements 4

8 TRI-LAKES CARES Statement of Functional Expenses For the Year Ended September 30, 2014 Program Services Supporting Services Family Thrift Housing & Disaster General & Fundraising Stabilization Pantry Store Utilities Relief Administrative & Development Totals Advertising & promotion $ 2,778 $ $ 4,235 $ $ $ 68 $ 2,292 $ 9,373 Appreciation 3, ,833 Child care assistance Clothing & merchandise assistance 2,935 14,030 16,965 Credit card processing fees 158 4, ,674 Depreciation 10, ,964 Dues & subscriptions 3, , ,454 Education assistance 7,880 7,880 Equipment 5,212 14, ,853 Gas vouchers 1,030 6,800 7,830 General assistance 4,232 1,790 6,022 Groceries & food assistance 10,704 25,966 18,413 55,083 Home repair assistance 3,107 1,400 4,507 Housing assistance 5,507 51,169 3,500 60,176 Human resources ,475 Insurance 5,318 2, ,736 Insurance assistance 4,694 4,694 Medical assistance 26,787 3,822 30,609 Office supplies 3, ,173 Payroll taxes 12,529 5,172 3,979 4,575 26,255 Postage & shipping 1, ,708 4,107 Professional fees 4, ,540 Rent expense 17,400 17,400 Repairs & maintenance 10, ,839 Salaries 137,523 59,952 45,964 54, ,077 School supplies 5,032 5,032 Supplies 2,715 1,570 3, ,117 Technology 16, ,839 Telephone & internet 2, ,104 Training & education 2, ,607 Transportation 10,369 10,369 Travel 2, ,355 Utilities 12, ,570 Utilities assistance 11,125 48,395 1,240 60,760 Value of donated goods & services 510, ,111 4,017 30,503 22,030 3, ,448 Value of goods sold 204, ,804 $ 845,511 $ 408,623 $ 310,518 $ 99,564 $ 81,498 $ 75,343 $ 70,385 $ 1,891,442 See Notes to Financial Statements 5

9 TRI-LAKES CARES Statement of Cash Flows For the Year Ended September 30, 2014 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ (22,327) Adjustments to reconcile change in net assets to net cash used by operating activities: Depreciation 10,964 Change in assets and liabilities: Increase in contributions receivable (12,307) Decrease in grants receivable 2,669 Increase in inventories (12,712) Increase in prepaid insurance (4,373) Decrease in gift cards 17,489 Increase in accounts payable 7,403 Decrease in accrued liabilities (286) Total adjustments 8,847 Net cash used by operating activities (13,480) CASH FLOWS FROM INVESTING ACTIVITIES: Acquisition of equipment (11,500) Net cash used by investing activities (11,500) NET DECREASE IN CASH (24,980) CASH AND CASH EQUIVALENTS, beginning of year 246,626 CASH AND CASH EQUIVALENTS, end of year $ 221,646 See Notes to Financial Statements 6

10 TRI-LAKES CARES Notes to Financial Statements For the Year Ended September 30, 2014 A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Tri-Lakes Cares (a nonprofit corporation) was incorporated in Colorado on January 24, Tri-Lakes Cares is a community based, volunteer supported, resource center whose purpose is to improve people's lives through emergency assistance, selfsufficiency and relief programs. In addition, the Organization hosts several other community partners, enabling their clients to obtain medical assistance, job services, as well as meeting several other basic needs all in one location. In June of 2013, a devastating fire (the Black Forest Fire) hit within the Tri-Lakes Cares service area. In this fiscal year the organization has provided relief services in the amount of $81,498. Relief services included providing monetary relief, food, clothing, household items and more. All funds collected for the Black Forest Fire benefited Black Forest Fire families; there were no overhead costs taken out of the donations received. The Organization also operates a thrift store, Hangers, which sells general merchandise to customers. All items sold in the thrift store are donated by members of the community. The thrift shop is also used as a resource for clients who are in need of clothing and other household items. The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code and is not a private foundation. The Organization is dependent on grants and contributions from the community and grantor agencies to maintain its operations at current levels. Method of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting. 7

11 Notes to Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Cash and Cash Equivalents Cash and cash equivalents consist of the Organization's cash in its checking and money market accounts. The Organization maintains its cash and cash equivalents at commercial banks. The Organization did not have funds in excess of the insured limits with any one financial institution during the year ended September 30, Building and Equipment The Organization's building and equipment are recorded at cost as of the date of acquisition. Items exceeding $2,000 in cost are capitalized. Depreciation is recorded on the building using the straight-line method over a useful life of fifty years and on the equipment using the straight-line method over estimated useful lives of three to five years. Depreciation expense for the year ended September 30, 2014 amounted to $10,964. Inventories Inventories primarily consist of donated food items valued at an estimated wholesale value of $1.72 per pound as of September 30, The estimated value was provided by the leading food bank of Southern Colorado. Other inventory includes supplies for the Organization`s programs and items held for sale through the Organization`s thrift store operations. Contributions Contributions that are restricted by the donor are reported as an increase in unrestricted support if the restriction expires in the reporting period in which the support is recognized. All other contributions are recorded when received as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence or nature of any donor restrictions. When a donor restriction is met, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as satisfaction of program restrictions. 8

12 Notes to Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Grants and Contributions Receivable Grants and contributions receivable are stated at the amount the Organization expects to collect from balances outstanding at year end. Based on management's assessment of the outstanding balances, it has concluded that no allowance for doubtful accounts is necessary. Income Taxes The Organization qualifies as a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and, accordingly, is not subject to federal income tax. Income generated by the Organization's thrift store is specifically excluded from tax under Internal Revenue Code Section 513(a)(3). The Organization does not engage in any activities not related to its exempt status. Accordingly, no income tax provision has been recorded. The Organization's form 990, Return of Organization Exempt from Income Tax, is subject to examination by various taxing authorities, generally for three years after the date they were filed. Management of the Organization believes that it does not have any uncertain tax positions that are material to the financial statements. 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 and liabilities, the disclosure of contingent liabilities, and the reported amounts of revenues and expenses. Actual results could differ from those estimates. Functional Allocation of Expenses Certain costs and expenses are allocated among the various programs and supporting services that benefited. Statement of Cash Flows The Organization paid no income taxes or interest during the year ended September 30,

13 Notes to Financial Statements A. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Date of Management's Review In preparing the financial statements, the Organization has evaluated events and transactions for potential recognition or disclosure through November 4, 2014, the date that the financial statements were available to be issued. B. ROYALTY INTEREST IN OIL PRODUCTION In 2010, the Organization received an overriding royalty interest in mineral property. The Organization has estimated the value of this royalty interest at $1,000. C. BOARD DESIGNATED NET ASSETS The Board of Directors has designated net assets as an operating reserve in the amount of $100,000. D. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at September 30, 2014 consist of amounts received that are restricted for the following programs: Family stabilization $ 26,821 Holiday food 12,542 Pledges 10,731 Groceries 7,173 Medical assistance 2,502 Volunteer expenses 2,445 Snack pack 1,513 Housing & utilities 500 Oil change fund 426 Specific individuals 101 EITC $ 64,779 Net assets are released from donor restrictions by incurring expenses that satisfy the restricted purpose. During the year ended September 30, 2014, net assets were released from restrictions by satisfying the following restricted purposes: Medical assistance $ 38,920 Groceries 30,066 Family stabilization 27,822 Disaster relief 26,522 Housing & utilities 13,507 Holiday food 12,481

14 Notes to Financial Statements D. TEMPORARILY RESTRICTED NET ASSETS Continued Senior supplements 10,050 School supplies 5,047 Giving tree 3,993 Getting ahead 3,384 EITC 1,225 Snack pack 1,157 Office expansion 920 Syrup 574 Specified individuals 449 Oil change fund 284 Veterans grant 200 Grocery cart 175 Volunteer expenses 55 Pets 40 E. COMPENSATED ABSENCES $ 176,871 Management has determined that the amount of accrued vacation compensation payable at September 30, 2014 was $5,279. F. OPERATING LEASES The Organization leases property from an unrelated party to conduct its thrift store activities. Monthly lease payments are $1,450 through March 31, Future minimum lease payments for the year ended September 30 are as follows: 2015 $8,700 G. DONATED GOODS AND SERVICES The solicitation, receipt, storage, and distributions of donated food constitutes one of the Organization`s principal operating activities. The value of donated food products received during the year ended September 30, 2014, was $462,682. The value of donated food products distributed during the year ended September 30, 2014, was $464,112. The Organization operates a thrift store, Hangers Thrift Shop, which sells general merchandise to customers. All items sold in the thrift store are donated by the members of the community. The thrift shop is also used as a resource for clients who are in need of clothing and other household items. The value of donated goods received by Hangers during the year ended September 30, 2014 totaled $212,487. The value of donated goods sold by Hangers during the year ended September 30, 2014 totaled $204,

15 Notes to Financial Statements G. DONATED GOODS AND SERVICES Continued Donated medical services and supplies received during the year ended September 30, 2014 totaled $138,363 and $135,453 was distributed during the year ended September 30, Donated holiday gifts for seniors and children received during the year ended September 30, 2014 totaled $59,724 and $57,371 was distributed during the year ended September 30, Donated school supplies during the year ended September 30, 2014 totaled $9,210 and $7,518 was distributed during the year ended September 30, Donated services acquired and provided for clients during the year ended September 30, 2014 totaled $141,339. Examples of some services include tax preparation, car repair and home repairs. Other donated supplies received by the organization for the purpose of aiding clients during the year ended September 30, 2014 totaled $13,091 and $13,766 was distributed during the year ended September 30, Examples of some of these items include clothing, technology and other supplies. During the year ended September 30, 2014, donated services for operational support totaled $102,645. Donated goods received by the Organization for operational support totaled $14,721 for the year ended September 30, The Organization recognizes donated services that create or enhance non-financial assets or that require specialized skills and would typically need to be purchased if not provided by donation. The Organization also receives donated services not reflected in the financial statements as they do not meet the criteria for recognition under Generally Accepted Accounting Principles (GAAP). For the year ended September 30, 2014, the Organization received approximately 24,362 volunteer hours with an estimated value of $611,486. H. TRADE NAME Tri-Lakes Cares has registered the trade name Hangers with the Colorado Secretary of State and the Organization operates its thrift store under this name. 12