SUNDAY BREAKFAST RESCUE MISSION Financial Statements June 30, 2016 and 2015 With Independent Auditors' Report

Transcription

1 SUNDAY BREAKFAST RESCUE MISSION Financial Statements With Independent Auditors' Report

2 TABLE OF CONTENTS Independent Auditors Report 1 Financial Statements Statements of Financial Position 2 Statements of Activities and Changes in Net Assets 3 Statements of Cash Flows 4 Statements of Functional Expenses

3 INDEPENDENT AUDITORS REPORT To the Board of Trustees, : Report on the Financial Statements We have audited the accompanying financial statement of ( the Mission ) which comprise the statement of financial position as of June 30, 2016, and the related statements of activities and changes in net assets, cash flows, and functional expenses 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 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 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 Mission as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Prior Period Financial Statements The financial statements of as of June 30, 2015 were audited by other auditors whose report dated December 15, 2015 expressed an unmodified opinion on those financial statements. January 4, 2017

4 Statements of Financial Position Assets Current assets Cash $ 274,583 $ 372,769 Investments 180, ,859 Inventory 156, ,273 Prepaid expenses 36,868 18,744 Total current assets 648, ,645 Investments, net of current 199, ,059 Split and beneficial interest in trusts 520, ,164 Deferred rent asset 5,421 7,942 Land 510, ,050 Buildings 4,620,851 4,465,040 Vehicles 150, ,783 Furniture, fixtures and equipment 406, ,982 Less: Accumulated depreciation (2,762,967) (2,507,435) 2,924,481 2,988,420 Total assets $ 4,298,995 $ 4,621,230 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 141,876 $ 155,490 Line of credit 395,221 44,000 Note payable 20,170 17,561 Security deposits 12,417 1,420 Total current liabilities 569, ,471 Long-term liabilities Note payable, net of current portion 326, ,305 Total liabilities 896, ,776 Net assets Unrestricted 2,512,692 3,034,293 Temporarily restricted 499, ,609 Permanently restricted 390, ,552 Total net assets 3,402,736 4,054,454 $ 4,298,995 $ 4,621,230 The are an integral part of these statements. 2

5 Statements of Activities and Changes in Net Assets Years Ended Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Support and revenues Contributions $ 1,559,879 $ 7,808 $ -- $ 1,567,687 $ 1,461,256 $ 329,500 $ -- $ 1,790,756 Bequests/wills 4, , , ,102 Gifts in kind- donations 879, , , ,815 Change in value of split interest -- agreements and perpetual trusts -- (26,022) (13,066) (39,088) -- (9,187) (9,354) (18,541) Thrift store sales 639, , , ,413 Trust and investment income 31, ,328 52, ,747 Other income 42, ,290 50, ,562 3,156,724 (18,214) (13,066) 3,125,444 3,161, ,313 (9,354) 3,472,854 Net assets released due to satisfaction of time and purpose restrictions 98,837 (98,837) ,203 (31,203) ,255,561 (117,051) (13,066) 3,125,444 3,193, ,110 (9,354) 3,472,854 Expenses Program services 2,895, ,895,418 2,806, ,806,610 Management and general 315, , , ,556 Fundraising 566, , , ,199 3,777, ,777,162 3,591, ,591,365 Changes in net assets (521,601) (117,051) (13,066) (651,718) (398,267) 289,110 (9,354) (118,511) Net assets - beginning of year 3,034, , ,552 4,054,454 3,432, , ,906 4,172,965 Net assets - end of year $ 2,512,692 $ 499,558 $ 390,486 $ 3,402,736 $ 3,034,293 $ 616,609 $ 403,552 $ 4,054,454 The are an integral part of these statements. 3

6 Statements of Cash Flows Years Ended Cash flows from operating activities Changes in net assets $ (651,718) $ (118,511) Adjustments to reconcile changes in net assets to net cash (used) provided by operating activities Depreciation 255, ,195 Net realized and unrealized gain on investments (23,038) (1,826) Decrease in value of split interest agreements and perpetual trusts 24,390 18,541 Changes in assets and liabilities Inventory (30,552) (31,485) Prepaid expenses (18,124) 844 Deferred rent asset 2,521 3,413 Accounts payable and accrued expenses (13,614) 28,118 Security deposits 10,997 1,020 Net cash (used) provided by operating activities (443,605) 140,309 Cash flows from investing activities Purchase of property and equipment (191,594) (38,505) Purchase of investments (25,536) (202,542) Proceeds from sale of investments 230, Net cash provided (used) by investing activities 13,319 (241,047) Cash flows from financing activities Proceeds from draws on line of credit 807,623 44,000 Payments on draws on line of credit (456,402) -- Payments on long-term debt (19,121) (14,170) Net cash provided by financing activities 332,100 29,830 Net decrease in cash and cash equivalents (98,186) (70,908) Cash and cash equivalents Beginning of year 372, ,677 End of year $ 274,583 $ 372,769 Supplemental disclosure of cash flow information Interest paid $ 29,620 $ 17,524 Property and equipment acquired under capital lease $ -- $ 23,448 The are an integral part of these statements. 4

7 Statements of Functional Expenses Years Ended Program Services Support Services Program Services Support Services Management Management Wayne and Wayne and Men Hall General Fundraising Total Men Hall General Fundraising Total Salaries $ 818,374 $ 158,547 $ 145,457 $ 102,658 $ 1,225,036 $ 785,274 $ 153,790 $ 110,555 $ 98,541 $ 1,148,160 Payroll taxes and fringe benefits 171,051 21,024 45,026 12, , ,080 19,602 37,890 10, , , , , ,175 1,474, , , , ,925 1,347,116 Advertising ,338 89, ,638 92,638 Automobile and travel 11,008 1,310 10, ,098 13,424 4,134 16,475 3,930 37,963 Clothing 639, , , ,413 Continuing education/conferences , , ,604 1,349 9,669 Depreciation 237,646 12,194 3,860 1, , ,560 12, , ,195 Dues and subscriptions 1, , ,491 1, , ,104 Food 280,307 14, , ,220 8, ,162 House expense 57,199 6, ,539 42,797 7, ,200 Insurance 81,152 16,728 17,577 1, ,940 77,731 16,155 18,069 1, ,193 Interest 17, , ,620 17, ,524 Marketing 3, , ,846 5, , ,511 Miscellaneous Newsletter ,913 31, ,489 27,489 Office expense 23, ,304 1,063 36,022 22,328 1,584 8, ,265 Postage ,248 9,833 12, ,477 10,792 14,358 Professional fees 7,408 3,160 45,796 2,225 58, ,564 55,413 10,016 67,178 Real estate taxes 1, ,297 1, ,198 Rent expense 5, ,924 4, ,270 Repairs and maintenance 73,534 9, , ,931 6,954 3, ,412 Small equipment 2,127 3,641 2, ,782 18,492 3,321 5, ,451 Software and IT support ,826 4,106 7, ,794 10,688 13,482 Telephone 22,137 6,572 4, ,973 18,793 7,030 3, ,843 Utilities 155,190 29, , ,151 30, ,121 $ 2,609,337 $ 286,081 $ 315,533 $ 566,211 $ 3,777,162 $ 2,530,772 $ 275,838 $ 279,556 $ 505,199 $ 3,591,365 The are an integral part of these statements. 5

8 1. ORGANIZATION AND PURPOSE OF CORPORATION The mission of the ( the Mission ) is as follows: The exists to minister in the name of Jesus Christ to the spiritual and practical needs of the disadvantaged in the Philadelphia area. The Mission operates a homeless mission and shelter for men, women and children. Residents can receive meals and shelter. There are also rehabilitation programs and job training programs. The Mission operates three Thrift Store programs to help train men. The men on the discipleship program (Overcomers program) spend anywhere from two weeks to one year developing good work habits and becoming work ready at the thrift stores. The Mission is primarily supported through donor contributions. It also receives between percent of its support from sales from the thrift stores that are owned by the Mission. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation Financial reporting by not-for-profit organizations requires that resources be classified for accounting and reporting purposes into net asset categories according to externally (donor) imposed restrictions. For the years ended, the Mission had accounting transactions in the unrestricted, temporarily restricted and permanently restricted net asset categories. The unrestricted net asset category represents net assets that are not subject to donor imposed restrictions and the temporarily and permanently restricted net asset category represents net assets that are subject to time and/or purpose donor imposed restrictions. Revenue and Support Recognition Contributions are recognized as revenue when they are received or unconditionally pledged and recorded as unrestricted or restricted support according to donor stipulations that limit the use of these assets due to time or purpose restrictions. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities and changes in net assets as net assets released from restrictions. Cash and Cash Equivalents Cash and cash equivalents include investments in highly liquid debt instruments purchased with a maturity of three months or less at acquisition, excluding money market funds included in investments. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of those financial instruments. 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. Leasehold Improvements and Office Equipment Leasehold improvements and office equipment are stated at cost. Depreciation is provided over the useful lives of the assets using the straight-line method. The Mission is using the term of the lease of seven years for the leasehold improvements, and estimated useful lives of three to five years for the office equipment. 6

9 Depreciation expense amounted to $ 255,533 and $240,195 for the years ended June 30, 2016 and 2015, respectively. Certain equipment is maintained at offsite locations. It is the Mission s policy to capitalize expenditures for those items in excess of $1,000. Fair Value of Financial Instruments The Mission measures fair value using a three-level hierarchy for fair value measurements based upon the transparency of inputs to the valuation of an asset or liability. Inputs may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset or liability. Observable inputs reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the Mission s own assumptions about the assumptions that market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The objective of a fair value measurement is to determine 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 (an exit price). Accordingly, the fair value hierarchy gives the highest priority to quoted prices (unadjusted) in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). The Mission may use valuation techniques consistent with the market, income and cost approaches to measure fair value. The fair value hierarchy consists of three levels of inputs that may be used to measure fair value as follows: Level 1- Inputs that utilize quoted prices (unadjusted) in active markets for identical assets or liabilities that the Mission has the ability to access. Level 2- Inputs that include quoted prices for similar assets and liabilities in active markets and inputs that are observable for the asset or liability, either directly or indirectly, for substantially the full term of the financial instrument. Fair values for these instruments are estimated using pricing models, quoted prices of securities with similar characteristics, or discounted cash flows. Level 3- Inputs that are unobservable inputs for the asset or liability, which are typically based on an entity s own assumptions, as there is little, if any, related market activity. Valuation of Long-Lived Assets In accordance with the provisions of accounting standards related to Accounting for the Impairment or Disposal of Long-Lived Assets, the Mission reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of the assets may not be fully recoverable. Management has determined that no assessment was required for the periods presented in these financial statements. Functional Allocation of Expenses The costs of providing program and supporting services have been summarized on a functional basis in the statements of activities and changes in net assets and functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income Taxes The Mission is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision for Federal income taxes has been recorded in the statements of activities and changes in net assets. 7

10 The Mission adopted the accounting pronouncement dealing with the uncertain tax positions as of July 1, Upon adoption of this pronouncement, the Mission had no unrecognized tax benefits. Furthermore, Mission had no unrecognized tax benefits at. In addition, the Mission has no income tax related penalties or interest for the periods reported in these financial statements. Investments Investments are carried at fair value. Fair value measurement is based upon quoted prices, if available. If quoted prices are not available, fair values are measured using independent pricing models or other model-based valuation techniques such as the present value of future cash flows, adjusted for the security s credit rating, prepayment assumptions and other factors such as credit loss assumptions. Cash equivalents and money markets are valued at cost which approximates fair value. Investments are exposed to various risks, such as interest rate, market and credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the value of investment securities will occur in the near-term and that such changes could materially affect the amounts reported in the statements of financial position. A formal investment policy was adopted by the Mission effective in September 2010, and revised in February 2012, for any endowment fund created by donor restricted contributions. This policy consists of a long term asset allocation target of 20 percent equities and 80 percent fixed income. This policy does not apply to operational funds. The Mission considers all investments to be current, except for those investments comprising the corpus of the endowment. Split Interest Agreements and Beneficial Interest in Perpetual Trusts The Mission has accepted a gift subject to a split interest agreement. Under this trust agreement the Mission receives semi-annual trust income distributions. Upon the death of the last individual beneficiary, the Mission will receive a proportionate share of the remaining principal. The estimated value of the Mission s share at the expected date of ultimate disposition has been subjected to a discount rate in order to record the asset at its present value. The net asset has been recorded as temporarily restricted due to time restrictions. The Mission also received three gifts of beneficial interests in trusts that are held by others. Under the terms of these trusts, the Mission has the irrevocable right to receive the income earned on the trust assets in perpetuity, but never receives the assets held in trust. At the time of the receipt, a gift is recorded based on the fair value of the assets contributed to the trust (or the portion thereof that benefits the Mission). Annual distributions from the trust are reported as investment income and classified as unrestricted or temporarily restricted based upon donor designations. The beneficial interests in perpetual trusts are reported at fair value, with the change in fair value reported as an increase or decrease in permanently restricted net assets. Given the nature of the promises, as well as the inability to compute the present value of the perpetual income stream of the trusts, the Mission has recorded its proportionate share of the total fair market value of the principal trust assets upon which its income distributions are based as permanently restricted net assets. The change in value of split interest agreements and perpetual trusts for the years ended June 30, 2016 and 2015 were decreases amounting to $24,390 and $18,541, respectively. Income from distributions from such trusts amounted to $13,169 and $30,843, for the years ended, respectively. 8

11 Inventory Inventory consists principally of donated goods for sale in the Mission s retail thrift stores and is recorded at estimated fair value. Donated Services and Materials A significant number of volunteers have donated a substantial amount of time to the Mission s program services, management and fundraising campaigns. No amounts have been reflected in the financial statements for those services since they do not meet the criteria for recognition. The Mission receives a significant amount of food donations from food banks, organizations and individuals. The Mission recognizes the estimated fair value of the food donations in their statements by using a value per meal served and subtracting out the costs of food purchases. In addition, the Thrift Store programs receive substantial donations of materials and clothing that are recognized at estimated fair value. Advertising Expense The Mission follows the policy of charging the costs of advertising to expense when the advertisements are first displayed for the Mission s programs. Advertising expense for the years ended June 30, 2016 and 2015 $89,338 and $92,638, respectively. 3. INVESTMENTS Investments at June 30, consisted of the following: Fair Fair Cost Value Cost Value Money market $ 50 $ 50 $ 47 $ 47 Mutual funds 344, , , ,871 $ 344,354 $ 380,043 $ 496,869 $ 561, CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Mission to concentrations of credit risk consist of cash and grants receivable. In an attempt to limit its credit risk, the Mission places all interest bearing funds with high credit quality financial institutions. This limits the exposure to credit risk. 5. DEFERRED RENT ASSET The Mission leases space on their roof for a cellular tower to AT&T under a fifteen year non-cancelable operating lease. Monthly payments began at $1,285 and escalate to $1,861 over the lease term. Rental income is recognized on a straight-line basis and amounted to $17,005 and $ 17,407, respectively. The cumulative difference between rental income recognized and rental payments received resulted in a deferred rent asset of $5,421 and $7,942 for the years ended, respectively. Future minimum rent payments for the years ended June 30, are as follows: Amount 2017 $ 21, ,885 $ 36,714 9

12 6. LINE OF CREDIT The Mission has a $200,000 revolving commercial line of credit from TD Bank that is renewed on an annual basis. The line is secured by a first mortgage on the real estate located at th Street, Philadelphia, Pennsylvania. The interest rate is the prime rate as published by the Wall Street Journal on the applicable date plus 2.5 percent, with a minimum rate of 4 percent. For the years ended June 30, 2016 and 2015, the outstanding balance on the line was $149,000 and $-0-, respectively. The Mission also has available a $250,000 revolving commercial line of credit from Citizen Bank that is renewed on an annual basis. The line is secured by a first mortgage on the real estate located at Wayne Avenue, Philadelphia, Pennsylvania. The interest rate is the prime rate as published by the Wall Street Journal on the applicable date plus 1 percent. For the years ended, the outstanding balances on the line were $246,221 and $44,000, respectively. 7. LONG-TERM DEBT The Mission s obligations under notes payable consist of the following: Note payable to individual secured by real estate at 32 West Lincoln Highway, Penndel, Pennsylvania. Monthly payments of $2,640 consisting of principal and interest at 5 percent, matures February 1, $ 327,619 $ 342,418 Loan payable to Lafferty Chevrolet Company secured by 2015 Chevrolet Silverado truck. Monthly payments of $431 consisting of principal and interest at 3.89 percent, matures July 10, ,126 23, , ,866 Less: Current portion of note payable 20,170 17,561 $ 326,575 $ 348,305 Future scheduled maturities of notes payable are as follows: Amount 2017 $ 20, , , , ,116 Thereafter $ 240, ,745 10

13 8. NET ASSETS Components of unrestricted net assets at June 30 were as follows: 11 Undesignated- operations $ 2,512,692 $ 3,034,293 Components of temporarily restricted net assets at June 30, were as follows: Split interest agreement- time restricted $ 278,788 $ 290,112 Program restrictions 220, ,497 $ 499,558 $ 616,609 Temporarily restricted net assets were released into unrestricted net assets in the amount of $94,512 and $31,203 for the years ended, respectively. Permanently restricted net assets at June 30, were as follows: Donor-restricted endowment funds $ 148,500 $ 148,500 Beneficial interest in perpetual trusts 241, ,052 $ 390,486 $ 403, ENDOWMENT The Mission s endowment consists of a fund restricted in perpetuity to continue the purpose of Sunday Breakfast Rescue Mission. As required by U.S. generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Endowment net asset activity and type of fund at June 30, were as follows: 2016 Permanently Unrestricted Restricted Total Endowment net assets, July 1, 2015 $ 93,559 $ 148,500 $ 242,059 Unrealized gain on investments 4, ,486 Withdrawals (47,000) -- (47,000) Endowment net assets, June 30, 2016 $ 51,045 $ 148,500 $ 199, Permanently Unrestricted Restricted Total Endowment net assets, July 1, 2014 $ 95,385 $ 148,500 $ 243,885 Unrealized loss on investments (1,826) -- (1,826) Withdrawals Endowment net assets, June 30, 2015 $ 93,559 $ 148,500 $ 242,059

14 10. IN-KIND DONATIONS For the years ended, the Mission received the following in-kind donations at estimated fair value: Materials and clothing $ 639,837 $ 622,413 Food, other goods and services 239, ,402 Total $ 879,517 $ 796, FAIR VALUE MEASUREMENTS The Mission uses fair value measurements to record fair value adjustments to investments and to determine fair value disclosures. For additional information on how the Mission measures fair value refer to Note 1. The following table presents the Mission s fair value hierarchy for those investments measured at fair value on a recurring basis for the years ended Level 1 Level 2 Level 3 Total Mutual funds $ 380,043 $ -- $ -- $ 380,043 Split and beneficial interests in trusts , ,774 $ 380,043 $ -- $ 520,774 $ 900, Level 1 Level 2 Level 3 Total Mutual funds $ 561,918 $ -- $ -- $ 561,918 Split and beneficial interests in trusts , ,164 $ 561,918 $ -- $ 545,164 $ 1,107,082 The change in Level 3 assets for the years ended are as follows: Beneficial Interest in Split Perepetual Interest Trusts Total Beginning balance, July 1, 2015 $ 290,112 $ 255,052 $ 545,164 Decrease in value of split and beneficial interests in trusts (11,324) (13,066) (24,390) Ending balance, June 30, 2016 $ 278, ,986 $ 520,774 Beneficial Interest in Split Perepetual Interest Trusts Total Beginning balance, July 1, 2014 $ 299,299 $ 264,406 $ 563,705 Decrease in value of split and beneficial interests in trusts (9,187) (9,354) (18,541) Ending balance, June 30, 2015 $ 290, ,052 $ 545,164 12

15 12. SUBSEQUENT EVENTS The Mission has evaluated subsequent events occurring after the statement of financial position date through the date of January 4, 2017 which is the date the financial statements were available to be issued. Based on this evaluation, the Mission has determined that no subsequent events have occurred which require disclosure in or adjustment to the financial statements. 13