THE LOS ANGELES FREE CLINIC, dba THE SABAN FREE CLINIC AND LOS ANGELES FREE CLINIC HOLLYWOOD ENDOWMENT CORPORATION

Transcription

1 THE LOS ANGELES FREE CLINIC, dba THE SABAN FREE CLINIC AND LOS ANGELES FREE CLINIC HOLLYWOOD ENDOWMENT CORPORATION CONSOLIDATED FINANCIAL STATEMENTS AND SINGLE AUDIT REPORTS

2 TABLE OF CONTENTS INDEPENDENT AUDITORS' REPORT 1-2 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statement of Financial Position 3 Consolidated Statement of Activities 4 Consolidated Statement of Functional Expenses 5 Consolidated Statement of Cash Flows SINGLE AUDIT REPORTS AND SCHEDULES Page 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 Report on Compliance with Requirement's Applicable to Each Major Program and on Internal Control Over Compliance in Accordance With OMB Circular A Schedule of Expenditures of Federal Awards 27 Notes to Schedule of Expenditures of Federal Awards 28 Schedule of Findings and Questioned Costs Corrective Action Plan Summary Schedule of Prior Audit Findings 35

3

4

5 CONSOLIDATED STATEMENT OF FINANCIAL POSITION JUNE 30, 2010 ASSETS Current Assets Cash and cash equivalents $ 739,859 Investments 11,156,235 Contracts receivable, net 1,496,469 Due from Friends of The Saban Free Clinic 276,615 Inventories 540,059 Prepaid expenses and other current assets 54,758 14,263,995 Property and Equipment, net 6,487,801 Permanently Restricted Investments 984,558 LIABILITIES AND NET ASSETS $ 21,736,354 Current Liabilities Current portion of notes payable $ 27,522 Accounts payable and accrued expenses 834, ,521 Notes Payable, net of current portion 892,069 Total Liabilities 1,754,590 Commitment and Contingencies (Notes 7 and 12) Net Assets Unrestricted Investment in land and building 5,024,181 General 2,342,143 Board designated 425,000 Unrestricted 7,791,324 Temporarily restricted 11,190,440 Permanently restricted 1,000,000 Total Net Assets 19,981,764 $ 21,736,354 See accompanying notes to consolidated financial statements. 3

6 CONSOLIDATED STATEMENT OF ACTIVITIES Temporarily Restricted Permanently Restricted Unrestricted Total Revenue Government contracts $ 6,991,696 $ - $ - $ 6,991,696 Friends of The Saban Free Clinic 2,617, ,617,757 Foundations and corporations 629,569 1,496,337-2,125,906 Contributed pharmaceuticals, rent and laboratory services 1,844, ,844,866 Contributions 633, ,096 Special events, net of direct benefit costs of $36, , ,973 Net Assets Released from Restriction 1,159,537 (1,159,537) ,978, ,800-14,315,294 Revenue, gains and losses Interest and dividends 386,597 29, ,170 Realized gains on sales of investments 312, ,127 Unrealized gains on investments 359, ,830 Miscellaneous 36, ,482 1,095,036 29,573-1,124,609 15,073, ,373-15,439,903 Functional Expenses Program Services Beverly Clinic 3,871, ,871,123 Hollywood Clinic 2,064, ,064,265 Hollywood Wilshire Health Clinic 2,651, ,651,445 Wallis Annenberg Center 1,634, ,634,737 Dental Clinic 1,370, ,370,972 Behavioral Health 635, ,449 Outreach and Education 565, ,015 12,793, ,793,006 Management and General 619, ,088 Fundraising 850, ,419 14,262, ,262,513 Changes in Net Assets 811, ,373-1,177,390 Net Assets, beginning of year 6,980,307 10,824,067 1,000,000 18,804,374 Net Assets, end of year $ 7,791,324 $11,190,440 $ 1,000,000 $19,981,764 See accompanying notes to consolidated financial statements. 4

7 Beverly Clinic THE LOS ANGELES FREE CLINIC, dba THE SABAN FREE CLINIC AND Hollywood Clinic CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Hollywood Wilshire Health Clinic Wallis Annenberg Center Dental Clinic Behavioral Health Outreach and Education Total Program Services Management and General Fundraising Total Personnel Expenses Salaries $ 1,988,383 $ 961,470 $ 1,321,570 $ 863,969 $ 872,790 $ 423,511 $ 346,711 $ 6,778,404 $ 440,412 $ 451,125 $ 7,669,941 Payroll taxes 143,263 70,680 96,828 62,359 64,142 30,337 24, ,361 33,013 33, ,389 Employee benefits 180,517 87, ,794 76,545 72,730 39,272 32, ,030 36,268 42, ,463 2,312,163 1,119,583 1,542,192 1,002,873 1,009, , ,202 7,883, , ,305 8,919,793 Other Expenses Bad debt 21,490 9,829 13,634 11,062 8,173 5,848 4,791 74,827 2,818 5,287 82,932 Consultant and subcontractors 20,727 82,577 14,355 5,791 4,976 8,519 6, ,873 25,249 78, ,896 Depreciation and amortization 112,937 51,517 69,114 52,912 40,922 27,151 26, ,307 14,384 25, ,662 Equipment and facility maintenance` 5,521 4,935 4,642 1,025 16, , ,059 Facility rent ,442 90, , , ,384 Insurance 53,971 24,124 29,845 22,715 18,102 11,772 12, ,696 6,246 13, ,060 Interest 1,179 1, , ,438 Laboratory services 304, , , ,808 6, , ,254 Legal and professional fees 26,299 12,123 16,200 12,850 9,728 6,726 5,541 89,467 3,324 6,167 98,958 Maintenance and security 124,373 52,897 26,656 20,667 25,409 18,415 19, ,374 11,364 9, ,767 Office 95,021 43,501 59,208 32,848 27,808 18,018 21, ,698 25,129 47, ,924 Printing and publications 33,657 17,516 29,179 10,535 9,679 8,030 9, ,324 3,879 35, ,817 Program supplies 680, , , , ,644 16,903 33,018 1,986,363 1,100 6,306 1,993,769 Telephone and utilities 72,404 35,594 25,269 17,333 19,307 15,329 16, ,860 7,800 15, ,371 Travel 6,317 2,955 3,474 2,117 1,469 4,388 2,750 23,470 7,803 2,156 33,429 $ 3,871,123 $ 2,064,265 $ 2,651,445 $ 1,634,737 $ 1,370,972 $ 635,449 $ 565,015 $12,793,006 $ 619,088 $ 850,419 $14,262,513 See accompanying notes to consolidated financial statements. 5

8 CONSOLIDATED STATEMENT OF CASH FLOWS Cash Flows from Operating Activities Changes in net assets $ 1,177,390 Adjustments to reconcile changes in net assets to net cash provided by operating activities Depreciation and amortization 421,662 Realized gains on sales of investments (312,127) Unrealized gains on investments (359,830) Increase in allowance for doubtful accounts 12,484 Decrease in contributed pharmaceuticals 414,919 Discount on pledge (97,087) (Increase) decrease in operating assets Contracts receivable (795,548) Due from Friends of The Saban Free Clinic 326,751 Inventories (105,067) Prepaid expenses and other current assets 12,912 Increase (decrease) in operating liabilities Accounts payable and accrued expenses 41,175 Net Cash Provided by Operating Activities 737,634 Cash Flows from Investing Activities Proceeds from sales of investments 3,607,772 Purchases of investments (7,268,157) Purchases of property and equipment (442,960) Net Cash Used in Investing Activities (4,103,345) Cash Flows from Financing Activities Principal payments on notes payable (26,710) Contribution intended for long-term purposes 3,333,334 Net Cash Provided by Financing Activities 3,306,624 Net Decrease in Cash and Cash Equivalents (59,087) Cash and Cash Equivalents, beginning of year 798,946 Cash and Cash Equivalents, end of year $ 739,859 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash Paid during the Year for Interest $ 6,438 See accompanying notes to consolidated financial statements. 6

9 NOTE 1 - NATURE OF OPERATIONS The Saban Free Clinic (the "Clinic" (legally known as The Los Angeles Free Clinic) and Affiliate (collectively, the "Organization") serve patients at three locations: The Beverly Clinic, located in the Seniel Ostrow Building on Beverly Boulevard. The S. Mark Taper Hollywood Clinic on Hollywood Boulevard. The Hollywood Wilshire Health Clinic and the Wallis Annenberg Children and Family Health Center on Melrose Avenue, a co-location with the County of Los Angeles Department of Health Services. The Organization operates as a free clinic, which means that patients are not charged for services. Costs are covered by state and local agencies and private funders. Services include: Medical and dental care. Mental health services, including case management, counseling and crisis intervention. HIV testing and counseling. Prenatal services. Family planning. Wellness programs, including chronic disease management, nutrition, yoga and general health education. Prevention programs for teen pregnancy, HIV, and alcohol and drug abuse. NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounting Standards Codification The Organization, as required by the Financial Accounting Standards Board, has implemented the new codification as the source of authoritative accounting principles generally accepted in the United States of America, for financial statements with interim and annual periods after September 15, All existing and future accounting pronouncements will now be arranged by topics and referred to within these consolidated financial statements as topics within the Accounting Standards Codification ("ASC"). 7

10 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Tax Status The Clinic and The Saban Free Clinic Hollywood Center Endowment Corporation (the "Endowment") are nonprofit public benefit corporations organized under the laws of California and, as such, are exempt from federal and state income taxes under Internal Revenue Code ("IRC") Section 501(c)(3) and corresponding state provisions. As of July 1, 2009, the Organization has adopted the changes to ASC Topic Income Taxes, which requires the Organization to evaluate its tax positions and recognize a liability for any positions that would not be considered more likely than not to be upheld under a tax authority examination. If such issues exist, the Organization s policy will be to recognize any tax liability so recorded, including applicable interest and penalties, as a component of income tax expense. The Organization s federal income tax and informational returns for tax years ending June 30, 2007 and subsequent remain subject to examination by the Internal Revenue Service. The returns for California, the Organization s most significant jurisdiction, remain subject to examination by the California Franchise Tax Board for tax years ending June 30, 2006 and subsequent. Basis of Consolidation The Clinic has direct administrative control of the funds held by the Endowment. The Endowment is a separate entity created in November 1991 for the purpose of providing income from its investments to be used solely for the operations of the S. Mark Taper Hollywood Clinic, owned and operated by the Clinic. Accordingly, the Endowment's financial activity is consolidated with that of the Clinic. All significant intercompany accounts and transactions have been eliminated. Financial Statement Presentation The Organization reports information regarding its consolidated financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Unrestricted Net Assets, Investment in Land and Buildings - Represents the investment in land and building, net of accumulated depreciation, and net of the related notes payable secured by the land and building (see Note 7). 8

11 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial Statement Presentation (Continued) Unrestricted Net Assets, General - Include contributions, fundraising, fees, sales and other forms of revenue that are not restricted by the donor or grantor as well as expenditures related to the general operations of the Organization. Unrestricted Net Assets, Board designated - Include unrestricted net assets the Organization's Board of Directors has segregated for future use. Temporarily Restricted Net Assets - Include contributions that are temporarily restricted by the donor or grantor. When the restriction expires, the net assets of this classification are reclassified to unrestricted net assets. Restricted contributions where restrictions are met in the same reporting period are classified as unrestricted. Permanently Restricted Net Assets - Include the net assets of the Endowment that have been restricted by the donor indefinitely and cannot be expended by the Organization. Income from the investments of the Endowment can be applied solely to the operations of the Hollywood Clinic, subject to an annual limit of 5% of the Endowment's assets. Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from these estimates. Cash and Cash Equivalents The Organization considers all highly liquid instruments with an original maturity of three months or less to be cash equivalents. The Endowment holds investments in cash and money market funds and includes these balances as "permanently restricted investments" in the consolidated statement of financial position due to the restricted nature of the assets (see Note 3). 9

12 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments Investments are included in the Statement of Financial Position as follows: Unrestricted Investments $ 11,156,235 Permanently Restricted Investments 984,558 $ 12,140,793 Investments are recorded at fair value. Investments consist of governmental and corporate bond mutual funds, global debt mutual funds, income equity mutual funds, growth equity mutual funds, international equity mutual funds, and a hedge fund. Cash included in money market funds held as part of investment portfolios are presented as investments rather than cash. ASC Topic Fair Value Measurements and Disclosures, which defines fair value, establishes a framework for measuring fair value in accordance with accounting principles generally accepted in the U.S., and expands disclosures about fair value measurements. Under this topic, the Organization must report its investments at fair value among three categories of price inputs available. These categories of inputs are quoted prices in active markets for identical assets (Level 1); significant other observable inputs (Level 2); and significant unobservable inputs (Level 3). At June 30, 2010, investments were considered to consist of both Level 1 and Level 3 amounts as follows: Quoted Prices in Active Description Value at June 30, 2010 Markets for Identical Assets (Level 1) Significant Unobservable Inputs (Level 3) Governmental/corporate bond mutual fund $ 5,271,096 $ 5,271,096 $ - Global debt mutual fund 1,850,253 1,850,253 - Income equity mutual fund 1,128,870 1,128,870 - Growth equity mutual fund 1,454,224 1,454,224 - International equity mutual fund 1,592,230 1,592,230 - Hedge fund 600, ,000 Cash and money market funds 244, ,120 - Total $ 12,140,793 $ 11,540,793 $ 600,000 10

13 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments (Continued) Level 3 investment activity during the year ended June 30, 2010 is as follows: Hedge Fund Beginning Balance $ - Purchases 600,000 Ending Balance $ 600,000 Investments in governmental and corporate bond mutual funds, global debt mutual funds, income equity mutual funds, growth equity mutual funds, international equity mutual funds, and the hedge fund (collectively "Investment Funds") are valued based on the net asset value as published or otherwise reported by Investment Funds' administrator. Investment Funds in which the Organization invests generally value securities traded on a national securities exchange or reported on a national market at the last reported sales price on the day of the valuation. The estimated fair value of Investments Funds in underlying investment companies, which may include securities that are not readily available, are determined by the underlying Investment Funds' administrators and may not reflect amounts that could be realized upon immediate sale, nor amounts that may be ultimately realized. Accordingly, the estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments. Contracts receivable Contracts receivable are anticipated to be collected during fiscal year end June 30, 2011; however, management has established an allowance for doubtful accounts based on specific risks. Inventories Inventories of medical supplies and pharmaceuticals are valued at the lower of cost (firstin, first-out) or market. Contributed pharmaceuticals are valued at their estimated cost at the time of their contribution and are reported as temporarily restricted until distributed to restricted recipients. 11

14 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment Purchases of fixed assets are recorded at cost. Donated items are recorded at fair value when received. Depreciation and amortization on both purchased and donated items are recorded using the straight line method over the shorter of the estimated useful life of the related asset or the term of the lease for leasehold improvements as follows: Buildings and improvements Machinery and equipment Furniture and fixtures 40 years 5 years 5 years Normal repairs and maintenance are expensed as incurred, whereas significant charges that materially increase values or extend useful lives are capitalized and depreciated over the estimated useful lives of the related assets. Impairment of Long-lived Assets Management reviews each asset or asset group for impairment whenever events or circumstances indicate that the carrying value of an asset or asset group may not be recoverable, but at least annually. The review of recoverability is based on management's estimate of the undiscounted future cash flows that are expected to result from the asset's use and eventual disposition. These cash flows consider factors such as expected future operating income, trends and prospects, as well as the effects of competition and other factors. If an impairment event exists due to the projected inability to recover the carrying value of an asset or asset group, an impairment loss is recognized to the extent that the carrying value exceeds estimated fair value. No impairment provision was recorded by the Organization during the year. Contributed Pharmaceuticals, Rent and Laboratory Services The values of contributed pharmaceuticals, rent and laboratory services are as follows: Inventories (pharmaceuticals) $ 987,035 Laboratory services 697,687 Rent (Hollywood Wilshire Health Clinic) 160,144 $ 1,844,866 12

15 NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Contributed Pharmaceuticals, Rent and Laboratory Services (Continued) No amounts were included in the accompanying consolidated financial statements for the fair value of contributed medical and legal services as such services, primarily contributed by physicians, dentists and attorneys, would not otherwise have been purchased by the Organization if they had not been contributed. During the year, management estimated medical, dental and legal professionals and other volunteers contributed approximately 12,618 hours of volunteer services to support the medical and dental clinics, administration and fundraising. Concentration of Risk Occasionally the Organization's cash balances exceed the FDIC insured limit of $250,000. The Organization received $4,486,845 and $1,693,785, respectively, from the County of Los Angeles Department of Health Services and the State of California Department of Health Services, comprising 30% and 11%, respectively, of the Organization's revenue during the year. At June 30, 2010, these two entities comprised 28% and 9%, respectively, of the balance in contracts receivable. Subsequent Events The Organization has evaluated events subsequent to June 30, 2010, to assess the need for potential recognition or disclosure in the consolidated financial statements. Such events were evaluated through November 12, 2010, the date the consolidated financial statements were available to be issued. Based upon this evaluation, it was determined no subsequent events occurred that require recognition or additional disclosure in the financial statements. 13

16 NOTE 3 - INVESTMENTS Investments are recorded at fair values (See Note 2) and consist of the following: Governmental/corporate bond mutual fund $ 5,271,096 Global debt mutual fund 1,850,253 Income equity mutual fund 1,128,870 Growth equity mutual fund 1,454,224 International equity mutual fund 1,592,230 Hedge fund 600,000 Cash and money market funds 244,120 Activity in the investments during the year was as follows: $ 12,140,793 Balance, beginning of year $ 7,808,451 Purchases of investments 7,268,157 Proceeds from sales of investments (3,607,772) Realized gains on sales of investments 312,127 Unrealized gains on investments 359,830 Balance, end of year $ 12,140,793 At June 30, 2010, investments totaling $984,558 are included in permanently restricted net assets. NOTE 4 - CONTRACTS RECEIVABLE Contracts receivable, consisting of amounts due from public and private funding agencies for services performed during the year, are as follows: Contracts receivable $ 1,520,732 Allowance for doubtful accounts (24,263) $ 1,496,469 14

17 NOTE 5 - GRANTS RECEIVABLE Included in contract receivables are $583,275 of grant receivables. During the year ended June 30, 2010, the Clinic recognized $350,000 of grant revenue related to a longterm pledge made in a prior year. At the time of the pledge there was doubt as to whether the grantor would fulfill the pledge in its entirety. Based upon payment history management has re-evaluated the collectibility and has recognized the remaining balance due. The grant's discounted value was not considered material and as such it was recognized at the undiscounted value. The grant receivables are scheduled for payment as follows: Pledge to be collected in one year or less $ 333,275 Pledge to be collected in one - five years 250,000 $ 583,275 NOTE 6 - PROPERTY AND EQUIPMENT Property and equipment consist of the following: Land $ 1,407,981 Buildings and improvements 6,780,363 Machinery and equipment 2,626,914 Furniture and fixtures 762,996 Leasehold improvements 76,829 11,655,083 Accumulated depreciation and amortization (5,167,282) $ 6,487,801 NOTE 7 - LINE OF CREDIT AND NOTES PAYABLE Line of Credit The Clinic maintains an unsecured $900,000 revolving line of credit with a bank to provide for unexpected cash demands. The line of credit bears interest at the bank's prime rate (3% at June 30, 2010) with interest payable monthly, expiring in March There was no balance outstanding under this line at June 30,

18 NOTE 7 - LINE OF CREDIT AND NOTES PAYABLE (Continued) Notes Payable Details of the Clinic's notes payable are as follows: Mortgage, secured by a first deed of trust on the Hollywood Clinic property, payable to California Health Facilities Financing Authority in monthly installments of $2,762, including interest at 3%, through February $ 200,064 Residual receipts loan, noninterest-bearing, secured by a second deed of trust on the Hollywood Clinic property, payable annually to the Community Redevelopment Agency of the City of Los Angeles over a term of 20 years through June 2015 exclusively from residual receipts, as defined by the loan agreement. There were no residual receipts for the year. At the end of the term, any outstanding balance shall be deemed paid in total if the Clinic has annually provided the required financial statements and has either made payments of residual receipts or has shown there were no payments required. 719, ,591 Current portion (27,522) Future payments on the notes payable are as follows: Year Ending June 30, $ 892, $ 27, , , , ,498 Thereafter 51,962 These obligations have various financial and operating covenants. $ 919,591 16

19 NOTE 8 - ENDOWMENTS The Board has interpreted California's UPMIFA 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 instrument 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 organization in a manner consistent with the standard of prudence prescribed by UPMIFA. The Organization has adopted an endowment investment policy, approved by the Board, for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of these endowment assets over the long term. The investment policy establishes an achievable return objective through diversification of asset classes. The objective is to grow the aggregate portfolio value at the rate of inflation (2% to 3%) over the investment horizon, net of spending 4% to 5% of income. Actual returns in any given year may vary from this amount. To satisfy its long-term rate of return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places an emphasis on equity investments and fixed income securities to achieve its long-term rate of return objectives within prudent risk parameters. As of June 30, 2010, all of the Organization's endowments were restricted as follows: Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ 10,029,573 $ 1,000,000 $ 11,029,573 Unrestricted net assets presented as "Board-Designated" have been determined to be more appropriately reserve funds and, therefore, not included above. 17

20 NOTE 8 - ENDOWMENTS (Continued) The Board has adopted a spending policy that provides for 5% of the average of the fair values of each endowment over the past two fiscal years. In any given year if total returns, including ordinary income and realized gains, are less than the target annual distribution, the distribution may be made from previously accumulated realized income and gains. Additionally, the Board may authorize distributions beyond this amount if deemed prudent and lawful. 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 UPMIFA requires the Organization to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $15,442 as of June 30, These deficiencies resulted from unfavorable market fluctuations. This fluctuation is anticipated to be temporary and, therefore, the Board has not appropriated any funds for expenditure from the permanently restricted endowment. Changes in endowment net assets are as follows: Temporarily Restricted Permanently Restricted Total Balance, $ 9,902,913 $ 1,000,000 $ 10,902,913 Investment Income 29,573-29,573 Contributions 97,087-97,087 Balance, June 30, 2010 $ 10,029,573 $ 1,000,000 $ 11,029,573 18

21 NOTE 9 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets and releases during the year are as follows: Released from Restrictions Balance, June 30, 2010 General medicine $ 76,375 $ 98,575 Pharmaceuticals 675, ,642 Health information technology 15,885 - Dental clinic 83, ,150 Education and outreach 12,500 12,500 The Saban Family Foundation - 10,000,000 HIV Testing 47,667 14,333 Breast cancer screening 32,500 17,500 Chronic disease management 95,833 79,167 Vision care - 25,000 Hollywood High School 45,000 45,000 Behavioral health 25,000 75,000 Hollywood Endowment - 29,573 Time-restricted funds 50, ,000 $ 1,159,537 $ 11,190,440 NOTE 10 - RETIREMENT PLAN The Clinic maintains a defined contribution IRC Section 403(b) retirement plan covering all regular employees. During the year, the Clinic ceased matching contributions and did not contribute to the plan. NOTE 11 - RELATED PARTY TRANSACTIONS The Clinic is the designated beneficiary of Friends of The Saban Free Clinic ("Friends"), a self-supporting, independently operated nonprofit organization. Friends was established to raise funds to support the Clinic. The Clinic receives an allocation from the annual income of Friends. During the year, this annual income allocation comprised $1,799,964 of general support. Friends also donated $817,793 with respect to the continued operation of the Wallis Annenberg Children and Family Health Center. 19

22 NOTE 11 - RELATED PARTY TRANSACTIONS (Continued) The Clinic provides fundraising, accounting and management services to Friends. The value of these services, which has not been estimated, is not reimbursed to the Clinic. NOTE 12 - GOVERNMENT CONTRACTS AND CONTINGENCIES Government contracts require the fulfillment of certain conditions as set forth in the contracts. Failure to fulfill the conditions could result in the return of funds to the funding source. Although this is a possibility, the Organization's Board deems the contingency remote since, by accepting a contract, the Board is acknowledging the requirements and terms of the funding source. 20