ASHEVILLE HUMANE SOCIETY, INC.

Transcription

1 ASHEVILLE HUMANE SOCIETY, INC. Asheville, North Carolina Financial Statements and Supplementary Information Year Ended June 30, 2016

2 ASHEVILLE HUMANE SOCIETY, INC. TABLE OF CONTENTS Page INDEPENDENT AUDITORS REPORT 1-2 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6-16 SUPPLEMENTARY INFORMATION Schedule of Functional Expenses 17

3 To the Board of Directors Asheville Humane Society, Inc. INDEPENDENT AUDITORS REPORT We have audited the accompanying financial statements of Asheville Humane Society, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities 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 from 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 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.

4 To the Board of Directors Asheville Humane Society, Inc. Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Asheville Humane Society, Inc. as of June 30, 2016, 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. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of functional expenses on page 17 is presented for purposes of additional analysis and is not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole. Asheville, North Carolina November 15, 2016

5 ASHEVILLE HUMANE SOCIETY, INC. Statement of Financial Position June 30, 2016 Assets Current assets: Cash and equivalents $ 698,913 Short-term investments 250,000 Accounts receivable 59,338 Promises to give, current portion 61,900 Prepaid expenses 20,491 Inventories 8,161 Total current assets 1,098,803 Promises to give, net of current portion 62,350 Beneficial interest in funds held by a community foundation 38,906 Property and equipment, net 2,876,121 Total assets $ 4,076,180 Liabilities and Net assets Current liabilities: Current portion of obligation under capital lease $ 5,182 Accounts payable 32,297 Accrued liabilities 30,661 Accrued compensated absences 34,006 Total current liabilities 102,146 Obligation under capital lease, net of current portion 23,642 Total liabilities 125,788 Net assets: Unrestricted: Investment in property and equipment 2,876,121 Undesignated 484,384 Total unrestricted 3,360,505 Temporarily restricted 554,887 Permanently restricted 35,000 Total net assets 3,950,392 Total liabilities and net assets $ 4,076,180 The accompanying notes are an integral part of the financial statements. 3

6 ASHEVILLE HUMANE SOCIETY, INC. Statement of Activities Year Ended June 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total Revenues and other support Contributions and grants $ 1,043,682 $ 451,338 $ $ 1,495,020 Local government contract revenue 815, ,000 Special events 241, ,618 Program service revenue 173, ,872 In-kind contributions 288, ,320 Sales 35,952 35,952 Other income 1,628 1,628 Net assets released from restrictions 303,944 (303,944) Total revenues and other support 2,904, ,394 3,051,410 Expenses Program services 2,386,903 2,386,903 Management and general 138, ,916 Fundraising 495, ,124 Total expenses 3,020,943 3,020,943 Increases (decrease) in net assets before other gains (losses) (116,927) 147,394 30,467 Other gains (losses) Net losses on investments (27) (27) Investment income 1,005 1,005 Net realized and unrealized losses on beneficial interest in funds held by a community foundation (88) (1,590) (1,678) Total other gains (losses) 890 (1,590) (700) Increase (decrease) in net assets (116,037) 145,804 29,767 Net assets at beginning of year 3,476, ,083 35,000 3,920,625 Net assets at end of year $ 3,360,505 $ 554,887 $ 35,000 $ 3,950,392 The accompanying notes are an integral part of the financial statements. 4

7 ASHEVILLE HUMANE SOCIETY, INC. Statement of Cash Flows Year Ended June 30, 2016 Cash flows from operating activities Increase in net assets $ 29,767 Adjustments to reconcile change in net assets to net cash used by operating activities: Depreciation and amortization 136,573 Net losses on investments 27 Net realized and unrealized losses on beneficial interest in funds held by a community foundation 1,678 Receipt of donated stock (5,636) Gain on reduction of capital lease obligation (4,920) Changes in working capital - sources (uses) Accounts receivable 7,020 Promises to give (122,756) Prepaid expenses 6,759 Inventories (112) Accounts payable (32,541) Accrued liabilities (38,467) Accrued compensated absences 12,370 Net cash used by operating activities (10,238) Cash flows from investing activities Proceeds from investments 5,609 Change in beneficial interest in funds held by a community foundation (88) Purchase of property and equipment (9,606) Purchase of short-term investments (250,000) Net cash used by investing activities (254,085) Decrease in cash and equivalents (264,323) Cash and equivalents at beginning of year 963,236 Cash and cash equivalents at end of year $ 698,913 The accompanying notes are an integral part of the financial statements. 5

8 ASHEVILLE HUMANE SOCIETY, INC. Notes to Financial Statements June 30, 2016 Note 1 - Summary of Significant Accounting Policies Organization Asheville Humane Society, Inc. (the Organization) is a non-profit corporation organized under the laws of the State of North Carolina. The organization is dedicated to promoting compassionate treatment of animals in the Asheville, North Carolina community through education, sheltering and adoption. Formed in 1984 as Buncombe County Friends for Animals, the organization operated as the governing body for the County Pet Adoption Center and Animal Shelter, previously operated by the County. The Organization has operated the Shelter since In 2010, the Organization, in partnership with Buncombe County, opened the Animal Care Campus. The Campus comprises two facilities: Asheville Humane Society Adoption and Education Center and the Buncombe County Animal Shelter. The two facilities operate side by side in a public-private partnership working collaboratively to eradicate animal homelessness. Basis of Accounting The accompanying financial statements have been prepared on the accrual basis in accordance with generally accepted accounting principles. Income Tax Status The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Organization s tax-exempt purpose is subject to taxation as unrelated business income. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under section 509(a)(2). The Organization has also been classified as a publicly-supported charitable organization and is exempt from state taxes under North Caroline General Statute (a). Basis of Presentation The Organization reports information regarding its financial position and activities according to three classes of net assets that are based upon the existence or absence of restrictions on use that are placed by its donors: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. 6

9 Note 1 - Summary of Significant Accounting Policies (continued) Basis of Presentation (continued) Unrestricted net assets are resources available to support operations. The only limits on the use of unrestricted net assets are the broad limits resulting from the nature of the Organization, the environment in which it operates, the purposes specified in its corporate documents and its application for tax-exempt status, and any limits resulting from contractual agreements with creditors and others that are entered into in the course of its operations. Temporarily restricted net assets are resources that are restricted by a donor for use for a particular purpose or in a particular future period. The Organization s unspent contributions are reported in this class if the donor limited their use, as well as the noncurrent portions of promises to give. Permanently restricted net assets are resources whose use is limited by donor-imposed restrictions that neither expire by being used in accordance with a donor s restriction nor by the passage of time. Recognition of Donor Restrictions Contributions that are restricted by the donor are reported as increases in unrestricted net assets, if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a donor s restriction is satisfied, either by using the resources in the manner specified by the donor or by the passage of time, the expiration of the restriction is reported in the financial statements by reclassifying the net assets from temporarily restricted to unrestricted net assets. Cash and Equivalents For the purposes of the statement of cash flows, the Organization considers highly liquid investments with an initial maturity of three months or less to be cash equivalents. Short-term Investments Short-term investments consist of certificates of deposit with an original maturity exceeding three months. 7

10 Note 1 - Summary of Significant Accounting Policies (continued) Promises to Give Promises to give include unconditional pledges receivable. Conditional promises to give are not recognized in the financial statements until the conditions are substantially met. Generally, unconditional promises to give that are expected to be collected in more than one year are recorded at fair value, which is measured as the present value of their future cash flows. Management believes the present value discount would not be material to the financial statements. In the absence of donor stipulations to the contrary, promises with payments due in future periods are restricted to use after the due date. Management provides for probable uncollectible amounts through a provision for uncollectible promises to give based on the history of amounts written off. Management believes they will collect all of the promises to give and therefore, no provision for uncollectible promises to give as been recorded. Inventories Inventories consist of pet supplies sold in retail. These items are stated at cost, determined by the first-in, first-out method. Investments Investments in marketable equity securities with readily determinable fair values are stated at fair value. The Organization created the Asheville Humane Society Adoption Center Fund with the Community Foundation of Western North Carolina, Inc. (the Foundation) specifically for major expenses (over $5,000) for the preservation and maintenance of the Adoption Center. Unrealized gains and losses are included in the change in net assets in the accompanying statements of activities. Investment Income and Gains Investment income and gains restricted by donors are reported as increases in unrestricted net assets if the restrictions are met (either a stipulated time period ends or a purpose restriction is accomplished) in the reporting period in which the income and gains are recognized. Fair Value Measurements and Disclosures Accounting principles generally accepted in the United States of America establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy are described follows: 8

11 Note 1 - Summary of Significant Accounting Policies (continued) Fair Value Measurements and Disclosures (continued) Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access. Level 2 - Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; and inputs that are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Property and Equipment Property and equipment with a cost of $2,500 or more and an estimated useful life of greater than one year, are capitalized at cost. Deprecation is computed using the straight-line method over a period of three to thirty-nine years. Donated Property and Equipment Donations of property and equipment are recorded as contributions at fair value at the date of the donation. Such donations are reported as increases in unrestricted net assets unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use are reported as restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time. Donated Goods and Services Donated marketable securities are recorded as contributions at their estimated fair value at the date of donation. Donated materials and equipment are reflected as in-kind contributions at their estimated fair value at the date of donation. For the year ended June 30, 2016, the Organization received inkind materials and equipment in the amount of $127,186. 9

12 Note 1 - Summary of Significant Accounting Policies (continued) Donated Goods and Services (continued) Donated services are recognized as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills and would otherwise be purchased by the Organization. The Organization received $161,134 in donated veterinary services during the year ended June 30, Volunteers also provided a variety of tasks that assist the Organization with specific objectives throughout the year that are not recognized as contributions in the financial statements since the recognition criteria were not met. Advertising Advertising costs are not expected to extend beyond the current period and are expensed as incurred. Advertising expense for the year ended June 30, 2016 was $21,885. Expense Allocation Directly identifiable expenses are charged to programs and supporting services. Expenses related to more than one function are charged to programs and supporting services by statistical means. Management and general expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Organization. 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. On an ongoing basis, management evaluates the estimates and assumptions based on new information. Management believes that the estimates and assumptions are reasonable in the circumstances; however, actual results could differ from those estimates. Fair Value of Financial Instruments The fair value of substantially all reported assets and liabilities which represent financial instruments, none of which are held for trading purposes, approximate the carrying values of such amounts. 10

13 Note 2 - Restrictions on Assets Temporarily restricted net assets are available for the following purposes: At June Adoption ambassador $ 2,000 Animal food 1,849 Animal supplies 1,393 ASPCA - general 3,207 ASPCA - other 4,971 Behavior assistant 4,400 Building maintenance 177,695 Community pets funding 47,500 Community pets - Petsmart 62,910 Disaster relief 2,312 Endowment - AHS Adoption Center Fund 3,906 Equine/livestock 93 Grooming supplies and equipment 5,965 Hiking hounds 350 Medical assistance vouchers 15,000 Pet retention medical fund 5,913 Petco grant 46,608 Pit bull spay/neuter w/incentive 1,497 Promises to give, net of current portion 62,350 Safety net 8,064 Spay/neuter 8,338 Spay/neuter - low cost 37,500 Staff payroll 9,407 Staff training 2,360 Temporary boarding & pet deposits 6,100 Transport 33,199 Temporarily restricted net assets $ 554,887 Permanently restricted net assets at June 30, 2016 consist of a partially restricted beneficial interest in funds held by the community foundation established in 2011 in the amount of $40,000, for the preservation and maintenance of the Adoption Center Building. Contributions to the fund are subject to donor restrictions that stipulate the income earnings from the fund may be used for major expenses greater than $5,000, and the original principal of the gift is to be held and invested by the Organization. The donor provided that, in the event of extreme crisis, $5,000 of the principal, plus accrued income, could be withdrawn, not to exceed one time annually. Because of this stipulation, $35,000 of the endowment is presented as permanently restricted and $5,000 less the net loss of $1,094, is temporarily restricted. 11

14 Note 3 - Accounts Receivable Accounts receivable are described as follows: At June Customer receivables $ 52,122 Sales tax receivable 7,216 Accounts receivable $ 59,338 Note 4 - Promises to Give Promises to give represent pledges for the Thrive! Together Campaign. Promises to give are recorded as receivables. Unconditional promises to give consist of the following: At June Due in less than one year $ 61,900 One to five years 62,350 Promises to give $ 124,250 Note 5 - Beneficial Interest in Funds Held by a Community Foundation The beneficial interest in funds held by a community foundation is managed by the Community Foundation of Western North Carolina (Foundation). The fund agreements grant variance power to the Foundation. This power allows the Board of Directors of the Foundation to modify any condition or restriction on distributions of funds, if such conditions or restrictions become unnecessary, incapable of fulfillment, or inconsistent with the charitable needs of the area served by the Foundation. The Organization s beneficial interest in funds held by a community foundation is presented in the financial statements in the aggregate at fair value. These funds are invested in an allocated investment pool at the Foundation. The cumulative unrealized losses on the beneficial interest in endowment funds are as follows: At June Fair market value $ 38,906 Cost 40,000 Cumulative unrealized losses $ (1,094) 12

15 Note 6 - Fair Value Measurements The fair value of each financial instrument described below was measured using the framework for measuring fair value described in Note 1. Short-term investments are certificates for deposit that can be liquidated and used for operations. The assets are considered Level 1 inputs. Due to the nature of beneficial interest in funds held by a community foundation, the assets are considered Level 3 inputs. Year Ended June 30, 2016 Total Level 3 inputs, beginning of year $ 40,496 Investment income 431 Net depreciation (1,678) Fees (343) Level 3 inputs, end of year $ 38,906 Note 7 - Property and Equipment Property and equipment consists of the following: At June Buildings $ 2,935,471 Land 186,000 Furniture and fixtures 263,729 Vehicles 110,137 Computers and equipment 82,639 3,577,976 Less, accumulated depreciation 701,855 Property and equipment $ 2,876,121 Depreciation expense for the year ended June 30, 2016 was $136,573. Note 8 - Line of Credit The organization maintains a $100,000 unsecured line of credit with a local bank to be used for operational needs. The line renews annually in January and the interest rate is the local bank s prime rate plus 0.50%. The terms require monthly interest payments. As of June 30, 2016, there was no balance owed on this line of credit. 13

16 Note 9 - In-kind Contributions, In-kind contributions are summarized as follows: Year Ended June Animal food and supplies $ 67,145 Veterinary services 161,134 General supplies 6,371 Advertising 1,040 Food 52,630 In-kind contributions $ 288,320 Note 10 - Lease Commitments The Organization leases office equipment under operating leases. The leases require various monthly payment amounts and expire through Rent expense for the year ended June 30, 2016 was $4,263. Future minimum payments for the Organization under all operating leases are as follows: Years Ending June $ 3, , Total minimum lease payments $ 8,173 Note 11 - Obligation Under Capital Lease A description of the capital lease is as follows: At June Capital lease obligation on leased equipment at 5.2% interest, with a cost of $33,744, less accumulated depreciation of $7,311 $ 28,824 Less, current portion of capital lease obligation 5,182 Obligation under capital lease, net of current portion $ 23,642 14

17 Note 11 - Obligation Under Capital Lease (continued) Scheduled payments on capital lease obligation for the next five years are as follows: Years Ending June $ 6, , , , ,560 32,800 Less, amounts representing interest (3,976) Present value of minimum lease payments $ 28,824 Note 12 - Retirement Plan The Organization maintains a SIMPLE IRA plan for eligible employees. During the year ended June 30, 2016, the Organization contributed $21,409 to the plan Note 13 - Uninsured Cash Balances The Organization maintains its cash balances at financial institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The uninsured cash balance at June 30, 2016 was $260,716. Note 14 - Summary Disclosure of Significant Contingencies Risk Management The Organization is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees and volunteers; and natural disasters. The Organization carries commercial insurance coverage for risks of loss. Claims have not exceeded coverage in any year since inception. Major Revenues The Organization maintains a contract with Buncombe County to provide shelter services. The Organization received approximately 27% of its operating support from the contract for the year ended June 30, Accounts receivable at June 30, 2016 from the contract was $50,000, and represents 84% of total accounts receivable. 15

18 Note 15 - Related Party Transactions During the year ended June 30, 2016, the Organization received promises to give from members of the Board of Directors and employees totaling $54,400. Note 16 - Income Taxes Uncertain Tax Positions The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code, expect on net income derived from unrelated business activities. The Organization believes that it has appropriate support for any tax provision taken and, as such, does not have any uncertain tax positions material to the financial statements. Note 17 - Subsequent Events Management has evaluated subsequent events through November 15, 2016, the date on which the financial statements were available to be issued. During the period from the end of the fiscal year and through this date, no circumstances occurred that require recognition or disclosure in these financial statements. 16

19 SUPPLEMENTARY INFORMATION

20 ASHEVILLE HUMANE SOCIETY, INC. Schedule of Functional Expenses Year Ended June 30, 2016 Supporting Services Total Program Management Supporting Services and General Fundraising Services Total Salaries and wages $ 1,150,160 $ 44,571 $ 157,717 $ 202,288 $ 1,352,448 Payroll taxes 102,152 3,274 13,314 16, ,740 Other benefits 132,051 4,539 21,033 25, ,623 Total personnel costs 1,384,363 52, , ,448 1,628,811 Program costs: Food for animals 89,207 89,207 Veterinary services 299, ,378 Medical/program supplies 195, ,205 Spay/neuter surgery 44,768 44,768 Other 6, ,369 Advertising 11, ,854 10,441 21,885 Bank/credit card charges 3,401 4,293 11,159 15,452 18,853 Computer/information services 22,041 22,624 43,773 66,397 88,438 Cost of sales 20,364 20,364 Depreciation and amortization 113,581 11,001 11,991 22, ,573 Dues/licenses/permits 2, ,249 4,193 Event expenses , , ,876 Insurance 34,394 5,738 4,544 10,282 44,676 Miscellaneous 7,296 4,012 1,222 5,234 12,530 Occupancy costs 66, ,747 Office supplies 4,045 6,281 1,975 8,256 12,301 Printing/production/postage 6,628 2,840 90,572 93, ,040 Professional services 15,517 18,544 17,547 36,091 51,608 Staff/donor appreciation 530 1, ,390 1,920 Telephone/communications 17, ,274 4,100 21,300 Travel mileage 15, ,547 2,068 17,870 Vehicle expenses 21,454 21,454 Meals and entertainment 1,945 3, ,588 5,533 Seminars and education 2,401 3, ,643 6,044 Total expenses $ 2,386,903 $ 138,916 $ 495,124 $ 634,040 $ 3,020,943 17