BEANS CAFÉ, INC. Financial Statements (With Independent Auditor s Report Thereon) Six Months Ended June 30, 2016

Transcription

1 Financial Statements (With Independent Auditor s Report Thereon) Six Months Ended June 30, 2016

2 Financial Statements (With Independent Auditor s Report Thereon) Six Months Ended June 30, 2016

3 Table of Contents Page Independent Auditor s Report 1-2 Financial Statements: Statement of Financial Position 3 Statement of Activities 4 Statement of Functional Expenses 5 Statement of Cash Flows 6 Notes to Financial Statements 7-16

4 Independent Auditor's Report Board of Directors Beans Café, Inc. Anchorage, Alaska We have audited the accompanying financial statements of Beans Café, Inc. (a nonprofit organization) which comprise the statement of financial position as of June 30, 2016, and the related statement of activities, functional expenses and cash flows for the six months period 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 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 G Street Suite 800 Anchorage, Alaska Phone Fax Offices in Juneau and Soldotna A Professional Corporation

5 Board of Directors Beans Café, Inc. 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 Beans Café, Inc. as of June 30, 2016, and the changes in its net assets and its cash flows for the six months then ended, in accordance with accounting principles generally accepted in the United States of America. Anchorage, Alaska January 27,

6 Statements of Financial Position June 30, 2016 Assets Current assets: Cash and cash equivalents - unrestricted $ 2,311,907 Contributions, grants and accounts receivable, net of allowance 328,790 Prepaid expenses 31,481 Inventory 123,177 Total current assets 2,795,355 Non current assets: Investments 255,001 Property and equipment, net of accumulated depreciation 3,077,267 $ 6,127,623 Liabilities and Net Assets Current liabilities: Accounts payable 674,515 Payroll taxes and related liabilities 62,418 Total liabilities 736,933 Net assets: Unrestricted: Designated: Invested in property and equipment 3,077,267 Other 1,399,412 Undesignated 787,111 Temporarily restricted 126,900 Total net assets 5,390,690 $ 6,127,623 See accompanying notes to financial statements. 3

7 Statements of Activities For the Six Months Ended June 30, 2016 Unrestricted net assets: Operating activities: Support: Individuals $ 388,877 Corporations 282,672 Foundations 106,159 Government 291,174 In-kind 76,592 Net assets released from restrictions 351,214 Total support 1,496,688 Revenues: Special events and fundraising 64,840 Contract meals 77,053 Gaming 596 Other 5,814 Total revenues 148,303 Total support and revenues 1,644,991 Expenses: Program services: Social services 31,478 Adult meals 696,763 Children's meals 430,636 Total program services 1,158,877 Support services: Management and general 282,250 Fundraising 74,764 Total support services 357,014 Total expenses 1,515,891 Increase in net assets from operating activities 129,100 Unrestricted net assets: Non-operating activities: Investment income, net 7,542 Increase in unrestricted net assets 136,642 Changes in temporarily restricted net assets: Support: Corporations 295,348 Net assets released from restrictions: For leasehold improvements (286,114) For operating purposes (65,100) Increase (decrease) in temporarily restricted net assets (55,866) Change in net assets 80,776 Net assets, beginning of year 5,309,914 Net assets, end of year $ 5,390,690 See accompanying notes to financial statements. 4

8 Statements of Functional Expenses For the Six Months Ended June 30, 2016 Program Services Support Services Total Total Management Total Program and Social Adult Children's Program and Support Support Services Meals Meals Services General Fundraising Services Services Payroll and benefits $ 30, , , , ,086 30, , ,835 Contractual and professional services - 60,670 5,092 65,762 36,494 3,161 39, ,417 Occupancy 99 61,195 8,369 69,663 41,869 7,590 49, ,122 Travel and training ,580 2,069 5,649 6,355 Supplies and equipment , , ,608 5,417 7,917 13, ,942 Postage and printing ,363 4,651 13,014 13,347 Advertising and promotion ,000 3,566 5,566 5,641 Vehicle maintenance - 1,543 2,556 4,099 1,264-1,264 5,363 Insurance 549 8,630 3,279 12,458 (406) ,876 Dues and subscriptions ,752-3,752 3,752 Other - 4, ,834 33,831 14,380 48,211 53,045 Depreciation - 70,598-70, ,598 Total expenses before in-kind 31, , ,636 1,068, ,250 74, ,014 1,425,293 In-kind food and supplies - 90,598-90, ,598 Total expenses $ 31, , ,636 1,158, ,250 74, ,014 1,515,891 See accompanying notes to financial statements. 5

9 Statements of Cash Flows For the Six Months Ended June 30, 2016 Cash flows from operating activities: Change in net assets $ 80,776 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 70,598 Unrealized (gain) loss on investments (3,671) Changes in assets and liabilities that provided (used) cash: (Increase) decrease in assets: Contributions, grants and accounts receivable 8,452 Prepaid expenses (9,049) Inventory 16,183 Increase (decrease) in liabilities: Accounts payable (29,572) Deposits payable Deferred revenue (58,000) Payroll taxes and related liabilities (9,888) Net cash provided by operating activities 65,829 Cash flows provided (used) by investing activities: Leasehold improvements (29,363) (Purchase) sales of investments (126) Net cash provided (used) by investing activities (29,489) Net increase in cash and cash equivalents 36,340 Cash and cash equivalents, beginning of year 2,275,567 Cash and cash equivalents, end of year $ 2,311,907 Noncash investing activities: Acquisition of leasehold improvements through increase in accounts payable $ 609,776 See accompanying notes to financial statements. 6

10 Notes to Financial Statements Six Months Ended June 30, 2016 (1) Summary of Significant Accounting Policies (a) Organization and business activity Beans Café, Inc. (the Organization), was originally incorporated as an Alaska non-profit organization on February 20, Recognizing that physical needs are crucial to rehabilitation and lifelong well-being, the Organization s mission is to improve the lives of indigent people of Anchorage, Alaska by providing nutritious meals, social service referrals, and a comfortable safe place in which to escape from the elements. (b) Basis of presentation The accounting records of Beans Café, Inc. are maintained on an accrual basis of accounting under which revenues are recognized when earned and expenses when incurred. Grant revenues are recorded as earned after allowable costs allocable to the grant have been incurred. Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Accounting Standards Codification (ASC) No. 958, Financial Statements of Not-for-Profit Organizations. Under ASC 958, the Corporation is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Unrestricted net assets represent the portion of net assets of Beans Café, Inc. that are neither permanently restricted nor temporarily restricted by donor-imposed stipulations. Temporarily restricted net assets represent the portion of net assets of Beans Café, Inc. whose use is limited by donor-imposed stipulations that either expire by the passage of time or can be fulfilled by actions of Beans Café, Inc. When the stipulated time restriction ends or action is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets represent the portion of the net assets from contributions and grants whose use by Beans Café, Inc. is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of Beans Café, Inc. 7

11 Notes to Financial Statements, continued (b) Basis of presentation, continued To ensure observance of limitations and restrictions placed on the use of resources available to Beans Café, Inc., the accounts are maintained in accordance with the principles of fund accounting, whereby resources and related expenses are classified for accounting and reporting purposes into permanently restricted, temporarily restricted, and unrestricted funds established according to their nature and purpose. (c) Cash and Cash Equivalents For the purpose of the statements of cash flows, Beans Café, Inc. considers all unrestricted highly liquid investments with initial maturity of three months or less to be cash equivalents. (d) Accounts Receivable Accounts receivable are recorded on the accrual basis when the goods and services are billed and are considered delinquent or uncollectible on a case-by-case basis by management. The Organization records an allowance for doubtful accounts for the estimated uncollectible portion of the accounts receivable. This estimate is based on management s historical collection experience and a review of current accounts receivable. Receivables are charged off when all collection efforts have been exhausted. (e) Inventory T-shirts and other inventory held for fundraising are stated at the lower of cost or market on the first in, first out method. Donated goods are valued at $1 per pound. (f) Investments Beans Café, Inc. has adopted Accounting Standards Codification (ASC) No. 958, Financial Statements of Not-for-Profit Organizations. Under ASC 958, unrealized gains and losses are included in the change in net assets in the accompanying statement of activities. (g) Property and Equipment Beans Café, Inc. reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, Beans Café, Inc. reports expirations of donor restrictions when the donated or acquired longlived assets are placed in service. 8

12 Notes to Financial Statements, continued (g) Property and Equipment, continued Property and equipment are stated at cost. Expenses for maintenance and repairs are charged to expense as incurred, and expenses for major renovations are capitalized. All expenses for equipment in excess of $5,000 are capitalized. Depreciation is provided over the estimated useful lives of the assets on a straight-line basis. Estimated useful lives are as follows: Building and improvements years Equipment 3, 10, 15 years Vehicles 5 years (h) Revenue Recognition Contributions are considered available for unrestricted use unless specifically restricted by the donor. Conditional promises to give and indications of intentions to give are reported at the fair value at the date the gift is received. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those specific net asset classes. Revenues are reported on the accrual basis in the period in which services are provided at the estimated net realizable amounts. Cost reimbursable grant revenues are recorded as earned when related expenses are incurred. Unearned grant receipts are deferred until expended for the purpose of the grant. (i) Prepaid Expenses Payments made to vendors for services that will benefit periods beyond the year end, are recorded as prepaid expenses. (j) Allocation of Functional Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the Statement of Activities and in the Statement of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. The description of Bean s Café Inc. s functional expenses categories is as follows: a) Social Services Social services program provides direct assistance and referral for clients seeking employment, transportation, housing, medical, legal, alcohol or drug rehabilitation and educational opportunities. In collaboration with a variety of community agencies, additional emergency and long term assistance are provided for those requiring mental health, veteran's assistance, disability, financial and case management services. 9

13 Notes to Financial Statements, continued b) Adult Meals Bean s Café provides breakfast, hot lunch, and hot & cold beverages and warm day shelter during the day as a safe alternative to the streets, 365 days per year. c) Children s Meals Children s meals program is designed to build strong and healthy foundations for children to increase productivity and enhance school age learning at school and throughout the day. Prepared meals are provided during the school year and delivered to alternative high schools, after school programs, and early morning programs, as well as parenting classes. An emphasis is made to expose the kids to delicious food that will give them the nutrients they need for their growing bodies and minds. The idea being that what the kids eat today will affect what they eat as adults. The program continues in the summer months through various summer enrichment programs. (k) Fair Value Measurement Beans Café, Inc. measures certain items in these financial statements at fair value. Fair value is 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, that is, other than in a forced liquidation or distress sale. Beans Café, Inc.'s financial assets and liabilities carried at fair value have been classified based on a hierarchy as defined in generally accepted accounting standards and are generally measured using the market approach. (l) In-kind Contributions Donated services are recognized as contributions in accordance with FASB ASC 958, Accounting for Contributions Received and Contributions Made, if the services (1) create or enhance nonfinancial assets or (2) require specialized skills, are performed by people with those skills, and would otherwise be purchased by the Organization. In-kind contributions for space, supplies, and professional services are recorded in the statement of activities at market value and recognized as revenue and expenses in the period they are received, except for donated equipment, which is recorded as revenue in the period received and the asset is depreciated over its estimated useful life. 10

14 Notes to Financial Statements, continued (m) Income Taxes Beans Café, Inc. is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Beans Café, Inc. is exempt from State income taxes under the Alaska Nonprofit Corporation Act. Therefore, the accompanying statements do not reflect a provision for income taxes. Beans Café, Inc. believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. The Organization s policy is to report interest and penalties associated with uncertain tax positions as interest expense and other expenses respectively. With few exceptions, the Organization is not subject to audit of its tax returns prior to Although Beans Café, Inc. is exempt from federal income taxes, any income derived from unrelated business activities is subject to the requirement of filing Federal Income Tax Form 990-T and a tax liability may be determined on these activities. (n) 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, and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. (o) Subsequent Events The Company has evaluated subsequent events through Month XX, 2016 the date on which the financial statements were available to be issued. No items were deemed necessary for disclosure. (2) Fair Value Measurements On January 1, 2009, Bean s Café, Inc. adopted the provisions of The Accounting Standards Codification (ASC) 820, Fair Value Measurements, for fair value measurements of financial instruments. ASC 820 defines fair value, establishes a framework for measuring fair value in generally accepted accounting principles (GAAP), and expands disclosures about fair value measurements. 11

15 Notes to Financial Statements, continued The Bean s Cafe financial assets carried at fair value have been classified based on a hierarchy defined by ASC 820. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets and liabilities (Level 1) and the lowest ranking to fair values determined using methods and models with unobservable inputs (Level 3). An asset s or a liability s classification is based on the lowest level input that is significant to its measurement. For example, a Level 3 fair value measurement may include inputs that are both observable (Levels 1 and 2) and unobservable (Level 3). The levels of the fair value hierarchy are as follows: Level 1 Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Level 2 Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves. Level 3 Level 3 inputs are unobservable inputs for the asset or liability. Unobservable inputs are inputs that reflect the reporting entity s own assumptions about the assumptions market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. Fair values are measured using the market approach. The market approach uses prices and other relevant information generated by market transactions involving identical or comparable assets or liabilities. (3) Cash and Cash Equivalents For the Statements of Cash Flows, the Organization includes cash on deposit, cash on hand, money market accounts, certificates of deposits, if any, and short-term investments with original maturities less than three months, if any to be cash equivalents. The carrying amount of cash and cash equivalents at June 30 consists of the following: Petty cash $ 100 Certificate of deposit 835,042 Money funds 229,652 Demand deposit accounts 1,247,113 $ 2,311,907 12

16 Notes to Financial Statements, continued Concentration of Credit Risk Financial instruments that potentially subject the Organization to concentrations of credit risk consist principally of cash balances. The Organization places its cash with financial institutions insured by FDIC. The limit is $250,000 of insurance coverage provided for depositor s other accounts held at an FDIC-insured banks. Cash exceed insured limits by $997,309 at June 30, (4) Receivables Contributions $ 157,028 Grants 21,375 Other 164,487 Total 342,890 Allowance for doubtful accounts (14,100) Accounts receivable, net $ 328,790 Management believes there is a potential for some contributions receivable to be uncollectible and has established an allowance for uncollectible accounts. The estimated uncollectible amount was $14,100 for the six month period ended June 30, (5) Investments Investments are recorded at fair value and consisted of the following at June 30, 2016: Cost Fair Value (Market) U.S. Agency Obligations $ 239, ,578 Investments held with ACF 10,000 13,423 $ 249, ,001 As described in Note 2 under Fair Value Measurements, fair value is determined through one of three input categories. Investments at June 30, 2016, are classified as follows: Level 1 Level 2 Level 3 Total U.S. Agency Obligations $ 241, ,578 Investments held with ACF - 13,423-13,423 Total investments $ 241,578 13, ,001 13

17 Notes to Financial Statements, continued Investment income reported on the statement of activities is comprised of the following: Interest $ 4,120 Investment expense (330) Unrealized gain (loss) 3,671 Realized gain (loss) 81 $ 7,542 The interest income component of investment income includes interest derived from cash and cash equivalents. (6) Property and Equipment Property and equipment at June 30, 2016 consisted of the following: Building and improvements $ 4,207,559 Equipment 606,927 4,814,486 Less: accumulated depreciation (1,737,219) $ 3,077,267 Depreciation expense $ 70,598 (7) Support and Revenue The basis for presentation of support, excluding in-kind of $76,592, on the statement of activities for the six month period ended June 30, 2016 is as follows: Temporarily Restricted Grants and Support Unrestricted Grants and Support Contributions Temporarily Total Balance at Contributions Released to Balance at Restricted Unrestricted Grants and 12/31/2015 Received Unrestricted 6/30/2016 Released Received Support Operating: Individuals $ , ,877 Corporations 65, ,348 (233,548) 126, , , ,220 Foundations 59,666 - (59,666) - 59, , ,825 Government 58,000 - (58,000) - 58, , ,174 Total $ 182, ,348 (351,214) 126, ,214 1,068,882 1,420,096 14

18 Notes to Financial Statements, continued (8) Net Assets Released from Restrictions Net assets of $351,214 were released from donor restrictions by expiration of time restrictions and by incurring expenses satisfying the restricted actions for the six month period ended June 30, 2016, as follows: 2016 Rasmuson Foundation (incurring expenses) $ 59,666 United Way of Anchorage (Time) 65,100 Corporate contributions (incurring expenses) 168,448 Government grants (incurring expenses) 58,000 $ 351,214 (9) Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purpose: United Way of Anchorage $126,900 (10) Gifts In-kind and Contributed Services Material gifts in-kind, consisting of foodstuffs, equipment and supplies used by Beans Café, Inc. are recorded as income and expense at the time such items are received, which is normally also the time they are placed into service. Food donations are conservatively valued at $1.00 per pound when received and recorded as inventory. As of the six month period ended June 30, 2016 total donations and use of food and supplies to Beans Café, Inc. were $ 90,598. Contributed services are reported as contributions at their fair value if such services create or enhance non-financial assets, or would have been purchased if not provided by donation, require specialized skills, and are provided by individuals possessing such skills. Contributed services not meeting the above criteria are not recorded in the accompanying financial statements. Beans Café, Inc. logged $ 581,217 in volunteer hours for the six month period ended June 30, 2016, which are not reflected in the financial statements. (11) Other Board Designated Net Assets At June 30, 2016, the Board of Directors designated $1,399,462 of net assets as follows: 2016 Six months of operations $ 1,349,412 Major computer maintenance 50,000 $ 1,399,412 15

19 Notes to Financial Statements, continued (12) Retirement Plan Beans Café, Inc. offered a retirement plan under Internal Revenue Code Section 408(p) for all employees. Employee contributions were matched dollar-for-dollar to a maximum of 3% for each participant s compensation. Retirement plan contributions expense totaled $10,066 for the year ended June 30, (13) Operating and capital leases During the six month period ended June 30, 2016, Beans Café, Inc. had no office spaces or equipment under operating or capital leases. (14) Contingencies Amounts received or receivable from granting agencies are subject to audit and adjustment. Any disallowed claims, including amounts already collected, would become a liability of Beans Café, Inc. (15) Related Parties For the year ended June 30, 2016, the Beans Café contracted with KPB Architects and Cook Inlet Housing Authority for approximately $134,950 and $12,241, respectively. A member of the Board of Directors of Beans Café is the President of KPB Architects and another board member is the President and CEO of Cook Inlet Housing Authority. These transactions were conducted at arm s length in the normal course of business. 16