Pathfinders Milwaukee, Inc. Milwaukee, Wisconsin. Consolidated Financial Statements And Supplementary Information

Transcription

1 Milwaukee, Wisconsin Consolidated Financial Statements And Supplementary Information Years ended December 31, 2016 and 2015

2 Years Ended December 31, 2016 and 2015 Table of Contents Independent Auditor's Report...1 Consolidated Financial Statements Consolidated Statements of Financial Position...3 Consolidated Statements of Activities...5 Consolidated Statements of Cash Flows...6 Notes to Consolidated Financial Statements...7 Supplementary Information Schedule of Support, Revenue and Expense by Program - Unrestricted...19 Schedule of Program Revenues and Expenses - Emergency Shelter...21 Schedule of Program Revenues and Expenses - Case Management...22 Schedule of Revenues and Expenses by Funding Source...23 Reserve Supplemental Schedule - Project O'Yeah...24 Schedule of Expenditures of Federal and State Awards...25 Notes to Schedule of Expenditures of Federal and State Awards...28 Independent Auditor's 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...29 Independent Auditor's Report on Compliance for Each Major Federal and State Program and on Internal Control Over Compliance Required by the Uniform Guidance and the State Single Audit Guidelines...31 Schedule of Findings and Questioned Costs...33

3 Independent Auditor's Report Board of Directors Pathfinders Milwaukee, Inc. Milwaukee, Wisconsin Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Pathfinders Milwaukee, Inc. (a nonprofit organization) which comprise the consolidated statements of financial position as of December 31, 2016 and 2015, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. DĂŶĂŐĞŵĞŶƚ ƐZĞƐƉŽŶƐŝďŝůŝƚLJĨŽƌƚŚĞŽŶƐŽůŝĚĂƚĞĚ&ŝŶĂŶĐŝĂů^ƚĂƚĞŵĞŶƚƐ Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. ƵĚŝƚŽƌ ƐZĞƐƉŽŶƐŝďŝůŝƚLJ Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the ĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐ dśğɖƌžđğěƶƌğɛɛğůğđƚğěěğɖğŷěžŷƚśğăƶěŝƚžƌ ƐũƵĚŐŵĞŶƚ ŝŷđůƶěŝŷőƚśğ assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the ĞŶƚŝƚLJ ƐƉƌĞƉĂƌĂƚŝŽŶĂŶĚĨĂŝƌƉƌĞƐĞŶƚĂƚŝŽŶŽĨƚŚĞĐŽŶƐŽůŝĚĂƚĞĚĨŝŶĂŶĐŝĂůƐƚĂƚĞŵĞŶƚƐŝŶŽƌĚĞƌƚŽĚĞƐŝŐn audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the ĞĨĨĞĐƚŝǀĞŶĞƐƐŽĨƚŚĞĞŶƚŝƚLJ ƐŝŶƚĞƌŶĂůĐŽŶƚƌŽů ĐĐŽƌĚŝŶŐůLJ ǁĞĞdžƉƌĞƐƐŶŽƐƵĐŚŽƉŝŶŝŽŶ ŶĂƵĚŝƚĂůƐŽ 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the financial position of Pathfinders Milwaukee, Inc., as of December 31, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended, in accordance with accounting principles generally accepted in the United States. 1

4 Other Matters Supplementary Information Our audit was performed for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplementary information appearing on pages 19 through 28, which includes the schedule of expenditures of federal and state awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards; and the State Single Audit Guidelines, issued by the Wisconsin Department of Administration, is presented for the purposes of additional analysis, and is not a required part of the consolidated 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 consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 12, 2017, on our consideration of Pathfinders Milwaukee /ŶĐ ƐŝŶƚĞƌŶĂůĐŽŶƚƌŽůŽǀĞƌĨŝŶĂŶĐŝĂůƌĞƉŽƌƚŝŶŐĂŶĚŽŶŽƵƌƚĞƐƚƐŽĨ its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Pathfinders Milwaukee /ŶĐ ƐŝŶƚĞƌŶĂůĐŽŶƚƌŽů over financial reporting and compliance. Wipfli LLP Milwaukee, Wisconsin June 12,

5 Consolidated Statements of Financial Position December 31, 2016 and 2015 Assets Current assets: Cash and cash equivalents $ 318,808 $ 397,354 Grants receivable 458, ,249 Pledges receivable 37,684 35,520 Investment Deferred compensation agreement 71,399 Prepaid expenses 1,010 12,284 Total current assets 815, ,806 Property and equipment: Land 26,700 26,700 Building and improvements 337, ,729 Furniture and equipment 289, ,286 Total property and equipment 653, ,715 Less Accumulated depreciation 509, ,763 Property and equipment Net 144, ,952 Other assets: Property held for sale 190, ,628 Unemployment reserve 36,629 36,601 Deposit 10,417 10,417 Total other assets 237, ,646 TOTAL ASSETS $ 1,198,077 $ 1,561,404 3

6 Consolidated Statements of Financial Position (Continued) December 31, 2016 and 2015 Liabilities and Net Assets Current liabilities: Lines of credit $ 204,201 $ 204,201 Current portion of capital lease obligation 15,799 14,986 Current portion of notes payable 23,720 39,895 Accounts payable 19,882 32,822 Accrued payroll and payroll taxes 114, ,410 Accrued vacation 45,622 44,675 Deferred compensation agreement 71,399 Deferred revenue 162, ,495 Total current liabilities 586, ,883 Long term liabilities: Reserve for unemployment compensation claims 21,704 Obligation under capital lease agreement, less current portion 9,610 25,409 Notes payable, less current portion 145, ,609 Total long term liabilities 155, ,722 Total liabilities 742, ,605 Net assets: Unrestricted 113, ,692 Temporarily restricted 342, ,107 Total net assets 455, ,799 TOTAL LIABILITIES AND NET ASSETS $ 1,198,077 $ 1,561,404 See accompanying notes to consolidated financial statements. 4

7 Consolidated Statements of Activities Years Ended December 31, 2016 and 2015 Unrestricted 2016 Temporarily Restricted Total Unrestricted 2015 Temporarily Restricted Total Support and revenue: Contributions $ 457,327 $ $ 457,327 $ 597,437 $ $ 597,437 Program service fees 141, , , ,887 Grants and contracts 2,313, ,663 2,656,417 2,028, ,107 2,380,548 Special events 99,848 99, , ,520 Miscellaneous revenues 56,298 56,298 41,478 41,478 Gain on sale of property 44,147 44, , ,300 Impairment loss on property held for sale (105,000) (105,000) Net assets released from restrictions 352,107 (352,107) 421,748 (421,748) Total support and revenue 3,359,886 (9,444) 3,350,442 3,533,811 (69,641) 3,464,170 Expenses: Program expenses 2,790,580 2,790,580 2,888,746 2,888,746 Fund raising 254, , , ,430 Management and general 516, , , ,351 Total expenses 3,561,458 3,561,458 3,461,527 3,461,527 Change in net assets (201,572) (9,444) (211,016) 72,284 (69,641) 2,643 Net assets at beginning of year 314, , , , , ,156 Net assets at end of year $ 113,120 $ 342,663 $ 455,783 $ 314,692 $ 352,107 $ 666,799 See accompanying notes to consolidated financial statements. 5

8 Consolidated Statements of Cash Flows Years Ended December 31, 2016 and Increase (decrease) in cash and cash equivalents: Cash flows from operating activities: Change in net assets $ (211,016) $ 2,643 Adjustments to reconcile change in net assets to net cash and cash equivalents provided by (used in) operating activities: Depreciation 33,414 33,835 Gain on sale of property (44,147) (146,300) Impairment loss on property held for sale 105,000 Changes in operating assets and liabilities: Receivables (16,297) 38,566 Prepaid expenses 11,274 (5,655) Accounts payable (12,940) 29,393 Accrued expenses 9,286 9,932 Other liabilities 31,752 73,825 Net cash (used in) provided by operating activities (93,674) 36,239 Cash flows from investing activities: Reinvested income on restricted investments (28) (29) Proceeds from the sale of property 124, ,977 Net cash provided by investing activities 124, ,948 Cash flows from financing activities Principal payments under capital lease obligation $ (14,986) $ (14,213) Principal payments on notes payable (94,024) (110,786) Payments on line of credit Net (150,000) Net cash used in financing activies (109,010) (274,999) Net decrease in cash and cash equivalents (78,546) (42,812) Cash and cash equivalents at beginning of year 397, ,166 Cash and cash equivalents at end of year $ 318,808 $ 397,354 Supplemental disclosures of cash flow information: Cash paid for interest $ 12,546 $ 22,797 See accompanying notes to consolidated financial statements. 6

9 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies Organization Activity Pathfinders Milwaukee, Inc. ( Pathfinders ) is a nonprofit organization which provides counseling, supportive services, and prevention and education programs along with a shelter and related services for runaway and homeless youth as part of its programs. Pathfinders also operates Southeastern Education Center which provides educational alternatives for troubled adolescents in a structured educational format. Southeastern Youth and Family Services, Inc. ( Southeastern ) is a nonprofit organization whose mission is to assist children, at-risk adolescents and their families by strengthening life skills through counseling, residential child care, and educational service. Southeastern owns and formerly operated group homes located in Milwaukee and Waukesha Counties. The group homes provided specialized social, rehabilitative, and supportive treatment services in residential or educational environments, to adolescents and their families as a result of referrals by the court system. Rosalie Manor Community and Family Services, Inc. ( Rosalie Manor ), a nonprofit organization, provides supportive services during pregnancy and after delivery to enhance parent-child relationships and help the parents identify and pursue personal career goals. Services also include a fatherhood program providing parenting education and related skills development as well as a teen pregnancy prevention education program. Consolidated Financial Statements The consolidated financial statements include the accounts of Pathfinders, Southeastern, and Rosalie Manor (collectively referred to as the Organization ). Southeastern and Rosalie Manor are consolidated with Pathfinders since Pathfinders is the sole member of these entities. All significant inter-organizational transactions and accounts have been eliminated. Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ( GAAP ). Use of Estimates in the Preparation of Financial Statements The preparation of the accompanying consolidated financial statements in conformity with GAAP requires management to make certain estimates and assumptions that directly affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. 7

10 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Net Assets Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donorimposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Unrestricted net assets Net assets that are not subject to donor-imposed stipulations or where donorimposed stipulations are met in the year of contribution. Temporarily restricted net assets Net assets subject to donor-imposed stipulations that may or may not be met, either by actions of the Organization and/or the passage of time. When a restriction expires, temporarily restricted net assets are transferred to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use all or part of the income earned on any related investments for general or specific purposes. The Organization had no permanently restricted net assets at December 31, 2016 and Cash and Cash Equivalents The Organization considers all highly liquid debt instruments with an original maturity of three months or less to be cash equivalents. Pledges Receivable Unconditional pledges are recorded as receivables in the year pledged. Conditional pledges receivable are recognized only when the conditions on which they depend are substantially met. Pledges and other promises to give whose eventual uses are restricted by the donors are recorded as increases in temporarily restricted net assets. Unrestricted pledges to be collected in future periods are also recorded as an increase to temporarily restricted net assets and reclassified to unrestricted net assets when received, unless the donor s intention is to support current-period activities. Pledges receivable expected to be collected in less than one year are reported at net realizable value. Pledges receivable that are expected to be collected in future years are recorded at the present value of estimated future cash flows on a discounted basis applicable to the years in which the promises were received. The amortization of the discount is recognized as contribution income over the duration of the pledge. Management individually reviews all past due pledge receivable balances and estimates the portion, if any, of the balance that will not be collected. The carrying amounts of pledges receivable are reduced by allowances that reflect management's estimate of uncollectible amounts. At December 31, 2016 and 2015, the balances are considered to be fully collectible, and accordingly, no allowance for uncollectible balances has been recorded. 8

11 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Investments - Deferred Compensation Agreement Investment Deferred compensation agreement is measured at fair value in the consolidated statements of financial position. Investment income or loss (including realized gains and losses on investments, interest, and dividends) earned on the deferred compensation agreement investment is not recognized as revenue to Pathfinders but is recorded directly as an increase to the deferred compensation payable. Property and Equipment Property and equipment with an acquisition cost of $5,000 or more are recorded at cost and capitalized. Depreciation is provided over the estimated useful life of each class of depreciable asset and is computed using the straight-line method. Equipment acquired under capital lease agreements are amortized on the straight-line basis over the estimated useful life of the underlying asset. The estimated useful lives for the major classes of property are 40 years for building and improvements and 5 years for furniture and equipment. Gifts of long-lived assets, such as land, buildings, or equipment, are reported as unrestricted support and are excluded from the change in net assets 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, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service. The Organization reviews its investment in property and equipment periodically to determine potential impairment by comparing the carrying value of the property and equipment with the estimated future undiscounted cash flows expected to result from the use of the assets, including cash flows from disposition. Should the sum of the expected cash flows be less than the carrying value, the Organization would recognize an impairment loss at that time. The Organization determined that no evaluations of recoverability were necessary during the years ended December 31, 2016 and Property Held for Sale At December 31, 2016 and 2015, the Organization owns properties currently being actively marketed for sale totaling $190,609 and $375,628, respectively. The properties were formerly used for Southeastern s Noah House, Unity House, and Southeastern Education Center programs. The properties are valued at the lesser of historic cost, less depreciation, and fair value, determined by appraisals, less estimated selling costs. Upon classification as held for sale, the properties are no longer depreciated; instead they are reviewed periodically for impairment, with the carrying value of the property adjusted for any impairment losses. In 2016, the Organization recognized an impairment loss of $105,000 on property formerly utilized for Southeastern Education Center programs. Unity House, with a carrying value of $80,019, was sold March 3, 2016, for net cash proceeds of $113,605. Southeastern Education Center, with a carrying value of $190,609, was sold May 5, 2017, for net cash proceeds of $180,440. 9

12 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Unemployment Reserve The Organization has elected reimbursement financing under provisions of the Wisconsin unemployment compensation laws. Unemployment claims are paid to the State of Wisconsin as incurred. The Organization has unemployment reserves established with an area financial institution of $36,629 and $36,601 at December 31, 2016 and 2015, respectively, to meet state funding requirements. Deferred Revenue Funds received but not earned as of the consolidated statement of financial position date have been classified as deferred revenue. Amounts will be recognized in future periods as qualifying expenses are incurred. Fair Value Measurements The Organization measures the fair value of their investments using a three-tier hierarchy which prioritizes the inputs used in measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets and liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The Organization determines fair value by: Level 1 inputs to the valuation methodology are unadjusted quoted prices for identical asset 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 active markets; Inputs, other than quoted prices, that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset s 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 used need to maximize the use of observable inputs and minimize the use of unobservable inputs. 10

13 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Contributions Contributions are recognized when the donor makes a promise to give to the Organization that is, in substance, unconditional. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and nature of any donor restrictions. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the year in which the contributions are 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 restriction expires, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions. Grants and Contract Revenue Federal, state, and local grants and contract revenue represent grants and contracts with various funding sources. In general, grant and contract revenue is recognized under the following methods: Cost reimbursement contracts Reimbursements are based on expenses incurred. The amount due from various funding sources is recognized in the accounting period when the expenses are incurred. Performance contracts Reimbursements are based on accomplishment of contract objectives without regard for expenditures. Performance revenue is recognized in the accounting period when the contracted services have been performed. Allocation of Expenses Indirect program expenses are allocated to program services. Supporting service expenses, net of supporting service revenues, are allocated to program services based on full-time employee s equivalents in each program. Income Taxes Pathfinders, Southeastern, and Rosalie Manor are nonprofit organizations as described in Section 501(c)(3) of the Internal Revenue Code (the Code ) and are exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. The Organization is also exempt from state income tax on the related income. In order to account for any uncertain tax positions, the Organization determines whether it is more likely than not that a tax position will be sustained upon examination on the technical merits of the position, assuming the taxing authority has full knowledge of all information. If the tax position does not meet the more-likely-than-not recognition threshold, the benefit of that position is not recognized in the consolidated financial statements. The Organization has recorded no assets or liabilities related to uncertain tax positions. 11

14 Notes to Consolidated Financial Statements Note 1: Summary of Significant Accounting Policies (Continued) Subsequent Events The Organization has evaluated subsequent events through June 12,2017, which is the date the financial statements were available to be issued. Note 2: Grants Receivable Grants receivable balances include the following: As of December State of Wisconsin: Department of Health Services - HIV Prevention Services $ - $ 3,014 Department of Children and Families - Runaway Services Grant 6, Department of Justice: Victims of Crime Act 67,506 47,823 Sexual Assault Victim Services Grant 10,530 9,616 Violence Against Women Act 4,538 - Milwaukee County 14,753 10,926 City of Milwaukee 6,075 9,508 United Way of Greater Milwaukee and Waukesha County, Inc. 317, ,149 Community Advocates 30,755 6,876 Aurora Family Services - 34,073 Other Total grants receivable $ 458,382 $ 444,249 Note 3: Investment - Deferred Compensation Agreement Investments, stated at fair value include the following: As of December 31, Equity mutual funds $ - $ 71,399 Note 4: Deferred Compensation Agreement Pathfinders had a non-qualified deferred compensation agreement with a former President/CEO that required Pathfinders to defer a portion of the former employee s base salary. Income earned on the deferral was not recognized as revenue to Pathfinders but was recorded directly as an increase to the deferred compensation payable. The employee resigned his position in November The agreement provided that the deferred amount plus earnings become payable to the employee immediately following retirement or termination of employment. Assets in the plan were distributed to the former employee in

15 Note 5: Notes Payable Notes payable consisted of the following: Pathfinders Milwaukee, Inc. Notes to Consolidated Financial Statements As of December 31, Note payable to Pyramax Bank due in monthly installments of principal and interest of $1,963 through May The note bears interest at 3.25%. The note was paid in full on March 3, $ - $ 9,643 Mortgage note payable to IFF Wisconsin, secured by real estate (Unity House and corporate office building), due in monthly installments of principal and interest of $744 through May The note bears interest at 3.38% until May 2018, at which time the interest rate will be recalculated. The note was paid in full with the sale of Unity House on March 3, ,418 Mortgage note payable to IFF Wisconsin, secured by real estate (Southeastern Education Center), due in monthly installments of principal and interest of $2,424 through May The note bears interest at 3.38% until May 2018, at which time the interest rate will be recalculated. The note matures in June The note was paid in full with the sale of Southeastern Education Center on May 5, , ,442 Total notes payable 169, ,503 Less: Current portion (23,720) (39,895) Notes payable, net of current portion $ 145,760 $ 223,608 Scheduled principal payments on long-term debt at December 31, 2016, including current maturities, are summarized as follows: Years Ending December 31, 2017 $ 23, , , , ,149 Thereafter 42,451 Total $ 169,480 13

16 Note 6: Line of Credit Pathfinders Milwaukee, Inc. Notes to Consolidated Financial Statements Pathfinders has a $300,000 line of credit with an area financial institution. The line of credit bears interest at the prime rate (3.75% as of December 31, 2016) and matures in October The line of credit is secured by a general business security agreement and guarantees by Southeastern and Rosalie Manor. At December 31, 2016 and 2015, total outstanding balances on the line of credit were $204,201. Note 7: Temporarily Restricted Net Assets Donor restrictions of temporarily restricted net assets are summarized as of December 31 as follows: As of December 31, Pathfinders Youth Shelter $ 246,648 $ 283,649 Prevention Education Program - Healthy Girls 71,250 37,500 Pledges receivable 24,765 30,958 Total temporarily restricted net assets $ 342,663 $ 352,107 Net assets were released from restrictions by incurring expenses, satisfying the restricted purpose or by occurrence of other events specified by donors. Net assets released from restrictions were as follows: Years Ended December 31, Pathfinders Youth Shelter $ 283,649 $ 283,650 Prevention Education Program - Healthy Girls 37,500 40,000 Strategic planning WHEDA Transitional Housing Program - 3,189 Suspension Supervision Program Collections on pledges receivable 30,958 93,953 Net assets released from restrictions $ 352,107 $ 421,748 Note 8: Deferred Revenue Deferred revenue consisted of funds received from the following sources but not earned: As of December 31, Milwaukee Public Schools $ 56,261 $ 32,495 Greater Milwaukee Foundation 50,000 25,000 Helen Bader Foundation 50,000 50,000 Other 6,690 2,000 Total deferred revenue $ 162,951 $ 109,495 14

17 Note 9: Fair Value Measurements Pathfinders Milwaukee, Inc. Notes to Consolidated Financial Statements Equity mutual funds are valued at the daily closing price as reported by the fund. Mutual funds held by the Organization are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily net asset value (NAV) and to transact at that price. The mutual funds held by the Organization are deemed to be actively traded. Information regarding assets and liabilities measured at fair value on a recurring basis is as follows: As of December 31, 2015 Total Assets and Liabilities at Fair Value Recurring Fair Value Measurements Using Quoted Market Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Assets: Equity mutual funds $ 71,399 $ 71,399 $ - $ - $ - $ - Liabilities: Deferred compensation agreement $ 71,399 $ 71,399 $ - $ - The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The Organization also has assets that under certain conditions are subject to measurement at fair value on a nonrecurring basis. These assets include property held for sale measured at the lower of carrying value or market, less costs to sell and had a fair value below carrying value at December 31, 2016: As of December 31, 2016 Total Assets at Fair Value Nonrecurring Fair Value Measurements Using Quoted Market Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs (Level 1) (Level 2) (Level 3) Property held for sale $ 190,609 $ - $ 190,609 $ - 15

18 Note 10: Retirement Plan Pathfinders Milwaukee, Inc. Notes to Consolidated Financial Statements The Organization has a 403(b) Plan covering substantially all full time employees. All employees are eligible to make contributions to the plan. Employees must have completed twenty-four months of service and work at least 20 hours a week to meet eligibility requirements to receive employer contributions. The employer will make a $50 monthly contribution per employee and an additional matching contribution, up to $50 of the employee s deferral per month. The employer contribution was $33,511 and $34,516 for the years ended December 31, 2016 and 2015, respectively. Note 11: Contingencies The Organization is subject to legal proceedings and claims that arise in the ordinary course of business. While any proceeding or litigation has an element of uncertainty, management of the Organization believes that the outcome of any pending or threatened actions will not have a material adverse effect on the financial condition of the Organization. Note 12: Leases Operating Leases Pathfinders leases office space through an operating lease which expires in December The lease requires monthly payments of $11,275 through December 31, 2016, and increases by 2% annually for each year thereafter. Pathfinders has three one year lease extension options at the end of the lease term. Pathfinders leases space for its educational center through an operating lease which expires in June The lease requires monthly payments of $6,667. Pathfinders has a five year lease extension option. Pathfinders may terminate the lease early if Milwaukee Public Schools does not renew Pathfinders' contract for the educational center. Rent expense for the years ended December 31, 2016 and 2015 totaled $221,496 and $223,072, respectively. Capital Leases Pathfinders leases telephone equipment under a lease which is classified as a capital lease. The lease requires monthly payments of $1,397 until August For the years ended December 31, 2016 and 2015, amortization expense totaled $14,785, and is included in depreciation expense. Assets held under capital lease obligations are included in furniture and equipment in the consolidated statement of financial position and are as follows: As of December 31, Telephone equipment $ 88,712 $ 88,712 Less: Accumulated amortization (66,871) (52,086) Assets held under capital lease obligation, net of accumulated amortization $ 21,841 $ 36,626 16

19 Note 12: Leases (Continued) Minimum Leases Payments Pathfinders Milwaukee, Inc. Notes to Consolidated Financial Statements Future minimum lease payments on the non-cancelable leases are as follows: Years Ending December 31, Operating Leases Capital Leases 2017 $ 215,304 $ 16, ,304 9, , , ,304 - Total minimum lease payments 1,036,520 26,546 Less: Amount representing interest (1,137) Present value of minimum lease payments 25,409 Less: Current portion of capital lease obligation (15,799) Long-term portion of capital lease obligation $ 9,610 Note 13: Concentration of Risk Bank Deposits The Organization maintains its cash with local financial institutions. Balances on deposit are insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits. Balances in excess of FDIC limits are uninsured. Management has not experienced any losses with the accounts and management believes the Organization is not exposed to any significant risk on cash and cash equivalents. Government and Grants The Organization receives grants from various government agencies whose programs rely on the availability of funding from federal or state governments. Concentrations in grant and contract revenue are as follows: Years Ended December 31, U.S. Department of Health and Human Services 10% 13% State of Wisconsin Department of Justice 16% 10% Milwaukee Public Schools 26% 30% United Way of Greater Milwaukee 24% 29% Other funding sources 24% 18% 17

20 Supplementary Information 18

21 Schedule of Support, Revenue and Expense by Program Unrestricted Year Ended December 31, 2016 Rosalie Hand in Youth Outreach Drop Center Hand Shelter In Center Q Blok Support and revenue: Contributions $ 26,000 $ $ 5,000 $ 78,010 $ 22,512 Federal grants 169,872 69,522 United Way 155,451 92,312 48,624 City of Milwaukee grants CDGA 27,568 City of Milwaukee grants ESG 34,906 14,350 Milwaukee Public Schools Milwaukee County 11,727 87,003 50,000 Walkers Point Pathfinders Street Beat 75,758 Victims of Crime Act grant 337,207 Sexual Assault Victim Services grant 52,891 State of Wisconsin grants 38,039 30, , ,001 Third party payments for client fees 124,843 16, Special events Miscellaneous revenues ,500 Gain on sale of property Impairment loss on property held for sale Net assets released from restrictions 188, ,343 Total support and revenue 189, , , , ,538 Expenses: Salaries and wages 138, , , ,726 66,730 Health and dental 18,251 28,070 40,182 42,404 8,770 Life and disability insurance 3,320 4,934 7,175 7,654 1,566 Retirement plan 3,177 4,931 6,845 7,090 1,492 FICA 10,110 20,104 25,933 23,442 4,503 Worker's compensation 2,011 3,021 5,033 4,769 1,005 Unemployment compensation 827 1,260 1,860 1, Professional fees 5,928 14,805 90,573 65,352 1,792 Office supplies 1,389 19,723 5,171 10, Program supplies 7,824 1,824 35,647 17,794 60,403 Telephone 2,673 4,591 6,016 5,770 1,337 Postage Insurance 5,298 7,786 11,920 12,744 2,649 Utilities 1,999 2,752 9,878 13, Building lease expense 11,460 17,891 72,084 2,030 Building depreciation ,664 4, Building maintenance and repairs 2,919 4,014 10,335 20, Equipment rental and maintenance , Equipment depreciation 1,185 1,629 2,666 2, Advertising Staff travel 3,946 2,694 2,305 5,571 4,093 Conferences and meetings 391 9,296 1,198 2, Dues 4,611 1, , Interest ,537 1, Miscellaneous expense Direct cost of benefits to donors Special events Allocated public information 5,619 10,434 16,053 19,264 4,013 Administrative support 30,540 60,862 87, ,565 21,814 Total expenses 263, , , , ,691 Change in unrestricted net assets $ (74,433) $ (62,188) $ (4,223) $ (11,146) $ (50,153) 19

22 Schedule of Support, Revenue and Expense by Program Unrestricted (Continued) Year Ended December 31, 2016 Educational Group Foster Administrative Fund Public Center Homes Support Raising Information Total Support and revenue: Contributions $ 3,000 $ $ $ 322,805 $ $ 457,327 Federal grants 239,394 United Way 296,387 City of Milwaukee grants CDGA 27,568 City of Milwaukee grants ESG 49,256 Milwaukee Public Schools 701, ,553 Milwaukee County 148,730 Walkers Point Pathfinders Street Beat 75,758 Victims of Crime Act grant 337,207 Sexual Assault Victim Services grant 52,891 State of Wisconsin grants 385,010 Third party payments for client fees 141,405 Special events 99,848 99,848 Miscellaneous revenues 50,343 56,298 Gain on sale of property 44,147 44,147 Impairment loss on property held for sale (105,000) (105,000) Net assets released from restrictions 352,107 Total support and revenue 599,553 44, ,996 3,359,886 Expenses: Salaries and wages 337, , ,239 49,595 1,974,521 Health and dental 52,557 22,642 9,486 5, ,463 Life and disability insurance 5,922 4,044 1, ,222 Retirement plan 3,616 3,861 1, ,512 FICA 24,115 21,897 10,836 3, ,601 Worker's compensation 5,780 2,513 1, ,640 Unemployment compensation 2,376 1, ,332 Professional fees 28,150 28,220 1,794 1, ,913 Office supplies 20,349 8,032 12,512 2,101 80,052 Program supplies 16, ,111 Telephone 8,136 3,342 1, ,870 Postage ,801 2,181 6,395 Insurance 17,043 6,622 2,649 1,324 68,035 Utilities 13,730 10,377 3,914 1, ,857 Building lease expense 80,000 21,648 5,412 5, ,937 Building depreciation 1, ,604 Building maintenance and repairs 50,684 3,269 5,798 23,206 1, ,398 Equipment rental and maintenance ,562 Equipment depreciation 3,407 1, ,810 Advertising ,429 3,376 Staff travel ,554 Conferences and meetings 793 1,355 12, ,539 Dues 1,299 8,847 1, ,595 Interest 1,964 4, ,546 Miscellaneous expense ,063 Direct cost of benefits to donors 17,065 17,065 Special events 1,885 1,885 Allocated public information 17, ,418 (80,262) Administrative support 95,983 4,363 (436,290) 34,906 Total expenses 788,810 31, ,650 3,561,458 Change in unrestricted net assets $ (189,257) $ 12,482 $ $ 177,346 $ $ (201,572) See Independent Auditor's Report. 20

23 Schedule of Program Revenues and Expenses Emergency Shelter Year Ended December 31, 2016 Budget Actual Variance Maximum Disallowed Revenues: Milwaukee County Department of Health and Human Services $ 11,727 $ 11,727 $ Other sources 713, ,589 (5,006) Total revenues 725, ,316 (5,006) Expenses: Salaries 343, ,262 1,619 $ 34,364 Employee benefits 56,800 54,202 (2,598) 21,760 Payroll taxes 33,000 32,826 (174) 21,760 Professional fees 95,000 90,614 (4,386) 21,760 Supplies 3,700 5,171 1,471 21,760 Telephone 7,500 6,016 (1,484) 21,760 Postage and shipping ,760 Occupancy 46,075 43,334 (2,741) 21,760 Equipment costs 6,500 3,185 (3,315) 21,760 Employee travel 2,500 2,305 (195) 21,760 Conferences, conventions, and meetings 1,000 1, ,760 Specific assistance to individuals 25,500 21,239 (4,261) 21,760 Membership dues ,760 Client transportation 12,845 14,408 1,563 21,760 Allocated costs 90, ,310 13,251 21,760 Total expensed 725, ,539 (783) Excess of expense over revenue $ $ (4,223) $ (4,223) See Independent Auditor's Report. 21

24 Schedule of Program Revenues and Expenses Case Management Year Ended December 31, 2016 Budget Actual Variance Maximum Disallowed Revenues: Milwaukee County Department of Health and Human Services $ 50,000 $ 50,000 $ Other sources 164,910 85,538 (79,372) Total revenues 214, ,538 (79,372) Expenses: Salaries 97,200 66,730 (30,470) $ 9,720 Employee benefits 12,300 11,828 (472) 6,447 Payroll taxes 8,700 5,922 (2,778) 6,447 Professional fees 1,900 1,801 (99) 6,447 Supplies ,447 Telephone 700 1, ,447 Postage and shipping (73) 6,447 Occupancy 4,450 6,123 1,673 6,447 Equipment costs ,447 Employee travel 11 4,093 4,082 6,447 Conferences, conventions, and meetings ,447 Specific assistance to individuals 58,525 56,127 (2,398) 6,447 Membership dues ,447 Client transportation 5,000 4,276 (724) 6,447 Allocated costs 25,145 25, ,447 Total expenses 214, ,691 (29,219) Excess of expense over revenue $ $ (50,153) $ (50,153) See Independent Auditor's Report. 22

25 Schedule of Revenues and Expenses by Funding Source Year Ended December 31, 2016 Milwaukee County DHHS Funded Programs Behavioral Health Division Emergency Case Project Other Indirect Shelter Management O'Yeah Programs Costs Total Revenues: Milwaukee County Department of Health and Human Services $ 11,727 $ 50,000 $ 87,003 $ $ $ 148,730 Other sources 3,298,159 3,298,159 Total revenues 11,727 50,000 87,003 3,298,159 3,446,889 Expenses: Salaries 5,621 24,617 36,875 1,563, ,276 1,974,521 Employee benefits 882 4,363 6, ,985 37, ,197 Payroll taxes 534 2,185 3, ,595 29, ,573 Professional fees 1, , ,707 31, ,289 Supplies ,175 68,478 10,133 80,052 Telephone ,610 4,010 33,870 Postage and shipping ,658 2,606 6,395 Occupancy 705 2,259 14, ,925 50, ,440 Equipment costs ,749 2,697 20,372 Employee travel 38 1, , ,554 Conferences, conventions, and meetings ,673 1,436 28,539 Specific assistance to individuals ,705 1,545 77, ,187 Membership dues ,909 1,266 21,595 Client transportation 235 1, ,623 39,924 Direct cost of benefits to donors 17,065 17,065 Special events 1,885 1,885 Allocated costs 1,682 9,528 13, ,650 (516,552) Total expenses 11,796 68,501 88,278 3,392,883 3,561,458 Excess of expense over revenue $ (69) $ (18,501) $ (1,275) $ (94,724) $ $ (114,569) See Independent Auditor's Report. 23

26 Reserve Supplemental Schedule Project O'Yeah Year Ended December 31, Total units of service 16, Allowable expenses for rate based service $ 88, Total revenue for rate based service $ 87, Excess (deficiency) revenue over expeses (line 3 minus line 2) $ (1,275) 5. Total reserves from all prior periods, excluding this period $ (81,297) 6. Calculation of reserve and amounts due to purchasers: First Test Second Test 6d 6f 6g 6h 6i 6j 6l 6c Purchaser's 6e Amount Amount Purchaser's Purchaser's Cap on Amount 6m 6b Purchaser's Share of Cap on to Add to Due to share of share of Reserves 6k Due to Total Revenue Share of Excess Reserves Reserves Purchaser reserves reserves for Amount Purchaser Amount 6a from Total Revenue for First for this From First from prior from all Second of From Second Due to Purchaser Purchaser Revenue (Deficiency) Test Period Test periods periods Test Reserves Test Purchaser Milwaukee County DHHS Behavioral Health Division $ 87, % $ (1,275) $ 4,350 $ (1,275) $ $ (81,297) $ (82,572) $ 8,700 $ (82,572) $ $ See Independent Auditor's Report. 24

27 Schedule of Expenditures of Federal and State Awards Year Ended December 31, 2016 Federal Grantor/Cluster Title/Program CFDA# Pass Through Grantor Pass Through # Expenditures U.S. Department of Agriculture: Special Supplemental Nutrition Program for Women, Infants, and Children Milwaukee County Wraparound $ 9 U.S. Department of Housing and Urban Development: Entitlement Grants Cluster: Community Development Block Grants City of Milwaukee, Wisconsin CD ,568 Emergency Solutions Grant Program City of Milwaukee, Wisconsin GR ,190 Emergency Solutions Grant Program City of Milwaukee, Wisconsin GR ,928 Emergency Solutions Grant Program City of Milwaukee, Wisconsin GR ,422 Emergency Solutions Grant Program City of Milwaukee, Wisconsin GR ,640 Emergency Solutions Grant Program City of Milwaukee, Wisconsin GR ,076 Total Emergency Solutions Grant Program 49,256 Total U.S. Department of Housing and Urban Development 76,824 U.S. Department of Justice: Sexual Assault Services Formula Program State of Wisconsin Dept. of Justice 2015 SA , VO Crime Victim Assistance State of Wisconsin Dept. of Justice 2015 VO ,840 Crime Victim Assistance State of Wisconsin Dept. of Justice 2015 VO ,367 Total Crime Victim Assistance 337,207 Juvenile Justice and Reinvestment Demonstration Program Milwaukee County Wraparound 113 Total U.S. Department of Justice 367,320 U.S Department of Education: Title I Grants to Local Educational Agencies (LEAs) Milwaukee Public Schools 701,553 25

28 Schedule of Expenditures of Federal and State Awards (Continued) Year Ended December 31, 2016 Federal Grantor/Cluster Title/Program CFDA# Pass Through Grantor Pass Through # Expenditures U.S. Department of Health and Human Services: State Partnership Grant to Improve Minority Health State of Wisconsin Dept. of Health Services $ 16,000 Affordable Care Act (ACA) Maternal, Infant, and Early Childhood Home Visiting Program State of Wis. Dept. of Children and Families ,039 Education and Prevention Grants to Reduce Sexual Abuse of Runaway, Homeless and Street Youth Direct 107,022 Education and Prevention Grants to Reduce Sexual Abuse of Runaway, Homeless and Street Youth Walker's Point Youth & Family Center, Inc. 37,500 Total Education and Prevention Grants to Reduce Sexual Abuse of Runaway, Homeless and Street Youth 144,522 TANF Cluster: Temporary Assistance for Needy Families Community Advocates 29,841 90CY Basic Center Grant Direct 90CY ,841 Stephanie Tubbs Jones Child Welfare Services Program State of Wis. Dept. of Children and Families ,585 Stephanie Tubbs Jones Child Welfare Services Program Milwaukee County Wraparound 16,000 Total Stephanie Tubbs Jones Child Welfare Services Program 133,585 Medicaid Cluster: Medical Assistance Program Milwaukee County Wraparound 58,309 Block Grants for Prevention and Treatment of Substance Abuse Community Advocates 140,159 Total U.S. Department of Health and Human Services 728,296 U.S. Department of Homeland Security: Emergency Food and Shelter National Board Program Direct 2,031 TOTAL FEDERAL EXPENDITURES $ 1,876,033 26

29 Schedule of Expenditures of Federal and State Awards (Continued) Year Ended December 31, 2016 State or Local Grantor/Cluster Title/Program State ID # Pass Through Grantor Pass Through # Expenditures State of Wisconsin Department of Corrections: Community Youth and Family Aids Milwaukee County Wraparound $ 8,474 State of Wisconsin Department of Health Services: Basic County Allocation Milwaukee County DHHS ,727 Basic County Allocation Milwaukee County Wraparound 2,828 Other Milwaukee County Wraparound 539 Other Milwaukee County Wraparound 52 HIV Awareness Days Project 435.U00 Direct 4,001 Total State of Wisconsin Department of Health Services 69,147 State of Wisconsin Department of Children and Families: G16 Runaway Services Direct CFE ,385 State of Wisconsin Department of Justice: Sexual Assault Victim Services Part B Direct 52,891 Other funding: Miscellaneous N/A Milwaukee County Wraparound 679 Miscellaneous N/A Walker's Point Youth & Family Center, Inc. 758 TOTAL STATE AND LOCAL EXPENDITURES $ 141,334 See Independent Auditor's Report. See accompanying notes to schedule of expenditures of federal and state awards. 27