VIRGINIA LEGAL AID SOCIETY, INC. Financial Statements. For the Year Ended June 30, 2011

Transcription

1 Financial Statements For the Year Ended June 30, 2011

2 CONTENTS Page Independent Auditor s Report 1 Statement of Financial Position 2 Statement of Activities 3 Statement of Cash Flows 4 Statement of Functional Expenses 5 Notes to Financial Statements 6-11

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors of Virginia Legal Aid Society, Inc. We have audited the accompanying statement of financial position of Virginia Legal Aid Society, Inc. (the Society ) as of June 30, 2011, and the related statements of activities, cash flows, and functional expenses for the year then ended. These financial statements are the responsibility of the Society s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Society s June 30, 2010, financial statements and, in our report dated October 21, 2010, we expressed an unqualified opinion on those statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Society as of June 30, 2011, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Lynchburg, Virginia September 9,

4 Statement of Financial Position June 30, 2011 With Comparative Totals for June 30, 2010 Assets Current assets Cash and cash equivalents $ 1,054,042 $ 841,935 Cash in escrow, client deposits 6,016 9,688 Investments, certificates of deposit 100, ,851 Contributions receivable 119, ,169 Grants receivable 16,000 15,250 Other receivables 4,631 6,343 Prepaid expenses 9,426 19,119 Total current assets 1,309,932 1,327,355 Property and equipment Land, buildings, furniture, and equipment 1,190,606 1,204,162 Less accumulated depreciation 395, ,442 Net property and equipment 794, ,720 Other assets Beneficial interest in net assets of Greater Lynchburg Community Trust 6,691 5,795 Liabilities and net assets Total assets $ 2,111,325 $ 2,165,870 Current liabilities Accounts payable $ 12,978 $ 10,429 Accrued payroll 64,263 54,201 Accrued vacation 63,407 53,719 Unearned revenue 8,691 22,938 Current maturities of long-term liabilities 18,806 16,272 Client trust deposits 6,016 9,688 Total current liabilities 174, ,247 Long-term liabilities Notes payable, net of current portion 186, ,421 Total liabilities 360, ,668 Net assets Unrestricted 1,545,741 1,530,474 Temporarily restricted: Legal Services Corporation 83,845 83,967 Other 121, , , ,728 Total net assets 1,750,902 1,792,202 Total liabilities and net assets $ 2,111,325 $ 2,165,870 The accompanying notes are an integral part of the financial statements. -2-

5 Statement of Activities Year Ended June 30, 2011 With Comparative Totals for the Year Ended June 30, Temporarily 2010 Unrestricted Restricted Total Total Support and revenue Federal grants $ 971,395 $ - $ 971,395 $ 953,180 Federal Technology Initiative Grant 52,500-52,500 77,500 Other grants 1,518,186 47,829 1,566,015 1,821,777 United Way 15,157 73,423 88,580 60,952 Contributions 73,481-73,481 63,506 Interest 4,277-4,277 4,461 Other 17,457-17, In-kind support 117, , ,896 Total 2,769, ,252 2,890,945 3,084,242 Net assets released from restrictions Expiration of time or purpose restrictions 177,819 (177,819) - - Total support and revenue 2,947,512 (56,567) 2,890,945 3,084,242 Expenses Program services Legal assistance 2,376,327-2,376,327 2,241,266 Supporting services Management and general 431, , ,477 Fund raising 124, , ,811 Total expenses 2,932,245-2,932,245 2,780,554 Change in net assets 15,267 (56,567) (41,300) 303,688 Net assets at beginning of year 1,530, ,728 1,792,202 1,488,514 Net assets at end of year $ 1,545,741 $ 205,161 $ 1,750,902 $ 1,792,202 The accompanying notes are an integral part of the financial statements. -3-

6 Statement of Cash Flows Year Ended June 30, 2011 With Comparative Totals for the Year Ended June 30, Cash flows from operating activities Change in net assets $ (41,300) $ 303,688 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 43,898 47,401 Loss on disposal of assets Unrealized gain on beneficial interest (896) (666) Decrease (increase) in grants and other receivables 962 (16,393) (Increase) decrease in contributions receivable (10,648) 97,652 Decrease (increase) in prepaid expenses 9,693 (1,168) Increase in accounts payable 2,549 3,012 Increase in accrued payroll 10,062 8,198 Increase in accrued vacation 9,688 1,005 (Decrease) increase in unearned revenue (14,247) 22,654 Net cash provided by operating activities 9, ,288 Cash flows from investing activities Purchases of investments, certificates of deposits - (325,851) Proceeds from redemption of certificates of deposits 225,851 - Purchases of property and equipment (5,880) (120,202) Net cash provided by (used in) investing activities 219,971 (446,053) Cash flows from financing activities Payments on notes payable (17,625) (12,249) Net cash used in financing activities (17,625) (12,249) Net increase in cash and cash equivalents 212,107 7,986 Cash and cash equivalents, beginning of year 841, ,949 Cash and cash equivalents, end of year $ 1,054,042 $ 841,935 The accompanying notes are an integral part of the financial statements. -4-

7 Statement of Functional Expenses Year Ended June 30, 2011 With Comparative Totals for the Year Ended June 30, Program Legal LSC Legal Services Local Technology Property Total Management 2010 Services Elderly Corporation United Government Initiative Other and Program and Fund Total Total Corporation Services of Virginia Way Funding Grant Grants Equipment General Expenses General Raising Expenses Expenses Lawyers' salaries $ 319,566 $ 23,115 $ 432,289 $ 34,591 $ 21,982 $ - $ 81,075 $ - $ 4,469 $ 917,087 $ 104,214 $ 5,656 $ 1,026,957 $ 935,635 Non-lawyer salaries 171,568 25, ,117 13,612 16,692-76,525-3, , ,567 95, , ,390 Employee benefits 158,649 9, ,968 9,880 10,358-35,964-2, ,505 61,976 19, , ,669 Contract services 8,221-7,338 1,456 1,869 52,500 1, ,564 10,840-84, ,684 Travel 2,079-3, , ,678 11,323-25,001 29,767 Office 29,927-68,580 6,807 3,153-40,395-4, ,588 34,824 4, , ,776 Library maintenance 16,881-21, ,014-2, ,934 2,506-45,440 45,601 Telephone 17,199-21,704 1,155 1,091-3, ,428 4,901-49,329 52,035 Training 5,875-6, , ,997 6,968-23,965 21,787 Insurance 3,129-3, ,284 2,306-10,590 9,949 Litigation 1,940-1, , , ,015 7,933 In-kind expenditures 117, , , ,896 Miscellaneous 87-1, , , ,337 17,126 Loss on disposal of assets Depreciation ,898-43, ,898 47,401 Total expenses $ 852,361 $ 58,318 $ 962,975 $ 70,278 $ 57,325 $ 52,500 $ 262,933 $ 43,898 $ 15,739 $ 2,376,327 $ 431,183 $ 124,735 $ 2,932,245 $ 2,780,554 The accompanying notes are an integral part of the financial statements -5-

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9 Notes to Financial Statements June 30, 2011 Note 1 - Summary of significant accounting policies Nature of activities Virginia Legal Aid Society, Inc. (the Society ) is a nonprofit corporation organized for the purpose of providing legal assistance in non-criminal proceedings to persons in various locations of Virginia who are financially unable to afford legal assistance. The Society has offices in Danville, Farmville, Emporia, Suffolk, and Lynchburg. The Society services individuals in these cities and surrounding counties. The Society is funded primarily by grants from the Legal Services Corporation (LSC), a nonprofit organization established by the U.S. Congress to administer a nationwide legal assistance program, and the Legal Services Corporation of Virginia (LSCV), a nonprofit organization at the state level. Promises to give and restrictions Contributions are recognized when the donor makes a promise to give to the Society that is, in substance, unconditional. Promises to give are presented at the amounts expected to be collected, which are estimated to approximate fair value. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal 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 to unrestricted net assets. Conditional promises to give are recognized in the period when the conditions on which they depend are substantially met. The awarding of LSC funds is considered a conditional promise to give because LSC awards such funds subject to the availability of federal funding. Basis of presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Under these generally accepted accounting principles, the Society 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. At the present time, the Society does not have any permanently restricted net assets. The accompanying financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information should be read in conjunction with the Society s financial statements as of and for the year ended June 30, 2010, from which the summarized information was derived. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash equivalents For purposes of the statement of cash flows, the Society considers all highly liquid debt instruments purchased with a maturity date of three months or less to be cash equivalents. continued -6-

10 Notes to Financial Statements, continued June 30, 2011 Note 1 - Summary of significant accounting policies (continued) Investments, certificates of deposit The Society occasionally invests in certificates of deposit issued by local banks which are valued and presented in the accompanying statement of financial position at the principal amounts expected to be realized upon maturity. Property and equipment Purchased property and equipment are recorded at cost. Property and equipment donated to the Society are recorded at their estimated fair market value at the time of the donation. The Society s policy is to capitalize property and equipment acquisitions if their cost is $5,000 or more; otherwise, the purchases are expensed during the current period. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. LSC claims a reversionary interest in the property and equipment purchased with LSC funds. In addition, LSC claims the right to determine the use of any proceeds from the sale of assets purchased with these funds. Grant support The Society recognizes grant funds from LSC as received. A receivable is recognized to the extent costs have been incurred under the grants and not reimbursed. In accordance with the terms of its contract with LSC, the Society may use unexpended funds in future periods to the extent that expenses incurred are in compliance with the specified terms of the contract. LSC may, at its discretion, request reimbursement or return of funds, or both, as a result of noncompliance by the Society with the terms of its contract. Allocation of expenses The costs of providing 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 between the program and supporting services benefited. Income taxes The Society is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Therefore, no provision or liability for federal or state income taxes has been made. In addition, the Society has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Internal Revenue Code. Note 2 - Other revenue Unrestricted other revenue, amounting to $17,457, for the year ended June 30, 2011, primarily represented income arising from litigation amounting to $11,082 and miscellaneous income amounting to $6,375. continued -7-

11 Notes to Financial Statements, continued June 30, 2011 Note 3 - In-kind support Donated services for the year ended June 30, 2011, are summarized as follows: Pro bono program $ 117,240 A Pro Bono Program has been instituted in all the Society s offices and is valued at the participating attorneys hourly rates times the hours contributed. All donated services are recognized as support and expenses in the accompanying financial statements. Note 4 - Private attorney involvement (PAI) LSC regulations require that at least 12.5% of the basic LSC grant be allocated to private attorney involvement. The calculated private attorney involvement (PAI) allocation, as compared with the PAI expenses for the year ended June 30, 2011, is as follows: Basic LSC Grant $ 971, % PAI spending requirement $ 121,424 Private attorney involvement expenses $ 133,160 Note 5 - Cash and cash equivalents Cash and cash equivalents at June 30, 2011, include money market funds amounting to $826,867 and shortterm certificates of deposits amounting to $225,000. Note 6 - Concentration of credit risk Financial instruments that potentially subject the Society to concentrations of credit risk consist principally of cash, cash equivalents, certificates of deposit, and unsecured receivables. Cash and cash equivalents and certificates of deposit are maintained in several financial institutions in Central Virginia. Interest bearing accounts at each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. Money market mutual funds, amounting to $423,814 at June 30, 2011, are not secured by the FDIC, but invest solely in government-backed securities. The unsecured receivables are due primarily from United Way agencies, private foundations, and local governments. Approximately 59% and 21% of contributions receivable at June 30, 2011, are due from two United Way agencies and one private foundation, respectively. Management believes there are no significant credit risks as of June 30, Note 7 Supplemental cash flow information Interest paid during the year ended June 30, 2011, amounted to $14,347. Note 8 - Retirement plan The Society has a voluntary tax deferred annuity plan for all qualified employees. The Society made contributions amounting to $52,029 to the plan during the year ended June 30, continued -8-

12 Notes to Financial Statements, continued June 30, 2011 Note 9 - Temporarily restricted net assets LSC considers its funding as temporarily restricted until such time as the funding is utilized for those purposes as permitted by LSC s regulations and awarding contract. As of June 30, 2011, the portion of the Society s temporarily restricted net assets attributable to LSC funding amounted to $83,845. Other temporarily restricted net assets consist of amounts restricted for operating use by the Society for the year ending June 30, 2012, for the Health, Education, Advocacy & Law, Mentoring, Financial Freedom, Housing Improvement & Preservation, Crisis & Income Protection, and Strengthening Families with Children programs. At June 30, 2011, these other temporarily restricted net assets amounted to $121,316. During the current year ended June 30, 2011, net assets were released from donor restrictions by satisfying the time and use restrictions specified by the donors in the amount of $177,819. Note 10 - Leases The Society rents office space for some of its branch offices and office equipment under various lease arrangements. During the year ended June 30, 2011, rental expense was $12,876 and $3,233 for office space and equipment, respectively, and is included in office expense in the accompanying statement of functional expenses. Minimum commitments under operating leases at June 30, 2011, are as follows: Year Ending June 30 Office Equipment 2012 $ 3, , Note 11 Beneficial interest in net assets of Greater Lynchburg Community Trust $ 6,885 During the year ended June 30, 2004, the Society made a transfer of $5,000 to an endowment fund (the Fund ) maintained by the Greater Lynchburg Community Trust (the GLCT ). Under the terms of the Society s agreement with GLCT, the transfer is irrevocable and GLCT will, upon the Society s request, make annual distributions of the income earned by the Fund. In addition, the Society has granted GLCT variance power, i.e. the right to redirect, consistent with GLCT s rules and regulations, the benefits of the transferred amounts. During the year ended June 30, 2011, the Society recognized realized and unrealized income, amounting to $896, on its beneficial interest. In addition to the Society, others may make contributions to the Fund. In accordance with U.S. generally accepted accounting principles, the Society will recognize contribution income from this portion of the Fund when received. The beneficial interest is presented in the accompanying statement of financial position at the fair value of the assets in which the Fund is invested. These fair values are based primarily on quoted market prices. continued -9-

13 Notes to Financial Statements, continued June 30, 2011 Note 12 Subsequent events Management has evaluated subsequent events for the period July 1, 2011 through September 9, 2011, the date on which these financial statements were available to be issued. Note 13 Property and equipment Property and equipment as of June 30, 2011 and 2010, are as follows: June 30, 2011 June 30, 2010 Acquisition Accumulated Acquisition Accumulated Value Depreciation Value Depreciation Furniture and fixtures - donated $ $ - $ $ - 4,318 4,318 Furniture and fixtures 28,145 28,133 28,517 28,504 Equipment 173, , , ,498 Buildings and leasehold improvements 899, , , ,440 Land 86,015-86,015 - $1,190,606 $ 395,904 $1,204,162 $ 371,442 As stated in Note 1, LSC claims a reversionary interest in the Society s property and equipment that were purchased with LSC funds. As of June 30, 2011, the property and equipment in which LSC claims a reversionary interest had a total acquisition value and accumulated depreciation of $114,757 and $94,906, respectively. Note 14 Long-term liabilities At June 30, 2011, long-term liabilities consisted of the following: Note payable to bank, payable $2,664 monthly, including interest at 6.58%, collateralized by real property, due 2019 $ 205,068 Less current maturities 18,806 Principal payments on the note payable are scheduled as follows: $ 186,262 Year ending June 30, 2012 $ 18,806 Year ending June 30, ,135 Year ending June 30, ,521 Year ending June 30, ,001 Year ending June 30, ,564 Years ending thereafter 97,041 continued -10- $ 205,068

14 Notes to Financial Statements, continued June 30, 2011 Note 15 - LSC net assets requirements LSC regulations require that the net assets of the basic LSC grant not exceed 10% of the current year s basic LSC grant. The Society s calculation of this requirement is as follows: LSC annualized grants $ 971,395 Income derived from LSC grant 4,277 Total LSC support $ 975,672 Allowable net assets (10%) $ 97,567 LSC net assets $ 83,845 Note 16 Conditional promise to give As indicated in Note 1, the awarding of LSC funding is considered a conditional promise to give. As of June 30, 2011, uncollected amounts on LSC s 2011 calendar year award amounted to approximately $381,000. Note 17 Information returns As an organization exempt from income taxes, the Society is required to file an annual information return with the Internal Revenue Service (the IRS ). Generally, the IRS has three years in which to select such returns for examination. Although the Society has not been notified that any of it information returns have been selected for examination, its returns for the years ended June 30, 2008, 2009, and 2010, remain subject to such examination. -11-