Community Action Agency of New Haven, Inc. Financial Statements and Independent Auditor's Report. September 30, 2015 and 2014

Transcription

1 Financial Statements and Independent Auditor's Report

2 Index Page Independent Auditor's Report 2 Financial Statements Statements of Financial Position 4 Statements of Activities and Changes in Net Deficit 5 Statements of Cash Flows 6 Notes to Financial Statements 7 1

3 Independent Auditor's Report To The Board of Directors Community Action Agency of New Haven, Inc. Report on the Financial Statements We have audited the accompanying financial statements of (a not-for-profit organization), which comprise the statements of financial position as of, and the related statements of activities and changes in net deficit and cash flows for the years 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 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Community Action Agency of New Haven, Inc. as of, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 2

4 Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 16, 2016, on our consideration of Community Action Agency of New Haven, Inc.'s internal control over financial reporting and on our tests of 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 Community Action Agency of New Haven, Inc.'s internal control over financial reporting and compliance. Emphasis-of-Matter Regarding Going Concern The accompanying financial statements have been prepared assuming Community Action Agency of New Haven, Inc. will continue as a going concern. As discussed in Note 14 to the financial statements, Community Action Agency of New Haven, Inc. has a working capital and net asset deficiency that raise substantial doubt about its ability to continue as a going concern. Management's plans regarding these matters also are described in Note 14. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. C Hartford, Connecticut February 16,

5 Statements of Financial Position Current assets Cash $ 85,257 $ 69,717 Restricted cash 4,091 2,488 Custodial cash 465 7,463 Grants receivable 171,864 6,179 Accounts receivable 96,937 31,758 Prepaid expenses 14,236 19,080 Total current assets 372, ,685 Property and equipment Equipment, furniture and fixtures 824, ,503 Vehicles 28,730 28,730 Leasehold improvements 25,850 25, , ,083 Less accumulated depreciation 778, ,967 Net property and equipment 101, ,116 Other asset Security deposit 25,000 25,000 Total assets $ 498,911 $ 317,801 Current liabilities Accounts payable and accrued expenses $ 881,606 $ 357,669 Note payable, current portion 13,044 10,414 Due to funding sources 168, ,312 Deferred grant revenue 33, ,967 Other liability, current portion 70,400 76,800 Custodial liabilities 465 7,444 Total current liabilities 1,167, ,606 Long-term liabilities Note payable, less current portion 161, ,845 Other liability, less current portion 153, ,000 Deferred lease obligation 104, ,857 Total long-term liabilities 419, ,702 Total liabilities 1,586,217 1,393,308 Commitments and contingencies Assets Liabilities and Net Deficit Net deficit Unrestricted (1,110,306) (1,079,555) Temporarily restricted 23,000 4,048 Total net deficit (1,087,306) (1,075,507) Total liabilities and net deficit $ 498,911 $ 317,801 See Notes to Financial Statements. 4

6 Statements of Activities and Changes in Net Deficit Years Ended Changes in unrestricted net assets Revenues, gains and other support Federal and state grants $ 9,611,774 $ 10,329,887 Program service income 203, ,906 Local and other grants and contributions 44,642 11,528 Investment and other income 129,112 27,697 Fundraising 33,289 24,663 In-kind 4,366 10,002 Net assets released from restrictions 4,048 2,452 Total revenues, gains and other support 10,030,369 11,139,135 Expenses Salaries and benefits 1,929,528 2,324,299 Client assistance 6,899,985 8,227,715 Occupancy 219, ,015 Professional and contractual services 480, ,519 Insurance 48,952 47,158 Depreciation 55,055 66,889 Transportation and travel 43,111 36,878 Materials and supplies 90,266 91,851 Other 294, ,733 Total expenses 10,061,120 11,475,057 Loss from operations (30,751) (335,922) Nonoperating revenue Forgiveness of debt - 1,454,538 Changes in unrestricted net assets (30,751) 1,118,616 Changes in temporarily restricted net assets Grants and contributions 23,000 - Net assets released from restrictions (4,048) (2,452) Changes in temporarily restricted net assets 18,952 (2,452) Changes in net deficit (11,799) 1,116,164 Net deficit, beginning of year (1,075,507) (2,191,671) Net deficit, end of year $ (1,087,306) $ (1,075,507) See Notes to Financial Statements. 5

7 Statements of Cash Flows Years Ended Operating activities Changes in net deficit $ (11,799) $ 1,116,164 Adjustments to reconcile changes in net deficit to net cash provided by operating activities Depreciation 55,055 66,889 Forgiveness of debt - (1,454,538) Changes in Restricted cash (1,603) (2,488) Custodial cash 6, Grants receivable (165,685) (4,536) Accounts receivable (65,179) 80,546 Prepaid expenses 4,844 (1,763) Accounts payable and accrued expenses 523,937 71,404 Deferred grant revenue (215,746) 193,686 Deferred lease obligation (14,857) 12,143 Custodial liabilities (6,979) (508) Net cash provided by operating activities 108,986 77,504 Financing activities Repayment on note payable (10,246) (3,741) Repayment on other liability (83,200) (77,200) Net cash used in financing activities (93,446) (80,941) Net increase (decrease) in cash 15,540 (3,437) Cash, beginning of year 69,717 73,154 Cash, end of year $ 85,257 $ 69,717 Supplemental disclosure of cash flow information Interest paid $ 7,354 $ 15,985 See Notes to Financial Statements. 6

8 Notes to Financial Statements Note 1 - Summary of significant accounting policies Organization Community Action Agency of New Haven, Inc. (the "Agency") is a Connecticut nonstock, nonprofit corporation organized to provide various types of assistance to low income and other eligible recipients in the greater New Haven area. The Agency is considered a community action agency under Sections 17b-885 through 17b-894 of the Connecticut General Statutes and is principally funded through grants received from the Federal government and the state of Connecticut. Basis of presentation The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. Net assets, revenues and expenses are classified based on the existence or absence of donor-imposed restrictions. Net assets that have similar characteristics have been combined into similar categories in the accompanying financial statements, as follows: Unrestricted - Net assets that are not subject to donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the Board of Directors. Temporarily Restricted - Temporarily restricted net assets represent contributions and nongovernmental grants that have donor- or grantor-imposed restrictions as to purpose or time of expenditure. Permanently Restricted - Permanently restricted net assets must be maintained by the Agency in perpetuity. Permanently restricted net assets increase when the Agency receives contributions for which donor-imposed restrictions limiting the Agency's use of an asset or its economic benefits neither expire with the passage of time nor can be removed by the Agency's meeting certain requirements. There are no permanently restricted net assets as of September 30, 2015 and 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 disclosure 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. Statements of cash flows Cash includes all cash balances and highly liquid investments with a maturity of three months or less when acquired. The Agency places its temporary cash investments with high credit quality financial institutions. At times, such investments may exceed Federally insured limits. Accounts receivable Accounts receivable relate to the provision of fee-based services to entities other than the state or Federal government. It is the Agency's policy to charge-off uncollectible accounts when management determines the receivable will not be collected. After charge-offs, management believes the Agency has little exposure to bad debts and, therefore, no allowance for doubtful accounts is considered necessary. Property and equipment Property and equipment acquisitions and improvements thereon that exceed $5,000 and have useful lives of greater than one year are capitalized at cost and depreciated on a straight-line 7

9 Notes to Financial Statements method over their estimated useful lives. Leasehold improvements are amortized over the shorter of the economic life or the life of the lease. Repairs and maintenance are charged to expense as incurred. Grants and contracts Grants and contracts are generally considered to be exchange transactions in which the grantor or contractor requires the performance of specified activities. Entitlement to cost reimbursement grants and contracts is conditioned on the expenditure of funds in accordance with grant restrictions and, therefore, revenue is recognized to the extent of grant expenditures. Entitlement to performance-based grants and contracts is conditioned on the attainment of specific performance goals and, therefore, revenue is recognized to the extent of performance achieved. Grant and contract receipts in excess of revenues recognized are presented as deferred revenue. Contributions Unconditional contributions are recognized when pledged or received, as applicable, and are considered to be available for unrestricted use unless specifically restricted by the donor. The Agency reports nongovernmental contributions and grants of cash and other assets as temporarily restricted support if they are received with donor stipulations that limit their use. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net deficit and reported in the statements of activities and changes in net deficit as net assets released from restrictions. Contributions received whose restrictions are met in the same period are presented with unrestricted net assets. The Agency recognizes the fair value of contributed services received if such services create or enhance nonfinancial assets or require specialized skills that are provided by individuals possessing those skills and would typically need to be purchased if not contributed. The Agency receives services from a large number of volunteers who give significant amounts of their time to support the Agency's mission but which do not meet the criteria for financial statement recognition. Functional allocation of expenses The costs of providing various programs and other activities have been summarized on a functional basis in Note 11. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income taxes The Agency has received tax exempt status from the Internal Revenue Service under Section 501(c)(3) of the Internal Revenue Code. Revenue from certain activities not encompassed in their tax exemption is subject to taxation as unrelated business taxable income. No provision has been made for income taxes as the operating expenses allocable to these unrelated activities exceed the revenue. The Agency has no unrecognized tax benefits at September 30, The Agency's Federal and state income tax returns prior to fiscal year 2011 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. If applicable, the Agency would recognize interest and penalties associated with tax matters as part of other expenses in the statements of activities and changes in net deficit and include accrued interest and penalties in accrued expenses in the statements of financial position. The Agency did 8

10 Notes to Financial Statements not recognize any interest or penalties associated with tax matters for the years ended September 30, 2015 and Reclassifications Certain amounts in the 2014 financial statements have been reclassified to conform to the 2015 presentation. Subsequent events Management has reviewed subsequent events through February 16, 2016, the date at which the statements were approved and available for issuance. Note 2 - Restricted cash Restricted cash held by the Agency is to be used to assist victims of a local fire. Restricted cash balances were $4,091 and $2,488 at, respectively. Note 3 - Concentrations Government grants and contracts Based on historical experience, management believes grant and contract receivables represent negligible credit risk. The Agency receives a significant portion of its total support from the United States Department of Health and Human Services and the State of Connecticut Department of Social Services. As with all government funding, these grants and contracts currently in effect are subject to reduction prior to the end of the grant or contract period. Any significant reduction in these grants and contracts could have an adverse effect on the Agency's program services. Note 4 - Note payable The Agency has an $189,500 note with a bank. The note bears interest at 4% and calls for principal and interest payments of $1,650 through January Beginning February 1, 2019, payments including principal and interest in the amount of $7,400 are due through July The note is collateralized by all business assets. The five year payout for this note is as follows: Year Ending September 30, 2016 $ 13, , , , ,022 Interest expense during 2015 and 2014 was $7,354 and $15,985, respectively. Note 5 - Due to funding sources Amounts due to funding sources represent unexpended state grant amounts for grants for which the grant period has expired. In 2014, a state agency cancelled an outstanding liability in the amount of $1,454,538. The debt cancelation is reported in the statements of activities and changes in net deficit as forgiveness of debt. The remaining balance of amounts due to funding sources was $168,312 as of. 9

11 Notes to Financial Statements Note 6 - Deferred lease obligation The Agency uses the straight-line method to recognize rent expense. As a result of this method, the Agency has recognized a deferred lease obligation of $0 and $118,857 at September 30, 2015 and 2014, respectively. Note 7 - Other liability The Agency has a $402,000 agreement with a granting agency. The agreement called for an $18,000 payment by July 19, The remainder of the agreement will be paid via 60 monthly installments in the amount of $6,400 each, payable on or before the fifteenth day of the month, commencing on October 5, 2013 and concluding with final payment on or before September 15, Future minimum payments for the remaining three years are as follows: Year Ending September 30, Note 8 - Temporarily restricted net assets 2016 $ 70, , ,400 Temporarily restricted net assets as of are available for the following purposes: Single Mothers Activly Reaching the Top (SMART) $ - $ 2,548 Managing Your Future - 1,500 Phillip Marrett Fund 23,000 - Note 9 - Contributed services $ 23,000 $ 4,048 The Agency received contributed professional legal services with a fair value on the dates of donations of $4,366 and $10,002 during the years ended, respectively. Note 10 - Leases Operating leases The Agency leases its headquarters, various equipment and vehicles under operating leases with various expiration dates through September Rent expense under these leases totaled $200,378 and $216,762 for the years ended, respectively. The Agency has a lease for office space that expires on September 30, The Agency has the option to terminate this lease in December 2017 with a termination penalty of $20,

12 Notes to Financial Statements Future minimum noncancellable lease payments under all operating leases for the next three years are as follows: Note 11 - Expenses by function Year Ending September 30, 2016 $ 212, , ,699 Expenses by function for the years ended are as follows: Program services Energy assistance $ 7,695,718 $ 8,481,055 Weatherization 425,043 1,226,206 Other programs 739, ,135 Total program services 8,860,380 10,246,396 Supporting services Management and general 1,197,308 1,221,932 Fundraising 3,432 6,729 Total support services 1,200,740 1,228,661 Total expenses $ 10,061,120 $ 11,475,057 Note 12 - Employee benefit plan The Agency sponsors a defined contribution pension plan covering substantially all employees. The plan covers permanent employees who work 35 hours or more per week. Eligibility begins on the first day of the month following date of hire. Participant contributions are matched by the Agency up to a maximum of 2.5% of annual pay for each participant. Participant and employer contributions are 100% vested. Employer contributions totaled $20,039 and $20,487 for the years ended, respectively. Note 13 - Commitments and contingencies Grant programs The Agency participates in Federal and state assisted grant programs. These grants are subject to audits by grantor agencies, which could result in costs due back to the grantor. Although the Agency has recorded all known and estimated liabilities related to funding source audits, it is reasonably possible that other liabilities could arise as a result of the audits. 11

13 Notes to Financial Statements Note 14 - Going concern uncertainty The Agency has experienced a deficiency in working capital and net assets. The losses have fluctuated due to a change in program funding. The Agency has experienced difficulty in obtaining sufficient unrestricted funds to provide working capital. Those factors create an uncertainty about the Agency s ability to continue as a going concern. Management of the Agency is working with its Board of Directors and private sources on the generation of unrestricted revenue. Additionally, the Agency has continued to reduce the workforce as needed and expenditures in the weatherization program due to the reduction in revenue for the previously mentioned program. Management has also developed a working relationship with the City of New Haven that has resulted in the Agency receiving several new grants and program initiatives. Since 2012, debt of approximately $2.4 million has been forgiven and approximately $573,000 was been converted into two term loans. All required debt payments have been made timely and the loans are scheduled to be repaid by These debt modifications along with cost containment have led to an improved change in net assets from operations. The ability of the Agency to continue as a going concern is dependent on generating enough unrestricted revenue to pay the current liabilities and support the administrative functions. The financial statements do not include any adjustments that might be necessary if the Agency is unable to continue as a going concern. 12

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