CPC BEHAVIORAL HEALTHCARE, INC. Financial Statements. June 30, 2011 and With Independent Auditors Report

Transcription

1 CPC BEHAVIORAL HEALTHCARE, INC. Financial Statements June 30, 2011 and 2010 With Independent Auditors Report

2 Table of Contents June 30, 2011 and 2010 Independent Auditors' Report... 1 Financial Statements Statements of Financial Position... 2 Statements of Activities Statements of Cash Flows... 4 Statements of Functional Expenses Notes to Financial Statements

3 WithumSmith+Brown, PC A Professional Corporation Certified Public Accountants and Consultants One Spring Street New Brunswick, NJ fax Additional Offices in New Jersey, New York, Pennsylvania, Maryland, Colorado and Florida Independent Auditors' Report To the Board of Trustees, CPC Behavioral Healthcare, Inc.: We have audited the accompanying statements of financial position of CPC Behavioral Healthcare, Inc. (the Center ) as of June 30, 2011 and 2010, and the related statements of activities, cash flows and functional expenses for the years then ended. These financial statements are the responsibility of the Center s management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits 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 significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide 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 CPC Behavioral Healthcare, Inc. as of June 30, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. October 3, 2011

4 Statements of Financial Position June 30, 2011 and 2010 Assets Cash and cash equivalents $ 3,526,309 $ 3,250,658 Certificates of deposit 413, ,493 Accounts receivable Government grants 233, ,541 Patient fees, net of allowance for doubtful accounts of $443,505 and $492,756 for 2011 and 2010, respectively 555, ,024 Tuition, net of allowance for doubtful accounts of $25,640 in both 2011 and ,899 1,130,901 Other 91,260 51,354 Due from CPC Foundation, Inc. 1,373,530 1,079,165 Prepaid expenses and other assets 897, ,609 Land, buildings and equipment, net 2,639,203 3,064,076 $ 10,426,183 $ 10,475,821 Liabilities and Net Assets Liabilities Accounts payable and accrued expenses $ 3,281,008 $ 3,057,607 Refundable advance 400, ,000 Long-term debt 2,520,000 2,765,000 Interest rate swap contract 337, ,571 Total liabilities 6,538,039 6,604,178 Net assets - unrestricted 3,888,144 3,871,643 $ 10,426,183 $ 10,475,821 The Notes to Financial Statements are an integral part of these statements. 2

5 Statements of Activities Years Ended June 30, 2011 and Operating revenue and support Tuition $ 11,856,586 $ 12,488,839 Government contracts 8,258,625 8,842,433 Patient fees 7,731,031 6,913,534 Contributions 632, ,183 Miscellaneous 327, ,568 28,805,883 29,470,557 Expenses Program services High Point Schools 10,716,847 11,248,685 Behavioral Health Services 10,938,685 11,089,648 Residential Services 3,371,052 3,372,873 Employee Assistance Program 225, ,236 25,252,027 25,925,442 Supporting services General and administrative 3,206,091 3,142,072 Development and community relations 399, ,314 3,605,818 3,523,386 28,857,845 29,448,828 Changes in unrestricted net assets from operations (51,962) 21,729 Nonoperating Other income, net 23,923 23,053 Gain (loss) on interest rate swap contract 44,540 (44,782) 68,463 (21,729) Changes in unrestricted net assets 16, Unrestricted net assets, beginning of year 3,871,643 3,871,643 Unrestricted net assets, end of year $ 3,888,144 $ 3,871,643 The Notes to Financial Statements are an integral part of these statements. 3

6 Statements of Cash Flows Years Ended June 30, 2011 and Cash flows from operating activities Changes in net assets $ 16,501 $ -- Adjustments to reconcile changes in net assets to net cash provided by operating activities Depreciation and amortization 690, ,469 (Gain) loss on interest rate swap contract (44,540) 44,782 Allowance for doubtful accounts (49,251) 157,916 Changes in operating assets and liabilities Accounts receivable Government grants 1,757 (34,972) Patient fees (40,255) (211,553) Tuition 435,002 (279,436) Other (39,906) (28,925) Due from CPC Foundation, Inc. (294,365) 24,817 Prepaid expenses and other assets (110,625) (26,676) Accounts payable and accrued expenses 223, ,123 Net cash provided by operating activities 788, ,545 Cash flows from investing activities Expenditures for buildings and equipment (265,459) (270,860) Purchases of certificates of deposit (1,941) (4,028) Net cash used by investing activities (267,400) (274,888) Cash flows from financing activities Payments of long - term debt (245,000) (230,000) Net increase in cash and cash equivalents 275, ,657 Cash and cash equivalents Beginning of year 3,250,658 2,800,001 End of year $ 3,526,309 $ 3,250,658 Supplemental disclosure of cash flow information Interest paid $ 131,378 $ 142,738 The Notes to Financial Statements are an integral part of these statements. 4

7 Statements of Functional Expenses Year Ended June 30, 2011 Total Total Program Supporting Services Services Total Salaries $ 17,017,345 $ 2,007,898 $ 19,025,243 Payroll taxes and employee benefits 4,030, ,104 4,499,156 Consultants 309,159 63, ,721 Rent 463, , ,665 Utilities 331,309 20, ,613 Telephone 156,947 37, ,574 Office supplies and expenses 72,370 28, ,082 Staff travel and promotion 28,162 4,548 32,710 Janitorial supplies and service 160,876 9, ,653 Dues and subscriptions 22,781 16,237 39,018 Conference and conventions 20,788 7,099 27,887 Program supplies 189,818 13, ,733 Program allowance 199, ,362 Computer expense 107, , ,374 Professional fees 45,237 48,230 93,467 Administrative 8,159 3,002 11,161 Maintenance and equipment 135,287 8, ,484 Interest and bank fees 174,480 28, ,374 Equipment rental 50,515 7,821 58,336 Buildings and general maintenance 214,293 10, ,917 Postage 10,817 24,444 35,261 Printing 21,688 17,910 39,598 Miscellaneous 33,092 2,207 35,299 Food 245,979 2, ,221 Recruitment 5,887 29,619 35,506 Automobile expense 243,446 8, ,235 Staff training 27,959 3,476 31,435 Minor equipment 63, ,200 Insurance 246, , ,228 Depreciation and amortization Grant funded assets 135, ,290 Agency funded assets 479,679 75, ,042 $ 25,252,027 $ 3,605,818 $ 28,857,845 The Notes to Financial Statements are an integral part of this statement. 5

8 Statements of Functional Expenses Year Ended June 30, 2010 Total Total Program Supporting Services Services Total Salaries $ 17,527,872 $ 1,914,264 $ 19,442,136 Payroll taxes and employee benefits 3,995, ,534 4,430,998 Consultants 337,320 97, ,918 Rent 541,736 93, ,047 Utilities 326,570 14, ,967 Telephone 159,039 34, ,804 Office supplies and expenses 84,743 26, ,017 Staff travel and promotion 26,432 3,838 30,270 Janitorial supplies and service 161,678 11, ,022 Dues and subscriptions 23,297 15,600 38,897 Conference and conventions 25,495 14,057 39,552 Program supplies 373,396 11, ,145 Program allowance 186, ,131 Computer expense 62, , ,895 Professional fees 32,559 44,199 76,758 Administrative 9,600 5,260 14,860 Maintenance and equipment 120,507 14, ,342 Interest and bank fees 188,537 27, ,025 Equipment rental 52,454 7,821 60,275 Buildings and general maintenance 256,559 4, ,930 Postage 13,292 25,938 39,230 Printing 18,591 18,397 36,988 Miscellaneous 30,617 2,984 33,601 Food 242,575 6, ,917 Recruitment 49,015 41,789 90,804 Automobile expense 195,682 14, ,399 Staff training 15,843 3,273 19,116 Minor equipment 65,968 5,475 71,443 Insurance 208, , ,872 Depreciation and amortization Grant funded assets 147, ,775 Agency funded assets 445,847 86, ,694 $ 25,925,442 $ 3,523,386 $ 29,448,828 The Notes to Financial Statements are an integral part of this statement. 6

9 Statements of Functional Expenses Program Services Year Ended June 30, 2011 Behavioral Employee High Point Health Residential Assistance Total Program Schools Services Services Program Services Salaries $ 7,334,149 $ 7,341,780 $ 2,192,827 $ 148,589 $ 17,017,345 Payroll taxes and employee benefits 1,736,264 1,738, ,313 35,572 4,030,052 Consultants 95,614 29, ,862 9, ,159 Rent 15, , , ,347 Utilities 152, ,545 51,246 3, ,309 Telephone 43,719 99,029 11,221 2, ,947 Office supplies and expenses 26,352 40,116 4,516 1,386 72,370 Staff travel and promotion 2,248 18,113 7, ,162 Janitorial supplies and service 80,801 55,216 23,551 1, ,876 Dues and subscriptions 11, , ,781 Conference and conventions 5,492 14, ,788 Program supplies 149,829 19,153 20, ,818 Program allowance 28, ,840 49, ,362 Computer expense 45,362 47,965 13, ,593 Professional fees 26,400 18, ,237 Administrative 1,282 6, ,159 Maintenance and equipment 73,977 40,111 19,886 1, ,287 Interest and bank fees 115,346 35,259 23, ,480 Equipment rental 31,424 17,541 1, ,515 Buildings and general maintenance 83,134 76,587 52,460 2, ,293 Postage 5,883 3, ,817 Printing , ,056 21,688 Miscellaneous 7,675 25, ,092 Food 119,699 67,652 58, ,979 Recruitment -- 5, ,887 Automobile expense 39, ,823 36, ,446 Staff training 12,532 14, ,959 Minor equipment 13,673 23,908 26, ,801 Insurance 197,016 36,658 12, ,509 Depreciation and amortization Grant funded assets ,727 23, ,290 Agency funded assets 260, ,983 35,780 2, ,679 $ 10,716,847 $ 10,938,685 $ 3,371,052 $ 225,443 $ 25,252,027 The Notes to Financial Statements are an integral part of this statement. 7

10 Statements of Functional Expenses Program Services Year Ended June 30, 2010 Behavioral Employee High Point Health Residential Assistance Total Program Schools Services Services Program Services Salaries $ 7,624,759 $ 7,564,602 $ 2,197,475 $ 141,036 $ 17,527,872 Payroll taxes and employee benefits 1,736,503 1,726, ,166 31,729 3,995,464 Consultants 90,752 29, ,559 13, ,320 Rent 15, , , ,736 Utilities 144, ,053 52,165 3, ,570 Telephone 45, ,265 10,358 2, ,039 Office supplies and expenses 34,698 41,530 6,707 1,808 84,743 Staff travel and promotion 2,103 16,986 6, ,432 Janitorial supplies and service 81,117 66,683 12,321 1, ,678 Dues and subscriptions 12, , ,297 Conference and conventions 10,802 11,859 1,499 1,335 25,495 Program supplies 344,573 12,255 16, ,396 Program allowance 33, ,961 46, ,131 Computer expense 37,040 23, ,262 62,360 Professional fees 28,000 4, ,559 Administrative 2,451 6, ,600 Maintenance and equipment 63,711 32,912 22,777 1, ,507 Interest and bank fees 124,640 38,099 25, ,537 Equipment rental 33,330 17,063 1, ,454 Buildings and general maintenance 122,878 69,676 62,311 1, ,559 Postage 6,383 4,850 1, ,292 Printing 1,083 16, ,591 Miscellaneous 31 30, ,516 Food 123,467 60,127 59, ,676 Recruitment 42,651 6, ,015 Automobile expense 24, ,232 36, ,682 Staff training 8,747 5,801 1, ,843 Minor equipment 33,238 9,113 23, ,968 Insurance 162,064 33,958 11, ,488 Depreciation and amortization Grant funded assets ,602 27, ,775 Agency funded assets 257, ,940 34,059 2, ,847 $ 11,248,685 $ 11,089,648 $ 3,372,873 $ 214,236 $ 25,925,442 The Notes to Financial Statements are an integral part of this statement. 8

11 Statements of Functional Expenses Supporting Services Year Ended June 30, 2011 Development and Total General and Community Supporting Administrative Relations Services Salaries $ 1,771,911 $ 235,987 $ 2,007,898 Payroll taxes and employee benefits 414,107 54, ,104 Consultants 62, ,562 Rent 76,771 26, ,318 Utilities 17,560 2,744 20,304 Telephone 33,134 4,493 37,627 Office supplies and expenses 22,351 6,361 28,712 Staff travel and promotion 3, ,548 Janitorial supplies and service 9, ,777 Dues and subscriptions 13,694 2,543 16,237 Conference and conventions 3,383 3,716 7,099 Program supplies 23 13,892 13,915 Computer expense 116,605 6, ,781 Professional fees 41,630 6,600 48,230 Administrative 1,520 1,482 3,002 Maintenance and equipment 7, ,197 Interest and bank fees 28, ,894 Equipment rental 5,968 1,853 7,821 Buildings and general maintenance 7,572 3,052 10,624 Postage 19,512 4,932 24,444 Printing 6,223 11,687 17,910 Miscellaneous 1, ,207 Food 713 1,529 2,242 Recruitment 29, ,619 Automobile expense 8, ,789 Staff training 3, ,476 Minor equipment Insurance 428,669 1, ,719 Depreciation and amortization Agency funded assets 68,909 6,454 75,363 $ 3,206,091 $ 399,727 $ 3,605,818 The Notes to Financial Statements are an integral part of this statement. 9

12 Statements of Functional Expenses Supporting Services Year Ended June 30, 2010 Development and Total General and Community Supporting Administrative Relations Services Salaries $ 1,690,947 $ 223,317 $ 1,914,264 Payroll taxes and employee benefits 385,128 50, ,534 Consultants 76,598 21,000 97,598 Rent 82,522 10,789 93,311 Utilities 12,957 1,440 14,397 Telephone 30,769 3,996 34,765 Office supplies and expenses 21,928 4,346 26,274 Staff travel and promotion 3, ,838 Janitorial supplies and service 10, ,344 Dues and subscriptions 13,820 1,780 15,600 Conference and conventions 11,641 2,416 14,057 Program supplies ,258 11,749 Computer expense 97,679 6, ,535 Professional fees 37,199 7,000 44,199 Administrative 4, ,260 Maintenance and equipment 14, ,835 Interest and bank fees 27, ,488 Equipment rental 5,968 1,853 7,821 Buildings and general maintenance 3, ,371 Postage 17,415 8,523 25,938 Printing 6,131 12,266 18,397 Miscellaneous 2, ,984 Food 4,825 1,517 6,342 Recruitment 41, ,789 Automobile expense 14, ,717 Staff training 1,693 1,580 3,273 Minor equipment 5, ,475 Insurance 435,367 1, ,384 Depreciation and amortization Agency funded assets 79,693 7,154 86,847 $ 3,142,072 $ 381,314 $ 3,523,386 The Notes to Financial Statements are an integral part of this statement. 10

13 Notes to Financial Statements June 30, 2011 and Organizational Purpose and Summary of Significant Accounting Policies Organizational Purpose CPC Behavioral Healthcare, Inc. is a nonprofit organization which provides a broad range of behavioral health and educational services in Monmouth County, New Jersey through various programs that respond to the needs of children and adults in the community. Basis of Accounting 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. Basis of Presentation Financial statement presentation follows the recommendations of the accounting standard for not-for-profit organizations. Under this standard, the Center 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 June 30, 2011 and 2010 the Center does not have any temporarily or permanently restricted net assets. The Center accounts for those contract revenues that have been determined to be exchange transactions in the statements of activities to the extent that expenses have been incurred for the purpose specified by the grantor during the period. Program revenues received in advance of their usage are classified as liabilities in the statements of financial position. In applying this concept, the legal and contractual requirements of each individual contract are used as guidance. Cash and Cash Equivalents For purposes of the statements of cash flows, the Center considers all highly liquid investments with an initial maturity of three months or less to be cash equivalents. Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements. Credit Risks The Center maintains its cash in a bank deposit account which, at times, may exceed federally insured limits. The Center has not experienced any losses in this account and considers its risk to be minimal. 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. Donated Services No amounts have been reflected in the financial statements for donated services since the recognition criteria were not met. The Center generally pays for services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist the Center with campaign solicitations and various committee assignments. 11

14 Notes to Financial Statements June 30, 2011 and 2010 Income Tax Status The Center is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, the Center qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under Section 509(a)(2). The Center adopted the accounting pronouncement dealing with uncertain tax positions as of July 1, Upon adoption of this accounting pronouncement, the Center had no unrecognized tax benefits. Furthermore, the Center had no unrecognized tax benefits at June 30, The Center had no open years subject to examination prior to June 30, Land, Buildings and Equipment Property and equipment is recorded at cost. Depreciation is being provided over the estimated useful lives of the assets using the straight-line method. At the time of retirement or other disposition of assets, the cost and accumulated depreciation are removed from the accounts and any gains or losses are reflected in the statements of activities. Depreciation expense amounted to $690,332 and $680,469, for the years ended June 30, 2011 and 2010, respectively. Functional Allocation of Expenses The costs of providing program and supporting services have been summarized on a functional basis based on a direct costing method for charging expenses to each program or function that is consistent with the benefit derived by each program. Reclassifications Certain amounts at June 30, 2010 were reclassified to conform to the presentation at June 30, There was no effect on net assets as a result of the reclassifications. 2. Property and Equipment Property and equipment at June 30, consisted of the following: Estimated Useful Lives Land $ 427,953 $ 427,953 Buildings and building improvements 5-20 years 8,987,266 8,949,835 Leasehold improvements 10 years 138, ,395 Furniture, fixtures and equipment 3-5 years 2,936,000 2,847,518 Construction in progress 180, ,259 12,669,941 12,544,960 Less: Accumulated depreciation 10,030,738 9,480,884 $ 2,639,203 $ 3,064, Certificates of Deposit The Center maintains certificates of deposit, with original maturities exceeding 3 months, totaling $413,434 and $411,493 as of June 30, 2011 and 2010, respectively. Fair Value Accounting Recurring Fair Value Measurements: Pursuant to the requirements of the accounting standard related to fair value measurements, which is effective for the years beginning after November 15, 2007, the Center has provided fair value disclosure information for relevant assets and liabilities in the financial statements. The following table summarizes assets which have been accounted for at fair value on a recurring basis as of June 30, 2011, along with the basis of determination of fair value: 12

15 Notes to Financial Statements June 30, 2011 and Observable Measurement Criteria Total (Level 2) Certificates of Deposit $ 413,434 $ 413, Certificates of Deposit $ 411,493 $ 411,493 Investment income consists of the following for the years ended June 30: Dividends and Interest $ 17,223 $ 16,928 For applicable assets and liabilities subject to this pronouncement, the Center will value such assets and liabilities using quoted market prices in active markets for identical assets and liabilities to the extent possible (Level 1). To the extent that such market prices are not available, the Center will next attempt to value such assets and liabilities using observable measurement criteria, including quoted market prices of similar assets and liabilities in active and inactive markets and other corroborated factors (Level 2). In the event that quoted market prices in active markets and other observable measurement criteria are not available, the Center will develop measurement criteria based on the best information available (Level 3). 4. Long-Term Debt In April 1999, the Center received financing through the New Jersey Economic Development Authority Bonds (CPC Behavioral Healthcare, Inc. Project) Series 1999A in the amount of $3,795,000 and Series 1999B in the amount of $800,000 (collectively, the "Bonds"). The proceeds from the Bonds were used to pay off the existing mortgages of the Center. Interest is payable monthly at a variable rate based on market conditions. Principal payments on the Series 1999A Bonds are due annually on March 1 beginning in 2006 until maturity, March 1, Principal payments on the Series 1999B Bonds were due annually on March 1 beginning in 2000 until maturity, March 1, The Center is required to make monthly principal payments equivalent to onetwelfth of the annual principal due on the Bonds into a sinking fund. The Center entered into an interest rate swap contract to reduce the impact on interest expense of fluctuations in interest rates on the $2,995,000 notional principal amount of its variable rate debt. The contract effectively converted the variable rate to a fixed rate of 4.86 percent on the Series 1999A Bonds. The Center has recorded a liability for the present value of the increase in interest cost over the remaining term of the debt. At June 30, 2011 and 2010, the fair value of the interest rate swap contract was a liability of $337,031 and $381,571, respectively. 13

16 Notes to Financial Statements June 30, 2011 and 2010 In accordance with the Bond agreements, the Bonds are secured by a letter of credit which in turn is secured by mortgages on the Center's premises. The balance of the debt was $2,520,000 and $2,765,000 at June 30, 2011 and 2010, respectively. As of June 30, 2011 and 2010, the available aggregate amount of the letters of credit is $2,567,638 and $2,817,270, respectively. Fees for the letters of credit are payable annually at a rate of 1.00 percent. The Bond agreements require the Center to comply with certain covenants. The Center has complied with all covenants. The anticipated sinking fund redemptions at June 30, 2011 are as follows: Year Amount , , , , ,000 Thereafter 1,080,000 $ 2,520,000 Total interest expense for the years ended June 30, 2011 and 2010 was $131,378 and $142,738, respectively. Line of Credit At June 30, 2011, the Center had an unused line of credit with a financial institution to be drawn upon as needed, not to exceed $1,000,000, line availability expiring February 13, There were no outstanding borrowings at June 30, 2011 and Tax-Deferred Annuity Plan The Center provides a tax-deferred annuity plan qualified under Section 403(b) of the Internal Revenue Code. The plan covers full-time employees of the Center. The Center contributes 50 percent of the first 4 percent of gross salaries deferred by qualified employees. Employees may make contributions to the plan up to the maximum amount allowed by the Internal Revenue Code if they wish. These matching contributions were $225,765 and $235,819 for the years ended June 30, 2011 and 2010, respectively. 6. Commitments and Contingencies Effective April 1, 2005, the Center entered into a noncancelable seven year lease agreement to rent office space in Eatontown, New Jersey. In 2009, the Center agreed to extend the lease for two years, with a five-year option to renew at a set price. Effective May 1, 2011 the Center entered into a noncancelable 3 year lease agreement to rent office space in Eatontown, NJ to conduct their t-shirt business. At June 30, 2011, the Center is obligated under other noncancelable operating leases for various office and program facilities and equipment through April In addition, the Center leases on a month-tomonth basis various program facilities. The Center is a sublessor of an office facility which expired in July 2010 and has not been renewed. Rental expenses, net of subleases, charged to operations under these leases amounted to $657,981 and $682,872 in 2011 and 2010, respectively. 14

17 Notes to Financial Statements June 30, 2011 and 2010 Minimum rental payments required under the leases in years subsequent to June 30, 2011 are as follows: Year Amount , , ,750 The Organization is the defendant in pending legal actions in the normal course of business. The ultimate outcome of these actions is unknown at the present time. Accordingly, no provision for any liability that might result has been made in the accompanying consolidated financial statements. In the opinion of management, the outcome of any existing action will not exceed the Organization s insurance limits and are not considered to be material in relation to CPC s financial position. Refundable Advance In connection with the purchase, renovation and operation of an outpatient mental health facility, during 1996 the Center entered into an agreement with the New Jersey Department of Human Services ( NJDHS ) which provided the Center with a noninterest bearing advance totaling $400,000 in exchange for a promissory note and mortgage against the facility. The term of the agreement is through March 9, 2016 and provides NJDHS with the following options at expiration: NJDHS may require the Center to repay the mortgage amount; NJDHS may purchase the Center's interest in the facility at fair market value; and/or NJDHS may extend the term of the agreement. At each of the years ending June 30, 2011 and 2010, $400,000 has been drawn under the agreement which has been recorded as a refundable advance in the statements of financial position. Government Contracts Government contracts require fulfillment of certain basic conditions as set forth in the contract agreement. Failure to fulfill the conditions may result in the return of part or all of the funds (or the assets these funds were used to purchase) to the government agencies. In management's opinion, all conditions of these contracts have been met. In connection with the conduct of certain residential programs, the State of New Jersey has provided the Center with two residential buildings. Although title to the properties has been passed to the Center, the State retains all beneficial interest in the properties which will revert to the State upon termination of the programs. The State has perfected its interest in the properties by having the Center execute promissory notes aggregating approximately $319,000 which are secured by mortgage liens on the properties. Neither the properties nor the corresponding liabilities have been recorded in the accompanying financial statements. 7. CPC Foundation, Inc. Certain members of the Center's Board of Trustees are also members of the Foundation's Board of Trustees. Included in contributions are $632,365 and $751,183 received from the Foundation in 2011 and 2010, respectively. At June 30, 2011 and 2010 amounts due from the Foundation of $1,373,530 and $1,079,165, respectively represent contributions pledged. 8. Subsequent Events The Center has evaluated subsequent events occurring after the statement of financial position through the date of October 3, 2011 which is the date the financial statements were available to be issued. Based on this evaluation the Center has determined that no subsequent events have occurred which require disclosure in the financial statements. 15