KENSINGTON COMMUNITY CORPORATION FOR INDIVIDUAL DIGNITY

Transcription

1 KENSINGTON COMMUNITY CORPORATION FOR INDIVIDUAL DIGNITY FINANCIAL STATEMENTS JUNE 30, 2014 AND 2013

2 Contents Page Financial Statements Independent auditors report 1 Statements of financial position as of June 30, 2014 and Statements of activities and changes in net assets for the years ended June 30, 2014 and Statements of functional expenses for the years ended June 30, 2014 and Statements of cash flows for the years ended June 30, 2014 and Notes to financial statements 7

3 INDEPENDENT AUDITORS' REPORT To the Board of Directors of Kensington Community Corporation for Individual Dignity Report on the Financial Statements We have audited the accompanying financial statements of Kensington Community Corporation for Individual Dignity (the Organization ), which comprise the statements of financial position as of June 30, 2014 and 2013, and the related statements of activities and changes in net assets, functional expenses, and cash flows for each of 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. Those standards require that we plan and perform the audits 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 Organization 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 Organization 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.

4 Opinion In our opinion, the financial statements referred to on the previous page present fairly, in all material respects, the financial position of Kensington Community Corporation for Individual Dignity as of June 30, 2014 and 2013, and the changes in its net assets and its cash flows for each of the years then ended in accordance with accounting principles generally accepted in the United States of America. Jenkintown, Pennsylvania March 7,

5 Statements of Financial Position ASSETS June Cash $ 1,828,252 $ 1,667,797 Accounts receivable: Client room and board 6,486 4,298 Fees and grants from governmental agencies 1,234, ,574 Other - 211,384 Prepaid expenses and other assets 180,969 96,701 Fixed assets, net of accumulated depreciation of $1,368,769 in 2014 and $1,222,970 in ,215,740 1,311,518 $ 4,466,058 $ 4,228,272 LIABILITIES Term notes payable $ 107,786 $ 133,019 Mortgage notes payable 462, ,199 Capital lease obligation 40,185 60,119 Accounts payable and accrued expenses 284, ,073 Accrued payroll and related costs 597, ,010 Total liabilities 1,491,933 1,692,420 Commitments and contingencies NET ASSETS Unrestricted 2,974,125 2,535,852 $ 4,466,058 $ 4,228,272 See notes to financial statements 3

6 Statements of Activities and Changes in Net Assets Year Ended June Unrestricted Support and revenue: Fees and grants from governmental agencies, including contractual adjustments of $-0- in 2014 and $211,384 in 2013 $ 8,639,718 $ 8,781,165 Client fees 347, ,549 Other revenue 37,970 42,552 9,025,416 9,155,266 Expenses: Community Living Arrangements services 7,555,303 7,079,162 Management and general 1,025, ,649 Fundraising 6,600 4,400 8,587,143 7,981,211 Increase in net assets 438,273 1,174,055 Net assets at beginning of year 2,535,852 1,361,797 Net assets at end of year $ 2,974,125 $ 2,535,852 See notes to financial statements 4

7 Statements of Functional Expenses Community Living Arrangements 2014 Management and General Fundraising Year Ended June 30 Community Total Living Expenses Arrangements 2013 Management and General Fundraising Total Expenses Salaries and wages $ 4,754,745 $ 462,781 $ - $ 5,217,526 $ 4,440,465 $ 399,664 $ - $ 4,840,129 Payroll taxes and employee benefits 1,629, ,508-1,771,851 1,430, ,368-1,560,136 Contract service payments and professional fees 56,954 90, ,764 85,683 70, ,319 Rent, utilities and housekeeping 245,491 82, , ,530 69, ,947 Communications 56,023 16,359-72,382 49,738 14,908-64,646 Insurance 33,486 17,883-51,369 31,982 12,577-44,559 Program supplies and grant equipment 179,477 10, , ,972 10, ,168 Local travel, staff and clients 223,124 3, , ,803 1, ,248 Repairs and maintenance 131, , , , , ,812 Interest expense 36, ,782 47, ,033 Miscellaneous 28,613 94,368 6, ,581 29,173 82,462 4, ,035 Total expenses before depreciation 7,375,378 1,025,240 6,600 8,407,218 6,905, ,649 4,400 7,808,032 Depreciation 179, , , ,179 $ 7,555,303 $ 1,025,240 $ 6,600 $ 8,587,143 $ 7,079,162 $ 897,649 $ 4,400 $ 7,981,211 See notes to financial statements 5

8 Statements of Cash Flows Year Ended June Cash flows from operating activities: Increase in net assets $ 438,273 $ 1,174,055 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation 179, ,179 (Increase) decrease in assets: Accounts receivable (88,841) (429,121) Prepaid expenses and other assets (84,268) 40,862 Increase (decrease) in liabilities: Accounts payable and accrued expenses 61, ,035 Accrued payroll and related costs (130,706) 326,889 Net cash provided by operating activities 375,606 1,395,899 Cash flows from investing activities: Purchase of property and equipment (46,647) (58,267) Cash flows from financing activities: Principal payments on mortgage notes (85,837) (71,523) Principal payments on term notes (62,733) (46,487) Repayments on capital lease obligation (19,934) (17,361) Net cash used in financing activities (168,504) (135,371) Net increase in cash 160,455 1,202,261 Cash at beginning of year 1,667, ,536 Cash at end of year $ 1,828,252 $ 1,667,797 Supplemental disclosure of cash flow information: Cash paid during the year for interest on mortgage notes, term notes and capital lease obligation $ 36,782 $ 47,033 Supplemental disclosure of noncash investing and financing activities: Long-term debt incurred for vehicles and equipment purchases $ 37,500 $ 70,600 Obligations under capital leases incurred for computer equipment purchases - 77,480 $ 37,500 $ 148,080 See notes to financial statements 6

9 Notes to Financial Statements June 30, 2014 and 2013 NOTE A - ORGANIZATION AND BASIS OF PRESENTATION Kensington Community Corporation for Individual Dignity ("KenCCID" or Agency ) is a nonprofit, nonsectarian agency providing developmental services and activities for developmentally disabled persons. Services are provided in residences located within the Kensington, Frankford, Northwood and Northeast Philadelphia communities to enable individuals to enhance their capabilities and capacities to achieve their optimum functional level. Funding for these services is primarily provided through Medical Assistance fee-for-service revenue from the Commonwealth of Pennsylvania, as a conduit of U.S. Department of Health and Human Services and Commonwealth of Pennsylvania, Department of Public Welfare funding, under annually renewable contractual arrangements. Positive and negative adjustments to fees and services billings are accounted for as adjustments to the related revenues in the year realized. Fees for services provided under renewable contractual arrangements generally reimburse the Agency using a predetermined negotiated cost rate. Until the financial information required by the funding sources is accepted, costs billed for program services are subject to review and possible disallowance. In management s opinion, such disallowance, if any, would not be material to the financial statements. Further, collection of receivables arising under these contracts is subject to the availability of funds from the funding sources. NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The following is a summary of the significant accounting policies followed by the Agency in the preparation of the financial statements. [1] Basis of presentation: The accompanying financial statements of KenCCID have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ( U.S. GAAP ). [2] Classification of net assets: Resources in the accompanying financial statements are classified for accounting and reporting purposes into classes of net assets according to the existence or absence of donor-imposed restrictions. As of June 30, 2014 and 2013, KenCCID had no restricted net assets. Unrestricted Unrestricted net assets are used to account for funds which have not been restricted by donors and over which the Board of Directors has discretionary control. [3] Revenue recognition: The Agency s program is funded on a fee-for-service basis, whereby per diem rates are established based on program budgets submitted to funding sources. Revenue on such contracts is recognized as services are provided. [4] Program services: Expenses are allocated to the various programs based on direct charges for those items specifically identified with the respective programs. Other charges are allocated in proportion to direct expenses, based on management s estimates. 7

10 Notes to Financial Statements June 30, 2014 and 2013 NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) [5] Capitalization policy: Maintenance, repairs and minor replacements are expensed as incurred. Replacements and betterments which increase the service capacity or prolong the service life beyond that originally contemplated are capitalized. The Agency follows a policy of capitalizing expenditures based on specified thresholds, which range between $1,000 and $25,000, as determined by asset class. [6] Accounts receivable and allowance for doubtful accounts: Accounts receivable are periodically reviewed by management for collectability. Bad debts are provided for on the allowance method based on historical experience and management s evaluation of outstanding accounts receivable. Accounts are written off when they are deemed uncollectable. Management has determined that an allowance is not necessary as of June 30, 2014 and [7] Land, buildings and improvements, furniture and equipment and depreciation: Land, buildings, improvements and furniture and equipment purchased are stated at cost less accumulated depreciation. Donated assets are recorded at fair market value on the date of the gift. KenCCID computes depreciation on the straight-line method over the following estimated useful lives: [8] Contributions: Buildings and improvements years Furniture and equipment 3-5 years Vehicles 3 years Contributions, including unconditional promises to give, are recognized as revenue in the period the promise to give is received. All contributions are considered available for unrestricted use unless specifically restricted by donor request. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire within the fiscal year in which the contributions are received. [9] Management s judgments and accounting estimates: The process of preparing financial statements in conformity with accounting principles generally accepted in the United States of America ( U.S. GAAP ) requires the use of estimates and assumptions regarding certain types of assets, liabilities, revenues and expenses. Such estimates primarily relate to unsettled transactions and events as of the date of the financial statements. Accordingly, upon settlement, actual results may differ from estimated amounts. NOTE C - FEDERAL TAX STATUS The Internal Revenue Service ( IRS ) has classified KenCCID as exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code ( Code ); as an organization, contributions to which are deductible under Section 170(c) of the Code; and as an organization that is not a private foundation as defined in Section 509(a) of the Code. 8

11 Notes to Financial Statements June 30, 2014 and 2013 NOTE C - FEDERAL TAX STATUS (CONTINUED) Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken and recognize a tax liability, if the Agency has taken an uncertain tax position that more likely than not would not be sustained upon examination by a government authority. Management has analyzed the tax positions taken by the Agency and has concluded that as of June 30, 2014 and 2013, there are no uncertain positions taken or expected to be taken that would require recognition of a liability or disclosure in the financial statements. The Agency recognizes accrued interest and penalties associated with uncertain tax positions, if any, as part of management and general expenses. There were no income tax related interest and penalties recorded for the years ended June 30, 2014 and The income tax returns of the Agency for the years ended June 30, 2011 through 2014 (when filed) are or will be subject to examination by the IRS and other various taxing authorities, generally for three years after they are filed. NOTE D - ACCOUNTS RECEIVABLE KenCCID s accounts receivable consist of the following as of June 30, 2014 and 2013: Commonwealth of Pennsylvania, Office of Developmental Programs $ 1,234,611 $ 936,574 Contractual adjustment receivable - 211,384 Client room and board 6,486 4,298 $ 1,241,097 $ 1,152,256 NOTE E - FIXED ASSETS As of June 30, 2014 and 2013, the recorded values of fixed assets were as follows: Land, buildings and improvements $ 1,971,244 $ 1,950,144 Furniture and equipment 117, ,908 Vehicles 397, ,065 Computer equipment under capital lease 97,371 97,371 2,584,509 2,534,488 Less accumulated depreciation 1,368,769 1,222,970 $ 1,215,740 $ 1,311,518 9

12 Notes to Financial Statements June 30, 2014 and 2013 NOTE F - LINE-OF-CREDIT As of June 30, 2014, KenCCID has a revolving line-of-credit arrangement with Firstrust Savings Bank in the amount of $650,000, bearing interest at.5% above the bank s prime rate (prime was 3.25% as of June 30, 2014 and 2013), with a floor rate of 4.25%. The line-of-credit agreement is collateralized by KenCCID s accounts receivable and real estate consisting of ten properties located in Philadelphia, Pennsylvania. The line-of-credit agreement requires that KenCCID also maintain certain financial covenants as stipulated in the agreement. The agreement expires on January 31, There was no balance outstanding under the line-of-credit agreement as of June 30, 2014 and No interest was assessed under the line-of-credit agreement for the years ended June 30, 2014 and NOTE G - TERM NOTES PAYABLE Term notes payable as of June 30, 2014 and 2013 consist of the following: Term notes payable; collateralized by motor vehicles with principal and interest of $628, payable monthly at interest rates of 4.25%; matured in April 2014 $ - $ 6,160 Term note payable; collateralized by motor vehicle with principal and interest of $1,192, payable monthly at interest rates of 4.25%; matured in June ,852 Term note payable; collateralized by motor vehicle with principal and interest of $304, payable monthly at interest rates of 0%; maturing in May ,048 6,699 Term note payable; collateralized by motor vehicle with principal and interest of $304, payable monthly at interest rates of 0%; maturing in May ,045 6,699 Term note payable; collateralized by motor vehicle with principal and interest of $340, payable monthly at interest rates of 4.39%; maturing in September ,634 8,423 Term note payable; collateralized by motor vehicle with principal and interest of $309, payable monthly at interest rates of 0.9%; maturing in July ,041 10,663 Term note payable; collateralized by motor vehicle with principal and interest of $438, payable monthly at interest rates of 6.5%; maturing in June ,280 18,447 Term notes payable; collateralized by motor vehicles with principal and interest of $2,083, payable monthly at interest rates of 4.0%; maturing in March ,217 63,076 Term note payable; collateralized by motor vehicle with principal and interest of $1,109, payable monthly at interest rates of 4.0%; maturing in March , , ,019 Less current portion 53,787 60,453 $ 53,999 $ 72,566 10

13 Notes to Financial Statements June 30, 2014 and 2013 NOTE G - TERM NOTES PAYABLE (CONTINUED) Scheduled future annual maturities of the term notes payable as of June 30, 2014 are as follows: Year Ending June $ 53, , ,816 $ 107,786 NOTE H - MORTGAGE NOTES PAYABLE Mortgage notes payable aggregating $416,952 and $490,730 as of June 30, 2014 and 2013, respectively, are payable in monthly installments of approximately $7,500, including interest at rates ranging from 4.50% to 4.75%, until maturities through These notes are collateralized by ten properties to which individual mortgages are attached. Additional mortgage notes in the amounts of $7,726 and $8,372 as of June 30, 2014 and 2013, respectively, bearing no interest, are payable in 2026 and are collateralized by one property. However, if the Agency continues to meet certain conditions pertaining to this property, the obligation is forgiven at the rate of $646 per year. Second mortgage notes payable aggregating $37,684 and $49,097 as of June 30, 2014 and 2013, respectively, are payable in monthly installments of approximately $1,100, including interest at 4.75%, until maturities through 2017 and are collateralized by two properties. Scheduled future annual maturities of the mortgage notes as of June 30, 2014 are as follows: Year Ending June $ 70, , , , ,389 Thereafter 4,496 $ 462,362 NOTE I - COMMITMENTS The Agency has entered into leases for facilities and administrative offices which have been accounted for as operating leases. Most of the Agency's leases provide that the Agency pays maintenance, insurance, and certain other operating expenses applicable to the leased property. In the normal course of business, leases that expire are renewed or replaced by other leases. Rental expenses for leases classified as operating leases were $195,447 and $164,121 for the years ended June 30, 2014 and 2013, respectively. The Agency has several rental lease commitments at various terms, with the final lease term expiring in August In July 2014, the Agency signed a lease agreement for new administrative office space under the terms of an operating lease that expires in October

14 Notes to Financial Statements June 30, 2014 and 2013 NOTE I - COMMITMENTS (CONTINUED) KenCCID also leases automobiles under leases accounted for as operating leases. Lease expenses were $44,296 and $46,636 for the years ended June 30, 2014 and 2013, respectively. The lease terms are for three years, with the final lease expiring in August Scheduled future minimum annual lease commitments under these operating leases as of June 30, 2014 are as follows: Year Ending June 30 Vehicles and Total Facilities Equipment 2015 $ 228,671 $ 188,834 $ 39, , ,821 20, , , , , , ,857 - Thereafter 807, ,267 - $ 1,601,700 $ 1,541,324 $ 60,376 Pension plan: KenCCID has a defined-contribution tax sheltered annuity plan covering eligible participating employees. Under the plan, employees may defer up to 20% of their compensation. The Agency may make discretionary contributions to the accounts of all eligible participants. The Agency contributed 2% of each eligible participant's salary for each of the years ended June 30, 2014 and Total pension expense amounted to $62,922 and $59,503 for the years ended June 30, 2014 and 2013, respectively. NOTE J - OBLIGATION UNDER CAPITAL LEASE During 2013, KenCCID purchased computer equipment under capital lease arrangements. The leases require monthly payments totaling $2,268 per month, at interest rates ranging from 12.06% to 19.35%, with the final lease maturing in May As of June 30, 2014, the cost and related accumulated depreciation of the capitalized equipment is $97,371 and $64,922, respectively. As of June 30, 2013, the cost and related accumulated depreciation of the capitalized equipment is $97,371 and $45,447, respectively. Depreciation for each of the years ended September 30, 2014 and 2013 was $19,475. Scheduled future minimum lease payments as of June 30, 2014 are as follows: Year Ending June $ 27, ,350 45,565 Less amount representing interest 5,380 Present value of net minimum lease payments $ 40,185 12

15 Notes to Financial Statements June 30, 2014 and 2013 NOTE K - COLLECTIVE BARGAINING UNIT KenCCID employees consisting of all full-time and part-time Resident Counselors, Client Care Workers, the Residential Program Supervisor and Assistant Supervisor, Van Drivers and Assistants, and Health Care Coordinators have appointed The National Union of Hospital and Health Care Employees ("Union") as their collective bargaining agent. The terms of the most recent agreement, dated June 25, 2008, provide for annual wage negotiations through June 30, The Agency is currently in the process of negotiating a renewal of the labor contract. The Union represents 60% of the total work force of KenCCID. NOTE L - FUNDRAISING REVENUES AND EXPENSES During the years ended June 30, 2014 and 2013, KenCCID held fundraising events that generated revenues of $4,350 and $5,631, respectively. There were expenses associated with fundraising of $6,600 and $4,400 for the years ended June 30, 2014 and 2013, respectively. NOTE M - CONCENTRATIONS OF CREDIT RISK ARISING FROM CASH DEPOSITS KenCCID maintains cash-in-bank deposits which may, at times, exceed federally insured limits. KenCCID has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk. NOTE N - CONTINGENCIES In the course of its business operations, the Agency is involved in several lawsuits, which are generally covered by insurance. As of June 30, 2014, management believes there is no exposure to such matters that, if decided adversely, would be material to the financial statements or are not adequately covered by insurance. NOTE O - SUBSEQUENT EVENTS The Agency has evaluated subsequent events through March 7, 2015, which is the date the financial statements were available to be issued. In July 2014, the Agency signed a lease agreement for new administrative office space under the terms of an operating lease that expires in October