Northwest Michigan Community Action Agency, Inc. and Affiliates Traverse City, Michigan

Transcription

1 Northwest Michigan Community Action Agency, Inc. and Affiliates Traverse City, Michigan Consolidated Financial Statements and Supplementary Information Year Ended September 3, 215

2 Northwest Michigan Community Action Agency, Inc. and Affiliates Consolidated Financial Statements and Supplementary Information Year Ended September 3, 215 Table of Contents Independent Auditor s Report... 1 Consolidated Financial Statements Consolidated Statement of Financial Position... 3 Consolidated Statement of Activities... 4 Consolidated Statement of Cash Flows... 5 Notes to Consolidated Financial Statements... 6 Supplementary Information Schedule of Program Activity Schedule of Expenditures of Federal Awards and List of Programs Schedule of Cash Restricted NeighborWorks America... 5 Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Independent Auditor s Report on Compliance With Requirements for Each Major Federal Program and on Internal Control Over Compliance Schedule of Findings and Questioned Costs... 55

3 Independent Auditor s Report Board of Directors Northwest Michigan Community Action Agency, Inc. and Affiliates Traverse City, Michigan Report on the Financial Statements We have audited the accompanying consolidated financial statements of Northwest Michigan Community Action Agency, Inc. and Affiliates, which comprise the consolidated statement of financial position as of September 3, 215, and the related consolidated statements of activities, and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. The financial statements of Community Action Credit Counseling, Inc. and Innovative Energy Management, LLC were not audited in accordance with Government Auditing Standards as those entities did not receive federal funding. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1

4 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Northwest Michigan Community Action Agency, Inc. and Affiliates as of September 3, 215, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States. Other Matters Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying schedule of expenditures of federal awards and list of programs, Schedule B, which includes the requirements of U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, and the schedule of program activity and the schedule of cash-restricted-neighborworks America are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 8, 216 on our consideration of Northwest Michigan Community Action Agency, 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 the 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 Northwest Michigan Community Action Agency, Inc. s internal control over financial reporting and compliance. The financial statements of Community Action Credit Counseling, Inc. and Innovative Energy Management, LLC were not audited in accordance with Government Auditing Standards as those entities did not receive federal funding. Wipfli LLP January 8, 216 Madison, Wisconsin 2

5 Northwest Michigan Community Action Agency, Inc. and Affiliates Consolidated Statement of Financial Position September 3, 215 Assets Current assets: Cash $ 1,341,55 Restricted cash 612,644 Grants receivable 1,232,86 Accounts receivable 22,829 Prepaid expenses 16,427 Inventory 238,448 Total current assets 3,463,939 Other assets: Investments 236,395 Mortgages receivable, net 22,47 Total other assets 438,442 Property and equipment, net 465,155 TOTAL ASSETS $ 4,367,536 Liabilities and Net Assets Current liabilities: Accounts payable $ 261,53 Accrued payroll and related expenses 487,723 Grant funds received in advance 949,223 Total liabilities 1,698,449 Net assets: Unrestricted 1,584,493 Temporarily restricted 984,594 Permanently restricted 1, Total net assets 2,669,87 TOTAL LIABILITIES AND NET ASSETS $ 4,367,536 See accompanying notes to consolidated financial statements. 3

6 Northwest Michigan Community Action Agency, Inc. and Affiliates Consolidated Statement of Activities Year Ended September 3, 215 Temporarily Permanently Unrestricted Restricted Restricted Total Revenue: Grant revenue $ 819,27 $ 17,43,626 $ 1, $ 17,872,653 Project income 454, ,375 Investment income 2, ,173 Donations 17,29 246, ,271 Miscellaneous income 5, ,974 In-kind contributions 56,295 56,295 Net assets released from restriction through satisfaction of program restrictions 17,658,31 ( 17,658,31) Total revenue 19,52,513 87,228 1, 19,149,741 Expenses: Salaries 8,49,269 8,49,269 Fringe benefits 1,589,277 1,589,277 Professional/contract services 1,459,125 1,459,125 Travel/transportation 585, ,785 Space costs 694,48 694,48 Beneficiary assistance and supplies 4,482,275 4,482,275 Lease and maintenance of equipment 134, ,673 Other 296, ,398 Commodity food distributed 84,393 84,393 Payments to subgrantees 23,451 23,451 In-kind expenses 56,295 56,295 Total expenses 18,84,989 18,84,989 Change in net assets 247,524 87,228 1, 344,752 Net assets - Beginning of the year 1,336, ,366 9, 2,324,335 Net assets - End of the year $ 1,584,493 $ 984,594 $ 1, $ 2,669,87 See accompanying notes to consolidated financial statements. 4

7 Northwest Michigan Community Action Agency, Inc. and Affiliates Consolidated Statement of Cash Flows Year Ended September 3, 215 Increase (decrease) in cash: Cash flows from operating activities: Change in net assets $ 344,752 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 85,559 Loss on disposal of property and equipment 7,826 Provision for loan loss 21,17 Change in discount on mortgages receivable ( 57) Unrealized and realized loss on investments 7,464 Changes in operating assets and liabilities: Restricted cash ( 13,865) Grants receivable 12,27 Accounts receivable ( 8,726) Prepaid expenses 1,443 Inventory 744 Accounts payable 9,483 Accrued payroll and related expenses 29,315 Grant funds received in advance 27,477 Net cash provided by operating activities 614,279 Cash flows from investing activities: Purchase of investments ( 9,549) Proceeds from sale of property 9,416 Mortgages receivable issued ( 42,215) Purchase of property and equipment ( 245,271) Net cash used in investing activities ( 287,619) Change in cash 326,66 Cash - Beginning of the year 1,14,845 Cash - End of the year $ 1,341,55 Supplemental schedule of noncash operating and financing activities: Change in commodity food inventory and grant funds received in advance $ 1,333 See accompanying notes to consolidated financial statements. 5

8 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies Nature of Operations Northwest Michigan Community Action Agency, Inc. (NMCAA) was organized as a nonprofit corporation in NMCAA was formed to develop and provide resources for the purpose of assisting low-income individuals through a variety of programs in Antrim, Benzie, Charlevoix, Emmet, Grand Traverse, Kalkaska, Leelanau, Missaukee, Roscommon, and Wexford counties in Michigan. NMCAA is primarily supported through federal and state grants. Approximately 45% of NMCAA s revenue (excluding in-kind) is received under their federal Head Start grant. Community Action Credit Counseling, Inc. (CACC) was organized as a nonprofit corporation in 28. CACC was formed to provide outreach activities that educate the public on the wise and proper use of consumer credit and to provide professional counseling to individuals in credit crisis and those in need of guidance in management of their finances, budgeting and wise use of personal credit. In appropriate cases, CACC will also arrange a program of orderly debt liquidation. CACC had minimal activity for the year ended September 3, 215. Innovative Energy Management, LLC (IEM) was organized as a wholly owned limited liability company in 212. IEM was formed to provide weatherization and rehabilitation services to middle- to upper-income households. IEM had minimal activity for the year ended September 3, 215. Principles of Consolidation NMCAA, CACC and IEM (the Organizations ) have common management and board members and; therefore, consolidated financial statements have been prepared for the entities. The consolidated financial statements include the accounts of the Organizations. All intercompany transactions and balances have been eliminated for consolidated financial statement purposes. Basis of Presentation The consolidated financial statements are prepared using the accrual basis of accounting in accordance with accounting principles generally accepted in the United States. Classification of Net Assets Net assets and revenue, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organizations and changes therein are classified and reported as follows: Unrestricted Net Assets - Net assets that are not subject to donor-imposed stipulations. 6

9 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies (Continued) Classification of Net Assets (Continued) Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that may or may not be met, either by actions of the Organizations and/or the passage of time. When a restriction expires, temporarily restricted net assets are transferred to unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organizations. Generally, the donors of these assets permit the Organizations to use all or part of the income earned on any related investments for general or specific purposes. Use of Estimates The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Revenue Recognition Contributions are recognized when the donor makes a promise to give to the Organizations that is, in substance, unconditional. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and nature of any donor restrictions. When a restriction expires, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Project income represents amounts contributed by program beneficiaries. The contributions are to help defray the cost of the specific program in which the beneficiary received assistance. The contributions are recorded as temporarily restricted revenue due to the implied stipulation that the contributions be used in the program the beneficiary received assistance. When a restriction expires, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statement of activities as released from restriction. Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Grants are either recorded as contributions or exchange transactions based on criteria contained in the grant award. 7

10 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies (Continued) Revenue Recognition (Continued) A. Grant Awards That Are Contributions Grants that qualify as contributions are recorded as invoiced to the funding sources. Revenue is recognized in the accounting period when the related allowable expenses or asset acquisition costs are incurred. Amounts received in excess of expenses or asset acquisitions are reflected as grant funds received in advance. B. Grant Awards That Are Exchange Transactions Inventory Exchange transactions reimburse based on a predetermined rate for services performed. The revenue is recognized in the period the service is performed. Inventory primarily consists of food commodities for distribution to low-income households and is stated at the values provided by the State of Michigan, Department of Education. Accounts Receivable Accounts receivable consist primarily of amounts billed under performance contracts for senior services. Amounts are reviewed for collectability by management and an allowance for doubtful accounts is recorded as needed based on collection history and customer attributes. NMCAA considers these receivables to be collectible and; therefore, no allowance for doubtful accounts has been recorded. Food Distributed Commodity food distributed represents the value of food received through the State of Michigan and distributed to low-income households. Valuations are provided by the State of Michigan. Commodity inventory is charged to expense when the commodities are distributed. Mortgages Receivable NMCAA operates loan programs funded through USDA Rural Development and Veterans Administration grants. The programs provide loans to home owners to perform home rehabilitations. The loans are non-interest-bearing. Loans receivable are discounted to their net present value at a 2.87% discount rate and are stated at the amount of unpaid principal. Any funds repaid must be used in accordance with the original grant agreement. Management has the intent and ability to hold all loans for the foreseeable future or until maturity or pay-off. Management has reported the loans at their outstanding unpaid principal balances adjusted for charge-offs and the allowance for expected loan losses, if applicable. 8

11 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies (Continued) Mortgages Receivable (Continued) The allowance for loan losses is a valuation allowance for probable incurred credit losses based on an evaluation of the outstanding loans. Loans losses are charged against the allowance when management believes the collectability of the principal is unlikely. Subsequent recoveries, if any, are credited to the allowance. Management regularly evaluates the allowance for loan losses taking into consideration such factors as historical loss experience, changes in the nature and volume of the loan portfolio, overall portfolio quality, and current economic conditions that may affect the borrower s ability to pay. A loan is considered impaired when, based on current information and events, it is probable that NMCAA will be unable to collect the scheduled payments of principal when due according to the contractual terms of the loan agreement. NMCAA has not identified any loans that are impaired at September 3, 215. Property and Equipment Property, equipment, and leasehold improvements are capitalized at cost. Depreciation is provided for using the straight-line method over the estimated useful life of the asset. NMCAA considers items with a cost greater than $5, and a useful life greater than one year to be property and equipment. Leasehold improvements are amortized by the straight-line method over the initial term of the lease or useful life, whichever is shorter. Amortization expense is included with depreciation expense. Property and equipment purchased with grant funds are owned by NMCAA while used in the program for which they were purchased or in other future authorized programs. However, the various funding sources have a reversionary interest in the property and equipment purchased with grant funds. Its disposition, as well as the ownership of any proceeds therefrom, is subject to funding source regulations. The property and equipment purchased with grant funds is normally restricted for use in specific programs operated by NMCAA. NMCAA has adopted a policy of implying a time restriction on assets purchased with grant contributions. Grant-funded property and equipment are recorded as restricted support. As the property and equipment are depreciated, the temporarily restricted net assets are released from restriction and reported in the consolidated statement of activities as net assets released from restriction. Investments Investments are recorded at fair value as determined in an active market. Realized and unrealized gains and losses are recognized as investment income in the consolidated statement of activities. 9

12 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1 Summary of Significant Accounting Policies (Continued) In-Kind Contributions In-kind contributions for space, supplies, and professional services are recorded in the statement of activities as revenue and expenses in the period they are received. During the year ended September 3, 215, NMCAA received $56,295 of such contributions, primarily for its Head Start and Senior Nutrition programs. In addition, NMCAA received contributions of nonprofessional volunteer services of $2,229,23, primarily for its Head Start and Senior Nutrition programs. The nonprofessional volunteer services are not reported in the consolidated statement of activities as they do not meet the criteria to be recorded under accounting principles generally accepted in the United States. Income Taxes NMCAA and CACC are exempt from income taxes under Section 51(c)(3) of the Internal Revenue Code. NMCAA and CACC are also exempt from Michigan franchise or income tax. IEM is a disregarded entity for tax purposes and all activity of IEM will be included in the tax return of NMCAA. The Organizations are required to assess whether it is more likely than not that a tax position will be sustained upon examination on the technical merits of the position assuming the taxing authority has full knowledge of all information. If the tax position does not meet the more likely than not recognition threshold, the benefit of that position is not recognized in the consolidated financial statements. The Organizations have determined there are no amounts to record as assets or liabilities related to uncertain tax positions. Cost Allocation Joint costs are allocated to benefiting programs using various allocation methods depending on the type of joint cost being allocated. Joint costs are those costs incurred for the common benefit of all agency programs, which cannot be readily identified with a final cost objective. Subsequent Events Subsequent events have been evaluated through January 8, 216, which is the date the consolidated financial statements were available to be issued. 1

13 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 2 Concentration of Credit Risk NMCAA maintains its cash and restricted cash balances at several financial institutions in noninterest-bearing accounts that are insured by the FDIC up to $25,. NMCAA has not experienced any losses with these accounts. Management believes NMCAA is not exposed to any significant credit risk on its cash. The cash associated with the NeighborWorks America grant has been deposited in a separate bank account that is covered by FDIC. Note 3 Restricted Cash The restricted cash balance at September 3, 215, consists of amounts as follows: Individual development accounts $ 512,875 Emergency solutions grant 1, NeighborWorks America capital fund 89,769 Total $ 612,644 Individual Development Accounts NMCAA received a grant award from the U.S. Department of Health and Human Services for Individual Development Accounts (IDA). The grant is intended to leverage grant funds, local match, and participant savings for eligible benefits. The grant awards are on a five-year basis. The grant awards require a dollar for dollar cash match. The grant states that it is mandatory that NMCAA establish a separate, restricted bank account for the grant and matching funds to be used for IDA participants. The IDA accounts can be established for three purposes as follows: Home ownership (first time homebuyer - funds for down payment, mortgage reduction, closing costs, etc.) Post-secondary education (college, technical, or trade school - for tuition, books, room, and board, etc.) Business start-up or expansion (equipment, expansion, office space, etc.) Eligible participants enroll in the program and open an individual development bank account. As the participant deposits money into his/her individual bank account, matching funds are earmarked for that participant. NMCAA incurs expenses against the grant and the match funds and releases the funds when the participant pays for an eligible cost. Participants can save up to $1, which is matched on a 3-to-1 or 2-to-1 basis by NMCAA, depending on the purpose of the benefit. Match is as follows: Home ownership 3-to-1 (maximum participant $1, - NMCAA $3,) Post-secondary education 2-to-1 (maximum participant $1, - NMCAA $2,) Business start-up or expansion 2-to-1 (maximum participant $1, - NMCAA $2,) 11

14 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 3 Restricted Cash (Continued) Emergency Solutions Grant NMCAA received an advance from the Michigan State Housing Development Authority (MSHDA) for the Emergency Shelter Grant which was required to be deposited into a restricted bank account. NeighborWorks America Capital Fund NMCAA received an award from NeighborWorks America to establish and maintain a permanently restricted revolving loan and capital projects fund. The award is required to be held in a restricted bank account segregated from other funding. Note 4 Inventory At September 3, 215, the inventory consists of the following: Commodity supplemental food $ 219,337 Central kitchen food 11,834 Grant funded housing inventory ADR project 6,62 Weatherization Materials 657 Inventory $ 238,448 Note 5 Grants Receivable Grants receivable at September 3, 215, consist of amounts due from funding sources as follows: U.S. Department of Health and Human Services $ 47,175 U.S. Department of Housing and Urban Development 76,487 U.S. Department of Agriculture Rural Development 29,179 Michigan State Housing Development Authority 62,95 Michigan Department of Human Services 199,449 Michigan Department of Education 29,362 Community Development Block Grant Counties 68,679 Charlevoix-Emmet Intermediate School District 117,541 Other programs 179,119 Total $ 1,232,86 12

15 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 6 Investments Investments at September 3, 215, consist of the following: Money market fund $ 6,494 Equities 119,9 Mutual funds 11,811 Total $ 236,395 Included in investment income for the year ended September 3, 215, was interest and dividends of $9,637 and a net realized and unrealized loss of $7,464 on the above investments. Investments, in general, are exposed to various risks, such as interest rate, credit, and overall market volatility. Due to the level of risk associated with certain investments, it is reasonably possible that changes in the values of certain investments will occur in the near term and that such changes could materially affect the amounts reported in the financial statements. Note 7 Fair Value Measurements NMCAA measures certain assets and liabilities at fair value in accordance with accounting standards. The accounting standard describes three levels of inputs that may be used to measure fair value (the fair value hierarchy). The level of an asset or liability within the fair value hierarchy is based on the lowest level of input significant to the fair value measurement of that asset or liability. Following is a brief description of each level of the fair value hierarchy: Level 1 - Fair value measurement is based on quoted prices for identical assets or liabilities in active markets. Level 2 - Fair value measurement is based on 1) quoted prices for similar assets or liabilities in active markets; 2) quoted prices for identical or similar assets or liabilities in markets that are not active; or 3) valuation models and methodologies for which all significant assumptions are or can be corroborated by observable market data. Level 3 - Fair value measurement is based on valuation models and methodologies that incorporate at least one significant assumption that cannot be corroborated by observable market data. Level 3 measurements reflect the Organization s estimates about assumptions market participants would use in measuring fair value of the asset or liability. Some assets and liabilities, such as investments, are measured at fair value on a recurring basis under accounting principles generally accepted in the United States. Other assets and liabilities, such as impaired investments, are measured at fair value on a nonrecurring basis. 13

16 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 7 Fair Value Measurements (Continued) As of September 3, 215, NMCAA does not have any liabilities that are measured at fair value. NMCAA also does not have any assets or liabilities measured on a nonrecurring basis. Following is a description of the valuation methodology used for each asset measured at fair value on a recurring or nonrecurring basis, as well as the classification of the asset within the fair value hierarchy. Equities, which consists of a corporate note, and mutual funds held at September 3, 215, are measured using Level 1 as quoted prices are available as they are traded in an active market. Money market funds are measured using Level 2 as quoted prices may not be available in an active market. Information regarding assets measured at fair value on a recurring basis is as follows: Fair Value Measurements Using Level 1 Level 2 Level 3 Fair Value Money market fund $ $ 6,494 $ $ 6,494 Equities, corporate note 119,9 119,9 Mutual funds: Equity mutual funds, convertible securities 54,658 54,658 Fixed income mutual funds, debt and equity Security investment funds 56,153 56,153 Totals $229,91 $ 6,494 $ $ 236,395 Note 8 Mortgages Receivable Mortgages receivable consist of the following: Housing preservation loans $ 523,564 Affordable Housing for Rural Veterans loans 32,267 Allowance for uncollectible mortgages receivable ( 277,915) Expected mortgages receivable to be collected 277,916 Discount at 2.87% ( 75,869) Total $ 22,47 The unamortized discount is the difference between the face amount of the loan receivable and its present value discounted at a compound interest rate. This discount is then amortized over the life of the loan. The loans are non-interest-bearing and are due upon the transfer of ownership. 14

17 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 8 Mortgages Receivable (Continued) NMCAA has a second mortgage on the properties. As NMCAA does not anticipate any homes to transfer ownership in the next year, the receivable balance has been classified as a long-term asset. An analysis of the allowance for uncollectible revolving loans receivable is as follows: Balance at beginning of year $ 256,88 Provision for loan loss 21,17 Balance at end of year $ 277,915 NMCAA considers loans impaired when, based on current information, it is probable that they will not collect all amounts due in accordance with contractual terms of the loan agreement. This generally includes loans where management has received indications suggesting future nonperformance is likely. Loans that are deemed impaired are evaluated for impairment individually. Loans that are not impaired are evaluated for impairment collectively based on past loss experience, current economic risks and other relevant factors. Detailed analysis of the allowance for loan losses as of September 3, 215, is as follows: Loan Allowance Balance Balance Loans individually evaluated for impairment $ $ Loans collectively evaluated for impairment 555, ,915 Totals $ 555,831 $ 277,915 Note 9 Property and Equipment A summary of property and equipment at September 3, 215, is as follows: Corporate Grant Award Purchased Purchased Totals Land $ 122,568 $ 15,625 $ 138,193 Buildings 881,868 92,63 973,931 Leasehold improvements 468,41 28,98 497,21 Vehicles/equipment 86,927 1,158,86 1,245,733 Subtotals 1,559,44 1,295,474 2,854,878 Accumulated depreciation ( 1,416,964) ( 972,758) ( 2,389,722) Property and equipment, net $ 142,44 $ 322,716 $ 465,156 15

18 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 1 Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes: Head Start parent funds $ 13,98 Senior funds 42,211 Community services 122,166 Assets for independence demonstration 281,474 HPG and AHRVF mortgages 22,47 Grant-funded equipment 322,716 Total $ 984,594 The above net assets have a specific purpose or time restrictions. When the restrictions are met, net assets are released from restriction and reported as unrestricted net assets. Note 11 Permanently Restricted Net Assets Capital funds provided by NeighborWorks America held in perpetuity, segregated and maintained as such to account for the eligible uses listed in the Investment and Grant Agreement between NeighborWorks America and NMCAA. The balance of the fund at September 3, 215 is $1,. Note 12 Employee Retirement Plan Employees may choose to withhold a portion of their income for contribution to NMCAA s 43(b) retirement plan. Contributions to the plan are 1% vested at the time of contribution. NMCAA did not directly contribute any amount into the retirement plan for the year ended September 3, 215. Note 13 Operating Lease Agreements NMCAA leases various facilities and equipment for operation of its programs with varying terms through September 3, 22. Lease expense for the year ended September 3, 215, was $418,86. Several of NMCAA s operating leases have terms extending beyond one year. The leases have a clause allowing early termination based on loss of grant funding. There is no expectation of loss of funding. The commitments are as follows: 216 $ 39, , , , ,64 Total $ 733,872 16

19 Northwest Michigan Community Action Agency, Inc. and Affiliates Notes to Consolidated Financial Statements Note 14 Functional Classification of Expenses The following program and supporting services are reflected in the consolidated statement of activities for the year ended September 3, 215: Program activities Child education $ 1,325,686 Housing program 2,575,534 Community services 2,229,772 Food programs 1,47,37 Older Americans 1,153,86 Weatherization/energy assistance 259,386 Total program activities 18,14,221 Management and general 689,179 Fund-raising 11,589 Total expenses $ 18,84,989 Note 15 Grant Awards At September 3, 215, NMCAA had received commitments for future funding under various grant awards of approximately $5,622,. These commitments are not recognized in the accompanying consolidated financial statements as receivables and revenue as they are conditional awards. 17

20 Supplementary Information

21 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-1 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Department of Agriculture Housing Housing Housing Preservation Preservation Preservation Grant Grant Grant Commodity Commodity Grand Trav. Co. Emmet Co. Grand Trav. Co. Child and Supplemental Supplemental Adult Day Food Program Food Total Subtotal Care Food 28122C Distribution (1) (2) (3) (4) (5) (6) REVENUE Prior year's grant funds received in advance $ 733,793 $ $ $ $ $ $ $ 218,4 Federal grant reimbursement revenue 13,123,935 7, 12,539 18,33 $ 37, , ,935 State and local grant reimbursement revenue 3,346,895 Performance contract revenue 811,527 Commodities food received 85, ,376 Grant funds received in advance ( 949,223) ( 219,337) Grant revenue 17,872,653 7, 12,539 18,33 37, , ,935 57,43 Project income 454, Investment income 2,173 Donations 263,271 Miscellaneous income 5,974 Transfers In-kind contributions 56,295 Total Revenue 19,149,741 7, 12,539 18,33 37, , ,984 57,43 EXPENSES Salaries 8,49,269 2,2 1,946 3,966 85,26 Fringe benefits 1,589, ,387 Professional/contract services 1,459, ,115 Travel/transportation 585, ,444 Space costs 694,48 31,676 Beneficiary assistance and supplies 4,482,275 7, 1,72 15,83 32, ,165 5,47 Lease and maintenance of equipment 134,673 6,691 Other 296, ,598 Commodity food distributed 84,393 57,43 Payments to subgrantees 23,451 In-kind expenses 56,295 Total Expenses 18,84,989 7, 12,539 18,33 37, , ,984 57,43 Change in Net Assets 344,752 Net assets - Beginning of the year 2,324,335 NET ASSETS - End of the year $ 2,669,87 $ $ $ $ $ $ $ See Independent Auditor's Report. 18

22 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-2 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Dept of Agriculture Dept. of Housing and Urban Development Temporary Emmet County Emergency Temporary 1.565, Targeted Food Assist. Emergency 1.568, LCHA LCHA Homeowner Program Food Assist Comprehensive Comprehensive Rehab. MSC- Subtotal Distribution Subtotal HC HC Subtotal HO (7) (8) (9) (1) (11) REVENUE Prior year's grant funds received in advance $ 218,4 $ $ $ 218,4 $ $ $ $ Federal grant reimbursement revenue 179,935 81, ,494 18,33 21,253 39, ,471 State and local grant reimbursement revenue Performance contract revenue Commodities food received 571, ,35 85,726 Grant funds received in advance ( 219,337) ( 219,337) Grant revenue 749,978 81, ,35 1,65,887 18,33 21,253 39, ,471 Project income Investment income Donations Miscellaneous income Transfers In-kind contributions Total Revenue 75,27 81, ,35 1,66,238 18,53 21,293 39, ,471 EXPENSES Salaries 85,26 29, ,251 1,64 1,717 2, Fringe benefits 25,387 7,979 33,366 2,323 2,66 4, Professional/contract services 1, ,76 3,847 Travel/transportation 9,444 35,727 45,171 1,243 3,338 4,581 2 Space costs 31,676 3,922 35,598 Beneficiary assistance and supplies 5, ,498 4,873 3,85 8, ,37 Lease and maintenance of equipment 6,691 2,59 8,75 Other 6,598 1,537 8, Commodity food distributed 57,43 234,35 84,393 Payments to subgrantees In-kind expenses Total Expenses 75,27 81, ,35 1,66,238 18,53 21,293 39, ,471 Change in Net Assets Net assets - Beginning of the year NET ASSETS - End of the year $ $ $ $ $ $ $ $ See Independent Auditor's Report. 19

23 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-3 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Department of Housing and Urban Development Charlevoix Co. Kalkaska Co. Emmet Co. Wexford Co. Wexford Co. Missaukee Benzie Co. CDBG CDBG CDBG CDBG CDBG Co. CDBG CDBG Housing Housing Housing Housing Housing Housing Housing MSC 211- MSC-212- MSC 212- MSC-213- MSC 211- MSC 211- MSC HOA 5264-HOA 737-HOA 5831-HOA 5831-HOA 763-HOA 771-HOA Subtotal (12) (13) (14) (15) (16) (17) (18) REVENUE Prior year's grant funds received in advance $ $ $ $ $ $ $ $ Federal grant reimbursement revenue 72, , ,17 1,287 ( 3,55) 4,126 32, ,225 State and local grant reimbursement revenue Performance contract revenue Commodities food received Grant funds received in advance Grant revenue 72, , ,17 1,287 ( 3,55) 4,126 32, ,225 Project income 34,743 9,475 45,479 2,472 3,18 9, ,59 Investment income Donations Miscellaneous income Transfers 6,913 ( 8,447) 4, ( 5,467) 7,332 5,83 In-kind contributions Total Revenue 79,17 148, ,88 55,766 17,276 37,677 49, ,817 EXPENSES Salaries , ,388 2,245 1,758 1,433 29,387 Fringe benefits 266 2, , ,411 Professional/contract services 12, , ,868 Travel/transportation 47 1, ,423 Space costs ,293 Beneficiary assistance and supplies 65, , ,142 42,159 14,43 34,867 47, ,21 Lease and maintenance of equipment Other 175 1, ,851 Commodity food distributed Payments to subgrantees In-kind expenses Total Expenses 79,17 148, ,88 55,766 17,276 37,677 49, ,817 Change in Net Assets Net assets - Beginning of the year NET ASSETS - End of the year $ $ $ $ $ $ $ $ See Independent Auditor's Report. 2

24 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-4 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Department of Housing and Urban Development Rural Permanent Rural Permanent Supportive Supportive Charlevoix- MSHDA MSHDA TSHLAP TSHLAP Housing Grant Housing Grant Emmet HMIS HML-213- HML WEX-MISS CHAR-EM Char/Em/Wex/Miss Char/Em/Wex/Miss HML ESF 17-ESF Subtotal SHP SHP SHP Yr 3 SHP Yr HMIS (19) (2) (21) (22) (23) (24) (25) REVENUE Prior year's grant funds received in advance $ $ $ $ $ $ $ $ 4,228 Federal grant reimbursement revenue , ,423 4,82 3, ,97 19,684 7,47 State and local grant reimbursement revenue Performance contract revenue Commodities food received Grant funds received in advance ( 6,63) Grant revenue , ,423 4,82 3, ,97 19,684 4,672 Project income Investment income Donations Miscellaneous income Transfers ( 1) ( 1) In-kind contributions Total Revenue , ,422 4,82 3, ,97 19,684 4,672 EXPENSES Salaries 192, ,963 3,742 3,37 54,498 3,65 Fringe benefits 41,483 41, , Professional/contract services 573 4,672 Travel/transportation 7,268 7,268 3,82 65 Space costs 3,737 3,737 3, Beneficiary assistance and supplies 61 13,562 14, ,36 14,911 Lease and maintenance of equipment Other 2,455 2,455 2, Commodity food distributed Payments to subgrantees 114, ,344 In-kind expenses Total Expenses , ,422 4,82 3, ,97 19,684 4,672 Change in Net Assets Net assets - Beginning of the year NET ASSETS - End of the year $ $ $ $ $ $ $ $ See Independent Auditor's Report. 21

25 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-5 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Department of Housing and Urban Development (HUD) Supportive Supportive Wexford-Miss. Housing Prog. Housing Prog. HUD HMIS WEX-MISS Manistee HMIS Wex./Miss. Char./Em. COC Merger Family Self- Family Self- HML-213 HML-213- SHP-12- SHP Fund Sufficiency Sufficiency 5682-HMIS 5682-HMIS 831 (3) 151 (3) Subtotal MI44L5F1212 Prog. - HCVP Prog. - HCVP (26) (27) (28) (29) (3) (31) (32) REVENUE Prior year's grant funds received in advance $ 4,994 $ $ $ $ 9,222 $ $ $ Federal grant reimbursement revenue 6,652 5, , ,81 532,444 9,283 1,225 5,526 State and local grant reimbursement revenue Performance contract revenue Commodities food received Grant funds received in advance ( 6,87) ( 3,156) ( 15,846) Grant revenue 5,559 2, , ,81 525,82 9,283 1,225 5,526 Project income Investment income Donations Miscellaneous income Transfers 6 6 In-kind contributions Total Revenue 5,559 2, , ,81 525,826 9,283 1,225 5,526 EXPENSES Salaries 42,721 41, ,311 1,55 4,472 Fringe benefits 8,26 5,292 24, ,52 Professional/contract services 4,934 2, ,787 8, Travel/transportation 1, ,675 Space costs 81 3,932 8,12 Beneficiary assistance and supplies 7,754 67,51 313, Lease and maintenance of equipment ,272 Other 1,656 1,845 6,683 Commodity food distributed Payments to subgrantees In-kind expenses Total Expenses 5,559 2, , ,81 525,826 9,283 1,225 5,526 Change in Net Assets Net assets - Beginning of the year NET ASSETS - End of the year $ $ $ $ $ $ $ $ See Independent Auditor's Report. 22

26 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-6 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS HUD Department of Treasury NeighborWorks NeighborWorks NW Fiancial NeighborWorks NeighborWorks NeighborWorks Green Program Green Program Capability Sgl. Fam. Home Wk Permanently Dev. Grant Dev. Grant Evaluation Prog. Design Pilot 337-SUP33 NeighborWorks Restricted FY & Operating Capital Subtotal GPD 413-SUP SUP SUP23 5-NWW3 Grant Grant (33) (34) (35) (36) (37) (38) (39) REVENUE Prior year's grant funds received in advance $ $ 18,467 $ $ $ $ 556 $ 14,742 $ Federal grant reimbursement revenue 6,751 5, 2,5 1, 25, 1, 7,5 1, State and local grant reimbursement revenue Performance contract revenue Commodities food received Grant funds received in advance ( 22,239) ( 2,5) ( 1,) ( 25,) ( 156,787) Grant revenue 6,751 1,228 1,556 18,455 1, Project income Investment income 88 Donations Miscellaneous income Transfers In-kind contributions Total Revenue 6,751 1,228 1,556 18,543 1, EXPENSES Salaries 5, ,21 Fringe benefits 1, ,328 Professional/contract services Travel/transportation Space costs Beneficiary assistance and supplies 893 1,411 1,5 Lease and maintenance of equipment Other 3 Commodity food distributed Payments to subgrantees In-kind expenses Total Expenses 6,751 1,228 1,556 18,543 Change in Net Assets 1, Net assets - Beginning of the year 9, NET ASSETS - End of the year $ $ $ $ $ $ $ $ 1, See Independent Auditor's Report. 23

27 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-7 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Department of Treasury Veterans Affairs Department of Energy (DOE) NeighborWorks National National Permanently Foreclosure Foreclosure Volunteer Supportive Serv. Weatherization Weatherization Restricted Mitigation Mitigation Income Tax Veterans Assistance Assistance Emmet County Cnsling R9 PL Cnsling R8 PL 21. Assistance Families Prog. Program DOE- Program DOE- ADR Project X X135 Subtotal 15VITA47 13-MI (4) (41) (42) (43) (44) (45) (46) REVENUE Prior year's grant funds received in advance $ $ $ 4,393 $ 128,158 $ $ $ $ Federal grant reimbursement revenue 6,329 6, ,186 24, 653, ,792 2,989 State and local grant reimbursement revenue Performance contract revenue Commodities food received Grant funds received in advance (216,526) Grant revenue 6,329 11,25 48,818 24, 653, ,792 2,989 Project income Investment income 88 Donations Miscellaneous income Transfers In-kind contributions 55,217 Total Revenue 6,329 11,25 48,96 79, , ,792 2,989 EXPENSES Salaries 4,759 9,774 28,846 16, ,855 78,644 7,573 Fringe benefits 916 1,476 5,763 3,15 45,876 22,774 2,254 Professional/contract services , , Travel/transportation 149 2,823 16,342 9,436 2,491 Space costs 16,738 4,418 1,423 Beneficiary assistance and supplies 3, , ,626 4,46 Lease and maintenance of equipment 2,398 1, Other 6,66 6,69 1,124 7,696 5,292 2,38 Commodity food distributed Payments to subgrantees 82,982 In-kind expenses 55,217 Total Expenses 6,62 6,329 11,25 45,526 79, , ,792 2,989 Change in Net Assets ( 6,62) 3,38 Net assets - Beginning of the year 9, NET ASSETS - End of the year ($ 6,62) $ $ $ 93,38 $ $ $ $ See Independent Auditor's Report. 24

28 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-8 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS DOE Department of Education Dept. of Health and Human Services Senior Early On Early On Senior Nutrition - Nutrition Char-Em Char-Em Nutrition - Home Services Subtotal ISD 215/216 ISD 214/215 Subtotal Congregate Delivered Subtotal Incentive (47) (48) (49) (5) (51) REVENUE Prior year's grant funds received in advance $ $ $ $ $ $ $ $ Federal grant reimbursement revenue 265,781 4,73 16,628 21, ,69 16, ,12 137,935 State and local grant reimbursement revenue 9,58 29, ,91 Performance contract revenue Commodities food received Grant funds received in advance Grant revenue 265,781 4,73 16,628 21, , , ,12 137,935 Project income 19,62 171,319 28,921 Investment income Donations Miscellaneous income Transfers 15,841 15,841 In-kind contributions 42,44 67,498 19,938 Total Revenue 265,781 4,73 16,628 21,331 31,79 787,3 1,97, ,935 EXPENSES Salaries 86,217 3,925 12,544 16,469 89, ,82 281,621 Fringe benefits 25, ,56 2,51 11,685 38,348 5,33 Professional/contract services 76 7,843 23, ,362 Travel/transportation 11, ,63 1,936 5,656 81,846 87,52 Space costs 5,841 5,588 2,78 8,368 Beneficiary assistance and supplies 126,86 81, ,79 274, ,935 Lease and maintenance of equipment 2, ,797 2,751 Other 7, ,229 6,623 8,852 Commodity food distributed Payments to subgrantees In-kind expenses 42,44 67,498 19,938 Total Expenses 265,781 4,73 16,628 21,331 31,79 787,3 1,97, ,935 Change in Net Assets Net assets - Beginning of the year NET ASSETS - End of the year $ $ $ $ $ $ $ $ See Independent Auditor's Report. 25

29 Northwest Michigan Community Action Agency, Inc. and Affiliates Schedule A-9 Schedule of Program Activity Year Ended September 3, 215 FEDERAL PROGRAMS Department of Health and Human Services TANF Community Services Salvation Army Support Serv. Weatherization Services Block Grant & Motel Provider MSHDA MI LIHEAP Block Grant Discretionary Prog. ADMIN- HCN LIHEAP CSBG-14- CSBG-D Subtotal MII Subtotal NFA# Year 2 Subtotal (52) (53) (54) (55) (56) REVENUE Prior year's grant funds received in advance $ $ $ $ $ $ $ $ Federal grant reimbursement revenue 394,37 29,2 29,2 228,431 68,168 35,4 643,568 State and local grant reimbursement revenue 299,91 Performance contract revenue 2,745 2,745 Commodities food received Grant funds received in advance Grant revenue 693,947 29,2 2,745 31, ,431 68,168 35,4 643,568 Project income 28,921 2,12 2,12 1,521 Investment income Donations Miscellaneous income Transfers 15,841 In-kind contributions 19,938 Total Revenue 1,235,647 29,2 4,865 33, ,952 68,168 35,4 643,568 EXPENSES Salaries 281,621 1,95 1,95 73, ,566 15,6 377,626 Fringe benefits 5, ,577 6,48 2,9 62,417 Professional/contract services 274,362 2,445 2, ,642 11,974 43,616 Travel/transportation 87, ,977 27,47 1,494 28,964 Space costs 8, ,618 5,618 Beneficiary assistance and supplies 412,22 29,2 29,2 127,744 23,612 4,518 28,13 Lease and maintenance of equipment 2, ,637 13,637 Other 8,852 1,119 38, ,56 Commodity food distributed Payments to subgrantees In-kind expenses 19,938 Total Expenses 1,235,647 29,2 4,865 33, ,952 68,168 35,4 643,568 Change in Net Assets Net assets - Beginning of the year NET ASSETS - End of the year $ $ $ $ $ $ $ $ See Independent Auditor's Report. 26