UPSTATE CEREBRAL PALSY, INC. Financial Statements as of December 31, 2014 Together with Independent Auditor s Report

Transcription

1 UPSTATE CEREBRAL PALSY, INC. Financial Statements as of December 31, 2014 Together with Independent Auditor s Report

2 INDEPENDENT AUDITOR S REPORT May 4, 2015 To the Board of Directors of Upstate Cerebral Palsy, Inc.: Report on Financial Statements We have audited the accompanying financial statements of Upstate Cerebral Palsy, Inc. (a New York not-for-profit corporation), which comprise the balance sheet as of December 31, 2014, and the related statements of activities and change in net assets, functional expenses and cash flows for the year 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 171 Sully s Trail, Suite 201 Pittsford, New York p (585) f (585) An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. (Continued) ALBANY BATAVIA BUFFALO EAST AURORA GENEVA NYC ROCHESTER RUTLAND, VT SYRACUSE UTICA

3 INDEPENDENT AUDITOR S REPORT (Continued) Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Upstate Cerebral Palsy, Inc., as of December 31, 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Upstate Cerebral Palsy, Inc. s 2013 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated April 30, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2013 is consistent, in all material respects, with the audited financial statements from which it has been derived.

4 UPSTATE CEREBRAL PALSY, INC. BALANCE SHEET DECEMBER 31, 2014 (With Comparative Totals for 2013) ASSETS CURRENT ASSETS: Cash and equivalents $ 14,405,764 $ 8,867,303 Certificates of deposit 2,795,190 2,786,909 Investments 14,611,227 13,912,789 Accounts receivable, net 8,582,147 9,938,425 Prepaid expenses 174, ,425 Due from affiliates 1,261, ,182 Note receivable - affiliate - 250,000 Total current assets 41,830,339 36,410,033 PROPERTY AND EQUIPMENT, net 5,821,129 6,013,041 OTHER ASSETS: Refinancing costs, net 92, ,174 Funded reserves 394, ,578 Investment in MSO 97,500 97,500 Workers' compensation collateral 2,065,000 1,665,000 Total other assets 2,649,723 2,554,252 LIABILITIES AND NET ASSETS $ 50,301,191 $ 44,977,326 CURRENT LIABILITIES: Current portion of long-term debt $ 1,013,839 $ 1,046,796 Accounts payable and accrued expenses 4,959,575 3,753,260 Accrued payroll and related expenses 5,859,429 6,012,941 Current portion of deferred revenue 1,350,281 1,223,482 Due to funding sources 7,138,742 2,641,976 Total current liabilities 20,321,866 14,678,455 LONG-TERM LIABILITIES: Deferred revenue, net of current portion 217, ,403 Long-term debt, net of current portion 4,338,406 5,199,115 4,555,441 5,481,518 Total liabilities 24,877,307 20,159,973 NET ASSETS - unrestricted 25,423,884 24,817,353 $ 50,301,191 $ 44,977,326 The accompanying notes are an integral part of these statements. 1

5 UPSTATE CEREBRAL PALSY, INC. STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETS FOR THE YEAR ENDED DECEMBER 31, 2014 (With Comparative Totals for 2013) REVENUE: Fees for services rendered - Medicaid $ 50,979,244 $ 50,657,655 Tuition 13,484,500 14,436,913 OMH contract 1,538,601 1,429,733 Participant fees 2,578,482 2,543,327 OMH community residences 36,850 36,850 Clinic contracts 145, ,194 Insurance/private 3,307,731 2,885,658 VESID contract 225, ,726 Federal grants 660, ,716 Other 232, ,316 Investment income 1,013,466 1,772,163 Gain on sale of fixed assets 23,953 14,785 Other and prior year revenues, net 1,763, ,588 Total revenue 75,990,362 75,746,624 PUBLIC SUPPORT: United Way 32,292 34,519 Contributions Total public support 32,292 34,769 Total revenue and public support 76,022,654 75,781,393 EXPENSES: Program services - ICF program 16,401,196 16,405,676 IRA program 17,658,998 17,616,950 Education programs 13,088,627 13,642,140 Day habilitation programs 7,555,238 7,252,642 Clinic programs 4,121,635 3,666,145 Community services programs 3,216,968 3,245,777 Mental health services 1,399,319 1,372,473 OMH residential services 1,402,119 1,503,403 Day care programs 515, ,202 Affiliated programs 1,206, ,624 Grants and other 882, ,959 Total program services 67,448,773 66,140,991 Supporting services - Management and general 7,967,350 7,592,842 Total expenses 75,416,123 73,733,833 CHANGE IN NET ASSETS 606,531 2,047,560 NET ASSETS - beginning of year 24,817,353 22,769,793 NET ASSETS - end of year $ 25,423,884 $ 24,817,353 The accompanying notes are an integral part of these statements. 2

6 UPSTATE CEREBRAL PALSY, INC. STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2014 (With Comparative Totals for 2013) Program Community ICF IRA Education Day Habilitation Clinic Services Mental Health Program Program Programs Programs Programs Programs Services Salaries $ 9,559,359 $ 10,745,214 $ 8,626,135 $ 4,012,435 $ 1,934,814 $ 2,058,565 $ 818,881 Fringe benefits 1,694,396 2,027,578 1,772, , , , ,802 Payroll taxes 1,555,928 1,749,122 1,031, , , ,081 93,118 Occupancy - rent 294, , ,339 19,716 60,915 41,541 Supplies - therapeutic 369, , ,891 65, ,003 8,259 25,470 Professional fees 25,727 37,640 35,509 11, ,397 6,296 58,118 Supplies - food 549, ,257 21,073 9,671 1, ,736 Depreciation 232, ,126 52, ,935 57,402 1,254 24,735 Facility tax 1,039, Day habilitation transportation , Minor equipment 118, , ,488 43,930 39,439 67,959 13,347 Non-professional fees 135, , ,336 53,539 58,630 93,929 12,361 Service agreements 49, ,757 25,721 22,537 35,615 11,420 8,454 Occupancy - utilities 142, , , ,807 22,324 17,804 16,961 Repairs and maintenance 169, ,093 24,626 18,201 13, ,215 6,544 Vehicle - operations 84, ,061 16,636 58, ,476 Supplies - office 19,084 29, ,071 25,314 99,987 10,633 6,794 Local transportation 39,675 80,045 60,131 25,609 6,862 65,941 25,493 Telephone 29,847 72,168 35,611 28,865 16,932 17,543 17,921 Donations to affiliates Supplies - maintenance 63,300 56,013 40,008 40,176 3,927 6,953 2,979 Vehicle - insurance 31,523 64,528 7,149 25, ,282 Occupancy - mortgage interest 46, ,357 10,242 3,234 1,039-1,270 Legal and audit - - 3,623-2, Insurance 21,712 24,658 19,748 8,807 4,007 4,746 1,664 Vehicle - repairs 31,330 67,172 3,591 12, ,375 Occupancy - insurance 21,129 31,723 17,056 22,267 2,930 3,185 4,405 Client recreation 33,280 14,535 1,517 23, ,866 7,845 Staff development 6,750 7,457 12,434 3,572 9,644 9,267 3,378 Other fares 2,068 1,137 1, ,928 3,791 1,310 Postage 1, ,945 4,677 6,289 10,518 3,799 Printing and publications 1,028 3,245 2, , Recruitment and recognition Occupancy - bond fees 10, Amortization 16,092 5,986-2, ,092 Vehicle - interest 3,321 12,525 1,541 5, Vehicle - lease Occupancy - tax - 2, , Other , ,005 1, $ 16,401,196 $ 17,658,998 $ 13,088,627 $ 7,555,238 $ 4,121,635 $ 3,216,968 $ 1,399,319

7 OMH Residential Day Affiliated Grants Management Services Care Programs and Other Total and General $ 527,015 $ 320,746 $ 659,734 $ 129,063 $ 39,391,961 $ 4,294,514 $ 43,686,475 $ 42,846, ,711 73, ,222 22,934 7,661, ,883 8,596,751 8,826,374 73,336 38,095 81, ,128 5,862, ,718 6,354,187 6,009, ,083 41, ,996-1,685, ,930 1,788,539 2,049,198 11,356 4,920 31,136 14,081 1,415,644 32,014 1,447,658 1,206, , ,584 1,117, ,957 1,321,580 1,152,260 56,555 6,391 4,223 7,579 1,309, ,310,628 1,278,223 59, ,077 2,457 1,078, ,264 1,226,473 1,138, ,039,827-1,039, , , , ,887 14, ,903 57, , , , ,432 16,020 7,364 52, , , , ,479 11,047 1,089 5, , , , ,430 26,790 10,091 30, ,785 84, , ,528 7, , ,700 11, , ,157 9,930-3,052 1, , , , ,984 2, , , , , ,578 2, ,224 2, ,483 27, , ,912 12,868 2,650 10, ,214 83, , , , , , ,030 5,579 2,241 8,323 1, ,729 17, , ,615 5, ,220 46, , ,238 18, , , , ,009-19, , , ,925 1, ,690 79, , , ,985 39, , ,255 5,289 1,229 3, ,734 11, , , ,762 10,439 94,935 3,378 98, ,038 1, ,268-57,122 31,971 89,093 97, ,505 2,421 25,246 35,410 60,656 45, ,047-39,925 13,417 53,342 87, ,645 28,206 50,851 59, ,030 30,138 18,164 48, , ,321 34, ,215 42,905 3, ,882-28,882 31,524 1, ,226 2,736 27,962 13, ,305 1,305 6,249 7,554 4, ,879-3,879 4, ,540 51,988 12,237 64,225 45,681 $ 1,402,119 $ 515,152 $ 1,206,545 $ 882,976 $ 67,448,773 $ 7,967,350 $ 75,416,123 $ 73,733,833 Total The accompanying notes are an integral part of these statements. 3

8 UPSTATE CEREBRAL PALSY, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2014 (With Comparative Totals for 2013) CASH FLOW FROM OPERATING ACTIVITIES: Change in net assets $ 606,531 $ 2,047,560 Adjustments to reconcile change in net assets to net cash flow from operating activities: Depreciation and amortization 1,255,355 1,169,631 Gain on sale of property (23,953) (14,785) Realized and unrealized gain on investments (648,735) (1,458,779) Securities donated to affiliated entity 250, ,030 Change in: Accounts receivable, net 1,356, ,108 Prepaid expenses (54,823) 15,212 Due from affiliates (726,581) (346,411) Accounts payable and accrued expenses 1,206,315 1,220,595 Accrued payroll and related expenses (153,512) (380,309) Due to funding source 4,496, ,517 Deferred revenue 61, ,483 Net cash flow from operating activities 7,625,072 3,431,852 CASH FLOW FROM INVESTING ACTIVITIES: Change in depreciation reserve 275,647 (300) Investment in MSO - (48,750) Deposits into workers' compensation collateral (400,000) (700,000) Change in notes receivable - affiliate 250,000 (61,055) Purchases of property and equipment (1,049,282) (950,176) Proceeds from sale of property and equipment 38,674 32,152 Purchase of certificates of deposit, net (8,281) (262,618) Purchases of investments (2,344,508) (4,336,471) Proceeds from sale of investments 2,044,805 4,102,154 Net cash flow from investing activities (1,192,945) (2,225,064) CASH FLOW FROM FINANCING ACTIVITIES: Repayment of long-term debt (1,439,285) (805,776) Borrowings on long-term debt 545, ,600 Repayment of refinanced debt (1,000,000) - Borrowings on refinanced debt 1,000,000 - Net cash flow from financing activities (893,666) 119,824 CHANGE IN CASH AND EQUIVALENTS 5,538,461 1,326,612 CASH AND EQUIVALENTS - beginning of year 8,867,303 7,540,691 CASH AND EQUIVALENTS - end of year $ 14,405,764 $ 8,867,303 The accompanying notes are an integral part of these statements. 4

9 UPSTATE CEREBRAL PALSY, INC. NOTES TO FINANCIAL STATEMENTS DECEMBER 31, THE AGENCY Upstate Cerebral Palsy, Inc. (the Agency) provides direct care services and programs for individuals who are physically, developmentally or mentally challenged. Services provided include preschool and school age education, clinical/medical diagnostic and treatment, primary care, home and community based waiver services, day care, residential services, Big Brother/Big Sisters as well as a variety of other services. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Agency have been prepared in conformity with accounting principles generally accepted in the United States of America (GAAP). Comparative Information The financial statements include certain prior year summarized comparative information. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with the Agency s financial statements for the year ended December 31, 2013, from which the summarized information was obtained. Classification of Net Assets At December 31, 2014 and 2013, the Agency s net assets were all unrestricted. Fair Value Measurements Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. GAAP provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). Valuations based on quoted prices in markets that are not active or for which all significant inputs are observable, directly or indirectly, are considered level 2 measurements. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The valuation methodology used for the Agency s investments is discussed in note 3. The Agency has other financial instruments in the accompanying balance sheet, including cash and equivalents, certificates of deposits, funded reserves, and debt. The carrying amount of cash and equivalents, certificates of deposit, and funded reserves approximates fair value due to the short-term nature of the instruments and is considered to be a level 1 measurement. The carrying amount of debt approximates fair value based on current rates at which the Agency could borrow funds with similar remaining maturities and is considered to be a level 2 measurement. 5

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Revenue and Support The Agency receives revenue primarily from federal, state and local government agencies, United Way, and other third-party payers at various approved rates. Revenue is recognized as services are performed. Certain of these revenues are subject to retroactive audit by the thirdparty payers. To the extent these changes relate to prior years, any changes resulting from these audits are recognized as prior year income and expenses in the year they become known. Cash and Equivalents Cash and equivalents consist of bank demand deposit and money market accounts which, at times, may exceed federally insured limits. The Agency has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk with respect to cash. Certificates of Deposit Certificates of deposit, with original maturities of one year or less, are recorded at cost, and at times may exceed federally insured limits. The Agency has not experienced any loss in such accounts and believes it is not exposed to any significant credit risk with respect to certificates of deposit. Investments Investments are recorded at fair value based on quoted market prices. The Agency invests in various types of investment securities. Investment securities are exposed to various risks, such as interest rate, market, and credit risk. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such change could materially affect the amounts reported in the accompanying financial statements. Accounts Receivable The Agency provides services that are paid for by third-party payers. The Agency does not accrue interest on these receivables. Accounts for which no payments have been received for several months are considered delinquent and when customary collection efforts are exhausted the account is written-off. The Agency records an allowance for doubtful accounts in anticipation of future write-offs. The allowance for doubtful accounts is based on the Agency s past experience and a review of specific outstanding accounts. Property and Equipment Property and equipment purchases are recorded at cost. Expenditures for property and equipment in excess of $5,000 and with an expected life in excess of two years are capitalized. Depreciation and amortization are recorded on property and equipment on a straight-line basis over the shorter of the remaining lease term or the assets estimated useful life for leasehold improvements or the assets estimated useful lives, which range from three (3) to thirty (30) years. Note Receivable - Affiliate During 2012, the agency entered into a line-of-credit agreement with an affiliated organization for a total of $300,000. The note receivable - affiliate is stated at the unpaid principal balance at December 31, 2013, and is secured by the assets of the organization. The note was repaid by the affiliate during the year ended December 31,

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Refinancing Costs Refinancing costs represent costs incurred to refinance long-term debt. These costs are amortized on a straight-line basis over the term of the related debt. Accumulated amortization of refinancing costs was $628,144 and $599,262 at December 31, 2014 and 2013, respectively. Amortization expense in 2014 and 2013 was $28,882 and $31,524, respectively. The amortization refinancing costs for each of the next five years is expected to be approximately $18,500. Funded Reserves As required by certain financing agreements, the Agency must maintain a funded depreciation reserve or debt service reserve. The funded depreciation reserve consists of a demand deposit account at a bank and the debt service reserve is maintained by the lending Agency. The reserves are required to remain intact until the bonds are paid in full and there are no requirements for additional deposits into the reserve. The revenue recorded in 2014 and 2013 is the interest revenue on the accounts. Investment in MSO The Agency has an investment in Management Services Solutions, LLC, (the MSO), with other not-for-profit corporations. The MSO is a New York State limited liability company that was established to provide efficiencies in administrative services, program coordination, and advocacy and assistance in program design and operations. During 2012, the Agency agreed to purchase 13 shares of ownership at a price of $7,500 per share for a total purchase price of $97,500. The total investment in MSO recorded as of December 31, 2014 and 2013 was $97,500. There was no activity in the MSO during 2014 or Workers Compensation Collateral The Agency has an agreement with an insurance company to pay workers compensation claims during the year. In accordance with the agreement, the Agency was required to remit collateral payments to the insurance company. The required collateral as of December 31, 2014 and 2013 was $2,065,000 and $1,665,000, respectively. The insurance company maintains the reserve funds in an account to be used in the future, if necessary. The amount is included in other assets on the balance sheet. The Agency has also recorded an additional amount due of $150,000 as of December 31, 2014, based on past experience and in anticipation of future assessments; which is included in accounts payable and accrued expenses in the balance sheet. Deferred Revenue Deferred revenue consists of funds advanced for the Agency s various programs. These advances will be recognized as revenue as services are rendered. Long term amounts consist of funded depreciation funds and capital advance grants, which are to be used for the retirement of mortgage principal. Funded depreciation is a requirement by New York State on projects that receive capital grants. Capital advance grants are being amortized from ten (10) to twenty-five (25) years. Due to Funding Sources Due to funding sources represents liabilities due to State funding sources that will be recouped by New York State agencies for program funding paid or advanced in excess of the amount eligible for reimbursement to the Agency. Income Taxes The Agency is a not-for-profit corporation, exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. The Agency has also been classified by the Internal Revenue Service as an entity that is not a private foundation. 7

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Donated Services Volunteers have donated significant amounts of time in support of the Agency s activities. The value of these services is not reflected in the accompanying statements, as these services do not meet the criteria for recognition as set forth under GAAP. Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Reclassifications Certain reclassifications have been made to the 2013 financial statements to conform to the current year presentation. 3. INVESTMENTS Composition The Agency s investments consisted of the following at December 31: Money market $ 14,657 $ 121,274 Mutual funds 12,141,950 11,515,144 Corporate bonds 1,533,133 1,349,375 Government securities 921, ,996 $ 14,611,227 $ 13,912,789 Net Investment Income The Agency s net investment income consisted of the following for the years ended December 31: Interest and dividends $ 364,731 $ 313,384 Realized and unrealized gain, net 648,735 1,458,779 $ 1,013,466 $ 1,772,163 Investment management fees paid by the Agency were approximately $39,000 and $35,000 in 2014 and 2013, respectively, and are included in professional fees in the statement of functional expenses. 8

13 3. INVESTMENTS (Continued) Fair Value The following are measured at fair value on a recurring basis at December 31, 2014: Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Assets: Money market $ 14,657 $ - $ - $ 14,657 Mutual funds - Bond 1,154, ,154,477 International 664, ,245 Intermediate term 1,181, ,181,024 Small cap growth 887, ,685 Large cap value 1,683, ,683,352 Large cap growth 1,658, ,658,387 Large cap blend 2,789, ,789,311 Mid cap blend 1,422, ,422,539 Mid cap growth 700, ,930 Corporate bonds - 1,533,133-1,533,133 Government - Treasury securities 244, ,918 Bonds - 676, ,569 $ 12,401,525 $ 2,209,702 $ - $ 14,611,227 The following are measured at fair value on a recurring basis at December 31, 2013: Level 1 Inputs Level 2 Inputs Level 3 Inputs Total Assets: Money market $ 121,274 $ - $ - $ 121,274 Mutual funds - Bond 1,639, ,639,806 International 602, ,043 Intermediate term 1,079, ,079,703 Small cap growth 904, ,175 Large cap value 1,614, ,614,491 Large cap growth 1,530, ,530,001 Large cap blend 2,757, ,757,217 Mid cap growth 1,387, ,387,708 Corporate bonds - 1,349,375-1,349,375 Government - Treasury securities 253, ,122 Bonds - 673, ,874 $ 11,889,540 $ 2,023,249 $ - $ 13,912,789 The measurement of level 1 investments was determined using quoted prices in active markets for identical assets held at year-end. The measurement of level 2 investments was estimated based on quoted market prices of securities with similar characteristics. There were no changes to the valuation techniques during 2014 or

14 4. ACCOUNTS RECEIVABLE Accounts receivable consisted of the following at December 31: Services fees receivable: Medicaid $ 5,288,022 $ 6,255,495 Third party payers 441, ,270 Self-pay 18,066 18,999 Grants and subsidies receivable: Tuition and title I 2,225,114 2,697,301 Other grants and subsidies 486, ,177 Other 234,456 70,639 8,693,434 10,052,881 Less: Allowance for doubtful accounts (111,287) (114,456) $ 8,582,147 $ 9,938, PROPERTY AND EQUIPMENT Property and equipment consisted of the following at December 31: Land and improvements $ 1,299,457 $ 1,246,278 Buildings and leasehold improvements 18,086,631 18,051,976 Furniture and equipment 4,320,758 4,190,456 Vehicles 3,903,539 3,730,926 Construction in progress 39,744-27,650,129 27,219,636 Less: Accumulated depreciation and amortization (21,829,000) (21,206,595) $ 5,821,129 $ 6,013,041 10

15 6. LONG-TERM DEBT AND FINANCING ARRANGEMENTS Long-term debt consisted of the following at December 31: Mortgages payable to Facilities Development Corporation (MCFFA) in semi-annual aggregate installments of approximately $210,000, including interest at rates ranging from 6.17% to 9.09%, maturing at various dates through August 2018, collateralized by real property. $ 1,191,724 $ 1,551,147 Bonds payable to Dormitory Authority of the State of New York (DASNY) in aggregate annual installments of approximately $107,000, including interest at 3.42%, maturing at various dates through December 2024, collateralized by real property. The proceeds were used to redeem other bonds. 913,061 - Bonds payable to DASNY in aggregate annual installments of approximately $169,000, including interest at 5.15%, maturing at various dates through June 2024, collateralized by real property. These bonds were refunded during 2014 in conjunction with the issuance of the new bonds discussed above. - 1,432,498 Mortgages payable to commercial banks in aggregate monthly installments of $30,000, including interest at rates ranging from 3.75% to 5.99%, maturing at various dates through April 2027, collateralized by real property. 2,136,462 2,358,950 Notes payable to commercial banks, in aggregate monthly installments of approximately $36,000, including interest at rates ranging from 0% to 4%, maturing at various dates through November 2018, collateralized by certain vehicles. 1,110, ,316 Total long-term debt $ 5,352,245 $ 6,245,911 Maturities of long-term debt are as follows at December 31, 2014: 2015 $ 1,013, , , , ,717 Thereafter 1,362,666 5,352,245 Less: Current portion (1,013,839) $ 4,338,406 11

16 6. LONG-TERM DEBT AND FINANCING ARRANGEMENTS (Continued) Line-of-Credit The Agency has available an unsecured operating line-of-credit with a bank totaling $2,000,000. Amounts borrowed under this agreement bear interest at the bank s prime rate of lending (3.25% at December 31, 2014). At December 31, 2014 and 2013, there were no outstanding borrowings against this line-of-credit. Supplemental Cash Flow Information Interest paid and expensed during 2014 and 2013 on all financing arrangements and charged to operations was approximately $217,000 and $365,000, respectively. Funded Reserves Funded reserves consisted of the following at December 31: Funded depreciation savings accounts $ 147,758 $ 147,463 MCFFA/DASNY bond reserve accounts 247, ,115 $ 394,931 $ 670,578 Loan Guarantee The Agency has guaranteed the repayment of two Civic Facility Revenue Bonds issued through the Oneida County Industrial Development Agency in 2005 and 2013 (replaced the 1999 issue) for Mohawk Valley Handicapped Services, Inc. (MVHS), an affiliated entity (see note 9). The bonds are secured by real property owned by MVHS and leased to the Agency for operations. The combined balance on these two bonds at December 31, 2014 and 2013 was $8,062,970 and $8,553,960, respectively. Debt Covenants In connection with its line-of-credit, the Agency is required to achieve a debt service coverage ratio of 1.2. Also, in conjunction with the aforementioned loan guarantees, the Agency and MVHS are required to maintain a combined debt service coverage ratio of 1.1 and combined liquidity (cash and investments) of $8,500,000. The Agency and MVHS were in compliance with these covenants as of December 31, 2014 and

17 7. COMMITMENTS The Agency has several non-cancelable operating leases for facilities and vehicles with MVHS and other entities that expire at various dates through September Total rental expense under all long-term leases was approximately $1,479,000 and $1,715,000 for the years ended December 31, 2014 and 2013, respectively. Future minimum payments under operating leases having lease terms in excess of one year as of December 31, 2014 are as follows: MVHS Others Total 2015 $ 1,373,864 $ 121,867 $ 1,495, ,297,409 20,000 1,317, ,277,653-1,277, ,249,194-1,249, ,225,187-1,225,187 Thereafter 10,044,158-10,044,158 $ 16,467,465 $ 141,867 $ 16,609, RETIREMENT PLAN The Agency has a defined contribution retirement plan that covers all eligible employees. The Agency matches up to 7% of an employee s voluntary contribution for new employees hired after January 1, The Agency contributes 4% of salary and matches up to 3% for new employees hired after February 28, 2004 who voluntarily contribute up to 3%. The Agency contributes 7% of salary for employees hired prior to March 1, The plan operates under Section 403(b) of the Internal Revenue Code. Retirement expense was approximately $1,600,000 and $1,800,000 for the years ended December 31, 2014 and 2013, respectively. 9. AFFILIATED ENTITIES Kelberman Center, Inc. Kelberman Center, Inc. (the Center) is a New York not-for-profit organization. The Center provides services to persons with autism spectrum disorders and related learning challenges; including health and behavioral services, education, resources, and community support systems. The Agency provides contract staffing, management services, rental of space, and other services to the Center. The amount of these services totaled $545,786 and $346,511 for the years ended December 31, 2014 and 2013, respectively. In 2014 and 2013, the Agency contracted with the Center for staffing in the amount of $23,821 and $35,775, respectively. The Center owed the Agency $105,695 and $278,639 as of December 31, 2014 and 2013, respectively, for services performed. Mohawk Valley Handicapped Services, Inc. MVHS is a New York not-for-profit corporation. The Agency leases building space from MVHS. For the years ended December 31, 2014 and 2013, the Agency made payments for rent totaling approximately $1,300,000 and $1,460,000, respectively, to MVHS. MVHS also paid management fees to the Agency during 2014 and 2013 of $10,000. MVHS owed the Agency $92,985 at December 31, 2014, respectively and the Agency owed MVHS $11,174 at December 31, 2013, respectively. 13

18 9. AFFILIATED ENTITIES (Continued) Cerebral Palsy Association of the Mohawk Valley, Inc. Cerebral Palsy Association of the Mohawk Valley, Inc. (the Foundation) is a New York not-forprofit organization. It raises funds from the general public for the primary benefit of the Agency, MVHS, and the Center. The Agency provides contracted staffing, management services, and other services to the Foundation. The amount of these services totaled $119,752 and $116,441 for the years ended December 31, 2014 and 2013, respectively. The Foundation contributed $150 and $5,000 to the Agency in 2014 and 2013, respectively. The Agency donated securities in the amount of $250,000 and $251,030 to the Foundation during 2014 and 2013, respectively. The Foundation owed the Agency $23,866 and $9,555 as of December 31, 2014 and 2013, respectively. Central New York Medical Practice, PLLC Central New York Medical Practice, PLLC (the Practice) is a New York professional limited liability corporation. The Agency provides contracted staffing, management services, and other services to the Practice. The amount of these services totaled $68,938 and $97,922 for the years ended December 31, 2014 and 2013, respectively; including a management fee of $60,000 in 2014 and The amounts due from the Practice as of December 31, 2014 and 2013 were $70,204 and $81,372, respectively. The Practice also has a note payable to the agency in the amount of $0 and $250,000 at December 31, 2014 and 2013, respectively. Amounts borrowed under this agreement bear interest at 3.25%. Central New York Health Home Network, LLC Central New York Health Home Network, LLC (the Health Home) is a New York limited liability company responsible for providing case management services. During 2014 and 2013 the Agency paid various expenses including salaries and benefits, professional fees and telephone on behalf of the Health Home totaling $477,728 and $164,860, respectively; including a management fee of $26,250 and $0 in 2014 and 2013, respectively. The amounts due from the Health Home as of December 31, 2014 and 2013 were $213,907 and $87,314, respectively. CNYHHN, Inc. CNYHHN, Inc. (CNYHHN) is a New York not-for-profit organization responsible for providing case management services that began operations in During 2014 the Agency paid various expenses including salaries and benefits, professional fees and telephone on behalf of the CNYHHN totaling $19,516, which includes a management fee of $3,750. The amounts due from CNYHHN as of December 31, 2014 and 2013 were $19,516 and $0, respectively. Other Affiliates The Agency paid legal expenses and other expenses on behalf of other affiliates. As of December 31, 2014 and 2013, the Agency was due $271,933 and $81,128 from Federal Qualified Health Center, respectively, $11,138 and $4,235 from Care Management of Central New York, Inc., respectively, $452,519 and $4,113 from Root Farm, LLC, respectively and $19,516 and $0 from Central New York Health Home Network, Inc., respectively. These amounts relate to the establishment of those organizations and are included in due from affiliates in the balance sheet. All amounts due from affiliates are non-interest bearing and are due in less than one year. 14

19 10. REVERSIONARY INTEREST Property acquired in 2008 in East Utica, New York contains a reversionary clause in favor of the City of Utica. The Agency shall allow other organizations to use the building or title will revert back to the City of Utica. 11. WORKERS COMPENSATION TRUST The Agency is a participant with other unrelated not-for-profit organizations in a self-insurance trust (Trust) that provides workers compensation benefits. Under the terms of the Trust, the Agency makes annual contributions to the Trust based on reported wages paid to the employees, using a rate-based formula. During the years ended December 31, 2014 and 2013 the Agency did not pay any premiums to the Trust. Based on actual claim experience, the Agency could receive a refund or be assessed an additional amount related to workers compensation premiums. Under the Trust agreement, each participating organization has joint and several liability for trust obligations. Effective December 31, 2011, all Trust members discontinued participation in the Trust and obtained coverage through insurance policies. Under the Trust agreement, each participating organization remains joint and severally liable for the remaining trust obligations. The Trust or the New York State Workers Compensation Board have not billed the Agency for additional liabilities resulting from the closure of the Trust; however, the Agency has recorded a liability to the Trust of $900,000 as of December 31, 2014 and 2013, based on past experience and in anticipation of future assessments; which is included in accounts payable and accrued expenses in the balance sheet. 12. CONTINGENCIES Third-Party Payers Service providers who are funded by Medicaid have become the subject of increased scrutiny with respect to reimbursements they have received for service provision. Specific areas often reviewed by Medicaid auditors include appropriate billing practices and technical regulatory compliance. The stated purpose for these reviews is to recover inappropriate reimbursements. The Agency has reviewed its internal records and policies with respect to such matters. However, since the laws and regulations governing the Medicaid programs are extremely complex and subject to interpretation, it is difficult to estimate definitively the ultimate liability, if any, that may be incurred by the Agency related to such matters. 13. SUBSEQUENT EVENTS Subsequent events have been evaluated through May 4, 2015, which is the date the financial statements were issued. 15