AMIkids, Inc. and Affiliates

Transcription

1 , Inc. and Affiliates COMBINED FINANCIAL STATEMENTS AND SCHEDULES (With comparative information for 2016)

2 , Inc. and Affiliates Table of Contents Page(s) Independent Auditors Report... 1 Financial Statements Combined Statement of Financial Position... 4 Combined Statement of Activities... 5 Combined Statement of Functional Expenses... 6 Combined Statement of Cash Flows... 7 Notes to Combined Financial Statements Supplementary Information Combining Schedule I - Statement of Financial Position Combining Schedule II- Statement of Activities Compliance Information Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... 43

3 REPORT

4 INDEPENDENT AUDITORS REPORT Board of Trustees, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Inc. and Affiliates (the Organization ), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities, 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. Auditors 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the Auditors 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. 1

5 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Inc. and Affiliates as of June 30, 2017, and the changes in its net assets and its functional expenses and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated September 22, 2017 on our consideration of Inc. and Affiliates internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Inc. and Affiliates internal control over financial reporting and compliance. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The supplemental schedules are presented for purposes of additional analysis and are not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 2

6 Report on Summarized Comparative Information We have previously audited the Inc. s 2016 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated September 20, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2016 is consistent, in all material respects, with the audited financial statements from which it has been derived. CARR, RIGGS & INGRAM, LLC Clearwater, Florida September 22,

7 FINANCIAL STATEMENTS

8 , Inc. and Affiliates Combined Statement of Financial Position Assets Cash and Cash Equivalents $ 8,041,444 $ 9,211,459 Investments 7,185,981 7,027,138 Endowment Investments 461, ,234 Accounts Receivable: Funding Agencies 5,019,332 5,011,635 Other 569, ,750 Prepaid Expenses and Other Assets 1,563,518 1,381,246 Assets Held for Sale 189, ,301 Boat Inventory 2,532,710 2,026,250 Boats Under Lease 9,572,586 10,581,017 Property and Equipment, Net 11,842,692 10,570,535 Total Assets $ 46,979,584 $ 47,294,565 Liabilities and Net Assets Liabilities: Lines of Credit $ 3,050,862 $ 1,077,000 Accounts Payable 2,384,260 2,215,091 Accrued Expenses 7,068,369 7,285,700 Accrued Pension 1,768,551 1,889,298 Deferred Revenues 1,523,891 2,177,300 Security Deposits 2,594,965 2,539,765 Notes Payable 1,930,389 1,381,295 Total Liabilities 20,321,287 18,565,449 Net Assets: Unrestricted Board Designated 433, ,234 Unrestricted 23,341,076 25,488,938 Total Unrestricted 23,775,028 25,727,172 Temporarily Restricted 2,798,228 2,919,854 Permanently Restricted 85,041 82,090 Total Net Assets 26,658,297 28,729,116 Total Liabilities and Net Assets $ 46,979,584 $ 47,294,565 The accompanying notes are an integral part of these combined financial statements. 4

9 , Inc. and Affiliates Combined Statement of Activities Totals Temporarily Permanently Unrestricted restricted restricted Public support and revenue: State support: Florida $ 18,225,072 $ - $ - $ 18,225,072 $ 19,969,278 South Carolina 10,044, ,044,488 9,884,369 Louisiana 2,263, ,263,140 1,948,551 Texas 955, , ,356 North Carolina 2,877, ,877,600 2,648,000 Missouri 1,024, ,024, ,274 Virginia 428, ,752 - Georgia 965, , ,829 Federal support 7,486, ,486,915 7,909,770 Regional support 8,911, ,911,457 8,880,358 Contributions 2,144,714 2,002,210-4,146,924 3,546,420 Total public support 55,328,020 2,002,210-57,330,230 57,161,205 Revenue: Boat program (Note 1) 8,114, ,114,685 8,802,102 Investment income 258,160 12, ,146 72,168 Other 942,020-2, , ,094 Total revenue 9,314,865 12,986 2,951 9,330,802 9,835,364 Net assets released from restrictions 2,136,822 (2,136,822) Total public support and revenue 66,779,707 (121,626) 2,951 66,661,032 66,996,569 Expenses: Program services 54,325, ,325,663 52,408,127 Boat program 7,875, ,875,250 7,590,726 Management and general 6,044, ,044,917 6,155,565 Fundraising 486, , ,154 Total expenses 68,731, ,731,851 66,556,572 Change in net assets (1,952,144) (121,626) 2,951 (2,070,819) 439,997 Net assets, beginning of year 25,727,172 2,919,854 82,090 28,729,116 28,289,119 Net assets, end of year $ 23,775,028 $ 2,798,228 $ 85,041 $ 26,658,297 $ 28,729,116 The accompanying notes are an integral part of these combined financial statements. 5

10 , Inc. and Affiliates Combined Statement of Functional Expenses Supporting Services Management Total Totals Program Boat and Support Services Program General Fundraising Services Salaries $ 30,857,727 $ 514,364 $ 2,025,904 $ 275,040 $ 2,300,944 $ 33,673,035 $ 32,349,003 Employee benefits and payroll taxes 7,244, , ,786 27, ,158 8,087,009 7,918,950 Commissions - 1,049, ,049, ,498 Travel 1,387,796 77, ,193 41, ,396 1,686,339 1,318,838 Conferences and training 1,216,841 2, ,082 3, ,850 1,359,367 1,227,271 Office and other supplies 44,987 5, ,783 10, , , ,454 Rent and utilities 2,250,307 9,783 78,898-78,898 2,338,988 2,446,219 Insurance 1,741, ,263 4,469-4,469 1,967,067 1,864,522 Telephone 835,126 15,938 14, , , ,337 Professional fees 950, ,188 1,489, ,508 1,611,778 2,711,268 3,174,736 Postage - 3,298 98, , , ,450 Student supplies and training 3,516, ,516,935 3,442,524 Community development 237,949 12, ,742 3, , , ,834 Equipment and maintenance 2,388,006 1,226, ,132 1, ,408 3,882,357 3,724,966 Dockage - 206, , ,570 Interest 107,795 71,229 58,338-58, , ,105 Depreciation and amortization 1,185, , , ,145 1,472,808 1,597,868 Amortization of boats on charter - 2,146, ,146,624 1,971,336 Impairment and other expenses 360, ,893 38,725-38, , ,892 Costs of sales - 1,747, ,747,809 1,389,199 Total Expenses $ 54,325,663 $ 7,875,250 $ 6,044,917 $ 486,021 $ 6,530,938 $ 68,731,851 $ 66,556,572 The accompanying notes are an integral part of these combined financial statements. 6

11 , Inc. and Affiliates Combined Statement of Cash Flows () Cash flows from operating activities: Change in net assets $ (2,070,819) $ 439,997 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 3,619,432 3,569,204 Net (gain) loss on disposal/impairment of property and equipment and assets held for sale 76, ,028 Donated boat inventory (3,336,113) (4,895,450) Donated property and equipment (45,727) (106,000) Realized and unrealized (gains) losses on investments (160,170) 73,878 (Increase) decrease in: Accounts receivable 185,169 (1,534,959) Prepaid expenses and other assets (182,272) 221,801 Boats under Lease 1,691,460 1,028,818 Increase (decrease) in: Accounts payable 169, ,084 Accrued expenses (217,331) (347,916) Accrued pension (120,747) (370,443) Deferred revenues (691,951) 1,605,028 Security deposits 55, ,940 Net cash and cash equivalents (used in) provided by operating activities (1,028,312) 762,010 Cash flows from investing activities: Purchases of property and equipment (2,019,244) (1,378,714) Proceeds from sale of property and equipment and assets held for sale 405, ,433 Proceeds from sale of investments 3,061,818 4,277,673 Purchases of investments (3,259,160) (3,463,090) Net cash and cash equivalents used in investing activities (1,810,589) (131,698) Cash flows from financing activities: Net (repayments) borrowings on lines of credit 1,973,862 77,000 Proceeds from new borrowings from third parties 74,322 - Payments on notes payable (379,298) (288,768) Net cash and cash equivalents provided by (used in) financing activities 1,668,886 (211,768) Net increase (decrease) in cash and cash equivalents (1,170,015) 418,544 Cash and cash equivalents at beginning of year 9,211,459 8,792,915 Cash and cash equivalents at end of year $ 8,041,444 $ 9,211,459 Cash paid for interest $ 237,362 $ 132,105 Supplemental disclosure of noncash investing and financing activities: Financed purchases of property and equipment $ 853,463 $ 1,719 Other noncash additions of property and equipment 38,542 27,866 The accompanying notes are an integral part of these combined financial statements. 7

12 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization, Inc. and affiliated member institutes and schools, non-profit corporations (collectively referred to as or the Organization ), are engaged in the rehabilitation of troubled youth by providing education, treatment and behavior modification as components of the Personal Growth Model. These services are performed by through over forty affiliated, but independently governed member institutes and schools located in Florida, Georgia, Louisiana, Missouri, New Mexico, North Carolina, South Carolina, Texas and Virginia. The educational component of, Inc. and the affiliated institutes and schools is accredited by AdvancED, a global accrediting agency dedicated to advancing excellence in schools, universities, and educational agencies. operating funds are primarily generated from state and federal contracts., Inc. executes the majority of contracts, collects funds, coordinates the operations, and manages the recordkeeping of these member institutes and schools. As part of the combined group, Foundation, Inc. supports the group in raising funds and investment management. Continued operation of rehabilitation programs is dependent on funding from state, federal and local agencies. Use of Estimates The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results may differ from such estimates and such differences could be material. Basis of Presentation The combined financial statements include the accounts of, Inc., Foundation, Inc., and affiliated member institutes and schools. All significant intercompany balances and transactions have been eliminated. The accompanying combined financial statements are presented on the accrual basis of accounting. Assets are presented in the accompanying combined statement of financial position according to their nearness of conversion to cash, and liabilities according to the nearness of their maturity and resulting use of cash. 8

13 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Basis of Presentation (Continued) Unrestricted net assets consist of amounts that are available for use in carrying out the activities of. Temporarily restricted net assets represent those amounts which are not available until future periods or are donor restricted for specific purposes. Permanently restricted net assets result from gifts and bequests from donors who place restrictions on the use of the funds which mandate that the original principal be invested in perpetuity. Cash and Cash Equivalents Cash and cash equivalents represent cash and highly liquid investments with original maturities of three months or less. Cash is maintained in bank deposit accounts, which at times may exceed federally insured limits. believes it is not exposed to any significant credit risk in these accounts. Investments and Investment Income Investments are recorded at cost at the time of purchase. Donated securities are recorded at fair value at the time of donation. Subsequent changes in fair value, regardless of how an investment is obtained, are determined based on quoted market prices and values provided by the investment sponsors, and are recorded as unrealized gains and losses. Net appreciation (depreciation) of investments reflects the net realized and unrealized gains and losses of investments during the reporting period. Interest and dividends are recorded as earned. Dispositions of securities are reflected in the combined financial statements as of the trade date. Endowment Investments Endowment investments consist of funds held by the Southwest Florida Community Foundation ( Community Foundation ), an unrelated organization. The Community Foundation is an external investment pool, where the Institute has a beneficial interest in the investment pool and no individual securities. The Institute has no control over investment pricing or investment selection within the investment pool. 9

14 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Accounts Receivable Accounts receivable consists primarily of receivables from federal and state agencies and county school boards. reviews outstanding receivables for collectability based on historical payment history from the payer and any known circumstances casting doubt over the collectability of accounts and reserves for amounts considered to be uncollectible. considers accounts receivable to be fully collectible and therefore no material allowance has been recorded. Amounts becoming uncollectible will be charged against the allowance for doubtful accounts when that determination is made. Boat Inventory Boat inventory represents boats held for lease which are valued at fair value less estimated selling expenses at the time of the donation. Boat inventory is recorded at net realizable value, as of June 30, 2017 and 2016, and was $2,532,710 and $2,026,250, respectively. Net realizable value is estimated based on third party appraisals, broker valuations, management s experience with the boat charter industry and estimated selling expenses are based on management s historical relationship with brokers. Net realizable values are reviewed quarterly by management and are reduced when necessary. Adjustments to net realizable values are recorded as a reduction in boat program revenue if the adjustment is made during the year of the donation and as an increase in boat program expense if made in subsequent years. Normal expenditures for repairs and maintenance of boats are expensed as incurred. Boats under Lease leases its boats to third parties under operating leases for periods of up to three years. The operating leases contain options to purchase the boat at the end of the charter period for the fair value estimated by management at lease inception, with all of the lease payments applied to the purchase price. Revenues are recognized as received except for security deposits, the option fee, and short-term lease payments, and an additional payment made for the one year period commencing on the lease commencement date. Security deposits are recorded as a liability and are recognized as revenue if and when the purchase option is exercised. The option fee and short-term lease payments are amortized over the life of the lease. If the purchase option is not exercised, the boat is returned to, Inc. and the security deposit is returned to the lessee after deducting all necessary expenses for the boat to be in the same condition as at time of initiation of the lease. Direct costs are deferred and amortized over the life of the lease. 10

15 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Boats under Lease (Continued) Future minimum lease payments due under operating leases during fiscal years 2018, 2019 and 2020 are approximately $1,766,600, $937,518 and $277,723, respectively. At June 30, 2017 and 2016, the unexercised purchase options were approximately $4,771,225 and $4,830,000, respectively. The gross value and accumulated amortization on leased property as of June 30, 2017 was approximately $13,164,000 and $4,043,000, respectively. The net leased property of approximately $9,573,000 includes $452,000 of unamortized commission. The gross value and accumulated amortization on leased property as of June 30, 2016 was approximately $13,646,000 and $3,440,000, respectively. The net leased property of approximately $10,581,000 includes $375,000 of unamortized commission. Amortization of boats under lease amounted to approximately $2,147,000 and $1,971,000 for the years ended June 30, 2017 and 2016, respectively. Amortization does not include the book value of boats optioned or sold to buyers, which was approximately $1,748,000 and $1,389,000 for the years ended June 30, 2017 and 2016, respectively. Property and Equipment Property and equipment are stated at cost if purchased or at estimated fair value at date of receipt if donated. Property and equipment transferred to an institute or school by a funding agency are stated at estimated fair value at date of transfer. Property and equipment transferred or acquired with grant funds may revert to the funding agency should the institute or school no longer provide the services required by the contract. At the time property is retired, or otherwise disposed of, the asset and related accumulated depreciation are removed from the accounts and any resulting gain or loss is included in earnings. Repairs and maintenance are expensed when incurred. Depreciation and amortization is calculated using the straight-line method over the following estimated useful lives of the assets (shorter of estimated useful life or term of the lease as to leasehold improvements) as follows: Permanent site improvements Buildings and leasehold improvements Furniture, fixtures and equipment Motor vehicles Boats, motors and trailers Swimming pools 3-30 years 5-30 years 3-5 years 3-5 years 3 years 10 years 11

16 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Assets Held for Sale As of June 30, 2017 and 2016, the Organization intends to sell the following properties and has classified the net book value of the land, building and improvements as held for sale on the combined statement of financial position: Institute Property held for sale Crossroads Land $ 80,000 $ 80,000 Gainesville Land, buildings and improvements 69,301 69,301 Pinellas Land and improvements 40,233 - WINGS Texas Land, buildings and improvements - 310,000 $ 189,534 $ 459,301 Impairment of Long-Lived Assets and Assets Held for Sale reviews all long-lived assets, which consist primarily of property and equipment, for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future net undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the discounted cash flows. Recoverability of assets held for sale is measured by a comparison of the assets carrying value to its fair value and any excess of its carrying value over fair value is recorded as impairment. Deferred Revenue Deferred revenue is related to grant, short-term boat lease payments, and boat option fees collected in advance of revenue recognition. 12

17 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Facilities Facilities provided by a funding agency and other donors to an institute or school for use during the term of its contract are recorded as an in-kind contribution and rental expense in the financial statements in the period in which the facilities are utilized by the institute or school. The amounts recorded in each period of use by the institute or school represent the difference between the fair rental value of the facilities and the stated amount of the rent payments. The stated amount of the rent payments is generally zero. In-kind rental contributions and the related rental expense were approximately $452,000 and $504,000 for the years ended June 30, 2017 and 2016, respectively, and are reflected as contribution revenue and rent and utilities expense, respectively, in the accompanying combined financial statements. Public Support and Revenue Public support is primarily from contracts with various federal, state and local agencies. Contracts with state and some federal agencies generally provide funding based on client service days. Regional support represents amounts received from local sources, including county school boards and United Way agencies. Other revenue is primarily special fundraising events and gain on sale of property and equipment. A significant portion of contracts are exchange transactions in which each party receives and sacrifices commensurate value. Funds from these exchange transactions are not considered contributions and, as such, are deemed to be earned and reported as revenue when such funds have been expended towards the designated purpose. Contributions received are measured at their fair values and are reported as increases in net assets. reports contributions of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets, or if they are designated as support for future periods. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the combined statement of activities as net assets released from restrictions. Donated Services Amounts are reported in the financial statements for voluntary donations of services when those services create or enhance non-financial assets or require specialized skills provided by the individuals possessing those skills and would be typically purchased if not provided by donation. For the years ended June 30, 2017 and 2016, donated services were not material to the combined financial statements. 13

18 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis. Accordingly, certain costs have been allocated among the program and supporting services benefited. Other expenses are allocated based on management s estimate of the benefit derived by each activity. Income Taxes, Inc. and affiliated member institutes and schools are exempt from income tax under Section 501(c)(3) of the Internal Revenue Code. There is minimal income tax associated with unrelated business income mainly from the sale of donated boats. The Organization identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability is established on the combined statement of financial position. The Organization has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Organization would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Organization s tax years subject to examination by the Internal Revenue Service generally remain open for three years from the date of filing. Recent Accounting Pronouncements In May 2014, the Financial Standards Accounting Board ( FASB ) issued an accounting standard which supersedes nearly all existing revenue recognition guidance under U.S. GAAP. Under the new guidance the policy is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity expects to be entitled for those goods or services. The new standard defines a five step process to achieve this core principle and, in doing so, more judgment and estimates may be required within the revenue recognition process than are required under existing U.S. GAAP. The standard is effective for annual periods beginning after December 15, 2017, and interim periods therein, using either of the following transition methods: (i) a full retrospective approach reflecting the application of the standard in each prior reporting period with the option to elect certain practical expedients, or (ii) a retrospective approach with the cumulative effect of initially adopting the new guidance recognized at the date of adoption. The new standard allows for early adoption for annual periods beginning after December 15, In July 2015, the FASB voted to defer the effective date of the new standard for all entities by one year, or for the Organization, annual periods beginning after December 15,

19 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 1: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements (Continued) The Organization is currently evaluating the impact of its pending adoption of the new revenue recognition standard on its combined financial statements and has not yet determined the method by which it will adopt the standard. In February 2016, the FASB issued an accounting standard which requires the recognition of assets and liabilities arising from lease transactions on the balance sheet and the disclosure of additional information about leasing arrangements. Under the new guidance, for all leases, interest expense and amortization of the right to use asset will be recorded for leases determined to be financing leases and straight-line lease expense will be recorded for leases determined to be operating leases. Lessees will initially recognize assets for the right to use the leased assets and liabilities for the obligations created by those leases. The new accounting standard must be adopted using a modified retrospective approach for leases existing at, or entered into after, the beginning of the earliest comparative period presented in the financial statements. The accounting standard is effective for the Organization beginning with the year ended June 30, 2021, with early adoption permitted. The Organization is currently in the process of assessing what impact this new standard may have on its combined financial statements. In August 2016, the FASB issued an accounting standard update to improve the consistency and usefulness of not-for-profit ( NFP ) financial statements. Included in this update are changes to net asset classifications by requiring the use of only two net asset classifications, information presented in financial statements and the footnotes about a NFP s liquidity, financial performance and cash flows. This accounting standard update will not have any impact on total assets, liabilities, net assets, revenues or expenses. The Organization is currently in the process of assessing what impact the new standard will have on its combined financial statements. Summarized Financial Information for 2016 The financial information for the year ended June 30, 2016 is presented for comparative purposes, and is not intended to be a complete presentation. Certain amounts for fiscal 2016 have been reclassified to conform to their presentation in the 2017 combined financial statements with no impact on total net assets or changes in net assets. 15

20 NOTE 2: ENDOWMENT INVESTMENTS, Inc. and Affiliates Notes to Combined Financial Statements During 2016, Southwest Florida, Inc. created a board designated donor advised fund and a permanently restricted donor advised fund. The board designated fund was created with a contribution of $283,770. The fund is under the direction of the Southwest Florida Community Foundation (an unrelated entity) (the Community Foundation ) and will be for the benefit of qualified charitable organizations. The Institute has the ability to direct the Community Foundation as to distributions. The intent of the Institute is to direct all distributions to benefit the Institute. The permanently restricted donor advised fund was created with a donation of $25,000. The intent of this fund is to maintain the corpus into perpetuity and distributions to be made from investment appreciation. Endowment investments had a fair value of $461,903 and $263,234, at June 30, 2017 and 2016, respectively, and had investment income, net of fees, of $27,039 and $4,464 for the year ended June 30, 2017 and 2016, respectively. NOTE 3: FAIR VALUE MEASUREMENTS The Organization reports its financial assets and liabilities using a three-tier hierarchy, which prioritizes the inputs used in measuring 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). The three levels of the fair value hierarchy are described below: Level 1 Valuation based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Valuation based on observable quoted prices for similar assets and liabilities in active markets. Level 3 Valuation based on inputs that are unobservable and are supported by little or no market activity, therefore requiring management s best estimate of what market participants would use as fair value. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. 16

21 NOTE 3: FAIR VALUE MEASUREMENTS (Continued), Inc. and Affiliates Notes to Combined Financial Statements Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain on-balance-sheet financial instruments approximates their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, accounts receivable, accounts payable and accrued expenses. The fair value of the lines of credit and notes payable are estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. Level 1 Fair Value Measurements: Level 1 investments include pooled equity funds, pooled fixed income funds, equity securities and government securities valued based on quoted market prices. Level 2 Fair Value Measurements: Level 2 financial assets consist of corporate bonds (included in pooled fixed income funds in Note 2), and cash surrender value of insurance policies. Corporate bonds are valued based upon recent bid prices. The cash surrender value of insurance policies is the quoted market prices of the underlying securities. Level 3 Fair Value Measurements: Level 3 assets consist of endowment investments managed by a third-party unrelated organization. The endowment investments are valued based on third-party pricing information without adjustment. The Institute does not develop nor are they provided with the quantitative inputs used to develop the fair market values. See activity of endowment investments in Note 2. The following tables present the fair value of the investments recorded at fair value on a recurring basis, segregated amount the appropriate levels within the fair value hierarchy for the years ended June 30, 2017 and 2016, respectively: 17

22 NOTE 3: FAIR VALUE MEASUREMENTS (Continued), Inc. and Affiliates Notes to Combined Financial Statements Fair Value Measurements at Reporting Date Using: Quoted Prices in Significant Significant Active Markets Other Observable Unobservable for Identical Assets Inputs Inputs June 30, 2017 Fair Value (Level 1) (Level 2) (Level 3) Assets Investments Certificates of deposits $ 312,599 $ 312,599 $ - $ - Pooled equity funds 1,420,257 1,420, Pooled fixed income funds 361, , Equity securities 59,211 59, Government securities 4,946,031 4,946, Cash surrender value of insurance policies 86,501-86,501 - Total investments 7,185,981 7,099,480 86,501 - Endowment investments 461, ,903 Total Assets $ 7,647,884 $ 7,099,480 $ 86,501 $ 461,903 Fair Value Measurements at Reporting Date Using: Quoted Prices in Significant Significant Active Markets Other Observable Unobservable for Identical Assets Inputs Inputs June 30, 2016 Fair Value (Level 1) (Level 2) (Level 3) Assets Investments Certificates of deposits $ 332,874 $ 332,874 $ - $ - Pooled equity funds 1,244,355 1,244, Master limited partnerships Pooled fixed income funds 360, , Government securities 4,929,782 4,929, Cash surrender value of insurance policies 83,634-83,634 - Total investments 7,027,138 6,943,504 83,634 - Endowment investments 263, ,234 Total Assets $ 7,290,372 $ 6,943,504 $ 83,634 $ 263,234 18

23 NOTE 3: FAIR VALUE MEASUREMENTS (Continued), Inc. and Affiliates Notes to Combined Financial Statements A summary of changes in the fair value of level 3 assets is a follows: Endowment investments Unrestricted, Board Designated Temporarily Restricted Permanently Restricted Total June 30, 2015 $ - $ - $ - $ - Asset transfer 283,770-25, ,770 Distributions (50,000) - - (50,000) Investment earnings 4, ,464 June 30, 2016 $ 238,234 $ - $ 25,000 $ 263,234 Contributions 226, ,215 Distributions (54,585) - - (54,585) Investment earnings 24,088-2,951 27,039 June 30, 2017 $ 433,952 $ - $ 27,951 $ 461,903 NOTE 4: INVESTMENTS Investments at June 30, 2017 and 2016 consist of: Certificates of deposit $ 312,599 $ 332,874 Pooled equity funds 1,420,257 1,244,355 Pooled fixed income funds 361, ,581 Equity securities 59,211 75,912 Government securities 4,946,031 4,929,782 Cash surrender value of insurance policies 86,501 83,634 $ 7,185,981 $ 7,027,138 19

24 NOTE 4: INVESTMENTS (Continued), Inc. and Affiliates Notes to Combined Financial Statements Investment income was comprised of the following for the years ended June 30, 2017 and 2016: Interest and dividends $ 110,976 $ 146,046 Net realized and unrealized gains (losses) 160,170 (73,878) $ 271,146 $ 72,168 NOTE 5: PROPERTY AND EQUIPMENT Property and equipment at June 30, 2017 and 2016 consist of: Land and permanent site improvements $ 3,481,181 $ 3,370,508 Buildings and leasehold improvements 20,970,196 21,830,024 Furniture, fixtures and equipment 6,919,830 7,595,444 Motor vehicles 2,008,987 2,088,938 Boats, motors and trailers 1,187,362 1,227,573 Swimming Pools 465, ,433 Construction in progress 1,434, ,111 36,467,045 36,962,031 Less accumulated depreciation and amortization (24,624,353) (26,391,496) $ 11,842,692 $ 10,570,535 Included in furniture, fixtures and equipment are assets recorded under capital leases with a cost and accumulated depreciation of $91,600 and $70,390, respectively, at June 30, 2017 and $138,331 and $80,926 respectively, at June 30, Certain of affiliated institutes and schools have purchased various assets with contract funds. Under the terms of these contracts, the funding agency may require such assets to be returned upon termination of the contract or program. 20

25 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 6: LINES OF CREDIT Lines of credit at June 30, 2017 and 2016 consist of: Entity , Inc. Line of Credit, maximum principal amount of $3,000,000, bearing variable interest at 2.4% above the SunTrust 30 Day LIBOR (interest rate at June 30, 2017 was 3.45%), expiring February 9, 2018, collateralized by government receivables $ 198,873 $ -, Inc. Line of Credit, maximum principal amount of $6,000,000, bearing variable interest at 2.4% above the SunTrust 30 Day LIBOR (interest rate at June 30, 2017 was 3.45%), expiring February 9, 2018, collateralized by vessel inventory and lease receivables 2,800,000 1,000,000 Space Coast Line of Credit, maximum principal amount of $100,000, interest rate tied to the WSJ Prime Rate plus 1.75% (interest rate at June 30, 2017 was 6%). expiring December 17, 2024, collateralized by real estate - - Beaufort Line of Credit, maximum available $100,000, interest at 2.6% secured by separate security instruments of a donor, expiring December 18, ,989 77,000 Total Lines of Credit $ 3,050,862 $ 1,077,000 The, Inc. lines of credit are cross-collateralized and are secured by the borrowing-base assets disclosed above as well as other assets of, Inc. At June 30, 2017, the Organization had a borrowing capacity of $9,200,000 under lines of credit subject to availability based on asset levels. The actual amount available based on assets levels as of June 30, 2017 in excess of the amount utilized was approximately $5,881,000. The, Inc. lines of credit contain restrictive financial covenants related to liquidity to modified debt ratio and the maintenance of minimum cash and marketable securities levels. The Organization was in compliance with these restrictive covenants as of and for the years ended June 30, 2017 and

26 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 7: NOTES PAYABLE Notes payable at June 30, 2017 and 2016 consists of: Entity , Inc. Mortgage payable bearing interest at 30 Day LIBOR index plus 2.1%; monthly installments of $7,711 plus interest, paid in full during 2017, collateralized by building $ - $ 73,453, Inc. Mortgage payable bearing interest at 30 Day LIBOR index plus 2.1%; monthly installments of $4,564 plus interest, paid in full during 2017, collateralized by building - 45,641 Beaufort Beaufort Baton Rouge Baton Rouge Big Cypress Caddo Caddo Sand Hills Crossroads Note payable in monthly installments of $664, including interest at 1.99%, due August 2018, collateralized by vehicle 7,788 16,181 Note payable in monthly installments of $666, including interest at 2.2%, due October 2018, collateralized by certificate of deposit 10,479 18,107 Note payable in monthly installments of $162, including interest at 8.47%, paid in full during 2017, collateralized by equipment under capital lease - 5,522 Note payable in monthly installments of $169, including interest at 8.00%, due February 2022, collateralized by equipment under capital lease 7,906 - Note payable in monthly installments of $324, including interest at 8.00%, paid in full during 2017, collateralized by equipment under capital lease - 12,752 Note payable in monthly installments of $120, including interest at 8.00%, due August 2021, collateralized by equipment under capital lease 5,070 - Note payable in monthly installments of $124, including interest at 8.00%, due August 2021, collateralized by equipment under capital lease 5,277 - Note payable in monthly installments of $145, including interest at 3.89%, due June 2019, collateralized by equipment under capital lease 3,343 4,978 Note payable in monthly installments of $256, including interest at 7.94%, due January 2020, collateralized by equipment under capital lease 6,945 9,360 22

27 NOTE 7: NOTES PAYABLE (Continued), Inc. and Affiliates Notes to Combined Financial Statements Entity Emerald Coast Infinity Wake Jacksonville Jacksonville Orlando Panama City Note payable in monthly installments of $299, including interest at 11%, due September 2019, collateralized by equipment under capital lease 7,132 9,576 Note payable in monthly installments of $230, including interest at 10%, due September 2019, collateralized by equipment under capital lease 5,525 7,608 Mortgage payable in monthly principal installments of $2,510 plus interest of 3.5% over the LIBOR rate, paid in full with re-financing during 2017, secured by Institute premises and guaranteed by, Inc ,227 Mortgage payable in monthly principal installments of $3,927 plus interest of 4.15%, due March 2032, secured with real property, with carrying value of $822,003, and guaranteed by, Inc. 517,148 - Mortgage payable in monthly installments of $1,370 including interest at 7.25%, paid in full during 2017, collateralized by building - 22,658 Note payable in monthly installments of $1,973, including interest at 5.5%, paid in full during 2017; collateralized by equipment - 48,256 Panama City Mortgage payable in monthly installments of $3,410, including interest at 4.75% with balloon payment of approx. $259,300, due January 2022, collateralized by land and buildings, with carrying value of $307, , ,852 Pensacola Note payable in monthly installments of $536, including interest at 4%, due October 2019, collateralized by vehicle 14,269 19,485 Pensacola Mortgage payable due to board member in monthly installments of $966, including interest at 3%, due June, 2019 with final balloon payment of of approx. $54,500, collateralized by building. 73,172 82,324 Pinellas YES Various Mortgage payable, with interest only payments through August 2018, when full note is due; interest paid at rate of 4.5%; collateralized by building, with carrying value of $805, ,671 - Note payable in monthly installments of $273, including interest at 8%, due August 2018, collateralized by equipment under capital lease 3,871 6,710 Various notes payable, monthly installments from $57 to $137, various interest rates, due various dates through May 2021, collateralized by equipment. 15,028 14,605 Total Notes Payable $ 1,930,389 $ 1,381,295 23

28 NOTE 7: NOTES PAYABLE (Continued), Inc. and Affiliates Notes to Combined Financial Statements Principal payments on notes payable for years subsequent to June 30, 2017 are as follows: 2018 $ 106, ,033, , , ,843 Thereafter 374,804 $ 1,930,389 NOTE 8: ACCRUED EXPENSES Accrued expenses at June 30, 2017 and 2016 consist of: Workers compensation self-funded reserve $ 3,344,003 $ 3,414,651 Vehicle and other self-funded reserve 383, ,198 Medical self-funded reserve 620, ,000 Accrued payroll 657, ,983 Accrued vacation 769, ,812 Accrued severance and unemployment 12,781 81,847 Accrued boat program payments 679, ,551 Other accruals 602, ,658 $ 7,068,369 $ 7,285,700 24

29 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 9: RESTRICTIONS AND LIMITATIONS ON NET ASSETS Temporarily restricted net assets consist of the following at June 30, 2017 and 2016: Education / Scholarship $ 887,754 $ 548,010 Experiential Activities 337, ,375 Building / Equipment 409, ,716 Girls Initiative Program 428, ,878 Other 735, ,875 $ 2,798,228 $ 2,919,854 Permanently restricted net assets represent endowment funds invested in perpetuity. The income from the endowment funds is restricted to assist former students of programs with educational or employment-related expense. The State of Florida adopted the Florida Uniform Prudent Management of Institutional Funds Act ( FUPMIFA ), which establishes statutory law governing Florida not-for-profit Corporation s management of investments. The Board of Trustees of the Organization has interpreted FUPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets: (a) the original value of the gift donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by FUPMIFA. In accordance with FUPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) The duration and preservation of the fund; (2) The purposes of the Organization and the donor-restricted endowment fund; (3) General economic conditions; (4) The possible effect of inflation and deflation; (5) The expected total return from income and the appreciation of investments; (6) Other resources of the Organization; (7) The investment policies of the Organization. 25

30 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 9: RESTRICTIONS AND LIMITATIONS ON NET ASSETS (Continued) Net assets were released from donor restrictions by occurrence of events specified by donors as follows for the years ended June 30, 2017 and Education / Scholarship $ 223,620 $ 285,574 Experiential Activities 585, ,350 Building / Equipment 796, ,776 Other 531, ,694 $ 2,136,822 $ 1,503,394 26

31 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 10: NET ASSETS The following reflects the separate components of net assets of, Inc., Foundation and combined Member Institutes and Schools: Unrestricted Temporarily Restricted Permanently Restricted Total, Inc. Net Assets June 30, 2015 $ 19,383,171 $ 750,104 $ 50,000 $ 20,183,275 Change in Net Assets 1,586,025 (104,302) - 1,481,723 Net Assets June 30, ,969, ,802 50,000 21,664,998 Change in Net Assets (712,315) 258,695 - (453,620) Net Assets June 30, ,256, ,497 50,000 21,211,378 Foundation Net Assets June 30, ,641 1,020,128 7,090 1,133,859 Change in Net Assets 17,474 66,535-84,009 Net Assets June 30, ,115 1,086,663 7,090 1,217,868 Change in Net Assets 23,330 (81,490) - (58,160) Net Assets June 30, ,445 1,005,173 7,090 1,159,708 Member Institutes and Schools Net Assets June 30, ,755,555 1,216,430-6,971,985 Asset transfer (25,000) - 25,000 - Change in Net Assets (1,096,694) (29,041) - (1,125,735) Net Assets June 30, ,633,861 1,187,389 25,000 5,846,250 Change in Net Assets (1,263,159) (298,831) 2,951 (1,559,039) Net Assets June 30, ,370, ,558 27,951 4,287,211 Total Net Assets as of June 30, 2017 $ 23,775,028 $ 2,798,228 $ 85,041 $ 26,658,297 27

32 NOTE 11: COMMITMENTS AND CONTINGENCIES, Inc. and Affiliates Notes to Combined Financial Statements A substantial portion of public support is derived from programs supported by various funding agencies. Under the terms of the agreements with the funding agencies, financial records are subject to audit by the appropriate governmental authorities. Depending on the results of these audits, if any, funds may be required to be refunded to the appropriate agency. is subject to various claims and legal proceedings which arise in the ordinary course of business. does not believe that these matters will have a material adverse effect on its financial position or results of operations. leases facilities under operating leases expiring in various years. Rent expense on these operating leases charged to operations for the years ended June 30, 2017 and 2016 was approximately $688,000 and $686,000, respectively. Based on the current operating leases, the annual lease expense is expected to remain consistent with 2017 expense over the next five years. Typically there are no operating leases with terms greater than five years. receives donations of boats that are recorded at fair value less estimated selling expenses at the time of the donation. Management has estimated the net realizable value of the boat inventory at $2,532,710 and $2,026,250 at June 30, 2017 and 2016, respectively. Net realizable value is estimated based on third party appraisals, broker valuations, management s experience with the boat charter industry and estimated selling expenses are based on management s historical experiences with brokers. The actual net realizable value of the boats is not known until the boat is sold or leased. has purchased high-deductible policies for workers compensation and for vehicle and other property and casualty insurance and is responsible for all claims below the deductible level. Management has accrued approximately $3,700,000 at June 30, 2017 and 2016 as an estimate of losses on unpaid claims under these insurance policies. These accruals are estimated based on current and historical claims experience. It is reasonably possible that these estimates will change and, if changed, could have a material impact on the Organization s financial position and results of operations. Under workers compensation and vehicle policies, the Organization has provided the insurance carrier a letter of credit for $600,000, which is collateralized by investments and cash and cash equivalents held by. There is also an additional $5,200,000 held in a secured collateralized account to support these policies. Total investments and cash and cash equivalents of $7,600,000 as of June 30, 2017 support the expected insurance commitments, including the required letters of credit and collateralized investment accounts. 28

33 , Inc. and Affiliates Notes to Combined Financial Statements NOTE 11: COMMITMENTS AND CONTINGENCIES (Continued) is self-funded for group health insurance up to a maximum of $125,000 per employee. Management has accrued $620,000 and $500,000 at June 30, 2017 and 2016, respectively, for estimated claims, including known claims and claims which are estimated to have occurred but which have not yet been reported. This estimate is based on current and historical claims experience and other information obtained from insurance provider. It is reasonably possible that these estimates will change and, if changed, could have a material impact on the Organization s financial position and results of operations. Adjustments to the estimated claims accrual are made when the need for such adjustments becomes apparent. NOTE 12: RETIREMENT PLANS maintains a noncontributory defined contribution pension plan covering all full-time employees who have completed two years of service and have attained the age of 20-1/2 years. Contributions to the Plan are based on a percentage of each employee s total compensation for the year. The pension expense for the years ended June 30, 2017 and 2016 was approximately $1,474,000 and $1,501,000, respectively, and is included in employee benefits and payroll taxes on the combined statement of functional expenses. has a deferred compensation plan in place for certain key members of management, which is accrued for and included in accrued pension in the combined statement of financial position. The deferred compensation plan is generally funded on an annual basis and the related assets are included as a component of investments. The cost related to the deferred compensation plan for the years ended June 30, 2017 and 2016 was approximately $105,000 and $77,000, respectively. NOTE 13: RELATED PARTY TRANSACTIONS There were no related party transactions significant to the combined financial statements. has rigorous controls concerning related party transactions to ensure that all transactions are in the best interest of the mission. Details of related party transactions can be found in Form 990s which files annually with the Internal Revenue Service. 29

34 NOTE 14: INSTITUTE OPENINGS AND CLOSINGS, Inc. and Affiliates Notes to Combined Financial Statements During the fiscal year ended June 30, 2017, opened Virginia, Inc., which provides service coordination for the state of Virginia by developing and overseeing the services delivered by subcontracting Direct Service Providers. reopened Manatee, a gender specific prevention and intervention day treatment program for boys. Due to loss of funding, closed Big Cypress, Inc. NOTE 15: SUBSEQUENT EVENTS The Organization has evaluated events and transactions occurring subsequent to June 30, 2017 as of September 22, 2017, which is the date the combined financial statements were issued. Subsequent events occurring after September 22, 2017 have not been evaluated by management. No material events have occurred since June 30, 2017 that requires recognition or disclosure in the combined financial statements. 30

35 SUPPLEMENTARY INFORMATION

36 , Inc. and Affiliates Schedule I Combining Schedule - Statement of Financial Position June 30, 2017 Foundation Baton Rouge Beaufort Bennettsville Clay County Crossroads Emerald Coast Gainesville Georgetown Assets Cash and Cash Equivalents $ 1,743,503 $ 2,726,160 $ 96,878 $ 139,008 $ 65,535 $ 23,472 $ 4,303 $ 27,319 $ 22,050 $ 218,140 Investments 5,992, , , Endowment investments Accounts Receivable: Funding Agencies 3,917, ,223 2,452 10, ,456-11,669 4,409 Other 102,382 71,297 12,144 76,006 14, ,662 8,876 14,201 25,049 Prepaid Expenses and Other Assets 520,245-49,742 46,068 30,032 20,619-31,574 30,771 31,811 Due from Affiliates 16,890,295-27, , ,426 65,466 3,138 28,935 41, ,514 Assets Held for Sale ,000-69,301 - Boat Inventory 2,532, Boats under Lease 9,572, Property and Equipment, Net 2,033, , ,658 56,253 46,443 6,322 11,964 29, ,006 Total Assets $ 43,304,947 $ 3,226,824 $ 597,928 $ 1,178,950 $ 279,587 $ 166,970 $ 218,881 $ 108,668 $ 219,369 $ 904,929 Liabilities and Net Assets Liabilities: Lines of Credit $ 2,998,873 $ - $ - $ 51,989 $ - $ - $ - $ - $ - $ - Accounts Payable 865,097-15, ,114 33,185 17, ,605 10,927 36,669 Accrued Expenses 10,517,052 2,129 36,203 42,567 37,087 42,880 10,976 21,684 28,118 38,761 Accrued Pension 726, Due to Affiliates 3,092,549 2,064, ,332 18,598 1,108, , , ,244 1,110,132 1,930 Deferred Revenues 1,298, , ,064 2,846 - Security Deposits 2,594, Long Term Debt - - 7,906 18, ,945 7, Total Liabilities 22,093,569 2,067, , ,534 1,186, , , ,729 1,152,023 77,360 Net Assets: Unrestricted: Board designated Unrestricted 20,256, , , ,844 (907,142) (263,965) (7,427) (512,786) (938,134) 809,131 Total unrestricted 20,256, , , ,844 (907,142) (263,965) (7,427) (512,786) (938,134) 809,131 Temporarily Restricted 904,497 1,005,174 23,087 92, ,455 60,725 5,480 18,438 Permanently Restricted 50,000 7, Total Net Assets 21,211,378 1,159, , ,416 (907,142) (263,965) 28 (452,061) (932,654) 827,569 Total Liabilities and Net Assets $ 43,304,947 $ 3,226,824 $ 597,928 $ 1,178,950 $ 279,587 $ 166,970 $ 218,881 $ 108,668 $ 219,369 $ 904,929 See Independent Auditors Report. 31

37 , Inc. and Affiliates Schedule I Combining Schedule - Statement of Financial Position June 30, 2017 Georgia Greater Ft. Lauderdale Jacksonville Miami-Dade North Carolina Family Services Orlando Panama City Marine Institute Pasco Pensacola Pinellas Assets Cash and Cash Equivalents $ - $ 139,500 $ 37,852 $ 459,462 $ 56,860 $ 73,661 $ 207,903 $ - $ 174,040 $ 20,407 Investments Endowment investments Accounts Receivable: Funding Agencies - 7,580 30,455 79,541-9,592 10,716-31,459 6,572 Other - 11,827 15,416 19,747-7,046 6,495 3,440 8,473 8,200 Prepaid Expenses and Other Assets - 48,233 47,205 73, ,656 31, ,111-77,862 76,261 Due from Affiliates 24,624 67,809 60, , ,556 71,717 71, ,048 74,049 Assets Held for Sale ,233 Boat Inventory Boats under Lease Property and Equipment, Net - 26, , ,917 27,375 49, , , , ,036 Total Assets $ 24,624 $ 301,694 $ 1,024,024 $ 949,848 $ 988,447 $ 242,968 $ 876,217 $ 113,440 $ 866,975 $ 1,174,758 Liabilities and Net Assets Liabilities: Lines of Credit $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Accounts Payable - 26,324 20,887 63,537 45,899 17,412 32,718-66,198 60,737 Accrued Expenses 2,129 31,099 29,554 89,125 64,144 30,236 55,646 25,000 96,845 25,792 Accrued Pension Due to Affiliates , ,743 54,372 37, ,724 37, , ,292 Deferred Revenues ,131 7, Security Deposits Long Term Debt - 5, , ,765-95, ,671 Total Liabilities 2, , , , , , ,469 25, ,197 1,210,492 Net Assets: Unrestricted: Board designated Unrestricted 21,748 (313,734) 95, , ,586 (289,869) 353,139 59, ,181 (36,854) Total unrestricted 21,748 (313,734) 95, , ,586 (289,869) 353,139 59, ,181 (36,854) Temporarily Restricted - 132,643 12, ,443-70,334 36,609 29,145 42,597 1,120 Permanently Restricted Total Net Assets 21,748 (181,091) 107, , ,586 (219,535) 389,748 88, ,778 (35,734) Total Liabilities and Net Assets $ 24,624 $ 301,694 $ 1,024,024 $ 949,848 $ 988,447 $ 242,968 $ 876,217 $ 113,440 $ 866,975 $ 1,174,758 See Independent Auditors Report. 32

38 , Inc. and Affiliates Schedule I Combining Schedule - Statement of Financial Position June 30, 2017 Piedmont Sand Hills Sandoval Southwest Florida Space Coast St. Louis Tallahassee Tampa Virginia Wilderness Volusia Assets Cash and Cash Equivalents $ 197,141 $ 33,755 $ 24,558 $ 197,677 $ 200,063 $ 15,609 $ 16,088 $ 20,093 $ 52,419 $ 33,103 Investments Endowment investments , Accounts Receivable: Funding Agencies 4,554 12, ,919-42,440 26, ,174 - Other 16,800 10,699 9,746 3,346 11,635-9,315-32,899 6,000 Prepaid Expenses and Other Assets 31,206 32, ,307 35,711 45,429 33,793 29,140 37,098 42,518 41,413 Due from Affiliates 110, , ,128 74, ,718 78,645 47,995 98,214-48,408 Assets Held for Sale Boat Inventory Boats under Lease Property and Equipment, Net 92,160 29, ,290 79, ,183 17, , , ,059 6,041 Total Assets $ 451,899 $ 245,566 $ 551,029 $ 852,583 $ 992,947 $ 145,925 $ 263,625 $ 450,482 $ 393,069 $ 134,965 Liabilities and Net Assets Liabilities: Lines of Credit $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Accounts Payable 53,038 42,077 37,618 58, ,986 7,193 18,962 29,685 21,918 14,693 Accrued Expenses 29,958 36,412 51,148 30,950 53,905 21,316 29,696 39,342 50,698 21,987 Accrued Pension Due to Affiliates 22, ,437 2,246,001 41,824 42,801 84,127 90, ,994 1,588, ,694 Deferred Revenues - 4,545-2,263 5,295-4,545 82,528 2,539 3,192 Security Deposits Long Term Debt - 3, Total Liabilities 105, ,814 2,334, , , , , ,549 1,663, ,566 Net Assets: Unrestricted: Board designated , Unrestricted 342,142 (454,248) (1,786,495) 251, ,039 33, ,739 (218,084) (1,270,483) (307,986) Total unrestricted 342,142 (454,248) (1,786,495) 685, ,039 33, ,739 (218,084) (1,270,483) (307,986) Temporarily Restricted 4,581-2,757 6,254 78, , Permanently Restricted , Total Net Assets 346,723 (454,248) (1,783,738) 719, ,960 33, ,739 (187,067) (1,270,483) (307,601) Total Liabilities and Net Assets $ 451,899 $ 245,566 $ 551,029 $ 852,583 $ 992,947 $ 145,925 $ 263,625 $ 450,482 $ 393,069 $ 134,965 See Independent Auditors Report. 33

39 , Inc. and Affiliates Schedule I Combining Schedule - Statement of Financial Position June 30, 2017 White Pines Acadiana Big Cypress Family Services Gadsden Center for Academic Discipline Infinity Marlboro Infinity Wake County Lafayette Rio Grande Valley Sarasota County Assets Cash and Cash Equivalents $ 457,316 $ 89,037 $ - $ - $ 9,587 $ 9,079 $ 25,295 $ - $ 21,839 $ - Investments Endowment investments Accounts Receivable: Funding Agencies 62, ,374 - Other 18,199 13, ,818 - Prepaid Expenses and Other Assets 41,495 48, ,628 19,235 18,795-27,988 - Due from Affiliates 235, , ,065 9, , ,359 Assets Held for Sale Boat Inventory Boats under Lease Property and Equipment, Net 112,257 32,299 5, ,855-5,541 - Total Assets $ 927,138 $ 377,201 $ 5,170 $ - $ 52,280 $ 38,558 $ 48,945 $ - $ 166,946 $ 143,359 Liabilities and Net Assets Liabilities: Lines of Credit $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Accounts Payable 74,173 33, ,409 2,863 4,712-29,161 - Accrued Expenses 57,183 61, ,777 10,301 13,698-30,783 70,000 Accrued Pension Due to Affiliates 104,060 1,957, ,473 29,208 11,999-2,037,891 - Deferred Revenues - - 4, ,260 - Security Deposits Long Term Debt , Total Liabilities 235,416 2,052,539 4,009-41,659 42,372 35,934-2,103,954 70,000 Net Assets: Unrestricted: Board designated Unrestricted 691,722 (1,685,406) 1,161-10,621 (10,807) 9,816 - (1,967,094) 73,359 Total unrestricted 691,722 (1,685,406) 1,161-10,621 (10,807) 9,816 - (1,967,094) 73,359 Temporarily Restricted - 10, ,993 3,195-30,086 - Permanently Restricted Total Net Assets 691,722 (1,675,338) 1,161-10,621 (3,814) 13,011 - (1,937,008) 73,359 Total Liabilities and Net Assets $ 927,138 $ 377,201 $ 5,170 $ - $ 52,280 $ 38,558 $ 48,945 $ - $ 166,946 $ 143,359 See Independent Auditors Report. 34

40 , Inc. and Affiliates Schedule I Combining Schedule - Statement of Financial Position June 30, 2017 Savannah River YES Georgia Properties Louisiana Properties South Carolina Wilderness Institute New Mexico Properties South Carolina Statewide Wings Texas Caddo, Inc Manatee, Inc. Virginia, Inc. Assets Cash and Cash Equivalents $ 26,027 $ 88,556 $ - $ - $ - $ - $ - $ - $ 19,713 $ 140,846 $ 127,590 Investments - 557, Endowment investments Accounts Receivable: Funding Agencies 88,211 55, ,331 Other - 8, , Prepaid Expenses and Other Assets 37,214 41, ,061 21,103 6,663 Due from Affiliates , , ,000 1, ,465 42,000 Assets Held for Sale Boat Inventory Boats under Lease Property and Equipment, Net 26,743 15,455 2,311,700 1,245, , ,029 7,097 5,049 Total Assets $ 178,871 $ 1,062,628 $ 2,311,700 $ 1,709,756 $ 103,000 $ 756,000 $ 1,603 $ 100 $ 82,020 $ 268,521 $ 446,633 Liabilities and Net Assets Liabilities: Lines of Credit $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - $ - Accounts Payable 23,919 53, ,785 16, ,116 Accrued Expenses 28,199 76, ,095 26,052 70,959 Accrued Pension Due to Affiliates 782,899 33, , ,572 4, ,382 30,502 41,827 Deferred Revenues - 87, Security Deposits Long Term Debt - 3, , Total Liabilities 835, , , ,286 5, ,609 72, ,902 Net Assets: Unrestricted: Board designated Unrestricted (667,417) 747,381 1,983,188 1,422,470 97, , (309,589) 195, ,731 Total unrestricted (667,417) 747,381 1,983,188 1,422,470 97, , (309,589) 195, ,731 Temporarily Restricted 11,271 60, , Permanently Restricted Total Net Assets (656,146) 807,634 1,983,188 1,422,470 97, ,154 1, (309,589) 195, ,731 Total Liabilities and Net Assets $ 178,871 $ 1,062,628 $ 2,311,700 $ 1,709,756 $ 103,000 $ 756,000 $ 1,603 $ 100 $ 82,020 $ 268,521 $ 446,633 See Independent Auditors Report. 35

41 , Inc. and Affiliates Schedule I Combining Schedule - Statement of Financial Position June 30, 2017 Total Before Eliminations Eliminations Total Assets Cash and Cash Equivalents $ 8,041,444 $ - $ 8,041,444 Investments 7,185,981-7,185,981 Endowment investments 461, ,903 Accounts Receivable: Funding Agencies 5,074,971 (55,639) 5,019,332 Other 569, ,884 Prepaid Expenses and Other Assets 2,164,352 (600,834) 1,563,518 Due from Affiliates 22,296,510 (22,296,510) - Assets Held for Sale 189, ,534 Boat Inventory 2,532,710-2,532,710 Boats under Lease 9,572,586-9,572,586 Property and Equipment, Net 11,842,692-11,842,692 Total Assets $ 69,932,567 $ (22,952,983) $ 46,979,584 Liabilities and Net Assets Liabilities: Lines of Credit $ 3,050,862 $ - $ 3,050,862 Accounts Payable 2,385,537 (1,277) 2,384,260 Accrued Expenses 12,083,920 (5,015,551) 7,068,369 Accrued Pension 726,593 1,041,958 1,768,551 Due to Affiliates 22,295,233 (22,295,233) - Deferred Revenues 1,523,891-1,523,891 Security Deposits 2,594,965-2,594,965 Long Term Debt 1,930,389-1,930,389 Total Liabilities 46,591,390 (26,270,103) 20,321,287 Net Assets: Unrestricted: Board designated 433, ,952 Unrestricted 19,976,302 3,364,774 23,341,076 Total unrestricted 20,410,254 3,364,774 23,775,028 Temporarily Restricted 2,845,882 (47,654) 2,798,228 Permanently Restricted 85,041-85,041 Total Net Assets 23,341,177 3,317,120 26,658,297 Total Liabilities and Net Assets $ 69,932,567 $ (22,952,983) $ 46,979,584 See Independent Auditors Report. 36

42 , Inc. and Affiliates Schedule II Combining Schedule - Statement of Activities Public Support and revenue: State support: Florida 1,862,437 Foundation Baton Rouge Beaufort Bennettsville Clay County Crossroads Emerald Coast Gainesville Georgetown $ $ - $ - $ - $ - $ 637,137 $ - $ 311,994 $ 366,404 $ - South Carolina 1,466, ,111,204 1,320, ,177,281 Louisiana 254, Texas 143, North Carolina 287, Missouri 109, Virginia 64, Georgia Federal support 1,108, , , , ,142 28, ,268 78,618 Regional Revenue ,449 27, , , , ,210 - Contributions 1,062, ,644 42, , ,180 3, , ,673 21,103 79,553 Total Public Support 6,360, , ,448 1,652,877 1,687, ,309 1,331, , ,985 1,335,452 Revenue Boat Program 8,114, Investment income (loss) 532,401 33, , Other 1,752, , ,991 13, ,816-2,000 12,517 Total revenue 10,399,516 33, , ,788 13, ,871-2,020 12,779 Total public support and revenue 16,759, ,417 1,381,469 1,767,665 1,701, ,309 1,635, , ,005 1,348,231 Expenses: Program Services 3,965,617 1,021,778 1,358,735 1,742,861 1,664, ,426 1,265, , ,385 1,235,359 Management and general 4,906,551 8, ,464 22,329 24,286 15, ,210 18,979 20,022 14,671 Fundraising 466, , Boat Program 7,875, Total expense 17,213,439 1,030,577 1,478,199 1,765,190 1,688, ,297 1,457, , ,407 1,250,030 Change in Net assets (453,620) (58,160) (96,730) 2,475 12,166 (115,988) 177,962 (73,300) (158,402) 98,201 Net assets (deficit), beginning of the year 21,664,998 1,217, , ,941 (919,308) (147,977) (177,934) (378,761) (774,252) 729,368 Net assets (deficit), end of the year $ 21,211,378 $ 1,159,708 $ 136,922 $ 911,416 $ (907,142) $ (263,965) $ 28 $ (452,061) $ (932,654) $ 827,569 See Independent Auditors Report. 37

43 , Inc. and Affiliates Schedule II Combining Schedule - Statement of Activities Georgia Public Support and revenue: State support: Florida - Greater Ft. Lauderdale Jacksonville Miami-Dade North Carolina Family Services Orlando Panama City Marine Institute Pasco Pensacola Pinellas $ $ 718,647 $ 582,329 $ 1,478,689 $ - $ 634,695 $ 544,132 $ 1,013 $ 2,538,388 $ 831,120 South Carolina Louisiana Texas North Carolina ,589, Missouri Virginia Georgia Federal support - 70,699 46, ,526-21, ,318 (1,573) 198,998 13,392 Regional Revenue - 283, , , , ,424-11, ,916 Contributions - 208,466 27, ,765 5,467 29, , ,147 47,839 Total Public Support - 1,281,615 1,013,173 2,835,249 2,595,307 1,005,857 1,810,316 (210) 2,820,126 1,127,267 Revenue Boat Program Investment income (loss) Other - 7,625 4,375 35,437 (1) 9,118 66,958 1,770 33,254 37,239 Total revenue 81 7,661 4,473 35, ,200 66,986 1,770 33,302 37,242 Total public support and revenue 81 1,289,276 1,017,646 2,870,764 2,595,973 1,015,057 1,877,302 1,560 2,853,428 1,164,509 Expenses: Program Services 588 1,221,269 1,085,948 2,762,153 2,327, ,376 1,670,914 (50,342) 2,652,584 1,215,325 Management and general 2,724 30,841 37,987 48,377 11,097 36,733 33,123 4,062 31,992 36,108 Fundraising Boat Program Total expense 3,312 1,252,110 1,123,935 2,810,530 2,338,428 1,012,109 1,704,037 (46,280) 2,684,576 1,251,433 Change in Net assets (3,231) 37,166 (106,289) 60, ,545 2, ,265 47, ,852 (86,924) Net assets (deficit), beginning of the year 24,979 (218,257) 213, , ,041 (222,483) 216,483 40, ,926 51,190 Net assets (deficit), end of the year $ 21,748 $ (181,091) $ 107,692 $ 741,868 $ 840,586 $ (219,535) $ 389,748 $ 88,440 $ 363,778 $ (35,734) See Independent Auditors Report. 38

44 , Inc. and Affiliates Schedule II Combining Schedule - Statement of Activities Piedmont Public Support and revenue: State support: Florida - Sand Hills Sandoval Southwest Florida Space Coast St. Louis Tallahassee Tampa Virginia Wilderness Volusia $ $ - $ - $ 665,593 $ 1,761,363 $ - $ 491,868 $ 911,542 $ - $ 521,667 South Carolina 1,177,282 1,323, Louisiana Texas North Carolina Missouri , Virginia Georgia Federal support 181, ,553 1,565,089 33, ,715-27,921 12, ,681 35,912 Regional Revenue 4, , , , , , ,327 Contributions 52, ,449 17, , ,725 8,839 15,310 30,930 28,106 6,140 Total Public Support 1,415,073 1,641,004 1,582,922 1,308,927 2,444, , ,765 1,091, , ,046 Revenue Boat Program Investment income (loss) , Other , , Total revenue ,644 85, , Total public support and revenue 1,415,160 1,641,005 1,582,957 1,336,571 2,530, , ,765 1,183, , ,046 Expenses: Program Services 1,444,176 1,729,268 2,242,571 1,242,670 2,594, , ,090 1,408,445 1,701, ,451 Management and general 23,457 38,041 39,320 29,556 46,314 9,838 33,532 28, ,433 18,992 Fundraising Boat Program Total expense 1,467,633 1,767,309 2,281,891 1,272,226 2,640, , ,622 1,436,488 1,868, ,443 Change in Net assets (52,473) (126,304) (698,934) 64,345 (110,309) (1,225) (258,857) (252,966) (941,482) (36,397) Net assets (deficit), beginning of the year 399,196 (327,944) (1,084,804) 655, ,269 34, ,596 65,899 (329,001) (271,204) Net assets (deficit), end of the year $ 346,723 $ (454,248) $ (1,783,738) $ 719,362 $ 722,960 $ 33,289 $ 119,739 $ (187,067) $ (1,270,483) $ (307,601) See Independent Auditors Report. 39

45 White Pines Public Support and revenue: State support: Florida - Acadiana Big Cypress Family Services Gadsden Center for Academic Discipline, Inc. and Affiliates Schedule II Combining Schedule - Statement of Activities Infinity Marlboro Infinity Wake County Lafayette Rio Grande Valley Sarasota County $ $ - $ 99,241 $ - $ 318,794 $ - $ - $ - $ - $ - South Carolina 2,468, Louisiana - 2,008, Texas ,287 - North Carolina Missouri Virginia Georgia Federal support 377, ,500 15, ,711 - Regional Revenue - 190,540 (9,199) , ,860-53,884 - Contributions 264,909 26,455 4,771-4,220 26, ,239 - Total Public Support 3,110,298 2,497, , , , , ,121 - Revenue Boat Program Investment income (loss) ,025 Other ,021 (1,353) - 1, ,273 - Total revenue ,021 (1,353) - 1, ,321 1,025 Total public support and revenue 3,110,612 2,497, ,891 (1,353) 323, , , ,442 1,025 Expenses: Program Services 2,703,758 2,359, ,542 1, , , , ,018,459 - Management and general 29,095 25,258 10,622-20,662 57,205 58,067-24, Fundraising Boat Program Total expense 2,732,853 2,384, ,164 1, , , , ,042, Change in Net assets 377, ,201 (51,273) (2,903) (88,147) 59,396 5,864 (886) (92,179) 649 Net assets (deficit), beginning of the year 313,963 (1,788,539) 52,434 2,903 98,768 (63,210) 7, (1,844,829) 72,710 Net assets (deficit), end of the year $ 691,722 $ (1,675,338) $ 1,161 $ - $ 10,621 $ (3,814) $ 13,011 $ - $ (1,937,008) $ 73,359 See Independent Auditors Report. 40

46 , Inc. and Affiliates Schedule II Combining Schedule - Statement of Activities Savannah River YES Public Support and revenue: State support: Florida $ - 2,059,921 Georgia Properties Louisiana Properties South Carolina Wilderness Institute New Mexico Properties South Carolina Statewide Wings Texas Caddo, Inc Manatee, Inc. Virginia, Inc. $ $ - $ - $ - $ - $ - $ - $ - $ 888,098 $ - South Carolina Louisiana Texas North Carolina Missouri Virginia ,439 Georgia 965, Federal support - 214, Regional Revenue - 221, ,343, ,368 - Contributions 208,470 48,184-22, ,081 13,432 - Total Public Support 1,174,098 2,544,558-22, ,347,485 1,072, ,439 Revenue Boat Program Investment income (loss) - 92,187-13,700-22, Other 5,196 8, , , Total revenue 5, , ,701-22, , Total public support and revenue 1,179,294 2,645, ,342-22, ,717 1,347,609 1,072, ,439 Expenses: Program Services 1,089,717 2,701,218 58, ,004-22,641 9,238 19,717 1,478, , ,757 Management and general 160,725 37,992 2, ,115 1, ,625 19,114 40,951 Fundraising Boat Program Total expense 1,250,442 2,739,210 60, ,850 1,115 23,779 9,290 19,717 1,657, , ,708 Change in Net assets (71,148) (93,826) (60,835) 69,492 (1,115) (846) (9,282) - (309,589) 195, ,731 Net assets (deficit), beginning of the year (584,998) 901,460 2,044,023 1,352,978 98, ,000 10, Net assets (deficit), end of the year $ (656,146) $ 807,634 $ 1,983,188 $ 1,422,470 $ 97,782 $ 755,154 $ 1,603 $ 100 $ (309,589) $ 195,901 $ 121,731 See Independent Auditors Report. 41

47 , Inc. and Affiliates Schedule II Combining Schedule - Statement of Activities Total Before Eliminations Eliminations Total Public Support and revenue: State support: Florida $ 18,225,072 $ - $ 18,225,072 South Carolina 10,044,488-10,044,488 Louisiana 2,263,140-2,263,140 Texas 955, ,632 North Carolina 2,877,600-2,877,600 Missouri 1,024,622-1,024,622 Virginia 428, ,752 Georgia 965, ,628 Federal support 7,486,915-7,486,915 Regional Revenue 8,911,457-8,911,457 Contributions 5,256,855 (1,109,931) 4,146,924 Total Public Support 58,440,161 (1,109,931) 57,330,230 Revenue Boat Program 8,114,685-8,114,685 Investment income (loss) 735,452 (464,306) 271,146 Other 3,169,023 (2,224,052) 944,971 Total revenue 12,019,160 (2,688,358) 9,330,802 Total public support and revenue 70,459,321 (3,798,289) 66,661,032 Expenses: Program Services 57,766,333 (3,440,670) 54,325,663 Management and general 6,698,345 (653,428) 6,044,917 Fundraising 486, ,021 Boat Program 7,875,250-7,875,250 Total expense 72,825,949 (4,094,098) 68,731,851 Change in Net assets (2,366,628) 295,809 (2,070,819) Net assets (deficit), beginning of the year 25,707,805 3,021,311 28,729,116 Net assets (deficit), end of the year $ 23,341,177 $ 3,317,120 $ 26,658,297 See Independent Auditors Report. 42

48 COMPLIANCE INFORMATION