The Family Place, Inc.

Transcription

1 Independent Auditor s Reports and Consolidated Financial Statements Year Ended December 31, 2016 (with Summarized Comparative Information for the Year Ended December 31, 2015)

2 December 31, 2016 Contents Independent Auditor s Report... 1 Consolidated Financial Statements Statement of Financial Position... 3 Statement of Activities Statement of Functional Expenses... 6 Statement of Cash Flows... 8 Notes to Consolidated Financial Statements... 9 Supplementary Information Schedule of Consolidating Financial Position Schedule of Consolidating Activities Schedule of Expenditures of Federal Awards Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of the Financial Statements Performed in Accordance with Government Auditing Standards Report on Compliance for the Major Federal Program and Report on Internal Control Over Compliance Independent Auditor s Report Schedule of Findings and Questioned Costs Summary Schedule of Prior Audit Findings... 38

3 Independent Auditor s Report Board of Directors The Family Place, Inc. Dallas, Texas Report on the Financial Statements We have audited the accompanying consolidated financial statements of The Family Place, Inc. and its subsidiaries (The Family Place Dallas Real Estate, Inc. and The Family Place Foundation), which comprise the consolidated statement of financial position as of December 31, 2016, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States 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 consolidated financial statements are free from material misstatement. The financial statements of The Family Place Dallas Real Estate, Inc. and The Family Place Foundation, which are included in the entity s financial statements, were not audited in accordance with Government Auditing Standards. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

4 Board of Directors The Family Place, Inc. Page 2 We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The Family Place, Inc. and its subsidiaries as of December 31, 2016, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Consolidated Comparative Information We have previously audited the December 31, 2015, consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated June 14, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2015, is consistent, in all material respects, with the consolidated audited financial statements from which it has been derived. Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying supplementary information including the consolidating schedules and the schedule of expenditures of federal awards required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, as listed in the table of contents, are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated June 20, 2017, on our consideration of The Family Place, Inc. s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering The Family Place, Inc. s internal control over financial reporting and compliance. Dallas, Texas June 20, 2017

5 Consolidated Statement of Financial Position December 31, 2016 with Comparative Totals for December 31, 2015 Total Total Temporarily Permanently December 31, December 31, Unrestricted Restricted Restricted Assets Cash and cash equivalents $ 10,451,848 $ 2,531,631 $ 5,000 $ 12,988,479 $ 4,142,667 Receivables Pledges, net 2,611 2,342,390-2,345,001 2,145,882 Grants 627, , ,398 Other, net 168,065 1,055,457-1,223, ,059 Prepaid expenses 163, , ,329 Investments, at fair value 2,332,269 94,878 1,573,159 4,000,306 5,171,353 Property, fixtures, and equipment, net 14,110, ,110,217 6,674,444 Deposits and other assets 93, ,464 76,746 Total assets $ 27,949,174 $ 6,024,356 $ 1,578,159 $ 35,551,689 $ 19,307,878 Liabilities Accounts payable and accrued liabilities $ 1,680,726 $ - $ - $ 1,680,726 $ 415,197 Notes payable 8,997, ,997,100 - Total liabilities 10,677, ,677, ,197 Net Assets Unrestricted Undesignated 16,451, ,451,336 12,248,105 Board designated Facilities and technology 287, , ,015 Future operations 355, , ,002 Employee retention 89, ,743 89,975 Client assistance 87, ,498 93,981 Public education ,023 Total board designated 820, , ,996 Total unrestricted 17,271, ,271,348 13,151,101 Temporarily restricted - 6,024,356-6,024,356 4,168,421 Permanently restricted - - 1,578,159 1,578,159 1,573,159 Total net assets 17,271,348 6,024,356 1,578,159 24,873,863 18,892,681 Total liabilities and net assets $ 27,949,174 $ 6,024,356 $ 1,578,159 $ 35,551,689 $ 19,307,878 See Notes to Consolidated Financial Statements 3

6 Consolidated Statement of Activities Year Ended December 31, 2016 with Comparative Totals for 2015 Total Total Temporarily Permanently December 31, December 31, Unrestricted Restricted Restricted Public Support and Revenue Public Support Contributions General $ 2,242,733 $ 4,406,674 $ 5,000 $ 6,654,407 $ 5,970,689 Pledges 13,042 2,859,346-2,872,388 3,264,983 Special events 2,195, ,195,515 2,213,249 In-kind goods and services 389, , ,797 United Way 880,058 4, , ,968 Total contributions 5,720,603 7,270,870 5,000 12,996,473 12,535,686 Grants from governmental agencies 4,220, ,220,810 4,006,679 Other revenue Resale shop sales 789, , ,231 Net investment return 187, , ,927 (121,839) Program service fees 203, , ,242 Miscellaneous income 43, ,467 26,752 Total other revenue 1,224, ,996-1,336, ,386 Net Assets Released from Restrictions Restriction satisfied by payment 5,526,806 (5,526,806) Total public support and revenue 16,692,322 1,856,060 5,000 18,553,382 17,405,751 Program and Supporting Services Program Services Public education 229, , ,026 Resale shop 740, , ,556 Volunteer services 87, ,577 82,960 Client legal services 27, ,960 32,273 Child development 1,159, ,159,861 1,271,832 Youth education 445, , ,274 Outreach services 2,213, ,213,597 1,897,203 Batterer s treatment program 579, , ,774 Transitional housing 1,772, ,772,482 1,839,475 Emergency shelter 2,092, ,092,735 1,775,377 Faith & Liberty s Place 474, , ,176 Incest recovery 114, , ,382 Total program services 9,938, ,938,370 9,485,308 See Notes to Consolidated Financial Statements 4

7 Consolidated Statement of Activities (Continued) Year Ended December 31, 2016 with Comparative Totals for 2015 Total Total Temporarily Permanently December 31, December 31, Unrestricted Restricted Restricted Supporting Services Management and general $ 1,463,249 $ - $ - $ 1,463,249 $ 1,372,303 Fundraising 1,170, ,170,581 1,112,898 Total supporting services 2,633, ,633,830 2,485,201 Total program and supporting services 12,572, ,572,200 11,970,509 Change in Net Assets 4,120,248 1,855,934 5,000 5,981,182 5,435,242 Net Assets, Beginning of Year 13,151,100 4,168,422 1,573,159 18,892,681 13,457,439 Net Assets, End of Year $ 17,271,348 $ 6,024,356 $ 1,578,159 $ 24,873,863 $ 18,892,681 See Notes to Consolidated Financial Statements 5

8 Consolidated Statement of Functional Expenses Year Ended December 31, 2016 with Comparative Totals for 2015 Program Services Client Batterer s Public Resale Volunteer Legal Child Youth Outreach Treatment Education Shop Services Services Development Education Services Program Salaries $ 167,093 $ 316,472 $ 45,756 $ 18,035 $ 678,733 $ 304,217 $ 1,262,373 $ 388,362 Employee benefits 10,139 43,579 5, ,265 39, ,180 56,999 Payroll taxes, etc. 11,563 30,185 3,576 1,561 57,728 24,124 98,851 30,107 Total salaries and related 188, ,236 55,316 19, , ,132 1,529, ,468 Professional fees and contract 10,133 34, ,453 5, ,727 13,310 Office and telecommunications 4,532 27,777 1,769 1,229 15,968 13,598 47,694 17,581 Agency occupancy 10, ,752 2,599 3,545 74,007 25, ,246 54,581 Printing and public relations 8,746 1, , Transportation - 9,107 1,062-1,928 5,375 7,714 6,024 Conferences and meetings 145 1,265 1, , ,356 6,187 Client assistance - 46,572 21, ,165 4,263 83,944 1,143 Liability insurance 742 9, ,408 2,542 9,494 3,160 In-kind goods and services 5,550 59,685 1,985 1,727 11,131 16,062 48,825 1,395 Special events expense Miscellaneous expenditures ,225 1, Total before depreciation 229, ,762 87,577 27,960 1,114, ,408 2,212, ,849 Depreciation , , , Total functional expenses $ 229,856 $ 740,809 $ 87,577 $ 27,960 $ 1,159,861 $ 445,184 $ 2,213,597 $ 579,424 See Notes to Consolidated Financial Statements 6

9 Consolidated Statement of Functional Expenses (Continued) Year Ended December 31, 2016 with Comparative Totals for 2015 Program Services Supporting Services Faith & Management Transitional Emergency Liberty s Incest and Fund Housing Shelter Place Recovery Total General Raising Total Total Total $ 696,466 $ 1,043,910 $ 257,606 $ 57,967 $ 5,236,990 $ 869,929 $ 452,135 $ 1,322,064 $ 6,559,054 $ 5,930,659 99, ,400 6,545 5, ,880 90,738 30, , , ,933 61,635 89,189 22,029 4, ,307 61,645 33,123 94, , , ,317 1,265, ,180 68,219 6,361,177 1,022, ,275 1,537,587 7,898,764 7,177,273 42,778 42,247 79,076 6, , ,561 65, , , ,356 27,120 39,653 29,374 1, ,114 74,985 19,414 94, , , , ,650 65,666 32,170 1,123,819 58,712 32,436 91,148 1,214,967 1,248, ,586 1,540 77,451 78,991 91, ,803 6,445 3, ,240 2, ,297 44,537 37,443 2,362 4,927 1, ,589 17,201 22,790 39,991 68,580 56, , ,543 1, , ,243 1,081,424 12,858 12,532 1, ,815 4,383 2,804 7,187 71,002 75,195 29,865 79,722 8,356 4, ,444 35,626 15,822 51, , , , , , ,236 20,781 5, ,892 2,209 45,882 48,091 78,983 41,539 1,630,174 1,999, , ,098 9,643,576 1,399,324 1,169,644 2,568,968 12,212,544 11,616, ,308 93, ,794 63, , , ,006 $ 1,772,482 $ 2,092,735 $ 474,787 $ 114,098 $ 9,938,370 $ 1,463,249 $ 1,170,581 $ 2,633,830 $ 12,572,200 $ 11,970,509 See Notes to Consolidated Financial Statements 7

10 Consolidated Statement of Cash Flows Year Ended December 31, 2016 with Comparative Totals for December 31, Operating Activities Change in net assets $ 5,981,182 $ 5,435,242 Adjustments to reconcile increase in net assets to net cash provided by (used in) operating activities: Depreciation 359, ,006 Loss on disposal of property, fixtures, and equipment 29,943 25,833 Net unrealized (gains) losses on investments (244,613) 344,482 Net realized (gains) losses on sale of investments 9,401 (154,455) Restricted contributions (6,063,503) (4,472,718) Changes in operating assets and liabilities: Receivables (1,175,290) (2,195,974) Prepaid expenses 58,735 (48,777) Deposits and other assets (16,718) (2,857) Accounts payable and accrued expenses - 17,278 Net cash used in operating activities (1,061,207) (697,940) Investing Activities Purchases of property, fixtures, and equipment (6,559,845) (3,507,907) Proceeds from sales of investments 1,849,117 1,479,644 Purchases of investments (442,856) (915,046) Net cash used in investing activities (5,153,584) (2,943,309) Financing Activities Notes payable 8,997,100 - Restricted contributions 6,063,503 4,472,718 Net cash provided by financing activities 15,060,603 4,472,718 Net Increase in Cash and Cash Equivalents 8,845, ,469 Cash and Cash Equivalents, Beginning of Year 4,142,667 3,311,198 Cash and Cash Equivalents, End of Year $ 12,988,479 $ 4,142,667 Supplemental Information Noncash Activity Accounts payable incurred for purchase of property and equipment $ 1,265,527 $ - See Notes to Consolidated Financial Statements 8

11 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations The Family Place, Inc. (the Agency), The Family Place Dallas Real Estate, Inc. (DRE) and The Family Place Foundation (the Foundation) are collectively known as (the Organizations). The Agency is a voluntary health and welfare organization with the stated mission of stopping family violence. The programs operated by the Agency educate the public about family violence, provide counseling for victims of family violence, deliver continuous telephone assistance, present prevention programs for youth and provide counseling for batterers. The Agency maintains a Safe Campus for victims and their families, which provides emergency shelter, extended-stay transitional housing, a licensed child development center, K-2nd grade school for children, employment and life-skills training for adults. In 2016, DRE was formed as a supporting organization within the meaning of Section 509(a)(3) of the Code to benefit the Agency. The Agency is a public charity under Sections 509(a)(1) and 170(b)(1)(A)(iv) of the Code. DRE borrowed funds through a new markets tax credit (NMTC) structure, owns certain real property contributed to it by the Agency, developed said property by constructing a 56,000 square foot facility (Ann Moody Place) that includes space for administrative offices, an emergency shelter, client counseling, youth education, job training, childcare and other social services, and will lease the property and improvements to the Agency. Chase Community Equity, LLC (Chase) made an equity contribution of $3,857,100 in the Chase NMTC Family Place Investment Fund, LLC (Fund) and the Fund obtained a loan in the principal amount of $7,872,900 from the Agency. Collectively, the Fund used the proceeds of the Fund Investment to make an equity contribution of $11,500,000 in the DRE, which is intended to be a qualified equity investment ( QEI ) as defined in Section 45D(b) of the Code. The DRE has two loans to the Fund in the aggregate principal amount of $11,270,000 to finance the Project (Ann Moody Place). The loans, in the principal amounts of $7,872,900 (Loan A) and $3,397,100 (Loan B), bear interest at 1.164% per annum and require payments of interest only on December 1 of each year to and including December 1, Loan A and Loan B will require payments of principal and interest commencing on December 1, 2024 until maturity on December 1, After December 31, 2023 the Loan A and Loan B will be forgiven, contingent on DRE maintaining compliance with all relevant requirements of the loans. The loans are secured by the property and rights and accounts relating thereto. DRE will lease the property to the Agency, pursuant to a lease agreement dated as of June 15, DRE is intended to be treated as a qualified active low income community business as defined in Section 45D(d)(2) of the Code and the Treasury Regulations thereunder (a QALICB ) and each of the loans is intended to constitute a qualified low-income community investment under Section 45D(d)(2) of the Code (a QLICI ). The parties understand and acknowledge that the Borrower s operations will be located in an economically distressed and underserved community within Census Tract The tract qualifies as an Area of Greater Economic Distress as defined by the CDFI Fund based on a Median Family Income of 46.01% of the metropolitan area median family income per American Community Survey. 9

12 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 The availability of NMTCs has enabled the Lender to provide the Loan on terms and conditions that are flexible and non-conventional, including interest rates that are at least 50% lower than the prevailing market rates for equivalent products, longer than standard amortization, longer than standard interest-only period, higher than standard loan-to-value ratio, lower than standard origination fees, lower than standard loan loss reserve, and lower than standard debt coverage ratio. The NMTC Beneficiary acknowledges that the Lender s agreement to execute the Loan Agreement and make the Loan is expressly predicated upon (1) the NMTC Beneficiary s agreement to sign, deliver and perform under the requirements set forth in this Agreement, (2) the Project s location in a community lacking adequate access to capital, (3) the significant community development benefits that will be delivered to Low-Income Communities and Low-Income Persons as a result of the Project, (4) the significant benefits that will be delivered to Low-Income Persons within Low- Income Communities by the Project. In 2007, the Foundation was formed as a public charity within the meaning of Sections 501(a) and 170(b)(1)(A)(vi) of the Internal Revenue Code (IRC) to operate exclusively for charitable purposes by engaging directly in support of or by making distributions to the Agency. Principles of Consolidation The accompanying consolidated financial statements include the accounts of the Agency, DRE and the Foundation. All significant accounts and transactions between the Agency, DRE and the Foundation have been eliminated in consolidation. Basis of Accounting The accompanying consolidated financial statements of the Organizations have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America and accordingly, reflect all significant receivables, payables and other liabilities. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the recorded amounts of revenues, expenses, gains, losses and other changes in net assets during the reporting period. Actual results could differ from these estimates. Cash and Cash Equivalents The Organizations consider all liquid investments with original maturities of three months or less to be cash equivalents. At December 31, 2016 and 2015, cash equivalents consisted primarily of money market accounts with brokers. 10

13 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 At December 31, 2016, the Organizations cash accounts exceeded federally insured limits by approximately $7,700,000. The Organizations have not experienced any losses in such accounts. Management monitors the ongoing business of such financial institutions and does not believe undue investment risk exists. Investments and Investment Return Investments in equity securities having a readily determinable fair value and in all debt securities are carried at fair value. Other investments are valued at the lower of cost (or fair value at time of donation, if acquired by contribution) or fair value. Investment return includes dividend, interest and other investment income; realized and unrealized gains and losses on investments carried at fair value; and realized gains and losses on other investments. Investment return that is initially restricted by donor stipulation and for which the restriction will be satisfied in the same year is recorded as temporarily restricted and then released from restriction. Other investment return is reflected in the accompanying consolidated statements of activities as unrestricted, temporarily restricted, or permanently restricted based upon the existence and nature of any donor or legally imposed restrictions. Investments are comprised of certificates of deposit and mutual funds. The carrying values of certificates of deposit approximate fair value. The fair values of mutual funds are determined primarily by reference to quoted market prices. Changes in market conditions may affect future designations and/or market valuations, which will be monitored, as necessary, by management. Accounts Receivable Accounts receivable are stated at the amount billed to donors plus any accrued and unpaid interest. The Organizations provide an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Accounts receivable are ordinarily due 30 days after the issuance of the invoice. Account balances past due more than 180 days are considered delinquent. Delinquent receivables are written off based on individual credit evaluation and specific circumstances of the donor. Property, Fixtures and Equipment Property, fixtures and equipment are stated at cost less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful life of each asset. Assets under capital lease obligations and leasehold improvements are depreciated over the shorter of the lease term or their respective estimated useful lives. Depreciation is computed using the straight-line method over periods of 3 to 30 years. Generally, the Organizations capitalize assets in excess of $3,500. Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are those whose use by the Organizations has been limited by donors to a specific time period or purpose. Permanently restricted net assets have been restricted by donors to be maintained by the Organizations in perpetuity. 11

14 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Contributions Gifts of cash and other assets received without donor stipulations are reported as unrestricted revenue and net assets. Gifts received with a donor stipulation that limits their use are reported as temporarily or permanently restricted revenue and net assets. When a donor stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying consolidated statement of activities as net assets released from restrictions. Gifts and investment income that are originally restricted by the donor and for which the restriction is met in the same time period are recorded as temporarily restricted and then released from restriction. Gifts of land, buildings, equipment and other long-lived assets are reported as unrestricted revenue and net assets unless explicit donor stipulations specify how such assets must be used, in which case the gifts are reported as temporarily or permanently restricted revenue and net assets. Absent explicit donor stipulations for the time long-lived assets must be held, expirations of restrictions resulting in reclassification of temporarily restricted net assets as unrestricted net assets are reported when the long-lived assets are placed in service. Unconditional gifts expected to be collected within one year are reported at their net realizable value. Unconditional gifts expected to be collected in future years are initially reported at fair value determined using the discounted present value of estimated future cash flows technique. The resulting discount is amortized using the level-yield method and is reported as contribution revenue. Conditional gifts depend on the occurrence of a specified future and uncertain event to bind the potential donor and are recognized as assets and revenue when the conditions are substantially met and the gift becomes unconditional. In-kind Contributions In addition to receiving cash contributions, the Organizations receive in-kind contributions of donated software, goods and food from various donors. It is the policy of the Organizations to record the estimated fair value of certain in-kind donations as an expense or an asset, as applicable, in its financial statements and similarly increase contribution revenue by a like amount. Generally, the Organizations recognize donated property if the estimated fair value exceeds $1,000. For the years ended December 31, 2016 and 2015, $247,488 and $70,079, respectively, was received in inkind contributions. 12

15 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Contributed Services Contributions of services are recognized as revenue at their estimated fair value only when the services received create or enhance nonfinancial assets or require specialized skills possessed by the individuals providing the service and the service would typically need to be purchased if not donated. Contribution revenue recognized from contributed services consisted of: Technology and design consulting for program services $ 85,447 $ 112,314 Technology and design consulting for support services 56,320 40,404 Total contributed services $ 141,767 $ 152,718 Deferred Revenue Revenue from special events and government grants is deferred and recognized over the periods to which the events and grants relate. For the years ended December 31, 2016 and 2015, $14,351 and $46,340, respectively, were considered deferred revenues. Government Grants Support funded by grants is recognized as the Agency performs the contracted services or incurs outlays eligible for reimbursement under the grant agreements. Grant activities and outlays are subject to audit and acceptance by the granting agency and, as a result of such audit, adjustments could be required. Income Taxes The Organizations are exempt from income taxes under Section 501 of the IRC and a similar provision of state law. However, the Organizations are subject to federal income tax on any unrelated business taxable income. The Organizations had no unrelated business income during the years ended December 31, 2016 and The Organizations file tax returns in the U.S. federal jurisdiction. With a few exceptions, the Organizations are no longer subject to U.S. federal examinations by tax authorities for years before Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the accompanying consolidated statements of activities. Salaries and related payroll expenses are recorded based on actual segregation of personnel by program or supporting services benefited. Distribution of all other expenses is based on actual usage or management s estimate of usage applicable to the various programs and supporting services benefited. 13

16 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Taxes Collected from Customers and Remitted to Governmental Authorities Taxes collected from customers and remitted to governmental authorities are presented in the accompanying consolidated statements of activities on a net basis. Comparative 2015 Financial Information Certain financial information of the Organizations for 2015 have been included in summarized form for purposes of comparison to the 2016 totals. Such information is not intended to be a complete presentation of the financial position, changes in net assets, cash flows and functional expenses in accordance with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organizations 2015 consolidated financial statements from which the summarized information was derived. Note 2: Grant Commitments The Agency receives its grant support through periodic claims filed with the respective funding sources, not to exceed a limit specified in the funding agreement. Since the accompanying consolidated financial statements of the Organizations are prepared on the accrual basis, all earned portions of the grants not yet received as of December 31, 2016 and 2015, have been recorded as receivables, which totaled $627,106 and $499,398, respectively. The Agency expects to receive the December 31, 2016, grant commitments by December 31,

17 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Note 3: Receivables Receivables consisted of the following: Unrestricted Temporarily Restricted December 31, 2016 Permanently Restricted Total Pledges $ 5,111 $ 829,470 $ - $ 834,581 Grants 627, ,106 Special events 69, ,107 Miscellaneous 94,397 1,053,457-1,147,854 Accrued interest 6, ,561 Receivables due within one year $ 802,282 $ 1,882,927 $ - $ 2,685,209 Pledges $ - $ 1,800,817 $ - $ 1,800,817 Receivables due in one to five years - 1,800,817-1,800,817 Less allowance for uncollectible pledges (2,500) (190,666) - (193,166) Less unamortized discount of pledges - (97,231) - (97,231) Total receivables, net $ 799,782 $ 3,395,847 $ - $ 4,195,629 Unrestricted Temporarily Restricted December 31, 2015 Permanently Restricted Total Pledges $ 2,000 $ 2,383,520 $ - $ 2,385,520 Grants 499, ,398 Special events 143, ,563 Miscellaneous 229, ,404 Accrued interest 2, ,092 Receivables due within one year 876,457 2,383,520-3,259,977 Less allowance for uncollectible pledges (1,500) (164,419) - (165,919) Less unamortized discount of pledges - (73,719) - (73,719) Total receivables, net $ 874,957 $ 2,145,382 $ - $ 3,020,339 The rate used for discount calculations was 0.70% in 2016 and 0.80% in

18 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Note 4: Investments and Investment Return Investments at December 31 consisted of the following: Certificates of deposits $ - $ 1,218,654 Municipal auction rate bond 22,475 23,339 Mutual funds equities 1,989,166 1,870,183 Mutual funds fixed income 1,544,417 1,650,514 Mutual funds alternative investments 444, ,663 Total investments $ 4,000,306 $ 5,171,353 The Organizations temporarily and permanently restricted net assets include three endowment funds established by donors. At December 31, 2016, the fair value of the assets of some of these funds was $254,897 higher than the level required by donor stipulation or law. Total investment return is comprised of the following: Interest and dividend income $ 99,271 $ 102,216 Net realized gains (losses) on sales of investments (4,636) 154,455 Net unrealized gains (losses) on investments 238,853 (344,482) Investment fees (33,561) (34,028) Total investment return $ 299,927 $ (121,839) Note 5: Disclosures About Fair Value of Investments 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. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 Quoted prices in active markets for identical assets or liabilities Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities 16

19 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Recurring Measurements The following table presents the fair value measurements of assets and liabilities recognized in the accompanying statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at December 31, 2016 and 2015: Fair Value Measurements Using Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair Value (Level 1) (Level 2) (Level 3) December 31, 2016 Municipal auction rate bond $ 22,475 $ - $ 22,475 $ - Mutual funds equities 1,989,166 1,989, Mutual funds fixed income 1,544,417 1,544, Mutual funds alternative investments 444, , December 31, 2015 Municipal auction rate bond $ 23,339 $ - $ 23,339 $ - Mutual funds equities 1,870,183 1,870, Mutual funds fixed income 1,650,514 1,650, Mutual funds alternative investments 408, , Following is a description of the inputs and valuation methodologies used for assets measured at fair value on a recurring basis and recognized in the accompanying consolidated statements of financial position, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the year ended December 31, Investments Where quoted market prices are available in an active market, investments are classified within Level 1 of the valuation hierarchy. Level 1 investments include mutual funds. If quoted market prices are not available, then fair values are estimated by using pricing models, quoted prices of securities with similar characteristics or discounted cash flows and are classified as Level 2. In certain cases where Level 1 or Level 2 inputs are not available, investments are classified within Level 3 of the hierarchy. During the years ended December 31, 2016 and 2015, all investments were Level 1 investments, except for a contributed municipal auction rate bond. There were no significant transfers between levels. Certificates of deposits are valued at cost plus accrued interest which approximates fair value and have been excluded from above fair value measurements. 17

20 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Note 6: Property, Fixtures and Equipment The following schedule summarizes property, fixtures and equipment as of December 31: Building and building improvements $ 4,786,036 $ 4,403,875 Construction in progress 7,709, ,445 Furniture and equipment 1,954,189 2,008,338 Land 2,738,688 2,738,688 Land improvements 864, ,305 Leasehold improvements 293, ,554 Vehicles 227, ,246 18,573,387 10,861,451 Less accumulated depreciation and amortization (4,463,170) (4,187,007) Property, fixtures and equipment, net $ 14,110,217 $ 6,674,444 Depreciation is charged to expense using the straight-line method over the estimated useful life of each asset. Assets under capital lease obligation and leasehold improvements are depreciated over the shorter of the lease term or their respective estimated useful lives. Depreciation is computed using the straight-line method over periods of 3 to 30 years. Note 7: Net Assets Temporarily Restricted Net Assets Temporarily restricted net assets at December 31 are available for the following purposes or periods: Program services $ 211,260 $ 487,950 Safe Campus expansion 73,613 76,951 Ann Moody Place 5,482,119 3,365,496 Agency operations 193, ,327 Client assistance 63,831 76,697 Total temporarily restricted net assets $ 6,024,356 $ 4,168,421 18

21 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Permanently Restricted Net Assets Permanently restricted net assets at December 31 are restricted to: Investment in perpetuity, the income of which is expendable to support Employee retention activities $ 825,859 $ 820,859 Children s program activities 752, ,300 Total permanently restricted net assets $ 1,578,159 $ 1,573,159 Net Assets Released from Restrictions Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors Purpose restrictions accomplished Program services $ 621,725 $ 873,639 Safe Campus expansion 53,338 70,905 Ann Moody Place 4,672,283 3,144,677 Agency operations 117,884 99,765 Client assistance 56,465 52,541 Total 5,521,695 4,241,527 Time restrictions expired passage of specified time 5,111 2,000 Total net assets released from restrictions $ 5,526,806 $ 4,243,527 Note 8: Endowment The Agency s endowment consists of an individual donor-restricted fund established to retain employees in support of Agency programming. The Foundation s endowment consists of two donor-restricted fund established for children programming. As required by accounting principles generally accepted in the United States of America (GAAP), net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. 19

22 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 The Organizations governing body has interpreted the State of Texas Prudent Management of Institutional Funds Act (SPMIFA) as requiring 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 Agency classifies as permanently restricted net assets (a) the original value of gifts 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 donor-restricted endowment funds are classified as temporarily restricted net assets until those amounts are appropriated for expenditure Draft by the Organizations in a manner consistent with the standard of prudence prescribed by SPMIFA. 5/17/2016 In accordance with SPMIFA, the Organizations consider the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. Duration and preservation of the funds 2. Purposes of the Organizations and the funds 3. General economic conditions 4. Possible effect of inflation and deflation 5. Expected total return from investment income and appreciation or depreciation of investments 6. Other resources of the Organizations 7. Investment policies of the Organizations The composition of net assets by type of endowment fund at December 31, 2016 and 2015, was as follows: Unrestricted Temporarily Restricted 2016 Permanently Restricted Total Donor-restricted endowment funds $ - $ 229,953 $ 1,578,159 $ 1,808,112 Unrestricted Temporarily Restricted 2015 Permanently Restricted Total Donor-restricted endowment funds $ - $ 208,535 $ 1,573,159 $ 1,781,694 20

23 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Changes in endowment net assets for the years ended December 31, was as follows: Draft Unrestricted Temporarily Restricted Permanently Restricted Endowment net assets, beginning of year $ - $ 208,535 $ 1,573,159 $ 1,781,694 Contribution - - 5,000 5,000 Investment return: Investment income 31,714-31,714 Net appreciation 80,157-80,157 Distributions - (90,453) - (90,453) 5/17/2016 Endowment net assets, end of year $ - $ 229,953 $ 1,578,159 $ 1,808, Total Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year $ - $ 320,253 $ 1,568,159 $ 1,888,412 Contribution - - 5,000 5,000 Investment return: Investment income 34,943-34,943 Net depreciation (100,915) - (100,915) Distributions - (45,746) - (45,746) Endowment net assets, end of year $ - $ 208,535 $ 1,573,159 $ 1,781,694 21

24 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Amounts of donor-restricted endowments funds classified as permanently and temporarily restricted net assets at December 31 consisted of: Permanently restricted net assets Portion of perpetual endowment funds to be retained permanently by explicit donor stiplulation $ 1,578,159 $ 1,573,159 Draft Temporary restricted net assets Portion of perpetual endowment funds subject to a time restriction under SPMIFA with purpose restrictions $ 229,953 $ 208,535 5/17/2016 From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level the Organizations are required to retain as a fund of perpetual duration pursuant to donor stipulation or SPMIFA. In accordance with GAAP, any deficiencies of this nature would be aggregately reported in unrestricted net assets. The Organizations have adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs and other items supported by its endowment while seeking to maintain the purchasing power of the endowment. Endowment assets include those assets of donor-restricted endowment funds the Organizations must hold in perpetuity or for donor-specified periods. Under the Organizations policies, endowment assets are invested in a manner that is intended to produce results that exceed inflation while assuming a prudent level of investment risk. Actual returns in any given year may vary from this amount. To satisfy its long-term rate of return objectives, the Organizations rely on a total return strategy in which investment returns are achieved through both current yield (investment income such as dividends and interest) and capital appreciation (both realized and unrealized). The Organizations target a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. Beginning in 2016, the Foundation, in compliance with donors restrictions, appropriates for expenditure each year a range of 2% to 5% of its endowment fund s average fair value over the prior 16 quarters through the year-end preceding the year in which the expenditure is planned. In determining this expenditure, the Organizations consider the long-term expected return on its endowments. Accordingly, over the long term, the Organizations objective is to maintain the purchasing power of endowment assets held in perpetuity, as well as to provide additional real growth through new gifts and investment return. 22

25 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Note 9: Retirement Benefits The Agency has a contributory defined contribution retirement plan (the Plan) under Section 403(b) of the IRC. The Plan is open to all employees meeting minimum age and service requirements. Contributions to the Plan by the Agency are made at the discretion of the Agency s Board of Directors. The Agency made no contributions for 2016 and Note 10: Operating Leases Draft 5/17/2016 The Agency leases its facilities under variable noncancellable operating lease agreements expiring through May Future minimum annual lease payments at December 31, 2016, are: 2017 $ 331, , , , ,957 Later years 98,611 Total minimum annual lease payments $ 858,850 Rental expense under these operating leases for the years ended December 31, 2016 and 2015, was approximately $636,000 and $664,000, respectively. The Agency s leased office space is accounted for using the straight-line method. The difference between the net cash requirement of the lease and the straight-line method is accrued within accounts payable and accrued liabilities in the accompanying consolidated statements of financial position. Note 11: Related Party Transactions During the year ended December 31, 2016, Agency, DRE and Foundation Board members and/or their affiliates contributed $636,000 to the Organizations and $234,000 is included in pledges receivable at year-end. During the year ended December 31, 2015, Agency and Foundation Board members and/or their affiliates contributed $1,080,000 to the Organizations and $1,030,000 is included in pledges receivable at year-end. Note 12: Significant Estimates and Concentrations Accounting principles generally accepted in the United States of America require disclosure of certain significant estimates and current vulnerabilities due to certain concentrations. Those matters include the following: 23

26 Notes to Consolidated Financial Statements December 31, 2016 with Comparative Totals for December 31, 2015 Grants and Other Revenue Sources The Agency receives most of its revenue from government grants, the United Way, special events and charitable contributions. Government grants must be approved each year, and the amount of in-kind goods and services, special events and charitable contributions received may be sensitive to economic conditions. The Agency is subject to the risk that these sources of revenue can vary from year-to-year. Management, with oversight from the Board of Directors, closely monitors the cash flows of the Agency and adjusts the operating budget to maintain expenditures at levels supported by cash flows. Draft 5/17/2016 Federal and other grants are subject to periodic review and assessment by the related federal and other agencies. The Agency believes matters related to these reviews will not have a material adverse effect on the consolidated financial position or activities of the Agency. Investments The Organization invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market and credit risks. 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 may occur and that such changes could materially affect the amounts reported in the accompanying statement of financial position. Note 13: Financing On April 30, 2015, the Agency purchased land and a building to house its central Dallas counseling services, overflow shelter space and agency operations (Ann Moody Place). The Agency obtained two loans for a total of $3.2 million that matured on March 31, The first loan was $2.6 million secured by the land with an interest rate of 2%. The second loan was unsecured with an interest rate of 2.4%. No amounts were outstanding at December 31, 2016 or Ann Moody Place is located in an underserved community in Dallas and qualified for New Market Tax Credits. Construction was completed and the building became occupied in May The improvements and operating costs were funded through a capital campaign, interim bank financing and New Market Tax Credits. On September 14, 2015, the Agency obtained a $6,000,000 pledge loan to remodel and expand Ann Moody Place to meet the demand for services. This loan is secured by capital campaign pledges for a term of five years, with an interest rate of 2.25%. Amounts outstanding were $5,600,000 and $0 at December 31, 2016 and 2015, respectively. On July 28, 2016, the Agency also obtained a $3,397,100 loan to finance the construction and improvements at Ann Moody Place. This loan is secured by the property and rights and accounts relating thereto, with an interest rate of 1.16%. This loan requires annual interest payments which commenced on December 1, The loan will require payments of principal and interest commencing on December 1, 2024 until maturity on December 1, Amounts outstanding were $3,397,100 and $0 at December 31, 2016 and 2015, respectively. 24