EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Audited Financial Statements

Transcription

1 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Audited Financial Statements June 30, 2017

2 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Table of Contents June 30, 2017 Independent Auditors Report... 1 Statements of Financial Position... 3 Statements of Activities and Changes in Net Assets... 4 Statement of Functional Expenses... 5 Statements of Cash Flows... 6 Notes to Financial Statements

3 INDEPENDENT AUDITORS REPORT To the Board of Directors of Easter Seals Capital Region & Eastern Connecticut, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Easter Seals Capital Region & Eastern Connecticut, Inc. ( Easter Seals ), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities and change in net assets, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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. 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 Easter Seals 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 Easter Seals 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

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Easter Seals Capital Region & Eastern Connecticut, Inc. as of June 30, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited Easter Seals Capital Region and Eastern Connecticut, Inc. s 2016 financial statements, and our report dated December 21, 2016 expressed an unmodified opinion on those audited financial statements. 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. Hartford, Connecticut November 14,

5 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Statements of Financial Position June 30, 2017 and Assets Current assets: Cash $ 516,520 $ 705,667 Accounts receivable, net 431, ,027 Investments 3,774,375 3,337,216 Prepaid expenses and other assets 149, ,301 Workshop inventories 10,060 22,650 Total current assets 4,882,204 4,973,861 Donor restricted investments 937, ,454 Fixed assets: Land, buildings and building improvements 5,162,803 5,112,808 Equipment and vehicles 1,765,669 1,295,613 6,928,472 6,408,421 Less accumulated depreciation (3,075,493) (2,802,581) Total fixed assets, net 3,852,979 3,605,840 Total assets $ 9,672,637 $ 9,517,155 Liabilities and net assets Current liabilities: Mortgage payable, current portion $ 47,172 $ 41,573 Due to DDS, current portion 12,488 - Accounts payable 115,047 94,657 Accrued liabilities 687, ,586 Deferred revenue and refundable advances 43, ,510 Total current liabilities 906,097 1,044,326 Long term liabilities: Mortgage payable 449, ,927 Due to DDS, long term portion 37,512 - Total long term liabilities 486, ,927 Total liabilities 1,392,617 1,544,253 Net assets: Unrestricted 7,239,866 7,035,448 Temporarily restricted 102,700 - Permanently restricted 937, ,454 Total net assets 8,280,020 7,972,902 Total liabilities and net assets $ 9,672,637 $ 9,517,155 The accompanying notes are an integral part of the financial statements. 3

6 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Statements of Activities and Changes in Net Assets For the years ended June 30, 2017 and Change in unrestricted net assets: Operating revenues and other support: Grants from government agencies $ 4,181,218 $ 4,995,645 Program service fees 2,616,659 2,553,382 Contributions and special events 671, ,524 Rental income 244, ,530 In-kind contribution 139, ,859 Investment income, net of investment advisory fees 341,288 37,738 Net assets released from temporary restrictions 158,271 76,124 Total revenues and other support 8,352,365 8,994,802 Operating expenses: Program services 6,847,413 7,106,235 General and administrative 800, ,082 Fundraising 499, ,565 Total expenses 8,147,947 8,339,882 Change in unrestricted net assets 204, ,920 Change in temporarily restricted net assets: Contributions 165,100 20,901 Investment income, net of investment advisory fees 95,871 19,014 Net assets released from restrictions (158,271) (76,124) Change in temporarily restricted net assets 102,700 (36,209) Total change in net assets 307, ,711 Net assets, beginning of year 7,972,902 7,354,191 Net assets, end of year $ 8,280,020 $ 7,972,902 The accompanying notes are an integral part of the financial statements. 4

7 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Statement of Functional Expenses For the year ended June 30, 2017 (with comparative totals for June 30, 2016) Program Services General and Administrative Fundraising Total 2016 Total Employee compensation $ 3,125,087 $ 465,341 $ 190,661 $ 3,781,089 $ 3,674,124 In-kind wages 139, , ,859 Employee benefits 883,101 99,822 35,897 1,018,820 1,139,943 Total employee compensation and related benefits 4,147, , ,558 4,939,675 5,027,926 Program wages and materials 1,421,520 3,388 1,721 1,426,629 1,688,581 Insurance 89,005 11, ,056 83,536 Transportation 313,041 4,328 16, , ,497 Occupancy 241,883 7,755 3, , ,055 Professional services 137, ,289 43, , ,517 Equipment, repairs, maintenance 130,194 19,446 8, , ,790 Depreciation 252,784 13,347 6, , ,052 Special events , , ,035 Supplies 45,038 2,113 2,643 49,794 31,597 Interest 19, ,963 49,030 Membership fees 2,674 43,614 2,887 49,175 60,038 Other 20,394 17,570 11,956 49,920 39,282 Telephone 16,041 1,639 1,427 19,107 20,457 Postage and shipping 932 3, ,158 7,209 Printing, publication, media 1, ,864 10,869 Commissions 6, ,339 5, Total expenses $ 6,847,413 $ 800,752 $ 499,782 $ 8,147,947 $ 8,339,882 The accompanying notes are an integral part of the financial statements. 5

8 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Statements of Cash Flows For the years ended June 30, 2017 and 2016 June 30, June 30, Operating activities Change in net assets $ 307,118 $ 618,711 Adjustments to reconcile change in net assets to net change in cash from operating activities: Capital grants (526,970) (449,356) Depreciation 272, ,052 Unrealized gains on investments (339,715) (22,389) Net realized loss on sale of investments 10,435 71,855 (Increase)/decrease in assets: Accounts receivable 315,317 (238,872) Workshop inventories 12,590 - Prepaid expenses and other assets 11,762 (80,848) Increase/(decrease) in liabilities: Accounts payable 20,390 16,855 Accrued liabilities (40,696) 1,948 Due to DDS 50,000 - Deferred revenue and refundable advances (136,010) 28,010 Net change in cash from operating activities (42,867) 110,966 Investing activities Additions to building improvements and equipment (520,051) (449,356) Purchases of investments (271,393) (493,551) Proceeds from sales of investments 163, ,333 Net change in cash from investing activities (627,930) (555,574) Financing activities Capital grants 526, ,356 Principal payment on capital lease obligations - (901) Principal payments on mortgage payable (45,320) (317,408) Net change in cash from financing activities 481, ,047 Net change in cash (189,147) (313,561) Cash, beginning of year 705,667 1,019,228 Cash, end of year $ 516,520 $ 705,667 Supplemental information: Cash paid for interest $ 19,963 $ 42,605 The accompanying notes are an integral part of the financial statements. 6

9 EASTER SEALS CAPITAL REGION & EASTERN CONNECTICUT, INC. Notes to Financial Statements June 30, 2017 and 2016 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Easter Seals Capital Region & Eastern Connecticut, Inc., ( Easter Seals ) is a Connecticut not-for-profit corporation with locations in Windsor, East Hartford, and Norwich, Connecticut. Easter Seals provides medical and vocational rehabilitation services for seniors and for adults and children with physical, mental, emotional or learning disabilities. Easter Seals is affiliated with Easter Seals, Inc. based in Chicago, Illinois. The following is a summary of significant accounting policies of Easter Seals. Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. Buildings and Equipment Equipment owned by Easter Seals is recorded at cost or, if donated, at fair market value. Depreciation is calculated using the straight-line method over the following estimated useful lives: Buildings Building improvements Equipment and vehicles 40 years 5-30 years 3-10 years Net Asset Categories The presentation follows the recommendations of the FASB Accounting Standards Codification topic Not-for-Profit Entities Presentation of Financial Statements, in which Easter Seals reports information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets as follows: Unrestricted - Unrestricted net assets represent available resources other than donor restricted contributions. Temporarily Restricted - Temporarily restricted net assets represent those contributions whose use by Easter Seals has been limited by the donor for later periods of time or for specified purposes. These restrictions primarily relate to funding received for programs for adults and children which must be utilized for specific purposes. Permanently Restricted - Permanently restricted net assets represent contributions received with the donor restriction that the principal be invested in perpetuity and that only the income earned thereon be available for operations and general charitable purposes. 7

10 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Asset Categories (Continued) Revenues are reported as increases in unrestricted net assets, unless the use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets are reported as increases or decreases in unrestricted and temporarily restricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. Fair Value Measurements The Financial Accounting Standards Board has established a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). Inputs to the valuation methodology for the three levels of the fair value hierarchy under FASB ASC 820 are described below: Level 1 Level 2 Unadjusted quoted prices for identical assets or liabilities in active markets that The Association has the ability to access. Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Unobservable and significant to the fair value measurement. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Allowance for Doubtful Accounts The allowances for doubtful accounts are maintained at levels which are adequate to absorb reasonable foreseeable losses based on management s evaluation of outstanding balances and current economic conditions. Balances that remain outstanding after Easter Seals has used reasonable collection efforts are written off. Donated Materials and Services Donated materials, when significant, are reflected at their appraised or estimated value. A substantial number of volunteers have donated significant amounts of time to Easter Seals activities and its fundraising events. Easter Seals recognizes contributed services when the service requires specialized skills that would typically need to be purchased if not provided by the contribution. Easter Seals receives in-kind labor through the Senior Community Service Employment Program SCSEP. These in-kind wages are recorded as revenue with a corresponding expense balance on the statements of activities and changes in net assets. 8

11 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Workshop Inventories Workshop inventories are carried at the lower of cost (first-in, first-out method) or market and consist primarily of finished jewelry. Allowances for obsolete inventory are evaluated and recorded on an annual basis to state inventory at its net realizable value. Endowment and Spending Policy Easter Seals has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that Easter Seals must hold in perpetuity as well as board-designated funds. Under this policy, as approved by the Board of Directors, the endowment assets are invested in accordance with sound investment practices that emphasize long-term investment fundamentals. It is recognized that short-term market fluctuations may cause variations in account performance. To satisfy its long-term rate of return objectives, Easter Seals relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). Easter Seals targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The Board approves annual appropriations for distribution. When deciding the appropriation amount, the Board considers the long-term expected return on its endowment in order to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Refundable Advances Refundable advances represent revenues collected in advance for the period of intended support. Revenue Easter Seals receives a substantial portion of its revenue from grants and contracts from government agencies. Easter Seals recognizes contract revenue (up to the contract ceiling) from its contracts to the extent of expenses. Grants require the fulfillment of certain conditions as set forth in the instrument of the grant. Failure to fulfill the conditions could result in the return of funds to grantors. Functional Expense Allocations The allocation of functional expenses has been performed using historical relationships and estimates developed by management. Tax Status Easter Seals is a not-for-profit voluntary health and welfare agency, exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code. Easter Seals has been classified as an organization that is not a private foundation and has been designated as a publicly supported organization. Use of Estimates The preparation of financial statements in conformity with auditing standards generally accepted in the United States requires management to make estimates and assumptions that affect the amounts reported in the financial statements and the related footnotes. Actual results could differ from those estimates. 9

12 NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Financial Instruments and Credit Risk Financial instruments, which potentially subject Easter Seals to concentration of credit risk, consist principally of temporary cash investments and money market funds. Easter Seals places its temporary cash and other investments with high-credit, quality financial institutions, which may exceed federally and privately insured amounts at times. Easter Seals does not believe that it is exposed to any significant credit risk on uninsured amounts. Subsequent Events Measurement Date Easter Seals monitored and evaluated any subsequent events for footnote disclosures or adjustments required in its financial statements for the fiscal year ended June 30, 2017 through November 14, 2017, the date on which financial statements were available to be issued. Reclassifications Certain reclassifications have been made to the June 30, 2016 financial statements to conform to the June 30, 2017 financial statement presentation. NOTE 2 ACCOUNTS RECEIVABLE Accounts receivable consist of the following at June 30,: Vocational receivables, less allowance for uncollectible accounts of $2,126 and $66,725 for the years ended $ 209,940 $ 456,979 June 30, 2017 and 2016, respectively Patient service receivables, less allowance for uncollectible accounts of $21,730 and $26,043 for the years ended 44,660 40,648 June 30, 2017 and 2016, respectively Grants and other receivables 177, ,400 $ 431,710 $ 747,027 NOTE 3 ENDOWMENT Easter Seals has adopted the provisions of the FASB Endowments of Not-for-Profit Centers: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Fund. Easter Seals endowment includes both donor-restricted endowment funds and funds designated by the Board of Directors to function as endowments. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. 10

13 NOTE 3 ENDOWMENT (CONTINUED) Easter Seals has interpreted the Connecticut Uniform Prudent Management of Institutional Funds Act ("CTUPMIFA") 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, Easter Seals 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 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 Board of Directors in a manner consistent with the standard of prudence prescribed by CTUPMIFA. In accordance with CTUPMIFA, Easter Seals considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: The duration and preservation of the fund The purposes of Easter Seals and the donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of Easter Seals The investment policies of Easter Seals Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the accompanying statements of financial position. Investment income or loss (including realized and unrealized gains and losses on investments, interest and dividends) is included in other income/(expenses) in the accompanying statements of activities. Endowment net asset composition by type of fund at June 30, 2017 and 2016 is as follows: 2017 Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ - $ - $ 937,454 $ 937,454 Board-designated endowment funds 3,774, ,774,375 Total funds $ 3,774,375 $ - $ 937,454 $ 4,711, Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ - $ - $ 937,454 $ 937,454 Board-designated endowment funds 3,337, ,337,216 Total funds $ 3,337,216 $ - $ 937,454 $ 4,274,670 11

14 NOTE 3 ENDOWMENT (CONTINUED) Changes in endowment net assets for the years ended June 30, 2017 and 2016 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, at July 1, 2015 $ 3,280,464 $ - $ 937,454 $ 4,217,918 Investment return: Interest and dividends 91,482 46, ,568 Management fees (20,848) (10,502) - (31,350) Realized and unrealized losses (32,896) (16,570) - (49,466) Total investment return 37,738 19,014-56,752 Released from restriction by Board 19,014 (19,014) - - Endowment net assets, at June 30, 2016 $ 3,337,216 $ - $ 937,454 $ 4,274,670 Investment return: Interest and dividends 110,380 31, ,387 Management fees (26,159) (7,349) - (33,508) Realized and unrealized gains 257,067 72, ,280 Total investment return 341,288 95, ,159 Released from restriction by Board 95,871 (95,871) - - Endowment net assets, at June 30, 2017 $ 3,774,375 $ - $ 937,454 $ 4,711,829 NOTE 4 INVENTORY Workshop and finished goods inventory consisted of the following: Finished goods $ 10,060 $ - Raw materials, subassembly and work in process - 22,650 Workshop inventories $ 10,060 $ 22,650 NOTE 5 RETIREMENT PLAN Easter Seals sponsors a defined contribution pension plan (the Plan) and a tax sheltered annuity plan (TSA). Both plans cover employees who have attained age twenty-one and have completed 1,000 hours of service on an annual basis. Under the provisions of the Plan, Easter Seals contributes a minimum of 2% of participants compensation on behalf of all employees. The TSA participants may contribute additional amounts up to 20% of their compensation with Easter Seals matching up to 3% of the employees compensation. Participants will be 100% vested at the end of five years of participation in the plans for contributions made by Easter Seals. Pension expense amounted to $115,853 and $111,684 for the years ended June 30, 2017 and 2016, respectively. 12

15 NOTE 6 INVESTMENTS The following represents fair value measurements of investments at June 30,: Fair Value Measurements at June 30, 2017 Level 1 Level 2 Level 3 Total Fixed income: Investment Grade Taxable $ 1,710,616 $ - $ - $ 1,710,616 1,710, ,710,616 Equities: - U.S. Large Cap 2,641, ,641,015 International Developed 99, ,168 Emerging Markets 183, ,734 2,923, ,923,917 Money Market 77, ,296 $ 4,711,829 $ - $ - $ 4,711,829 Fair Value Measurements at June 30, 2016 Level 1 Level 2 Level 3 Total Fixed income: Investment Grade Taxable $ 1,599,163 $ - $ - $ 1,599,163 1,599, ,599,163 Equities: - U.S. Large Cap 2,316, ,316,436 International Developed 84, ,864 Emerging Markets 158, ,535 2,559, ,559,835 Money Market 115, ,672 $ 4,274,670 $ - $ - $ 4,274,670 NOTE 7 LEASE COMMITMENTS Operating Leases Easter Seals entered into an agreement to lease space in East Hartford, Connecticut, which expires November 30, Future minimum lease payments are as follows, for the years ending June 30,: 2018 $ 75, , ,639 Rental Income Easter Seals leases space at its building located at 100 Deerfield Road, Windsor, Connecticut, to a third party. Estimated committed rental income from leases for the fiscal years ended June 30 is as follows: 2018 $ 112, , , , ,288 13

16 NOTE 8 MORTGAGE PAYABLE Mortgage payable consists of the following at June 30,: On June 30, 2016, Easter Seals executed a commercial real estate mortgage note with Webster Bank, N.A., secured by the property at 24 Stott Ave., Norwich, CT, in the amount of $541,500. The mortgage has an annual initial interest rate of 3.78%, subject to adjustment at the end of five years. The adjusted rate will be 2.5% above the Index Rate, which is the 5 Year Federal Home Loan Bank Classic Advance Rate in effect on the first date of the adjustment period commencing subsequent to the preceding sixty-month period. Unless paid sooner, all amounts owing under the Note shall be due and payable in full on June 30, $ 496,180 $ 541,500 Total mortgage payable $ 496,180 $ 541,500 Estimated maturities for the years ending June 30, and thereafter are as follows: NOTE 9 NATIONAL AFFILIATE 2018 $ 47, , , , ,682 Thereafter $ 241, ,180 Easter Seals is affiliated with Easter Seals, Inc. and pays annual dues, which is included in membership fees in the statement of functional expenses and amounted to $43,614 and $42,544 for the years ended June 30, 2017 and 2016, respectively. For the year ended June 30, 2016, Easter Seals also paid $12,901 related to rebranding implementation. Easter Seals is also the recipient of grant funding that is passed through Easter Seals, Inc. which amounted to $1,026,171 and $1,712,870 for the years ended June 30, 2017 and 2016, respectively, and is reported under grants from government agencies in the statements of activities and changes in net assets. Effective January 2017, this pass through grant funding for the SCSEP program has been discontinued. NOTE 10 CONCENTRATION OF REVENUES Of the total revenues and other support received by Easter Seals, approximately 14% and 22%, for the years ended June 30, 2017 and 2016 represents a grant from Easter Seals National whose source is from a federal agency. Approximately 31% and 32% represent grants from state agencies for the years ended June 30, 2017 and 2016, respectively. 14

17 NOTE 11 COMMITMENTS AND CONTINGENCIES Revenue under third party payer agreements is subject to audit and retroactive adjustment. Provisions for estimated third party settlements are provided in the period the related services are rendered. Differences between the estimated amounts accrued and interim and final settlements are reported in operations in the year of settlement. Management believes that the government reimbursement principles have been properly applied and that no material adjustments will occur as a result of an audit. Laws and regulations governing the Medicare and Medicaid programs are complex and subject to interpretation. Easter Seals believes that it is in compliance with all applicable laws and regulations and is not aware of any pending or threatened investigations involving allegations of potential wrongdoing. While no such regulatory inquiries are outstanding, compliance with such laws and regulations can be subject to future government review and interpretation as well as significant regulatory action including fines, penalties, and exclusion from the Medicare and Medicaid programs. During the fiscal year ended June 30, 2017, the Department of Social Services ( DSS ) conducted an audit of claimed services rendered under the Medicaid Waiver Program by Easter Seals for the period February 25, 2013 through February 24, Consequent to that audit, the Department determined an overpayment had occurred and following review and negotiation with Easter Seals, the amount of final disallowance was determined by DSS as $50,000. Easter Seals has established a liability account in that amount and has agreed to a recoupment plan over a period of 48 months which will deduct from Department of Developmental Services ( DDS ) monthly reimbursements the amount of $1, in month 1 (September 2017) and $1, per month thereafter (months 2-48). Per terms of the agreement, Easter Seals is permitted to arrange an alternative payment methodology, including voluntary supplemental payments over and above the monthly installments. NOTE 12 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets were restricted for the following purposes at June 30,: Veterans and Military Families Services $ 102,700 $ - Release of restrictions for the years ended June 30, 2017 and 2016 were the result of funds being spent for their donor restricted purpose. NOTE 13 IN KIND CONTRIBUTIONS An estimated value for contributed services, representing supervisors wages related to the SCSEP grant, is recorded as expenses, with corresponding revenue, under the following category for the years ended June 30,: Wages $ 139,766 $ 213,859 NOTE 14 SUBSEQUENT EVENT Effective July 10, 2017, Easter Seals changed its legal name from Easter Seals Capital Region & Eastern Connecticut, Inc. to Easterseals Capital Region & Eastern Connecticut, Inc. 15