Rochester Area Habitat for Humanity Rochester, Minnesota. Financial Statements June 30, 2011 and 2010

Transcription

1 Rochester Area Habitat for Humanity Rochester, Minnesota Financial Statements June 30, 2011 and 2010

2 Rochester Area Habitat for Humanity Table of Contents Independent Auditor's Report 1 Financial Statements Statements of Financial Position 2 Statements of Activities and Changes in Net Assets 3-4 Statements of Cash Flows 5-6 Statements of Functional Expenses 7-10 Notes to Financial Statements 11

3 Independent Auditor's Report On the Financial Statements To the Board of Directors Rochester Area Habitat for Humanity Rochester, MN We have audited the accompanying statements of financial position of Rochester Area Habitat for Humanity as of June 30, 2011 and 2010, and the related statements of activities, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally excepted 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 of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinions. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Rochester Area Habitat for Humanity as of June 30, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. Wolter & Raak, Ltd. December 1,

4 Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENTS OF FINANCIAL POSITION As of June 30, 2011 and 2010 ASSETS Cash and cash equivalents $ 83,859 $ 37,980 Construction in process 238, ,883 Accounts receivable - 1,169 Promises to give 27,438 13,339 Prepaid expenses 23,616 31,046 Mortgages receivable, net 1,583,098 1,538,407 Deposits 2,533 2,533 Interest in gift annuity 38,693 29,771 Leasehold improvements and equipment, net of accumulated depreciation 4,660 8,440 Total Assets $ 2,002,869 $ 1,810,568 LIABILITIES AND NET ASSETS Liabilities: Accounts payable $ 35,668 $ 38,123 Line of credit 64,915 40,000 Accrued interest payable - 1,741 Payroll taxes withheld and accrued 4,592 5,152 Long-term debt, net 684, ,122 Total Liabilities 789, ,138 Net Assets: Unrestricted 1,083, ,079 Temporarily restricted 129,709 30,351 Total Net Assets 1,212, ,430 Total Liabilities and Net Assets $ 2,002,869 $ 1,810,568 2 See accountant's report and accompanying notes to the financial statement.

5 Support and Revenues Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended June 30, 2011 Unrestricted Temporarily Restricted Totals Support: Contributions and Grants: Cash $ 395,263 $ - $ 395,263 In-Kind 33,668-33,668 Fund raising events and merchandise sales 42,931 91, ,946 - Revenues: - Transfer to homeowners 258, ,500 Mortgage discount amortization 109, ,691 Interest income Gain in value of gift annuity - 8,923 8,923 Other income 2,717-2,717 Total Support and Revenues $ 843,447 $ 99,938 $ 943,385 Net Assets Released from Restriction 580 (580) - Total Support and Revenues 844,027 99, ,385 Expenses Program Services: Construction 434, ,757 Home finance 191, ,632 Supporting Services: - Management and general 42,590-42,590 Fundraising 37,851-37,851 Total Expenses 706, ,830 Change in Net Assets 137,197 99, ,555 Net Assets, beginning of the year 946,079 30, ,430 Net Assets, end of the year $ 1,083,276 $ 129,709 $ 1,212,985 3 See accountant's report and accompanying notes to the financial statement.

6 Support and Revenues Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended June 30, 2010 Unrestricted Temporarily Restricted Totals Support: Contributions and Grants: Cash $ 463,595 $ 27,275 $ 490,870 In-Kind 72,760-72,760 Fund raising events and merchandise sales 54,424-54,424 Revenues: Transfer to homeowners 399, ,300 Mortgage discount amortization 86,765-86,765 Interest income Loss in value of gift annuity - 4,488 4,488 Other income Total Support and Revenues $ 1,077,515 $ 31,763 $ 1,109,278 Net Assets Released from Restriction 32,078 (32,078) - Total Support and Revenues 1,109,593 (315) 1,109,278 Expenses Program Services: Construction 588, ,877 Home finance 270, ,524 Supporting Services: Management and general 36,073-36,073 Fundraising 42,400-42,400 Total Expenses 937, ,874 Change in Net Assets 171,719 (315) 171,404 Net Assets, beginning of the year 774,360 30, ,026 Net Assets, end of the year $ 946,079 $ 30,351 $ 976,430 4 See accountant's report and accompanying notes to the financial statement.

7 Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2011 and Cash Flows From Operating Activities: Cash received from contributions $ 414,832 $ 499,507 Cash received from fund raising events and merchandise sales 133,946 54,424 Cash payments received on mortgages receivable & homeowners payments 178, ,347 Interest received Other income 2, Cash paid to employees (167,132) (159,854) Cash paid to suppliers (443,492) (410,154) Interest paid (18,480) (23,987) Net Cash Provided by Operating Activities 101, ,955 Cash Flows From Investing Activities: Purchase of Equipment and Building (1,340) - Net Cash Provided (Used) By Financing Activities (1,340) - Cash Flows From Financing Activities: Repayments of note payable (32,224) (83,500) Proceeds from line of credit 57,139 20,000 Payments on long-term debt (79,179) (75,957) Net Cash Provided (Used) By Financing Activities (54,264) (139,457) Net Increase In Cash 45,879 23,498 Cash and Cash Equivalents, beginning of the year 37,980 14,482 Cash and Cash Equivalents, end of the year $ 83,859 $ 37,980 5 See accountant's report and accompanying notes to the financial statement.

8 Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENTS OF CASH FLOWS For the Years Ended June 30, 2011 and 2010 Reconciliation of Increase in Net Assets To Cash Operating Activities Cash Flows From Operating Activities: Change in Net Assets $ 236,555 $ 171,404 Adjustments required to reconcile change in net assets To net cash provided by operating activities: Depreciation 5,120 7,404 Gift annuity (8,923) (4,488) Contributions of equipment and software - (3,409) Imputed interest on long-term debt 14,767 14,456 Discount on long-term debt - - Transfers to homeowners (258,500) (399,300) Collections of mortgages receivable 178, ,374 Amortization of imputed interest on mortgages receivable (109,691) (86,792) Imputed discounts on mortgages receivable 145, ,861 Change in construction in process (91,089) 67,710 (Increase) Decrease In: Accounts receivable 1, Promises to give (14,099) 8,637 Prepaid expenses 7, Increase (Decrease) In: Accounts payable (2,455) (40,422) Accrued interest payable (1,741) - Payroll taxes withheld and accrued (560) 891 Net Cash Provided By (Used In) Operating Activities $ 101,483 $ 162,955 6 See accountant's report and accompanying notes to the financial statement.

9 Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENT OF FUNCTIONAL EXPENSES Year Ended June 30, 2011 Program Services Construction Home Finance Total Construction materials and supplies $ 233,326 $ - $ 233,326 Discounts on mortgages receivable - 145, ,085 Interest - 31,505 31,505 Salaries and wages 136, ,589 Subcontracted Services 2,825-2,825 Payroll taxes 10,307-10,307 Employee benefits 10,038-10,038 Rent 17,589-17,589 Printing Postage Direct mail services Direct costs of special events Supplies Telephone 3,334-3,334 Bank and loan processing fees - 9,323 9,323 Insurance 7,258-7,258 Accounting and auditing fees Legal fees Travel and reimbursements 3,727-3,727 Dues Training Volunteers 5,566-5,566 Tithe - 5,436 5,436 Miscellaneous Total expenses before depreciation 430, , ,191 Depreciation 4,198-4,198 Total Expenses $ 434,757 $ 191,632 $ 626,389 7 See accountant's report and accompanying notes to the financial statement.

10 Support Services Management and General Fundraising Total Totals $ - $ - $ - $ 233, , ,505 9,994 19,989 29, ,572-1,895 1,895 4, ,508 2,262 12, ,469 2,204 12,242 1,287 2,574 3,861 21, ,872 1,872 1,872-2,034 2,034 2,034-4,316 4,316 4,316 6,022-6,022 6, ,429 4, , ,560 6,875-6,875 6, ,048 1,824-1,824 1,824 4,851-4,851 4, , ,436 8,576-8,576 8,586 42,283 37,236 79, , ,120 42,590 $ 37,851 $ 80,441 $ 706,830 8 See accountant's report and accompanying notes to the financial statement.

11 Rochester Area Habitat for Humanity Rochester, Minnesota STATEMENT OF FUNCTIONAL EXPENSES Year Ended June 30, 2010 Program Services Construction Home Finance Total Construction materials and supplies $ 388,796 $ - $ 388,796 Discounts on mortgages receivable - 223, ,861 Interest - 38,443 38,443 Salaries and wages 131, ,080 Subcontracted Services 3,525-3,525 Payroll taxes 9,180-9,180 Employee benefits 7,004-7,004 Rent 16,236-16,236 Printing Postage Direct mail services Direct costs of special events Supplies Telephone 3,503-3,503 Bank and loan processing fees - 7,612 7,612 Insurance 7,106-7,106 Accounting and auditing fees Legal fees Travel and reimbursements 4,876-4,876 Dues Training Volunteers 5,029-5,029 Tithe 6,471-6,471 Miscellaneous Total expenses before depreciation 582, , ,330 Depreciation 6,071-6,071 Total Expenses $ 588,877 $ 270,524 $ 859,401 9 See accountant's report and accompanying notes to the financial statement.

12 Support Services Management and General Fundraising Total Totals $ - $ - $ - $ 388, , ,443 9,591 19,183 28, ,854-1,760 1,760 5, ,343 2,015 11, ,025 1,538 8,542 1,188 2,376 3,564 19,800-3,442 3,442 3, ,698 2,720 2,720-1,074 1,074 1,074-7,583 7,583 7,583 4, ,543 4, ,501 5, , ,402 5,585-5,585 5, ,342 1,601-1,601 1,601 6,047-6,047 6, , ,471 4,621-4,621 4,621 35,629 41,511 77, , ,333 7,404 36,073 $ 42,400 $ 78,473 $ 937, See accountant's report and accompanying notes to the financial statement.

13 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities Net Assets Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 Rochester Area Habitat for Humanity ("Organization") seeks to eliminate poverty housing from the region through the construction and rehabilitation of simple, decent, and affordable homes, built in partnership with working families. The goal is to eliminate cycles of generational poverty by providing responsible, costeffective homeownership opportunities, along with comprehensive homeownership education programs. It is a volunteer-driven organization, supported by a small, dedicated staff. The Organization is an IRS nonprofit corporation, organized under the laws of the state of Minnesota, that is supported by individuals, businesses, places of worship, and other local community and civic organizations. It is an affiliate in good standing of Habitat for Humanity International, and participates in the global housing ministry of Habitat for Humanity through tithing a portion of its local revenue in support of international home construction. Unrestricted net assets are those funds presently available for use by or on behalf of the Organization including amounts available for general and administrative expenses. These unrestricted net assets may also include board designated funds. Temporarily restricted net assets are contributions that have donor-imposed stipulations that can be fulfilled by certain actions of the Organization. These are primarily contributions that are restricted for the acquisition of property and equipment and residential support. When the donor restriction is accomplished, these temporarily restricted assets are reclassified to unrestricted and reported on the statement of activities as assets released from restrictions. If the restriction is met in the period the related revenue is recognized, the amounts are reported within the unrestricted activity. Permanently restricted net assets are contributions that have donor imposed restrictions whereby the amount of the gift is to be held in perpetuity. These are referred to as endowment funds. Income derived from such funds is to be used for operating expenses of the Organization. Contributions The Organization records contributions as revenue when it has been determined that there is a legal right to the contribution. Contributions which will be received over a period exceeding one year are recorded at fair value, i.e., present value of estimated future cash flows. Donated materials are reported at the fair market value on the date of the gift. No amounts have been reflected in the statements for donated services. However, a substantial number of volunteers have donated time to the Organization. 11

14 NOTE 1. CONT. Transfers to Homeowners Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 Transfers to homeowners represent the revenues realized from the sale of the constructed homes, and are recorded at the gross mortgage amount. Non-interest bearing mortgages issued during the fiscal year have been fully discounted based upon prevailing market rates for low income housing at the inception of the mortgage. This amount is noted as "Discounts on Mortgages Receivable" on the Organization's Statement of Functional Expenses. The discounts on the mortgages are recognized as interest income over the term of the mortgage. As the cumulative discounts on all homes previously constructed by the Organization gradually reduce as mortgage payments are made, this amount is recognized as Mortgage Discount Amortization revenue on the Organization s Statement of Activities and Changes in Net Assets, utilizing the effective interest method. Donated Services and Materials The Organization receives a significant amount of volunteer time in the fulfillment of its program activities and supporting activities. Contributions of time that do not require a specialized skill are not included in these financial statements. The contributions of services that require specialized skills, are provided by individuals possessing those skills, and are services that the Organization would normally purchase if not contributed are reflected in the statement of activities at their fair market value. Donated materials are reflected as contributions at their fair market value at the date of donation if the donated materials are usable in program and supporting services. Property and Equipment Property and equipment are recorded at cost or at estimated fair market value at the date of donation, less accumulated depreciation. Donations of equipment are reported as unrestricted revenue unless the donor has restricted the use of the donated equipment. The Organization generally capitalizes all expenditures for equipment in excess of $500. Depreciation is provided using the straight-line method over estimated lives ranging from five to twelve years. Tax Status The Organization is exempt from federal and state income taxes as a public charity under Section 501 (c)(3) of the Internal Revenue Code; therefore, no provision for income taxes has been made in these financial statements. Management is not aware of any uncertain tax positions. There is no material unrelated income for the year ended June 30, In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under Section 509(a)(2). The Organization files federal exempt income tax returns (Form 990). The Organization is no longer subject to Federal Tax examinations for the years before 2008 and State examinations for the years before

15 NOTE 1. CONT. Cash and Cash Equivalents For financial statement purposes, the Organization considers all highly liquid investments with maturity of three months or less when purchased to be cash equivalents. Mortgage Receivable Mortgage receivable consists of non-interest bearing mortgages that are secured by real estate located in Southeastern Minnesota and payable in monthly installments over the life of the loan. Mortgages are carried at their current present value. Mortgages Receivable Delinquency Policy Mortgages of up to 90 days past due receive numerous written and verbal correspondence from the Organization. At 90 days, if no workout or payment plan has been established and agreed upon with the homeowner, the mortgagor will be declared to be in default, which initiates the foreclosure process in accordance with Minnesota state law. The Organization will make every effort to bring the mortgagor back on track with payment schedules. Foreclosure is the least desirable outcome and will only be used when all negotiation and attempts of settlement have occurred and failed. Gift Annuity Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 The Organization has been named as the beneficiary of an annuity agreement entered into between an idiid individual and dhbi Habitat for Humanity International. lthe Organization i records its interest in this annuity agreement at the current market value of the related assets less the estimated liability for the actuarially determined present value of payments to be made to the designated beneficiaries. The value of the gift annuity is considered temporarily restricted since the amount is not available until the termination of the annuity agreement. Use of Estimates in the Preparation of Financial Statements The preparation of financial statements in accordance with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Functional Expenses The cost of providing the Organization's various program and supporting services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated between the program and supporting services benefited by the expenditure. Directly identifiable expenses are charged to programs and supporting services. 13

16 NOTE 1. CONT. Fair Value of Financial Instruments Accounts Receivable Accumulated Unpaid Vacation and Sick Time Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 The Organization's financial instruments, none of which are held for trading purposes, include cash and cash equivalents and mortgages receivable. For cash and cash equivalents the carrying amount approximates fair value because of the short maturities of those instruments. For mortgages receivable the carrying amount approximates fair value because they have already been discounted using an imputed interest rate set at the date of the mortgage origination. The rates used for computing imputed interest do not vary significantly from market rates. Accounts receivable are stated at the amount management expects to collect from balances outstanding at yearend. The Organization does not estimate a reserve for bad debts, as write-off have been historically small and the amounts involved are believed to be not material. The Organization does not currently have a policy to place receivables in nonaccrual status. Accounts in excess of 30 days are not considered past due. The Organization has no nonmortgage loans held for sale, interest-only strips, loans or other receivables, or retained interest in securitizations. Vacation and paid sick leave are recognized as an expense when paid and not accrued as earned. The unrecorded liability, if any, is not considered material in relation to the financial statements of the Organization. Subsequent Events In preparing these financial statements, the Organization has evaluated events and transactions for potential recognition or disclosure through December 1, 2011, the date the financial statements were available to be issued. NOTE 2. PROMISES TO GIVE As of June 30, 2011 and 2010 promises to give represents amounts due from United Way of Olmsted County, IBM Employees Charitable Contribution Campaign, and the ReStore Capital Campaign. These promises to give have not been discounted and are expected to be received in less than one year. The Organization does not estimate a reserve for uncollectible promises to give, as write-offs have historically been small and the amounts involved are believed not to be material. In 2011, the Organization began the leadership phase of a capital campaign to start up a Habitat ReStore used building supply store. The ReStore will accept donations of used building supplies from individuals and contractors, and the goods will be sold to consumers at 10-50% of new retail prices. The ReStore will provide an ongoing means of diverting used building supplies from the waste stream, while providing a highly affordable home supply outlet for the community. Net proceeds of ReStore operations will be used to support the Organization's mission. 14

17 Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 NOTE 3. MORTGAGES RECEIVABLE AND CONCENTRATIONS OF CREDIT RISK The Organization constructs and sells homes to individuals under non-interest bearing mortgages. The individuals are required to make mortgage payments for periods ranging from 20 to 25 years. All of the mortgages receivable are secured by the homes sold. All of the Organization's mortgages are used to finance the purchase of homes in Rochester and the surrounding area. The ability of the borrowers to repay the mortgages is partially dependent upon the economic strength of the area. For financial reporting purposes, these mortgages used imputed interest rates ranging from 5.25% to 8.06%. This rate is provided by Habitat for Humanity International and is based upon an average of the monthly IRS Low Income Housing Credit Annual Discount Rates. Interest is recognized for financial reporting as the mortgages mature. Generally, the homes have a fair market value at the date of sale that exceeds the contract sales price making them a secured creditor, thus, management feels no provision for loan losses is required. In consideration for receiving a bargain purchase price and receiving a non-interest bearing mortgage, the purchasers are restricted in their ability to mortgage or sell the home. The Organization generally has the option to repurchase the home or receive a portion of the realized gain from the sale of the home during a portion of the mortgage period. The following schedule summarizes the payment status of the mortgage loan balances as of June 30: NUMBER COST NUMBER COST Current 49 $ 2,725, $ 2,620, days past due 1 37, , days past due 1 25, days past due Discount representing imputed interest (1,206,202) (1,170,808) Mortgages receivable, net 51 $ 1,583, $ 1,538,407 NOTE 4. PROPERTY AND EQUIPMENT The composition of property, equipment, and accumulated depreciation as of June 30, 2011 and 2010 is as follows: Equipment and software $ 40,451 $ 39,111 Vehicles 7,000 7,000 Total Before Depreciation 47,451 46,111 Accumulated depreciation (42,791) (37,671) Total Property and Equipment $ 4,660 $ 8,440 15

18 Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 NOTE 5. LINE OF CREDIT, NOTES PAYABLE, LONG-TERM DEBT AND PLEDGED ASSETS The Organization has the following Lines of Credit at separate financial institutions: $150,000 Revolving Line of Credit due on December 25, Bank advances on the credit line are payable on demand and have an interest rate of.5% over prime, which has a floor of 4.75% and a ceiling of 21.75%. $ 64,915 $ 40,000 Total Line of Credit $ 64,915 $ 40,000 The Organization borrows funds from a local bank. The interest rate is variable with the initial rate at 7.5%. The rate can be adjusted on March 1, 2012 and every 60 months thereafter. The note matures March 15, The initial principle amount of the loan was $250,000 and the organization has borrowed $176,321 under this loan agreement. The loan is secured by mortgages receivable with outstanding balances of $254,320. The Organization has borrowed funds from Habitat For Humanity of Minnesota for the funding of home construction. The loan is secured by mortgages receivable with outstanding balances of $607,471. Several of the borrowings from Habitat For Humanity of Minnesota were made under non-interest bearing promissory notes. These non-interest bearing notes have been discounted using an imputed rate of 3%. 16

19 Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 NOTE 5. CONT. Long-term debt as of June 30, 2011 and 2010 is as follows: 3% promissory note payable in monthly installments of $ 250, including principle and interest, due June, % promissory note payable in monthly installments of $ 240, including principle and interest, due June, % promissory note payable in monthly installments of $ 604, including principle and interest, due June, 2020 Variable interest rate note payable to bank, (currently 7.5%) due in monthly installments of $2,983, including principle and interest, due March 15, 2017 Non-interest bearing promissory note, due December 2017 Non-interest bearing promissory note, due December 2017 Non-interest bearing promissory note, due March 2020 Non-interest bearing promissory note, due in varying monthly installments $ 18,920 $ 21,313 18,744 21,025 55,790 61, , ,321 7,461 7,461 7,163 7,163 16,218 16, , ,077 Total Long Term Debt Before Discounts $ 762,678 $ 841,857 Discount recognized on non-interest bearing promissory notes (77,969) (92,735) Long Term Debt After Discount $ 684,709 $ 749,122 Maturities of long-term debt are as follows: Year Ending June $ 69, , , , ,867 Thereafter 380,342 Total $ 762,678 17

20 NOTE 6. SECOND MORTGAGES Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 In order to retain the value of the cumulative community investment of volunteer labor and resources into constructed homes, the Organization may execute nonrecourse, nonperforming second mortgages for homes sold. The principal amount of these mortgages is the difference between the bargain sale price of the home to the homeowner and the true market value of the home, as determined by a qualified appraisal at the time of sale. The second mortgage has the effect of making the gift of equity, made possible by community volunteer service, over time instead of immediately upon the original sale to homeowner. The principal balance of second mortgages remains constant for the first seven years of its existence, then begins to self-forgive in equal monthly installments starting in year 8. If the homeowner is determined to be in default of their first mortgage, or notifies Organization of their intent to sell their home, payment on the balance of the second mortgage becomes due. Therefore, the amount is not recorded in the financial statements. At June 30, 2011 the second mortgages held by the Organization was $184,700. NOTE 7. RESTRICTED NET ASSETS AND NET ASSETS RELEASED FROM RESTRICTION During the year ended June 30, 2011, the Organization received grants which required that the grant proceeds be used for the construction of specific homes. Temporarily restricted net assets are available for the following purposes: Gift annuity 38,693 29,771 Stewartville Build, net- see below Rochester ReStore 91,015 - Total $ 129,708 $ 30,351 The Organization recognized an other-than-temporary (gain) or loss on its gift annuity. The amounts for 2011 and 2010 are as follows: Gift annuity $ (8,923) $ (4,488) A designated home build is a partnership with individuals, churches, businesses, and organizations within communities to build homes specifically in those communities. Construction costs of this home are intended to be paid from funds raised within the community. Therefore, funds raised in conjunction with these builds are temporarily restricted, to ensure that they are spent specifically on these projects. The following accounts for both income and expenses for the year ended June 30, 2011 and 2010, the net included in temporarily restricted net assets Stewartville Income $ 27,275 Expenses (26,695) Net $

21 NOTE 8. DONATED SERVICES, MATERIALS AND EQUIPMENT Statement of Activity Construction Construction materials and supplies $ 32,206 $ 67,005 Fundraising Direct Cost of Fundraising Events 712 2,121 Home finance Legal fees ,668 69,351 Statement of Financial Position Equipment - 3,409 Totals $ 33,668 $ 72,760 NOTE 9. OPERATING LEASE Rochester Area Habitat for Humanity NOTES TO THE FINANCIAL STATEMENTS For the Year Ended June 30, 2011 During the years ended June 30, 2011 and 2010 the Organization received donated services, materials and equipment valued at $33,668 and $72,760, respectively. These amounts are included in the financial statements as follows: The Organization leases its current office space under a lease that commenced January 1, 2008 and expires February 28, The base rental cost is $1,650 per month. Rent expense for the years ended d June 30, 2011 and 2010 were $21,450 and $19,800, respectively. Minimum annual payments under this lease agreement for the year ended June 30 is as follows: Year Ending Amount 2012 $ 19, ,200 19