FINANCIAL STATEMENTS

Transcription

1 Asheville Area Habitat for Humanity, Inc. Asheville, NC FINANCIAL STATEMENTS Year Ended June 30, 2015

2 Asheville, North Carolina Financial Statements Years Ended and Independent Auditors Report Board of Directors David Whilden President Robby Russell Vice President Tom Maher Treasurer Beth Robrecht Secretary Chris Cavanaugh Spencer Duin Lou Farquhar Scott Gillam Jacqueline Grant David Greiner James Hamling Skip Helms Rebecca Lawton Jane McNeil John Miles Philip J. Roth Gail Stashick Kirby Tyndall Tim Wrinn

3 Table of Contents Page Number Independent Auditors Report 1 2 Financial Statements Statements of Assets, Liabilities, and Net Assets Modified Cash Basis 3 Statements of Revenues, Expenses and Other Changes in Net Assets Modified Cash Basis 4 Statements of Changes in Net Assets Modified Cash Basis 5 Statements of Functional Expenses Modified Cash Basis 6 7 Notes to Financial Statements 8 25

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6 Asheville Area Habitat For Humanity, Inc. Statements of Assets, Liabilities, and Net Assets Modified Cash Basis June 30, Assets Cash and equivalents $ 1,287,797 $ 1,368,319 Restricted cash 643, ,824 Investments 365, ,904 Inventory 1,397,685 1,302,365 Construction in progress 495, ,290 Mortgages receivable 15,658,296 14,759,913 Property and equipment, net of depreciation 9,222,422 9,386,309 Other assets 64, ,359 Total assets $ 29,135,984 $ 27,971,283 Liabilities and Net Assets Funds held for others: Payroll liabilities $ 3,685 $ 4,584 Homeowners' escrow payable 198, ,553 Amounts held for other organizations 430,000 Refundable deposits Notes payable 7,748,959 7,835,463 Total liabilities 8,382,012 8,013,125 Net assets: Unrestricted 18,189,397 17,537,255 Temporarily restricted 110,044 7,710 Permanently restricted 2,454,531 2,413,193 Total net assets 20,753,972 19,958,158 Total liabilities and net assets $ 29,135,984 $ 27,971,283 The accompanying notes are an integral part of these financial statements. 3

7 Asheville Area Habitat For Humanity, Inc. Statements of Revenues, Expenses, and Other Changes in Net Assets Modified Cash Basis Years Ended June 30, Changes in unrestricted net assets: Public support, revenues and gains: Contributions $ 1,441,517 $ 1,203,867 Contributions Building A Way Home Capital Campaign 308,204 1,243,391 Sale of homes 1,794,771 1,742,250 Home Repair sales 37,893 80,658 Government grants 227, ,748 ReStore income, net of related expenses 542, ,378 Rents, net of related expenses 2,151 3,250 Investment income (loss) 2,613 3,274 Forgiven mortgage income 41,062 4,076 Other income 125,882 49,169 Total public support, revenues and gains 4,524,064 5,176,061 Net assets released from restrictions: Satisfaction of time restrictions 60, ,860 Total net assets released from restrictions 60, ,860 Total unrestricted public support,revenues and gains 4,584,438 5,294,921 Expenditures: Program services 3,297,190 3,202,120 Management and general 171, ,811 Fundraising 463, ,365 Total expenditures 3,932,296 3,826,296 Increase in unrestricted net assets 652,142 1,468,625 Changes in temporarily restricted net assets: Contributions 151,728 Endowment spendable income 10,980 7,710 Temporarily restricted income 162,708 7,710 Net assets released from restrictions: Satisfaction of time restrictions (60,374) (118,860) Total net assets released from restrictions (60,374) (118,860) Increase (decrease) in temporarily restricted net assets 102,334 (111,150) Changes in permanently restricted net assets: Rents, net of related expenses 50,448 45,721 Unrealized gains (losses) (9,110) 30,788 Increase in permanently restricted net assets 41,338 76,509 Increase (decrease) in net assets $ 795,814 $ 1,433,984 The accompanying notes are an integral part of these financial statements. 4

8 Asheville Area Habitat For Humanity, Inc. Statements of Changes in Net Assets Modified Cash Basis Years Ended Temporarily Permanently Unrestricted Restricted Restricted Total Net assets, June 30, 2013 $ 16,068,630 $ 118,860 $ 2,336,684 $ 18,524,174 Increase (decrease) in net assets 1,468,625 (111,150) 76,509 1,433,984 Net assets, June 30, ,537,255 7,710 2,413,193 19,958,158 Increase (decrease) in net assets 652, ,334 41, ,814 Net assets, June 30, 2015 $ 18,189,397 $ 110,044 $ 2,454,531 $ 20,753,972 The accompanying notes are an integral part of these financial statements. 5

9 Asheville Area Habitat For Humanity, Inc. Statement of Functional Expenses Modified Cash Basis Year Ended June 30, 2015 Supporting services Program Management Services and General Fundraising Totals Salaries and wages $ 645,008 $ 114,355 $ 286,694 $ 1,046,057 Payroll taxes 52,626 9,126 23,176 84,928 Employee benefits 116,011 20,877 45, ,712 Construction and repair of homes 1,804,262 1,804,262 Advertising and promotion 7,028 1,945 8,973 Supplies 21, ,214 23,432 Miscellaneous 27,697 11,989 10,592 50,278 Special events 8,483 1,082 26,348 35,913 Travel and entertainment 7, ,518 9,468 Grants to other organizations 98,000 98,000 Maintenance and repairs 28,987 1,102 8,702 38,791 Insurance 68,463 4,609 2,045 75,117 Interest expense 172, ,700 Dues and subscriptions 8, ,858 13,827 Taxes and licenses 4, ,372 Postage and printing 9, ,602 25,370 Professional fees 98, , ,627 Equipment rental 12, ,604 17,814 Staff development and training 9, ,013 11,658 Utilities 32,905 1,679 7,124 41,708 Vehicle expense 7,302 7,302 Depreciation expense 55,590 4,803 15,594 75,987 $ 3,297,190 $ 171,171 $ 463,935 $ 3,932,296 The accompanying notes are an integral part of these financial statements. 6

10 Asheville Area Habitat For Humanity, Inc. Statement of Functional Expenses Modified Cash Basis Year Ended June 30, 2014 Supporting services Program Management Services and General Fundraising Totals Salaries and wages $ 554,809 $ 125,270 $ 280,976 $ 961,055 Payroll taxes 44,916 9,832 22,503 77,251 Employee benefits 129,630 21,577 44, ,791 Construction and repair of homes 1,760,282 1,760,282 Advertising and promotion 6,351 2,629 8,980 Supplies 27, ,168 30,254 Miscellaneous 29,076 6,028 10,148 45,252 Other construction costs Special events 9, ,785 33,368 Travel and entertainment 6, ,638 Grants to other organizations 85,600 85,600 Maintenance and repairs 28,424 1,117 8,694 38,235 Insurance 58,565 (3,884) 4,198 58,879 Interest expense 235, ,858 Dues and subscriptions 7, ,514 11,997 Taxes and licenses 2, ,119 Postage and printing 7, ,815 24,345 Professional fees 103, , ,206 Equipment rental 10, ,279 14,064 Staff development and training 3, ,220 Utilities 27,539 1,622 6,884 36,045 Vehicle expense 3,998 3,998 Depreciation expense 57,966 6,005 16,796 80,767 $ 3,202,120 $ 168,811 $ 455,365 $ 3,826,296 The accompanying notes are an integral part of these financial statements. 7

11 Notes to Financial Statements Note A Summary of significant accounting policies: Nature of activities Asheville Area Habitat for Humanity, Inc. is a nonprofit ministry that fosters community by partnering with qualified families and individuals to build new houses and preserve existing homes. Its vision is to provide a safe and decent home for every family. The Organization has been building houses and changing lives in Buncombe County since The Organization receives its support principally through contributions, grants, and net proceeds from its Restore operations. Basis of accounting The accompanying financial statements have been prepared on the modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. Under that basis, certain revenue and the related assets are recognized when received rather than when earned and certain expenses are recognized when paid rather than when the obligations are incurred. The modifications to the cash basis of accounting are capitalization of property and equipment, construction in progress, non cash donations, undiscounted mortgages receivable on homes conveyed and the recording of long term debt obligations. Accordingly, the accompanying financial statements are not intended to present financial position and results of operations in accordance with generally accepted accounting principles. Estimates The preparation of financial statements requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and equivalents Cash consists of funds held in demand at banks. The Organization considers all highly liquid investments with maturities of three months or less to be cash equivalents. Cash and investment balances exceeded federally insured amounts by $546,810 and $549,311 as of June 30, 2015 and 2014, respectively. Restricted cash Restricted cash consists of amounts held in escrow to pay taxes and insurance for homeowners and amounts held for other organizations. 8

12 June 30, 2014 and 2013 Note A Summary of significant accounting policies continued: Investments Investments purchased by the Organization are initially recorded at their cost, and donated investments are recorded at fair value on the date they are received as a donation. Endowment investments are adjusted to fair values as of the date of the statement of assets and net assets. Unrealized gains and losses are included in the changes in net assets. Fair value measurement Fair value is the price that would be received to sell an asset or the price that would be paid to transfer a liability in an orderly transaction between market participants at the measurement date. Certain valuation techniques are used to measure fair value. There are three broad levels as follows: Level 1 (the highest level) inputs are based on quoted prices in active markets for identical assets or liabilities that the Organization has the ability to access at the measurement date. For example, securities traded in an active market, such as the New York Stock Exchange, are valued using Level 1 inputs. Level 2 inputs are observable inputs other than quoted prices, either directly or indirectly through corroboration with observable market data. If the asset or liability has a specified term, the Level 2 input must be observable for substantially the full term. Level 3 inputs are unobservable inputs for the asset or liability, meaning the inputs reflect the Organization s own assumptions about the assumptions market participants would use in pricing the asset or liability, including inputs related to risk, which have been developed based on the best information available in the circumstances. 9

13 Note A Summary of significant accounting policies continued: Promises to give Unconditional promises to give as of June 30 are as follows: Receivable in less than one year $ 139,848 $ 276,106 Receivable in one to five years 305,999 57,333 Total unconditional promises to give $ 445,847 $ 333,439 Promises to give are normally discounted to net present value for the time value of money for generally accepted accounting principles purposes. Property and equipment The Organization capitalizes all property and equipment with a cost, if purchased, or fair value, if donated, of $500 or more. Donations of property and equipment are recorded as support at their estimated fair value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor, and reclassifies temporarily restricted net assets to unrestricted net assets at that time. Property and equipment are depreciated using the straight line method over the assets' estimated useful lives, ranging from 5 to 40 years for leasehold improvements and buildings, 5 to 10 years for equipment and furniture, and 2 to 5 years for vehicles. Amounts held for other organizations The Organization enters in to some agency transactions in which an anonymous donor makes contributions that are for other Habitat affiliates but are held by Asheville Area Habitat for Humanity, Inc. until transferred on behalf of the anonymous donor. Asheville Area Habitat for Humanity, Inc. has no variance power with regard to these funds and is not financially interrelated to the specified beneficiaries. In accordance with FASB ASC , both the asset and the liability are measured at the fair value of the assets received from the donor. The total payable to other organizations as of is $430,000 and $ 0, respectively. 10

14 Note A Summary of significant accounting policies continued: Net assets Net assets are classified based on the existence or absence of donor imposed restrictions. The following is a description of each class: Unrestricted Unrestricted net assets include all net assets which are neither temporarily nor permanently restricted and are available for use in the performance of the activities of the Organization. If the Board of Directors specifies a purpose where none has been stated by the original donor, such funds are classified as designated, unrestricted funds. Temporarily restricted Temporarily restricted net assets include contributed net assets for which donor imposed time and purpose restrictions have not been met and the ultimate purpose of the contribution is not permanently restricted. Permanently restricted Permanently restricted net assets consist of contributions subject to donor imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of these assets would permit the Organization to use all or part of the income earned on the related investments for general or specific purposes. Contributions and grants Contributions and grants are recognized as received. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donor restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. 11

15 Note A Summary of significant accounting policies continued: Contributed services Contributed services are recognized if the services received (a) create or enhance long lived assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. Contributions of tangible assets are recognized at fair market value when received. Additionally, the Organization receives a significant amount of contributed time which does not meet the two recognition criteria described above. Accordingly, the value of this contributed time, an estimated 61,162 hours at a value of $1,313,153 for the year ended June 30, 2015 and 62,837 hours at a value of $1,322,099 for the year ended June 30, 2014, is not reflected in the accompanying financial statements. Sales tax The State of North Carolina imposes a sales tax of 7% on all of the Organization s ReStore sales to nonexempt customers. The Organization collects that sales tax from customers and remits the entire amount to the State. The Organization s accounting policy is to include the tax collected and remitted to the State in revenue and cost of sales. The Organization s revenue and cost of sales of the ReStore included $158,022 and $152,832 in sales tax collected and remitted for the years ended, respectively. Advertising The Organization uses advertising to promote its programs among the audiences it serves. The production costs of advertising are expensed as incurred. Advertising costs totaled $97,345 and $60,893 for the years ended, respectively. The amount paid by the Organization is included in Advertising and promotion and ReStore income, net of related expenses. Income taxes The Organization is tax exempt under Internal Revenue Code Section 501(c)(3) and, as such, is not subject to income taxes on net income from exempt purposes. It is the Organization s policy to evaluate all tax positions to identify any that may be considered uncertain. All identified material tax positions are assessed and measured by a more likely than not threshold to determine if the tax position is uncertain, and what, if any, effect the uncertain tax position may have on the financial statements. No material uncertain tax positions were identified for the tax years 2014 and

16 Note A Summary of significant accounting policies continued: Concentration of credit risk Financial instruments that potentially subject the Organization to credit risk consist of notes receivable that are secured by the residential property constructed with the proceeds. These notes receivable totaled $15,658,296 and $14,759,913 as of, respectively. Note B Mortgages receivable: All mortgage notes are receivable in monthly installments. In keeping with the stated purpose of the Organization, persons who purchase homes built by the Organization are not charged interest on their mortgage obligations. The implied market rate interest is considered to be a grant to the homeowner. Under the modified cash basis of accounting, the Organization does not accrue and expense this nonmonetary grant. Notes are amortized over various lives of between 20 and 30 years, and the notes are secured by the residential property sold to the homeowners. Mortgages receivable are considered past due if a payment has not been received by the 15 th of the month. A penalty or late fee of 4% of the monthly principal is assessed. The note holder is notified of the penalty by a past due letter. The total undiscounted amount of mortgages receivable was $15,658,296 and $14,759,913 as of, respectively. Net present value of mortgages receivable was $7,159,475 based on imputed interest rates ranging from 7.39% to 9.00% as of June 30, 2015 and $6,732,522, based on an imputed interest rates ranging from 7.39% to 9.00% as of June 30,

17 Note C Investments: Investments consisted of the following for the years ended June 30: Crosby Endowment Fund: Cost $ 315,641 $ 265,184 Distribution taken (21,570) (13,860) Unrealized gain (loss) 71,440 69,580 Fair value $ 365,511 $ 320,904 The Crosby Endowment Fund is managed by the Community Foundation of Western North Carolina (CFWNC). The investment and spending policies of CFWNC are the governing policies for the Crosby Endowment Fund. In setting its policies, CFWNC complies with the Uniform Prudent Management of Institutional Funds Act (UPMIFA), adopted by the State of North Carolina in April 2009, and FASB ASC The Organization relies on CFWNC for compliance with State law, and does not purport to report its endowment position or activity in compliance with FASB Had the Organization prepared the financial statements using generally accepted accounting principles, fair value of the investments above would be considered to have been valued using Level 3 inputs. Note D Inventory: The Organization operates a used furniture and appliance store. Most of the ReStore inventory is donated and is recorded as unrestricted contributions at fair value on the date of receipt. Inventory of such goods totaled $124,895 and $167,880 as of, respectively. Inventory also included developed and undeveloped lots held for future homes. The cost of acquiring and developing the lots was $1,272,790 and $1,134,485, which does not exceed net realizable value, as of, respectively. 14

18 Note D Inventory continued: The Organization listed for sale a certain parcel of land with a total carrying value of $15,000 as of. This land is included in the inventory amount shown above. The land listed for sale had not been sold as of the date of issuance of these financial statements. Note E Construction in progress: As homes are constructed, the corresponding amounts for direct materials and other costs are recorded as construction in progress. Construction in progress consisted of fourteen homes under construction at a cost of $495,754 as of June 30, 2015 and nineteen homes under construction at a cost of $525,290 as of June 30, Note F Property and equipment: Property and equipment consisted of the following as of June 30: Land $ 4,059,733 $ 4,059,733 Buildings 6,256,110 6,256,110 Store equipment 133, ,467 Office equipment 364, ,313 Deconstruction equipment 1,480 1,480 Jobsite equipment 104, ,005 Vehicles 286, ,265 Accumulated depreciation (1,983,223) (1,764,064) Net property and equipment $ 9,222,422 $ 9,386,309 Depreciation expense totaled $219,159 and $218,329 for the years ended June 30, 2015 and 2014, respectively. 15

19 Note G Other assets: Other assets consisted of the following as of June 30: Refundable deposits and escrows $ 29,719 $ 76,523 Cash surrender value of life insurance 21,398 25,580 Pre acquisition costs of land under contract 2,681 2,681 Deferred loan costs, net of amortization 10,774 9,575 Total other assets $ 64,572 $ 114,359 Note H Homeowners escrow payable: The homeowners escrow account consists of monies collected from homeowners in conjunction with the payment of mortgages receivable, which is retained by the Organization for the payment of homeowners insurance and property taxes when due. The balance payable was $198,843 and $172,553 as of, respectively. 16

20 Note I Notes payable: Notes payable are summarized as follows as of June 30: Note payable to Wells Fargo Bank, at an interest rate of 3.26%, due on September 24, 2016, with 53 monthly principal payments of $17,797 plus accrued unpaid interest and a principal balloon payment due on September 24, This note is secured by property and improvements thereon, with a carrying value of $7,106,004 as of June 30, $ $ 4,620,406 Note payable to First Bank, at an interest rate of 2.75%, due on August 13, 2021, with 53 monthly principal payments of $17,797 plus accrued unpaid interest and a principal balloon payment due on August 13, This note is secured by property and improvements thereon, with a carrying value of $6,944,056 as of June 30, ,718,994 Thirty eight notes payable to the North Carolina Housing Finance Agency, which run concurrently with homeowners first mortgages, each in the original note amount of $20,000, at interest rates of 0%, payable in monthly installments of $56, beginning on various dates from 7/1/2006 through 3/1/2009, secured by homeowners property. 565, ,053 Fifty four notes payable to the North Carolina Housing Finance Agency, which run concurrently with homeowners first mortgages, each in the original note amount of $25,000, at interest rates of 0%, payable in monthly installments of $69, beginning on various dates from 4/1/2009 through 09/06/2013, secured by homeowners property. 1,171,916 1,216,913 17

21 Note I Notes payable continued: Six notes payable to the North Carolina Housing Finance Agency, which run concurrently with homeowners first mortgages, each in the original note amount of $30,000, at interest rates of 0%, payable in monthly installments of $83, beginning on various dates from 2/12/2015 through 5/21/2015, secured by homeowners property. 178,750 Fourteen notes payable to the North Carolina Housing Finance Agency, which run concurrently with homeowners first mortgages, each in the original note amount of $40,000, at interest rates of 0%, payable in monthly installments of $111, beginning on various dates from 10/10/2013 through 11/13/2014, secured by homeowners property. 528, ,222 Note payable to Habitat for Humanity International, at an interest rate of 4.5%, payable in 28 quarterly installments of $46,225, beginning 3/31/2012, secured by pledged mortgages receivable with a total balance of $4,047,599 as of June 30, ,751 Note payable to Hometrust Bank, at an interest rate of 1.0%, due on January 6, 2015, with monthly interest payments beginning on February 6, 2014, secured by building lots for affordable single family housing units. 70,000 18

22 Note I Notes payable continued: Note payable to Buncombe County, at an interest rate of 2.0%, for the construction of 17 affordable single family homes. $15,000 of this liability will be passed through to each homeowner in the form of a second mortgage to be repaid only in the event that the home is resold to a family which does not meet Buncombe County s income guidelines for affordable housing. The balance per house of $5,588 plus accrued interest on the full $20,588 per house will be due and payable upon the sale of the house. The second mortgages will be used to reduce the Organization s mortgages receivable resulting from sales of the completed houses. 144,118 Note payable to Buncombe County, at an interest rate of 2.0%, for the construction of 24 affordable single family homes. $3,000 of this liability will be passed through to each homeowner in the form of a second mortgage to be repaid only in the event that the home is resold to a family which does not meet Buncombe County s income guidelines for affordable housing. The balance per house of $4,292 plus accrued interest on the full $7,292 per house will be due and payable upon the sale of the house. The second mortgages will be used to reduce the Organization s mortgages receivable resulting from sales of the completed houses. 131,250 Note payable to Buncombe County, at an interest rate of 2.0%, for the construction of 5 affordable single family homes. $5,000 of this liability will be passed through to each homeowner in the form of a fourth mortgage to be repaid only in the event that the home is resold to a family which does not meet Buncombe County s income guidelines for affordable housing. 5,000 19

23 Note I Notes payable continued: Note payable to Bank of North Carolina, at the current prime interest rate, due on June 18, 2018, with monthly interest payments beginning on July 18, 2015, secured by building lots for affordable single family housing units. 100,000 Note payable to TD Bank at an interest rate equal to 2.0% above the ICE LIBOR rate, due on April 10, 2018, with monthly interest payments beginning on May 10, 2015, secured by building lots for affordable single family housing units. 250,000 Note payable to Bank of North Carolina, at the current prime interest rate, due on January 20, 2017, with monthly interest payments beginning on February 20, 2014, secured by a single family house to be redeveloped for affordable housing. 100, ,000 Total notes payable $ 7,748,959 $ 7,835,463 Prime interest rate as of is 3.25%. The 3 month US Dollar ICE LIBOR rate as of June 30, 2015 is %. Maturities of notes payable are as follows: Year ending June 30: 2016 $ 471, , , , ,403 Thereafter 5,375,694 Total $ 7,748,959 20

24 Note I Notes payable continued: The notes payable to Habitat for Humanity International and TD Bank contain various covenants requiring the Organization to maintain a certain level of net assets and mortgage ownership and a minimum debt service coverage ratio. For the years ended June 30, 2015 and 2014, no violations of debt covenants were noted. Note J Restricted net assets: As of June 30, temporarily restricted net assets are available for the following purposes: Building of homes $ 10,980 $ 7,710 Home repair projects 99,064 Total temporarily restricted net assets $ 110,044 $ 7,710 Permanently restricted net assets were established in 2006, when the Organization received a contribution of rental property valued at $2.1 million, to establish an endowment fund. Under the terms of the contribution, the original property or the proceeds from sale of such property is permanently restricted, and a portion of the earnings on the property is permanently restricted and a portion is temporarily restricted until spent for the support of the Organization. As a condition of the gift, an endowment fund was established. The $5,000 used to establish the endowment fund is also permanently restricted. The endowment fund had income, net of expenses, in the amount of $52,318 and $84,219 for the years ended, respectively. A portion of the endowment income is spendable and is temporarily restricted until spent, according to the agreement between The Community Foundation of Western North Carolina, Inc. and the Organization. The endowment fund s spendable income is made available annually to the Organization and those amounts are determined under the spending policies of the Community Foundation of Western North Carolina, Inc. 21

25 Note K ReStore income: Proceeds from ReStore sales, net of operating expenses, are used to help cover administrative expenses, fundraising expenses, and for the construction of homes. Net income consists of the following for the years ended June 30: Revenue $ 2,505,084 $ 2,441,295 Less operating expenses 1,962,820 1,820,917 ReStore income, net of related expenses and depreciation $ 542,264 $ 620,378 Note L Net assets released from restriction: Net assets were released from donor restrictions by incurring expenses satisfying restricted purposes as follows: Building of homes $ 7,710 $ 118,860 Home repair projects 52,664 Total net assets released from restriction $ 60,374 $ 118,860 22

26 Note M Operating lease commitments: The Organization leases two parking lots under a non cancelable operating lease with a term of six months. This lease expires September 2015 and a replacement lease is currently in negotiation with the same tenants. The following is a schedule by years of the future minimum rentals under the leases in effect: Year ending June 30: 2016 $ 11,721 Rental income from these leases and the costs of operating the rental property for the years ended June 30 is as follows: Gross rents $ 59,801 $ 57,035 Less cost of operations 12,022 10,810 Rents, net of related expenses $ 47,779 $ 46,225 The Organization also leases a copier and two printers from Great American Leasing Corporation for monthly payments in the amount of $569 for a period of 60 months. The lease expires July The following is a schedule by years of future minimum rental payments: Year ending June 30: 2016 $ 569 Operating lease expense was $6,833 for the years ended. 23

27 Note N Retirement plan: The Organization has a defined contribution retirement plan covering substantially all employees. Employees are eligible to participate in the plan after six months of service and reaching age 21. Employees become 100% vested after five years of service. Contributions provided to the plan for the year ended June 30, 2015 were $244,369, which consisted of $81,647 from the Organization and $162,722 from employees. Contributions provided to the plan for the year ended June 30, 2014 were $198,110, which consisted of $95,448 from the Organization and $122,662 from employees. The amount paid by the Organization is included in Employee benefits. Note O Line of credit: The Organization established a line of credit in the amount of $100,000 with Wells Fargo Bank in May This facility is secured by the Organization s inventory, accounts, equipment and intangibles and carries a variable interest rate of the lender s prime rate plus 1%. The original maturity date was May As of June 30, 2014, there was no outstanding balance on the line. The line of credit was closed in August Note P Commitments and contingencies: Contingent receivable When the Organization sells a home, the difference between the cost of the home and its appraised value is recorded as a second mortgage by the Organization. The second mortgage is amortized and forgiven over the life of the original first mortgage. If the home is sold by its owner before the first mortgage is satisfied, the seller is required to pay to the Organization any remaining balance on the second mortgage. The value of this contingent receivable totaled $3,572,643 and $3,610,027 as of, respectively. No provision for this contingency has been made in these financial statements, because the potential receipts from these second mortgages cannot be reasonably estimated. Risk management The Organization is exposed to various risks of loss related to torts; theft of, damage to and destruction of assets; errors and omissions; injuries to employees; and natural disasters. The Organization carries commercial insurance coverage for all risks of loss. Claims have not exceeded coverage in any of the previous three years. 24

28 Note Q Related party transactions: The Organization has four bank accounts with a financial institution, of which a Board member is an officer. The balances totaled $734,823 and $232,019 as of, respectively. Additionally, the same financial institution provides processing services for the Organization s mortgages receivable. The fair value of those services, which is recorded as a contribution in kind, totaled $56,024 and $52,856 for the years ended, respectively. A paid employee of the Organization has an outstanding mortgage balance with the Organization. The mortgage was entered into in August 2003 for a 25 year term in the amount of $97,900, with monthly payments of $273. The total payments made were $3,274 and $3,274 for the years ended, respectively. Note R Subsequent events: The Organization has other evaluated events that have occurred after June 30, 2015 and prior to September 9, 2015 (the date of issuance) for potential recognition or disclosure in the financial statements. On July 23, 2015, the Organization purchased a parcel of undeveloped land in Buncombe County for the purpose of developing affordable housing. The cost of the parcel was $375,000 of which $275,000 was seller financed with an interest only loan for three years at an interest rate of prime plus 0%. 25