United Cerebral Palsy Associations of New York State, Inc. (d/b/a Cerebral Palsy Associations of New York State) and Affiliates

Transcription

1 United Cerebral Palsy Associations of New York State, Inc. (d/b/a Cerebral Palsy Associations of New York State) and Affiliates Consolidated Financial Statements Year Ended June 30, 2017 The report accompanying these financial statements was issued by, BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company llmited by guarantee.

2 (d/b/a Cerebral Palsy Associations of New York State) and Affiliates Consolidated Financial Statements Year Ended June 30, 2017

3 Contents Independent Auditor's Report 3-4 Consolidated Financial Statements: Statement of Financial Position as of June 30, 2017 Statement of Activities for the Year Ended June 30, 2017 Statement of Functional Expenses for the Year Ended June 30, 2017 Statement of Cash Flows for the Year Ended June 30,

4 IBDO Tel: Fax: Park Avenue New York, NY Independent Auditor's Report The Board of Directors United Cerebral Palsy Associations of New York State, Inc. (d/b/a Cerebral Palsy Associations of New York State) and Affiliates New York, New York We have audited the accompanying consolidated financial statements of United Cerebral Palsy Associations of New York State, Inc. (d/b/a Cerebral Palsy Associations of New York State) and Affiliates ("CP of NYS and Affiliates"), which comprise the consolidated statement of financial position as of June 30, 2017, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. BOO USA, LLP, a Delaware limited liability partnership, is the lj.s. member of BOO International Limited, a UK company limited by guarantee, and forms part of the international BOO network of independent member firms, BOO is the brand name for the BOO network and for each of the BOO Member Firms. 3

5 BDO Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of United Cerebral Palsy Associations of New York State, Inc. as of June 30, 2017, and the results of their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited United Cerebral Palsy Associations of New York State, Inc. (d/b/a Cerebral Palsy Associations of New York State) and Affiliates' 2016 consolidated financial statements and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated November 18, 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 consolidated financial statements from which it has been derived. November 16,

6 June 30, Assets (Note 12(c)) Consolidated Statement of Financial Position (with comparative totals for 2016) Current: Cash and cash equivalents (Note 3) Investments, at fair value (Notes 3, 4 and 9) Assets whose use is limited - current (Notes 3 and 4) Accounts receivable, net (Notes 3 and 5) Amounts held for the benefit of residents (Note 3) Prepaid expenses and other assets Loan receivable from related party, net (Note 6) Total Current Assets Assets Whose Use is Limited (Notes 3 and 4) Fixed Assets, Net (Notes 3, 7, 8 and 9) Liabilities and Net Assets Current Liabilities: Accounts payable and accrued expenses (Note 12(b)) Accrued payroll and related benefits Amounts held for the benefit of residents (Note 3) Deferred revenue (Note 3) Due to governmental agencies (Note 3) Line of credit (Note 12) Current portion of mortgages and notes payable (Note 8) Current portion of bonds payable, net of unamortized issuance costs of $136,612 and $50,864 for 2017 and 2016, respectively (Note 9) Total Current Liabilities Deferred Revenue (Note 3) Mortgages and Notes Payable, Less Current Maturities (Note 8) Bonds Payable, Less Current Maturities, Net of Unamortized Issuance Costs of $2,611,407 and $62, 121 for 2017 and 2016, Respectively (Note 9) Total Liabilities Commitments and Contingencies (Notes 7, 9, 11 and 12) Net Assets (Note 3 ): Unrestricted 2017 s 1,931,698 31,078,819 2,493,908 15,693,553 1,276,353 1,056,580 3, 174, ,705,899 4,442, , 164,944 $102,313,042 s 1,614,442 11,457,623 1,276, ,412 1,266,227 4,600, , ,989 22,291,912 5, 118,420 48, 133,438 75,543, ,769,272 $102,313, s 2,692,498 3,962,201 15,756,032 1,055, ,833 3, 119,401 27,495,470 3,051,694 31,654,592 $62,201, 756 s 2,745,829 9,737,983 1,055,505 2,456, , ,200 1,012,877 18, 136,742 83,372 2,383,314 17,009,290 37,612,718 24,589,038 $62,201, 756 See accompanying notes to consolidated financial statements. 5

7 Consolidated Statement of Activities (with comparative totals for 2016) Year ended June 30, (Unrestricted) Program Revenue: Medicaid fees Affiliate services and conference Grants and fees Other program income Total Program Revenue Expenses: Program services: Residential services Day services Clinic services Affiliate services and conference Balancing Incentive Program Grant Transportation ALPHA expenses Total Program Services Supporting services: Management and general Total Expenses Change in Net Assets Before Support and Nonoperating Revenue $131,928,351 1,834,379 2,785,930 6, 165, ,714, ,090,816 21, 121,958 6,883,241 2,221,588 1,678, , ,378,645 8,754, , 132,757 (5,418,539) $109,632,014 1,679,387 4,812, 189 8,237, ,360,732 85,865,687 16,216,426 8,312,362 2,422,490 2, 136, ,768 1,499, ,367, 163 6,971, ,338,325 22,407 Support and Nonoperating Revenue: Contributions Investment loss Interest income Gain on sale of property Donated property Other nonoperating income Total Support and Nonoperating Revenue Change in Net Assets Net Assets, Beginning of Year Net Assets, End of Year 11, ,411 2,745,308 4,600,000 7,598,773 2, 180,234 24,589,038 $ 26,769,272 28,359 (57,012) 77,543 53, , ,888 24,464, 150 s 24,589,038 See accompanying notes to consolidated financial statements. 6

8 Year ended June 30, Salorl.,. and frln1e llenef!u SalorleS Empio;'ff benefits and payrdl taxes Totol Salari"' and fr1nae lleneflts Other(_,,..., Supplle" laundry and h<><.l>cl<eepi'lll "'"'""" Recreation, '~ clothiog nd '"""mer camp [ea,., and rer.tal equipment Travel <:o'"'""'"~ Travel -other '"- Utllitie> Faa~ty a..essments "''""" Offl<:e "'JIPlJes, postage and ;hipping Corif<!rences, conventions and rneetlog Repairs and maintenance lnsoran<e Ctmultant fees Profes..jOMlfees LO&S and def"""' cost incurred MlsceUa"" "' Bad debt"""" ' C~ent transportation coots allocated to Prl?lt"'m' Total 1<p<1n.., &efore Depredatkx! and Amortization Depredation and Amorti>atloo ~ United Cerebral Palsy Associations of New York State, Inc. Consolidated Statement of Functional Expenses (with comparative totals for 2016) Suppornng ProgramSeMces ~ Tota\ Affiliate llatar.cmg Residential Se vk.,.and Incentive Total Program Management SeMC"' 0.yServic:es Cli<llcSeM<e Conference P"'<!ramGrant Transpt!tahon and General ,.. S SS,716, 147 s 8.600,604 $2,421,195 $1,016, ,231 s 5,(198,937 s ll,338,433 $4,067,819 $ 77,406,252 64,428,371 s 25,'!0a,501 28,127, ,648 12,411,538 3,383,579 1,218,583 5%,441 6,961,849 1(l6,206,638 5,265, ,472,5?2 92,556,257 l,594,212 1,568,104 1,171, ,267 10, ,639 6,716,924 1,245,'\4) 7,962,467 5,418,997 2,605, ,567 19,865 11,162 2,752,734 2,733,922 5,231 4,360 ' '".. 2,753,230 2,036,156 m 2,744,241 1,497 2,745,738 2,426, ,831 14,622 5,11J 493,712 2,%0 496,672 49(1, , , ,57J ll,231 m ~ 21, ,271 29'i, , ,( , ,924 4,567 1,350,647 1,6%,211 15,036 1,711,247 1, ,980 26,716 9,764 "" 48,014 65,21>4 " 23, ,008 12,131 5Z6,tl9 455,( , ,910 17'1,510 5, ,640 )12,351 1,n8, , , ,680 "'.~' 35,238 1,498,9()6 1,498, ,432 l,810,934 %2, , ,210 1,862,912 32,868,205 1,198,065 34,066,270 1,456,642 'i-05,31:!5 58,699 32,883 14,249 2,092 59,5'\4 1,456,642 6n, ,810 1,456, ,672 1,001, ,114 19B,B77 50,592 14, 159 l0,826 15,608 13, ,167 54, , ,745 89,571 27,890 20,956 23S,60l 105,757 12, , , , ,441 l,961, , ,716 25, ,489 57,244 3,915,48l ll2,l21 4,247,804 J,5%.688 1,511,260 1n,m 190,213 B,810 1, ,723 2,195,050 38,412 2,233,462 1, ,130!24, , , , , ,362 12, ,277 96, ,717 1,431, ,958 2,055, 134 3,497,071 1,433, , , ,325 23,030 56, ,370, ,41M 1,494, , , , ,000 4,100,520 4,887,041 18,987,563) 105, 115,584 20,803,207 6,695,587 2,216,587 1,678, ,840 1,975, , ,654 5,001 ~ Zl1,470 $107,090,816 $21,121,958 $6,883,241 Sl $\,678, ,670,471 8,612, ,283, ,710,976 2,708, , ,403 2, $139,378,645 $8,754,112 $ , ,338,325 Se,. occompanyiny notes to consolfdated fioondal statements.

9 Consolidated Statement of Cash Flows (with comparative totals for 2016) Year ended June 30, Cash Flows From Operating Activities: Change in net assets $ 2, 180,234 s 124,888 Adjustments to reconcile change in net assets to net cash used in operating activities: Depreciation and amortization 2,849,403 2,627,349 Interest income (242,411) (77,543) Gain on sale of property (2, 745,308) Donated property (4,600,000) Provision for bad debt 300,000 (Increase) decrease in: Accounts receivable 62,479 (1,064,834) Amounts held for the benefit of residents (220,848) (34, 739) Prepaid expenses and other assets (146, 747) 128,038 Increase (decrease) in: Accounts payable and accrued expenses (1, 131,387) (109,880) Accrued payroll and related benefits 1,719, ,514 Amounts held for the benefit of residents 220,848 34,739 Deferred revenue (2,066, 161) (919,331) Due to ~overnmental agencies 787,080 (5, 128, 190) Total Adjustments (5,213,412) (3,710,877) Net Cash Used In Operating Activities (3,033, 178) (3,585, 989) Cash Flows From Investing Activities: Purchases of fixed assets (5,066,290) (8,332,877) Disposal of fixed assets 51,843 4,745,275 Sales of investments 2,079,470 Loan receivable (355,587) (3,119,401) Purchases of investments (30,836,408) Assets whose use is limited (1,390,505) (128,453) Net Cash Used In Investing Activities (37,596,947) (4,755,986) Cash Flows From Financing Activities: Bond escrow fund 1,468, ,775 Proceeds from line of credit 23,271,549 Repayment on line of credit (18,671,549) Proceeds from mortgages and notes payable 3,439, 166 2,288, 162 Principal payments on mortgages and notes payable (716,395) (551,286) Proceeds from bonds payable 32, 168,981 Principal payments on bonds payable (1,090, 720) (1,619,249) Net Cash Provided By Financing Activities 39,869, ,402 Net Decrease in Cash and Cash Equivalents (760,800) (7,407,573) Cash and Cash Equivalents, Beginning of Year 2,692,498 10, 100,071 Cash and Cash Equivalents, End of Year $ 1,931,698 s 2,692,498 Supplemental Disclosure of Cash Flow Information: Cash paid for interest during the year $ 1,204, 186 s 802,489 See accompanying notes to consolidated financial statements. 8

10 1. Principles of Consolidation The accompanying consolidated financial statements include the accounts of United Cerebral Palsy Associations of New York State, Inc. (d/b/a Cerebral Palsy Associations of New York State) ("CP of NYS"), Cerebral Palsy Transport, Inc. ("CPT") and ALPHA Comp, Inc. ("ALPHA") (collectively, "CP of NYS and Affiliates"), which are related by certain common members of the Board of Directors and identical management. The accompanying consolidated financial statements of CP of NYS and Affiliates include their residential services, day services, clinic, transportation, management and general and other programs. All intercompany balances and transactions have been eliminated in consolidation. 2. Nature of Organizations (a) CP of NYS is a not-for-profit voluntary agency which serves as a statewide medium through which assistance is provided to its local affiliates in various counties of New York State. CP of NYS addresses the needs of developmentally-disabled individuals and their families by providing, promoting and assisting in the establishment of residential, education, training, treatment and rehabilitation facilities throughout the State. (b) CPT is a New York state not-for-profit corporation that was established to provide motor vehicle transportation to persons with disabilities served by CP of NYS. CP of NYS is the sole corporate member of CPT. Consistent with the foregoing, its specific purpose is to support the activities of CP of NYS. CPT maintains certain common board members with CP of NYS. (c) ALPHA was incorporated under the laws of the State of Montana on January 16, 2014 and began operations on January 1, ALPHA provides deductible buy-down workers' compensation insurance for CP of NYS. The policy indemnifies the insured for workers' compensation claims up to $250,000, with an aggregate liability limit of $1,700,000. ALPHA was dissolved effective December 31, The remaining assets and liabilities were transferred to CP of NYS. (d) CP of NYS transferred clinic operations to the Metro Community Health Centers, Inc. ("Metro") a separate 501 (c)(3) corporation which received approval to operate as a Federally Qualified Health Center ("FQHC") during fiscal year The operation will provide clinical services as a subrecipient of Sunset Park Health Council. (e) CP of NYS entered into an agreement with Catholic Charities Neighborhood Services Inc. ("CCNS") to change the auspices of CCNS's Residential Homes and Day Habilitation programs. In accordance with the change in auspices, CP of NYS assumed 19 properties relating to the aforementioned programs. 3. Summary of Significant Accounting Policies (a) Basis of Presentation The consolidated financial statements of CP of NYS and Affiliates have been prepared on the accrual basis. In the statement of financial position, assets and liabilities are presented in order of liquidity or conversion to cash and their maturity resulting in the use of cash, respectively. (b) Financial Statement Presentation The classification of a not-for-profit organization's net assets and its support, revenue and expenses is based on the existence or absence of donor-imposed restrictions. It requires that the amounts for each of three classes of net assets, permanently restricted, temporarily restricted, and 9

11 unrestricted, be displayed in a consolidated statement of financial position and that the amounts of change in each of those classes of net assets be displayed in a consolidated statement of activities. Income from investment gains and losses, including unrealized gains and losses, dividends, interest and other investments should be reported as increases (or decreases) in unrestricted net assets unless the use of the income received is limited by donor-imposed restrictions. These classes are defined as follows: (i) (ii) (iii) (c) Permanently Restricted - Net assets resulting from inflows of assets whose use by CP of NYS and Affiliates are limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of CP of NYS and Affiliates. Temporarily Restricted - Net assets resulting from contributions and other inflows of assets whose use by CP of NYS and affiliates is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of CP of NYS and Affiliates pursuant to those stipulations. When such stipulations end or are fulfilled, such temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities. Unrestricted - The part of net assets that is neither permanently nor temporarily restricted by donor-imposed stipulations. Cash and Cash Equivalents Cash equivalents include short-term, highly liquid investments with maturities of three months or less at the time of purchase. (d) Investments at Fair Value Investments are valued at fair value in the consolidated statement of financial position and consist of mutual funds and equity securities. Realized and unrealized gains and losses are included in the consolidated statement of activities. (e) Assets Held for the Benefit of Residents Assets held for the benefit of residents consist of cash deposits held by CP of NYS on behalf of its residents for the residents' personal use. There is a corresponding liability included in the consolidated statement of financial position. (f) Assets Whose Use is Limited Assets whose use is limited are comprised of cash held for Cigna medical expenses and Flex Spending on behalf of CP of NYS's employees in the amount of $739,894. It also consists of a debt service reserve fund held by a bank, to be applied towards the last payment on a bond (Note 9), in the amount of $692,924. At June 30, 2017, $1,759,598 of assets whose use is limited represents a reserve for future workers' compensation obligation and other disbursements. In February 2014, CP of NYS obtained financing of facility revenue bonds through the Dormitory Authority of the State of New York ("DASNY") for the renovation of facilities located in Queens, New York and Staten Island in the amount of $7,245,544 (see Note 9). There is a balance in the bond escrow fund in the amount of $2,493,908, which will be used for the completion of the construction of these sites. 10

12 In May 2017, CP of NYS entered into a tax certificate agreement with DASNY in connection with the issuance of a revenue bond totaling $34,590,000 for acquisition of the property located at Rector Street in New York, NY and repayment of a loan in connection with the property located at Java Street in Brooklyn, New York. There is a balance in the debt service reserve fund in the amount of $1, 152,283. In July 2012, CP of NYS acquired 13 units of ownership of Management Services Solutions, LLC for $97,500. (g) Fixed Assets Fixed assets are stated at cost. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the lease term or the estimated useful lives of the related assets. Buildings and leasehold improvements Computer equipment Equipment Vehicles Land improvements Years (h) Impairment of Fixed Assets CP of NYS and Affiliates review fixed assets for impairment whenever events or changes in business circumstances indicate that the carrying amount of an asset may not be fully recoverable. An impairment loss would be recognized when the future cash flows from the use of the asset are less than the carrying amount of that asset. As of June 30, 2017, there have been no such losses. (i) Contributions and Grants Contributions and grants, including unconditional promises to give that are expected to be collected within one year, are recognized as revenues in the period earned and are either classified as temporarily restricted or unrestricted. Conditional contributions, including conditional promises to give, are not recognized until they become unconditional, that is, when the conditions on which they depend are substantially met. Contributed property is recognized at fair value. (j) Third-Party Reimbursements and Revenue Recognition CP of NYS and Affiliates receive substantially all of their revenue for services provided to approved clients from third-party reimbursement agencies; primarily the Office for People With Developmental Disabilities ("OPWDD") and the Department of Health. These revenues are based on predetermined rates based on cost reimbursement principles and are subject to audit and retroactive adjustment by the respective third-party fiscal intermediary. Revenue is recognized as earned from third parties and when received or pledged for contributions, special events and fundraising activities. (k) Provision for Doubtful Accounts Doubtful accounts are written off as they are deemed by management to be uncollectible. All accounts receivable, as stated in the consolidated financial statements, are deemed by CP of NYS's management to be fully collectible. 11

13 (I) Deferred Revenue Deferred revenue represents amounts received from OPWDD for advances under grants that are applicable to future periods. (m) Due to Governmental Agencies Due to governmental agencies consists of advances by funding sources to be recouped. The balance at June 30, 2017 amounted to $1,266,227 and is payable through the year (n) In-Kind Services and Materials Contributions of services are recognized when they are received if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, and are provided by individuals possessing those skills, and would typically need to be purchased if not donated. A number of volunteers have donated time to CP of NYS. A dollar valuation of their effort is not reflected in the consolidated financial statements since it does not meet the criteria for recognition. (o) Use of Estimates The preparation of the consolidated financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates (p) Allocation Methodology The cost of providing the various programs and other activities has been summarized on a functional basis in the consolidated statement of activities. Accordingly, certain costs have been allocated to the programs and supporting services benefited. (q) Income Taxes CP of NYS and Affiliates were incorporated in the State of New York and are exempt from Federal and state income taxes under Section 501 (c)(3) of the Internal Revenue Code (the "Code") and therefore have made no provision for income taxes in the accompanying consolidated financial statements. CP of NYS and Affiliates have been determined by the Internal Revenue Service ("IRS") not to be "private foundations" within the meaning of Section 509(a) of the Code. There was no unrelated business income for CP of NYS and Affiliates adopted the provisions of Accounting Standards Codification ("ASC") 740, "Income Taxes," on January 1, Under ASC 740, an organization must recognize the tax benefit associated with tax positions taken for tax return purposes when it is more likely than not that the position will be sustained upon examination by a taxing authority. The implementation of ASC 740 had no impact on CP of NYS and Affiliates' consolidated financial statements. CP of NYS and Affiliates do not believe they have taken any material uncertain tax positions and, accordingly, they have not recorded any liability for unrecognized tax benefits. CP of NYS and Affiliates have filed for and received income tax exemptions in the jurisdictions where they are required to do so. Additionally, CP of NYS and Affiliates have filed IRS Form 990 information returns, as required, and all other applicable returns in jurisdictions where so required. For the year ended June 30, 2017, there were no interest or penalties recorded or included in the consolidated statement of activities. CP of NYS and Affiliates are subject to routine audits by a taxing authority. As of June 30, 2017, CP of NYS and Affiliates were not subject to any examination by a taxing authority. Management believes it is no longer subject to income tax examination for the years prior to (r) Recent Authoritative Guidance Not Yet Adopted 12

14 (i) Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954)- Presentation of Financial Statements of Not-for-Profit Entities In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update ("ASU") , "Not-for-Profit Entities (Topic 958) and Health Care Entities (Topic 954) - Presentation of Financial Statements of Not-for-Profit Entities." The ASU amends the current reporting model for nonprofit organizations and enhances their required disclosures. The major changes include: (a) requiring the presentation of only two classes of net assets now entitled "net assets without donor restrictions" and "net assets with donor restrictions", (b) modifying the presentation of underwater endowment funds and related disclosures, (c) requiring the use of the placed in service approach to recognize the expirations of restrictions on gifts used to acquire or construct long-lived assets absent explicit donor stipulations otherwise, (d) requiring that all nonprofits present an analysis of expenses by function and nature in either the statement of activities, a separate statement, or in the notes and disclose a summary of the allocation methods used to allocate costs, (e) requiring the disclosure of quantitative and qualitative information regarding liquidity and availability of resources, (f) presenting investment return net of external and direct expenses, and (g) modifying other financial statement reporting requirements and disclosures intended to increase the usefulness of nonprofit financial statements. The ASU is effective for CP of NYS's consolidated financial statements for fiscal years beginning after December 15, Early adoption is permitted. The provisions of the ASU must be applied on a retrospective basis for all years presented although certain optional practical expedients are available for periods prior to adoption. Management is currently evaluating the impact of this ASU on its consolidated financial statements. (ii) Leases (Topic 842) In February 2016, the FASB issued ASU , "Leases (Topic 842)," to increase transparency and comparability among organizations by recognizing lease assets and lease liabilities on the statement of financial position and disclosing key information about leasing arrangements for lessees and lessors. The new standard applies a right-of-use ("ROU") model that requires, for all leases with a lease term of more than 12 months, an asset representing its right to use the underlying asset for the lease term and a liability to make lease payments to be recorded. The ASU is effective for CP of NYS's fiscal years beginning after December 15, 2019 with early adoption permitted. Management is currently evaluating the impact of this ASU on its consolidated financial statements. (iii) Revenue From Contracts with Customers (Topic 606) In May 2014, the FASB issued ASU , "Revenue from Contracts with Customers (Topic 606)," which is a comprehensive new revenue recognition standard that will supersede existing revenue recognition guidance. The core principle of the guidance is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects to be entitled in exchange for those goods or services. The FASB also issued ASU , which deferred the effective date for the entity until annual periods beginning after December 15, This ASU is effective for fiscal year June 30, Earlier adoption is permitted subject to certain limitations. The amendments in this update are required to be applied retrospectively to each prior reporting period presented or with the cumulative effect being recognized at the date of initial application. Management is currently evaluating the impact of this ASU on its consolidated financial statements. 13

15 (s) Reclassifications Certain prior year amounts were reclassified to conform to the current year financial statement presentation. 4. Investments, at Fair Value ASC 820, "Fair Value Measurement," establishes a hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that inputs that are most observable be used when available. Observable inputs are inputs that market participants operating within the same marketplace as CP of NYS would use in pricing CP of NYS's asset or liability based on independently derived and objectively determinable market data. Unobservable inputs are inputs that can not be sourced from a broad active market in which assets or liabilities identical or similar to those of CP of NYS are traded. CP of NYS estimates the price of any assets for which there are only unobservable inputs by using assumptions that market participants that have investments in the same or similar assets would use as determined by the money managers administering each investment based on best information available in the circumstances. The input hierarchy is broken down into three levels based on the degree to which the exit price is independently observable or determinable as follows: Level 1 - Valuation based on quoted market prices in active markets for identical assets or liabilities. Since valuations are based on quoted prices that are readily and regularly available in an active market, valuation of these products does not entail a significant degree of judgment. Examples include equity securities and publicly-traded mutual funds that are actively traded on a major exchange or over-the-counter market. Level 2 - Valuation based on quoted market prices of investments that are not actively traded or for which certain significant inputs are not observable, either directly or indirectly, such as municipal bonds. The fair value of municipal bonds is estimated using recently executed transactions, bid/asked prices and pricing models that factor in, where applicable, interest rates, bond spreads and volatility. Level 3 - Valuation based on inputs that are unobservable and reflect management's best estimate of what market participants would use as fair value. Examples include limited partnerships and private equity investments. CP of NYS's holdings consist principally of equity securities, U.S. Treasury obligations, and fixed income carried at their aggregate market value that is determined by quoted market prices. Each of these investments can be liquidated daily. The valuation is based on Level 1 and Level 2 inputs within the hierarchy used in measuring fair value. There were no transfers between levels during the year end June 30,

16 Below sets forth tables of assets measured at fair value as of June 30, 2017: Assets U.S. Treasury bills Fair Value Measurement at Report Date Using Quoted Prices Significant Significant in Active Other Other Markets for Observable Unobservable Identical Assets Inputs Inputs (level 1) (level 2) (Level 3) $31,078,819 $ $- $31,078,819 $- $- Balance as of June 30, 2017 $31,078,819 $31,078,819 Assets Whose Use is Limited Cash and cash equivalents U.S. Treasury obligations Equity securities Fixed income Fair Value Measurement at Report Date Using Quoted Prices Significant Significant in Active Other Other Markets for Observable Unobservable Identical Assets Inputs Inputs (level 1) (level 2) (Level 3) $1,584,446 2,493,908 1,105,821 $5,184,175 $ 502, 149 $502, 149 $- s- Balance as of June 30, 2017 $1,584,446 2,493,908 1, 105, , 149 $5,686,324 June 30, 2017 U.S. Treasury bills Cash and cash equivalents U.S. Treasury obligations Equity securities Fixed income Cost $30,859,244 1,584,446 2,493,908 1,088, , 150 Fair Value $30,859,244 1,584,446 2,493,908 1, 105, ,

17 5. Accounts Receivable The accounts receivable balance of $15,693,553 at June 30, 2017 consists of the following: June 30, 2017 Individualized Residential Alternative Day Habilitation Grants receivable Intermediate Care Facilities FQHC Clinic Other accounts receivable Due from CCNS s 5,393,520 1,517, ,287 4,964,060 1,412, , , ,735 $15,693, Related Party Transactions CP of NYS and Metro entered into a loan agreement in which CP of NYS will loan funds to Metro to establish the FQHC and other cost associated with providing clinical services. As. of June 30, 2017, $3,174,988, net of allowance of $300,000, was due to CP of NYS. 7. Fixed Assets, Net Fixed assets, net consist of the following: June 30, 2017 Land Buildings Leasehold improvements Computer equipment Equipment Vehicles Land improvements Less: Accumulated depreciation and amortization Construction-in-progress Fixed assets, net s 7,640, ,071,698 10,546, ,943 3, 108,527 3,045, ,344 54, 186,646 (19,999,524) 34,187,122 6,977,822 s 41,164,944 The estimated cost to complete construction-in-progress is $7,598,044. Land includes $587,500 associated with the acquisition of property in the Bronx for the development of a 14-unit independent living project approved by the U.S. Department of Housing and Urban Development ("HUD") under Section 811, Supportive Housing for Persons With Disabilities Program. As of the date of the consolidated financial statements, no capital advances have been received from HUD. 16

18 Depreciation and amortization expense amounted to $2,849,403 for the year ended June 30, Mortgages and Notes Payable Mortgages and notes payable consist of the following: Mortgage payable to a bank, due September 15, 2018, payable in monthly installments of $967, including interest at 5.30%; secured by property located in Staten Island, New York Mortgage payable to a bank, due December 1, 2031, payable in monthly installments of $7,933, including interest at 3.228%; secured by property located in Brooklyn, New Yori< Mortgage payable to a bank, due December 1, 2031, payable in monthly installments of $7,038, including interest at 3.228%; secured by property located in Brooklyn, New York Mortgage payable to a bank, due December 1, 2031, payable in monthly installments of $6,009, including interest at 3.228%; secured by property located in Brooklyn, New York Various notes payable for vehicle and equipment financing due at various dates, payable at various monthly installments, including interest from 4.58% to 5. 70% with maturities through December 22, 2020; secured by related vehicles and equipment Various notes payable for vehicle financing, due at various dates, payable at various monthly installments, including interest ranging from 3.65% to 3.81% with maturities through July 21, 2018; secured by related vehicles Mortgage payable to a bank, due April 1, 2036, payable in monthly installments of $2,631, including interest at 4.45%; secured by property located in Queens, New York Mortgage payable to a bank, due April 1, 2036, payable in monthly installments of $42,720, including interest at 4.45%; secured by properly located in Staten Island, New York various notes payable for vehicle financing, due at various dates, payable at various monthly installments with maturities through January 26, 2021, secured by related vehicles Less: Current maturities Total $ 27,382 1, 139,286 1,003, , , , , , ,034 5,755,286 (636,866) $5, 118,420 Mortgages and notes payable mature as follows: Year ending June 30, Thereafter Total $ 636, , , ,714 62,206 4,215,524 $5,755,286 17

19 9. Bonds Payable CP of NYS obtained financing of facility revenue bonds through OPWDD (issuer) and DASNY (issuer) due at various dates for the acquisition and renovation of certain residences for use in its programs. In May 2017 CP of NYS entered into a tax certificate agreement with DASNY in connection with issuance of a revenue bond totaling $34,590,000 for acquisition of the property located at Rector Street in New York, NY and repayment of a loan in connection with the property located at Java Street in Brooklyn, New York. The net proceeds from the bonds, amounting to $31,078,819, are included in investments in the consolidated statement of financial position at June 30, 2017 as the real estate closing did not take place as of June 30, The real estate closing for the purchase of the property will be scheduled after the completion of contractual construction work by the sponsor. Based on the current construction timeline, the property transfer transaction will be completed in the second quarter of fiscal year The bonds, which require semi-annual principal and interest payments, bear interest at the following rates and are secured by the following real estate. The total amount outstanding on bonds payable at June 30, 2017 amounted to $48,133,438. Bond payable, due February 15, 2019, payable in semi-annual debt service and administration fee payments ranging from $69,275 to $75,510, including interest at 6.42% per annum; secured by real estate located in Bayside, New York Bond payable, due February 15, 2019, payable in semi-annual debt service and administration fee payments ranging from $58,750 to $89,719, including interest at 6.42% per annum; secured by real estate located in Staten Island, New York Bond payable, due August 15, 2020, payable in semi-annual debt service and administration fee payments ranging from $52,828 to $68,582, including interest at 5.89% per annum; secured by real estate located in Staten Island, New York Bond payable, due February 15, 2019, payable in semi-annual debt service and administration fee payments ranging from $79,028 to $86,781, including interest at 6.42% per annum; secured by real estate located in Jamaica, New York Bonds payable, due September 1, 2038, payable in semi-annual debt service and administration fees payments ranging from $93,553 to $689,349, including interest rates ranging from 4% to 5% per annum; secured by pledged revenues Bond payable, due September 1, 2024, payable in semi-annual debt service and administration fee payments ranging from $6,602 to $13, 141, including interest at 3.01% per annum; secured by pledged revenues Bond payable, due January 1, 2034, payable in semi annual debt service and administration fee payments ranging from $18,315 to $36,559, including interest at 3.68% per annum; secured by pledged revenues Bond payable, due September 1, 2050, payable in quarterly debt service, including interest ranging from 4.87%-5.37% per annum; secured by related property Less: Unamortized issuance cost Less: Current maturities Unamortized issuance costs, current portion Total $ 425, , , ,539 9,887, ,270 5,419, , 915,000 51,846,446 (2,746,019) 49, 100,427 (1, 101,601) 134,612 $48, 133,438 18

20 The provisions of these related agreements require CP of NYS to maintain specified performance ratios. At June 30, 2017, management represents that all debt covenant requirements under these agreements were met. The maturities of the bonds payable are as follows: Year ending June 30, Thereafter Total s 1,101,601 1, 155, , , ,041 46,832,025 $51,846, New York State Elks Association Major Projects, Inc. The New York State Elks Association Major Projects, Inc. (the "Association") provides funds for home service directors' salaries to various CP of NYS's affiliates within the State of New York. Annually, the Association will designate amounts to be given to each affiliate. These amounts totaled $456, 700 for the fiscal year ended June 30, CP of NYS functions as the intermediary and distributes such designated monies as directed by the Association. 11. Operating Leases CP of NYS and Affiliates lease apartments, office space and equipment under various operating leases through June 30, Rent expense under such leases amounted to $7,629,003 for the year ended June 30, CP of NYS and Affiliates have additional leases which are cancellable after the current-year lease term. Future minimum lease payments under these obligations are as follows: Year ending June 30, Thereafter s 6,566,321 5,986,782 3,726,067 3,463,580 3, 126,247 61,236,849 19

21 12. Commitments and Contingencies (a) CP of NYS had a noncontributory pension plan covering all eligible employees who have met a one-year service requirement. Vesting was defined to be 20% after two years of service and 20% a year thereafter until fully vested. CP of NYS contributed 5% of annual payroll, as defined. The Board of Directors of CP of NYS voted to adopt a plan amendment to freeze all future contributions effective July 1, As of July 1, 2009, CP of NYS sponsored a 403(b) tax-deferred annuity plan covering all eligible employees who have met one year of service. CP of NYS can make a discretionary contribution which becomes 100% vested after six years. Contribution expense for the year ended June 30, 2017 amounted to approximately $66,000. CP of NYS is obligated to make contributions to a pension plan maintained by a union (Local 1199), on behalf of its members. CP of NYS contributes % of the gross salary of the union employees as per the union agreement. Such union pension expense for the year ended June 30, 2017 amounted to approximately $3,888,000. (b) CP of NYS maintains an involuntary severance plan for its employees. Benefit payments in the event of involuntary termination, other than for cause, are equal to one week's pay for each year of service to a maximum of four weeks. The post-employment benefit liability in accrued payroll and related benefits is approximately $145,500 as of June 30, (c) CP of NYS has a line of credit for $10,000,000 with a bank which expires on February 28, Interest at June 30, 2017 was 3.55% and the line is secured by general assets. As of June 30, 2017, there was a balance of $4,600,000 outstanding on the line of credit. As part of the line of credit, CP of NYS entered into an irrevocable letter of credit amounting to $4,639,500 from a bank which matures on January 30, The letter was issued in conjunction with CP of NYS' workers' compensation policy. There were no outstanding borrowings at June 30, Subsequent to year-end, $2,500,000 of the outstanding line of credit was paid. 13. Concentration of Risk The financial instruments that potentially subject CP of NYS to concentration of credit risk consist primarily of cash and cash equivalents. At various times, CP of NYS has cash deposits at financial institutions which exceed the Federal Deposit Insurance Corporation ("FDIC") limit. These financial institutions have strong credit ratings; therefore, management believes the risk related to these accounts is minimal. 14. Subsequent Events CP of NYS and Affiliates' management has performed subsequent events procedures through November 16, 2017, which is the date the consolidated financial statements were available to be issued. There were no subsequent events requiring adjustment to the consolidated financial statements or disclosures as stated herein. 20