HUMAN RESOURCES AGENCY OF NEW BRITAIN, INC.

Transcription

1 FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015

2 CONTENTS Independent Auditors Report 1-2 Statements of Financial Position - June 30, 2016 and Statements of Activities for the Years Ended June 30, 2016 and Statements of Cash Flows for the Years Ended June 30, 2016 and Notes to the Financial Statements 7-14

3 29 South Main Street P.O. Box West Hartford, CT Tel Fax blumshapiro.com Independent Auditors Report To the Board of Directors Human Resources Agency of New Britain, Inc. New Britain, Connecticut Report on the Financial Statements We have audited the accompanying financial statements of Human Resources Agency of New Britain, Inc. (the Agency), which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of 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 financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Blum, Shapiro & Company, P.C. -1- An independent member of Baker Tilly International

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Agency as of June 30, 2016 and 2015, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Change in Accounting Principle As discussed in Note 1 to the financial statements, during the year ended June 30, 2016, the Agency has adopted Financial Accounting Standards Update No , Interest - Imputation of Interest. The amendments require retrospective application. As a result, certain amounts related to debt issuance costs have been reclassified as of and for the year ended June 30, Our opinion is not modified with respect to this matter. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated October 21, 2016 on our consideration of the Agency s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Agency s internal control over financial reporting and compliance. West Hartford, Connecticut October 21,

5 STATEMENTS OF FINANCIAL POSITION JUNE 30, 2016 AND 2015 ASSETS (Restated) Current Assets Cash and cash equivalents $ 1,063,102 $ 475,677 Grants receivable 1,112, ,081 Other receivables 160, ,392 Debt service funding held by state 371, ,506 Prepaid expenses 66,356 65,127 Total current assets 2,773,403 1,871,783 Property and Equipment Land and buildings 14,050,891 14,007,459 Leasehold improvements 645, ,967 Equipment 978, ,848 Vehicles 95,466 95,466 Construction in progress 5,000 22,131 15,775,398 15,567,871 Less accumulated depreciation 3,775,278 3,311,389 Net property and equipment 12,000,120 12,256,482 Other Assets Restricted cash 107,685 93,585 Total Assets $ 14,881,208 $ 14,221,850 The accompanying notes are an integral part of the financial statements -3-

6 STATEMENTS OF FINANCIAL POSITION (CONTINUED) JUNE 30, 2016 AND 2015 LIABILITIES AND NET ASSETS (Restated) Current Liabilities Current portion of bonds payable $ 239,849 $ 219,849 Current portion of notes payable 43,169 18,890 Accounts payable and accrued expenses 723, ,991 Accrued payroll and vacations 618, ,092 Accrued interest payable 146,163 73,850 Due to funding source 27,939 1,064 Deferred revenue 307, ,730 Total current liabilities 2,105,875 1,626,466 Long-Term Liabilities Bonds payable, net of current portion 6,977,554 7,205,309 Notes payable, net of current portion 220, ,767 Total long-term liabilities 7,197,621 7,392,076 Total liabilities 9,303,496 9,018,542 Net Assets Unrestricted 5,485,544 5,169,126 Temporarily restricted 92,168 34,182 Total net assets 5,577,712 5,203,308 Total Liabilities and Net Assets $ 14,881,208 $ 14,221,850 The accompanying notes are an integral part of the financial statements -4-

7 STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED JUNE 30, 2016 AND (Restated) Changes in Unrestricted Net Assets Revenues, gains and other support: Grants $ 14,344,580 $ 14,147,172 Program income 1,008, ,393 Nongovernmental grants and contributions 386, ,267 Bond debt service funding 433, ,353 Contributed services 113,269 73,075 Rental income 62,800 61,693 Other income 33,747 27,167 Net assets released from restrictions 24,515 11,524 Total revenues, gains and other support 16,408,058 16,298,644 Expenses: Salaries and benefits 10,535,828 10,432,988 Direct client assistance 2,099,576 2,141,948 Professional and contracted services 1,301, ,850 Occupancy 724, ,664 Depreciation and amortization 463, ,128 Materials and supplies 410, ,384 Interest 321, ,049 Other 234, ,313 Total expenses 16,091,640 15,483,324 Change in unrestricted net assets 316, ,320 Changes in Temporarily Restricted Net Assets Contributions 82,501 - Net assets released from restrictions (24,515) (11,524) Change in temporarily restricted net assets 57,986 (11,524) Change in Net Assets 374, ,796 Net Assets - Beginning of Year 5,203,308 4,399,512 Net Assets - End of Year $ 5,577,712 $ 5,203,308 The accompanying notes are an integral part of the financial statements -5-

8 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2016 AND Cash Flows from Operating Activities Change in net assets $ 374,404 $ 803,796 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 463, ,128 (Increase) decrease in operating assets: Grants receivable (205,092) 134,340 Other receivables (14,218) (87,531) Debt service funding held by state (93,656) 102,194 Prepaid expenses (1,229) (36,067) Restricted cash (14,100) (12,008) Increase (decrease) in operating liabilities: Accounts payable and accrued expenses 133,100 (157,112) Accrued payroll and vacations 72,385 76,575 Accrued interest payable 72,313 (115,850) Due to funding source 26,875 (5,870) Deferred revenue 130,457 (126,285) Net cash provided by operating activities 945,128 1,021,310 Cash Flows from Investing Activities Purchase or improvement of property and equipment (207,527) (425,709) Net cash used in investing activities (207,527) (425,709) Cash Flows from Financing Activities Principal repayments on bonds and notes payable (150,176) (340,144) Net cash used in financing activities (150,176) (340,144) Net Increase in Cash and Cash Equivalents 587, ,457 Cash and Cash Equivalents - Beginning of Year 475, ,220 Cash and Cash Equivalents - End of Year $ 1,063,102 $ 475,677 The accompanying notes are an integral part of the financial statements -6-

9 NOTES TO FINANCIAL STATEMENTS NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Human Resources Agency of New Britain, Inc. (the Agency), a community action agency, was established in 1964 as a Connecticut nonstock, nonprofit corporation whose purpose is to provide the economically disadvantaged in the greater New Britain, Connecticut, area with various social programs and services including food, training, education, child care, shelter and energy-related assistance. Basis of Accounting and Presentation The financial statements of the Agency have been prepared in accordance with accounting principles generally accepted in the United States of America. Accordingly, the accounts of the Agency are reported in the following net asset categories: Unrestricted Net Assets Unrestricted net assets represent available resources other than donor restricted contributions. These resources may be expended at the discretion of the Board of Directors. Temporarily Restricted Net Assets Temporarily restricted net assets represent contributions that are restricted by the donor as to purpose or time of expenditure. Change in Accounting Principle In April 2015, the Financial Accounting Standards Board issued Accounting Standards Update (ASU) No , Interest - Imputation of Interest, which simplifies the presentation of debt issuance costs. The amendments change the presentation of debt issuance costs from an asset to a direct deduction of the debt on the accompanying statements of financial position. In addition, the amortization of debt issuance costs is now included in interest expense rather than amortization expense in the accompanying statements of activities. This ASU is effective for annual periods beginning after December 15, The Agency has adopted the amendments for the year ended June 30, The amendments have been retrospectively applied. As a result, debt issuance costs of $253,965 have been reclassified from assets to a direct deduction of the debt in the statement of financial position as of June 30, 2015, and $12,094 of amortization expense has been reclassified to interest expense in the statement of activities for the year ended June 30, Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Cash and Cash Equivalents The Agency considers all highly liquid debt instruments purchased with an original maturity of three months or less to be cash equivalents, exclusive of restricted cash. Restricted cash consists of cash restricted by the Connecticut Health and Educational Facilities Authority (CHEFA) bond indenture for property renewal and replacements. -7-

10 NOTES TO FINANCIAL STATEMENTS Property and Equipment Property and equipment acquisitions and improvements thereon that exceed $2,500 are capitalized at cost and depreciated on a straight-line basis over their estimated useful lives. Leasehold improvements are amortized over the life of the improvement or the remaining lease term, whichever is shorter. Repairs and maintenance are charged to expense as incurred. Funding sources retain a reversionary right to certain property acquired with grant funds, although no grant programs are expected to end prior to the end of the respective properties useful lives that would require return of such assets. In addition, certain improvements have been funded by state bonding grants over the years, which provide for a lien against the property that declines at the rate of 10% per year as long as the property continues to be used for its intended purpose. Deferred Financing Costs Deferred financing costs represent costs incurred in obtaining bond financing. Debt issuance costs are presented as a direct deduction of the carrying amount of the debt. These costs are being amortized on a straight-line basis over the term of the related bonds. Amortization of debt issuance costs is included in interest expense. Amortization expense (interest) for each of the years ended June 30, 2016 and 2015, was $12,094. Grants and Contracts Governmental grants and contracts, with the exception of certain awards to fund capital expenditures, are generally considered to be exchange transactions rather than contributions. Revenue from costreimbursement grants and contracts is recognized to the extent of costs incurred. Revenue from performance-based grants and contracts is recognized to the extent of performance achieved. Grant and contract receipts in excess of revenue recognized on open grants are presented as deferred revenue. Contributions Unconditional contributions are recognized when pledged or received, as applicable, and are considered to be available for unrestricted use unless specifically restricted by the donor. The Agency reports nongovernmental contributions and grants of cash and other assets as temporarily restricted support if they are received with donor stipulations that limit their use. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Contributions received whose restrictions are met in the same period are presented with unrestricted net assets. Conditional promises to give are recognized when the conditions on which they depend are substantially met. The Agency reports gifts of property and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions on how the assets are to be used and gifts of cash or other assets that must be used to acquire property and equipment are reported as temporarily restricted support. -8-

11 NOTES TO FINANCIAL STATEMENTS Functional Allocation of Expenses The costs of providing various programs and other activities have been summarized on a functional basis in Note 10. Accordingly, costs have been allocated among the programs and supporting services benefited. Income Taxes The Agency is exempt from federal and state corporate income taxes under Section 501(c)(3) of the Internal Revenue Code as a public charity. Subsequent Events In preparing these financial statements, the Agency has evaluated subsequent events through October 21, 2016, which represents the date the financial statements were available to be issued. NOTE 2 - CONCENTRATIONS Cash and Cash Equivalents The Agency maintained deposits in financial institutions that exceeded federal depository insurance limits. However, management regularly monitors the financial strength of its depository institutions and, based on that monitoring, believes that the Agency s deposits are not subject to significant credit risk. Government Grants and Contracts Based on historical experience, management believes grant and contract receivables represent negligible credit risk. Therefore, no allowance is generally maintained for grants and contracts receivable. The Agency receives a significant portion of its total support from the United States Department of Health and Human Services and the State of Connecticut Department of Social Services. As with all government funding, these grants and contracts may not be renewed or may be renewed in reduced amounts in future years. In addition, grants and contracts currently in effect are subject to reduction prior to the end of the grant or contract period. Any significant reduction in these grants and contracts could have an adverse effect on the Agency s program services. -9-

12 NOTES TO FINANCIAL STATEMENTS NOTE 3 - BONDS PAYABLE Bonds payable consisted of the following as of June 30, 2016 and 2015: Unamortized Debt Issuance Costs Principal Unamortized Debt Issuance Costs Principal CHEFA refunding bonds payable, maturing through 2036, original amount $7,360,000, with interest ranging from 1.5% - 5.0% $ 7,155,000 $ 241,871 $ 7,360,000 $ 253,965 Unamortized bond premium 304, ,123 - Total 7,459,274 $ 241,871 7,679,123 $ 253,965 Less current portion 239, ,849 Long term portion 7,219,425 7,459,274 Less unamortized deferred financing costs 241, ,965 Bonds Payable - Long-Term, Net $ 6,977,554 $ 7,205,309 The bonds are secured by the Agency s headquarters facility. As a requirement of the bond indenture, the Agency is required to meet certain financial and nonfinancial covenants. Maturities of bonds payable for the next five years and in the aggregate are as follows: Year Ending June $ 239, , , , ,849 Thereafter 6,205,029 $ 7,459,274 The Connecticut Department of Social Services (DSS) funds the majority of the debt service related to the bond issuance through its Debt Service Fund and a Contract Intercept agreement with the Agency. This revenue is presented in the accompanying statements of activities as bond debt service funding. Debt payments funded by DSS and intercepted from Agency grants are held by DSS until debt service payments are due on the bonds. Amounts held by DSS are reported as debt service funding held by state in the accompanying statements of financial position. These amounts were released by DSS on July 1 of the following fiscal year and remitted to the bondholders on behalf of the Agency. -10-

13 NOTES TO FINANCIAL STATEMENTS NOTE 4 - NOTES PAYABLE Notes payable consisted of the following as of June 30, 2016 and 2015: Mortgage of $225,000, payable in monthly installments of $1,503 through April 2020, at which time the remaining balance of $142,770 is due, secured by real property $ 179,081 $ 187,776 Note of $52,334, payable in monthly installments of $977 through February 2017, including interest at 4.57%, secured by a vehicle 6,738 17,881 Note of $84,038, payable in monthly installments of $2,469 through March 2019, including interest at 3.60%, secured by equipment 77, , ,657 Less current portion 43,169 18,890 Notes Payable - Long-Term $ 220,067 $ 186,767 Expected maturities of notes payable for the next four years and in the aggregate are as follows: Year Ending June $ 43, , , ,140 $ 263,236 NOTE 5 - LINE OF CREDIT The Agency has an available line of credit of $700,000, which expires February 1, 2017 and bears interest of the Wall Street Journal Prime Rate plus.25%. The interest rate at June 30, 2016 was 3.75%. The line is secured by substantially all Agency assets and is subject to certain financial covenants. No amounts were outstanding under the line as of June 30, 2016 and NOTE 6 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets of $24,515 and $11,524 were released during the years ended June 30, 2016 and 2015, respectively, by meeting the assets for independence purpose restriction. Temporarily restricted net assets of $92,168 and $34,182 as of June 30, 2016 and 2015, respectively, are available for use in the assets for independence program. -11-

14 NOTES TO FINANCIAL STATEMENTS NOTE 7 - FAIR VALUE OF FINANCIAL INSTRUMENTS Generally accepted accounting principles establish a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Agency has the ability to access. Level 2 Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Financial Instruments Carried at Fair Value The Agency has no financial instruments that are carried at fair value in the financial statements. Financial Instruments Not Carried at Fair Value The Agency s major financial instruments not carried at fair value consist of cash and cash equivalents, grants receivable, accounts payable, line of credit and bonds and notes payable. The fair values of cash and cash equivalents, restricted cash, grants receivable, and accounts payable approximate their carrying values due to the short-term nature of these items. It is impracticable to determine the fair value of the Agency s notes payable due to their lack of marketability. The carrying value of bonds payable approximates its fair value based on quoted prices for similar bond issues and is considered to be a Level 2 input. -12-

15 NOTES TO FINANCIAL STATEMENTS NOTE 8 - OPERATING LEASES The Agency leases various locations and equipment under leases that expire through Total rent expense was $62,983 and $68,505 for the years ended June 30, 2016 and 2015, respectively. Future minimum lease payments under operating leases that have remaining terms in excess of one year are as follows: Year Ending June $ 54, , , ,646 Total Minimum Lease Payments $ 212,946 NOTE 9 - CONTRIBUTED SERVICES Contributed services recognized of $113,269 and $73,075 for the years ended June 30, 2016 and 2015, respectively, relate principally to early childhood programs. NOTE 10 - EXPENSES BY FUNCTION Expenses by function are as follows for the years ended June 30, 2016 and 2015: Program: Children and family services $ 6,127,328 $ 6,026,016 Employment and training 5,106,057 4,393,815 Energy and housing services 2,301,776 2,413,801 Health and wellness services 836, ,585 Community and neighborhood services 749, ,202 15,122,001 14,516,419 Management and general 969, ,905 $ 16,091,640 $ 15,483,324 NOTE 11 - EMPLOYEE BENEFIT PLAN The Agency sponsors a defined contribution 401(k) profit-sharing plan covering substantially all employees. All full-time employees are eligible to participate upon hire and will be eligible for profit sharing after one year of service, as defined, and attaining the age of 18. The Agency matches employees contributions up to 2% of their compensation. On May 18, 2013, the Agency elected to suspend both the discretionary matching and profit-sharing contributions. Effective January 1, 2015, the Agency implemented the match once again. Agency contributions totaled $52,232 and $18,865 for the years ended June 30, 2016 and 2015, respectively. -13-

16 NOTES TO FINANCIAL STATEMENTS NOTE 12 - CASH FLOW INFORMATION Interest Paid The Agency paid interest of $321,473 and $388,049 during the years ended June 30, 2016 and 2015, respectively. NOTE 13 - CONTINGENCIES The Agency participates in federal and state assisted grant programs. These grants are subject to audits by grantor agencies, which could result in disallowed costs due back to the grantor. The Agency has recognized all known audit liabilities. -14-