BETHANY SERVICES, INC. D/B/A BAKERSFIELD HOMELESS CENTER AND ALLIANCE AGAINST FAMILY VIOLENCE AND SEXUAL ASSAULT (Not-for-Profit Organization)

Transcription

1 (Not-for-Profit Organization) CONSOLIDATED FINANCIAL REPORT JUNE 30, 2017 AND 2016

2 CONSOLIDATED FINANCIAL REPORT JUNE 30, 2017 AND 2016 TABLE OF CONTENTS Independent Auditor s Report... 1 CONSOLIDATED FINANCIAL STATEMENTS Consolidated Statements of Financial Position... 3 Consolidated Statements of Activities... 4 Consolidated Statements of Cash Flows... 6 Notes to the Consolidated Financial Statements... 7 CONSOLIDATED SUPPLEMENTARY INFORMATION Consolidated Schedule of Expenditures of Federal Awards Notes to Consolidated Schedule of Expenditures of Federal Awards Consolidated Statements of Functional Expenses Consolidating Statement of Financial Position Consolidating Statement of Activities OTHER INDEPENDENT AUDITOR S REPORTS Independent Auditor s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards Independent Auditor s Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance FINDINGS AND RECOMMENDATIONS Consolidated Schedule of Findings and Questioned Costs Page

3 INDEPENDENT AUDITOR S REPORT Board of Directors Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault Bakersfield, California Report on the Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault (the Organization), which are comprised of consolidated statements of financial position as of June 30, 2017 and 2016, the related consolidated statements of activities and cash flows for the years then ended and the related notes to the 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 opinions on these consolidated 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 consolidated 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 Organization 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 Organization 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 opinions. 1

4 Opinions In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the respective financial position of the Organization, as of June 30, 2017 and 2016, and the respective changes in financial position and cash flows thereof for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards and the consolidated supplementary information, as noted in the table of contents, are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 14, 2017, on our consideration of the Organization s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and 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 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 Organization s internal control over financial reporting and compliance. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California December 14,

5 CONSOLIDATED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 AND 2016 ASSETS Current Assets: Cash $ 29,192 $ 450,238 Grants receivable 1,003, ,394 Prepaid expenses 82,331 64,306 Investments (Note 2) 12,175 6,174 Total current assets 1,126,983 1,436,112 Noncurrent Assets: Property and equipment (Note 3) 4,051,370 4,261,848 Deposits 21,209 18,026 Temporarily restricted cash in savings 596, ,000 Other assets 5,469 4,816 Total noncurrent assets 4,674,833 4,784,690 Total assets $ 5,801,816 $ 6,220,802 LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 228,984 $ 267,584 Accrued expenses 143, ,460 Line of credit (Note 4) 35,000 72,000 Current maturities of long-term debt (Note 5) 91,420 87,578 Deferred revenue 75, ,684 Total current liabilities 574, ,306 Noncurrent Liabilities: Long-term debt, less current maturities (Note 5) 921,784 1,252,967 Deposit 5,000 5,000 Total noncurrent liabilities 926,784 1,257,967 Total liabilities 1,501,254 2,128,273 Net Assets: Unrestricted 2,097,359 1,789,590 Temporarily restricted (Note 6) 2,203,203 2,302,939 Total net assets 4,300,562 4,092,529 Total liabilities and net assets $ 5,801,816 $ 6,220,802 See Notes to the Consolidated Financial Statements. 3

6 CONSOLIDATED STATEMENTS OF ACTIVITIES FOR THE YEARS ENDED JUNE 30, 2017 AND Temporarily Unrestricted Restricted Total Revenues and support: Grants $ 5,760,099 $ - $ 5,760,099 Contributions 3,136,425-3,136,425 Special events 382, ,438 Volunteer match income 65,028-65,028 United Way of Kern County grants 116, ,469 Miscellaneous income 94,783-94,783 Investment income Unrealized loss 1,012-1,012 Other income 240, ,000 Gain on disposal of assets Net assets released from restrictions 99,736 (99,736) - Total revenues and support 9,896,487 (99,736) 9,796,751 Expenses: Program services 8,495,886-8,495,886 Management and general 777, ,304 Fundraising 315, ,528 Total expenses 9,588,718-9,588,718 Change in net assets 307,769 (99,736) 208,033 Net assets, beginning 1,789,590 2,302,939 4,092,529 Net assets, ending $ 2,097,359 $ 2,203,203 $ 4,300,562 See Notes to the Consolidated Financial Statements. 4

7 CONSOLIDATED STATEMENTS OF ACTIVITIES (Continued) FOR THE YEARS ENDED JUNE 30, 2017 AND Temporarily Unrestricted Restricted Total Revenues and support: Grants $ 4,854,329 $ - $ 4,854,329 Contributions 1,451,763-1,451,763 Special events 350, ,656 Volunteer match income 63,606-63,606 United Way of Kern County grants 126, ,880 Miscellaneous income 107, ,401 Investment income Unrealized gain Other income Gain on disposal of assets Net assets released from restrictions Total revenues and support 6,956,212-6,956,212 Expenses: Program services 5,923,923-5,923,923 Management and general 762, ,087 Fundraising 192, ,882 Total expenses 6,878,892-6,878,892 Change in net assets 77,320-77,320 Net assets, beginning 1,712,270 2,302,939 4,015,209 Net assets, ending $ 1,789,590 $ 2,302,939 $ 4,092,529 See Notes to the Consolidated Financial Statements. 5

8 CONSOLIDATED STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2017 AND CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 208,033 $ 77,320 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 222, ,407 Other Income (240,000) - Changes in assets and liabilities: (Increase) decrease in: Accounts receivable (87,891) (284,308) Investments (6,001) (657) Prepaid expenses and deposits (21,208) 14,442 Other assets (653) (739) Increase (decrease) in: Accounts payable (38,600) 47,937 Accrued expenses and deposit (151,344) (4,339) Deferred revenue (72,734) 6,536 Net cash provided (used) by operating activities (188,306) 90,599 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (11,614) (68,047) Net cash used in investing activities (11,614) (68,047) CASH FLOWS FROM FINANCING ACTIVITIES Net payments on revolving credit agreement (37,000) (227,000) Principal payments on long-term debt (87,341) 325,723 Net cash provided (used) by financing activities (124,341) 98,723 Net increase (decrease) in cash (324,261) 121,275 Cash: Beginning 950, ,963 Ending $ 625,977 $ 950,238 Supplemental Disclosures of Cash Flow Information Cash payments for: Interest $ 18,189 $ 26,462 See Notes to the Consolidated Financial Statements. 6

9 NOTES TO THE CONSOLIDATED FINANCIAL STATEMENTS JUNE 30, 2017 AND 2016 NOTE 1 NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Nature of organization: Bethany Services, Inc. d/b/a Bakersfield Homeless Center (the Organization) operates the Bakersfield Homeless Center, an emergency shelter designed for short-term occupancy of one to one hundred eighty days for homeless individuals and families. In addition, the Organization provides meals to both resident and non-resident indigent persons and provides a variety of social services including case management, medical and dental services, daycare for homeless children, rental and utility assistance, housing placement, and a work force reentry program that enables clients to achieve their highest level of self-sufficiency through employment. The Organization is supported primarily through public and private grants and donor contributions. Alliance Against Family Violence and Sexual Assault was organized to shelter, feed, and counsel people who are the victims of family violence and sexual assault. A summary of significant accounting policies follows: Principles of consolidation: The accompanying consolidated financial statements include the accounts of Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault (hereinafter collectively referred to as the Organization ). All material related party balances and transactions have been eliminated in consolidation. Use of estimates: The preparation of consolidated financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash: The Organization considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Accounts receivable: Accounts receivable is considered to be fully collectable; accordingly, no allowance for doubtful accounts is required. Concentration of credit risk: The Organization maintains all cash and cash equivalent accounts with one financial institution. Cash accounts at the institution are insured up to $250,000 by the Federal Deposit Insurance Corporation. As of June 30, 2017 and 2016, the Organization had $405,283 and $460,906, respectively, in excess of the $250,000 insured limit at the financial institution. Support and expenses: Contributions received and unconditional promises to give are measured at their fair values and are reported as an increase in net assets. The Organization reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets, or if they are designated as support for future periods. 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 statement of activities as net assets released from restrictions. Donor-restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted support. The Organization reports gifts of goods 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 that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained. The Organization reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. 7

10 NOTE 1 NATURE OF ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES (Continued) Donated services, goods, and facilities: The Organization s policy is to record donated services if the service either (a) creates or enhances a nonfinancial asset, (b) is a specialized skill that would be purchased if it was not donated, or (c) is required as part of a match contribution in compliance with a grant agreement. These services are valued at fair value in the consolidated financial statements. The amount of services recorded during the years ended June 30, 2017 and 2016, was $65,028 and $63,606, respectively. While the Organization receives significant other services from volunteers, the Organization does not record any support, revenue, or expense from these services in the consolidated financial statements, since the services do not require specialized skills. Materials and other assets received as donations are recorded and reflected in the accompanying consolidated financial statements at their fair values at the date of receipt. Property and equipment: The Organization s policy is to capitalize purchases of property and equipment above $2,500. Property and equipment are stated at cost. Depreciation of property and equipment is computed on the straight-line method over the following estimated useful lives: 8 Years Building and improvements 5-40 Leasehold improvements 5-10 Vehicles 5 Equipment and furnishings 3-15 Deferred revenue: Cash received for federal, state, and privately funded special projects and programs is recognized as revenue to the extent that qualified expenditures have been incurred. Deferred revenue is recorded to the extent that cash received for specific projects and programs exceeds qualified expenditures. Income taxes: The Organization is a not-for-profit corporation and has been recognized as tax exempt pursuant to Section 501(c)(3) of the Internal Revenue Code and related California Franchise Tax Board codes. The Organization adopted the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the consolidated financial statements. Under this guidance, the Organization may recognize the tax benefit from an uncertain tax position only if it is more-likely-than-not that the tax position will be sustained on an examination by taxing authorities, based on the technical merits of the position. The tax benefits recognized in the consolidated financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. The guidance on accounting for uncertainty in income taxes also addresses derecognition, classification, interest and penalties on income taxes, and accounting in interim periods. The Organization is no longer subject to U.S. federal, state, or local income tax examinations by tax authorities for years before Functional allocation of expenses: The costs of providing the various programs, fundraising, and other activities have been summarized on a functional basis in the consolidated statements of functional expenses. Accordingly, certain costs have been allocated among the benefiting programs and fundraising activities. This allocation is based upon management s estimate of hours spent on the programs and activities. Subsequent events: The Organization has evaluated subsequent events through December 14, 2017, the date on which the consolidated financial statements were available to be issued. There were no subsequent events identified by management which would require disclosure in the consolidated financial statements. Reclassifications: Certain items in the 2016 consolidated financial statements have been reclassified to conform to the 2017 presentation, with no effect on the change in net assets.

11 NOTE 2 INVESTMENTS The Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) Topic 820, Fair Value Measurements, defines fair value as the exchange price that would be received for an asset or paid to transfer a liability in an orderly transaction between market participants on the measurement date. The standard describes three levels of inputs that may be used to measure fair value: Level 1 Values are based upon quoted prices in active markets for identical assets or liabilities. Level 2 Values are based on quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data of substantially the full term of the assets or liabilities. Level 3 Values are determined using pricing models, discounted cash flow methodologies, or similar techniques, and at least one significant model assumption or input is unobservable. Determination of the fair value requires significant management judgment or estimation. The Organization s investments consist of cash and marketable securities and are presented in the consolidated financial statements at fair value based on quoted prices in active markets (all Level 1 measurements). Market risk could occur and is dependent on the future changes in market prices of the various investments held. An analysis of the investments held as of June 30, 2017 and 2016, is as follows: Fair Value Cost Fair Value Cost Unrestricted $ 12,175 $ 7,187 $ 6,174 $ 5,946 NOTE 3 PROPERTY AND EQUIPMENT Property and equipment as of June 30, 2017 and 2016, are comprised of the following: Building and improvements $ 4,889,749 $ 4,879,494 Land 997, ,453 Leasehold improvements 341, ,746 Vehicles 199, ,807 Equipment and furnishings 768, ,781 7,196,895 7,185,281 Less accumulated depreciation (3,145,525) (2,923,433) $ 4,051,370 $ 4,261,848 Depreciation expense for the years ended June 30, 2017 and 2016, was $222,092 and $234,407, respectively. 9

12 NOTE 4 LINE OF CREDIT The Organization has a $300,000 revolving credit line available with Wells Fargo. As of June 30, 2017 and 2016, the consolidated outstanding balances were $35,000 and $72,000, respectively. Interest on the outstanding balances is variable and equal to the floating rate equal to the index plus 1.50%, but not less than 4.5%. Interest was 5.5%. NOTE 5 PLEDGED ASSETS AND LONG-TERM DEBT Long-term debt consists of the following as of June 30, 2017 and 2016: % note payable, due in monthly installments of $4,627 through April 15, 2021, secured by a deed of trust $ 195,963 $ 241, % note payable, due in monthly installments of $4,003 through April 15, 2020, secured by a deed of trust 128, ,476 Non-interest bearing note payable**, no principal or interest payments, due November 2023, secured by deed of trust 500, ,000 Non-interest bearing note payable***, no principal or interest payments, due July 2016, secured by deed of trust - 240,000 Non-interest bearing note payable***, no principal or interest payments, due February 2065, secured by deed of trust 189, ,225 $ 1,013,204 $ 1,340,545 **In 2008, the Organization entered into an agreement with the Bakersfield Redevelopment Agency to open and operate the Friese House. The agreement provides for payment deferral so long as the Friese House is used as transitional housing for low-income and mentally disabled individuals. At the completion of the loan term, the loan shall be forgiven. However, if a transfer or conveyance of the Friese House occurs prior to the end of the loan term that results in the Friese House no longer being used as transitional housing for low-income and mentally disabled individuals, the loan shall be terminated and immediate repayment of the loan will be required. Due to the dissolution of the Bakersfield Redevelopment Agency in January 2012, the agreement continues to exist with the successor agency. ***In 2001, the Organization entered into agreements with the County of Kern (County) and City of Bakersfield for $240,000 and $189,225, respectively, to open and operate the Friese House. The agreements provides for payment deferral as long as the Friese House is used as transitional housing for low-income and mentally disabled individuals. At the completion of the loan terms, the loans shall be forgiven. If a transfer of conveyance of the Friese House occurs prior to the end of the loan terms that results in the Friese House no longer being used as a transitional housing for low-income and mentally disabled individuals the loans would be terminated and immediate repayment of the loans would be required. In July 2016 the loan from the County, in the amount of $240,000, was forgiven, and recognized as Other Income in the 2017 Consolidated Statement of Activities. 10

13 NOTE 5 PLEDGED ASSETS AND LONG-TERM DEBT (Continued) Aggregate maturities required on long-term debt as of June 30, 2017, are due in future years as follows: Years Ending June 30, 2018 $ 91, , , , Later years 689,225 $ 1,013,204 Total interest expense on long-term debt and the line of credit for 2017 and 2016 was $18,189 and $26,462, respectively. NOTE 6 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets as of June 30, 2017 and 2016, consist of land and buildings used for program services. Temporarily restricted net assets also include a $500,000 donation to be used to help purchase a new building if the High-Speed Rail goes through. If the High-Speed rail does not go through, the funds will be used for capital improvements. In the current year, $99,736 was released from restriction. NOTE 7 LEASE COMMITMENTS The Organization leases office equipment under various non-cancelable agreements which expire through May 2020 and require various minimum annual rentals. Rental expense for the years ended June 30, 2017 and 2016, was $24,912 and $26,011, respectively. The total minimum rental commitment as of June 30, 2017, is due in future years as follows: Year Ending June 30, 2018 $ 6, , ,709 $ 18,165 11

14 CONSOLIDATED SUPPLEMENTARY INFORMATION

15 CONSOLIDATED SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 Federal Federal Grantor/Pass-Through CFDA Grantor Program Title Number Amount FEDERAL: U.S. Department of Health and Human Services Direct Program Supportive Housing Program $ 812,746 Direct Program Promoting Safe and Stable Families ,140 County of Kern - Pass-Through Programs Emergency Shelter Grant Program ,901 Homelessness Prevention and Rapid Re-Housing Program (HPRP) ,007 City of Bakersfield - Pass-Through Programs Emergency Shelter Grant Program ,624 Homelessness Prevention and Rapid Re-Housing Program (HPRP) ,056 U.S. Department of Homeland Security Pass-Through United Way of Kern County Local Board Emergency Food and Shelter National Board Program ,205 U.S. Department of Agriculture State of California - Pass-Through Program Department of Education: Child and Adult Care Food Program ,541 U.S. Department of Justice State of California - Pass-Through Program Governor's Office of Emergency Services: Prison Rape Elimination Act Program ,498 State of California - Pass-Through Program Governor's Office of Emergency Services: Crime Victim Assistance Program ,075,478 $ 3,479,196 12

16 NOTES TO CONSOLIDATED SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS FOR THE YEAR ENDED JUNE 30, 2017 NOTE 1 BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards includes the federal grant activity of Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault (the Organization) and is presented on the accrual basis of accounting. The information in this schedule is presented in accordance with the requirements of U.S. Office of Management and Budget (OMB) Compliance Supplement. NOTE 2 LOAN OUTSTANDING The U.S. Department of Housing and Urban Development loaned money to the County of Kern and the City of Bakersfield totaling $240,000 and $189,225, respectively, who passed the money through to the Organization totaling $429,225. In July 2016, the Organization met the terms of the $240,000 loan and the loan was forgiven. As of June 30, 2017, the balance outstanding was as follows: Federal CFDA Cluster/Program Title Outstanding Number Amount Home Investment Partnerships Program $ 189,225 NOTE 3 INDIRECT COST RATE The organization has elected not to use the 10 percent deminimis indirect cost rate allowed under the Uniform Guidance. 13

17 CONSOLIDATED STATEMENTS OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED JUNE 30, Program Management Services and General Fundraising Total Salaries $ 3,441,902 $ 272,847 $ 113,752 $ 3,828,501 Specific assistance to individuals 3,238,462 3,238,462 Payroll taxes and workers' compensation insurance 618,580 54,086 22, ,215 Depreciation 186,624 35, ,092 Amortization Volunteer match 65, ,028 Supplies 166,307 33, ,308 Utilities 146,126 35, ,421 Contracted grant services 32,140 4,200-36,340 Professional fees 2,000 90,944-92,944 Employee benefits 156,732 9,412 3, ,068 Printing and publications - 41,645 35,149 76,794 Insurance 73,690 17,846-91,536 Travel 91, ,856 Telephone 32,450 32,115-64,565 Repairs and maintenance 127,324 51, ,825 Postage and shipping - 10,820-10,820 Special events , ,154 Tax and permits 12,911 5,110-18,021 Interest - 18,189-18,189 Equipment rental 15,281 9,631-24,912 Conferences, conventions, and meetings 20,261 3,913 24,174 Advertising - 12,209-12,209 Miscellaneous 35,462 37,543-73,005 Training 8, ,567 Storage - 1,529-1,529 Occupancy 24, ,000 $ 8,495,886 $ 777,304 $ 315,528 $ 9,588,718 14

18 CONSOLIDATED STATEMENTS OF FUNCTIONAL EXPENSES (Continued) FOR THE YEAR ENDED JUNE 30, Program Management Services and General Fundraising Total Salaries $ 3,096,948 $ 250,849 $ 44,209 $ 3,392,006 Specific assistance to individuals 1,102, ,102,054 Payroll taxes and workers' compensation insurance 539,007 48,345 8, ,858 Depreciation 198,323 36, ,407 Volunteer match 63, ,606 Supplies 180,239 25, ,791 Utilities 129,297 33, ,442 Contracted grant services 29, ,772 Professional fees 17, , ,065 Employee benefits 159,586 11,414 2, ,016 Printing and publications 19,127 46,290-65,417 Insurance 69,202 32, ,401 Travel 71,150 4,163-75,313 Telephone 41,674 13,468-55,142 Repairs and maintenance 115,447 22,579 3, ,784 Postage and shipping - 14,465-14,465 Special events , ,393 Tax and permits 4,517 3,176-7,693 Interest - 26,462-26,462 Rent of equipment 18,314 7,697-26,011 Conferences, conventions, and meetings 19,078 4,095-23,173 Advertising 3,707 4,522-8,229 Miscellaneous 9,962 63,355-73,317 Training 10, ,166 Storage - 1,224-1,224 Occupancy 24, ,000 Public education 1, ,685 $ 5,923,923 $ 762,087 $ 192,882 $ 6,878,892 15

19 CONSOLIDATING STATEMENT OF FINANCIAL POSITION JUNE 30, 2017 ASSETS Alliance Against Bethany Family Violence Services, Inc. and Sexual Assault Eliminations Consolidated Current Assets: Cash $ 8,027 $ 21,165 $ - $ 29,192 Grants receivable 543, ,402 (77,702) 1,003,285 Prepaid expenses 38,814 43,517-82,331 Investments 12, ,175 Total current assets 602, ,084 (77,702) 1,126,983 Noncurrent Assets: Property and equipment 3,364, ,669-4,051,370 Deposits 14,497 6,712-21,209 Temporarily restricted cash in savings 596, ,785 Other assets 1,774 3,695-5,469 Total assets $ 4,580,358 $ 1,299,160 $ (77,702) $ 5,801,816 LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 149,837 $ 156,849 $ (77,702) $ 228,984 Accrued expenses 98,890 44, ,116 Line of credit - 35,000-35,000 Current maturities of long-term debt 43,380 48,040-91,420 Deferred revenue 37,987 37,963-75,950 Total current liabilities 330, ,078 (77,702) 574,470 Noncurrent Liabilities: Long-term debt, less current maturities 773, , ,784 Deposit 5, ,000 Total liabilities 1,108, ,001 (77,702) 1,501,254 Net Assets: Unrestricted 1,268, ,159-2,097,359 Temporarily restricted 2,203, ,203,203 Total net assets 3,471, ,159-4,300,562 Total liabilities and net assets $ 4,580,358 $ 1,299,160 $ (77,702) $ 5,801,816 16

20 CONSOLIDATING STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2017 Bethany Services, Inc. Temporarily Unrestricted Restricted Total Revenues and support: Grants $ 3,609,519 $ - $ 3,609,519 Contributions 2,998,716-2,998,716 Special events 240, ,223 Volunteer match income United Way of Kern County grants 62,621-62,621 Miscellaneous income 211, ,683 Investment income Unrealized loss 1,012-1,012 Other Income 240, ,000 Gain on disposal of assets Net assets released from restrictions 99,736 (99,736) - Total revenues and support 7,464,007 (99,736) 7,364,271 Expenses: Program services 6,431,485-6,431,485 Management and general 536, ,409 Fundraising 246, ,662 Total expenses 7,214,556-7,214,556 Change in net assets 249,451 (99,736) 149,715 Net assets, beginning 1,018,749 2,302,939 3,321,688 Net assets, ending $ 1,268,200 $ 2,203,203 $ 3,471,403 17

21 CONSOLIDATING STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2017 Alliance Against Family Violence and Sexual Assault Temporarily Unrestricted Restricted Total Revenues and support: Grants $ 2,150,580 $ - $ 2,150,580 Contributions 137, ,709 Special events 142, ,215 Volunteer match income 65,028-65,028 United Way of Kern County grants 53,848-53,848 Miscellaneous income 23,687-23,687 Investment income Unrealized loss Other Income Gain on disposal of assets Net assets released from restrictions Total revenues and support 2,573,067-2,573,067 Expenses: Program services 2,087,934-2,087,934 Management and general 357, ,949 Fundraising 68,866-68,866 Total expenses 2,514,749-2,514,749 Change in net assets 58,318-58,318 Net assets, beginning 770, ,841 Net assets, ending $ 829,159 $ - $ 829,159 18

22 CONSOLIDATING STATEMENT OF ACTIVITIES (Continued) FOR THE YEAR ENDED JUNE 30, 2017 Alliance Against Bethany Family Violence Services, Inc. and Sexual Assault Eliminations Consolidated Revenues and support: Grants $ 3,609,519 $ 2,150,580 $ - $ 5,760,099 Contributions 2,998, ,709-3,136,425 Special events 240, , ,438 Volunteer match income - 65,028-65,028 United Way of Kern County grants 62,621 53, ,469 Miscellaneous income 211,683 23,687 (140,587) 94,783 Investment income Other Income 240, ,000 Unrealized loss 1, ,012 Net assets released from restrictions Total revenues and support 7,364,271 2,573,067 (140,587) 9,796,751 Expenses: Program services 6,431,485 2,087,934 (23,533) 8,495,886 Management and general 536, ,949 (117,054) 777,304 Fundraising 246,662 68, ,528 Total expenses 7,214,556 2,514,749 (140,587) 9,588,718 Change in net assets 149,715 58, ,033 Net assets, beginning 3,321, ,841-4,092,529 Net assets, ending $ 3,471,403 $ 829,159 $ - $ 4,300,562 19

23 INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault Bakersfield, California We have audited, in accordance with the 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, the consolidated financial statements of Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault (the Organization) as of and for the year ended June 30, 2017, and the related notes to the consolidated financial statements, which collectively comprise the Organization s consolidated financial statements, and have issued our report thereon dated December 14, Internal Control Over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered the Organization s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinions on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the Organization s consolidated financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 20

24 Compliance and Other Matters As part of obtaining reasonable assurance about whether the Organization s consolidated financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of consolidated financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California December 14,

25 INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault Bakersfield, California Report on Compliance for Each Major Federal Program We have audited the compliance of Bethany Services, Inc. d/b/a Bakersfield Homeless Center and Alliance Against Family Violence and Sexual Assault (the Organization) with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of the Organization s major federal programs for the year ended June 30, The Organization s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Organization s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Organization s compliance. 22

26 Opinion on Each Major Federal Program In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, Report on Internal Control Over Compliance Management of the Organization is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Organization s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. ******** The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. BROWN ARMSTRONG ACCOUNTANCY CORPORATION Bakersfield, California December 14,

27 CONSOLIDATED SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2017 SECTION I SUMMARY OF AUDITOR S RESULTS Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: Material weakness identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major federal programs: Material weakness identified? Yes X No Significant deficiencies identified that are not considered to be material weaknesses? Yes X None Reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with the Uniform Guidance? Yes X No Identification of major programs: CFDA Number(s) Name of Federal Program or Cluster Crime Victim Assistance Promoting Safe and Stable Families Dollar threshold used to distinguish between type A and B programs: $750,000 Auditee qualified as low-risk auditee? X Yes No SECTION II CURRENT YEAR FINDINGS None. SECTION III PRIOR YEAR FINDINGS None. 24