FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2018 and 2017

Transcription

1 FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2018 and 2017

2 CONTENTS Page INDEPENDENT AUDITOR S REPORT 1 2 FINANCIAL STATEMENTS Statements of Financial Position 3 Statements of Activities 4 Statements of Functional Expenses 5 6 Statements of Cash Flows 7 Notes to Financial Statements 8 23

3 INDEPENDENT AUDITOR S REPORT Board of Directors WISE & Healthy Aging Report on the Financial Statements We have audited the accompanying financial statements of WISE & Healthy Aging (the Organization ), which comprise the statement of financial position as of June 30, 2018, the related statements of activities, functional expenses, and cash flows for the year 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. 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 auditor s judgment, including the assessment of risks of material misstatement of the 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 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 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.

4 Board of Directors WISE & Healthy Aging Independent Auditor s Report Page Two Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of June 30, 2018 and the changes in net assets and its 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 the Organization s 2017 financial statements, and we expressed an unmodified audit opinion on those financial statements in our report dated December 5, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2017 is consistent, in all material respects, with the audited financial statements from which it has been derived. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 21, 2018 on our consideration of the Organization s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts; and grant agreements and other matters. The purpose of that report is solely 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 effectiveness of the Organization s 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. November 21, 2018

5 STATEMENTS OF FINANCIAL POSITION ASSETS Current assets Cash and cash equivalents $ 102,552 $ 96,733 Cash held in trust Operating Investments 10,788,968 10,660,719 Grants and contributions receivable 636, ,162 Accounts receivable, net 163, ,408 Prepaid expenses and other assets 104, ,237 Total current assets 11,796,655 11,523,604 Property and equipment, net 257, ,086 Endowment investments 2,202,405 2,090,189 Total assets $ 14,256,860 $ 13,905,879 LIABILITIES AND NET ASSETS Current liabilities Line of credit $ 170,000 $ - Accounts payable and accrued expenses 752, ,703 Deposits held in trust Deferred revenue and other liabilities 21,651 54,951 Total current liabilities 943, ,999 Net assets Unrestricted 10,745,255 10,886,003 Temporarily restricted 1,303, ,999 Permanently restricted 1,264,737 1,261,878 Total net assets 13,313,042 13,140,880 Total liabilities and net assets $ 14,256,860 $ 13,905,879 The accompanying notes are an integral part of these financial statements. 3

6 STATEMENTS OF ACTIVITIES Year Ended June 30, 2018 (with Summarized Comparative Totals For The Year Ended June 30, 2017) Temporarily Permanently Total Unrestricted Restricted Restricted Revenue and support Government agencies $ 4,135,911 $ - $ - $ 4,135,911 $ 3,995,092 Program income 1,453, ,453,063 1,603,464 Net investment return 785, ,046 2, ,516 1,072,016 Contributions and grants 35, , , ,077 Donated services and in-kind rent 1,533, ,533,499 1,143,609 Special events 213, , ,737 Net assets released from restriction pursuant to endowment spending-rate distribution 42,689 (42,689) Net assets released from restriction for time and purpose 374,935 (374,935) Total revenue and support 8,574, ,051 2,859 8,887,513 8,608,995 Expenses Program services 7,901, ,901,749 7,220,106 Supporting services General administrative 539, , ,352 Fundraising 274, , ,725 Total expenses 8,715, ,715,351 8,183,183 Change in net assets (140,748) 310,051 2, , ,812 Net assets, beginning of year 10,886, ,999 1,261,878 13,140,880 12,715,068 Net assets, end of year $ 10,745,255 $ 1,303,050 $ 1,264,737 $ 13,313,042 $ 13,140,880 The accompanying notes are an integral part of these financial statements. 4

7 STATEMENTS OF FUNCTIONAL EXPENSES Year Ended June 30, 2018 (with Summarized Comparative Totals For The Year Ended June 30, 2017) Care Co/City Adult Day Senior Rec Nutrition LA Co/Other Peer Para- Elder Abuse Management OMB Support Center Center Services Mental Health Counseling transit Prevention Personnel expenses Salaries $ 613,214 $ 1,482,577 $ 535,169 $ 143,085 $ 83,818 $ 344,913 $ 156,750 $ 272,625 $ 372,909 Employee benefits 98, ,480 95,448 22,448 18,169 60,995 21,652 47,442 54,411 Total personnel expenses 711,367 1,702, , , , , , , ,320 Other expenses Professional fees/contract services 380,900 48,709 48,588 40, ,498 79,073 3,233 29,512 12,585 Supplies 7,996 21,280 18,068 5,220 8,458 5,197 1,352 3,834 5,316 Phone 6,455 68,893 6,023 1,343 1,031 2, ,360 3,509 Postage 1,501 1,244 1, , Building occupancy 19, ,400 54,722 1, ,664 8,039 4,964 7,456 Equipment purchases/repair/maintenance , Travel 2,148 24,620 2, ,135 Printing and duplication 8,202 17,250 7,956 4,663 3,242 3,048 1,658 5,700 11,831 Employee development 3,808 5,597 2,958 1, , ,549 Insurance 4,806 13,714 6,673 1, ,425 1,111 1,980 2,436 Volunteer 449 8,719 2,763 1,882-1,401 1,032-2,000 In-kind services 43, , , ,260 In-kind rent 61,346 66, , ,016 29,746 6,695 7,937 Special events Depreciation and amortization 3,048 3,289 11, ,664 1, Interest (credit line) Other 30,449 9,680 5,056 1,689 1,560 16, ,092 7,572 Total other expenses 573, , ,249 60, , ,876 50,895 62,246 87,730 Total functional expenses $ 1,285,285 $ 2,346,823 $ 1,174,866 $ 225,879 $ 233,131 $ 670,784 $ 229,297 $ 382,313 $ 515,050 The accompanying notes are an integral part of these financial statements. 5

8 STATEMENTS OF FUNCTIONAL EXPENSES Year Ended June 30, 2018 (with Summarized Comparative Totals For The Year Ended June 30, 2017) Personnel expenses Salaries Employee benefits Total personnel expenses Other expenses Professional fees/contract services Supplies Phone Postage Building occupancy Equipment purchases/repair/maintenance Travel Printing and duplication Employee development Insurance Volunteer In-kind services In-kind rent Special events Depreciation and amortization Interest (credit line) Other Total other expenses Total functional expenses Caregiver Training Los Angeles Total Program General & Total Supporting Total Academy Oasis Services Administrative Fundraising Services $ 97,257 $ 110,119 $ 4,212,436 $ 183,694 $ - $ 183,694 $ 4,396,130 $ 4,149,287 17,282 15, ,573 18,995-18, , , , ,212 4,883, , ,689 5,085,698 4,778,564 4,798 71, ,039 6, , ,415 1,081,454 1,311,116 1,836 16,266 94,823 1,380-1,380 96,203 81,396 1,475 2,858 99,678 1,989-1, ,667 82, ,131 10, ,955 11,453 4,786 1, ,398 7,649-7, , , ,448 16, ,557 45, ,403 41,632 3,157-3,157 44,789 41,055 5,514 10,948 80,012 1,442-1,442 81,454 62,335 2,911 1,318 22,881 14,092-14,092 36,973 35, , ,820 39,621 1,042 2,121 21, ,168 15,467-97, , , ,995 37, , , , , , , ,410 33,410 33,410 46,689 1,856-27,464 6,823-6,823 34,287 41, ,389-5,389 5,389 5,918 1,241 5,147 83, , , , ,637-63, ,619 3,018, , , ,913 3,629,653 3,404,619 $ 178,490 $ 659,831 $ 7,901,749 $ 539,451 $ 274,151 $ 813,602 $ 8,715,351 $ 8,183,183 The accompanying notes are an integral part of these financial statements. 6

9 STATEMENTS OF CASH FLOW Years Ended Cash flows from operating activities Change in net assets $ 172,162 $ 425,812 Adjustments to reconcile changes in net assets to net cash used in operating activities: Depreciation and amortization 34,287 41,062 Net investment return (940,516) (1,072,015) Provision for (recovery of) doubtful accounts 5,086 (17,607) Changes in operating assets and liabilities: Cash held in trust 345 (129) Grants and contributions receivable (137,475) (32,719) Accounts receivable (8,452) (12,155) Prepaid expenses and other assets 1,513 8,268 Accounts payable and accrued expenses 42,464 (96,818) Deposits held in trust (345) 129 Deferred revenue and other liabilities (33,300) 10,186 Net cash used in operating activities (864,231) (745,986) Cash flows from investing activities Proceeds from sales of investments 10,419,452 5,021,796 Purchases of investments (9,719,402) (4,313,704) Net cash provided by investing activities 700, ,092 Cash flows from financing activities Proceeds from line of credit 670, ,000 Payments on line of credit (500,000) (250,000) Net cash from financing activities 170,000 - Net change in cash and cash equivalents 5,819 (37,894) Cash and cash equivalents, beginning of year 96, ,627 Cash and cash equivalents, end of year $ 102,552 $ 96,733 Supplemental cash flow disclosure Interest paid $ 5,389 $ 5,918 The accompanying notes are an integral part of these financial statements. 7

10 NOTE 1 ORGANIZATION AND NATURE OF ACTIVITIES WISE & Healthy Aging (the Organization ) is a result of the November 1, 2007 merger between WISE Senior Services and the Center for Healthy Aging. The Organization is a multiservice, 501(c)(3) not-for-profit corporation serving older adults and their families and caregivers throughout Los Angeles County, with emphasis on low-income and/or underserved individuals. The Organization offers vital support services and programs that promote and improve the well-being, independence, and self-esteem of seniors and prevention of premature institutionalization whenever possible. From the active senior looking for meaningful volunteer opportunities to the frail senior resident of a nursing home, the Organization seeks to enhance quality of life. The Organization empowers those seniors who are at risk when alone, have a physical or mental impairment, want to live in their own home, are lonely or depressed and/or are at risk for exploitation by others. Programs and support services the Organization provides include: Adult Day Service Center, Benefits Enrollment Center, Caregiver Support, Caregiver Training Academy, Care Management (In-Home Services), City and County of Los Angeles Long-Term Care Ombudsman Program, Club 1527, Elder Abuse Prevention Services, FAST (Financial Abuse Specialist Team), Financial and Legal Clinics, WISE Diner Healthy Lunches Program (within City of Santa Monica), Medicare Insurance Counseling, Mental Health Services, a Peer Counseling Program, Support Groups, Training & Education Center, Transportation & Mobility Program, Information & Referral Services, Volunteer Opportunities, and WISE HomeCare. In addition to receiving program income from private paying clients, the Organization is partially funded by the State of California General Fund, State of California Department of Aging, County of Los Angeles Community and Senior Services (through the Older Americans Act of 1965, as amended) and County of Los Angeles Department of Mental Health, City of Los Angeles Department of Aging, City of Santa Monica, as well as from generous corporate and private philanthropic sources. NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Comparative Financial Information The financial statements include certain prior-year summarized information. Such information does not include sufficient detail to constitute a presentation in conformity with U.S. GAAP. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended June 30, 2017, from which the summarized information was derived. 8

11 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Cash Equivalents The Organization considers all cash and highly liquid financial instruments with original maturities of three months or less, and which are neither held for nor restricted by donors for long-term purposes, to be cash and cash equivalents. Cash and highly liquid financial instruments restricted to permanent endowment or other long-term purposes are excluded from this definition. Cash Held in Trust The Organization maintains a bank account for several of its clients, whereby retirement income or other deposits are collected, and bills are managed and paid on their behalf. Undisbursed funds, which are held exclusively for the benefit of these clients, was $0 and $345 at, respectively. Receivables and Credit Policies Accounts receivable consist primarily of noninterest-bearing amounts due for services. The Organization determines the allowance for uncollectable accounts receivable based on historical experience, an assessment of economic conditions, and a review of subsequent collections. Accounts receivable are written off when deemed uncollectable. At June 30, 2018 and 2017, the allowance was $11,216 and $6,130, respectively. Grants and Contributions Receivable The Organization records unconditional promises to give expected to be collected within one year at net realizable value. The Organization determines the allowance for uncollectable grants and contributions receivable based on historical experience, an assessment of economic conditions, and a review of subsequent collections. Promises to give are written off when deemed uncollectable. At, management determined there was no allowance necessary. Property and Equipment Property and equipment are stated at cost or at their estimated fair value at the date of donation. Depreciation is provided using the straight-line method over the estimated useful lives of the assets. Amortization of leasehold improvements is provided using the straight-line method over the remaining term of the lease or the useful life of the improvement, whichever is shorter. The estimated useful lives of the related assets are as follows: Leasehold improvements Furniture, fixtures and equipment lesser of years, or life of the lease 5 7 years Under the terms of certain contracts, the Organization is required to transfer ownership of all fixed assets to other authorized programs or agencies upon termination of the programs. 9

12 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments The Organization records investment purchases at cost, or if donated, at fair value on the date of donation. Thereafter, investments are reported at their fair values in the statement of financial position. Net investment return/(loss) is reported in the statements of activities and consists of interest and dividend income, realized and unrealized capital gains and losses, less investment management and custodial fees. Impairment of Long-lived Assets Long-lived assets, such as property and equipment and intangible assets, are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. If circumstances require that a long-lived asset be tested for possible impairment, the Organization first compares undiscounted cash flows expected to be generated by an asset to the carrying value of the asset. If the carrying value of the long-lived asset is not recoverable on an undiscounted cash flow basis, an impairment loss is recognized to the extent that the carrying value exceeds its fair value less the cost of disposal or net realizable value. Fair value is determined through various valuation techniques, including discounted cash flow models, quoted market values and third-party independent appraisals, as considered necessary. No impairment losses were recognized during the years ended June 30, 2018 or Classes of Net Assets To ensure observance of certain constraints and restrictions placed on the use of resources, the accounts of the Organization are maintained in accordance with the principles of net assets accounting. This is the procedure by which resources for various purposes are classified for accounting and reporting purposes into net asset classes that are in accordance with specified activities or objectives. Accordingly, all financial transactions have been recorded and reported by net asset class as follows: Unrestricted. These generally result from revenues generated by receiving unrestricted contributions, providing services and receiving interest from investments less expenses incurred in providing program-related services, raising contributions and performing administrative functions. Temporarily Restricted. The Organization reports gifts of cash and other assets as temporarily restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires that is, when a stipulated time restriction ends, or the purpose of the 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. Permanently Restricted. These net assets are received by donors who stipulate that resources are to be maintained permanently but permit the Organization to expend all of the income (or other economic benefits) derived from the donated assets. 10

13 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Contributions and Revenue Revenue is recognized when earned. Program service fees and payments under costreimbursable contracts received in advance are deferred to the applicable period in which the related services are performed, or expenditures are incurred, respectively. Contributions are recognized when cash, securities or other assets, an unconditional promise to give, or notification of a beneficial interest is received. Conditional promises to give are not recognized until the conditions on which they depend have been substantially met. Donated Services and In-kind Contributions Volunteers contribute significant amounts of time to the Organizations program services, administration, and fundraising activities; however, the financial statements do not reflect the value of these contributed services because they do not meet recognition criteria prescribed by U.S. GAAP. Contributed goods and rent are recorded at fair value at the date of donation. The Organization records specialized donated professional services at the respective fair values of the services received (see Note 9). Use of Estimates The preparation of financial statements in conformity with U.S. GAAP 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 financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Advertising Advertising expenses are charged to expense as incurred or the first time the advertising activity takes place. For the years ended, advertising expense totaled $40,321 and $36,910, respectively. Functional Allocation of Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the statements of activities. The statements of functional expenses present the natural classification detail of expenses by function. Accordingly, certain costs have been allocated among the programs and supporting services benefited based on physical space used, number of staff, and salaries of staff. Reclassifications Certain reclassifications of amounts previously reported have been made to the accompanying financial statements to maintain consistency between periods presented. The reclassifications had no impact on previously reported net assets. 11

14 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Financial Instruments and Credit Risk The Organization manages deposit concentration risk by placing cash, money market accounts, and certificates of deposit with financial institutions believed to be creditworthy. At times, amounts on deposit may exceed insured limits or include uninsured investments in money market mutual funds. To date, the Organization has not experienced losses in any of these accounts. Credit risk associated with accounts receivable and promises to give is considered to be limited due to high historical collection rates and because substantial portions of the outstanding amounts are due from governmental agencies, and foundations supportive of the Organization s mission. Investments are made by diversified investment managers whose performance is monitored by the Organization and the Finance Committee of the Board of Directors. Although the fair values of investments are subject to fluctuation on a year-to-year basis, the Organization and the Finance Committee believe that the investment policies and guidelines are prudent for the long-term welfare of the Organization. Major Contributors With respect to grants, contributions, and accounts receivables, the Organization routinely assesses the financial strength of its donors and, as a consequence, believes that credit exposure is limited. As of and for the year ended June 30, 2018, two contributors accounted for 55% of grants, contributions and accounts receivables; two contributors accounted for 52% of total revenue and support. As of and for the year ended June 30, 2017, three contributors accounted for 70% of grants, contributions and accounts receivables; two contributors accounted for 46 % of total revenue and support. Major Suppliers As of June 30, 2018, one supplier accounted for approximately 39% of accounts payable (see Note 11). As of June 30, 2017, one supplier accounted for approximately 58% of accounts payable. Management feels that, given the nature of these products and availability from alternative providers, potential risk to the Organization resulting from supply concentrations is minimal. Income Taxes The Organization is a not-for-profit organization that is exempt from income taxes under Internal Revenue Code 501(c)(3) and California Revenue and Taxation Code 23701(d). Accordingly, no provisions for income taxes or related credits are included in these financial statements. The Organization recognizes the impact of tax positions in the financial statements if that position is more likely than not to be sustained on audit by tax authorities, based on the technical merits of the position. The Organization recognizes potential accrued interest and penalties related to uncertain tax positions in income tax expense. During the years ended, the Organization performed an evaluation of uncertain tax positions and did not identify any matters that would require recognition in the financial statements or any which may have an effect on its tax-exempt status. 12

15 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements In May 2014, the FASB issued ASU , Revenue from Contracts with Customers (Topic 606), to supersede nearly all existing revenue recognition guidance under U.S. GAAP. The core principle of ASU is to recognize revenues when promised goods or services are transferred to customers in an amount that reflects the consideration to which an entity is expected to be entitled for those goods or services. ASU defines a five-step process to achieve this core principle and, in doing so, it is possible more judgment and estimates may be required within the revenue recognition process than required under existing U.S. GAAP, including identifying performance obligations in the contract, estimating the amount of variable consideration to include in the transaction price, and allocating the transaction price to each performance obligation. ASU , as deferred one year by ASU , will be effective for fiscal years beginning after December 15, 2018, using either of two methods: (a) retrospective to each prior reporting period presented with the option to elect certain practical expedients as defined within ASU ; or (b) retrospective with the cumulative effect of initially applying ASU recognized at the date of initial application and providing certain additional disclosures as defined in ASU The Organization has not yet selected a transition method and is currently evaluating the effect that the standard will have on the financial statements. In January 2016, the FASB issued ASU , Financial Instruments Overall (Subtopic ): Recognition and Measurement of Financial Assets and Financial Liabilities, which updates certain aspects of recognition, measurement, presentation, and disclosure of financial instruments. ASU will be effective for the Organization for fiscal years beginning after December 15, The Organization is currently evaluating the impact of adoption of this standard on its financial statements. In February 2016, the FASB issued ASU , Leases (Topic 842), which sets out the principles for the recognition, measurement, presentation, and disclosure of leases for both lessees and lessors. The new standard requires lessees to apply a dual approach, classifying leases as either finance or operating leases based on the principle of whether or not the lease is effectively a financed purchase by the lessee. This classification will determine whether lease expense is recognized based on an effective interest method or on the straight-line basis over the term of the lease. A lessee is also required to record a right-of-use asset and a lease liability for all leases with a term of greater than 12 months regardless of their classification. Leases with a term of 12 months or less will be accounted for similar to existing guidance for operating leases today. The new standard requires lessors to account for leases using an approach that is substantially equivalent to existing guidance for sales-type leases, directfinancing leases, and operating leases. ASU will be effective for the Organization for fiscal years beginning after December 15, The Organization is currently evaluating the impact of its pending adoption of the new standard on its financial statements. 13

16 NOTE 2 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Recent Accounting Pronouncements (Continued) In June 2016, the FASB issued ASU , Financial Instruments Credit Losses (Topic 326): Measurement of Credit Losses on Financial Statements, which requires a financial asset measured at amortized cost basis to be presented at the net amount expected to be collected. The measurement of expected credit losses is based on relevant information about past events, including historical experience, current conditions, and reasonable and supportable forecasts that affect the collectability of the reported amount. ASU will be effective for fiscal years beginning after December 15, 2020 and the transition method will be a cumulativeeffect adjustment to net assets as of the beginning of the first reporting period. The Organization is currently evaluating the impact the adoption of this guidance will have on its financial statements. In August 2016, the FASB issued ASU , Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, which simplifies and improves how a not-forprofit organization classifies its net assets, as well as the information it presents in financial statements and notes about its liquidity, financial performance, and cash flows. Among other changes, the ASU replaces the three current classes of net assets with two new classes, net assets with donor restrictions and net assets without donor restrictions, and expands disclosures about the nature and amount of any donor restrictions. ASU is effective for fiscal years beginning after December 15, 2017 and interim periods within fiscal years beginning after December 15, 2018, with early adoption permitted. The Organization is currently evaluating the impact the adoption of this guidance will have on its financial statements. In November 2016, the FASB issued ASU , Statement of Cash Flows (Topic 230): Restricted Cash, which provides guidance on the presentation of restricted cash or restricted cash equivalents in the statement of cash flows. ASU requires that amounts generally described as restricted cash or restricted cash equivalents be included with cash and cash equivalents when reconciling the beginning-of-period and end-of-period total amounts shown on the statement of cash flows. ASU will be effective for the Organization beginning on July 1, The Organization believes the adoption of this guidance will not have a material effect on its financial statements. In June 2018, the FASB issued ASU , Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting Guidance for Contributions Received and Contributions Made, which assists entities in (1) evaluating whether transactions should be accounted for as contributions (nonreciprocal transactions) within the scope of Topic 958, Not-for-Profit Entities, or as exchange (reciprocal) transactions subject to other guidance and (2) determining whether a contribution is conditional. ASU should be applied on a modified prospective basis and retrospective application is permitted. ASU will be effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, The Organization is currently evaluating the impact of the adoption of this guidance on its financial statements. 14

17 NOTE 3 FAIR VALUE MEASUREMENT AND DISCLOSURE The Organization reports certain assets at fair value in the financial statements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction in the principal, or most advantageous, market at the measurement date under current market conditions regardless of whether that price is directly observable or estimated using another valuation technique. Inputs used to determine fair value refer broadly to the assumptions that market participants would use in pricing the asset or liability, including assumptions about risk. Inputs may be observable or unobservable. Observable inputs are inputs that reflect the assumptions market participants would use in pricing the asset or liability based on market data obtained from sources independent of the reporting entity. Unobservable inputs are inputs that reflect the reporting entity s own assumptions about the assumptions market participants would use in pricing the asset or liability based on the best information available. For the year ended June 30, 2018, the application of valuation techniques applied to similar assets and liabilities has been consistent with the techniques applied during the fiscal year ended June 30, A three-tier hierarchy categorizes the inputs as follows: Level 1 Quoted prices in active markets for identical assets or liabilities Level 2 Inputs other than Level 1 that are observable, either directly or indirectly, such as 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 for substantially the full term of the assets or liabilities Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities The Organization s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the instrument. Investments are financial instruments that are classified within Level 1, because these accounts were valued primarily using quoted market prices utilizing market-observable inputs. 15

18 NOTE 3 FAIR VALUE MEASUREMENT AND DISCLOSURE (Continued) The following table summarizes the Organization s investments by the fair value hierarchy levels as of June 30, 2018: Level 1 Level 2 Level 3 Total Operating Investments: Cash equivalents $ 23,876 $ - $ - $ 23,876 Bond funds 4,286, ,286,616 Equity funds 6,478, ,478,476 Total operating investments 10,788, ,788,968 Endowment Investments: Cash equivalents 8, ,249 Bond funds 871, ,577 Equity funds 1,322, ,322,579 Total endowment investments 2,202, ,202,405 Total assets at fair value $ 12,991,373 $ - $ - $ 12,991,373 The following table summarizes the Organization s investments by the fair value hierarchy levels as of June 30, 2017: Level 1 Level 2 Level 3 Total Operating Investments: Cash and cash equivalents $ 8,838 $ - $ - $ 8,838 Bond funds 3,717, ,717,372 Equity funds 6,934, ,934,509 Total Operating investments 10,660, ,660,719 Endowment Investments: Cash and cash equivalents 4, ,131 Bond funds 750, ,173 Equity funds 1,335, ,335,885 Total restricted investments 2,090, ,090,189 Total assets at fair value $ 12,750,908 $ - $ - $ 12,750,908 16

19 NOTE 3 FAIR VALUE MEASUREMENT AND DISCLOSURE (Continued) Net investment return for the years ended June 30, consisted of the following: Dividend and interest income $ 465,520 $ 367,142 Net investment gains 474, ,874 Total $ 940,516 $ 1,072,016 NOTE 4 EQUIPMENT AND LEASEHOLD IMPROVEMENTS Equipment and leasehold improvements consisted of the following at June 30: Leasehold improvements $ 592,563 $ 592,563 Furniture, fixtures and equipment 371, , , ,751 Accumulated depreciation (705,951) (671,665) $ 257,800 $ 292,086 NOTE 5 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets, and changes thereon as of and for the year ended June 30, 2018 are comprised of: Available Released Available June 30, New from June 30, 2017 Revenues Restriction 2018 Care Management $ 97,198 $ 86,622 $ (172,109) $ 11,711 Ombudsman Program 18,627 32,500 (24,065) 27,062 Adult Day Service Center 23,506 6,855 (30,361) - Elder Abuse Prevention - 53,000 (29,256) 23,744 Training and Education 25, ,500 (37,400) 236,457 Los Angeles Oasis Partnership - 121,707 (55,424) 66,283 General Fund - 26,455 (26,320) 125 Unappropriated Endowment Earnings 828, ,046 (42,689) 937,668 Total $ 992,999 $ 727,765 $ (417,624) $ 1,303,050 17

20 NOTE 5 TEMPORARILY RESTRICTED NET ASSETS (Continued) Temporarily restricted net assets, and changes thereon as of and for the year ended June 30, 2017 are comprised of: Available Released Available June 30, New from June 30, 2016 Revenues Restriction 2017 Care Management $ - $ 180,000 $ (82,802) $ 97,198 Ombudsman Program 20,000 32,500 (33,873) 18,627 Adult Day Service Center - 65,000 (41,494) 23,506 Mental Health Services 20,000 - (20,000) - Para Transit 20,000 - (20,000) - Elder Abuse Prevention - 27,818 (27,818) - Training and Education - 57,000 (31,643) 25,357 General Fund 149,513 23,215 (172,728) - Unappropriated Endowment Earnings 698, ,451 (42,178) 828,311 Total $ 907,551 $ 557,984 $ (472,536) $ 992,999 NOTE 6 ENDOWMENTS The Organization has adopted the State of California-enacted version of the Uniform Prudent Management of Institutional Funds Act (UPMIFA). The Organization classifies all gifts that contain a donor-imposed permanent restriction as permanently restricted funds on the statement of financial position. Each gift is recorded at its fair value on the date of receipt and will remain at that value in accordance with the current policy of the Board of Directors. All net appreciation earned by the donor-imposed permanently restricted funds is classified as temporarily restricted net assets until appropriated for expenditure by the Organization, or donor-specified amounts must be added to endowment principal. Funds with Deficiencies From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires the Organization to retain as a fund of perpetual duration. In accordance with U.S. GAAP, deficiencies of this nature are reported in unrestricted net assets; however, there were no such deficiencies as of. 18

21 NOTE 6 ENDOWMENTS (Continued) Return Objectives and Risk Parameters The Organization has adopted an investment policy that attempts to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donorrestricted funds that the Organization must hold in perpetuity or for donor-specified periods. Under this policy, as approved by the Board of Directors, the Organization expects its endowment funds, over time, to provide an annual rate of return over a trailing three-year period, net of investment expense, which is expected to outperform the greater of a) the CORE Consumer Price Index, plus 5%, or b) the Portfolio Benchmark, plus 0.5%, assuming a moderate level of investment risk. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives and to maximize total return net of investment expenses, the Organization preserves the inflation-adjusted value of the funds. The Organization targets a diversified asset allocation that places a greater emphasis on U.S. stocks and fixed income investments to achieve its long-term return objectives within prudent risk constraints. The Organization s investment policies include the following guidelines provided to the investment manager: Allowable types of investment that can be purchased Asset allocation and rebalancing Quarterly review and monitoring of investments Prohibited types of investment and transaction Spending Policy and How the Investment Objectives Relate to It In determining the annual spending from the investment earnings, the Organization takes into consideration the rate of inflation and real growth of the investment pool. The spending percentage will be determined by the Organization s Investment Committee every year up to a) the CORE Consumer Price Index, plus 5%, or b) the Portfolio Benchmark, plus 0.5%, of the endowment asset value as of the end of the previous fiscal year. The Organization considers the following factors when determining the amount of spending from each donor-imposed permanently restricted fund: Whether the funds would be spent in accordance with donor-imposed use restrictions Other available funds from which this request could be considered Expected returns based upon investment policy The trend of current economic indicators As of June 30, 2018, and 2017, the endowment consisted solely of investments. 19

22 NOTE 6 ENDOWMENTS (Continued) Changes in endowment net assets for the year ended June 30, 2018 are as follows: Endowment net assets, beginning of year Temporarily Permanently Restricted Restricted Total $ 828,311 $ 1,261,878 $ 2,090,189 Net investment income 152,046 2, ,905 Appropriation of endowment assets (42,689) - (42,689) Total change in endowment funds 109,357 2, ,216 Endowment net assets, end of year $ 937,668 $ 1,264,737 $ 2,202,405 Changes in endowment net assets for the year ended June 30, 2017 are as follows: Temporarily Permanently Restricted Restricted Total Endowment net assets, beginning of year $ 698,038 $ 1,259,739 $ 1,957,777 Net investment income 172,451 2, ,590 Appropriation of endowment assets (42,178) - (42,178) Total change in endowment funds 130,273 2, ,412 Endowment net assets, end of year $ 828,311 $ 1,261,878 $ 2,090,189 20

23 NOTE 7 COMMITMENTS AND CONTINGENCIES Leases The Organization leases three facilities under noncancelable operating lease agreements that expire through July 17, The Organization leases its headquarters at the Ken Edwards Center from the City of Santa Monica on a month-to-month basis. The Organization also leases storage space and copiers that expire through January 20, 2019 or under month-to-month lease agreements. Rent expense amounted to $214,155 and $202,501 for the years ended, respectively. In addition, as noted at Note 9, the Organization received in-kind rent on a month-to-month basis of $690,172 and $303,605, respectively, from the City of Santa Monica and Macy s for the year ended June 30, The Organization received in-kind rent of $643,614 from the City of Santa Monica for the year ended June 30, As of June 30, 2018, minimum lease payments required under noncancelable lease agreements for future years ending June 30 are as follows: 2019 $ 96, , , ,505 Total $ 259,696 Government Funding Certain government grants/contracts that the Organization administers and for which it receives funding are subject to audit and final acceptance by government granting agencies. The amount of expenditures that may be disallowed by the grantor, if any, cannot be determined at this time. The Organization expects that such amounts, if any, would not have a significant impact on the financial position of the Organization. Employment Contract The Organization entered into an employment agreement with an officer commencing on July 1, 2015 and ending on June 30, The officer s base salary is $210,000 per year with a built-in increase of 3% per year. 21

24 NOTE 8 LINE OF CREDIT The Organization has a $250,000 unsecured line of credit with a bank that matures on December 15, The line allows borrowing up to $250,000 at the daily Wall Street Journal Prime Rate (5.00% at June 30, 2018). The line of credit also has various financial covenants. As of June 30, 2018, the outstanding balance on the line of credit was $170,000 and, as of June 30, 2018, there were no outstanding balances on the line of credit. For the year ended June 30, 2018, the Organization was in compliance with its financial covenants and nonfinancial requirements. NOTE 9 DONATED SERVICES AND IN-KIND RENT Donated Services During the years ended June 30, 2018, and 2017, the Organization received specialized services from volunteers providing long-term care services for seniors recorded at an estimated fair value of $539,722 and $499,995, respectively. Donated professional services for the year ended June 30, 2018, is as follows: Program Services Care Management $ 43,232 Ombudsman Program 239,074 Adult Day Service Center 144,093 Elder Abuse Prevention 16,260 Los Angeles Oasis Partnership 97,063 Donated professional services for the year ended June 30, 2017, is as follows: $ 539,722 Program Services Care Management $ 28,098 Ombudsman Program 358,290 Adult Day Service Center 107,937 Training and Education 5,670 $ 499,995 22

25 NOTE 9 DONATED SERVICES AND IN-KIND RENT (Continued) In-kind Rent The Organization records contributed rent for its headquarters and three Macy s facilities for the Los Angeles Oasis Partnership Program, which are measured as the difference between the rent s fair market value per square foot and the actual amount paid. This contribution is recorded as a revenue and expense in the period in which the facilities are occupied and not as a temporarily restricted contribution at the lease inception due to the conditional nature of the lease with the City of Santa Monica and Macy s. As a result, during the years ended June 30, 2018 and 2017, the Organization recorded $993,777 and $643,614, respectively, as in-kind rent. NOTE 10 EMPLOYEE RETIREMENT PLAN The Organization maintains a 401(k) plan (the Plan ), which provides eligible employees with retirement benefits in accordance with the Plan. The Organization has the option to make discretionary matching contributions to the Plan each year where the contribution does not exceed the federally determined maximum amount. The Organization made contributions totaling $40,471 and $28,880 for the years ended, respectively. NOTE 11 RELATED PARTY TRANSACTIONS For the years ended, the Organization paid $825,708 and $485,354, respectively, for non-medical home care services to a company in which a Board director of the Organization is a principal shareholder. As of, the Organization owed $113,508 and $169,528, respectively, to this related party and such amounts are included in accounts payable in the accompanying Statements of Financial Position. During the years ended, the Organization received contributions from members of the Board of Directors totaling $50,125 and $33,000, respectively. NOTE 12 SUBSEQUENT EVENTS Management evaluated all activity through November 21, 2018 (the date the financial statements were available to be issued). 23