Financial Statements Year Ended September 30, Virginia Home for Boys and Girls

Transcription

1 Financial Statements Year Ended September 30, 2012 Virginia Home for Boys and Girls

2 Virginia Home for Boys and Girls Contents Page Report of Independent Auditors 1 Consolidated Financial Statements Statement of Financial Position 2 Statement of Activities 3 Schedule of Functional Expenses 4 Statement of Cash Flows 5 Notes to Financial Statements 6-15

3 Report of Independent Auditors Board of Trustees Virginia Home for Boys and Girls We have audited the accompanying statement of financial position of Virginia Home for Boys and Girls (a nonprofit organization) as of September 30, 2012, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the management of Virginia Home for Boys and Girls. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing 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 over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Virginia Home for Boys and Girls as of September 30, 2012, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Richmond, Virginia March 25,

4 Virginia Home for Boys and Girls Statement of Financial Position September 30, 2012, with Comparative Totals for 2011 Temporarily Permanently Total Unrestricted Restricted Restricted Current assets Cash and cash equivalents $ 169,865 $ - $ - $ 169,865 $ 728,877 Accounts receivable: Public and private placements - net 469, , ,861 Other accounts receivable - net 120, ,914 37,528 Pledges receivable 44, , ,227 Notes receivable ,150 Accrued investment income 39, ,637 44,477 Prepaid expenses 36, ,895 48,626 Total current assets 880, ,968 1,590,746 Investments 20,654, ,724-21,100,698 17,773,687 Property and equipment - net 7,698, ,698,668 7,766,715 Other assets Beneficial interest in trusts - 1,348, ,446 2,289,987 2,275,227 Note receivable - 368, , ,329 Land held for investment 345, , ,000 Total assets $ 29,579,610 $ 2,162,999 $ 941,446 $ 32,684,055 $ 30,104,704 Current liabilities Accounts payable $ 295,958 $ - $ - $ 295,958 $ 128,146 Accrued expenses 315, , ,934 Deferred revenue Total current liabilities 611, , ,480 Net assets 28,967,892 2,162, ,446 32,072,337 29,636,224 Total liabilities and net assets $ 29,579,610 $ 2,162,999 $ 941,446 $ 32,684,055 $ 30,104,704 The accompanying notes are an integral part of these financial statements. 2

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6 Virginia Home for Boys and Girls Schedule of Functional Expenses Year Ended June 30, 2012, with Comparative Totals for 2011 (Next Page)

7 Virginia Home for Boys and Girls Schedule of Functional Expenses Year Ended September 30, 2012, with Comparative Totals for 2011 Program Services Residential Programs J.G. Wood School Independent Living Program Foster Care Building and Grounds Service Health Services Clinical Salaries 980,276 $ 609,366 $ 149,107 $ 53,871 $ 88,156 $ 124,290 $ 173,264 Employee benefits 158,125 51,585 27,594 9,231 11,906 21,650 25,617 Payroll taxes 112,383 45,170 10,665 4,343 6,517 8,616 12,497 Total personnel costs 1,250, , ,366 67, , , ,378 Child family services, direct 93,374 84,623 24, , , Occupancy 94,189 37,884 12,704 2,885 7,759 12,154 8,594 Equipment and supplies 26,594 8,281 3, ,292 3,537 2,652 Computer maintenance supplies 18,265 5,669 2, ,260 2,520 1,889 Vehicle expense 30,370 5,503 12,214 1,314 4,369 2,482 6,095 Insurance 19,141 5,954 2, ,324 2,646 2,076 Other expenses 65,068 15,616 4,697 3, ,774 6,639 Total expenses before depreciation 1,597, , , , , , ,681 Depreciation 157,006 48,725 21,656 5,414 10,644 21,656 16,242 Total expenses $ 1,754,791 $ 918,376 $ 272,395 $ 189,934 $ 134,580 $ 226,776 $ 255,923

8 Supporting Services Fundraising and Total Total Training and Human Program Other Total Program Management Community Supporting Evaluation Resources Development Programs Services and General Relations Services $ 44,921 $ 55,358 $ 128,512 $ 22,319 $ 2,429,440 $ 410,740 $ 194,411 $ 605,151 $ 3,034,591 $ 2,703,907 12,607 81,285 13,443 2, ,635 42,718 14,580 57, , ,535 2,933 4,120 9,473 1, ,117 34,669 14,636 49, , ,010 60, , ,428 26,311 3,063, , , ,754 3,774,946 3,380,452 5,114 2, (195) 322,428 4, , , ,727 5,731 4,012 8,720 4, ,013 18,852 11,517 30, , ,871 1,979 1,238 11, ,052 4,962 26,349 31,311 95,363 72,414 1, , ,412 40,995 2,520 43,515 80,927 42, ,812 3, ,688 4,146 2,223 6,369 75,057 84,684 1, , ,455 3,777 2,646 6,423 45,878 43,864 12,717 2, ,594 2, , , , , , ,989 89, , ,036 35,536 4,063, , ,741 1,340,689 5,404,324 4,654,087 10,828 7,579 16,242 5, ,406 30,502 21,656 52, , ,163 $ 100,420 $ 161,618 $ 329,278 $ 40,950 $ 4,385,041 $ 717,450 $ 675,397 $ 1,392,847 $ 5,777,888 $ 5,006,250 The accompanying notes are an integral part of these financial statements. 4

9 Virginia Home for Boys and Girls Statement of Cash Flows Year Ended September 30, 2012, with Comparative Totals for Cash flows from operating activities Change in net assets $ 2,436,113 $ (881,518) Adjustments to reconcile to net cash from operating activities: Depreciation 373, ,163 Bad debt 15,150 45,254 Accrued interest added to note receivable (15,405) (14,963) Contributions restricted for investment in property - (10,000) Non-cash gifts - (360,511) Change in value of trusts and annuities (14,760) 115,394 Loss on disposal of assets 10,222 5,390 Realized gain on investments (119,220) (959,267) Unrealized loss (gain) on investments (2,067,578) 1,288,027 Change in: Accounts receivable (186,105) (73,034) Pledges receivable 305,150 27,368 Accrued investment income 4,840 5,640 Prepaid expenses 11,731 (17,480) Accounts payable and accrued expenses 143, ,389 Deferred revenue (400) (6,525) Net cash from operating activities 896,940 (320,673) Cash flows from investing activities Purchase of investments (6,954,363) (12,999,764) Proceeds from sale of investments 5,814,150 13,628,655 Proceeds from sale of property and equipment 5,240 - Purchase of property and equipment (320,979) (98,565) Payments on notes receivable - 6,902 Net cash from investing activities (1,455,952) 537,228 Cash flows from financing activities Contributions received restricted for investment in property - 10,000 Net change in cash and cash equivalents (559,012) 226,555 Cash and cash equivalents - beginning of year 728, ,322 Cash and cash equivalents - end of year $ 169,865 $ 728,877 The accompanying notes are an integral part of these financial statements. 5

10 Virginia Home for Boys and Girls Notes to Financial Statements September 30, Organization and Nature of Activities Virginia Home for Boys and Girls (Home) is a private, non-sectarian, non-profit organization that was founded in 1846 and is located in Richmond, Virginia. The Home operates as a comprehensive child and family services agency providing a variety of programs including residential group homes, alternative day school, foster care, intensive in-home services, independent living, and clinical services for at-risk children and families. Through its programs, the Home serves children from birth to 21 years of age, families, and residential alumni. The five residential group homes are the heart of the Home s campus services, which offer family-style living for boys and girls ages using the highly successful Teaching-Family Model, emphasizing social skills and healthy development. The Home also operates an accredited alternative day school which serves boys and girls, grades 6-12 including residents of the Home as well as students from the surrounding greater Richmond community. The Home is a licensed provider of Therapeutic Foster Care which assists children ages birth to 18 by placing them with extensively trained foster parents to help them succeed and thrive. The intensive inhome services help families solve problems within their own homes rather than through placement outside the home by offering one-on-one support. The independent living program provides counseling and guidance for young men age who are moving towards independence, by providing them social, vocational and lifelong learning skills to develop and prosper as young adults. The Home is primarily supported through placement fees, donor contributions, grants and endowments. 2. Summary of Significant Accounting Policies Basis of Presentation The Home is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted net assets. The financial statements report amounts separately by class of assets as follows: Unrestricted net assets include resources that can be used currently for the general operations of the Home. Temporarily restricted net assets include contributions restricted by donor designation and are reported as increases in temporarily restricted net assets. When a restriction expires either with the passage of time or by actions of the Home, 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 net assets include contributions restricted by donor designation that they be maintained permanently by the Home. At September 30, 2012, permanently restricted net assets consists of the Home s beneficial interest in perpetual trusts. 6

11 Cash and Cash Equivalents The Home considers all short-term debt securities purchased with a maturity of three months or less to be cash equivalents. Cash designated for investment purposes is reported with investments. Allowance for Doubtful Accounts The Home extends unsecured credit in the ordinary course of its activities related to public and private placements. The allowance for doubtful accounts is based upon management s assessment of historical and expected net collections. Receivables are charged against the allowance when deemed to be uncollectible. Subsequent recoveries are added to the allowance. The allowance was $5,000 at September 30, Concentration of Credit Risk Financial instruments that potentially subject the Home to concentration of credit risk consist of interestbearing transaction accounts. The Home places its interest-bearing transactions accounts with high credit quality financial institutions. At times, the Home maintains balances in these accounts in excess of the amount insured by the Federal Deposit Insurance Corporation (FDIC). There were no amounts in excess of insured limits at September 30, Property and Equipment Property and equipment are recorded at cost. Donated items are recorded at fair market value at the date of contribution. Depreciation is computed using the straight-line method and provided over the estimated useful life of each class of depreciable assets as follows: Buildings Building improvements Land improvements Furniture, equipment, computer equipment, and software Vehicles 7 40 years 7 40 years 7 20 years 3 7 years 5 years Maintenance and repairs that do not improve or extend the lives of property and equipment are charged to expense as incurred. Betterments and renewals are capitalized. When assets are sold or retired, their cost and related accumulated depreciation are removed from the accounts and any gain or loss is reported in the statement of activities. Investments Investments in securities are carried at fair value. The fair value of limited partnerships is determined in good faith by external investment managers or other independent sources and reviewed by management. Because these alternative investments are not readily marketable, their estimated value is subject to additional uncertainty and therefore, value realized upon disposition may vary significantly from currently reported values. Unrealized gains and losses are included in the change in net assets. Gains and losses on sales of securities are calculated using the specific identification method and recorded on the trade date. Investments, including real property held for investment, received by gift are recorded at fair value on the date received or pledged, if earlier. 7

12 Investment securities are exposed to several risks, such as interest rate, currency, market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and such changes could materially affect the amounts reported in the Home s financial statements. Donated Assets and Services The Home receives a significant amount of donated services from unpaid volunteers who assist in program services, fund-raising and special projects. Donated services are not recognized as contributions in the Home s financial statements since the recognition criteria under accounting standards were not met. Advertising Costs The Home expenses advertising costs as they are incurred. Advertising expense was $106,091 for Income Taxes Virginia Home for Boys and Girls is exempt from federal and state income taxes under Section 501(c)(3) of the Internal Revenue Code and the tax statutes of the Commonwealth of Virginia; accordingly, the accompanying financial statements do not reflect a provision or liability for federal and state income taxes. The Home has determined that it does not have any material unrecognized tax benefits or obligations as of September 30, Fiscal years ending on or after September 30, 2009 remain subject to examination by federal and state taxing authorities. 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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Subsequent Events In preparing these financial statements, the Home has evaluated events and transactions for potential recognition or disclosure through March 25, 2013, the date the financial statements were available to be issued. Reclassification Certain comparative year figures have been reclassified to conform with the current year s financial statement presentation. 3. Pledges Receivable The Home has pledges receivable of $44,077 at September 30, 2012, all of which are current. 8

13 4. Property and Equipment Major classes of property and equipment consist of the following at September 30, 2012: Land $ 1,320,651 Land improvements 888,020 Buildings and improvements 9,854,368 Furniture and equipment 606,268 Computer equipment and software 456,259 Vehicles 326,525 13,452,091 Less - accumulated depreciation (5,753,423) Depreciation expense was $373,564 for $ 7,698, Investments Investments as of September 30, 2012, are summarized as follows: Cost Fair Value Common stock $ 8,111,886 $ 9,707,059 Mutual funds 4,467,995 4,480,400 Fixed income securities 3,806,505 4,172,700 Limited partnerships master feeder funds 1,207,608 1,164,061 17,593,994 19,524,220 Cash and cash equivalents 1,576,478 1,576,478 $ 19,170,472 $ 21,100, Fair Value Measurement Accounting standards established 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 Level 2 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Home has the ability to access. Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical 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. 9

14 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 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. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at September 30, Common stock: Valued at the closing price reported on the active market on which the stocks are traded. Mutual funds: Valued at the closing price reported on the active market on which the mutual funds are traded. Fixed income securities: Valued at the closing price reported in the financial market in which the fixed income securities are traded, which involves standard pricing and valuation models. Limited partnerships master feeder funds: Valued at the Home s pro-rata interest in the net assets of these entities. Investments held by these entities are valued at prices which approximate fair value. The fair value of certain investments in the underlying entities are determined in good faith by the investment advisors of the respective entities and may not reflect amounts that could be realized upon immediate sale, nor amounts that may be ultimately realized. The advisor may rely on pricing services or other sources to assist in determining the fair value of an investment. Factors considered to determine fair value may include the correlation with price movement of similar securities in the same or other markets; the type, cost and investment characteristics of the security; the business and financial condition of the issuer; and trading or other market data. The estimated fair values may differ significantly from the values that would have been used had a ready market existed for these investments, and these differences could be material. Net asset valuations are provided daily, monthly or quarterly by these entities. Pledges receivable: Valued using the income approach based on discounted cash flows. Beneficial interest in perpetual trusts: Valued using the fair value of the underlying assets of the trust as an estimate for the present value of the expected future cash flows. 10

15 The following tables sets forth by level, within the fair value hierarchy, the Home s assets at fair value as of September 30, 2012: Level 1 Level 2 Level 3 Total Common stock: Large cap core $ 2,330,429 $ - $ - $ 2,330,429 Large cap value 2,282, ,282,534 Large cap growth 2,087, ,087,072 Mid cap value 1,437, ,437,477 Small cap value 1,569, ,569,547 Mutual funds: International 1,083, ,083,550 Emerging markets 1,486, ,486,766 Securities 324, ,324 Bonds 339, ,936 Commodities 212, ,631 World allocation 514, ,462 Foreign large value 518, ,731 Fixed income securities: Corporate bonds - 2,086,766-2,086,766 Corporate mortgage/asset backed securities - 30,849-30,849 Government bonds - 1,511,320-1,511,320 Government asset backed/cmo securities - 186, ,165 Foreign bonds - 314, ,214 Other bonds - 43,386-43,386 Limited partnership master feeder funds - 1,146,747 17,314 1,164,061 14,187,459 5,319,447 17,314 19,524,220 Pledges receivable ,077 44,077 Beneficial interest in perpetual trusts , ,446 Total assets at fair value $ 14,187,459 $ 5,319,447 $ 1,002,837 $ 20,509,743 In relation to the above level 3 investment asset class, the following information is presented regarding the nature of the investments and related commitments. The fair value of the investments in this class has been estimated using the net asset value per share of the investments. Redemption of these investments is restricted as indicated below. Fair Value Unfunded Commitments Redemption Frequency Lock-in Period Limited partnerships master feeder funds Multi-strategy (a) $ 17,314 $ - As available n/a (a) This class includes an investment in a master feeder fund structure. The feeder fund is in a redemption mode and each member s interest will be redeemed as the feeder fund receives redemption proceeds from the master fund. 11

16 The table below sets forth a summary of changes in the fair value of the Home s level 3 investment assets: Limited Partnerships Pledges Receivable Beneficial Interest in Perpetual Trusts Balance September 30, 2011 $ 22,150 $ 349,227 $ 849,657 Unrealized losses net (4,836) - - New pledges - 138,190 - Write offs - (353,196) - Pledge collections - (90,144) - Adjustment to fair value ,789 Balance September 30, 2012 $ 17,314 $ 44,077 $ 941, Note Receivable In 2004, in connection with the capital campaign, the Home received as a contribution a note receivable. The note receivable has a face value of $250,000 with an interest rate of 4.36%. The unpaid balance of the note and all accrued interest thereon is due and payable in full on the earlier of August 30, 2023, or twelve months after the death of the donor and his wife. At September 30, 2012, the balance of the note receivable and accrued interest was $368, Beneficial Interest in Trusts The Home is the beneficiary of various charitable trusts that are managed by third party trustees. The contribution portion of these trusts is recognized as revenue when the Home has the unconditional right to receive benefits under the agreements. During the term of the agreements, any changes in actuarial assumptions are recognized as change in beneficial interest in trusts in the statement of activities. The Home is the beneficiary of four charitable remainder trusts. The Home s beneficial interest in these trusts at September 30, 2012 was $180,992, calculated using discount rates ranging from.62% to 2.42% for The change in the value of the trusts for 2012 was $20,688. The Home is the beneficiary of two charitable lead trusts. The Home receives annual distributions which will continue under the terms of the trusts. The Home s beneficial interest in these trusts at September 30, 2012, was $1,167,550, calculated using discount rates ranging from 1.65% to 2.82% for The change in the value of the trusts during 2012 was ($110,447). The Home has a beneficial interest in four perpetual trusts. The value of the Home s share of the trusts was $941,446 at September 30, The change in value of the trusts was $91,789 for

17 9. Land Held for Investment The Home owns 2 parcels of undeveloped land in Sussex County of approximately 198 acres zoned for agricultural use. The deed to the parcels was recorded in the Home s name on April 22, The land was appraised and is recorded on the statement of financial position as land held for investment in the amount of $345,000. On December 19, 2012, the Home entered into a Purchase and Sale agreement to sell one of the parcels for $300, Restricted Net Assets The net assets of the home are restricted as follows at September 30, 2012: Temporarily Permanently Beneficial interest in trusts $ 1,335,811 $ 941,446 Higher education scholarships 21,822 - Betsy Wade Chinnis scholoarship 20,030 - Glock-Goodwin Extended Education scholarships 14,451 - Alger Higher Education scholarships 38,913 - Independent Living Program home purchase 25,000 - Independent Living Program 51,859 - Capital Campaign 585,113 - Intensive in-home therapy 20,000 - Operations for fiscal year ,000 - Amounts were released from restrictions as follows: $ 2,162,999 $ 941,446 Temporarily Donor dinner $ 11,104 Capital campaign 281,706 Residential services 192,975 J. G. Wood School 11,350 Other 5,931 $ 503, Retirement Plan Effective July 1, 2002, the Home established a 403(b) retirement savings plan for its employees. The retirement savings plan is an individual account plan which provides for the Home to elect to contribute up to 6% of eligible pay to each participant s account. If a participant was also a participant in the prior defined benefit pension plan and was age 50 or older as of July 1, 2002, the Home will make an additional contribution of 1% to 3% of eligible pay, depending on the participant s age and service on that date. If a participant elects to make voluntary contributions on a pretax basis, the Home will also make a matching contribution to the participant s account in the amount of 50% of the first 4% of eligible pay contributed by the participant. The Home s contributions to the plan for 2012 was $37,

18 12. Rent Income The Home leases a acre tract of land to Asbury Automotive North Carolina Real Estate Holdings LLC, located on West Broad Street for use as a surface parking lot under a 20 year agreement expiring in April of Rent is adjusted annually based upon an adjustment fraction per the agreement. Rent income under this lease for 2012 was $70,997. Future minimum rental income, based upon estimated adjustments to the current rental amount under the above operating lease as of September 30, 2012, is as follows: 2013 $ 72, , , , ,308 Thereafter 433,847 $ 795,387 The remaining balance of rent income in the statement of activities includes miscellaneous facility rentals. 13. Commitments Operating Lease The Home leases office equipment under operating leases with terms expiring in April 2014 and February Lease expense was $15,692 for Future minimum commitments under the operating lease for succeeding years ending September 30 are as follows: 2013 $ 13, , , , $ 25, Line of Credit The Home has a revolving working capital line of credit with a bank not to exceed $1,000,000. Interest accrues at a rate of the greater of the bank s prime rate plus.8% or 5.0%. Interest only is due monthly. All principal and accrued interest is due and payable on July 30, As of September 30, 2012, no funds have been advanced on this line. 14

19 15. Comparative Totals The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Home s financial statements for the year ended September 30, 2011 from which the summarized information was derived. * * * * * 15