LIFETIES, INC. Financial Statements. For the year ended June 30, (With Independent Auditor s Report thereon)

Transcription

1 Financial Statements (With Independent Auditor s Report thereon)

2 LifeTies, Inc. Table of Contents Independent Auditor s Report 1-2 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 3-4 Page Statement of Financial Position 5 Statement of Activities 6 Statement of Functional Expenses 7 Statement of Cash Flows 8 Notes to Financial Statements 9-17

3 INDEPENDENT AUDITOR S REPORT To the Board of Trustees LifeTies, Inc. We have audited the accompanying financial statements of LifeTies, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2018, and the related statement 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. Auditors Responsibility 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 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 audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of LifeTies, Inc. as of June 30, 2018, 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated October 26, 2018, on our consideration of LifeTies, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grants 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 LifeTies, Inc. s internal control over financial reporting and compliance. HOLMAN FRENIA ALLISON, P.C. Certified Public Accountants October 26, 2018 Toms River, New Jersey 2

5 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 To the Board of Trustees of LifeTies, Inc. 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 financial statements of LifeTies, Inc., as of and for the year ended June 30, 2018, and the related notes to the financial statements, which collectively comprise LifeTies, Inc. s basic financial statements, and have issued our report thereon dated October 26, Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered LifeTies, Inc.'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 financial statements, but not for the purpose of expressing an opinion on the effectiveness of LifeTies, Inc. s internal control. Accordingly, we do not express an opinion on the effectiveness of LifeTies, Inc. 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 entity s 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. 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. 3

6 Compliance and Other Matters As part of obtaining reasonable assurance about whether LifeTies, Inc.'s 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 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 entity 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 entity s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. HOLMAN FRENIA ALLISON, P.C. Certified Public Accountants October 26, 2018 Toms River, New Jersey 4

7 Statement of Financial Position June 30, ASSETS Current assets: Cash $ 73,719 Accounts receivable 145,184 Prepaid expenses 3,332 Total current assets 222,235 Property and equipment,net 269,215 Security deposit 5,335 Total assets $ 496,785 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ 9,278 Accrued expenses 46,969 Note payable - current portion 6,935 Mortgage payable - current portion 8,400 Total current liabilities 71,582 Long term liabilities: Note payable - noncurrent portion 16,610 Mortgage payable - noncurrent portion 335,949 Total liabilities 424,141 Net assets: Unrestricted 59,434 Temporarily restricted 13,210 Total net assets 72,644 Total liabilities and net assets $ 496,785 The accompanying notes are an integral part of these financial statements. 5

8 Statement of Activities June 30, 2018 Temporarily Unrestricted Restricted Total Support and revenue: State of NJ, DCF contract $ 238,875 $ - $ 238,875 Medicaid 1,254,764-1,254,764 Grants 64,857 8,000 72,857 State of NJ, clothing allowance 2,325-2,325 Note forgiveness 6,935-6,935 Public donations 45,759-45,759 Special events 42,461 7,383 49,844 Interest income Miscellaneous 1,327-1,327 Net assets released from restrictions 2,173 (2,173) - Total support and revenue 1,659,650 13,210 1,672,860 Expenses: Program services 1,409,554-1,409,554 Management and general 285, ,094 Fundraising 35,827-35,827 Total expenses 1,730,475-1,730,475 Changes in net assets (70,825) 13,210 (57,615) Net assets: Beginning of year 86,174-86,174 Prior period adjustment 44,085-44,085 End of year 59,434 13,210 72, The accompanying notes are an integral part of these financial statements. 6

9 Program Services Supporting Services Total TILT Mary's Family Program Management Rainbow Triad Mentoring Place Engagement Services and General Fundraising Total Total $ 695,424 $ 524,618 $ 51,812 $ 125,196 $ 12,504 $ 1,409,554 $ 285,094 $ 35,827 $ 1,730,475 LIFETIES, INC. Statement of Functional Expenses 7 Salaries $ 395,162 $ 298,105 $ 35,569 $ 37,535 $ 9,242 $ 775,613 $ 219,844 $ 17,500 $ 1,012,957 Taxes and benefits 68,167 51,424 6,593 11,096 1, ,286 37,373 2, ,251 Clothing 6,573 4, , ,532 Computer maintenance and supplies 9,887 7,458 2,400 1,700-21, ,445 Consultants and professional fees 1,831 1, ,213 18,205-21,418 Depreciation 23,078 17, ,487 6,175-46,662 Dues and subscriptions 4,024 3, , ,182 Enrichment expenses 20,998 15, ,885-38, ,963 Fundraising expenses ,735 15,735 Insurance 26,646 20, , ,388 Interest 7,543 5, ,134 2,653-16,787 Materials and supplies 40,919 30,868 1,580 1, , ,102 Office supplies 3,031 2, , , ,385 Recreation 3,720 2, , ,667 Rent 1,977 1,491-47,165-50, ,633 Repairs and maintenance - auto 1,492 1, , ,885 Repairs and maintenance - general 36,060 27,203-10, , ,310 Specific assistance to clients 2,240 1,689 3, , ,244 Staff training and conferences 3,174 2, , , ,385 Telephone 20,864 15, , , ,026 Utilities 18,055 13,621-5,105-36, ,781 Vehicle and mileage expense (18) (13) 411 1,357-1, ,737 The accompanying notes are an integral part of these financial statements.

10 Statement of Cash Flows June 30, Cash flows from operating activities: Cash received from fees, grants and contracts $ 1,640,627 Interest received 174 Cash paid to suppliers and employees (1,708,450) Net cash used in operating activities (67,649) Cash flows from financing activities: Principal payments on debt (8,014) Net cash used in financing activities (8,014) Net decrease in cash (75,663) Cash, beginning of year 149,382 Cash, end of year $ 73,719 Adjustments to reconcile change in net assets to net cash used in operating activities: Change in net assets $ (57,615) Items which did not use cash: Depreciation 46,662 Note forgiveness (6,935) Working captial changes which provided/(used) cash: Accounts receivable (31,984) Security deposits (75) Prepaid expenses (3,332) Accounts payable (12,469) Accrued expenses (1,901) Net cash used in operating activities $ (67,649) The accompanying notes are an integral part of these financial statements. 8

11 NOTE 1: ORGANIZATION AND PURPOSE LIFETIES, INC. Notes to Financial Statements LifeTies, Inc. (the Organization) is a not-for-profit corporation organized under the laws of the State of New Jersey. The purpose of the Organization is to provide quality care and services to youth and young adults in crisis due to abuse, neglect, sexual orientation, homelessness and various chronic illnesses such as Diabetes or Asthma. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Presentation The financial statements of LifeTies, Inc. have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor imposed restrictions. LifeTies, Inc. is required to report information regarding its financial position and activities that resources be classified for accounting and reporting purposes into two net asset categories according to externally (donor) imposed restrictions: Unrestricted net assets Net assets that are not subject to donor-imposed restrictions. These assets may, however, be subjected to Board designation. Temporarily restricted net assets Net assets are subject to donor-imposed restrictions that will be met by the passing of time or by the action of the Organization. Permanently restricted net assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use all or part of the income earned on any related investments for general or specific purpose. As of June 30, 2018, there were no permanently restricted net assets. B. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of management s estimates. Those estimates and assumptions affect the reported amount of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. C. Cash and Cash Equivalents Cash and cash equivalents consist of cash held in checking accounts, money market accounts, and certificates of deposit with original maturities of three months or less, at various financial institutions. D. Accounts Receivable The Organization carries its accounts receivable at cost. On a periodic basis, management evaluates its receivables to determine if any portion is uncollectible. Management has determined that all open receivables are collectible and therefore no allowance account is deemed necessary., accounts receivable were $145,184. 9

12 Notes to Financial Statements NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) E. Property and Equipment Property and equipment are stated at cost, or if contributed, at fair market value at the date of contribution. Depreciation is provided over the estimated useful lives of the applicable asset using the straight-line method. Leasehold improvements are amortized over the respective lease term. Building and building improvements years Vehicles 5 years Equipment 7-10 years Repairs and maintenance which do not extend the useful lives of the related assets are expensed as incurred. F. Deferred Revenues Deferred revenues consist of program grant revenues that pertain to program expenditures in the next fiscal year and service fee revenues related to services to be provided in the next fiscal year. G. Revenue Recognition Resources from restricted grants are recorded as revenue when the restricted expenditures are incurred. Contributions are recorded as revenue when received. Fees for service are recorded at the time the service is provided. All contributions and grants are considered to be available for unrestricted use unless specifically restricted by the donor/grantor. Restricted contributions received and expended within the same period are shown by the Organization as increases in unrestricted revenues and expenses. H. Income Taxes The Organization is a non profit entity as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes. Accordingly, there is no provision for income taxes. The Organization is required to file Form 990, Return of Organization Exempt from Income Tax, with the Internal Revenue Service and the New Jersey Charities Registration & Investigation Form (CRI). The Organization follows the income tax standards for uncertain tax positions. This standard had no impact on the Organization s financial statements. The Organization s income tax returns are subject to review and examination by federal and state authorities. The Organization is not aware of any activities that would jeopardize its tax exempt status or any activities that are subject to tax on unrelated business income taxes. 10

13 Notes to Financial Statements NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) I. Allocation of Expenses Expenses have been allocated to program services based on the reasonable benefit that the programs derived from these expenses. LifeTies, Inc. expenditures are charged to one of six functional cost categories, defined as follows: a. Rainbow House a 24 hour residential Group Home for female adolescents, ages 12-21, who have chronic illnesses such as Diabetes or Asthma, or who are pregnant or parenting. Babies live with the parenting youth up to 18 months at Rainbow. Many of the youth are victims of abuse and/or neglect. Youth are provided with life skills training, parenting classes and support, medical support, educational support and advocacy, mental health services, career services and recreational activities. b. Triad House a 24 hour residential Group Home for youth ages This is a LGBTQ+ friendly home. Youth are provided with life skills training, medical support, educational support and advocacy, mental health services, career services, and recreational activities. Many of the youth are victims of abuse and/or neglect. c. Teenage Independent Living Program (TILT) Mentoring - a program for adolescents ages LifeTies recruits, screens, and trains community volunteers to mentor youth in Rainbow House, Triad House, Mary s Place and in the community. Mentors work on assisting youth with meeting their educational and career goals and exposing them to new experiences. In addition to one on one activities, LifeTies also has group mentor activities as well. They also serve as role models and help establish trusting relationships with a responsible adult. d. Mary s Place a supportive housing program for youth ages who are transitioning into adulthood in New Jersey. It offers efficiency style apartments as well as shared living apartments. An array of supportive services such as educational services, money management skills, recreational services, facilitation and linkages to mental and health services, career services and independent living skills are available for residents. e. Family Engagement Program a program for families whose youth up to age 18 are involved in the Mercer County Juvenile Justice System. LifeTies provides families with information, training and support during all stages the youth moves through the system including what to expect at hearings, probation, in the detention center and alternative treatments to the detention center. Our goal is to encourage and empower the families to advocate for their youth and be involved with every step of the process to reduce recidivism. f. Management and General activities related to policy development, planning, design and implementation of agency programs and services; these activities include administrative, financial and personnel management functions. g. Fundraising activities related to agency efforts to solicit, attract and increase financial support. 11

14 Notes to Financial Statements NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) I. Allocation of Expenses (continued) For purposes of the Statement of Functional Expenses, certain costs have been reclassified from the amounts reported to funding agencies. Such costs, while valid expenses under approved government contracts, are not appropriate program costs for financial statements prepared under generally accepted accounting principles in the United States of America. J. Prepaid Expenses Prepaid expenses are amounts paid in the current year which benefit future periods. K. Impact of Recently Issued Accounting Principles Recently Issued Pronouncements In May 2014, the Financial Accounting Standards Board ( FASB ) issued Accounting Standards Update ( ASU ) No , Revenue from Contracts with Customers, which is applicable for all entities that enter into contracts with customers to transfer goods and services or enter into contracts for the transfer of nonfinancial assets unless those contracts are within the scope of other standards (for example, insurance or lease contracts). This ASU supersedes the revenue recognition requirements in Topic 605, Revenue Recognition, the most industry-specific guidance. The core principle of this ASU is that an entity should recognize revenue to depict the transfer of promised goods or services to customers in an amount that reflects the consideration to which the entity expects. There are five steps to achieve this core principle. Entities can either apply this standard retrospectively to each prior reporting period presented or retrospectively apply with the cumulative effect at the date of initial application. This statement is effective for annual reporting periods beginning after December 15, Early adoption is permitted for fiscal years beginning after December 15, The Organization has not yet implemented this ASU and is currently evaluating the impact of the adoption of this standard on the financial statement and related disclosures. In February 2016, the FASB issued (ASU) , Leases. The new ASU will require lessees to recognize for all leases (with terms of more than 12 months) at the commencement date the following a) a lease liability, which is a lessee s obligation to make lease payments arising from a lease, measured on a discounted basis, and b) a right-of-use asset, which is an asset that represents the lessee s right to use, or control the use of, a specified asset for the lease term. The new lease guidance also simplified the accounting for sale and lease back transactions primarily because lessees must recognize lease assets and lease liabilities. Lessees will no longer be provided with a source of off-balance sheet financing. This standard will be effective for nonpublic businesses for fiscal years beginning after December 15, Early implementation will be permitted. The Organization has not yet implemented this ASU and is currently evaluating the impact of the adoption of this standard on the financial statement and related disclosures. 12

15 Notes to Financial Statements NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) K. Impact of Recently Issued Accounting Principles (continued) In August 2016, the FASB issued (ASU) , Not-for-Profit Entities: Topic 958. The amendments in this update affect not-for-profit entity s (NFP s) and the users of their general purpose financial statements. The amendments in this update make certain improvements to the current net asset classification requirements and the information presented in financial statements and notes about a not for profit s liquidity, financial performance, and cash flows. The amendments in the ASU are effective for annual financial statements issued for fiscal years beginning after December 15, The Organization has not yet implemented this ASU and is currently evaluating the impact of the adoption of this standard on the financial statement and related disclosures. In January 2017, the FASB issued (ASU) , Not-for-Profit Entities Consolidation (Subtopic ). The amendments in this update apply to a not for profit entity that is a general partner or a limited partner of a for-profit limited partnership or a similar legal entity. These amendments clarify when a not-for-profit entity that is a general partner or a limited partner should consolidate a for-profit limited partnership or similar legal entity once the amendments in Accounting Standards Update No , Consolidation (Topic 810): Amendments to the Consolidation Analysis, become effective. Effective for NFP s for fiscal years beginning after December 15, Implementation of this Statement did not impact the Organization s financial statements. In February 2017, the FASB issued (ASU) , Other Income Gains and Losses from the Derecognition of Nonfinancial Assets (Subtopic ). The amendment clarifies the scope of asset derecognition guidance and accounting for partial sales of nonfinancial assets, such as intangible assets, land, buildings, materials and supplies. It is effective for annual periods beginning after December 15, An entity is required to apply the amendments in ASU at the same time that it applies the new revenue recognition standard (see ASU above). The Organization has not yet implemented this ASU and is currently evaluating the impact of the adoption of this standard on the financial statement and related disclosures. L. Subsequent Events LifeTies, Inc. has evaluated subsequent events occurring after the Statement of Financial Position date through the date of October 26, 2018, which is the date the financial statements were available to be issued. 13

16 Notes to Financial Statements NOTE 3: CASH The cash held by LifeTies, Inc. at June 30, 2018 and reported at fair value, are as follows: 2018 Deposits: Demand deposits $ 73,719 Total deposits $ 73,719 Reconciliation of Statement of Financial Position Current assets: Cash $ 73,719 Total reconciliation $ 73,719 Custodial Credit Risk - Deposits in financial institutions, reported as components of cash and investments had a bank balance of $91,001 at June 30, 2018, which was fully insured by depository insurance. Concentration of Credit Risk - Financial instruments that potentially subject the Organization to concentrations of credit risk consist principally of cash investments. At June 30, 2018, all of LifeTies, Inc. s cash and investments were held by The Bank of Princeton. NOTE 4: PROPERTY AND EQUIPMENT Property and equipment at June 30, 2018 consisted of the following: 2018 Land $ 27,200 Buildings and improvements 508,310 Vehicles 142,403 Equipment 11,099 Subtotal 689,012 Less: accumulated depreciation (419,797) Property and equipment, net 269,215 Depreciation expense for the year ended June 30, 2018 and 2017 was $46,

17 Notes to Financial Statements NOTE 5: MORTGAGE PAYABLE On June 10, 2016, the existing mortgage was refinanced with the Bank of Princeton to lower the interest rate from 6.5% to 4.75%. As part of the refinance, $52,839 additional cash was advanced and the total loan was increased to $360,000. The mortgage is collateralized by 2205 Pennington Road, Ewing, New Jersey. Monthly payments are $2,067 through June Future minimum principal payments are as follows: 2019 $ 8, , , , , and thereafter $ 298, ,349 NOTE 6: LINE OF CREDIT During the year ended June 30, 2018, LifeTies, Inc. increased their line of credit from the Bank of Princeton from $50,000 to $100,000. The maturity date is February 8, 2019 and interest is payable at the prime rate plus 1%. There were no borrowings on this line during the year ended June 30, NOTE 7: NOTES PAYABLE STATE OF NEW JERSEY Notes payable to the State of New Jersey are pursuant to capital funds contracts for a period of twenty years. As per the contracts, the State of New Jersey will reduce the notes annually by amounts set forth in the contracts, provided that the facility is maintained as an approved facility. The Organization has agreed to maintain its facility as an approved facility for New Jersey Division of Child Protection and Permanency (DCPP) clients for twenty years in accordance with the capital funds contracts. Should the facility cease to be an approved facility prior to the end of the contract period, the entire remaining balance of the notes will be due to the State of New Jersey immediately. These notes are non-interest bearing. 15

18 Notes to Financial Statements NOTE 7: NOTES PAYABLE STATE OF NEW JERSEY (continued) Notes payable at June 30, 2018 consist of the following: Cumulative Note Advanced Note Payable Length of Date Amount Forgiveness June 30, 2018 Contract 1996 $ 50,000 $ 50,000 $ - 20 years ,600 23,370 1, years ,957 28,458 1, years ,630 6, years ,810 17, years ,240 8, years ,999 8,999 1, years years ,541 15,301 8, years ,000 5,250 9, years $ 188,701 $ 165,156 $ 23,545 Aggregate maturities of notes payable are summarized as follows: June 30, 2019 $ 6, , , , and thereafter 10,282 $ 23,545 NOTE 8: TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes at June 30: 2018 Youth Summer Vacations $ 7,383 Training 5,827 $ 13,210 16

19 Notes to Financial Statements NOTE 9: LEASING ARRANGEMENTS Facilities: The Organization leases space for program services under the terms of three monthly and one non-cancelable operating lease ending May 31, Rent expense for facilities was $50,633 for the year ending June 30, Equipment: The Organization leases office equipment under operating leases with varying expirations. Lease expense for office equipment was $15,143 for the year ending June 30, The minimum lease payments required under the above operating leases as of June 30, 2018 are as follows: 2019 $ 42, , ,740 $ 103,143 NOTE 10: CONTINGENCY CONTRACT REVENUE Grants Awarded - State of New Jersey: Under contracts with the State of New Jersey social service programs, funds are received on the basis of an initial advance and/or reimbursements for monthly expenditures as submitted to the grantor. Grant transactions are subject to audit by appointees of the State. Reimbursements in excess of allowed expenditures must be returned to the State when requested. In addition, some grants require that interest earned on grant deposits be refunded to the grantor agency. Vested interests in grant funded fixed assets and ultimate disposition of the same are according to requirements of the grantor for the specific grant under which the assets were acquired. LifeTies, Inc. has agreed to maintain its facility as an approved facility for New Jersey Division of Child Protection and Permanency (DCPP) clients for twenty years in accordance with its capital funds contracts. Pursuant to the contracts, LifeTies, Inc. has signed notes payable to the State of New Jersey in an initial amount of $188,701. As discussed in Note 7, the State of New Jersey will reduce the notes annually by amounts set forth in the contracts for a period of twenty years. Should the facility cease to be an approved facility prior to the end of the contract period, the entire remaining balance of the notes will be due to the State of New Jersey immediately. NOTE 11: PRIOR PERIOD ADJUSTMENTS During the year ended June 30, 2018, the Organization discovered that it had not recognized fixed assets in the amount of $27,200. Additionally, the Organization had determined that it had recognized liabilities in error in prior years in the amount of $16,885. The correction of this error increased opening net assets by $44,