MAKE THE ROAD NEW YORK AND AFFILIATE. Combined Financial Statements. December 31, 2011 and With Independent Auditors Reports

Transcription

1 MAKE THE ROAD NEW YORK AND AFFILIATE Combined Financial Statements With Independent Auditors Reports

2 Table of Contents Independent Auditors Report... 1 Financial Statements Combined Statements of Financial Position... 2 Combined Statements of Activities and Changes in Net Assets... 3 Combined Statements of Functional Expenses Combined Statements of Cash Flows... 6 Notes to Combined Financial Statements

3 WithumSmith+Brown, PC A Professional Corporation Certified Public Accountants and Consultants One Spring Street New Brunswick, NJ fax Additional Offices in New Jersey, New York, Pennsylvania, Maryland, Colorado and Florida Independent Auditors Report To the Board of Directors, Make the Road New York and Affiliate: We have audited the accompanying combined statements of financial position of Make the Road New York and Affiliate as of and the related combined statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended. These combined financial statements are the responsibility of Make the Road New York and Affiliate's management. Our responsibility is to express an opinion on these combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and 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 combined financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the combined financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall combined financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the combined financial statements referred to above present fairly, in all material respects, the financial position of Make the Road New York and Affiliate as of and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. September 10, 2012

4 Combined Statements of Financial Position Assets (Restated) Current assets Cash and cash equivalents $ 827,364 $ 487,277 Contributions receivable 1,421,830 1,459,556 Grants receivable 444, ,715 Other accounts receivable 2,710 71,001 Prepaid expenses and other current assets 27, ,159 Total current assets 2,723,624 2,785,708 Property and equipment, net 489, ,995 Other assets Beneficial interest in trust 267, ,761 Security deposits 64,733 44,035 Total other assets 331, ,796 $ 3,544,600 $ 3,907,499 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 771,562 $ 514,652 Notes payable 18, ,361 Line of credit 453, ,000 Deferred revenue 88,735 38,383 Total current liabilities 1,331,658 1,074,396 Note payable, net of current portion 41,312 59,673 Deferred rent 129, ,873 Total liabilities 1,502,583 1,247,942 Net assets Unrestricted 476,392 1,280,014 Temporarily restricted 1,565,625 1,379,543 Total net assets 2,042,017 2,659,557 $ 3,544,600 $ 3,907,499 The Notes to Combined Financial Statements are an integral part of these statements. 2

5 Combined Statements of Activities and Changes in Net Assets Years Ended Unrestricted Public support and revenues Contributions Foundations 3,757,713 The Notes to Combined Financial Statements are an integral part of this statement (Restated) Temporarily Temporarily Restricted Total Unrestricted Restricted Total $ $ 1,346,517 $ 5,104,230 $ 2,189,809 $ 1,805,723 $ 3,995,532 Individuals 173, , , ,790 Corporations 91, ,942 70, ,207 Trust , , ,761 Governmental grant revenues 2,490, ,490,540 2,693, ,693,885 Event revenue, net 221, , , ,889 Legal revenue 26, , , ,796 Other income 47, , , ,227 6,809,455 1,346,517 8,155,972 5,859,654 2,128,433 7,988,087 Net assets released due to satisfaction of time and purpose restrictions 1,095,353 (1,095,353) -- 1,908,566 (1,908,566) -- 7,904, ,164 8,155,972 7,768, ,867 7,988,087 Expenses Program services Adult education 839, , , ,146 Youth development 1,692, ,692,253 1,460, ,460,423 Organizing projects 2,229, ,229,495 2,109, ,109,452 Community workforce 337, , , ,406 School-based programs 413, , , ,300 Legal and supportive services 1,644, ,644,414 1,685, ,685,653 7,156, ,156,260 6,773, ,773,380 Supporting services Management and general 839, , , ,817 Fundraising 615, , , ,606 1,455, ,455,434 1,073, ,073,423 8,611, ,611,694 7,846, ,846,803 Increase (decrease) in net assets before other activity (706,886) 251,164 (455,722) (78,583) 219, ,284 Non-operating activity In-kind contributions 47, ,000 16, ,500 Bad debt expense (143,736) -- (143,736) Change in beneficial interest in trust -- (65,082) (65,082) Changes in net assets (803,622) 186,082 (617,540) (62,083) 219, ,784 Net assets, beginning of year as previously recorded 1,280,014 1,379,543 2,659,557 1,497,097 1,159,676 2,656,773 Prior period adjustment (155,000) -- (155,000) Net assets, end of year $ 476,392 $ 1,565,625 $ 2,042,017 $ 1,280,014 $ 1,379,543 $ 2,659,557

6 Combined Statement of Functional Expenses Year Ended Program Services Supporting Services Legal and Management Adult Youth Organizing Supportive Community School-based and Education Development Projects Services Workforce Programs Total General Fundraising Total Total Payroll $ 539,001 $ 405,869 $ 1,112,971 $ 958,823 $ 208,792 $ 204,672 $ 3,430,128 $ 447,019 $ 337,252 $ 784,271 $ 4,214,399 Payroll taxes and benefits 115,144 85, , ,425 53,733 53, ,843 94,845 80, , ,229 Computer maintenance 16,311 10,155 31,236 27,974 7,291 4,993 97,960 8,989 9,046 18, ,995 Consultants 1,037 10,272 30,884 3, ,024 6,889 72,360 79, ,273 Accounting 14,400 8,752 28,196 24,626 6,319 4,298 86,591 7,224 7,160 14, ,975 Audit , ,850 33,850 Depreciation 9,930 7,878 24,123 17,058 3,118 3,718 65,825 7,160 5,953 13,113 78,938 Dues and fees 1, ,373 7, ,687 10,867 3,565 14,432 31,119 Equipment leases 5,479 3,785 10,966 9,357 2,336 1,813 33,736 2,528 3,004 5,532 39,268 Events , ,554 3, ,101 33,655 Insurance 922 2,092 7,092 7, , ,568 19,639 Legal fees Miscellaneous 225 2,538 13,335 17, ,633 45,635 7,118 52,753 86,386 Newsletter Payroll service fees 2,139 1,256 4,102 3, ,777 1,143 1,053 2,196 14,973 Postage 2,702 1,579 5,315 4,772 1, ,369 4,202 15,647 19,849 36,218 Printing 2,224 1,724 7,488 4, ,697 4,234 20,491 24,725 42,422 Rent 60,016 18, ,864 98,550 31,315 11, ,146 33,147 19,759 52, ,052 Repairs and maintenance 4,247 3,202 8,735 8,537 1,458 1,797 27,976 4,503 2,798 7,301 35,277 Staff training and development 1,765 27,787 10,407 2, ,217 15,133 3,560 18,693 61,910 Stipends -- 71, , , ,212 Sub-grant expense 1, , , , ,000 1,443,967 45, ,297 1,489,264 Supplies - food 3,839 29,752 31,730 7,328 1,831 3,326 77,806 11,169 1,780 12,949 90,755 Supplies - other 29,449 32,054 62,447 30,780 7,033 5, ,738 13,860 12,787 26, ,385 Telephone 15,338 8,926 25,887 27,219 5,931 3,694 86,995 6,919 6,625 13, ,539 Travel - local 3,664 13,441 33,549 12, ,800 68,067 1, ,025 70,092 Travel - out of town -- 12,304 7, ,867 24, ,995 44,862 Utilities 8,998 5,457 16,919 14,849 2,741 2,672 51,636 4,257 4,375 8,632 60,268 $ 839,292 $ 1,692,253 $ 2,229,495 $ 1,644,414 $ 337,589 $ 413,217 $ 7,156,260 $ 839,575 $ 615,859 $ 1,455,434 $ 8,611,694 The Notes to Combined Financial Statements are an integral part of this statement. 4

7 Combined Statement of Functional Expenses Year Ended December 31, 2010 Program Services Supporting Services Legal and Management Adult Youth Organizing Supportive Community School-based and Education Development Projects Services Workforce Programs Total General Fundraising Total Total Payroll $ 608,171 $ 441,834 $ 998,661 $ 1,005,818 $ 253,926 $ 102,884 $ 3,411,294 $ 303,840 $ 274,150 $ 577,990 $ 3,989,284 Payroll taxes and benefits 137,849 86, , ,704 54,712 25, ,777 80,214 69, , ,811 Computer maintenance 21,974 12,823 32,506 36,790 6,873 1, ,709 5,604 7,875 13, ,188 Conference and education -- 7, , ,075 Consultants ,440 29,968 4,556 2, ,046 8,535 42,865 51, ,446 Accounting 14,191 8,232 21,094 22,574 3, ,735 3,466 4,544 8,010 78,745 Audit , ,750 24,750 Depreciation 13,171 5,306 18,933 22,413 7,597 2,826 70,246 3,417 5,062 8,479 78,725 Dues and fees ,366 8, ,900 3,965 1,559 5,524 20,424 Equipment leases 4,888 2,974 7,635 8,505 1, ,267 1,302 1,874 3,176 29,443 Insurance 2,622 3,849 9,623 9,912 1, , ,476 2,306 30,376 Miscellaneous ,950 7,723 8,310 5, ,779 43, ,313 88,092 Occupancy Payroll service fees 2,480 1,406 3,699 3, , ,414 13,826 Postage 2, ,569 2, ,915 1,161 14,248 15,409 24,324 Printing 3,124 2,348 12,922 7,365 2, ,118 2,416 7,307 9,723 37,841 Rent 94,290 25, , ,712 28,642 2, ,318 33,451 12,843 46, ,612 Repairs and maintenance 7,213 2,996 10,044 9,643 2, ,679 1,570 1,776 3,346 36,025 Staff training and development -- 8,385 15, ,033 6,852 (217) 6,635 30,668 Stipends 4, , , ,693 Sub-grant expense , ,991 89, ,088,005 49, ,060 1,138,065 Supplies - food 3,348 26,439 33,129 8, ,722 3,102 1,482 4,584 77,306 Supplies - other 31,741 25,358 52,841 25,516 4, ,619 9,077 13,151 22, ,847 Telephone 18,383 9,376 25,478 29,078 5,537 1,511 89,363 5,769 5,421 11, ,553 Travel - local 34 22,795 45,417 16,556 1, , ,876 Travel - out of town 1,590 4,783 20,574 3, ,026 4,709 2,869 7,578 38,604 Utilities 12,566 5,061 16,507 17,460 3,960 1,077 56,631 2,702 3,282 5,984 62,615 $ 987,146 $ 1,460,423 $ 2,109,452 $ 1,685,653 $ 389,406 $ 141,300 $ 6,773,380 $ 600,817 $ 472,606 $ 1,073,423 $ 7,846,803 The Notes to Combined Financial Statements are an integral part of this statement. 5

8 Combined Statements of Cash Flows Years Ended (Restated) Cash flows from operating activities Changes in net assets $ (617,540) $ 157,784 Adjustments to reconcile changes in net assets to net cash provided (used) by operating activities Prior period adjustment (155,000) Depreciation 78,938 78,725 Bad debt expense 143, Contribution of beneficial interest in trust -- (509,761) Changes in assets and liabilities Contributions receivable 37, ,082 Grants receivable 12,694 32,937 Other accounts receivable 68,291 20,552 Prepaid expenses and other current assets 139,724 (28,788) Security deposits (20,698) (4,330) Accounts payable and accrued expenses 256,910 (69,172) Deferred rent 15,740 15,741 Deferred revenue 50,352 (32,149) Net cash provided (used) by operating activities 165,873 (158,379) Cash flows from investing activities Purchase of equipment -- (56,837) Net cash used by investing activities -- (56,837) Cash flows from financing activities Proceeds from line of credit, net 33, ,000 Payments on beneficial interest in trust 242, Proceeds from notes payable 83,000 83,000 Payments of notes payable (184,361) (98,560) Net cash provided by financing activities 174, ,440 Net increase in cash and cash equivalents 340, ,224 Cash and cash equivalents Beginning of year 487, ,053 End of year $ 827,364 $ 487,277 Supplemental disclosure of cash flow information Cash paid during the year for interest $ 29,546 $ 19,167 Contribution of beneficial interest in trust $ -- $ 509,761 The Notes to Combined Financial Statements are an integral part of these statements. 6

9 Notes to Financial Statements 1. Nature of Activity Organization and Basis of Combination Make the Road New York ( MRNY ) was created by the coming together of Make the Road by Walking, Inc., and the Latin American Integration Center ( LAIC ) in October of These not-for-profit organizations were established in New York in 1998 and 1992, respectively. MRNY is a membership-led organization based in the neighborhoods of Bushwick, Brooklyn; Northwest Queens; and Port Richmond, Staten Island. Members are primarily low-income Latino and African-American residents of these neighborhoods. Working within these economically marginalized neighborhoods, MRNY s multigenerational membership fights for justice and opportunity through community organizing. MRNY also promotes economic justice and participatory democracy by increasing residents power to achieve selfdetermination through collective action. Children s Grove Park, Inc. ( CGP or Affiliate ) was established as a New York not-for-profit corporation in CGP s primary activity is the holding of real property. MRNY and CGP are exempt from Federal income taxes under Sections 501(c)(3) and 501(c)(2), respectively of the Internal Revenue Code. Accordingly, no provision or liability for Federal income taxes has been recorded in the combined financial statements. MRNY and CGP (the Organization ) have been combined in these financial statements due to financial interdependence and overlapping boards of directors. All significant intercompany accounts have been eliminated. A substantial portion of the Organization s revenue is received from contributions from foundations and government agencies. Program Services Adult Education Adult Education programs provide community residents with opportunities to improve basic skills and, at the same time, to share ideas and experiences, to analyze the root causes of the problems they face and to strategize about how they can take action together to resolve their problems in a way that values the voice, perspective, and contribution of every person. Youth Development Youth development programs support youth ages 14 to 21 in leading community change efforts on issues of concern to them, developing critical skills in the areas of leadership, literacy, group work, community organizing and self expression, and setting and meeting ambitious personal and academic goals. Organizing Projects Organizing projects build a stronger community, make governing institutions subject to democratic community control, and mobilize resistance to oppression based on race, class, gender, age, national origin, and sexual orientation. Legal and Supportive Services Legal and supportive services coordinates and conducts litigation in support of immigrant workers; provides extensive Know Your Rights trainings and skill-building workshops, assists Spanish-speaking immigrants with translation and communication in an Englishspeaking world and advocates on behalf of immigrants. Experienced attorneys and paralegals meet with community members and visitors to the food pantry in order to assess the causes of their hunger emergency and to assist them in finding long-term solutions to their problems. Legal and supportive services then helps clients apply for, maintain and correct any problems with ongoing Medicaid, Food Stamps, Public Assistance or disability benefits. Legal staff advocate for clients at the local welfare centers and Social Security Administration offices, represent clients at administrative hearings and in court and help homeless clients find shelters and apply for public housing. Legal staff also help clients to access badly needed social services such as job training, child care, adult education, counseling for survivors of domestic violence, psychiatric care, and drug and alcohol treatment. School Based Program - School-based programming supports young people in accessing college and job opportunities through partnerships with two new innovative high schools that MRNY helped to design and launch and an array of after school programs that support young people in developing leadership, literacy, group work, and community organizing skills. 7

10 Notes to Financial Statements Community Workforce Program - Make the Road New York s Community Workforce Program seeks to create innovative approaches to job placement, job training and job creation targeting immigrant workers and low-income community residents in Brooklyn, Queens and Staten Island. The program seeks to connect immigrant workers to job opportunities and training programs that expand access to living-wage jobs, and incubate worker cooperatives or small business projects to expand economic opportunities for immigrant workers during the economic crisis. 2. Summary of Significant Accounting Policies Basis of Accounting The combined financial statements of the Organization have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Basis of Presentation Financial reporting by not-for-profit organizations requires that resources be classified for accounting and reporting purposes into net asset categories according to externally (donor) imposed restrictions. For the years ended the Organization had accounting transactions in the unrestricted net asset category, which represents net assets that are not subject to donor imposed restriction, and the temporarily restricted net asset category, which represents net assets that are subject to time or purpose donor imposed restriction. Revenue and Support Recognition The Organization recognizes contributions as revenue when they are received or unconditionally pledged and records these revenues as unrestricted or restricted support according to donor stipulations that limit the use of these assets due to time or purpose restrictions. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the combined statements of activities and changes in net assets as net assets released from restrictions. However, the receipt of restricted contributions whose restrictions expire or are otherwise satisfied within the period of receipt are reported as unrestricted revenues in the combined statements of activities and changes in net assets. The Organization generally accounts for contract and grant revenues as exchange transactions in the combined statements of activities and changes in net assets except for revenues earned under cost reimbursement contracts, which represent a reimbursement for property and equipment purchases. Unexpended contract funds are recorded as grant or contract payables at the end of the contract period. Funds received in advance of their use are accounted for as deferred revenue in the combined statements of financial position. Management estimates allowances for uncollectible pledges and other receivables, as required, based on its review of the status of receivables at year end and on its experience with donors. No allowance has been recorded at. Cash and Cash Equivalents The Organization considers all highly liquid investments with a maturity date of three months or less at the date of acquisition to be cash equivalents. Property and Equipment Property and equipment purchases are recorded at cost, except for donated items which are recorded at the fair value on the date of donation. Depreciation is provided over the estimated useful lives of the assets using the straight-line method. The principal rates for computing depreciation by major asset categories are as follows: Description Estimated Life (Years) Leasehold improvements 5-15 Equipment and furniture

11 Notes to Financial Statements When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts. Maintenance, repairs and minor renewals are charged to operations as incurred. Income Taxes MRNY is exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code. CGP is exempt from Federal income tax under Section 501(c)(2) of the Internal Revenue Code. The Organization files tax returns in the U.S. federal jurisdiction and New York. MRNY adopted the accounting pronouncement relating to uncertain tax positions as of January 1, Upon adoption of this pronouncement and as of December 31, 2011, MRNY had no unrecognized tax benefits. The Organization has no open years prior to December 31, In addition, MRNY has no income tax related penalties and interest in the periods reported in these combined financial statements. Estimates The preparation of combined financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Functional Allocation of Expenses The costs of providing program services, management and general, and fundraising have been summarized on a functional basis based on a direct costing method for charging expenses to each program or function that is consistent with the benefit derived by each program. Financial Instruments The carrying value of financial instruments including cash, contracts receivable, grants receivable and accounts payable approximates their fair value due to the short maturity of these instruments. 3. Concentrations of Credit Risk Financial investments, which potentially subject the Organization to concentrations of credit risk, consist of cash and cash equivalents and receivables. In an attempt to limit the credit risk, the Organization places its funds with high quality financial institutions. From time to time, the cash on deposit in individual institutions exceeds FDIC insurance limitations. Credit risk for the Organization s accounts receivable is minimal because the amounts are due primarily from governmental agencies and established philanthropic foundations. 4. Property and Equipment Property and equipment, shown net of accumulated depreciation at, consisted of the following: Leasehold improvements $ 414,251 $ 414,251 Land and land improvements 164, ,686 Equipment and furniture 286, , , ,397 Accumulated depreciation (376,340) (297,402) $ 489,057 $ 567,995 Depreciation expense for the years ended was $78,938 and $78,725, respectively. 9

12 Notes to Financial Statements 5. Commitments Operating Leases The Organization leases office space under six non-cancelable leases that expire in various years through The Organization is responsible for its utility costs and other routine repairs and maintenance for the buildings, backyards and sidewalks. Rent expense for these leases amounted to $385,052 and $401,612 for the years ended, respectively. Future minimum annual lease payments are as follows: Year Amount 2012 $ 408, , , , ,200 Thereafter $ 1,537,900 2,970, Note Payable The Organization had available a $100,000 line of credit due on demand, at an interest rate of prime plus 3 percent. On March 15, 2010 the outstanding balance on the line of credit of $94,839 was converted to a five year term loan at an interest rate of prime plus four percent. Beginning on April 15, 2010, each of the sixty payments will include a fixed principal payment of $1,530 plus accrued interest. At December 31, 2011 and 2010, the outstanding balance amounted to $59,673 and $78,034, respectively. Future principal payments are as follows: Year Amount 2012 $ 18, , , $ 4,590 59, Line of Credit The Organization has a $500,000 revolving line of credit, of which $453,000 and $420,000 was used at, respectively. Advances on the line of credit are payable on August 20, 2012 and carry an interest rate equal to Prime Rate plus 1 percent, but not to fall below 4.5 percent. The line of credit is secured by substantially all assets of the Organization. 10

13 Notes to Financial Statements 8. Temporarily Restricted Net Assets Components of temporarily restricted net assets at December 31, were as follows: Restricted by donors for specific purpose Legal $ 390,676 $ 227,553 Youth Power 115, ,914 Adult Education -- 8,333 Restricted by donors for specific time General Support 792, ,033 Beneficial interest in trust 267, ,710 $ 1,565,625 $ 1,379, Related Party Transactions The three co-directors of the Organization serve as members of the Board of Directors as well as employees of the Organization. During the years ended, payments made to them as employees totaled $377,061 and $359,941 in salaries and fringe benefits, respectively. 10. Beneficial Interest In Trust In 2010, the Organization was informed that it was named as one of the recipients of a beneficial interest in a charitable lead unitrust held by an outside trustee. The trust is for a 20 year term expiring 2025, during which the Organization will receive annual distributions of 6.5 percent of the net fair market value of the trust. The present value of the estimated future cash flows was recognized as an asset and contribution revenue during the year ending December 31, The fair value of this asset is revalued annually by calculating the present value of estimated future cash flows, based on a discount rate of 1 percent, which reflects the target investment return. The fair value of the beneficial interest in the trust at was $267,186 and $509,761, respectively. As of December 31, 2010 the Organization received $322,710 of the contribution revenue as temporary restricted due to the restrictions and the remaining amount of unrestricted. 11. Benefit Plans The Organization is a participant in a defined contribution 401(k) plan (the Plan ). The Plan covers all participating full-time employees that have completed three months of service within the Organization or other social, economic and environmental justice agencies that are members within the Plan. Under the terms of the Plan, discretionary contributions were made for all eligible employees at a rate of 4 percent of compensation for each of the years ended. The Organization funded the Plan until September 2010 due to cash flow. The Organization commenced funding the Plan in January The Organization contributed $96,342 and $111,230 for the years ended December 31, 2011 and 2010, respectively. 12. Donated Services and In-Kind Contributions Donated legal services represent the value of contributed time by volunteer attorneys and interns based upon the actual hours worked at rates paid to attorneys and interns performing similar duties. For the years ended, services were valued at $47,000 and $16,500, respectively in the combined financial statements. 11

14 Notes to Financial Statements 13. Prior-Period Adjustment The net assets of the Organization as of December 31, 2010 have been restated from the amount previously reported to reflect an overstatement of contribution revenue of $155,000 in The 2010 financial statements have also been restated to reflect an over accrual of revenue of $75,000. The effect of these adjustments is a decrease in 2010 public support and revenues of $75,000 and a decrease in 2010 net assets of $230,000. The 2010 release of temporarily restricted net assets to unrestricted was increased by $117,000 to properly reflect the expiration of donor restrictions. 14. Subsequent Events The Organization has evaluated events occurring after the combined statement of financial position date through the date of September 10, 2012, the date the financial statements were available for release. Based on this evaluation, the Organization has determined that no subsequent events have occurred which require disclosure in the combined financial statements. 12