WESTERN CAROLINA RESCUE MINISTRIES, INC.

Transcription

1 ASHEVILLE, NORTH CAROLINA FINANCIAL STATEMENTS FOR THE YEAR ENDED DECEMBER 31, 2017

2 TABLE OF CONTENTS Page INDEPENDENT AUDITOR S REPORT 1 FINANCIAL STATEMENTS Statement of Financial Position 2 Statement of Activities 3 Statement of Functional Expenses 4 Statement of Cash Flows

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4 Statement of Financial Position December 31, 2017 Assets Current assets: Cash and equivalents $ 371,302 Other receivables 4,425 Prepaid expenses 7,423 Total current assets 383,150 Property and equipment, net 3,681,918 Total assets $ 4,065,068 Liabilities and Net Assets Current liabilities: Current maturities of long-term notes payable $ 364,696 Lines of credit 163,704 Accounts payable 220,115 Accounts payable - capital campaign 86,500 Accounts payable - thrift store 6,454 Accrued liabilities 11,278 Total current liabilities 852,747 Long-term notes payable, less current maturities 882,601 Total liabilities 1,735,348 Net Assets: Unrestricted: Undesignated (108,824) Investment in property and equipment 2,291,973 Total unrestricted net assets 2,183,149 Temporarily restricted net assets 146,571 Total net assets 2,329,720 Total liabilites and net assets $ 4,065,068 The accompanying notes are an integral part of these financial statements. 2

5 Statement of Activities For the Year Ended December 31, 2017 Unrestricted Temporarily Restricted 2017 Total Public support and other revenues: Contributions and grants $ 1,201,866 $ 115,764 $ 1,317,630 Thrift store sales 658, ,721 In-kind donations - food 529, ,344 In-kind donations - program supplies 37,367 37,367 In-kind donations - parking 7,200 7,200 Other income 33,372 33,372 Releases of restrictions 508,303 (508,303) 0 Total public support and other revenues 2,976,173 (392,539) 2,583,634 Expenses: Program services 1,892,237 1,892,237 Supporting services 573, ,103 Total expenses 2,465,340 2,465,340 Increase (decrease) in net assets 510,833 (392,539) 118,294 Net assets, beginning of year 1,672, ,110 2,211,426 Net assets, end of year $ 2,183,149 $ 146,571 $ 2,329,720 The accompanying notes are an integral part of these financial statements. 3

6 Statement of Functional Expenses For the Year Ended December 31, 2017 Program Services Fund- Raising Management and General Total Supporting Services Total Compensation - mission and thrift store $ 474,847 $ 62,464 $ 69,135 $ 131,599 $ 606,446 Payroll taxes 43,891 5,774 6,390 12,164 56,055 Employee benefits 58,535 7,700 8,522 16,222 74,757 Total salaries and related expenses 577,273 75,938 84, , ,258 Maintenance 34,340 3,816 3,816 38,156 Supplies 10,159 1,129 1,129 11,288 Office expenses 10,860 31,942 21,082 53,024 63,884 Utilities 44,640 12,754 6,378 19,132 63,772 Parking - inkind 7,200 7,200 Telephone 1,340 1,380 1,340 2,720 4,060 Food - purchased 1,889 1,889 Food - inkind 529, ,344 Insurance 20,190 8,467 3,907 12,374 32,564 Auto 20,629 4, ,484 26,113 Professional fees 4,560 2, ,040 7,600 Advertising 1,400 1,400 1,400 Capital campaign expenses 27,402 27,402 27,402 Program expenses 477, ,364 Program expenses - inkind 27,467 27,467 Fundraising expenses 253, , ,683 Other 9,344 11,396 2,050 13,446 22,790 Total expenses before interest and depreciation 1,776, , , ,635 2,333,234 Interest 32, ,350 Depreciation 82,955 9,876 5,925 15,801 98,756 Total interest and depreciation 115,638 10,543 5,925 16, ,106 Total functional expenses $ 1,892,237 $ 164,345 $ 408,758 $ 573,103 $ 2,465,340 The accompanying notes are an integral part of these financial statements. 4

7 Statement of Cash Flows For the Year Ended December 31, 2017 Cash flows from operating activities: Increase (decrease) in net assets $ 118,294 Adjustments to reconcile net assets to net cash provided by operating activities: Depreciation 98,756 Changes in working capital - sources (uses): Grants receivable 500,000 Other receivables (1,910) Prepaid expenses 554 Accounts payable 110,945 Accrued liabilities (5,531) Net cash provided from (used for) operating activities 821,108 Cash flows from investing activities: Purchase of property and equipment (561,508) Net cash provided from (used for) investing activities (561,508) Cash flows from financing activities: Repayment of amounts borrowed (166,404) Net cash provided from (used for) financing activities (166,404) Increase (decrease) in cash and equivalents 93,196 Beginning cash and cash equivalents 278,106 Ending cash and cash equivalents $ 371,302 Supplemental disclosures of cash flow information: Cash paid for interest $ 33,350 The accompanying notes are an integral part of these financial statements. 5

8 Note 1 Summary of Significant Accounting Policies Organization Western Carolina Rescue Ministries, Inc. (Ministry) is a nonprofit corporation created for the purpose of providing food, shelter and Christian ministry to the poor and homeless in the Asheville area. It is funded primarily by contributions from the general public, churches and businesses. The Ministry operates a thrift store ministry through a whollyowned low-profit limited liability company, WCRM Thrift Stores, L3C. This ministry is dedicated to the rehabilitation of men and women in the work place. They are trained at pricing, sorting, receiving and distribution of donated materials. Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles that are generally accepted in the United States of America. Consequently, revenues are recognized when earned and expenses are recognized when the obligation is incurred. Income Taxes The Ministry was established as a not-for-profit entity and has been recognized as an organization exempt from income taxes under Section 501 ( c)( 3) of the Internal Revenue Code. During June 2006, the Financial Accounting Standards Board (FASB) released FASB Interpretation No. 48 (FIN 48), Accounting for Uncertainty in Income Taxes, and clarified the accounting for the recognition and measurement of uncertainties in income taxes recognized in an entity s financial statements and prescribes a threshold of more-likely-than not for recognition of tax positions taken or expected to be taken on the tax return. The Ministry s policy is to evaluate the likelihood that its uncertain tax positions will prevail upon examination based on the extent to which those positions have substantial support with the Internal Revenue Code and Regulations, Revenue Rulings, court decision and other evidence. As of December 31, 2017, the Ministry had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Recognition of Donor Restrictions Support restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When restriction s expire, temporarily restricted and permanently restricted net assets are released to unrestricted net assets. 6

9 Note 1 Summary of Significant Accounting Policies (continued) Financial Statement Presentation Information regarding the Ministry s financial position and activities is presented according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The three classes of net assets are defined as follows: Unrestricted Net Assets: Unrestricted net assets represent resources whose use is not limited or restricted by donors. They generally arise as a result of exchange transactions, unrestricted contributions, or restricted contributions whose restrictions have expired. Temporarily Restricted Net Assets: Temporarily restricted net assets represent resources whose use is limited by donors for the purpose and/or time in which they may be expended. Eventually, temporarily restricted net assets are released to unrestricted net assets as their time and purpose requirements are met. Permanently Restricted Net Assets: Permanently restricted net assets represent resources that must be maintained permanently. Like temporarily restricted net assets, permanent restrictions may be imposed only by the donor. However, permanently restricted net assets generally do not get reclassified, since, by definition, their restrictions never expire. The income may be unrestricted or may also be restricted according to donor s wishes. Donated Services and Materials A substantial number of volunteers have donated a significant amount of time to the Ministry s operations and program services. Contributed services that create or enhance nonfinancial assets or require specialized skills that are provided by individuals possessing those skills will be recognized as support. No amounts have been reflected in the accompanying financial statements for contributed services since the requirements for recognition were not met. Donated materials are reflected as in-kind contributions in the accompanying financial statements at their estimated fair market value at date of receipt. The value of food donated during the current year is based in a study commissioned by Second Harvest, a national food bank network. The study produced guidelines for determining the approximate average wholesale value of one pound of donated product at the national level. Although the value of items for different organizations may vary, average wholesale values of $1.70 per pound have been used by this Ministry for the year ended December 31, Cash and Equivalents The Ministry considers all unrestricted highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. 7

10 Note 1 Summary of Significant Accounting Policies (continued) Property and Equipment Acquisitions of equipment and improvements are stated at cost except for donated equipment, which is stated at fair market value at date of receipt. It is the Ministry s policy to capitalize expenditures or donations of these items with values or costs in excess of $1,000. Items of lesser amounts are expensed. Depreciation is computed annually using the straight -line method over the assets estimated useful lives. Maintenance and repairs are charged to operating expense as incurred. Cost of renewals and betterments, which materially extend the useful lives of the assets or increase their productivity, are capitalized. Advertising Advertising costs are expensed as incurred. December 31, 2017 was $ 1,400. Advertising expense for the year ended Functional Expenses The Ministry allocate s its expenses on a functional basis among its various programs and support services. Expenses that can be identified with a specific program and support service are allocated directly according to their nature and expenditure classification. Other expenses that are common to several functions are allocated between program and supporting services based on evaluations of the related benefits. Management and general expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Ministry. Use of Estimates The preparation of financial statements in accordance with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Fair Value of Financial Instruments The Ministry discloses for each class of financial instruments the methods, and when a valuation technique is used, the significant assumptions applied in determining the fair values of financial assets and liabilities. If there is a change in the valuation technique, then the Ministry discloses both the change and the reasons for the change. The Ministry estimates that the fair value of all financial instruments does not differ materially from the aggregate carrying values of its financial instruments recorded in the accompanying statements of financial position. The estimated fair value amounts have been determined by the Ministry using available market information and appropriate valuation methodologies. 8

11 Note 1 Summary of Significant Accounting Policies (continued) Fair Value of Financial Instruments (continued) The Ministry s financial instruments consist of cash, accounts payable, accrued expenses and long term debt. Note 2 Property and Equipment A description of property and equipment is as follows: At December At cost: Land $ 117,000 Building and building improvements 3,499,146 Construction in progress 933,043 Equipment, furniture and fixtures 423,671 Vehicles 91,015 5,063,875 Less accumulated depreciation 1,381,957 Property and equipment, net $ 3,681,918 Depreciation expense for the year ended December 31, 2017 was $ 98,756. Note 3 Construction in Progress Capital Campaign In January 2008, the Ministry s board of directors voted to construct a new building to replace its current facilities at 225 Patton Avenue. In that year, the Ministry initiated a capital campaign seeking contributions and grant funding. In 2009, the board of directors and management decided to suspend the campaign in order to re-evaluate the feasibility of the Ministry s plans given current economic conditions. At December 31, 2017, capitalized costs incurred during this campaign consist ed of architect fees and site planning, which totaled $ 368,144. Building Renovations In 2012, the Ministry began renovations to one of its buildings. Phase I of this project was completed and placed in service in Costs for this phase totaled $ 1,343,881. Phase II of this project began in 2016 and costs through December 31, 2017 totaled $ 564,899. 9

12 Note 3 Construction in Progress (continued) Building Renovations (continued) Estimated costs for Phase II of this project are expected to total $ 730,000, of which $100,000 is expected to be expended from in-kind sources. The Ministry received $ 676,473 during the year in contributions for use on this project including a grant of $500,000 from the Affordable Housing Program of the Federal Home Loan Bank of Pittsburgh. Note 4 Long-term Notes Payable Long-term notes payable is described as follows: At December BB&T 59 monthly payments of $ 1,328, including interest at 5.00%, and one balloon payment of the outstanding balance and all accrued interest, due in 2019, collateralized by buildings and land at 221 and 225 Patton Avenue $ 179,013 BB&T 59 monthly payments of $ 2,460, including interest at 4.50%, and one balloon payment of the outstanding balance and all accrued interest, due in 2018, collateralized by buildings and land at 624 Patton Avenue 322,828 BB&T 120 monthly payments of $ 4,388, including interest at 4.50%, and one balloon payment of the outstanding balance and all accrued interest, due in 2022, collateralized by buildings and land at 221 and 225 Patton Avenue 558,131 BB&T 53 monthly payments of $ 1,328, including interest at 5.00%, and one balloon payment of the outstanding balance and all accrued interest, due in 2020, collateralized by buildings and land at 221 Patton Avenue 187,325 Less current maturities (364,696) Long-term debt, net of current maturities $ 882,601 10

13 Note 4 Long-term Notes Payable (continued) Scheduled principal repayments on long-term debt for the next five years are as follows: Years Ending December 31 Long-Term Debt 2018 $ 364, , , , ,075 Thereafter Principal repayments $ 1,247,297 Note 5 Lines of Credit The Ministry established a line of credit for working capital through HomeTrust Bank with maximum borrowings totaling $150,000. The line is secured by furniture and equipment located at 225 Patton Avenue. Interest payments are due monthly on any outstanding withdrawals and accrue interest at 4.5% per annum. At December 31, 2017, the balance on the line of credit was $130,000. The Ministry established a line of credit through PNC Bank to be used for the Phase II construction of the building renovations as indicated in Note 3. This line of credit is secured by a right of setoff against any deposits, moneys, securities or other properties in possession of the lender. Maximum borrowings under this line are $500,000. Total outstanding advances at December 31, 2017 were $ 33,704. These outstanding advances bear interest at the prime rate for the period they are outstanding. The line expired on December 6, All outstanding amounts borrowed on this line of credit were subsequently repaid as of February 16, Note 6 Lease Commitments In September 2015, the Ministry entered into an agreement to lease retail facilities for the Long Shoals Road thrift store location. The lease requires a minimum rental of $ 4,000 per month for a five-year period commencing on October 1, The Ministry is also required to reimburse the landlord for taxes and insurance associated with this lease. Expense related to this lease for the year ended December 31, 2017 was $95,307. Minimum future rental payments for 2018 through 2019 total $ 49,745 annually. For 2020, the minimum future rental payments total $ 37,

14 Note 6 Lease Commitments (continued) In April 2017, the Ministry entered into an agreement to lease retail facilities for the Westridge thrift store location. The lease requires a minimum rental of $ 4,515 per month for a five-year period commencing on November 1, The Ministry is also required to reimburse the landlord for common area maintenance, taxes and insurance associated with this lease. Expense related to this lease for the year ended December 31, 2017 was $10,899. Minimum future rental payments for 2018 through 2021 total $ 65,334 annually. For 2022, the minimum future rental payments total $ 54,445. The Ministry has a month-to-month lease for the retail facilities for the Tunnel Road thrift store location. The monthly payment on this lease is $ 5,337, which includes the monthly rental plus the common area maintenance fees. Expense related to this lease for the year ended December 31, 2017 was $ 64,207. The Ministry had a month-to-month lease for the retail facilities for the Smoky Park thrift store location thru May The monthly payment on this lease is $ 4,400, which includes the monthly rental plus the common area maintenance fees. Expense related to this lease for the year ended December 31, 2017 was $ 18,000. Note 7 Concentration of Credit Risk The Ministry has concentrated its credit risk for cash by maintaining deposits at local area banks which may at times exceed amounts covered by insurance provided by the U. S. Federal Deposit Insurance Corporation (FDIC). The Ministry has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk to cash. Note 8 Retiremen t Plan During 2009, the Ministry established a Simple IRA defined contribution plan covering substantially all employees. The plan provides that an employee can voluntarily contribute up to $12,500 to the plan for 2016 if they have received at least $5,000 in annual compensation and have completed 90 days of service. The Ministry is required to match each employee s salary reduction contribution on a dollar for dollar basis up to 3% of the employee s compensation. The Ministry has the option to make non-elective contributions of 2% of the employee s compensation. If the board of directors chooses to make non-elective contributions, it must make them for all eligible employees whether or not they make salary reduction contributions. Expense related to the plan for the year ended December 31, 2017 was $ 6,698. Note 9 Subsequent Events Subsequent events have been evaluated through February 28, 2018, which is the date that the financial statements were available to be issued. 12

15 Note 9 Subsequent Events (continued) On January 5, 2018, The Ministry entered into a contract with Buncombe County to provide residential placements for up to 14 women, with small children, who are in recovery from substance abuse treatment and in need of housing and support under the Abba s House program. Payments to the Ministry will be $30,127 per month up to a maximum of $ 180,766 in the contract period starting January 1, 2018 through June 30, Certain other additional cost reimbursements such as child care and replacement of parenting items are also available under this contract for a maximum reimbursement of $ 9,304. Note 10 Temporarily Restricted Net Assets Temporarily restricted net assets at December 31, 2017 were available for the following purposes: Phase II building renovations $ 89,870 Impact Fund- Christian Education Opportunities 56,701 Total temporarily restricted net assets $ 146,571 Note 11 Open Tax Positions The Ministry's Forms 990, Return of Organization Exempt from Income Tax, for the years ending 2014, 2015, and 2016, are subject to examination by the IRS, generally for 3 years after they were filed. Note 12 Related Party Transactions Contributions from the Ministry s board of directors totaled $ 18,350 for the year ended December 31, A member of the board of directors of the Ministry is employed as a Senior Vice President of a bank where the Ministry has established a line of credit (Note 5- Home Trust Bank). A member of the board of directors of the Ministry is employed as a Commercial Relationship Banker at a bank where the Ministry has established a line of credit (Note 5- PNC Bank). Under the provisions of the grant award agreement from the Affordable Housing Program (Note 3), the bank that is permitted to finance the construction through this line of credit must be one of their member banks. PNC Bank was the only member bank that has branch locations in the local area. Note 13 Summary Disclosure of Significant Contingencies Risk Management The Ministry is exposed to various risks of loss related to torts, theft of, damage to and destruction of assets, errors and omissions, injuries to employees, and natural disasters. The Ministry carries commercial insurance coverage for risks of loss. 13