SHELTER HOUSE, INC. AND SUBSIDIARY AUDITED CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION YEARS ENDED JUNE 30, 2018 AND 2017
Table of Contents Shelter House, Inc. and Subsidiary Independent Auditor s Report 1-2 Audited Consolidated Financial Statements Page Consolidated Statements of Financial Position 3-4 Consolidated Statements of Activities and Changes in Net Assets 5-6 Consolidated Statements of Functional Expenses 7-8 Consolidated Statements of Cash Flows 9 Notes to Consolidated Financial Statements 10-17 Supplementary Information 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 18-19 Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance 20-22 Schedule of Expenditures of Federal Awards 23-24 Notes to Schedule of Expenditures of Federal Awards 25 Schedule of Findings and Questioned Costs 26-27
Independent Auditor s Report Board of Directors Shelter House, Inc. and Subsidiary Reston, Virginia We have audited the accompanying consolidated financial statements of Shelter House, Inc. and Subsidiary (a nonprofit organization), which comprise the Consolidated Statements of Financial Position as of June 30, 2018 and 2017, and the related Consolidated Statements of Activities and Changes in Net Assets, Functional Expenses, and Cash Flows for the years then ended, and the related notes to the consolidated financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 1
Independent Auditor s Report (continued) Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Shelter House, Inc. and Subsidiary as of June 30, 2018 and 2017, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying Schedule of Expenditures of Federal Awards, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 27, 2018, on our consideration of Shelter House, Inc. and Subsidiary s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Shelter House, Inc. and Subsidiary s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Shelter House, Inc. and Subsidiary s internal control over financial reporting and compliance. Rockville, Maryland November 27, 2018 2
Consolidated Statements of Financial Position June 30, 2018 2017 Assets Current assets Cash and cash equivalents $ 1,425,034 $ 1,188,081 Accounts receivable 998,533 1,157,443 Pledge receivable, current portion 28,000 20,000 Prepaid expenses and other assets 127,613 113,245 Total current assets 2,579,180 2,478,769 Other assets Pledge receivable, net of current portion 45,000 70,000 Property and equipment Land 488,094 488,094 Buildings 1,705,968 1,697,368 Leasehold improvements 249,823 244,123 Furniture and equipment 187,894 292,696 Total property and equipment 2,631,779 2,722,281 Less: Accumulated depreciation and amortization (586,918) (612,399) Property and equipment, net 2,044,861 2,109,882 Total assets $ 4,669,041 $ 4,658,651 The accompanying Notes to the Consolidated Financial Statements are an integral part of these financial statements. - 3 -
Consolidated Statements of Financial Position 2018 2017 Liabilities and Net Assets Current liabilities Accounts payable and accrued expenses $ 221,435 $ 265,926 Advances from other parties 398 72,713 Deferred revenue 53,382 94,725 Client rent deposits 1,800 1,800 Deferred rent, current portion 4,069 5,305 Total current liabilities 281,084 440,469 Long-term liabilities Note payable 203,000 203,000 Deferred rent, net of current portion - 4,069 Total long-term liabilities 203,000 207,069 Total liabilities 484,084 647,538 Net assets Unrestricted Undesignated 3,463,584 3,296,909 Board designated reserve fund 535,783 486,191 Temporarily restricted 185,590 228,013 Total net assets 4,184,957 4,011,113 Total liabilities and net assets $ 4,669,041 $ 4,658,651 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. - 4 -
Consolidated Statement of Activities and Changes in Net Assets Temporarily 2018 For the Year Ended June 30, 2018 Unrestricted Restricted Total Change in net assets Support and revenue Government agencies $ 5,774,465 $ - $ 5,774,465 Donated facilities, materials and services 978,701-978,701 Grant income 19,500 195,900 215,400 Miscellaneous income 148,287-148,287 Interest income 2,013-2,013 Events, net 72,683-72,683 Contributions 156,124 100,059 256,183 Net assets released from restrictions 338,382 (338,382) - Total support and revenue 7,490,155 (42,423) 7,447,732 Expenses Program services: Shelter 1,647,043-1,647,043 Shelter- Domestic Violence 1,647,706-1,647,706 Rapid and Preventative Housing 2,464,664-2,464,664 Housing services 824,233-824,233 Total program services 6,583,646-6,583,646 Supporting services: Management and general 434,253-434,253 Fundraising 255,989-255,989 Total supporting services 690,242-690,242 Total expenses 7,273,888-7,273,888 Change in net assets 216,267 (42,423) 173,844 Net assets, beginning of year 3,783,100 228,013 4,011,113 Net assets, end of year $ 3,999,367 $ 185,590 $ 4,184,957 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. - 5 -
Consolidated Statements of Activities and Changes in Net Assets Temporarily 2017 For the Year Ended June 30, 2017 Unrestricted Restricted Total Change in net assets Support and revenue Government agencies $ 5,043,997 $ - $ 5,043,997 Donated facilities, materials and services 949,324-949,324 Grant income 15,000 315,750 330,750 Miscellaneous income 123,272-123,272 Interest income 1,697-1,697 Events, net 72,833-72,833 Contributions 263,003 68,946 331,949 Net assets released from restrictions 479,726 (479,726) - Total support and revenue 6,948,852 (95,030) 6,853,822 Expenses Program services: Shelter 1,754,894-1,754,894 Shelter- Domestic Violence 1,372,128-1,372,128 Rapid and Preventative Housing 2,394,041-2,394,041 Housing services 574,651-574,651 Total program services 6,095,714-6,095,714 Supporting services: Management and general 425,074-425,074 Fundraising 225,675-225,675 Total supporting services 650,749-650,749 Total expenses 6,746,463-6,746,463 Change in net assets 202,389 (95,030) 107,359 Net assets, beginning of year 3,580,711 323,043 3,903,754 Net assets, end of year $ 3,783,100 $ 228,013 $ 4,011,113 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. - 6 -
Consolidated Statements of Functional Expenses Program Management 2018 For the Year Ended June 30, 2018 Services and General Fundraising Total Payroll expenses Salaries $ 2,647,132 $ 304,820 $ 180,833 $ 3,132,785 Employee benefits 404,183 35,944 21,623 461,750 Payroll taxes 201,984 22,465 13,766 238,215 Total payroll expenses 3,253,299 363,229 216,222 3,832,750 Other operating expenses Donated rent and utilities 2,173,685 - - 2,173,685 Direct assistance 343,329 - - 343,329 Fundraising - - 19,777 19,777 Meals 113,798 - - 113,798 Insurance 92,599 9,819 5,846 108,264 Professional fees 58,906 42,552 3,203 104,661 Client transportation 97,343 - - 97,343 Offsite 31,591 - - 31,591 Staff training and travel 53,552 5,989 3,566 63,107 Maintenance 148,345 307 183 148,835 Office supplies 31,610 3,535 2,105 37,250 Linens and housekeeping 17,647 - - 17,647 Miscellaneous 19,659 2,201 1,309 23,169 Rental expense 61,275 5,177 3,082 69,534 Printing and postage 6,996 782 466 8,244 Total other operating expenses 3,250,335 70,362 39,537 3,360,234 Depreciation and amortization 80,012 662 230 80,904 Total expenses $ 6,583,646 $ 434,253 $ 255,989 $ 7,273,888 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. - 7 -
Consolidated Statements of Functional Expenses Program Management 2017 For the Year Ended June 30, 2017 Services and General Fundraising Total Payroll expenses Salaries $ 2,652,949 $ 300,227 $ 160,920 $ 3,114,096 Employee benefits 399,767 31,028 12,511 443,306 Payroll taxes 204,528 22,652 16,528 243,708 Total payroll expenses 3,257,244 353,907 189,959 3,801,110 Other operating expenses Donated rent and utilities 1,683,964 - - 1,683,964 Direct assistance 420,814 - - 420,814 Fundraising - - 19,325 19,325 Meals 107,182 - - 107,182 Insurance 79,828 8,269 4,441 92,538 Professional fees 41,680 38,759 2,432 82,871 Client transportation 79,047 - - 79,047 Offsite 68,778 - - 68,778 Staff training and travel 51,731 6,045 3,019 60,795 Maintenance 74,461 372 200 75,033 Office supplies 27,458 2,983 1,602 32,043 Linens and housekeeping 19,142 - - 19,142 Miscellaneous 20,544 7,955 1,190 29,689 Rental expense 70,208 5,273 2,832 78,313 Printing and postage 7,235 786 422 8,443 Total other operating expenses 2,752,072 70,442 35,463 2,857,977 Depreciation and amortization 86,398 725 253 87,376 Total expenses $ 6,095,714 $ 425,074 $ 225,675 $ 6,746,463 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. - 8 -
Consolidated Statements of Cash Flows For the Years Ended June 30, 2018 2017 Cash flows from operating activities Changes in net assets $ 173,844 $ 107,359 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 80,904 87,376 Gain on sale of fixed assets - 11,938 Decrease (increase) in: Accounts receivable 158,910 (219,345) Pledge receivable 17,000 (90,000) Prepaid expenses and other assets (14,368) (49,476) (Decrease) increase in: Accounts payable and accrued expenses (44,491) 89,842 Advances from other parties (72,315) 66,942 Deferred revenue (41,343) 42,683 Client rent deposits - 1,800 Deferred rent (5,305) (3,002) Net cash provided by operating activities 252,836 46,117 Cash flows used by investing activities Purchases of property and equipment (15,883) (21,038) Cash flows from financing activities Principal payments on obligation under capital lease - (2,604) Net change in cash and cash equivalents 236,953 22,475 Cash and cash equivalents, beginning of year 1,188,081 1,165,606 Cash and cash equivalents, end of year $ 1,425,034 $ 1,188,081 Supplemental cash flow information Interest paid $ - $ 38 The accompanying Notes to Consolidated Financial Statements are an integral part of these financial statements. - 9 -
Notes to Consolidated Financial Statements 1. Organization and significant accounting policies Organization: Shelter House, Inc. is a not-for-profit organization formed in the Commonwealth of Virginia in February 1981. The founding purposes of Shelter House, Inc. are to receive voluntary contributions to be used exclusively for charitable purposes; to provide housing for families or individuals who may be in need of relief, distressed or underprivileged; and to maintain an active interest in the overall wellbeing of these families or individuals. Shelter House, Inc. operates three shelters, two for homeless families and one shelter for victims of domestic violence in Fairfax County, Virginia. Shelter House, Inc. also operates seven offsite transitional housing units under the Rise Program, six units under the Stride Program, four units under the Off-site Program and a shared housing unit called Ives House. Shelter House, Inc. also provides the residents with counseling, life skills training, and other services to assist them in making an expeditious return to the community. NOVACO, Inc. is a not-for-profit organization originally formed in Fairfax County, Virginia in 1999. The founding purpose was to provide transitional housing, support, and guidance to survivors of domestic abuse. NOVACO, Inc. offers supportive housing and services, job training, counseling and financial literacy to enable families to reach self-sufficiency through community collaboration. Basis of consolidation: The consolidated financial statements include the accounts of Shelter House, Inc. and NOVACO, Inc. (collectively referred to as the Organization ). Because the organizations are under common control and an economic interest exists between them, they have been consolidated as required under accounting principles generally accepted in the United States of America. All intercompany accounts and transactions have been eliminated in consolidation. Basis of accounting: The accompanying consolidated financial statements have been prepared on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America for not-for-profit organizations. Basis of presentation: The Organization classifies net assets and revenue based on the existence or absence of donor imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Unrestricted net assets undesignated net assets that are not subject to donor-imposed stipulations. - 10 -
Notes to Consolidated Financial Statements Unrestricted net assets reserve fund net assets that are designated by the Board of Directors. The primary objective of the reserve fund is to sustain the Organization s operations through a significant or unanticipated shortfall in funding. It was established to meet a short to mid-term funding crisis and is not intended to enable the Organization to continue operating on a long-term basis without its usual funding sources. Temporarily restricted net assets net assets subject to donor-imposed stipulations that will be met either by actions of the Organization and/or the passage of time. Permanently restricted net assets net assets subject to donor-imposed stipulations that they be maintained permanently. The Organization had no permanently restricted net assets as of June 30, 2018 and 2017. Cash and cash equivalents: Cash and cash equivalents consist of demand deposits with original deposits of 90 days or less. The Organization maintains cash balances which may exceed federally insured limits. Management does not believe that this results in any significant credit risk. Accounts receivable: The balance of accounts receivable includes all billed and unbilled costs incurred on government grants and contracts, which are earned within the respective period. All accounts receivable are stated at the amount management expects to collect for balances outstanding at year end. Management believes all accounts receivable are fully collectible, and therefore no allowance for doubtful accounts is recorded as of June 30, 2018 and 2017. Pledges receivable: Pledges receivable are recorded in the consolidated financial statements at the time the contributions are made or received. An allowance for doubtful accounts is allocated on an account by account basis, if needed. All accounts are considered collectible as of June 30, 2018 and 2017. Contributions expected to be collected in future years are recorded at present value of their estimated future cash flows. The discounts on contributions are computed at a discount rate approximating the prevailing local borrowing rate. Amortization of the discount is included in contribution revenue. Property and equipment: Property and equipment purchases in excess of $1,000 are capitalized and recorded at cost. Donated assets are capitalized at estimated fair value at the date of receipt. Depreciation and amortization are calculated on the straight line method over estimated useful lives of 39 years for buildings and 5-7 years for furniture and equipment. Leasehold improvements are amortized over the lesser of the lease term or their useful lives. For the years ended June 30, 2018 and 2017, depreciation and amortization expense was $80,904 and $87,376, respectively. - 11 -
Notes to Consolidated Financial Statements Impairment of long-lived assets: The Organization performs an impairment evaluation on the carrying value of its long-lived assets held for use based upon a comparison of the undiscounted future net cash flows for the assets to the net book value. These evaluations for impairment are significantly impacted by estimates of revenue, costs and expenses, and other factors. If the net book value is greater than the future undiscounted cash flows estimated, the Organization records an impairment adjustment to reduce the assets cost basis to its fair value. At June 30, 2018 and 2017, the Organization has performed a recoverability analysis of all long-lived assets and does not believe an impairment adjustment is required. Revenue recognition: Government agencies Revenue from cost reimbursable grants are recognized to the extent of the Organization s corresponding expenditures on the basis of allowable direct and indirect costs. Government agency reimbursements and grants received in advance are reported as deferred revenue on the Consolidated Statements of Financial Position. Donated facilities, materials and services The Organization receives donated rent, utilities, telephone, some maintenance costs and services for the three shelters at no cost. Donated services are recorded when specialized skills are provided that would otherwise need to be purchased. These contributions are reported at their estimated fair value and included on the Consolidated Statements of Activities and Changes in Net Assets. These donated facilities, materials and services were expensed and included on the Consolidated Statements of Functional Expenses. Contributions and grant income The Organization recognizes all unconditional contributions and grant income received as income in the period in which the commitment is made. Unconditional contributions are reported as unrestricted, temporarily restricted or permanently restricted depending on the absence or existence of donor stipulations that limit the use of contributions. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Consolidated Statements of Activities and Changes in Net Assets as released from restrictions. - 12 -
Notes to Consolidated Financial Statements Events - The Organization conducts a special event for fundraising in which the attendees receive a direct benefit. The funds raised are reported on the Statements of Activities and Changes in Net Assets net of the cost of the event which was $6,685 and $6,665 for the years ended June 30, 2018 and 2017, respectively. Functional allocation of expenses: The costs of providing the various programs and other activities have been summarized on a functional basis in the Consolidated Statements of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income tax status: Shelter House, Inc. and Subsidiary are nonprofit organizations as described in Section 501(c)(3) of the Internal Revenue Code and are exempt from federal and state income taxes. They have been determined by the Internal Revenue Service not to be private foundations within the meaning of Section 509(a) of the Internal Revenue Code. The Organization evaluates uncertainty in income tax positions based on a morelikely-than-not recognition standard. If that threshold is met, the tax position is then measured at the largest amount that is greater than 50% likely of being realized upon ultimate settlement. As of June 30, 2018 and 2017, there were no accruals for uncertain tax positions. If applicable, the Organization records interest and penalties as a component of income tax expense. Tax years from 2015 through the current year remain open for examination by tax authorities. Estimates: The preparation of consolidated 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Reclassification: Certain reclassifications have been made to prior year s presentation to conform to the current year presentation. Capital leased assets in the prior year are now included with furniture and equipment. Subsequent events: Management has evaluated subsequent events for disclosure in these consolidated financial statements through November 27, 2018, which is the date the consolidated financial statements were available to be issued. - 13 -
Notes to Consolidated Financial Statements 2. Pledges Receivable In January 2017, the Organization received a pledge to be received over five years. The pledge to give as of June 30, 2018 and 2017 is due as follows: 2018 2017 Less than one year $ 28,000 $ 20,000 One to five years 45,000 70,000 Total pledge receivable $ 73,000 $ 90,000 3. Line of credit NOVACO, Inc. has a revolving line of credit in the amount of $30,000 with a bank in Virginia, collateralized by a checking account held with the bank. Advances bear interest at the Wall Street Journal Prime Rate plus 2.5% (7.5% at June 30, 2018). Interest is payable monthly. At June 30, 2018 and 2017, there was no outstanding balance on the line of credit. 4. Note payable NOVACO, Inc. entered into an agreement with Fairfax County Redevelopment and Housing Authority ( FCRHA ) whereby NOVACO, Inc. was awarded Federal HOME Program Community House Development Organization (CHDO) Funds to acquire transitional housing for victims of domestic abuse. During March 2012, NOVACO, Inc. exercised the first part of that agreement and purchased property in Centreville, Virginia. NOVACO, Inc. was granted a $203,000 HOME loan deferred for 30 years at a 0% interest rate to be repaid in the event the property is either sold or no longer used for affordable rental housing. At the end of the 30 year period, NOVACO, Inc. will be indebted for the equity share if the property is sold or no longer used for affordable housing. The loan contains various covenants, which include a debt coverage ratio, a dedicated operating reserve account, minimum contributions annually to the replacement reserve account and annual audited financials. 5. Temporarily restricted net Temporarily restricted net assets are available for the following purposes as of June 30, 2018 and 2017: assets 2018 2017 Restricted as to purpose Patrick Henry Shelter $ - $ 12,500 Katherine Hanley Shelter 1,825 500 Artemis House Shelter 148,823 173,265 NOVACO, Inc. - 19,220 Management - 13,069 Housing and support 34,942 9,459 Total temporarily restricted net assets $ 185,590 $ 228,013-14 -
Notes to Consolidated Financial Statements Temporarily restricted releases by program during the year ended June 30, 2018 and 2017 were as follows: 2018 2017 Patrick Henry Shelter $ 19,590 $ 5,328 Katherine Hanley Shelter 20,192 6,113 Artemis House Shelter 221,795 375,719 NOVACO, Inc. 19,221 18,905 Management 9,458 23,292 Housing and support 48,126 50,369 Total releases by program $ 338,382 $ 479,726 6. Donated facilities 7. Donated services Fairfax County provides facilities, utilities, telephone and some maintenance costs to the three emergency shelters at no cost to the Organization. These shelter facilities are owned or leased by Fairfax County and occupied by the Organization. The Patrick Henry shelter facility is approximately 6,400 square feet with 4,400 square feet added under the Family Resource Center. The Katherine Hanley family shelter is approximately 16,000 square feet. The Artemis House Shelter is approximately 8,500 square feet. The fair value of donated facilities for the years ended June 30, 2018 and 2017 was estimated at $968,266 and $949,324, respectively, which is included in both revenue and program services expense on the Consolidated Statements of Activities and Changes in Net Assets. Additionally, there was a donation of furniture during the year ended June 30, 2018 for $7,035, which is included in both revenue and program services expense on the Consolidated Statements of Activities and Changes in Net Assets. There were donated services received in the years ended June 30, 2018 and 2017 of $3,400 and $0, respectively. When donated services are recognized, they are reflected as a component of donated facilities, materials and services on the Consolidated Statements of Activities and Changes in Net Assets. In addition, the Organization receives significant volunteer hours each year which do not meet the requirements for financial statement recognition as many individuals volunteer their time and perform a variety of tasks that assist the Organization at its shelters. - 15 -
Notes to Consolidated Financial Statements 8. Operating leases The Organization has entered into lease agreements with Fairfax County to operate three shelter facilities. The annual lease payment for the Patrick Henry shelter is one dollar and the lease was effective for five years, beginning June 12, 1986. There is a provision for an indefinite number of one-year extensions beyond the initial five-year lease period. The Organization is currently leasing this facility on a one-year extension. The Katherine Hanley shelter lease runs concurrently with the service contract beginning May 31, 2007, and is extended annually. The lease is renewed automatically at the time the service contract is renewed. No annual lease payment for the Katherine Hanley shelter is required. The Artemis House shelter lease runs concurrently with the service contract beginning January 2010. No annual lease payment for the Artemis House shelter is required. The Organization records the estimated fair value of the donated space for these facilities as disclosed in Note 6. The Organization is obligated under two leases. The first lease is for office space in Reston, Virginia and terminates on January 31, 2019. The lease provides for fixed annual increases during the lease term as well as a two month abatement. A deferred rent liability is recorded for the difference between the pro rata expense recognized and the total amounts paid to date under the lease. The second lease, for Ives House, commenced on March 12, 2013 and terminated after three years on March 12, 2016. As of June 30, 2018, the Organization continues to rent the Ives House property on a month to month basis until a long term agreement can be established. The future minimum lease payments under these leases are $35,891 for the year ending June 30, 2019. Total rent expense was $69,534 and $78,313 for the years ended June 30, 2018 and 2017, respectively. 9. Retirement plan The Organization sponsors a 401(k) retirement plan for its employees. The plan calls for a 50 percent match of employee contributions up to four percent of each employee s salary. Employees are fully vested after two years of participation in the plan. For the years ended June 30, 2018 and 2017, the organization contributed $62,231 and $57,343, respectively. - 16 -
Notes to Consolidated Financial Statements 10. Concentration For the years ended June 30, 2018 and 2017, 65% and 75%, respectively, of the Organization s revenue (excluding revenue recognized for donated facilities, materials and services) was derived from Fairfax County. At June 30, 2018 and 2017, 87% and 94%, respectively, of the Organization s accounts receivable was due from Fairfax County. At June 30 2018, 11% of the Organization s accounts receivable were due from the federal government. Five of the largest contracts with Fairfax County to run the shelters below comprised 58% and 60% of revenue (excluding revenue recognized for donated facilities) for the years ended June 30, 2018 and 2017, respectively. The remaining revenue from Fairfax County is comprised of a number of smaller one-year contracts that fund discretionary services that could be discontinued if the contracts are not renewed. The Organization expects the contracts to be renewed and they have been continuously renewed since contract origination. The table on the next page reflects contract terms for the five material contracts. Patrick Henry Shelter Katherine Hanley Shelter Case Management/Housing Location Program Artemis House Shelter Region II Region IV Contract origination 7/1/2006 3/5/2007 9/1/2009 7/1/2012 7/1/2012 Current expiration date 6/30/2020 6/30/2020 6/30/2019 6/30/2020 6/30/2020 Revenue for the year ended 6/30/2018 $458,539 $1,132,126 $900,273 $543,215 $696,338 Percentage of total revenue less in-kind 7% 18% 14% 8% 11% - 17 -
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 Directors of Shelter House, Inc. and Subsidiary Reston, Virginia 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 consolidated financial statements of Shelter House, Inc. and Subsidiary (a nonprofit organization), which comprise the Consolidated Statements of Financial Position as of June 30, 2018 and 2017, and the related Consolidated Statements of Activities and Changes in Net Assets, Functional Expenses and Cash Flows for the years then ended, and the related notes to the consolidated financial statements, and have issued our report thereon dated November 27, 2018. Internal Control over Financial Reporting In planning and performing our audits of the consolidated financial statements, we considered Shelter House, Inc. and Subsidiary 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 opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of Shelter House, Inc. and Subsidiary s internal control. Accordingly, we do not express an opinion on the effectiveness of Shelter House, Inc. and Subsidiary 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. 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. 18
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 (Continued) Compliance and Other Matters As part of obtaining reasonable assurance about whether Shelter House, Inc. and Subsidiary s consolidated 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 consolidated 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 organization 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 organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Rockville, Maryland November 27, 2018 19
Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance To the Board of Directors of Shelter House, Inc. and Subsidiary Reston, Virginia Report on Compliance for Each Major Federal Program We have audited Shelter House, Inc. and Subsidiary s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Shelter House, Inc. and Subsidiary s major federal programs for the year ended June 30, 2018. Shelter House, Inc. and Subsidiary s major federal programs are identified in the summary of auditor s results section of the accompanying Schedule of Findings and Questioned Costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of Shelter House, Inc. and Subsidiary s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Shelter House, Inc. and Subsidiary s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Shelter House, Inc. and Subsidiary s compliance. 20
Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance (Continued) Opinion on Each Major Federal Program In our opinion, Shelter House, Inc. and Subsidiary complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of their major federal programs for the year ended June 30, 2018. Report on Internal Control over Compliance Management of Shelter House, Inc. and Subsidiary is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Shelter House, Inc. and Subsidiary s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Shelter House, Inc. and Subsidiary s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 21
Independent Auditor s Report on Compliance for Each Major Program and on Internal Control over Compliance Required by the Uniform Guidance (Continued) The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Rockville, Maryland November 27, 2018 22
Schedule of Expenditures of Federal Awards Year Ended June 30, 2018 Federal Grantor/Pass-Through Grantor Federal CFDA Number Grant Number Pass through to subrecipients Total Federal Expenditures Department of Housing and Urban Development (HUD) Direct Funding: VA0014LG01-1609; VA0014LG01-1508; Continuum of Care 14.267 400006357 $ 1,382 $ 502,400 Rise PSH Program 14.267 VA0286LG01-1500 39,998 455,782 Subtotal 41,380 958,182 Pass-through funding: County of Fairfax, Virginia (EIN # 54-0787833) Home Investment Partnerships Program Loan 14.239 M-05-US-51-0503; M-07-US-51-0503; M-08-US-51-0503 - 203,000* Virginia Department of Housing and Community Development (EIN # 54-1080347) Virginia Homeless Solutions Program 14.231 E27DC510001-72,447 Total HUD 41,380 1,233,629 Refer to accompanying Notes to Schedule of Expenditures of Federal Awards. 23
Schedule of Expenditures of Federal Awards Department of Health and Human Services (DHHS) Pass-through funding County of Fairfax, Virginia (EIN # 54-0787833) Consolidated Community Funding Pool: Community Case Management Program 93.569 Employment Services Program 93.569 Domestic Violence Supportive Housing 93.569 G17B1VA- COSR - 67,210 G17B1VA- COSR - 80,805 G17B1VA- COSR - 58,592 Temporary Assistance for Needy Families: Employment Services Program 93.558 G17B1VA- COSR - 31,424 Virginia Department of Social Services (EIN # 54-0959533) Temporary Assistance for Needy Families: Virginia Homeless Solutions Program 93.558 1701VAVPS - 99,400 Family Violence Prevention and Services/ Domestic Violence Shelter and Supportive Services: 2017 Domestic Violence Prevention and Services 93.671 1701VAVPS - 10,000 Total DHHS - 347,431 Department of Justice Office on Violence Against Women (OVW) Pass-through funding: Virginia Department of Social Services (EIN # 54-0959533) Virginia Department of Criminal Justice Services (EIN # 54-0852528) 16.575 2016-VA-GX- 0039-172,502 Total OVW - 172,502 Total federal expenditures $ 41,380 $ 1,753,562 *This represents an outstanding loan balance Refer to accompanying Notes to Schedule of Expenditures of Federal Awards. 24
Notes to Schedule of Expenditures of Federal Awards 1. Basis of presentation 2. Summary of significant accounting policies 3. Indirect cost rate 4. Reconciliation of Schedule of Expenditures of Federal Awards to Revenue The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal grant activity of Shelter House, Inc. and Subsidiary under programs of the federal government for the year ended June 30, 2018. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of Shelter House, Inc. and Subsidiary, it is not intended to and does not present the consolidated financial position, changes in net assets, or cash flows of Shelter House, Inc. and Subsidiary. Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Shelter House, Inc. and Subsidiary has elected not to use the 10 percent de minimis indirect cost rate as allowed under the Uniform Guidance. The following is a reconciliation of the Schedule of Expenditures of Federal Awards to the total government agency revenue per the Consolidated Statements of Activity and Changes in Net Assets. Schedule of Expenditures of Federal Awards $ 1,753,562 State and County contracts and grants 4,223,903 Less outstanding loan (203,000) Total government agencies $ 5,774,465 25
Schedule of Findings and Questioned Costs Year Ended June 30, 2018 Financial Statements Type of auditor s report issued: Unmodified Internal control over financial reporting: SECTION I - SUMMARY OF AUDITOR S RESULTS Material weakness identified? yes X no Significant deficiency identified? yes X none reported Noncompliance material to financial statements noted? yes X no Federal Awards Internal control over major programs: Material weakness identified? yes X no Significant deficiency identified? yes X none reported Type of auditor s report issued on compliance for major programs: Unmodified Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? yes X no Identification of Major Programs: CFDA Number Name of Federal Program or Cluster 14.267 Continuum of Care Program Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? yes X no 26
Schedule of Findings and Questioned Costs (Continued) Year Ended June 30, 2018 SECTION II - FINANCIAL STATEMENT FINDINGS None SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None SECTION IV PRIOR YEAR FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None 27