CONSOLIDATED FINANCIAL REPORT JUNE 30, 2015
CONSOLIDATED FINANCIAL REPORT JUNE 30, 2015 CONTENTS INDEPENDENT AUDITORS' REPORT 1-2 Page FINANCIAL STATEMENTS Consolidated Statements of Financial Position 3 Consolidated Statements of Unrestricted Revenues, Expenses and Other Changes in Unrestricted Net Assets 4 Consolidated Statements of Changes in Net Assets 5 Consolidated Statements of Cash Flows 6-7 Notes to Consolidated Financial Statements 8-17 STATE GOVERNMENTAL REPORTS AND SCHEDULES Schedule of Expenditures of State Awards 18 Independent Auditors Report on Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Governmental Auditing Standards 19-20 Independent Auditors Report on Compliance for Each Major State Program and on Internal Control Over Compliance Required by the State Single Audit Act 21-22 Schedule of Findings and Questioned Costs 23
CARTER HAYES + ASSOCIATES, P.C. established 1988 CERTIFIED PUBLIC ACCOUNTANTS 1952 WHITNEY AVENUE HAMDEN CONNECTICUT 06517 (203) 287-3990 Fax (203) 287-3995 www.carterhayes.com INDEPENDENT AUDITORS' REPORT To the Board of Directors Chapel Haven, Inc. New Haven, Connecticut Report on the Financial Statements We have audited the accompanying consolidated financial statements of Chapel Haven, Inc. (a nonprofit organization) and Subsidiaries which comprise the consolidated statement of financial position as of June 30, 2015 and 2014, and the related consolidated statements of unrestricted revenues, expenses, and other changes in unrestricted net assets, changes in net assets and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Chapel Haven, Inc. and Subsidiaries as of June 30, 2015 and 2014, and the changes in their net assets and their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Other Matters Other Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The accompanying schedule of expenditures of state awards is presented for purposes of additional analysis as required by the State Single Audit Act and is not a required part of the basic 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 basic 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 taken as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued a report dated December 23, 2015, on our consideration of Chapel Haven, Inc. s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing in considering Chapel Haven, Inc. s internal control over financial reporting and compliance. Carter, Hayes + Associates, P.C. Hamden, Connecticut December 23, 2015 2
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION JUNE 30, 2015 AND 2014 ASSETS 2015 2014 CURRENT ASSETS Cash and cash equivalents $ 1,957,197 $ 1,935,552 Accounts receivable, net of allowance for doubtful accounts of $0 in 2015 and $40,478 in 2014 219,079 190,828 Grant receivable 120,000 - Current portion of unconditional promises to give 25,000 25,000 Marketable securities, market value 989,052 920,881 Prepaid expenses 360,691 138,202 Total current assets 3,671,019 3,210,463 PROPERTY, PLANT AND EQUIPMENT Land 1,412,237 1,412,237 Buildings 6,211,663 6,163,314 Building improvements 1,289,567 1,109,813 Furniture and equipment 491,626 542,514 Vehicles 290,854 290,854 9,695,947 9,518,732 Less accumulated depreciation and amortization 3,103,644 2,898,843 6,592,303 6,619,889 OTHER ASSETS Cash restricted for property 424,400 424,400 Marketable securities held for scholarship, market value 289,269 269,330 Marketable securities, market value 1,837,126 1,710,244 Unconditional promises to give, less current portion, net of allowance for uncollectible pledges of $55,000 in 2015 and $80,000 in 2014 25,000 50,000 2,575,795 2,453,974 $ 12,839,117 $ 12,284,326
LIABILITIES AND NET ASSETS 2015 2014 CURRENT LIABILITIES Accounts payable and accrued expenses 379,852 $ 244,939 Current maturities of long-term debt 39,661 37,863 Tuition received in advance 1,116,555 1,334,600 Advance deposits 281,500 361,959 Total current liabilities 1,817,568 1,979,361 LONG TERM DEBT, less current maturities 584,236 623,311 NET ASSETS Unrestricted Undesignated 5,331,730 4,962,544 Board designated for the quasi-endowment 675,928 675,928 6,007,658 5,638,472 Temporarily restricted 1,942,887 1,589,889 Permanently restricted 2,486,768 2,453,293 10,437,313 9,681,654 $ 12,839,117 $ 12,284,326 See Notes to Consolidated Financial Statements. 3
CONSOLIDATED STATEMENTS OF UNRESTRICTED REVENUES, EXPENSES AND OTHER CHANGES IN UNRESTRICTED NET ASSETS YEARS ENDED JUNE 30, 2015 AND 2014 OPERATING REVENUES 2015 2014 Tuition $ 4,270,902 $ 3,671,929 Supported living fees 2,046,935 1,685,822 Asperger program 1,428,998 1,547,187 Adult education courses 156,753 164,101 Café and bookstore revenue 35,821 35,544 Week visitors 13,867 23,370 Miscellaneous income 49,363 34,449 Investment income 137 97 8,002,776 7,162,499 OPERATING EXPENSES Program services: Life skills 3,799,832 3,599,272 Day programming 1,570,304 1,389,080 Asperger program 1,598,764 1,528,601 Supportive services: Management and general 1,056,854 946,067 Fundraising 233,887 11,700 8,259,641 7,474,720 Changes in unrestricted net assets from operations before other operating support (256,865) (312,221) OTHER OPERATING SUPPORT Contributions 346,615 518,553 Federal and state grants 40,000 - Net assets released from restriction: Restrictions satisfied by payment for operations 47,045 77,414 Changes in unrestricted net assets from operations 176,795 283,746 OTHER CHANGES Net investment return 68,171 194,454 State grants for capital expenditures 120,000 - Net assets released from restriction: Restrictions satisfied by payment for capital expenditures 4,220 97,482 Increase in unrestricted net assets $ 369,186 $ 575,682 See Notes to Consolidated Financial Statements. 4
CONSOLIDATED STATEMENTS OF CHANGES IN NET ASSETS YEARS ENDED JUNE 30, 2015 AND 2014 2015 2014 UNRESTRICTED NET ASSETS Total unrestricted revenue and support $ 8,577,562 $ 7,875,506 Total net assets released from restrictions 51,265 174,896 Total unrestricted expenses (8,259,641) (7,474,720) Increase in unrestricted net assets 369,186 575,682 TEMPORARILY RESTRICTED NET ASSETS Support for employment program 100,000 - Support for Landau memorial 71,746 - Support for residential scholarship 21,947 2,000 Support for Bowl-a-thon 20,119 38,347 Support for Spencer/Rec 20,000 - Support for recreation activities 12,800 12,500 Support for Golf Tournament 9,500 - Support for senior program 1,000 100,000 Support for Uarts 323 - Support for Special Olympics 100 - Support for vehicle acquisition - 60,000 Net investment return on Scholarship investments 19,938 57,046 Net investment return on permanent and quasi-endowments 126,790 319,535 Net assets released to cover Endowment expenses (123) (100) Net assets released from restrictions (51,142) (174,796) Increase in temporarily restricted net assets 352,998 414,532 PERMANENTLY RESTRICTED NET ASSETS Contributions received for the Endowment 5,000 22,100 Contributions received for the Scholarship fund 3,475 1,600 Write off of uncollectible Endowment pledge - (40,000) Recovery of uncollectible Endowment pledge 25,000 - Increase (decrease) in permanently restricted net assets 33,475 (16,300) INCREASE IN NET ASSETS 755,659 973,914 NET ASSETS, beginning of year 9,681,654 8,707,740 NET ASSETS, end of year $ 10,437,313 $ 9,681,654 See Notes to Consolidated Financial Statements. 5
CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2015 AND 2014 2015 2014 CASH FLOWS FROM OPERATING ACTIVITIES Increase in net assets $ 755,659 $ 973,914 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Depreciation and amortization 292,859 280,703 Gain on investments (214,992) (518,456) Contributions for endowment (5,000) (22,100) Write off of endowment pledge - 40,000 (Increase) decrease in: Accounts receivable (148,251) 37,020 Unconditional promises to give 25,000 (35,000) Prepaid expenses (222,489) (33,745) Increase (decrease) in: Accounts payable and accrued expenses 134,913 9,858 Tuition received in advance (218,045) 324,797 Advance deposits (80,459) 33,459 Net cash provided by operating activities 319,195 1,090,450 CASH FLOWS FROM INVESTING ACTIVITIES Payments for land, buildings and improvements (228,103) (168,627) Payments for furniture and vehicles (37,170) (150,722) Purchase of marketable securities - (54,785) Net cash used in investing activities (265,273) (374,134) CASH FLOWS FROM FINANCING ACTIVITIES Debt payments (37,277) (35,558) Contributions for endowment 5,000 22,100 Write off of endowment pledge - (40,000) Net cash used in financing activities (32,277) (53,458) 6
CONSOLIDATED STATEMENTS OF CASH FLOWS, Continued YEARS ENDED JUNE 30, 2015 AND 2014 2015 2014 NET INCREASE IN CASH AND CASH EQUIVALENTS AND RESTRICTED CASH 21,645 662,858 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, beginning 2,359,952 1,697,094 CASH AND CASH EQUIVALENTS AND RESTRICTED CASH, ending $ 2,381,597 $ 2,359,952 SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION: Operating activities reflect cash paid during the period for: Interest $ 30,303 $ 33,714 See Notes to Consolidated Financial Statements. 7
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 1. Summary of Significant Accounting Policies: Nature of Organization JUNE 30, 2015 Chapel Haven, Inc. and Subsidiaries is a private, non-profit committed to providing a lifelong program of individualized support services for adults with developmental and social disabilities, enabling them to live independent and productive lives. The Organization receives income from fees for services, contributions and investment income and is exempt from federal income taxes under the Internal Revenue Code Section 501(c)(3). During 2008, Chapel Haven Inc. formed a subsidiary in Arizona to provide independent living services and a subsidiary in Connecticut to maintain its investment assets. In June 2015, Chapel Haven Inc. formed 25 Emerson Street Holdings, LLC. to facilitate the purchase of additional real estate. There was no activity in the LLC for the fiscal year ended June 30, 2015. Consolidation Policy The consolidated financial statements include the accounts of its wholly owned Subsidiaries, Chapel Haven West, Inc., as well as the supporting organization Chapel Haven Endowment, Inc. All significant transactions and balances between the entities have been eliminated in consolidation. Financial Statement Presentation The consolidated financial statements are presented in accordance with FASB ASC 958. Under FASB ASC 958, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Certain prior year amounts have been reclassified for consistency with current period presentation. The reclassifications had no effect on the reported net assets. Net Asset Categories To ensure the observance of limitations and restrictions on the use of resources available to the Organization, the accounts of the Organization are maintained in the following net asset categories: Unrestricted Net Assets Unrestricted net assets represent available resources other than donor-restricted contributions. Included in unrestricted net assets are grants and contracts, which may be earmarked for special purposes. Temporarily Restricted Net Assets Temporarily restricted net assets represent contributions that are restricted by the donor either as to purpose or as to time of expenditure. 8
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued Permanently Restricted Net Assets Permanently restricted net assets represent contributions that are received with the donor restriction that the principal be invested in perpetuity and only the income earned thereon is available for operations. Recognition of Support and Revenue Grants and Contracts Grants and contracts are generally considered to be exchange transactions in which the grantor or contractor requires the performance of specified activities. Entitlement to cost reimbursement grants and contracts is conditioned on the expenditure of funds in accordance with grant restrictions and, therefore, revenue is recognized to the extent of grant expenditures. Entitlement to performance-based grants and contracts is conditioned on the attainment of specific performance goals and, therefore, is recognized to the extent of performance achieved. Grant and contract receipts in excess of revenues recognized are presented as deferred grant support. Contributions Contributions are defined as voluntary, nonreciprocal transfers. Unrestricted and unconditional contributions are recognized as support when received or pledged, if applicable. Contributions are reported as temporarily restricted support if they are received with donor stipulations that limit the use of such assets. When a restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of changes in net assets as net assets released from restrictions. The Organization s policy is to present temporarily restricted net assets received during the year whose restrictions are also met during the current year as unrestricted net assets. Contributions received with donor-imposed conditions are presented as deferred support until such conditions are substantially met, at which time they are recognized as support. The Organization s policy is to recognize the expiration of donor restrictions for contributions of property and equipment or the use of contributions restricted for property and equipment in the year the property and equipment is placed in service. Contributions made for construction activities are recognized in the year construction activities are performed. An exception to this policy is when a grantor places a lien on property or equipment purchased or constructed with grant funds. In this situation, the grant is recognized utilizing the straight-line method over the life of the asset. Promises to Give Unconditional promises to give, less an allowance for uncollectible amounts, are recognized as revenue in the period received and as assets, decreases of liabilities or expenses depending on the form of the benefits received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. 9
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued An allowance for doubtful promises to give is determined by a review of the outstanding balances to estimate which promises may not be completed. At June 30, 2015, this allowance for doubtful promises to give amounts to $55,000. Accounts Receivable The accounts receivable arise in the normal course of business. It is the policy of management to review the outstanding accounts receivable at year end, as well as the bad debt write-offs experienced in the past, and establish an allowance for doubtful accounts for uncollectible amounts. Balances still outstanding after management uses reasonable collection efforts are charged to the allowance for doubtful accounts and credited to accounts receivable. Changes in the allowance for doubtful accounts have not been material to the financial statements. There was no allowance for uncollectible accounts at June 30, 2015. Cash Equivalents The Organization considers all highly liquid debt instruments purchased with a maturity of three months or less and all funds deposited with banking institutions (including certificates of deposit) to be cash equivalents. Restricted Cash Restricted cash represents amounts of temporarily restricted net assets held in cash and cash equivalent accounts which are to be expended in subsequent years. Investments Investments in marketable securities are stated at fair market value. Fair Value Measurements FASB ASC 820 establishes a fair value hierarchy, which prioritizes the inputs to valuation techniques used to measure fair value into three levels. A financial instrument s categorization within the fair value hierarchy is based upon the lowest level of input that is available and significant to the fair value measurement. FASB ASC 820 establishes and prioritizes three levels of input that may be used to measure fair value. Level 1 Quoted prices in active markets for identical assets or liabilities. The fair market value of marketable securities is based upon quoted prices in active markets. The Organization s index funds are Level 1 investments. Level 2 - Observable inputs other than quoted prices in active markets for identical assets and liabilities, quoted prices for identical or similar assets or liabilities in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. The Organization has no Level 2 fair value measurements. Level 3 Inputs that are generally unobservable and typically reflect management s estimates of assumptions that market participants would use in pricing the asset or liability. The Organization has no Level 3 fair value measurements. 10
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued Property and Equipment Donated property is stated at fair market value as determined by management at the date contributed. Such donations are reported as unrestricted support unless the donor has restricted the donated assets to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Organization reports expirations of donor restrictions when the donated or acquired assets are purchased as instructed by the donor. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time. Property purchased is recorded at cost. Depreciation expense is computed by the straight-line method over the estimated useful lives of the respective assets. Depreciation expense for the years ended June 30, 2015 and 2014 amounted to $292,859 and $280,703, respectively. Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities and the reported revenues and expenses. Actual results could vary from the estimates that were used. Revenue Recognition Revenue received in advance of providing client services is classified as tuition received in advance and advance deposits. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of unrestricted revenues, support, expenses and other changes in unrestricted net assets. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income Taxes Chapel Haven, Inc., a not-for-profit organization operating under Section 501(c)(3) of the Internal Revenue Code, is generally exempt from federal, state and local taxes and, accordingly, no provision for income taxes is recorded in the financial statements. The Organization files tax returns in the United States. The Organization has not taken any tax positions that management believes would result in additional tax liabilities upon examination of the tax returns by a tax jurisdiction. The Organization has no open tax years prior to fiscal 2012. The Organization s tax returns are subject to examination, generally for three years after they were filed. The Organization has filed its quadrennial exemption with the City of New Haven to preserve its properties tax exempt status. 2. Concentrations of Credit Risk Due to Temporary Cash Investments and Accounts Receivable Financial instruments that potentially subject the Organization to concentrations of credit risk consist principally of temporary cash investments and accounts receivable. The Organization places its temporary cash investments with substantial financial institutions to limit the amount of credit exposure. Concentrations of credit risk with respect to accounts receivable are limited due to the financial stability of the customers comprising the Organization s revenue base. 11
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued The Organization maintains cash balances at financial institutions in Connecticut and Arizona, which are insured by the Federal Deposit Insurance Corporation up to $250,000. At June 30, 2015, the Organization had uninsured cash balances of roughly $1,070,000. 3. Marketable Securities: Details of the cost, market value and unrealized appreciation at June 30, 2015 and 2014 are as follows: June 30, 2015 Permanently Unrestricted Restricted Total Index Funds: Cost $585,600 $1,317,241 $1,902,841 Unrealized gain 403,452 809,154 1,212,606 Market value $989,052 $2,126,395 $3,115,447 Less Scholarship fund $ - ($ 289,269) ($ 289,269) $989,052 $1,837,126 $2,826,178 June 30, 2014 Permanently Unrestricted Restricted Total Index Funds: Cost $566,013 $1,275,132 $1,841,145 Unrealized gain 354,868 704,442 1,059,310 Market value $920,881 $1,979,574 $2,900,455 Less Scholarship fund $ - ($ 269,330) ($ 269,330) $920,881 $1,710,244 $2,631,125 Marketable securities related to the endowment and scholarship contributions have been segregated as long-term assets. The following schedule summarizes the investment return and its classification in the consolidated statements of unrestricted revenues, expenses and other changes in unrestricted net assets and the statement of changes in net assets for the years ended June 30, 2015 and 2014. 12
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued Year ended June 30, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total Dividends and interest income $ 19,724 $ 5,729 $ 36,611 $ 62,064 Net realized and unrealized gain 48,584 14,209 90,179 152,972 Total return on investments 68,308 19,938 126,790 215,036 Investment return segregated for current operations 137 - - 137 Investment return in excess of amounts for current operations $68,171 $19,938 $126,790 $214,899 Year ended June 30, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total Dividends and interest income $ 16,768 $ 4,871 $ 31,037 $ 52,676 Net realized and unrealized gain 177,783 52,175 288,498 518,456 Total return on investments 194,551 57,046 319,535 571,132 Investment return segregated for current operations 97 - - 97 Investment return in excess of amounts for current operations $194,454 $57,046 $319,535 $571,035 The Organization segregates dividend and interest income from unrestricted investments for use in unrestricted activities. Net realized and unrealized gains and losses and interest and dividend income earned on scholarship investments and the permanent endowment are temporarily restricted until authorized for use. 4. Promises to Give: Unconditional promises to give to the Endowment fund at June 30, 2015 are as follows: Receivable in one to five years $ 105,000 Allowance for uncollectible pledges (55,000) Total unconditional promises to give $ 50,000 13
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued 5. Restrictions on Net Assets: Temporarily restricted net assets consisted of the following at June 30, 2015: Permanent endowment earnings $ 899,622 Property purchases 424,400 Endowment scholarships earnings 153,180 Senior programs 133,976 Poole scholarship 103,735 Various contributions to provide for recreational activities for clients 47,728 Golf tournament 7,900 Employment program 100,000 Landau memorial 71,746 Residential scholarships 600 Endowment Investment and Spending Policies 14 $1,942,887 The Organization s endowments consist of both donor-restricted endowment funds (permanently restricted net assets) and funds designated by the Board of Directors to function as an endowment. As required by generally accepted accounting principles, net assets associated with endowment funds, including board designated funds, are classified and reported based on the existence or absence of donor-imposed restrictions. In February 2000, the Board of Directors approved the establishment of a permanent endowment with annual earnings to be reinvested until the endowment reaches $500,000. In 2008, the Board of Directors voted to increase the amount to $1,000,000. In 2009, the Board of Directors voted to increase the amount to $1,500,000 for its Permanent endowment fund and $1,000,000 for the board designated endowment fund. Spending of the scholarship endowment is determined by the board so as to maintain the historical dollar amount of donations in perpetuity. In 2015, the board voted to allow up to 3% of the permanent endowment ending balance at June 30 th each year to made available to be transferred to Chapel Haven Inc. for spending. The funds must be spent within three fiscal years of the approval date or they become unavailable. Total historical donor-restricted donations to the endowment as of June 30, 2015 and 2014 were approximately $2,313,000 and $2,282,000 as of June 30, 2015 and 2014, respectively. In addition, the Organization has a scholarship endowment which must be maintained in perpetuity. Total historical scholarship endowment donor-restricted contributions as of June 30, 2015 and 2014 were approximately $174,000 and 171,000, respectively. In addition, the Organization has a quasi-endowment fund comprised of board designated amounts. Total historical board designated donations as of June 30, 2015 and 2014 were approximately $676,000 and are recorded as board designated unrestricted net assets. The Board of Directors has interpreted the State of Connecticut s Uniform Prudent Management of Institutional Funds Act (CTUPMIFA) as requiring the preservation of the fair value of the original gift as of the date of the date of the donor restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of donor restricted contributions to the permanent endowment fund and the permanent scholarship fund, (b) the original value of any subsequent donor restricted contributions to the permanent endowment and permanent scholarship funds, (c) earnings on the permanent endowment and permanent scholarship funds up until the funds reach the Board designated amount of $1,500,000 for the permanent endowment fund and as determined by the board for the permanent scholarship fund. The remaining portion of the donor
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued restricted endowment fund and earnings in excess of the board requirements that are not classified in permanently restricted net assets are classified as temporarily restricted net assets until those amounts are approved for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by the CTUPMIFA. In accordance with CTUPMIFA, the organization considers the following factors in making a determination to appropriate or accumulate donorrestricted endowment funds: 1. The duration and preservation of the fund 2. The purpose of the Organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the Organization 7. The investment policies of the Organization The Organization has adopted investment and spending policies for endowment assets that attempt to provide continued funding for the Organizations programs while maintaining the purchasing power of the endowment assets. Endowment assets include those assets of donorrestricted funds the Organization must hold in perpetuity. The Organizations spending and investment policies work together to achieve this objective. The investment policy establishes an achievable return objective through both capital appreciation and current yield. 6. Line of Credit: At June 30, 2015, the Organization had available a line of credit from First Niagara Bank in the amount of $500,000 which is secured by substantially all of the business assets of the Organization. There were no outstanding amounts on the line of credit at June 30, 2015. No interest expense was incurred for June 30, 2015. Interest expense included in operating expense for June 30, 2014 was $1,691. 7. Long-Term Debt In January 2008, the Organization borrowed $787,500 from Wells Fargo Bank for the purchase of 1701 North Park Avenue, Tucson, Arizona, which is used for the Chapel Haven West program. The mortgage is secured by the property at a fixed interest rate of 6.86%. The maturity date on this loan was in January, 2013. In August 2012, the note was refinanced without penalty at an interest rate of 4.65%. Payments are due monthly in the amount of $5,635 which includes principal and interest. The loan matures in July 2017. Interest expense included in operating expense for June 30, 2015 and 2014 was $30,303 and $32,023, respectively. Aggregate maturities required on long-term debt at June 30, 2015 are as follows: 2016 $ 39,661 2017 41,545 2018 542,691 $623,897 15
8. Pension Plan: CHAPEL HAVEN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued The Organization maintains a 403(B) TDA and defined contribution plan. The defined Contribution plan is for all employees who have attained age 21 and completed two years of service. Contributions under the plan are made in the amount of 4% of qualified employee earnings. Total contributions under this plan were $158,128 and $151,219 for the years ended June 30, 2015 and 2014, respectively. The plan s year end is December 31. An audit for the plan year ended June 30, 2015 was conducted and a 5500 has been filed by the Organization. 9. Community Foundation for Greater New Haven: In 1984, a donation was made to the Community Foundation of Greater New Haven to create the Chapel Haven Graduate Fund. The purpose of this fund is to help provide job counseling, daily living, and recreational support services for graduates of Chapel Haven, Inc. For the years ended June 30, 2015 and 2014, Chapel Haven, Inc. received $8,059 and $8,258, respectively, from the Chapel Haven Graduate Fund. 10. Subsidiary Transactions: The Organization is related through common control, to Chapel Haven Endowment, Inc., a supporting organization incorporated to hold endowment funds. During the fiscal year 2010, Chapel Haven Inc. transferred all investments into Chapel Haven Endowment. In June 2010 Chapel Haven Endowment, Inc. loaned Chapel Haven, Inc. $457,429 to be re-paid in quarterly principal installments of $15,642 beginning in September 2010 with interest of 6.5%. The proceeds of this loan were used to pay off bank debt. In March 2011 Chapel Haven Endowment, Inc. loaned Chapel Haven, Inc. $200,000 to be re-paid in quarterly principal installments of $6,839 beginning in June 2011 with interest of 6.5%. The proceeds of this loan were used to pay off bank debt. In March 2011 Chapel Haven Endowment, Inc. loaned Chapel Haven, Inc. $170,000 to be re-paid in quarterly principal installments of $5,813 beginning in June 2011with interest of 6.5%. The proceeds of this loan were used to pay off bank debt. In June 2012 Chapel Haven Endowment, Inc. made a short term loan to Chapel Haven, Inc. in the amount of $300,000 with interest of 2.64%, to be repaid in June 2013. The proceeds of this loan were used to purchase property at 38-40 Emerson St, New Haven, Connecticut. In fiscal 2013 $725,000 was refinanced at a lower rate of 2.34% for 15 years. Additionally, two new loans were made from Chapel Haven Endowment, Inc. to Chapel Haven, Inc. for $259,000 and $300,000 in fiscal 2013 with interest rates of 2.23% and 2.60%, respectively. The Chapel Haven, Inc. loans payable and the Chapel Haven Endowment, Inc. loans receivable have been eliminated during the consolidation. The balance at June 30, 2015 on the above loans from Chapel Haven Endowment, Inc. to Chapel Haven, Inc. amounted to $605,000. Interest paid to Chapel Haven Endowment, Inc. from Chapel Haven, Inc. amounted to $18,582 and $25,614, respectively, for the years ending June 30, 2015 and 2014. This interest was eliminated in the consolidated financial statements. Chapel Haven, Inc. had made non-interest bearing advances to Chapel Haven West, Inc. which amounted to $210,846 at June 30, 2014. The amount was repaid in full in 2015. 16
11. Subsequent Events CHAPEL HAVEN, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS, Continued Management has evaluated subsequent events through December 23, 2015, the date which the financial statements were available for issue and has determined that no events have occurred that would impact the financial statements. Subsequent to year end the Organization embarked on a capital campaign to potentially make improvements to the facility. 17
SCHEDULE OF EXPENDITURES OF STATE AWARDS YEAR ENDED JUNE 30, 2015 State Grant Program State Grantor/Program Title CORE-CT Number Expenditures State of Connecticut Department of Development Services Employment Opportunities 11000-DDS50000-16108 and Day Services $332,273 Community Residential Program 11000-DDS50000-16122 370,807 State of Connecticut Office of Policy and Management Nonprofit Grant Program 12052-OPM20830-43574 120,000 Note to Schedule Total state financial assistance $823,080 The accompanying schedule of expenditures of state financial assistance includes state grant activity of the Chapel Haven, Inc. under programs of the State of Connecticut for the fiscal year ended June 30, 2015. The State of Connecticut Department of Developmental Services has provided financial assistance to Chapel Haven, Inc. through grants and other authorizations in accordance with the General Statutes of the State of Connecticut. These financial assistance programs fund the Organization s REACH program which provides employment, life skills and supported living guidance. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES The accounting policies of Chapel Haven, Inc. and Subsidiaries conform to generally accepted accounting principles as applicable to not-for-profit agencies. The information in the Schedule of Expenditures of State Awards is presented based upon regulations established by the State of Connecticut, Office of Policy and Management. Basis of Accounting The expenditures reported on the Schedule of Expenditures of Financial Assistance are reported on the accrual basis of accounting. In accordance with Section 4-236-22 of the Regulations to the State Single Audit Act, certain grants are not dependent on expenditure activity, and accordingly, are considered to be expended in the fiscal year of receipt. These grant program receipts are reflected in the expenditures column of the Schedule of Expenditures of State Financial Assistance. 18
CARTER HAYES + ASSOCIATES, P.C. established 1988 CERTIFIED PUBLIC ACCOUNTANTS 1952 WHITNEY AVENUE HAMDEN CONNECTICUT 06517 (203) 287-3990 Fax (203) 287-3995 www.carterhayes.com INDEPENDENT AUDITORS 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 Chapel Haven, Inc. New Haven, Connecticut We have audited, 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 the consolidated financial statements of the Chapel Haven, Inc. and Subsidiaries, which comprise the consolidated statement of financial position as of June 30, 2015 and the related consolidated statements unrestricted revenues, expenses and other changes in unrestricted net assets, changes in net assets, and cash flows for the year ended, and the related notes to the financial statements, and have issued our report thereon dated December 23, 2015. Internal Control Over Financial Reporting In planning and performing our audit of the consolidated financial statements, we considered Chapel Haven, Inc. and Subsidiaries 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 financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Chapel Haven, Inc. and Subsidiaries internal control. Accordingly, we do not express an opinion on the effectiveness of the Chapel Haven, Inc. and Subsidiaries 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 combination of deficiencies in internal control, such that there a reasonable possibility that a material misstatement of the entity s consolidated financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or 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 the internal control over financial reporting 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 financial reporting 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. 19
Compliance and Other Matters As part of obtaining reasonable assurance about whether Chapel Haven, Inc. and Subsidiaries consolidated financial statements are free of 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 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 result of that testing, and not to provide an opinion on the effectiveness of Chapel Haven, Inc. and Subsidiaries internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Chapel Haven, Inc. and Subsidiaries internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Carter, Hayes + Associates, P.C. Hamden, Connecticut December 23, 2015 20
CARTER HAYES + ASSOCIATES, P.C. established 1988 CERTIFIED PUBLIC ACCOUNTANTS 1952 WHITNEY AVENUE HAMDEN CONNECTICUT 06517 (203) 287-3990 Fax (203) 287-3995 www.carterhayes.com INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR STATE PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE STATE SINGLE AUDIT ACT To the Board of Directors Chapel Haven, Inc. New Haven, Connecticut Report on Compliance for Each Major State Program We have audited Chapel Haven, Inc. s compliance with the types of compliance requirements described in the Office of Policy and Management Compliance Supplement that could have a direct and material effect on each of Chapel Haven, Inc. s major state programs for the year ended June 30, 2015. Chapel Haven, Inc. s major state programs are identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grants applicable to its state programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of Chapel Haven, Inc. s major state 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 State Single Audit Act (C.G.S. Sections 4-230 to 4-236). Those standards and the State Single Audit Act 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 state program occurred. An audit includes examining, on a test basis, evidence about Chapel Haven, Inc. 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 state program. However, our audit does not provide a legal determination of Chapel Haven, Inc. s compliance. Opinion on Each Major State Program In our opinion, Chapel Haven, Inc. 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 its major state programs for the year ended June 30, 2015. 21
Report on Internal Control over Compliance Management of Chapel Haven, Inc. 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 Chapel Haven, Inc. s internal control over compliance with the types of requirements that could have a direct and material effect on each major state program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing our opinion on compliance for each major state program and to test and report on internal control over compliance in accordance with the State Single Audit Act, 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 Chapel Haven, Inc. 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 state 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 state 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 state 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. 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 State Single Audit Act. Accordingly, this report is not suitable for any other purpose. Carter, Hayes + Associates, P.C. Hamden, Connecticut December 23, 2015 22
CHAPEL HAVEN, INC. SCHEDULE OF FINDINGS AND QUESTIONED COSTS FOR THE YEAR ENDED JUNE 30, 2015 I. SUMMARY OF AUDITOR S RESULTS Financial Statements Type of auditors report issued: Unmodified Internal control over financial reporting: Material weaknesses identified: Significant deficiencies: Noncompliance material to financial statements noted: No None Reported No State Financial Assistance Internal control over major programs: Material weaknesses identified: No Significant deficiencies identified: None reported Type of auditors opinion issued on compliance for major programs: Any findings disclosed that are required to be reported in accordance with Section 4-236-24 of the Regulations to the State Single Act: Unmodified No The following schedule reflects the major programs included in the audit: State Grantor State Grant Program and CORE-CT Program Number Expenditures State of Connecticut Department of Development Services Employment Opportunities and Day Services 11000-DDS50000-16108 $332,273 Community Residential Program 11000-DDS50000-16122 $370,807 State of Connecticut Office of Policy and Management Nonprofit Grant Program 12052-OPM20830-43574 $120,000 Dollar threshold used to distinguish between Type A and Type B Programs $100,000 II. FINANCIAL STATEMENT FINDINGS None III. STATE FINANCIAL ASSISTANCE FINDINGS AND QUESTIONED COSTS None 23