THE RESOURCE ENVIRONMENT FOR UNDERPRIVILEGED AUDITED FINANCIAL STATEMENTS JUNE 30, 2017 (with 2016 comparative and summarized totals)
TABLE OF CONTENTS Independent Auditors' Report on the Financial Statements... 1 Statement of Financial Position... 3 Statement of Activities and Changes in Net Assets... 4 Statement of Cash Flows... 5 Statement of Functional Expenses... 6 Notes to Financial Statements... 8 Supplemental Information Statement of Expenditures for County of Alameda... 12 Schedule of Expenditures of Federal Awards... 13 Group Home Reporting Forms SR 3 Group Home Program Cost Report... 15 SR 4 Group Home Program Payroll & Fringe Benefit Report... 16 SR 10 Certification of Audited Cost Data... 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... 18 Independent Auditor s Report on Compliance for Each Major Federal Program and on Internal Control Over Compliance Required by Uniform Guidance... 20 Schedule of Findings and Questioned Costs... 22
STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 (with comparative totals for 2016) ASSETS 2017 2016 Current Assets Cash $ 129,132 $ 101,811 Accounts Receivable (Note 2) 729,933 314,801 Total Current Assets 859,065 416,612 Property and Equipment (Note 3) 532,823 61,811 Total Assets $ 1,391,888 $ 478,423 LIABILITIES AND NET ASSETS Accounts Payable and Accrued Liabilities $ 377,268 $ 204,547 Construction Payable 334,758 - Retirement Payable 30,202 - Related Party Loan (Note 6) 128,000 - Notes Payable (Note 4) 32,118 114,897 Total Liabilities 902,346 319,444 NET ASSETS Net Assets 489,542 158,979 Total Net Assets 489,542 158,979 TOTAL LIABILITES AND NET ASSETS $ 1,391,888 $ 478,423 The accompanying notes are an integral part of these financial statements. -3-
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30, 2017 (with comparative totals for 2016) 2017 2016 REVENUES: Social Service- Foster Care $ 1,543,274 $ 1,376,087 CA Nutrition Program 21,538 22,744 Other 66,922 - Total Revenues 3,276,653 2,914,845 EXPENSES: Program: Foster Care 1,555,280 1,072,475 Emergency Group Beds 502,935 420,708 Behavioral Health 806,253 992,826 Total Program Expenses 2,864,468 2,486,008 Supporting Services: Management & General 81,622 317,976 Total Expenses 2,946,090 2,803,984 Change in net assets 330,563 $ 110,861 Net Assets at Beginning of Year 158,979 552,729 Prior Period Adjustment (Note 5) - (504,611) Unrestricted Net Assets at End of Year $ 489,542 $ 158,979 The accompanying notes are an integral part of these financial statements. -4-
STATEMENTS OF CASH FLOWS YEAR ENDED JUNE 30, 2017 (with comparative totals for 2016) 2017 2016 CASH FLOW FROM OPERATING ACTIVITIES Change in Net Assets $ 330,563 $ 110,861 Adjustments to Reconcile Change in Net Assets to Net Cash Provided by Operating Activities: Provision for Depreciation 33,377 29,440 Changes in: Accounts Receivable (415,132) 88,564 Accounts Payable, Accrued Expenses 172,721 120,755 Construction Payable 334,758 - Retirement Payable 30,202 - Prior Year Program Audit Assessment - (504,611) Net Cash Provided by (Used from) Operating Activities 486,488 (154,991) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of Property and Equipment (504,389) - Net Cash Used From Investing Activities (504,389) - CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from Loan Payable - 75,000 Proceeds from Line of Credit 26,077 43,076 Proceeds from Related Party Loan 128,000 - Payments on Loan Payable (71,820) (3,179) Payments on Line of Credit (37,035) Net Cash (Used from) Provided by Financing Activities 45,222 114,897 Increase (Decrease) in Cash and Cash Equivalents 27,321 (40,094) Cash and Cash Equivalents: Beginning of Year 101,811 141,905 End of Year $ 129,132 $ 101,811 Supplemental Disclosure of Cash Flow Information Cash Paid for Interest $ 19,439 $ 7,976 The accompanying notes are an integral part of these financial statements. -5-
STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2017 FOSTER CARE PROGRAM SERVICE EXPENSES ALAMEDA COUNTY EMERGENCY BEDS ALAMEDA COUNTY BEHAVORIAL HEALTH TOTAL PROGRAM SERVICES SUP P ORT ING SERVICES, MANAGEMENT & GENERAL TOTAL OPERATING EXPENSES: Personnel: Executive Director $ 173,200 $ 84,900 $ 68,900 $ 327,000 $ - $ 327,000 Administrator Salary 205,228 45,500-250,728-250,728 Group Home Salaries 529,997 116,447 415,163 1,061,607 32,167 1,093,774 Social Work Salaries 75,168 - - 75,168-75,168 Workers Compensation 3,999 1,003 1,968 6,970 131 7,101 Employee Benefits 95,027 21,536 49,079 165,642 3,858 169,500 Payroll Taxes 93,071 9,512 30,895 133,478 7,689 141,167 Total Personnel 1,175,690 278,898 566,005 2,020,593 43,845 2,064,438 Accounting/Audit 10,235 - - 10,235 10,661 20,896 Fees & Miscellaneous Taxes 3,159-750 3,909-3,909 Insurance 11,837 11,837 11,837 35,511 358 35,869 Interest - 9,071-9,071 10,368 19,439 Miscellaneous 5,368 13,447 1,871 20,686 4,821 25,507 Dues & Subscriptions - 5,024 3,765 8,789 563 9,352 Office Supplies 5,152-2,692 7,844 423 8,267 Professional Fees 9,625 126,823 59,672 196,120 2,980 199,100 Social Work - - - - - - Telephone 3,754 5,277 3,019 12,050-12,050 Training 4,555 - - 4,555-4,555 Travel, Conferences & Meetings 3,216 4,151 1,981 9,348 23 9,371 Total Operating Expenses 56,901 175,630 85,587 318,118 30,197 348,315 Building & Equipment Rent (note 4) 123,750 6,375 116,000 246,125 6,375 252,500 Utilities 28,427-14,577 43,004 1,170 44,174 Equipment, Supplies & Maintenance 22,320 4,581 13,288 40,189-40,189 Vehicle Insurance/Operating Expense 29,943 4,705 10,796 45,444 35 45,479 Depreciation 33,377 - - 33,377-33,377 Total Building & Equipment 237,817 15,661 154,661 408,139 7,580 415,719 Child Related Supplies & Services: Clothing - 27,436-27,436-27,436 Food 49,415 - - 49,415-49,415 Personal & Incidentials 7,864 3-7,867-7,867 Supervised Activities 15,386 - - 15,386-15,386 Behavioral Modification/Allowance 9,626 - - 9,626 9,626 Program Expenses 1,788 5,307-7,095 7,095 Child Transportation 793 - - 793 793 Total Child Related 84,872 32,746-117,618-117,618 Total Expenses $ 1,555,280 $ 502,935 $ 806,253 $ 2,864,468 $ 81,622 $ 2,946,090 2017 The accompanying notes are an integral part of these financial statements. -6-
STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2016 FOSTER CARE PROGRAM SERVICE EXPENSES ALAMEDA ALAMEDA COUNT Y COUNTY EMERGENCY BEHAVORIAL BEDS HEALTH TOTAL PROGRAM SERVICES SUPPORTING SERVICES, MANAGEMENT & GENERAL TOTAL OPERATING EXPENSES: Personnel: Executive Director $ - $ 88,107 $ 88,107 $ 176,214 $ 137,940 $ 314,154 Administrator Salary 40,400 40,400 80,800 101,200 182,000 Group Home Salaries 569,272 87,580 437,902 1,094,754-1,094,754 Social Work Salaries 64,848 - - 64,848-64,848 Workers Compensation 28,163 9,633 25,251 63,047 10,661 73,708 Employee Benefits 61,119 20,906 54,798 136,823 23,136 159,959 Payroll Taxes 52,325 17,898 46,913 117,136 19,807 136,943 Total Personnel 775,728 264,523 693,371 1,733,622 292,744 2,026,366 Accounting/Audit - 14,000 14,000 Fees & Miscellaneous Taxes - 14,309-14,309-14,309 Insurance 16,216 5,626 11,252 33,094-33,094 Interest 7,976 - - 7,976-7,976 Miscellaneous - - - - 7,548 7,548 Office Supplies - 5,411 5,411 10,822 2,200 13,022 Professional Fees - 66,703 66,702 133,405-133,405 Social Work - - 68,077 68,077-68,077 Telephone - 6,671 6,671 13,342 1,484 14,826 Travel, Conferences & Meetings - 3,516 9,304 12,820-12,820 Total Operating Expenses 24,192 102,236 167,417 293,845 25,232 319,077 Building & Equipment Rent (note 4) 80,640 30,240 57,120 168,000-168,000 Utilities 23,663 6,385 7,512 37,560-37,560 Equipment, Supplies & Maintenance 31,559 12,757 22,830 67,146-67,146 Vehicle Insurance/Operating Expense 29,857 29,856 59,713-59,713 Depreciation 14,720 14,720 29,440-29,440 Total Building & Equipment 180,439 49,382 132,038 361,859-361,859 Child Related Supplies & Services: Clothing 8,148 - - 8,148-8,148 Food 45,266 4,566-49,832-49,832 Personal & Incidentials 38,702 - - 38,702-38,702 Child Transportation - - - - - - Total Child Related 92,116 4,566-96,682-96,682 Total Expenses $ 1,072,475 $ 420,708 $ 992,826 $ 2,486,008 $ 317,976 $ 2,803,984 2016 The accompanying notes are an integral part of these financial statements. -7-
NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations The Resource Environment For Underprivileged Groups Enterprise, Inc. (The R.E.F.U.G.E.) provides residential care and treatment for children with social, emotional, and/or behavioral problems. The R.E.F.U.G.E. operates a comprehensive group home system of care that provides mental health, educational, nutritional, and recreational as well as a variety of other specialized programs for vulnerable, troubled and seriously disturbed children. Basis of Accounting The accompanying financial statements are presented on an accrual basis, which recognizes income when earned, and expenses when incurred. Cash and Cash Equivalents The R.E.F.U.G.E. considers cash equivalents to be all highly liquid debt instruments with a maturity of three months or less. Cash and cash equivalents consist mainly of cash in checking accounts. Property and equipment: Purchased property and equipment are stated at cost; donated assets, if any, are valued at their estimated fair value on the date donated. Leasehold Improvements are recorded at cost. All assets are depreciated over estimated useful lives on a straight-line basis. Repairs and maintenance and small equipment purchases are expensed as incurred. Expenditures that significantly increase asset values or extend useful lives are capitalized. Property and equipment is depreciated in amount sufficient to amortize the costs of the assets over their estimated useful lives ranging from 5 to 10 years for furniture, fixtures and equipment. Leasehold Improvements are amortized over the term of the lease. Financial Statement Presentation The R.E.F.U.G.E has presented its financial statements in accordance with generally accepted accounting principles for not-for-profit organizations. Under this guidance, 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. -8-
NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 NOTE 1 NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) A summary of the net asset categories is as follows: Unrestricted Net Assets: Unrestricted net assets represent net assets that are not subject to donorimposed restrictions. Contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Temporarily Restricted Net Assets: Temporarily restricted net assets are assets subject to donor imposed restrictions that may or will be met, either by actions of the organization and/ or the passage of time. When a restriction is satisfied, temporarily restricted net assets are transferred to unrestricted net assets and are reported in the statement of activities as net assets released from restrictions. Permanently restricted Net Assets: Permanently restricted net assets are subject to donorimposed restrictions that will not terminate. Funds are held in perpetuity while the income is available for general use. There were no temporarily or permanently Restricted Net Assets at June 30, 2017. Management estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that effect the reported amounts of assets and liabilities. Actual results could differ from those estimates. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis on the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Income Taxes The R.E.F.U.G.E. is exempt from federal income taxes under section 501(c)(3) of the Internal Revenue Code and therefore has made no provision for federal income taxes in the accompanying financial statements. In addition, the Organization has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Internal Revenue Code. There was no unrelated business income. Concentration of Credit Risk The R.E.F.U.G.E. maintains cash in checking accounts at two banks. Bank accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per customer per bank. The cash balance at the bank, at times throughout the year, may exceed the federally insured limit of $250,000. The R.E.F.U.G.E. has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. -9-
NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 NOTE 2 ACCOUNTS RECEIVABLE R.E.F.U.G.E. receives funds from State of California Foster Care, Alameda County Behavioral Health and the State of California Department of Education-Nutritional program. As of June 30, accounts receivables were as follows: 2017 2016 Foster Care Revenue $ 121,962 $ 118,402 Behavioral Health 532,416 157,987 Emergency Beds 71,881 36,721 Nutrition 3,674 1,691 $ 729,933 $ 314,801 NOTE 3 PROPERTY AND EQUIPMENT 2017 2016 Furnitures & Fixtures $ 9,892 $ 7,714 Equipment 13,984 11,721 Vehicles 160,184 219,011 Leasehold Improvements 3,678 - Construction in Progress 463,251-650,989 238,446 Accumulated Depreciation (118,166) (176,635) Net Book Value $ 532,823 $ 61,811 Depreciation expense for fiscal years 2017 and 2016 was $33,377 and $29,440 respectively. NOTE 4 NOTES PAYABLE AND LINE OF CREDIT The R.E.F.U.G.E. Inc. has obtained a line of credit from Wells Fargo Bank which allows borrowing up to $130,000. The interest and principal are payable monthly, commencing on January 15, 2016. The outstanding balance is subject to a rate, whichever is greater between index rate plus 2% and the interest rate floor of 5%. The line of credit matured December 15, 2016. As of June 30, 2017, the credit is in default and the unpaid balance is $31,118. The R.E.F.U.G.E. Inc. has a short-term loan of $75,000 with annual interest at 5.45%, payable in monthly installments of $1,433.62 maturing March 15, 2021. As of June 30, 2017, the loan is repaid in full. -10-
NOTES TO FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2017 NOTE 5 PRIOR PERIOD ADJUSTMENT The R.E.F.U.G.E. Inc. was the subject of a fiscal audit conducted by The California Department of Social Services (CDSS), Program and Financial Audits Bureau for the fiscal year July 1, 2012 through June 30, 2013. This audit was concluded in May of 2016 which resulted in findings, an assessment and related corrective action plan. The corrective action included reinforcement of the organization s internal control and accounting policy and procedures and changes to the board of directors. The CDSS assessed the sum of $504,611. This amount was paid in full at the conclusion of the audit and is reflected as a prior period adjustment to Unrestricted Net Assets in the 2016 financial statements. NOTE 6 RELATED PARTY TRANSACTIONS The R.E.F.U.G.E. operates three group home facilities in Oakland California, one administrative office and a Transitional Age Youth (TAY) facility in San Leandro. All five buildings are leased from affiliated parties under a non-cancelable lease agreement. The rent is determined by independent market analysis and is scheduled to be approved by the board of directors prior to renewal. The leases renewal and rent are as follows: FACILITY LEASE PERIOD MONTHLY LEASE AMOUNT RENT PAID FISCAL YEAR 6/30/17 Garden 05/01/2015-05/01/2020 3,500 42,000 Loma Vista 05/01/2015-05/01/2020 3,500 42,000 Rawson 05/01/2015-05/01/2020 3,500 42,000 Tompkins 01/01/2017-12/01/2021 3,500 42,000 TAY 07/01/2016-06/30/2017 6,500 84,500 $ 252,500 Total facility rent paid under the various lease agreements during fiscal year ended June 30, 2017 was $252,500. Related party transactions also include various non-interest-bearing working capital loans made by the Executive Director to cover ordinary expenses of the business. The total amount of these loans at June 30, 2017 was $128,000. NOTE 7 SUBSEQUENT EVENTS Management evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affects the financial statements. Such events have been evaluated through July 25, 2018, which is the date the financial statements were available to be issued. -11-
STATEMENT OF EXPENDITURES FOR COUNTY OF ALAMEDA GRANTS YEAR ENDED JUNE 30, 2017 Program Names: Contract Period: July 1, 2016 to June 30, 2017 Mental Health Services Program Emergency Group Home Beds Contract Number: 900841 900841 EXPENSES Salaries & Wages $ 484,063 $ 246,847 Workers Compensation 1,968 1,003 Employee Benefits 49,079 21,536 Payroll Taxes 30,895 9,512 Fees & Miscellaneous Taxes 750 - Insurance 11,837 11,837 Miscellaneous 1,870 22,518 Dues & Subscriptions 3,765 5,024 Office Supplies 2,692 - Professional Fees 59,672 126,823 Social Work - - Rent 116,000 6,375 Utilities 14,577 - Telephone 3,019 5,277 Equipment, Supplies & Maintenance 13,288 4,581 Vehicle Insurance/Operating Expense 10,796 4,705 Depreciation - - Child Related - 32,746 Travel, Conferences & Meetings 1,982 4,151 Total Expenses $ 806,253 $ 502,935-12-
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 Federal Grantor Federal Contract Program Title CFDA# Period Expenditures Federal: Major Program: U.S Department of Health and Human Services Foster Care - Title IV-E *93.658 07/01/16-06/30/17 $ 1,452,943 U.S Department of Agriculture School Breakfast Program 10.553 07/01/16-06/30/17 10,163 U.S Department of Agriculture National School Lunch Program 10.555 07/01/16-06/30/17 11,375 Total Federal Expenditures $ 1,474,481 *Major programs determined in accordance with Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards -13-
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2017 NOTE A BASIS OF PRESENTATION The accompanying Schedule of Expenditures of Federal Awards (the Schedule) includes the federal award activity of The Resource Environment for Underprivileged Groups Enterprise, Inc. (a Non-profit) under programs of the federal government for the year ended June 30, 2017. The information on this Schedule is prepared 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 the Organization, it is not intended to and does not present the financial position, changes in net assets, or cash flows of the Organization. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, wherein certain types of expenditures may or may not be allowable or may be limited as to reimbursement. The Organization has elected not to use the 10-percent de minimis indirect cost rate as allowed under the Uniform Guidance. NOTE C MATCHING REQUIREMENTS Certain Federal programs require the Organization to contribute non-federal funds (matching funds) to support the Federally-funded programs The Resource Environment for Underprivileged Groups Enterprise, Inc. has met its matching requirements. The Schedule does not include the expenditure of non- Federal matching funds. -14-
STATE OF CALIFORNIA HEALTH AND HUMAN SERVICES SUPPLEMENTAL FORMS