Audited Financial Statements
Audited Financial Statements Table of Contents Independent Auditors Report 1 Page Statement of Financial Position, 3 Statement of Activities, For the year ended 4 Statement of Cash Flows, For the year ended 5 Notes to Financial Statements 6 Supplemental Schedule: not a required part of the basic financial statements Schedule of Functional Expenses, For the year ended 12
A H S ALBRIGHT, HILL & SUMPTER CERTIFIED PUBLIC ACCOUNTANTS A Professional Corporation INDEPENDENT AUDITORS REPORT Board of Directors 1035 Military Parkway Mesquite, TX 75149-4124 Report on the Financial Statements We have audited the accompanying financial statements of Mesquite Social Services, Inc. which comprise the Statement of Financial Position as of December 31, 2013, and the related Statements of Activity and Cash Flows, and the related notes to the financial statements for the year then ended. 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 error or fraud. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of material misstatements. An audit includes performing procedures to obtain audit evidence about amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of 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 12160 North Abrams Road Suite 412 Dallas, Texas 75243 972.270.5452 972.686.4216 Fax
Board of Directors Page 2 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 opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of, as of, and the results of the changes in its net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying Schedule of Functional Expenses is presented for purposes of additional analysis and is not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole. Albright, Hill & Sumpter, PC Certified Public Accountants June 17, 2014
Statement of Financial Position Assets Cash $ 98,746 Certificate of deposit 75,164 Food inventory 109,726 Grants receivable 14,000 Property and equipment 43,760 Accumulated depreciation (34,052) Total assets $ 307,344 Liabilities and Net Assets Sales tax payable $ 474 Total liabilities 474 Net assets Unrestricted 263,487 Temporarily restricted 43,383 Total net assets 306,870 Total liabilities and net assets $ 307,344 The accompanying notes are an integral part of this statement. 3
Statement of Activities For the year ended Unrestricted Temporarily Restricted Total Net Assets Revenue United Way funds $ 61,903 $ - $ 61,903 Special event/fund raising 26,291-26,291 Thrift store 83,200-83,200 Energy assistance funds - 44,381 44,381 Contributions - general 43,758 15,488 59,246 Contributions - facility 23,850-23,850 Contributions - food 870,337-870,337 Interest income 249-249 Miscellaneous income 4,840-4,840 Net assets released from restrictions 86,959 (86,959) - Total revenue 1,201,387 (27,090) 1,174,297 Expenses Program service expenses 1,208,376-1,208,376 Supporting service expenses 120,863-120,863 Fund raising expenses 14,471-14,471 Total expenses 1,343,710-1,343,710 Decrease in net assets (142,323) (27,090) (169,413) Net assets, beginning of year 405,810 70,473 476,283 Net assets, end of year $ 263,487 $ 43,383 $ 306,870 The accompanying notes are an integral part of this statement. 4
Statement of Cash Flows For the year ended Cash Flows from Operating Activities: Change in net assets $ (169,413) Adjustments to reconcile change in net assets to net cash (used in) operating activities: Depreciation 2,243 Decrease in grants receivable 42,161 Decrease in prepaid expense 2,295 Decrease in food inventory 44,748 (Decrease) in payables (3,273) Net cash (used in) operating activities (81,239) Cash Flows from Investing Activities: Liquidation of certificates of deposit 29,556 Cash Flows from Financing Activities: - (Decrease) in cash (51,683) Cash at beginning of year 150,429 Cash at end of year $ 98,746 Supplemental Information: Interest paid during 2013 $ - Income taxes paid during 2013 $ - Donated fixed assets $ - The accompanying notes are an integral part of this statement. 5
Notes to Financial Statements NOTE 1 ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES In fulfilling its responsibility for the preparation of s (the Organization) financial statements and disclosures, management selects accounting principles and adopts methods for their application. The application of accounting principles generally accepted in the United States of America requires the estimating, matching and timing of revenue and costs in the determination of income or loss. It is also necessary for management to determine, measure and allocate the Organization s resources and obligations within the financial process according to those principles. The following is a summary of certain significant accounting policies selected by management. Background and Nature of Activities provides emergency assistance to individuals and families in the Mesquite, Texas area. In addition to contributions from individuals and other organizations, contributions are received and distributed in the following areas: Emergency Food and Shelter Program: Funding received and distributed for rent and utility assistance payments. Energy Assistance Funds: Funding received from energy companies used to provide assistance on utility bills. United Way: Funding received from the United Way used to provide financial assistance. Food: Contributions of food are received from food drives at local schools, churches and other organizations. This food is distributed to needy individuals and families. has been granted exemption from income tax under Section 501(c)(3) of the Internal Revenue Code. Accrual Basis The accounts of the Organization are maintained on the accrual basis of accounting. The Statement of Activities is a statement of the various financial activities related to the current reporting period. It does not purport to represent the results of operations, nor of net income or loss, for the period since the primary objective of the Organization is not to achieve a profit. 6
Notes to Financial Statements Operating expenses are placed into three categories program service expenses, supporting service expenses and fund raising expenses. The program service category includes expenses which directly relate to the accomplishment of the Organization s programs. The supporting service category includes expenses such as overhead and indirectly related type expenses. Fund raising expenses include direct cost of fund raising activities. Net Asset Accounting As a non-profit organization, records are maintained on a net asset accounting basis in order to ensure observance of limitations and restrictions placed on the use of its resources by donors. Therefore, net assets are classified for accounting and reporting purposes into self-balancing accounts as follows: Unrestricted net assets those funds available for support of the Organization and its programs. Temporarily restricted net assets those funds limited by the donor(s) for later periods or specific purposes. Permanently restricted net assets those funds limited by the donor(s) for permanent investment of principal and use of income. As of, there were no permanently restricted net assets. Revenue Recognition Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support, depending on the existence of any donor restrictions. If contributions are received and the restrictions are released in the same reporting period, the contributions are reported as unrestricted contributions. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires in a different reporting period from when they are received (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 Statement of Activities as net assets released from restrictions. A number of volunteers, including members of the Board of Directors, donated their time to program services and administrative functions. The value of this contributed time is not reflected in the accompanying financial statements since it is not 7
Notes to Financial Statements susceptible to objective measurement or valuation. During the year ended, the Organization received approximately 9,500 hours of contributed services. These services do not meet the criteria to be recognized as revenue in these financial statements since specialized skills were not involved. The City of Mesquite provides the facility used by the Organization rent free. The estimated rental value of this facility is included in the accompanying financial statements as revenue of $23,850 with a like amount shown as occupancy expense. The Organization is responsible for maintenance and utility costs, which it shares with other agencies that also share the facility. Statement of Cash Flows The Statement of Cash Flows is presented using the indirect method. For the purpose of this statement, the Organization considers all cash on hand, cash in checking accounts, certificates of deposit and other similar instruments with original maturities of three months or less as cash and cash equivalents. Accounting Estimates and Assumptions 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 affect certain reported amounts and disclosures. Such estimates and assumptions primarily relate to valuation as of the date of the financial statements. Accordingly, actual results could differ from these estimates and assumptions. Significant estimates and assumptions are used to determine the value of inventory, the value of receivables and the allocation of functional expenses. The methods used in making accounting estimates are believed by management to be reasonable and have been consistently applied. Property and Equipment Property and equipment representing costs that benefit more than one accounting cycle are recorded at cost and depreciation is recorded over the useful lives by the straight-line method using eight (8) year lives in most cases. Depreciation expense was $2,243 for the year ended. Compensated Absences Employees of the Organization are entitled to paid vacation, paid sick days and personal days off depending on job classification, length of service and other 8
Notes to Financial Statements factors. The Organization s policy is to recognize the costs of compensated absences when actually paid to employees. Allocation of Functional Expenses The costs of providing programs and other activities of the Organization have been summarized on a functional basis in the Statement of Activities. Accordingly, certain costs have been allocated among program cost and the cost of supporting services. NOTE 2 NET ASSETS Temporarily restricted net assets were received and released from restrictions as follows: Restricted Balance as of 12/31/2012 Contributions Released from Restrictions Restricted Balance as of 12/31/2013 Energy Aid $ 18,298 $ 44,381 $ (51,800) $ 10,879 Holiday Event 21,409 15,488 (4,393) 32,504 Rental Assistance 21,894 - (21,894) - Food Assistance 8,872 - (8,872) - Total $ 70,473 $ 59,869 $ (86,959) $ 43,383 NOTE 3 TAX STATUS The Organization is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. During the year ended, generated unrelated business income in the form of advertising revenue. The resulting federal income tax was insignificant. NOTE 4 CONCENTRATIONS In the normal course of business, the Organization maintains balances in financial institutions in excess of federally insured amounts. As of, there were no balances at a single financial institution in excess of federally insured amounts. 9
Notes to Financial Statements The Organization derives its revenue from two main sources, in-kind donations and the United Way. For 2013, 79% of the Organization s revenue was received from the following sources: Percentage of Source Total Revenue In-kind donations 74% United Way 5% Continued funding from these sources, at current levels, is dependent upon various factors. Such factors include economic conditions, donor satisfaction and public perception of mission effectiveness and relative importance. NOTE 5 DISCLOSURES ABOUT UNCERTAINTY IN INCOME TAXES UNDER FASB ASC 740 The Organization files an annual information return. With few exceptions, the Organization is no longer subject to U.S. federal income tax examinations by tax authorities for years before 2010. The Organization has adopted the provisions of FASB ASC 740, Accounting for Uncertainty in Income Taxes. There were no unrecognized tax benefits as of. The Organization recognizes interest accrued related to unrecognized tax benefits in interest expense and penalties in administrative expense. There were no such interest and penalties for 2013. NOTE 6 FAIR VALUE The Organization s financial instruments are cash and cash equivalents, investments, grants receivable, accounts payable and sales tax payable. The recorded values of financial instruments approximate their estimated fair values based on their short-term nature. Non-financial assets consist primarily of fixed assets and are valued at fair value on a nonrecurring basis. Management evaluates its long-lived assets for financial impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. An impairment loss is recognized when the estimated undiscounted cash flows from the assets are less than the carrying value of the assets. Assets to be disposed of are reported at the lower of their 10
Notes to Financial Statements carrying amount, or estimated fair value, less costs to sell. There was no such impairment loss for the year ended. NOTE 7 THRIFT STORE The Organization opened a thrift store in 2010, with 2011 being the first full year of operations. For the year ended, the thrift store generated $83,200 in sales revenue and incurred $11,893 in expenses. NOTE 8 SUBSEQUENT EVENTS Management has reviewed events occurring subsequent to through the issue date of the financial statements, June 17, 2014. Based on this review, no events have occurred requiring disclosure. 11
Schedule of Functional Expenses For the year ended Program Services Supporting Services Fund Raising Total Personnel costs: Salaries $ 111,463 $ 74,309 $ - $ 185,772 Employee benefits 16,488 10,992-27,480 Payroll taxes 9,853 6,569-16,422 Total personnel costs 137,804 91,870-229,674 Depreciation - 2,243-2,243 Employee expenses - 823-823 Financial assistance 106,009 - - 106,009 Food distribution 917,069 - - 917,069 Fund raising - - 2,578 2,578 Thrift store - - 11,893 11,893 Holiday expense 4,393 - - 4,393 Insurance and bonding - 6,704-6,704 Volunteer recognition 448 - - 448 Miscellaneous expenses - 3,228-3,228 Occupancy 34,266 - - 34,266 Organization dues - 1,768-1,768 Postage - 624-624 Printing 1,718 - - 1,718 Professional fees - 12,312-12,312 Supplies 4,733 - - 4,733 Telephone 1,936 1,291-3,227 $ 1,208,376 $ 120,863 $ 14,471 $ 1,343,710 12