Independent Auditor s Report and Financial Statements
Contents Independent Auditor s Report... 1 Financial Statements Statements of Financial Position... 3 Statements of Activities... 4 Statement of Functional Expenses... 5 Statements of Cash Flows... 6... 7
Independent Auditor s Report Board of Directors Indianapolis, Indiana We have audited the accompanying financial statements of (Gleaners), which comprise the statement of financial position as of September 30, 2015, and the related statements of activities, functional expenses and cash flows for the year 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 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 audit to obtain reasonable assurance about whether the financial statements are free from 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 financial statements referred to above present fairly, in all material respects, the financial position of as of September 30, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information Other auditors have previously audited the September 30, 2014 financial statements, and they expressed an unmodified audit opinion on those audited financial statements in their report dated January 22, 2015. In our opinion, the summarized comparative information presented herein as of and for the year ended September 30, 2014 is consistent, in all material respects, with the audited financial statements from which it has been derived. Indianapolis, Indiana March 16, 2016 2
Statements of Financial Position Assets Liabilities 2015 2014 Cash $ 2,798,303 $ 5,128,893 Accounts receivable, net of allowance; 2015 and 2014 - $15,489 141,215 119,159 Grants receivable 218,331 148,120 Contributions receivable, net 865,461 1,489,867 Inventories 3,677,946 4,499,157 Prepaid expenses 80,175 194,595 Beneficial interest in assets held by community foundation 165,631 173,731 Property and equipment, net 9,862,045 10,336,316 Total assets $ 17,809,107 $ 22,089,838 Accounts payable $ 372,637 $ 353,773 Accrued liabilities and other payables 279,662 251,363 Inventory held for distribution to recipient agencies - 111,267 Note payable 1,013,725 1,272,549 Total liabilities 1,666,024 1,988,952 Net Assets Unrestricted Undesignated 13,904,555 16,982,457 Board designated 165,631 173,731 Total unrestricted net assets 14,070,186 17,156,188 Temporarily restricted 2,072,897 2,944,698 Total net assets 16,143,083 20,100,886 Total liabilities and net assets $ 17,809,107 $ 22,089,838 See 3
Statements of Activities Years Ended 2015 2014 Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total Revenue and Other Support Government grants and contracts $ 638,879 $ - $ 638,879 $ 679,969 $ - $ 679,969 Shared contributions 266,139-266,139 392,427-392,427 Gifts and donations 4,312,546 2,158,616 6,471,162 5,117,433 3,017,701 8,135,134 Investment return 1,829-1,829 32,387-32,387 Special events 56,959-56,959 127,632-127,632 Purchased food sales 2,060,583-2,060,583 1,926,682-1,926,682 Miscellaneous income 79,950-79,950 74,860-74,860 Net assets released from restriction 3,030,417 (3,030,417) - 3,238,016 (3,238,016) - Total revenue and other support before donated food contributions 10,447,302 (871,801) 9,575,501 11,589,406 (220,315) 11,369,091 Donated food contributions 38,401,176-38,401,176 45,354,344-45,354,344 Total revenue, support and donated food contributions 48,848,478 (871,801) 47,976,677 56,943,750 (220,315) 56,723,435 Expenses Program services Food distribution 7,410,444-7,410,444 6,282,505-6,282,505 Kids and seniors 2,285,521-2,285,521 2,528,344-2,528,344 Supporting services Management and general 532,141-532,141 262,894-262,894 Fundraising 2,587,027-2,587,027 3,006,544-3,006,544 Total expenses before donated food distributions 12,815,133-12,815,133 12,080,287-12,080,287 Donated food distributions 39,119,347-39,119,347 46,351,044-46,351,044 Total expenses and donated food distributions 51,934,480-51,934,480 58,431,331-58,431,331 Total Change in Net Assets (3,086,002) (871,801) (3,957,803) (1,487,581) (220,315) (1,707,896) Net Assets, Beginning of Year 17,156,188 2,944,698 20,100,886 18,643,769 3,165,013 21,808,782 Net Assets, End of Year $ 14,070,186 $ 2,072,897 $ 16,143,083 $ 17,156,188 $ 2,944,698 $ 20,100,886 4 See
Statement of Functional Expenses Year Ended September 30, 2015 (With Summarized Comparative Totals for 2014) Program Services Food Total Support Services Distribution Kids and Program Management 2015 2014 Costs Seniors Services and General Fundraising Total Total Salaries and wages $ 2,020,614 $ 167,872 $ 2,188,486 $ 177,610 $ 689,674 $ 3,055,770 $ 2,974,561 Payroll taxes and benefits 882,865 84,441 967,306 139,647 242,662 1,349,615 1,031,762 Professional services 28,277 632 28,909 96,703 597,823 723,435 938,617 Fees for services 24,578-24,578 17,051 1,815 43,444 44,749 Transportation 495,228-495,228 - - 495,228 560,300 Warehouse supplies 34,374 42,293 76,667 - - 76,667 97,447 Supplies 30,480 2,287 32,767 11,789 1,346 45,902 48,476 Promotional 4,598 4,548 9,146 2,414 753,590 765,150 643,018 Postage 2,134-2,134 14,146 59,010 75,290 33,738 Computer 83,387 14,497 97,884-55,390 153,274 110,027 Equipment rental and maintenance 25,918 18,271 44,189 35,166-79,355 95,486 Occupancy 357,212 29,456 386,668 21,558 4,125 412,351 398,935 Telephone 15,104 1,924 17,028 1,728 5,058 23,814 21,796 Travel, conferences and maintenance 28,176 9,846 38,022 11,703 14,825 64,550 64,015 Special events and projects - - - - 156,493 156,493 184,843 Food acquisition 471,550 1,873,430 2,344,980 - - 2,344,980 2,211,208 Cost of goods sold 2,241,802-2,241,802 - - 2,241,802 1,787,442 Interest expense 34,617-34,617 - - 34,617 42,381 Depreciation 622,061 36,024 658,085 2,626 5,216 665,927 659,844 Miscellaneous 7,469-7,469 - - 7,469 131,642 Total functional expenses before donated food distributions 7,410,444 2,285,521 9,695,965 532,141 2,587,027 12,815,133 12,080,287 Donated food distributions 38,566,878 552,469 39,119,347 - - 39,119,347 46,351,044 Total functional expenses $ 45,977,322 $ 2,837,990 $ 48,815,312 $ 532,141 $ 2,587,027 $ 51,934,480 $ 58,431,331 Percentage of total expenses 94.0% 1.0% 5.0% 100% 5 See
Statements of Cash Flows Years Ended 2015 2014 Operating Activities Cash received from operating and support activities $ 10,105,919 $ 12,050,845 Cash paid to suppliers and employees (12,147,644) (11,684,863) Miscellaneous receipts 84,950 68,636 Investment income received 9,929 12,345 Interest paid (34,617) (42,381) Net cash provided by (used in) operating activities (1,981,463) 404,582 Investing Activities Purchase of property and equipment (113,285) (141,156) Proceeds from disposal of equipment - 2,000 Proceeds from sale of investments 22,982 49,169 Net cash used in investing activities (90,303) (89,987) Financing Activity - principal payment on note payable (258,824) (258,823) Increase (Decrease) in Cash and Cash Equivalents (2,330,590) 55,772 Cash, Beginning of Year 5,128,893 5,073,121 Cash, End of Year $ 2,798,303 $ 5,128,893 Noncash Activities Property and equipment in accounts payable $ 83,371 $ - Reconciliation of Change in Net Assets to Net Cash Provided by Operating Activities Change in net assets $ (3,957,803) $ (1,707,896) Items not requiring (providing) cash Depreciation 665,927 659,844 (Gain) loss on disposal of fixed assets 5,000 (6,224) Realized and unrealized (gain) loss on investments 8,100 (20,042) Donated property and equipment - (10,400) Donated investments (22,982) (47,696) Change in operating assets: Accounts receivable (22,056) (3,676) Contributions and grants receivable 554,195 850,773 Inventory 821,211 1,123,971 Prepayments 114,420 (111,393) Accounts payable (64,507) 125,718 Accrued liabilities and other payables 28,299 12,063 Inventory held for distribution to recipient agencies (111,267) (460,460) Net cash provided by (used in) operating activities $ (1,981,463) $ 404,582 See 6
Note 1: Nature of Operations and Summary of Significant Accounting Policies Nature of Operations (Gleaners) vision: Food for every table. Hope for every future. Gleaners mission: Lead the fight against hunger. Gleaners service programs are designed to reach critical needs populations (seniors, children and families) in over 21 counties in central and southeastern Indiana. The simple fact is that 1 in 6 people in central and southeast Indiana struggle with hunger and food insecurity. That means 1 in 6 Hoosiers worry about where their next meal will come from. To make matters worse, many of those people who need help are those who fall into a gap where they struggle to put food on their table and yet their income is too high to qualify for any federal hungerrelief programs, such as the Supplemental Nutrition Assistance Program (SNAP) or free school meals for children. Gleaners was founded in 1980 by concerned citizens who had a simple yet profound vision, no one in Indiana should suffer from hunger and malnutrition. Gleaners goal is to lead the fight against hunger in central and southeast Indiana by collecting, storing, and distributing food to those in need. Gleaners distributes food to hungry Hoosiers through a network of over 250 partner agencies including: emergency food pantries, soup kitchens and shelters. In addition to our partner agencies, Gleaners extends our reach to those in need through programs like: BackSacks: Weekend Food for Kids, to help feed kids over the weekend; School-Based Pantries, helping high school students provide food for their families; Summer Meals for Kids providing food to children throughout the summer; and Mobile Pantries, helping remote areas meet food demands. In addition to providing hunger-relief directly to those in need, Gleaners works to expand awareness of the hunger crisis through various marketing and communication channels that include: continuous media and public relations, special events, community outreach, an annual awareness campaign and other tactics. The main sources of revenue for Gleaners are donations from individuals, service organizations, corporations and family foundations, as well as government grants. Use of 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 affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 7
Summarized Comparative Information The financial statements include certain prior year summarized comparative information in total, but not by functional expense detail. Such information does not include sufficient detail to constitute a complete presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with Gleaners 2014 financial statements from which the information was derived. Cash At September 30, 2015, Gleaners cash in bank deposit accounts exceeded federally insured limits by approximately $1,563,000. Accounts Receivable Accounts receivable are amounts due to Gleaners by agencies for share fees charged to those agencies. Accounts receivable are stated at the amounts billed to agencies. Gleaners provides an allowance for doubtful accounts, which is based upon a review of outstanding receivables, historical collection information and existing economic conditions. Accounts receivable are ordinarily due 30 days after the issuance of the invoice. Inventory Inventory consists primarily of donated food and non-food product valued at the approximate average wholesale value of one pound of donated product at the national level. This value is outlined in the Product Valuation Survey Methodology (December 31, 2014, prepared by Feeding America, a national food bank network nonprofit Corporation). KPMG, a major international CPA firm, performed agreed-upon procedures in accordance with standards established by the American Institute of Certified Public Accountants, to assist in determining the approximate average wholesale value of one pound of donated product at the national level as of December 31, 2014. KPMGs report is available upon request. According to this report, at December 31, 2014 and 2013, the average wholesale value of one pound of donated product at the national level was $1.70 and $1.72, respectively. For reporting purposes, Gleaners uses the rate in effect at the beginning of the fiscal year to price inventory for the fiscal year. Accordingly, the rates utilized for the inventory values as of were $1.72 and $1.69, respectively. The valuation of inventory is performed for purposes of measuring program activity and does not reflect a net realizable value. Under Internal Revenue Code Section 170(e)[3], donated inventory cannot be available for sale, also Feeding America restricts the amount charged for share contribution to affiliate agencies to eighteen cents per pound. USDA commodities received and held for recipient agencies have been reflected as an agency transaction. The liability reflected in the statements of financial position for inventory held for recipient agencies as of September 30, 2015 and 2014, was $0 and $111,267, respectively. Purchased food inventory is stated at the lower of cost (first-in, first-out method) or fair value. At, purchased food inventory was $677,983 and $693,093, respectively. 8
Property and Equipment Property and equipment are stated at cost, less accumulated depreciation. Depreciation is charged to expense using the straight-line method over the estimated useful life of each asset ranging from 5 to 39 years. Long-Lived Asset Impairment Gleaners evaluates the recoverability of the carrying value of long-lived assets whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-lived asset is tested for recoverability and the undiscounted estimated future cash flows expected to result from the use and eventual disposition of the asset is less than the carrying amount of the asset, the asset cost is adjusted to fair value and an impairment loss is recognized as the amount by which the carrying amount of a long-lived asset exceeds it fair value. No asset impairment was recognized during the years ended. Endowment/Board Designated Net Assets Gleaners endowment consists of a fund designated by the Board of Directors to function as an endowment. The Gleaners Board designated endowment has been established as a fund with the Central Indiana Community Foundation (CICF) and is reported as a beneficial interest in assets held by community foundation in the statement of financial position. Gleaners can distribute from the endowment up to 5% of the endowments previous year fund balance for expenditures. The change in the endowment for the years ended are as follows: Unrestricted 2015 2014 Endowment net assets, beginning of year $ 173,731 $ 155,162 Investment return, net of fees (8,100) 18,569 Balance, end of year $ 165,631 $ 173,731 Temporarily Restricted Net Assets Temporarily restricted net assets are those whose use by Gleaners has been limited by donors to a specific time period or purpose. Contributions Gifts of cash and other assets received without donor stipulations are reported as unrestricted revenue and net assets. Gifts received with a donor stipulation that limits their use are reported as temporarily or permanently restricted revenue and net assets. When a donor stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Gifts that are originally restricted by the donor and for which the restriction is met in the same time period are recorded as temporarily restricted and then released from restriction. 9
Gifts of land, buildings, equipment and other long-lived assets are reported as unrestricted revenue and net assets unless explicit donor stipulations specify how such assets must be used, in which case the gifts are reported as temporarily or permanently restricted revenue and net assets. Absent explicit donor stipulations for the time long-lived assets must be held, expirations of restrictions resulting in reclassification of temporarily restricted net assets as unrestricted net assets are reported when the long-lived assets are placed in service. Unconditional gifts expected to be collected within one year are reported at their net realizable value. Unconditional gifts expected to be collected in future years are initially reported at fair value determined using the discounted present value of estimated future cash flows technique. The resulting discount is amortized using the level-yield method and is reported as contribution revenue. In-Kind Contributions In addition to receiving cash contributions, Gleaners receives in-kind contributions. Gleaners records the value of donated goods or services when there is an objective basis available to measure their value. The valued donated materials and equipment are reflected as contributions at their estimated values at date of receipt. Total donated goods and services, excluding donated food, reflected in the statements of activities for the years ended were $0 and $73,903, respectively. Gleaners receives food from the general public as well as through federal USDA programs. Donated food contributions as reflected in the statements of activities for the years ended were $38,401,176 and $45,354,344, respectively. All in-kind contributions are treated as non-cash transactions for the purpose of the statements of cash flows. Government Grants Support funded by grants is recognized as Gleaners performs the contracted services or incurs outlays eligible for reimbursement under the grant agreements. Grant activities and outlays are subject to audit and acceptance by the granting agency and, as a result of such audit, adjustments could be required. Income Taxes Gleaners is exempt from income taxes under Section 501 of the Internal Revenue Code and a similar provision of state law. However, Gleaners is subject to federal income tax on any unrelated business taxable income. Gleaners files tax returns in the U.S. federal jurisdiction. Functional Allocation of Expenses Expenses have been classified as program services, management and general and fundraising based on the actual direct expenditures and cost allocation based on estimates of time and usage by Gleaners personnel and programs. 10
Reclassifications Certain reclassifications have been made to the 2014 financial statements to conform to the 2015 financial statement presentation. These reclassifications had no effect on the change in net assets. Subsequent Events Subsequent events have been evaluated through the date of the Independent Auditors Report, which is the date the financial statements were available to be issued. Effective October 1, 2015, Gleaners moved to a self-insurance plan for medical claims. Note 2: Contributions Receivable Contributions receivable consisted of the following: 2015 2014 Amounts due in: Less than one year $ 511,707 $ 1,105,516 One to five years 467,930 487,412 Total contributions and grants receivable 979,637 1,592,928 Less allowance for uncollectible pledges (47,178) (47,178) Less discounts to net present value (66,998) (55,883) Net contributions and grants receivable $ 865,461 $ 1,489,867 Discount rates ranged from 3% to 4% for 2015 and 2014. Note 3: Property and Equipment Property and equipment at September 30 consists of: 2015 2014 Land and buildings $ 8,233,543 $ 8,233,543 Building improvements 2,072,975 2,058,423 Furniture and equipment 221,899 221,899 Warehouse equipment 2,498,097 2,492,577 Computer equipment 317,314 311,469 Construction in progress 154,981-13,498,809 13,317,911 Less accumulated depreciation and amortization (3,636,764) (2,981,595) Net property and equipment $ 9,862,045 $ 10,336,316 11
Note 4: Line of Credit Gleaners has a $500,000 line of credit agreement with a bank that remains in effect until Gleaners note payable has been paid in full. The line bears interest at the one-month LIBOR rate plus 2.9% (3.10% at September 30, 2015) and is secured by substantially all assets of Gleaners. There were no amounts outstanding on the line of credit at. Note 5: Note Payable Gleaners purchased a building which was partially financed by the seller, creating a note payable of $2,200,000. The note is due in monthly installments of $21,569 plus interest at 3% with the final payment due in August 2019. The balance of the note at was $1,013,725 and $1,272,549, respectively. Aggregate annual maturities of the note payable at September 30, are: 2016 $ 258,828 2017 258,828 2018 258,828 2019 237,241 $ 1,013,725 Note 6: Net Assets Temporarily Restricted Net Assets Temporarily restricted net assets at September 30 are available for the following purposes or periods: 2015 2014 Children's programs $ 10,394 $ 367,412 Marketing and awareness activities 607,534 1,215,000 Other purposes - 3,669 Food and share purchase 71,008 114,550 Capital expansion 1,214,354 974,647 Future contributions to be received 169,607 269,420 $ 2,072,897 $ 2,944,698 12
Net Assets Released From Restrictions Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors. 2015 2014 Children's programs $ 1,701,714 $ 2,546,916 Marketing and awareness activities 607,466 60,000 Other purposes 45,176 49,688 Food and share purchase 374,455 341,415 Future contributions to be received 301,606 239,997 $ 3,030,417 $ 3,238,016 Note 7: Disclosure About Fair Value of Assets and Liabilities Fair value is the price that would be received to sell an asset in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Level 2 Level 3 Quoted prices in active markets for identical assets Observable inputs other than Level 1 prices, such as quoted prices for similar assets; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets 13
Recurring Measurements The following table presents the fair value measurements of assets recognized in the accompanying statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at : Quoted Prices in Active Significant Markets for Other Significant Identical Observable Unobservable Fair Assets Inputs Inputs Value (Level 1) (Level 2) (Level 3) September 30, 2015 Contributions receivable $ 865,461 $ - $ - $ 865,461 Beneficial interest in assets held by others 165,631-165,631 - September 30, 2014 Contributions receivable $ 1,489,867 $ - $ - $ 1,489,867 Beneficial interest in assets held by others 173,731-173,731 - Following is a description of the valuation methodologies and inputs used for assets measured at fair value on a recurring basis and recognized in the accompanying statements of financial position, as well as the general classification of such assets pursuant to the valuation hierarchy. There have been no significant changes in the valuation techniques during the year ended September 30, 2015. Fair value determinations for Level 3 measurements of securities are the responsibility of the Chief Financial Officer. The Chief Financial Officer determines the reasonableness of the assumptions used and reviews the methodology to ensure the estimated fair value complies with accounting standards generally accepted in the United States of America. As permitted by Topic 825, Gleaners has elected to measure contributions receivable at fair value. Management has elected the fair value option for contributions receivable because the discount rates utilized to calculate fair value do not fluctuate significantly from year to year. Contributions Receivable Fair value is estimated by discounting the cash flows of the future payments expected to be received using rates of return on assets with similar cash flows. Unobservable inputs include the rate of return utilized which ranged from 3-4%. 14
Beneficial Interest in Assets Held by Others Fair value is estimated based upon the fair value of the underlying assets included in the CICF long-term and short-term pooled funds. Level 3 Reconciliation The following is a reconciliation of the beginning and ending balances of recurring fair value measurements recognized in the accompanying statements of financial position using significant unobservable (Level 3) inputs: Contributions Receivable 2015 2014 Balance, beginning of year $ 1,489,867 $ 2,399,592 New contributions 293,940 203,910 Payments received (907,231) (1,155,449) Change in discount to present value (11,115) 27,941 Change in allowance - 13,873 Balance, end of year $ 865,461 $ 1,489,867 Note 8: Retirement Plan Gleaners provides a retirement plan described in Section 403(b) of the Internal Revenue Code of 1986, as amended. The plan permits each participant to voluntarily elect to have Gleaners make a contribution to the plan on their behalf by reducing the amount of compensation otherwise payable to the participant. Gleaners employer matching contribution is equal to 100% of the first 1% of employee contributions. Gleaners employer matching contribution was $16,929 and $11,248 for the years ended, respectively. Note 9: Related Party Transactions During the year, Gleaners utilized a company for the expansion of the facility for which a member of the board of directors is a vice president. The board member recused himself of discussions regarding the decision to utilize the company. Total payments to this company totaled approximately $65,000 during the year ended September 30, 2015. 15