FINANCIAL STATEMENTS For the Years Ended with Independent Auditors Report
FINANCIAL STATEMENTS CONTENTS Page Independent Auditors Report...1 2 Financial Statements: Statements of Financial Position...3 Statements of Activities...4 5 Statements of Functional Expenses...6 7 Statements of Cash Flows...8 Notes to Financial Statements...9 15
INDEPENDENT AUDITORS REPORT To the Board of Directors Marian Hope Center for Children s Therapy We have audited the accompanying financial statements of Marian Hope Center for Children s Therapy (a nonprofit organization), which comprise the statements of financial position as of, and the related statements of activities, functional expenses, 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits 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 auditors 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 Marian Hope Center for Children s Therapy as of December 31, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Overland Park, Kansas June 8, 2015-2-
MARIAN HOPE CENTER FOR CHILDREN'S THERAPY STATEMENTS OF FINANCIAL POSITION ASSETS 2014 2013 Current Assets: Cash and cash equivalents $ 148,586 $ 186,356 Receivables: Client fees: Insurance and self-pay, net of allowance for doubtful accounts of $49,430 and $24,233 at December 31, 2014 and 2013, respectively 65,789 53,273 State and local governments, no allowance for doubtful accounts 21,994 26,055 Tuition, no allowance for doubtful accounts 4,602 200 Prepaid expenses 15,535 9,264 Total Current Assets 256,506 275,148 Property and Equipment, net 121,887 122,628 Intangible Asset, net 148,833 195,833 Total Assets $ 527,226 $ 593,609 LIABILITIES AND NET ASSETS Current Liabilities: Accounts payable $ 14,116 $ 11,365 Accrued expenses 23,519 22,308 Deferred revenue 42,253 20,038 Total Current Liabilities 79,888 53,711 Net Assets: Unrestricted 392,366 488,058 Temporarily restricted 54,972 51,840 Total Net Assets 447,338 539,898 Total Liabilities and Net Assets $ 527,226 $ 593,609 See accompanying notes -3-
MARIAN HOPE CENTER FOR CHILDREN'S THERAPY STATEMENT OF ACTIVITIES Year Ended December 31, 2014 Temporarily Unrestricted Restricted Total Support and Revenue: Contributions $ 194,702 $ 58,300 $ 253,002 Fundraising events 34,055-34,055 Client fees: Insurance and self-pay 408,802-408,802 State and local governments 284,947-284,947 Tuition and fees 250,183-250,183 Other revenue 4,381-4,381 Net assets released from restriction 55,168 (55,168) - Total Support and Revenue 1,232,238 3,132 1,235,370 Expenses: Program services 1,091,183-1,091,183 General and administrative 199,956-199,956 Fundraising 36,791-36,791 Total Expenses 1,327,930-1,327,930 Change in Net Assets (95,692) 3,132 (92,560) Net Assets at Beginning of Year 488,058 51,840 539,898 Net Assets at End of Year $ 392,366 $ 54,972 $ 447,338 See accompanying notes -4-
MARIAN HOPE CENTER FOR CHILDREN'S THERAPY STATEMENT OF ACTIVITIES Year Ended December 31, 2013 Temporarily Unrestricted Restricted Total Support and Revenue: Contributions $ 352,872 $ 51,011 $ 403,883 Fundraising events 130,140-130,140 Client fees: Insurance and self-pay 437,693-437,693 State and local governments 299,100-299,100 Tuition and fees 65,493-65,493 Other revenue 2,827-2,827 Net assets released from restriction 37,936 (37,936) - Total Support and Revenue 1,326,061 13,075 1,339,136 Expenses: Program services 838,647-838,647 General and administrative 137,115-137,115 Fundraising 98,365-98,365 Total Expenses 1,074,127-1,074,127 Change in Net Assets 251,934 13,075 265,009 Net Assets at Beginning of Year 236,124 38,765 274,889 Net Assets at End of Year $ 488,058 $ 51,840 $ 539,898 See accompanying notes -5-
MARIAN HOPE CENTER FOR CHILDREN'S THERAPY STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2014 Program Services Support Activities Marian Health & Learning Hope Nutrition Total Program General and Center Academy Services Services Administrative Fundraising Total Salaries, wages and benefits $ 227,574 $ 143,679 $ 23,558 $ 394,811 $ 132,341 $ 27,847 $ 554,999 Contract labor 296,385 94,820-391,205 - - 391,205 Occupancy 62,287 60,260 1,198 123,745 14,821 599 139,165 Amortization 47,000 - - 47,000 - - 47,000 Professional fees 864 647 432 1,943 39,415 108 41,466 Scholarships - 28,500-28,500 - - 28,500 Curriculum and supplies - 25,784-25,784 - - 25,784 Bad debts expense 25,197 - - 25,197 - - 25,197 General supplies & equipment rental 5,719 3,300-9,019 7,883 3,347 20,249 Travel 13,308-1,177 14,485 617 2,370 17,472 Insurance 4,306 6,578 302 11,186 3,096 365 14,647 Advertising and promotion 671 3,932-4,603-2,106 6,709 Depreciation 4,493 515-5,008 843-5,851 Therapy tools and supplies 5,249 - - 5,249 - - 5,249 Gifts to others 2,873 - - 2,873 - - 2,873 Printing and production - - - - 940 49 989 Training and education 575 - - 575 - - 575 Total Expenses $ 696,501 $ 368,015 $ 26,667 $ 1,091,183 $ 199,956 $ 36,791 $ 1,327,930 See accompanying notes -6-
MARIAN HOPE CENTER FOR CHILDREN'S THERAPY STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2013 Program Services Support Activities Marian Health & Learning Hope Nutrition Total Program General and Center Academy Services Services Administrative Fundraising Total Salaries, wages and benefits $ 251,055 $ 64,795 $ 45,564 $ 361,414 $ 90,875 $ 39,519 $ 491,808 Contract labor 280,804 5,731-286,535-581 287,116 Occupancy 36,734 34,650-71,384 23,959 18,563 113,906 Amortization 39,167 - - 39,167 - - 39,167 Advertising and promotion - - - - 820 19,815 20,635 Scholarships - 15,750-15,750 - - 15,750 Curriculum and supplies - 14,881-14,881 - - 14,881 Travel 12,314-2,173 14,487 - - 14,487 Professional fees 305 218 218 741 3,482 9,780 14,003 General supplies & equipment rental 1,964 1,572-3,536 3,929 6,089 13,554 Therapy tools and supplies 12,961 - - 12,961 - - 12,961 Bad debts expense 12,779 - - 12,779 - - 12,779 Insurance - - - - 8,971-8,971 Depreciation 4,290 572-4,862 858-5,720 Catering - - - - - 4,018 4,018 Gifts to others - - - - 3,262-3,262 Printing and production - - - - 959-959 Training and education 150 - - 150 - - 150 Total Expenses $ 652,523 $ 138,169 $ 47,955 $ 838,647 $ 137,115 $ 98,365 $ 1,074,127 See accompanying notes -7-
MARIAN HOPE CENTER FOR CHILDREN'S THERAPY STATEMENTS OF CASH FLOWS Years Ended 2014 2013 Cash Flows from Operating Activities: Cash received from donors $ 174,889 $ 228,419 Cash received from others 903,974 734,368 Cash paid to vendors and others (562,195) (445,843) Cash paid to employees (553,788) (476,194) Net Cash (Used) Provided by Operating Activities (37,120) 40,750 Cash Flow from Investing Activities: Purchases of property and equipment (650) (5,316) Net Cash Used by Investing Activities (650) (5,316) Net (Decrease) Increase in Cash and Cash Equivalents (37,770) 35,434 Cash and Cash Equivalents at Beginning of Year 186,356 150,922 Cash and Cash Equivalents at End of Year $ 148,586 $ 186,356 Reconciliation of Change in Net Assets to Net Cash (Used) Provided by Operating Activities: Change in net assets $ (92,560) $ 265,009 Adjustments to reconcile change in net assets to net cash (used) provided by operating activities: Depreciation and amortization 52,851 44,887 Bad debts expense 25,197 12,779 In-kind property and equipment donation (4,460) (1,000) In-kind client listing donation - (235,000) Increase in: Accounts receivable - client fees (33,652) (74,833) Accounts receivable - tuition (4,402) (200) Prepaid expenses (6,271) (5,815) Increase (decrease) in: Accounts payable 2,751 (729) Accrued expenses 1,211 15,614 Deferred revenue 22,215 20,038 Net Cash (Used) Provided by Operating Activities $ (37,120) $ 40,750 See accompanying notes -8-
NOTES TO FINANCIAL STATEMENTS 1. NATURE OF ORGANIZATION Organization Marian Hope Center for Children s Therapy ( MHC ) was incorporated as a Missouri not-for-profit corporation in 2004. MHC s mission is to increase the availability of educational and holistically developmental learning to individuals with special needs and their families, to seek comprehensive and positive learning experiences that nurture self-determination, to enhance opportunities for life s basic needs and to promote the healthy, happy and productive living of any and all persons. MHC operates three primary, fee-based programs, in the Kansas City metro area, as described below. It is also supported by public donations. The Marian Hope Children s Learning Center (the Learning Center ) is located in Independence, Missouri, and is MHC s primary program service, providing both in-house and home and community outreach services. The goal of the in-house services is to provide a nurturing environment where children feel safe and loved, offering a plethora of classes and services for the array of differential learners and learning diagnoses including such special needs as autism spectrum disorders, childhood apraxia and other speech disorders, Down syndrome and other genetic disorders, dyslexia and other reading disorders, the varying language and learning disabilities; feeding disorders; sensory integration disorders; and motor disorders. MHC provides the same services along with educational programs at the child s home, at community centers, and at schools. MHC s Health and Nutrition Services program augments the Learning Center activities by helping families understand and embrace better nutrition for the child as well as for the entire family. This is accomplished by several means such as individualized nutritional counseling, nutritional management support groups, grocery store tours and feeding classes. The Marian Hope Academy Christian School for Creative Learning ( Marian Hope Academy ) is located in Kansas City, Missouri, and is a small Christian school offering personalized education with a classical and Christian foundation. The academy is a blended school of children with all abilities with the goal of providing a Christ-like community academy that excels in problem-solving and critical thinking, oral and written language, missions, and Godly use of self-creativity. Marian Hope Academy opened in September 2013, serving grades kindergarten through 5 th grade. -9-
NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Accounts Receivable Accounts receivable consists primarily of amounts due for services provided from programs. Expected payment sources are from state and local government funds, insurance companies, and the clients themselves. Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectible amounts through a provision for bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off to the valuation allowance and a credit to accounts receivable. Basis of Accounting - MHC prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Basis of Presentation - Financial statement presentation follows the recommendations of the Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) 958-210, which requires MHC to report information regarding its financial position and activities according to three classes of net assets: Unrestricted net assets - include unrestricted resources which represent the portion of funds that are available for the operating objectives of MHC. Temporarily restricted net assets - consist of donor-restricted contributions. Amounts restricted by donors for a specific purpose are deemed to be earned and reported as temporarily restricted revenue, when received, and such unexpended amounts are reported as temporarily restricted net assets at year-end. When the donor restriction expires, that is, when a stipulated time 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 restriction. Permanently restricted net assets consist of donor-restricted contributions, which are required to be held in perpetuity. Income from the assets held is available for either general operations or specific purposes, in accordance with donor stipulations. MHC had no permanently restricted net assets at. Cash and Cash Equivalents For the purposes of the statements of cash flows, MHC considers those highly-liquid investments purchased with an original maturity of three months or less to be cash equivalents. -10-
NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Concentrations of Credit Risk MHC maintains its cash in bank accounts in amounts that may exceed federally insured limits at times. MHC has not experienced any losses in these accounts in the past, and management believes MHC is not exposed to significant credit risks as they periodically evaluate the strength of the financial institutions in which it deposits funds. Estimates The preparation of financial statements in conformity with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Functional Expense Allocation Expenses are charged to each program based on direct expenditures incurred. Expenses which cannot readily be related to a specific program are charged to the various programs based upon hours worked, square footage, estimated usage or other reasonable methods. General and administrative expenses include those expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of MHC. In-kind Donations In-kind contributions are reflected at their estimated fair values at date of receipt and are summarized as follows for the years ended December 31, 2014 and 2013. Contributions: 2014 2013 Rent Learning Center $ 52,800 $ 34,604 Rent Marian Hope Academy 55,300 35,000 Furniture and equipment Marian Hope Academy - 1,000 Leasehold Improvements Learning Center 4,460 - Total In-kind Donations $ 112,560 $ 70,604 Any volunteer services donated to MHC that do not meet the criteria for recognition as a contribution are not reflected in the accompanying financial statements. Income Taxes MHC is a non-profit organization exempt from Federal income taxes, except on unrelated income, under Section 501(c)(3) of the Internal Revenue Code ( the Code ). Contributions to MHC are deductible within the limitations of the Code. MHC has been classified as a publicly-supported entity which is not a private foundation under Section 509(a) of the Code. -11-
NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Income Taxes (continued) MHC s policy with regard to FASB ASC 740-10 is to record a liability for any tax position that is beneficial to MHC, including any related interest and penalties, when it is more likely than not the position taken by management with respect to the transaction or class of transactions will be overturned by a taxing authority upon examination. Management believes there are no such positions as of December 31, 2014 and, accordingly, no liability has been accrued. However, MHC s returns are subject to examination by the Internal Revenue Service generally for three years after they were filed. Intangible Assets The intangible asset consists of a client listing, has initially been recorded at fair value based on the discounted value of estimated future cash flows, and is being amortized over five years on a straight-line basis. Impairment is recognized if the sum of the undiscounted estimated future cash flows expected to result from the use of the asset is less than the carrying value. When an impairment loss is recognized, the carrying value is reduced to its estimated fair value. No impairment loss has been recognized for the years ended December 31, 2014 or 2013. Property and Equipment Purchased property and equipment are stated at cost, whereas donated property and equipment are capitalized at fair value at the June 8, 2015 of donation. Property and equipment with a per unit acquisition cost exceeding $550 are capitalized. Maintenance and repairs are charged to expense as they are incurred whereas major renewals and betterments exceeding $2,000 that extend the useful life of assets are capitalized. Depreciation and amortization are charged to operations using the straightline method over the estimated useful lives of the assets. The estimated useful lives are as follows: Estimated Useful Life Leasehold improvements Furniture and equipment 7-39 years 5-7 years Depreciation as of amounted to $5,851 and $5,720, respectively. Revenue Recognition Revenue from client services is recognized when the underlying services are performed. Tuition is generally due at the beginning of each school session. Tuition and fees revenue is recognized on a pro-rated basis over the terms of the related school session. Remaining funds received in advance are recorded as deferred revenue on the statements of financial position. Reclassifications Certain amounts in the 2013 financial statements have been reclassified for comparative purposes to conform to the 2014 presentation. Subsequent Events Management has evaluated events and transactions that have occurred since December 31, 2014 and reflected their effects, if any, in these financial statements through June 8, 2015, the date the financial statements were available to be issued. -12-
NOTES TO FINANCIAL STATEMENTS 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following at : 2014 2013 Land $ 95,000 $ 95,000 Leasehold improvements 20,686 16,226 Furniture and equipment 35,952 35,302 Less accumulated depreciation (29,751) (23,900) Net Property and Equipment $ 121,887 $ 122,628 4. INTANGIBLE ASSET On March 1, 2013, Outreach Therapies & Consulting, Inc. ( OTC ) donated its client listing to MHC. At this time, the owner of OTC also became an officer and management member of MHC. The intangible asset consists of the following at : 2014 2013 Client Listing $ 235,000 $ 235,000 Less accumulated amortization (86,167) (39,167) Intangible Asset, net $ 148,833 $ 195,833 Amortization expense of $47,000 and $39,167 has been recorded for the years ended, respectively. Future amortization expense during the next five years ending December 31 is as follows: 2015 $ 47,000 2016 47,000 2017 47,000 2018 7,833 Total $ 148,833-13-
NOTES TO FINANCIAL STATEMENTS 5. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consist of the following at December 31, 2014 and 2013. 2014 2013 Playground Equipment $ - $ 8,084 Scholarship Fund 4,985 5,050 Parking Lot 12,060 12,060 Occupational Therapy 20 738 Infant Program Development 1,500 1,500 Teacher Supplies Marian Hope Academy 22,388 20,466 Technology 993 2,942 Equipment Marian Hope Academy 450 1,000 Nutrition 7,626 - Community Awareness 4,950 - Total Temporarily Restricted Net Assets $ 54,972 $ 51,840 Net assets were released from time and donor-imposed restrictions as follows: 2014 2013 Real Estate Tax $ - $ 283 Playground Equipment 8,084 - Scholarship Fund 65 - Occupational Therapy 718 1,050 Teacher Supplies Marian Hope Academy 21,078 5,534 Technology 1,950 12,058 Equipment Marian Hope Academy 550 - Nutrition 2,673 19,011 Community Awareness 50 - Capital Campaign 20,000 - Net Assets Released From Restrictions $ 55,168 $ 37,936 6. DEFINED CONTRIBUTION PLAN MHC sponsors a qualified defined contribution 401(k) retirement plan. Full-time employees with a one-year tenure are eligible to participate. MHC matches up to 3% of eligible employees salary deferrals. During the year ended, MHC contributed $8,178 and $6,606 to the plan, respectively. -14-
NOTES TO FINANCIAL STATEMENTS 7. RELATED PARTY TRANSACTIONS During the years ended, approximately 10% and 21% of contribution revenue originated from board members or members of management. During the years ended, $28,500 and $15,750 in tuition and fees revenue was waived by MHC for certain MHC officers whose children attend Marian Hope Academy. These amounts have been included as part of scholarships expense on the statements of functional expenses. 8. CONCENTRATIONS One program revenue source comprised approximately 18% and 17% of total revenue as of, respectively, which is included in state and local governments client fees revenue on the statements of activities. This revenue source also comprised approximately 13% and 25% of total accounts receivable on the statements of financial position. -15-