Financial Statements June 30, 2015 Certified Public Accountants & Consultants 4401 Dominion Boulevard Glen Allen, VA 23060 www.keitercpa.com
Table of Contents Page Report of Independent Accountants 1 Financial Statements: Statements of Financial Position 3 Statements of Activities 4 Statements of Functional Expenses 6 Statements of Cash Flows 8 Notes to Financial Statements 9
REPORT OF INDEPENDENT ACCOUNTANTS To the Board of Directors A Grace Place Adult Care Center Richmond, Virginia Report on the Financial Statements We have audited the accompanying financial statements of A Grace Place Adult Care Center (the Organization ), which comprise the statements of financial position as of June 30, 2015 and 2014, 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; 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States. Those standards require that we plan and perform the audits 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. Certified Public Accountants & Consultants 4401 Dominion Boulevard Glen Allen, VA 23060 T:804.747.0000 F:804.747.3632 www.keitercpa.com
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of June 30, 2015 and 2014, 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. December 1, 2015 Glen Allen, Virginia
Statements of Financial Position June 30, 2015 and 2014 Assets 2015 2014 Current assets: Cash and cash equivalents $ 410,896 $ 437,981 Accounts receivable, net 194,660 217,985 Pledges and grants receivable 159,078 94,554 Investments 14,494 13,790 Deposits 10,975 7,692 Prepaid expenses 29,669 32,828 Total current assets 819,772 804,830 Property and equipment, net 534,863 639,701 Total assets $ 1,354,635 $ 1,444,531 Liabilities and Net Assets Current liabilities: Note payable, current $ 19,756 $ 19,030 Accounts payable 83,253 54,506 Accrued payroll and payroll taxes 78,187 82,433 Accrued vacation and sick leave 91,488 95,731 Accrued retirement expenses 49,170 46,086 Accrued expenses 15,275 23,550 Total current liabilities 337,129 321,336 Note payable, less current portion 48,994 68,674 Total liabilities 386,123 390,010 Net assets: Unrestricted: Undesignated 449,092 630,035 Board-designated 255,740 254,714 704,832 884,749 Temporarily restricted 263,680 169,772 Total net assets 968,512 1,054,521 Total liabilities and net assets $ 1,354,635 $ 1,444,531 See accompanying notes to financial statements. 3
Statements of Activities Year Ended June 30, 2015 Unrestricted Temporarily Restricted Total Program service revenue: Medicaid reimbursements $ 1,889,619 $ - $ 1,889,619 State and local government reimbursements 528,375-528,375 Other program service fees 164,137-164,137 Total program service revenue 2,582,131-2,582,131 Other revenue, gains, and support: United Way 50,984 60,148 111,132 Contributions 65,694 254,161 319,855 Donated goods 13,970-13,970 Unrealized gain on investments 704-704 Interest and other income 32,632-32,632 Total other revenue, gains, and support 163,984 314,309 478,293 Total program service, other revenue, gains, and support 2,746,115 314,309 3,060,424 Net assets released from restrictions 220,401 (220,401) - Expenses and losses: Program services: Adult day care 963,908-963,908 Day support 1,627,001-1,627,001 Transportation 83,696-83,696 Supporting services: Fundraising 213,954-213,954 Administrative 228,443-228,443 Total expenses 3,117,002-3,117,002 Loss on disposal of property and equipment 29,431-29,431 Total expenses and losses 3,146,433-3,146,433 Change in net assets (179,917) 93,908 (86,009) Net assets, beginning of year 884,749 169,772 1,054,521 Net assets, end of year $ 704,832 $ 263,680 $ 968,512 See accompanying notes to financial statements. 4
Statements of Activities Year Ended June 30, 2014 Unrestricted Temporarily Restricted Total Program service revenue: Medicaid reimbursements $ 2,014,009 $ - $ 2,014,009 State and local government reimbursements 423,392-423,392 Other program service fees 142,047-142,047 Total program service revenue 2,579,448-2,579,448 Other revenue, gains, and support: United Way 49,369 56,362 105,731 Contributions 429,514 115,692 545,206 Donated goods 2,114-2,114 Unrealized gains on investment 2,528-2,528 Interest and other income 4,248-4,248 Total other revenue, gains, and support 487,773 172,054 659,827 Total program service and other revenue, gains, and support 3,067,221 172,054 3,239,275 Net assets released from restrictions 286,690 (286,690) - Expenses: Program services: Adult day care 932,622-932,622 Day support 1,705,890-1,705,890 Transportation 92,883-92,883 Supporting services: Fundraising 141,821-141,821 Administrative 447,069-447,069 Total expenses 3,320,285-3,320,285 Change in net assets 33,626 (114,636) (81,010) Net assets, beginning of year 851,123 284,408 1,135,531 Net assets, end of year $ 884,749 $ 169,772 $ 1,054,521 See accompanying notes to financial statements. 5
Statements of Functional Expenses Year Ended June 30, 2015 Program Services Supporting Services Adult Day Care Day Support Transportation Fundraising Administrative Total Salaries $ 499,306 $ 920,387 $ 35,145 $ 101,946 $ 139,967 $ 1,696,751 Occupancy 131,277 167,732 2,801 355 34,561 336,726 Employee payroll taxes, health and retirement benefits 97,962 235,417 8,072 15,724 30,493 387,668 Professional fees 58,756 56,506 1,215 90,386 7,115 213,978 Travel 8,343 66,735 18,981 104 64 94,227 Insurance 33,120 51,311 1,155 3,268 4,780 93,634 Supplies 70,047 35,670 241 407 2,125 108,490 Depreciation 36,983 41,310-728 5,459 84,480 Equipment maintenance 9,857 21,990 704 174 1,309 34,034 Other 5,287 6,906 12,630 186 710 25,719 Telephone 4,625 9,261 2,010 91 683 16,670 Conferences, conventions, and meetings 5,912 6,982 24 458 844 14,220 Printing 1,594 1,857-110 209 3,770 Postage and shipping 839 937 718 17 124 2,635 Bad debts - 4,000 - - - 4,000 $ 963,908 $ 1,627,001 $ 83,696 $ 213,954 $ 228,443 $ 3,117,002 See accompanying notes to financial statements. 6
Statements of Functional Expenses Year Ended June 30, 2014 Program Services Supporting Services Adult Day Care Day Support Transportation Fundraising Administrative Total Salaries $ 537,996 $ 1,016,670 $ 32,870 $ 34,036 $ 170,130 $ 1,791,702 Occupancy 120,339 154,703 277 17,189 50,600 343,108 Employee payroll taxes, health and retirement benefits 59,293 164,156 5,450 5,638 36,112 270,649 Professional fees 22,170 22,002 1,606 76,403 91,313 213,494 Payroll taxes 40,901 77,630 2,382 2,525 15,515 138,953 Supplies 71,303 59,303 161 1,266 3,906 135,939 Insurance 37,718 64,956 5,074 2,354 6,780 116,882 Travel 5,646 78,039 24,756 9 643 109,093 Depreciation 20,971 37,896 17,720 980 1,914 79,481 Conferences, conventions, and meetings 4,567 6,803 45 135 24,269 35,819 Equipment maintenance 6,698 15,472 836 1,136 8,636 32,778 Other 2,708 5,717 1,011 49 10,061 19,546 Telephone 142 2,334 695-7,243 10,414 Printing 56 209 - - 9,468 9,733 Postage and shipping - - - 100 4,113 4,213 Bad debts - - - - 4,000 4,000 Interest - - - - 2,366 2,366 Donated goods 2,114 - - - - 2,114 $ 932,622 $ 1,705,890 $ 92,883 $ 141,821 $ 447,069 $ 3,320,285 See accompanying notes to financial statements. 7
Statements of Cash Flows Years Ended June 30, 2015 and 2014 2015 2014 Cash flows from operating activities: Change in net assets $ (86,009) $ (81,010) Adjustments to reconcile the change in net assets to net cash from operating activities: Depreciation 84,480 79,481 Unrealized gain on investments (704) (2,528) Loss on disposal of property and equipment 29,431 - Changes in operating assets and liabilities: Accounts receivable, net 23,325 (33,029) Pledges and grants receivable (64,524) 20,481 Deposit and prepaid expenses (124) (10,157) Accounts payable 28,747 36,409 Accrued payroll and payroll taxes (4,246) 990 Accrued vacation and sick leave (4,243) (15,709) Accrued retirement expenses 3,084 3,388 Accrued expenses (8,275) 12,355 Net cash provided by operating activities 942 10,671 Cash flows used in investing activities: Purchase of property and equipment (9,073) (154,724) Cash flows from financing activities: Proceeds from note payable - 100,000 Payments on note payable (18,954) (12,296) Net cash (used in) provided by financing activities (18,954) 87,704 Change in cash and cash equivalents (27,085) (56,349) Cash and cash equivalents, beginning of year 437,981 494,330 Cash and cash equivalents, end of year $ 410,896 $ 437,981 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 3,009 $ 2,366 See accompanying notes to financial statements. 8
Notes to Financial Statements 1. Summary of Significant Accounting Policies: Organization: A Grace Place Adult Care Center (the Organization ) is a non-stock, non-profit corporation formed in Virginia on October 9, 1969, to provide various programs of support, education, training, rehabilitation, and recreation for adults with disabilities and age-related conditions. The Organization has two divisions, Adult Day Care and Day Support (referred to as Connections ). Basis of Accounting: The Organization prepares its financial statements on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States ( GAAP ), which require reporting information regarding its financial position and activities according to these three classes of net assets: Unrestricted net assets are net assets that are not subject to donor-imposed stipulations. Donor-restricted contributions whose restrictions are met in the same reporting period are reported as unrestricted support. If the Board of Directors specifies a purpose where none has been stated by the original donor, such assets are classified as Board-designated within unrestricted net assets. Temporarily restricted net assets are net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Organization and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. However, contributions that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the contribution is recognized. Permanently restricted net assets are subject to donor-imposed stipulations that the original amount of the gift be maintained permanently by the Organization and use of all or part of the income earned on any related investments is for general or specific purposes. There were no permanently restricted net assets at June 30, 2015 and 2014. Estimates: The preparation of financial statements in conformity with GAAP 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. Cash and Cash Equivalents: The Organization considers as cash equivalents all short term, highly liquid investments with maturities of three months or less at date of acquisition. 9
Notes to Financial Statements, Continued 1. Summary of Significant Accounting Policies, Continued: Credit Risk: The Organization maintains its cash and cash equivalent balances in financial institutions. The balances in the financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,000. Funds held by brokerage houses are insured by the Securities Investors Protection Corporation up to $500,000, including cash claims of up to $250,000. The Organization periodically has balances in excess of insured limits. Accounts Receivable: Accounts receivable are carried at original invoice amount less an estimate made for doubtful receivables based on a review of all outstanding amounts on a monthly basis. Management determines the allowance for doubtful accounts by identifying troubled accounts, and receivables are written off when deemed uncollectible. The allowance for doubtful accounts was $7,120 at June 30, 2015 and $19,482 at June 30, 2014. Recoveries of receivables previously written off are recorded when collected. Accounts receivable consisted of 59% due from Medicaid at June 30, 2015 and 75% due from Medicaid at June 30, 2014. Pledges Receivable: Contributions pledged are recognized when the donor makes a promise to give to the Organization that is, in substance, unconditional. The Organization uses the allowance method for estimates of uncollectible pledges receivable. The allowance is based on historical collection rates and an analysis of individual pledges receivable. There was no allowance for doubtful accounts at June 30, 2015 and 2014, as all pledges receivable were considered collectible. Investments: The Organization s investments are reported at readily determinable fair value in the statements of financial position. The fair value of marketable equity and debt securities is determined using quoted market prices. Unrealized gains and losses are included in the statements of activities. Property and Equipment: Property and equipment are recorded at cost for purchased assets and at fair value for donated items. Major repairs and betterments are capitalized and normal maintenance and repairs are charged to expense as incurred. Depreciation is computed on a straight-line basis over the estimated useful lives of the related assets, which range from three to fifteen years. Upon retirement or sale of an asset, the cost and accumulated depreciation are removed from the accounts and any gain or loss is reflected in operations. 10
Notes to Financial Statements, Continued 1. Summary of Significant Accounting Policies, Continued: Revenue and Support: The Organization received substantially all of its public support from the Richmond metropolitan community and is substantially dependent on continued government reimbursement programs. All revenue is recognized when earned. Program service revenue is recorded at the Organization s established rates with contractual adjustments, if any, deducted to arrive at program service revenue. The Organization has agreements with third-party payers which provide for reimbursement to the Organization at amounts different from its established rates. The primary program is Medicaid, which accounted for approximately 75% of total program service revenue for 2015 and 78% of total program service revenue for 2014. Functional Allocation of Expenses: The costs of providing the various programs and activities have been summarized on a functional basis in the statements of activities and functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Advertising Expense: The Organization expenses advertising costs as they are incurred. Advertising expense amounted to $1,472 for 2015 and $7,027 for 2014. Income Taxes: The Organization is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Income Tax Uncertainties: Management has evaluated the effects of accounting guidance related to uncertain income tax positions and concluded that the Organization had no significant financial statement exposure to uncertain income tax positions at June 30, 2015 and 2014. The Organization's informational tax returns (Form 990) for years since June 30, 2012 remain open for examination by tax authorities. The Organization is not currently under audit by any tax jurisdiction. Donated Goods: The value of donated materials amounted to $13,970 for 2015 and $2,114 for 2014 and have been recognized at their fair value as determined by the donor in the financial statements. In addition, many individuals volunteer their time in the furtherance of the Organization s programs. The value of this contributed time is not reflected in these financial statements because the criteria for recognition under guidance provided by Financial Accounting Standards Board ( FASB ) related to accounting for contributions received and contributions made had not been satisfied. Subsequent Events: Management has evaluated subsequent events through December 1, 2015, the date the financial statements were available to be issued, and has determined there are no subsequent events to be reported in the accompanying financial statements. 11
Notes to Financial Statements, Continued 2. Temporarily Restricted Net Assets: Temporarily restricted net assets at June 30, 2015 and 2014 were restricted for the following purposes: 2015 2014 Time restrictions $ 60,148 $ 59,554 Memory support 115,000 44,058 New program initiative 43,778 39,567 Nursing services 30,000 25,000 Satellite office 1,593 1,593 Capital expansion 13,161 - $ 263,680 $ 169,772 Temporarily restricted net assets were released to expenses to satisfy the following restricted purposes: 3. Pledges Receivable: 2015 2014 Time restrictions $ 59,554 $ 56,204 Memory support 69,058 10,198 New program initiative 76,789 144,743 Nursing services 15,000 20,242 Satellite office - 500 Capital expansion - 54,803 $ 220,401 $ 286,690 Total unconditional promises to give were $60,148 at June 30, 2015 and $59,554 at June 30, 2014 and are expected to be received in less than a year. In addition, the Organization has been named the beneficiary of a trust that is currently in the process of liquidation. As the future amount to be received is indeterminable at June 30, 2015, no receivable has been recorded. 12
Notes to Financial Statements, Continued 4. Property and Equipment: Property and equipment at June 30, 2015 and 2014 consisted of the following: 2015 2014 Leasehold improvements $ 717,431 $ 1,394,490 Furniture, fixtures, and equipment 55,635 318,783 Vehicles 88,598 354,676 861,664 2,067,949 Less accumulated depreciation (326,801) (1,428,248) $ 534,863 $ 639,701 5. Investments: The costs of investments and their related carrying values (market) by major investment type were as follows at June 30, 2015 and 2014: 2015 2014 Cost Market Cost Market Mutual fund $ 10,027 $ 14,494 $ 10,027 $ 13,790 6. Fair Value Measurements: The Organization follows FASB guidance, which provides a framework for measuring fair value under GAAP, for all financial assets and liabilities measured at fair value on a recurring basis. Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. The guidance requires that valuation techniques maximize the use of observable inputs and minimize the use of unobservable inputs. The guidance also establishes a fair value hierarchy which prioritizes the valuation inputs into three broad levels. Based on the underlying inputs, each fair value measurement in its entirety is reported in one of the three levels. 13
Notes to Financial Statements, Continued 6. Fair Value Measurements, Continued: These levels are: Level 1 Valuation is based upon quoted prices for identical instruments traded in active markets. Level 1 assets and liabilities include debt and equity securities traded in an active exchange market, as well as certain U.S. Treasury securities that are traded by dealers or brokers in active markets. Level 2 Valuation is based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Valuation is determined using model-based techniques that use significant assumptions not observable in the market and significant to the fair value measurement. These values are generally determined using pricing models for which the assumptions utilize management s estimates of market participant assumptions. Valuation techniques used should maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for investments carried at fair value: Mutual funds: Valued at the net asset value of shares held by the Organization at year end. The fair value of the Organization s investment in a mutual fund totaling $14,494 at June 30, 2015 and $13,790 at June 30, 2014 was based upon Level 1 valuation criteria. 7. Note Payable: On October 18, 2013, the Organization entered into a business loan agreement for a promissory note in the amount of $100,000, bearing interest at 3.75% per annum. The note is payable in monthly installments of principal and interest of $1,833 with a balloon payment due on the maturity date of October 18, 2016. The outstanding balance was $68,750 at June 30, 2015. Future minimum payments are as follows: Year Ending June 30, Amount 2016 $ 19,756 2017 48,994 $ 68,750 14
Notes to Financial Statements, Continued 8. Leases: The Organization leases office space and equipment under operating lease agreements. Rental expense was $289,434 for 2015 and $268,989 for 2014. The Organization s office leases provide for certain rent holidays and annual rent escalations. The Organization recognizes rent expense on a straight-line basis over the life of the lease. This policy resulted in the recognition of accrued rent of $15,580 at June 30, 2015 and $24,143 at June 30, 2014. Future minimum payments under operating lease obligations consisted of the following at June 30, 2015: Year Ending June 30, Amount 2016 $ 259,543 2017 266,841 2018 213,750 2019 33,797 2020 34,479 Thereafter 132,437 Total $ 940,847 9. Employee Retirement Plans: The Organization sponsors a defined contribution retirement plan which covers all employees who meet eligibility requirements. The plan enables participants to make contributions, and the Organization may elect to match the employee s contribution. The Organization did not make any matching contributions to the plan during 2015 and 2014. The Organization also participates in an affiliated agency noncontributory multi-employer pension plan, sponsored and administered by the United Way of Greater Richmond (the Pension Plan ). Effective July 1, 2008, participants in the Pension Plan were limited to those employees over 50 years of age. The actuarial present value of vested and nonvested accumulated plan benefits and net assets available for benefits are not determined for the affiliated participating agencies. Effective December 31, 2008, the Organization received notification that the administrator of the Pension Plan would freeze all future benefit accruals for those who were current active plan participants. In addition, the administrator is developing a strategy to terminate the plan. For the year ended June 30, 2015 and 2014, the Organization accrued contributions of $49,170 and $46,086, respectively, which are included in accrued retirement expense in the accompanying statements of financial position. 15