Financial Report with Additional Information December 31, 2008
Contents Report Letter 1 Financial Statements Statement of Financial Position 2 Statement of Activities and Changes in Net Assets 3 Statement of Functional Expenses 4-5 Statement of Cash Flows 6 Notes to Financial Statements 7-11 Additional Information 12 Report Letter 13 Combining Statement of Financial Position 14 Combining Statement of Activities and Changes in Net Assets 15
Independent Auditor's Report To the Board of Directors Goodwill Industries of Mid-Michigan, Inc. We have audited the accompanying statement of financial position of Goodwill Industries of Mid- Michigan, Inc. as of December 31, 2008 and 2007 and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended. These financial statements are the responsibility of the Organization's management. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Goodwill Industries of Mid-Michigan, Inc. at December 31, 2008 and 2007 and the changes in its net assets and its cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. January 30, 2009 1
Statement of Financial Position December 31, 2008 December 31, 2007 Assets Current Assets Cash and cash equivalents $ 473,211 $ 405,548 Receivables 179,704 245,473 Investments (Note 2) 1,891,876 1,695,197 Inventory (Note 3) 277,422 309,121 Prepaid expenses and other current assets 202,982 96,188 Total current assets 3,025,195 2,751,527 Property and Equipment (Note 4) 1,097,340 1,102,652 Total assets $ 4,122,535 $ 3,854,179 Liabilities and Net Assets Current Liabilities Trade accounts payable $ 191,694 $ 209,867 Deferred revenue - 5,500 Accrued liabilities and other: Accrued compensation 283,768 222,116 Other accrued liabilities 113,151 171,180 Total current liabilities 588,613 608,663 Net Assets - Unrestricted Unrestricted and undesignated net assets 3,342,238 3,061,522 Unrestricted - Board designated net assets 191,684 183,994 Total net assets 3,533,922 3,245,516 Total liabilities and net assets $ 4,122,535 $ 3,854,179 See Notes to Financial Statements. 2
Statement of Activities and Changes in Net Assets December 31, 2008 Year Ended December 31, 2007 Changes in Unrestricted Net Assets Revenue and support: Contributions $ 25,418 $ 36,744 Program service earned revenue (Note 6) 8,763,903 8,324,389 Contracts 177,625 395,015 Training and evaluation fees 822,677 486,241 Interest income 67,595 65,013 Gain (loss) on sale of fixed assets (21,257) 1,592 Miscellaneous income 16,784 17,724 Total revenue and support 9,852,745 9,326,718 Expenses: Program services: Retail goods production 6,801,749 6,265,926 Contracts 377,631 479,085 Rehabilitation 960,170 602,951 Miscellaneous services 121,379 107,948 Total program services 8,260,929 7,455,910 Support services - Management and general 1,204,426 1,154,236 Total expenses 9,465,355 8,610,146 Increase in Unrestricted Net Assets - Before payments to national organization 387,390 716,572 Unallocated Payments to National Organization (98,984) (87,977) Increase in Net Assets 288,406 628,595 Net Assets - Beginning of year 3,245,516 2,616,921 Net Assets - End of year $ 3,533,922 $ 3,245,516 See Notes to Financial Statements. 3
Statement of Functional Expenses Year Ended December 31, 2008 Program Services Retail Goods Miscellaneous Production Contracts Rehabilitation Services Total Support Services Management and General Totals Salaries and wages $ 3,195,792 $ 238,698 $ 651,810 $ 38,904 $ 4,125,204 $ 670,848 $ 4,796,052 Employee benefits 103,496 16,691 25,235 2,899 148,321 55,730 204,051 Payroll taxes 424,183 44,350 65,801 4,920 539,254 79,171 618,425 Total salaries and related expenses 3,723,471 299,739 742,846 46,723 4,812,779 805,749 5,618,528 Supplies 1,103,576 48,931 107,201 69,426 1,329,134 63,261 1,392,395 Transportation 197,591 3,683 14,413 851 216,538 12,577 229,115 Contract and professional fees 36,003 1,315 51,818-89,136 38,705 127,841 Telephone 28,680 1,555 5,979 516 36,730 7,329 44,059 Postage and shipping 55,537 921 300-56,758 2,867 59,625 Occupancy 1,219,539 4,167 8,307 239 1,232,252 160,926 1,393,178 Equipment rental and maintenance 78,190 5,455 2,540 1,383 87,568 18,119 105,687 Printing and advertising 131,833 1,100 1,481 83 134,497 5,531 140,028 Conferences and meetings 5,515 1,757 6,708 625 14,605 12,455 27,060 Memberships 1,787 525 7,204-9,516 1,300 10,816 Miscellaneous 103,072 242 6,771 89 110,174 31,881 142,055 Depreciation 116,955 8,241 4,602 1,444 131,242 43,726 174,968 Total functional expenses $ 6,801,749 $ 377,631 $ 960,170 $ 121,379 $ 8,260,929 $ 1,204,426 $ 9,465,355 See Notes to Financial Statements. 4
Statement of Functional Expenses (Continued) Year Ended December 31, 2007 Program Services Retail Goods Miscellaneous Production Contracts Rehabilitation Services Total Support Services Management and General Totals Salaries and wages $ 2,856,639 $ 249,596 $ 445,104 $ 39,415 $ 3,590,754 $ 641,172 $ 4,231,926 Employee benefits 94,012 14,028 17,014 2,629 127,683 86,995 214,678 Payroll taxes 395,288 41,002 48,035 4,680 489,005 78,772 567,777 Total salaries and related expenses 3,345,939 304,626 510,153 46,724 4,207,442 806,939 5,014,381 Supplies 1,071,384 122,758 6,709 59,105 1,259,956 42,904 1,302,860 Transportation 151,196 4,266 3,901 782 160,145 14,324 174,469 Contract and professional fees 26,595 7,131 56,703-90,429 24,580 115,009 Telephone 21,783 1,741 2,582 177 26,283 7,169 33,452 Postage and shipping 56,930 1,301 448-58,679 2,391 61,070 Occupancy 1,151,576 2,676 763-1,155,015 150,426 1,305,441 Equipment rental and maintenance 99,800 11,222 388-111,410 15,023 126,433 Printing and advertising 109,288 12,497 452-122,237 4,442 126,679 Conferences and meetings 14,284 1,246 6,859-22,389 14,382 36,771 Memberships 1,347 480 6,544-8,371 10 8,381 Miscellaneous 87,865 144 3,064 38 91,111 17,167 108,278 Depreciation 127,939 8,997 4,385 1,122 142,443 54,479 196,922 Total functional expenses $ 6,265,926 $ 479,085 $ 602,951 $ 107,948 $ 7,455,910 $ 1,154,236 $ 8,610,146 See Notes to Financial Statements. 5
Statement of Cash Flows December 31, 2008 Year Ended December 31, 2007 Cash Flows from Operating Activities Increase in net assets $ 288,406 $ 628,595 Adjustments to reconcile increase (decrease) in net assets to net cash from operating activities: Depreciation 174,968 196,922 Loss (gain) on sale of property and equipment 21,257 (1,592) Changes in operating assets and liabilities which provided (used) cash: Accounts receivable 65,769 (63,467) Inventory 31,699 (32,412) Prepaid expenses and other (106,794) 40,825 Accounts payable (18,173) 12,341 Accrued compensation 61,652 28,773 Accrued liabilities and other (58,029) 77,642 Deferred revenue (5,500) (2,212) Net cash provided by operating activities 455,255 885,415 Cash Flows from Investing Activities Purchase of property and equipment (200,313) (141,991) Proceeds from disposition of property and equipment 9,400 13,950 Purchases of investments (3,899,465) (2,480,311) Proceeds from sales and maturities of investments 3,702,786 1,844,866 Net cash used in investing activities (387,592) (763,486) Net Increase in Cash and Cash Equivalents 67,663 121,929 Cash and Cash Equivalents - Beginning of year 405,548 283,619 Cash and Cash Equivalents - End of year $ 473,211 $ 405,548 See Notes to Financial Statements. 6
Notes to Financial Statements December 31, 2008 and 2007 Note 1 - Nature of Activities and Significant Accounting Policies Nature of Organization - Goodwill Industries of Mid-Michigan, Inc. (the "Organization") is a not-for-profit corporation whose purpose is to achieve the full participation in society of people with disabilities and other special needs. Major programs include retail goods production, contracts, rehabilitation, and other miscellaneous services. Specific activities include vocational evaluation and assessment; employee development; organizational employment; computer retail, food service, and janitorial skills training; workers on wheels and youth leadership training; and community employment with approximately 1,150 and 779 clients served during 2008 and 2007, respectively. The Organization serves a 10-county area from Flint to Oscoda and Owosso to Lapeer. Significant accounting policies are as follows: Cash and Cash Equivalents - The Organization considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Investments - Investments, which consist of money market funds and certificates of deposits, are recorded at fair market value. Accounts Receivable - Accounts receivable are stated at invoice amounts. An allowance for doubtful accounts is established based on a specific assessment of all invoices that remain unpaid following normal payment periods. In addition, a general valuation allowance is established for other accounts receivable based on historical loss experience. All amounts deemed uncollectible are charged against the allowance for doubtful accounts in the period that determination is made. As of December 31, 2008 and 2007, the allowance for doubtful accounts was estimated to be $14,580. Inventory - Inventory, which consists of contributed goods and parts, is stated at the lower of cost or market, by use of the first-in, first-out (FIFO) method of valuation. There is a significant amount of work in bringing contributed goods to salable value; therefore, the Organization records inventory only for contributed goods brought to the point of sale. Contributed goods that have not reached their point of sale have not been included in inventory. Property and Equipment - Property and equipment are recorded at cost when purchased or at fair value at the date of donation and are being depreciated on a straight-line basis over their estimated useful lives. Costs of maintenance and repairs are charged to expense when incurred. Board-designated Net Assets - Board-designated net assets are unrestricted net assets designated by the board primarily for capital improvements. These designations are based on board actions, which can be altered or revoked at a future time by the board. 7
Notes to Financial Statements December 31, 2008 and 2007 Note 1 - Nature of Activities and Significant Accounting Policies (Continued) Donated Services and Assets - Certain donated assets are recognized as support in the statement of activities and changes in net assets. The value of these assets is determined as stated in the above-referenced significant accounting policy for inventory. During the years ended December 31, 2008 and 2007, the Organization recognized donated goods with an estimated fair value of $3,350,000 and $3,100,000, respectively, in program service revenue. A number of volunteers have donated time to the Organization. The volunteer services were not reflected in the financial statements because the services are not recordable under accounting principles generally accepted in the United States of America. Functional Allocation of Expenses - The costs of providing the program and support services have been reported on a functional basis in the statement of activities and changes in net assets. Indirect costs have been allocated between the various programs and support services based on estimates, as determined by management. Although the methods of allocation used are considered reasonable, other methods could be used that would produce a different amount. Advertising Costs - Advertising costs are expensed as incurred. 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 revenue, expenses, and other changes in net assets during the reporting period. Actual results could differ from those estimates. Note 2 - Investments Investments consisted of the following at December 31: 2008 2007 Money market funds $ 386,354 $ 524,352 Certificates of deposits 1,505,522 1,170,845 Total $ 1,891,876 $ 1,695,197 8
Notes to Financial Statements December 31, 2008 and 2007 Note 3 - Inventory Inventory consists of the following: 2008 2007 Contributed goods $ 261,734 $ 287,782 Purchased goods 11,656 - Parts 4,032 21,339 Total inventory $ 277,422 $ 309,121 Note 4 - Property and Equipment Property and equipment are summarized as follows: 2008 2007 Land $ 187,238 $ 187,238 Buildings and improvements 2,043,380 2,043,380 Machinery and equipment 1,575,464 1,577,572 Leasehold improvements 473,670 447,513 Total cost 4,279,752 4,255,703 Accumulated depreciation 3,182,412 3,153,051 Net property and equipment $ 1,097,340 $ 1,102,652 Depreciation expense was $174,968 for 2008 and $196,922 for 2007. At December 31, 2008, the Organization had a commitment of $282,316 for the purchase of a Point-of-Sale program for its retail stores. Note 5 - Line of Credit The Organization has a $500,000 line of credit available from a bank. There were no borrowings on this line of credit at December 31, 2008 and 2007. The note bears interest at a rate equal to the bank's prime rate and is secured by receivables, inventory, and equipment. 9
Notes to Financial Statements December 31, 2008 and 2007 Note 6 - Program Service Earned Revenue The following is the detail of program service earned revenue for the years ended December 31: 2008 2007 Stores $ 7,603,726 $ 7,285,330 Salvage (net of commissions $30,929 & $33,790, respectively, for 2008 and 2007) 1,038,504 941,943 Auxiliary 72,374 61,977 Miscellaneous 49,299 35,139 Note 7 - Operating Leases Total program service earned revenue $ 8,763,903 $ 8,324,389 The Organization leases office space under operating lease agreements that expire through 2017. The following is a schedule of future minimum rental payments for the years ending December 31: 2009 $ 847,486 2010 707,762 2011 521,812 2012 409,884 2013 365,573 2014 and thereafter 294,984 Total $ 3,147,501 Total rent expense on these leases for 2008 and 2007 was $688,403 and $636,690, respectively. 10
Notes to Financial Statements December 31, 2008 and 2007 Note 8 - Pension Plans The Organization previously participated in a non-contributory defined benefit pension plan through the United Way of Genesee and Lapeer Counties through 1988. On January 1, 1989, the Organization terminated its participation in the above-mentioned pension plan. Therefore, no contributions have been made to this plan since 1988. On June 17, 1992, the United Way of Genesee and Lapeer Counties adopted a motion, which terminated the pension plan as of September 1, 1992. At this date, all benefit accruals ceased to accrue and all participants became 100 percent vested in his or her accrued benefit. Plan assets will be distributed in accordance with the plan document and federal regulations. As of the issuance date of the audit report, the Organization had not received any assets which may revert to the Organization under the plan document. The position of the Organization relative to other contributors to the multiple-employer plan has not been determined with respect to plan assets and accumulated benefits. However, the plan, as a whole, is overfunded by $43,697 as of January 1, 2007. In the event of withdrawal from the plan and under certain other conditions, a contributor to a multi-employer plan may be liable to the plan for a portion of the underfunded status, if any. A comparison of the accumulated plan benefits and plan net assets, as of January 1, 2007, the most recent actuarial study date available for the plan as a whole, is as follows: Vested $ 1,832,967 Net assets available for benefits $ 1,876,664 The assumed rate of return used in determining the actuarial present value of accumulated plan benefits was 8 percent. The Organization has made available a 403(b) pension plan to all employees. There is no set employee contribution required and no employer contribution. Note 9 - Goodwill Auxiliary The accompanying statement of financial position as of December 31, 2008 and 2007 and the related statements of activities and changes in net assets, functional expenses, and cash flows for the years then ended include Goodwill Auxiliary, a committee of Goodwill Industries of Mid-Michigan, Inc. 11
Additional Information 12
To the Board of Directors Goodwill Industries of Mid-Michigan, Inc. We have audited the financial statements of Goodwill Industries of Mid-Michigan, Inc. as of December 31, 2008 and 2007. Our audits were made for the purpose of forming an opinion on the financial statements taken as a whole. The accompanying combining statement of financial position and combining statement of activities and changes in net assets are presented for the purpose of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the procedures applied in the audits of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. January 30, 2009 13
Combining Statement of Financial Position Assets Goodwill Industries of Mid-Michigan, Inc. Year Ended December 31, 2008 December 31, 2007 Goodwill Auxiliary Total Total Current Assets Cash and cash equivalents $ 412,582 $ 60,629 $ 473,211 $ 405,548 Receivables 179,704-179,704 245,473 Investments 1,886,811 5,065 1,891,876 1,695,197 Inventory 277,422-277,422 309,121 Prepaid expenses and other current assets 202,982-202,982 96,188 Total current assets 2,959,501 65,694 3,025,195 2,751,527 Property and Equipment 1,097,240 100 1,097,340 1,102,652 Total assets $ 4,056,741 $ 65,794 $ 4,122,535 $ 3,854,179 Liabilities and Net Assets Current Liabilities Trade accounts payable $ 191,694 $ - $ 191,694 $ 209,867 Deferred revenue - - - 5,500 Accrued liabilities and other: Accrued compensation 283,768-283,768 222,116 Other accrued liabilities 113,151-113,151 171,180 Total current liabilities 588,613-588,613 608,663 Net Assets - Unrestricted Undesignated 3,276,444 65,794 3,342,238 3,061,522 Board-designated 191,684-191,684 183,994 Total net assets 3,468,128 65,794 3,533,922 3,245,516 Total liabilities and net assets $ 4,056,741 $ 65,794 $ 4,122,535 $ 3,854,179 14
Combining Statement of Activities and Changes in Net Assets Goodwill Industries of Mid-Michigan, Inc. Year Ended December 31, 2008 December 31, 2007 Goodwill Auxiliary Total Total Changes in Unrestricted Net Assets Revenue and support: Contributions $ 25,418 $ - $ 25,418 $ 36,744 Program service earned revenue 8,691,529 72,374 8,763,903 8,324,389 Contracts 177,625-177,625 395,015 Training and evaluation fees 822,677-822,677 486,241 Interest income 67,206 389 67,595 65,013 Gain (loss) on sale of fixed assets (21,257) - (21,257) 1,592 Miscellaneous income 15,679 1,105 16,784 17,724 Total revenue and support 9,778,877 73,868 9,852,745 9,326,718 Expenses: Program services: Retail goods production 6,801,749-6,801,749 6,265,926 Contracts 377,631-377,631 479,085 Rehabilitation 960,170-960,170 602,951 Miscellaneous services 121,379-121,379 107,948 Total program services 8,260,929-8,260,929 7,455,910 Support services - Management and general 1,195,160 9,266 1,204,426 1,154,236 Total expenses 9,456,089 9,266 9,465,355 8,610,146 Increase in Unrestricted Net Assets - Before transfers and payments to national organization 322,788 64,602 387,390 716,572 Transfers 53,029 (53,029) - - Unallocated Payments to National Organization (98,984) - (98,984) (87,977) Increase in Net Assets 276,833 11,573 288,406 628,595 Net Assets - Beginning of year 3,191,295 54,221 3,245,516 2,616,921 Net Assets - End of year $ 3,468,128 $ 65,794 $ 3,533,922 $ 3,245,516 15