Financial Report June 30, 2013
Contents Independent Auditor s Report 1 Financial Statements Statements of financial position 3 Statements of activities 4 5 Statements of cash flows 7 Statements of functional expenses 8 9 Notes to financial statements 10 17
Independent Auditor s Report To the Board of Directors Charlotte Rescue Mission Charlotte, North Carolina Report on the Financial Statements We have audited the accompanying financial statements of Charlotte Rescue Mission (CRM) which comprise the statements of financial position as of June 30, 2013 and 2012 and the related statements of activities, cash flows and functional expenses 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. 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of 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 Charlotte Rescue Mission as of June 30, 2013 and 2012, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Charlotte, North Carolina October 25, 2013 1
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Statements of Financial Position June 30, 2013 and 2012 Assets (Note 5) 2013 2012 Cash and cash equivalents: Cash held in operating accounts (Note 1) $ 1,755,102 $ 1,367,135 Cash held for restricted purposes 345,220 25,275 2,100,322 1,392,410 Certificates of deposit 252,040 250,471 Accounts receivable 49,077 202,483 Pledges receivable, net (Notes 2 and 4) 642,724 1,144,341 Inventory 92,222 69,464 Prepaid expenses and other assets 134,018 96,036 3,270,403 3,155,205 Property and equipment, net (Note 3) 9,226,702 9,175,514 Total assets $ 12,497,105 $ 12,330,719 Liabilities and Net Assets Liabilities Accounts payable $ 52,885 $ 443,515 Accrued expenses 233,528 172,853 Property taxes payable - 33,587 Notes payable (Note 5) - 1,081,650 Grant payable (Note 6) 1,000,000 - Total liabilities 1,286,413 1,731,605 Commitments and Contingencies (Notes 6, 9 and 10) Net Assets Unrestricted: Undesignated, of which $9,226,702 and $9,175,514 is utilized by property and equipment in 2013 and 2012, respectively 10,458,226 9,429,486 Temporarily restricted (Note 7) 752,466 1,169,628 Total net assets 11,210,692 10,599,114 Total liabilities and net assets $ 12,497,105 $ 12,330,719 See Notes to Financial Statements. 3
Statements of Activities Years Ended June 30, 2013 and 2012 2013 Temporarily Unrestricted Restricted Total Support and revenue: Contributions and grants $ 3,756,758 $ 249,127 $ 4,005,885 Capital campaign contributions - 625,099 625,099 Gifts-in-kind 772,629-772,629 Program service income 82,025-82,025 Interest income 7,152 151 7,303 Miscellaneous income 60,752 33,587 94,339 Net gain on disposal of assets 224,990 (110) 224,880 Support and revenue 4,904,306 907,854 5,812,160 Net assets released from restrictions Capital campaign (Note 7) 1,149,535 (1,149,535) - Net assets released from restrictions Non-capital campaign (Note 7) 175,481 (175,481) - Total support and revenue 6,229,322 (417,162) 5,812,160 Expenses: Program services 3,457,220-3,457,220 Supporting activities: General and administrative 647,716-647,716 Fundraising 1,095,646-1,095,646 Total expenses 5,200,582-5,200,582 Change in net assets 1,028,740 (417,162) 611,578 Net assets, beginning of year 9,429,486 1,169,628 10,599,114 Net assets, end of year $ 10,458,226 $ 752,466 $ 11,210,692 See Notes to Financial Statements. 4
2012 Temporarily Unrestricted Restricted Total $ 3,570,554 $ 159,162 $ 3,729,716-2,256,165 2,256,165 934,554-934,554 73,358-73,358 10,099 12,684 22,783 33,208-33,208 - - - 4,621,773 2,428,011 7,049,784 5,226,451 (5,226,451) - 154,524 (154,524) - 10,002,748 (2,952,964) 7,049,784 2,643,496-2,643,496 571,441-571,441 1,052,498-1,052,498 4,267,435-4,267,435 5,735,313 (2,952,964) 2,782,349 3,694,173 4,122,592 7,816,765 $ 9,429,486 $ 1,169,628 $ 10,599,114 5
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Statements of Cash Flows Years Ended June 30, 2013 and 2012 2013 2012 Cash Flows from Operating Activities Change in net assets $ 611,578 $ 2,782,349 Adjustments to reconcile change in net assets to net cash provided by operating activities: Gifts restricted for capital campaign (1,002,563) (2,452,413) Gain on sale of property and equipment (224,990) - Interest income on certificate of deposit (1,569) 4,756 Depreciation 392,903 89,860 Changes in operating assets and liabilities: Pledges receivable 501,617 204,014 Accounts receivable 153,406 (185,302) Prepaid expenses and other assets (37,982) 130,456 Inventory (22,758) (55,071) Accounts payable (390,630) (126,129) Accrued expenses and property taxes payable 27,088 34,566 Net cash provided by operating activities 6,100 427,086 Cash Flows from Investing Activities Purchase of property and equipment (605,160) (5,850,021) Proceeds from sale of property and equipment 386,059 - Purchases for construction in progress - (14,100) Cash collections on note receivable - 254,072 Net cash used in investing activities (219,101) (5,610,049) Cash Flows from Financing Activities Payments on notes payable (1,081,650) - Proceeds from grant award 1,000,000 - Gifts restricted for capital campaign 1,002,563 2,452,413 Net cash provided by financing activities 920,913 2,452,413 Net increase (decrease) in cash and cash equivalents 707,912 (2,730,550) Cash and cash equivalents, beginning 1,392,410 4,122,960 Cash and cash equivalents, ending $ 2,100,322 $ 1,392,410 Supplemental Disclosure of Cash Flow Information Gifts-in-kind used by the ministry $ 772,629 $ 934,554 Property and equipment additions included within accounts payable $ - $ 378,542 Property and equipment additions included within notes payable $ - $ 1,081,650 See Notes to Financial Statements. 7
Statements of Functional Expenses Years Ended June 30, 2013 and 2012 2013 General and Program Administrative Fundraising Total Salaries and wages $ 1,642,523 $ 377,213 $ 347,267 $ 2,367,003 Payroll taxes 129,586 34,486 21,492 185,564 Benefits 285,570 69,632 60,768 415,970 Advertising 13,155-148,131 161,286 Promotional (direct mail) - - 409,419 409,419 Food 364,266 - - 364,266 Occupancy 208,425 5,003 2,422 215,850 Supplies and maintenance 244,849 20,663 29,546 295,058 Contracted services 41,794 50,469 4,195 96,458 Postage 633 1,758 26,563 28,954 Depreciation 369,114 10,407 13,382 392,903 Communications 30,193 4,298 5,950 40,441 Auto and travel 19,550 2,504 1,415 23,469 Insurance 75,896 5,478 3,299 84,673 Radio program 5,849 - - 5,849 Bank charges - 46,174 505 46,679 Dues and education 24,059 15,052 10,220 49,331 Other 1,758 4,579 11,072 17,409 $ 3,457,220 $ 647,716 $ 1,095,646 $ 5,200,582 See Notes to Financial Statements. 8
2012 General and Program Administrative Fundraising Total $ 1,360,780 $ 368,835 $ 316,787 $ 2,046,402 112,973 29,863 27,787 170,623 210,703 50,608 40,521 301,832 5,189-91,288 96,477 - - 449,884 449,884 367,354 - - 367,354 129,178 4,783 2,316 136,277 218,407 15,616 30,734 264,757 25,081 39,096 27,956 92,133 645 1,208 34,403 36,256 74,331 6,238 9,291 89,860 21,874 3,739 4,369 29,982 17,696 2,436 2,007 22,139 64,041 5,052 4,469 73,562 11,674 - - 11,674-26,867 369 27,236 16,475 13,192 7,420 37,087 7,095 3,908 2,897 13,900 $ 2,643,496 $ 571,441 $ 1,052,498 $ 4,267,435 9
Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies Nature of organization: Charlotte Rescue Mission (CRM) is a North Carolina not-for-profit corporation that was formed in 1938. As a nonprofit corporation, CRM is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code (Code). CRM is also classified as a publicly supported organization, which is not a private foundation as defined by Section 509(a) of the Code. The purpose of CRM is to provide an intensive Christian residential chemical dependence recovery and rehabilitation program for homeless men and women or those about to become homeless. The primary programs of CRM are as follows: Rebound CRM provides a 90-day Christian residential recovery program, utilizing the principles of Alcoholics Anonymous, which has more than 130 men in residence at its West First Street location. Dove s Nest CRM moved its 120-day program for women and children into a new 120-bed facility on West Boulevard in early July of 2012. This program uses the same principles as the men s Rebound program. Prior to this date, it was located in a much smaller 12-bed facility which housed only women in the Dilworth area of Charlotte. See Note 4 for additional information related to this program and facility. Cross Path CRM provided a radio ministry, which aired at 8:25 PM on WMIT-FM (106.9) until December 31, 2012. Holiday Meals CRM provides hot nourishing meals at Easter, Thanksgiving, and Christmas to the community to include not only the homeless but also families, children, and senior citizens. A summary of CRM s significant accounting policies follows: Accrual basis: The financial statements of CRM have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP). Basis of presentation: Revenue is recognized when earned and support when contributions are received, which may be when cash is received, unconditional promises are made, or ownership of donated assets is transferred to CRM. CRM reports information regarding its activities according to the following classes of net assets: Unrestricted net assets: Net assets that are currently available for operating purposes, as they are not subject to donor-imposed stipulations. Temporarily restricted net assets: Net assets subject to donor-imposed stipulations that may or will be met by actions of CRM and/or the passage of time. CRM reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated amounts. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Donor restricted contributions whose restrictions are met in the same reporting period are reported as temporarily restricted support and as net assets released from restrictions. 10
Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) Use of estimates: The preparation of the 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: Cash and cash equivalents include cash, checking, and highly liquid investments with a maturity of three months or less when purchased. CRM maintains cash and cash equivalents in financial institutions covered by the Federal Deposit Insurance Corporation (FDIC). At times throughout the year, the cash balances may exceed federally insured limits. CRM has not experienced any losses on such accounts. Cash and cash equivalents held for restricted purposes primarily relates to donations received to fund the construction of the new 120-bed facility for CRM s Dove s Nest program. Board designated amounts included within cash in operating accounts totaled approximately $381,813 and $-0- as of June 30, 2013 and 2012, respectively. Certificates of deposit: Certificates of deposit are measured at fair value. Fair value measurement rules define fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants and require the use of valuation techniques that are consistent with the market approach, the income approach and/or the cost approach. Inputs to valuation techniques refer to the assumptions that market participants would use in pricing the asset or liability. In that regard, accounting rules establish a fair value hierarchy for valuation inputs that give the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. All investments held by CRM are in the form of certificates of deposits and are considered Level 1 measurements. Certificates of deposit at June 30, 2013 and 2012 consist of amounts on deposit at a bank, with interest rates ranging from 0.45% to 0.85%, with a maturity date of January 10, 2014. These deposits amounted to $252,040 and $250,471 at June 30, 2013 and 2012, respectively. Pledges receivable: Pledges receivable include unconditional promises made by donors wherein the donor has unconditionally promised to contribute funds to the ministry in future periods for a capital campaign associated with its Dove s Nest expansion project. Unconditional promises expected to be collected within one year are recorded as support and a receivable at net realizable value. Unconditional promises expected to be collected in future years are recorded as support and a receivable at the present value of the expected future cash flows. The discounts on pledges receivable made before June 30, 2010, are computed using risk-free interest rates applicable to the year in which the promise was received. The discounts on pledges receivable made after July 1, 2010, are computed using a rate commensurate with the risk of the pledges receivable in accordance with fair value accounting standards. For pledges received during the years ended June 30, 2013 and 2012, respectively, the discount rate used was 2.00% and 1.22%. Amortization of the discount is included in contribution revenue. Conditional promises to give, if any, are not included as support until the conditions are substantially met. 11
Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) Inventory: Inventory consists of purchased and donated food and program supplies. Purchased inventory is stated at the lower of cost or market. Cost is determined using the average cost method. Donated food inventory is stated at wholesale value, or $1.60 per pound, determined on the date of receipt. Donated program supplies inventory is stated at estimated fair value at the date of donation. Inventory cost is expensed when goods are disbursed. Management periodically evaluates the net realizable value of all inventory to ensure that any unusable inventory is expensed. Property and equipment: Property and equipment is recorded at cost if purchased or fair market value at the date of donation if donated. Costs that improve or extend the useful lives of assets are capitalized. Amounts paid for maintenance and repairs are expensed as incurred. Depreciation expense is recorded using the straight-line method over the estimated useful lives of the assets, which range from 3-10 years for computer equipment, vehicles, furniture and equipment and to 40 years for buildings. Gifts of donated assets used in the ministry of $500 or more and with useful lives greater than one year are capitalized. Property taxes payable: CRM had $-0- and $33,587 of property taxes payable as of June 30, 2013 and 2012, respectively. Taxes payable as of 2012 had been deferred per an agreement with Mecklenburg County which specified that they would become due and payable in full if the new Dove s Nest facility was not open and operating within five years of the original deferment date of September 1, 2008. However, during 2013, a certification of operation was filed with the County and the tax liability was waived. The revenue associated with the waived tax liability is included within miscellaneous income on the statement of activities. Donated equipment and services: Gifts of property and equipment are reported as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Absent explicit donor stipulations about how long those long-lived assets must be maintained, CRM reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Donated goods (including securities, property, and equipment) are recorded at fair value at the date of the gift. Contributed services are recognized for those that improve or enhance property and equipment (as contributions and increases to the basis) or for those that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation (as contributions and expenses). Gifts-in-kind: CRM receives and distributes a large amount of clothing and other goods directly to those in need which are recorded in the accompanying financial statements. CRM also receives donations of food and supplies which are used in its operations. These goods are recorded as support with a similar amount as expense at an estimated value of $419,619 and $448,865 for the years ended June 30, 2013 and 2012, respectively. CRM also received donations of services and facilities in the amounts of $314,005 and $454,280 for the years ended June 30, 2013 and 2012, respectively, which are included in property and equipment on the Statements of Financial Position. 12
Notes to Financial Statements Note 1. Nature of Organization and Significant Accounting Policies (Continued) Many individuals volunteer their time and perform a variety of tasks that assist CRM with program services, management and general, and fund-raising efforts. In accordance with the Revenue Recognition-Contributions Received topic of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC), only services rendered by individuals with specialized skills or services which enhance nonfinancial assets are recorded as support in the accompanying financial statements. During the years ended June 30, 2013 and 2012, CRM received non-capital contributions and expense of services from attorneys, doctors, architects, and teachers which were valued at $39,005 and $31,409, respectively, and are recorded as in-kind contributions with a corresponding amount as expense. Significant amounts of other services were also donated. However, no amounts have been reflected in the financial statements for any other services rendered, as they do not meet the reporting criteria. Income taxes: CRM is exempt from income tax under the provisions of Section 501(c)(3) of the Code. Management evaluated CRM s tax positions and concluded that CRM had taken no uncertain tax positions that require adjustment to the financial statements to comply with the provisions of this guidance. With few exceptions, CRM is no longer subject to income tax examinations by the U.S. federal, state or local tax authorities for years before 2010. Subsequent events: CRM has evaluated its subsequent events (events occurring after June 30, 2013) through October 25, 2013, which represents the date the financial statements were available to be issued. Note 2. Pledges Receivable CRM has received commitments or pledges which are expected to be realized in the following periods: 2013 2012 Less than one year $ 415,118 $ 630,242 One to five years 325,725 666,585 740,843 1,296,827 Less allowance for uncollectible pledges receivable 70,470 131,167 Less discount for pledges receivable 27,649 21,319 $ 642,724 $ 1,144,341 13
Notes to Financial Statements Note 3. Property and Equipment Property and equipment at June 30 consists of: 2013 2012 Land $ 325,100 $ 361,100 Land improvements 975,349 831,145 Buildings 7,444,498 7,405,215 Furniture and equipment 1,394,423 1,183,616 Vehicles 127,934 121,496 Computer equipment 166,628 151,696 10,433,932 10,054,268 Less accumulated depreciation 1,207,230 927,313 9,226,702 9,126,955 Construction in progress - 48,559 $ 9,226,702 $ 9,175,514 Depreciation expense was $392,903 and $89,860 for the years ended June 30, 2013 and 2012, respectively. Note 4. Capital Campaign CRM is continuing its capital campaign to raise project funds and three years of increased operating funds for its Dove s Nest women s program in its new 120-bed facility on West Boulevard in Charlotte. The existing program of 12 women was relocated to the new building in July of 2012 and as of September 30, 2013, there were 55 women and children residing in the new Dove s Nest facility. Of the $11.2 million goal for this campaign, a total of approximately $10.5 million had been raised in restricted donations and pledges through June 30, 2013. Additionally, CRM sold the old Dove s Nest facility on Euclid Avenue in Charlotte, North Carolina which generated cash proceeds of approximately $386,000. Subsequent to June 30, 2013 but prior to issuance of the financial statements, an additional $239,000 in donations towards the campaign were received. Approximately $478,000 remains in order for CRM to reach the full campaign goal. 14
Notes to Financial Statements Note 5. Line of Credit and Notes Payable CRM had a $250,000 line of credit with a commercial bank available for operating purposes through December 2012. Payments of principal and interest on any outstanding balance were due monthly at an interest rate of prime plus 0.7% but no lower than 5%. The line of credit was formally closed in December 2012. In January 2013, CRM entered into a $300,000 line of credit with a commercial bank that is available for operating purposes through December 2013. Payments of principal and interest on any outstanding balance are due monthly at an interest rate of prime plus 0.5% (3.75% at June 30, 2013). There were no outstanding balances on lines of credit at June 30, 2013 or 2012. On January 30, 2012, CRM entered into a long-term note payable with a commercial bank permitting CRM to draw funds up to a maximum of $3,000,000 from the date of the note through January 1, 2015. The long-term note payable is due in 35 monthly payments of accrued interest, beginning on February 1, 2012, and continuing on the first of each month through the maturity date of the note. The long-term note bears interest at a fixed rate of 3.75%. CRM is required to make a payment of principal to the extent necessary to reduce the outstanding balance of the note to $1,500,000, to be paid on January 1, 2014, with the remaining principal balance due upon maturity. As of June 30, 2012, the outstanding balance was $1,081,650. The note was paid off in full during the year ended June 30, 2013, and as of June 30, 2013, there was no outstanding balance on this note. The line of credit and note payable are collateralized by substantially all of the assets of CRM related to the Dove s Nest. Note 6. Grant Payable During the year ended June 30, 2013, CRM was the recipient of a $1,000,000 grant from the Federal Home Loan Affordable Housing Program to offset costs associated with the Dove s Nest construction project. Among other non-financial covenants, the grant requires CRM to utilize the Dove s Nest facility for a minimum of 15 years. If the facility is sold before a period of 15 years, CRM is required to repay the grant in full. As of June 30, 2013, CRM has a liability recorded in the amount of $1,000,000 associated with the grant. Upon satisfaction of all required grant conditions, CRM will recognize the cash proceeds associated with the grant as revenue. 15
Notes to Financial Statements Note 7. Temporarily Restricted Net Assets At June 30, 2013 and 2012, temporarily restricted net assets are available for the following purposes: 2013 2012 Program supplies $ - $ 765 General projects 79,356 13,060 Bibles 3,541 7,331 Other restricted funds 26,845 4,131 Time restrictions, capital campaign 634,858 1,125,666 Time restrictions, matching gifts 7,866 18,675 $ 752,466 $ 1,169,628 Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by the donors as follows for the years ended June 30, 2013 and 2012: 2013 2012 Purpose restrictions accomplished: Amounts related to capital campaign $ 338,736 $ 4,769,145 Program costs 118,778 88,685 Time restrictions: Amounts related to capital campaign 810,799 457,306 Amounts related to matching gifts 56,703 65,839 $ 1,325,016 $ 5,380,975 Note 8. Retirement Plan CRM maintains a qualified 403(b) retirement plan (the Plan) in which all eligible employees may participate. Eligibility and annual contributions to the Plan are determined by applicable federal law and are described in the summary plan document. The Plan provides for employer contributions to be determined annually at the discretion of CRM. Employees become 100% vested immediately upon their effective date of participation. CRM s matching contributions to the Plan for the years ended June 30, 2013 and 2012, amounted to approximately $61,600 and $47,300, respectively. 16
Notes to Financial Statements Note 9. Operating Leases CRM leases office equipment and an automobile under non-cancelable lease agreements with monthly payments ranging from $244 to $475. Rent expense for the years ended June 30, 2013 and 2012 was $14,203 and $13,290, respectively. The future minimum lease payments are as follows: Years Ending Amount 2014 $ 12,113 2015 $ 8,842 20,955 Note 10. Commitments and Contingencies In accordance with the Asset Retirement and Environmental Obligations topic of the FASB ASC, CRM has identified a building it occupies in downtown Charlotte, North Carolina that is known to contain asbestos, as well as an undetermined number of underground petroleum storage tanks. CRM has not recorded a liability for these conditional asset retirement obligations due to CRM being unable to reasonably estimate the fair value of the liability. Fair value of such a liability could not be reasonably estimated as CRM has not specified plans that would require abatement and/or remediation and, therefore, settlement dates for these conditional asset retirement obligations are not known nor can they be reasonably estimated. As noted in Note 4, CRM is still in the process of a capital campaign to cover three years of operating costs for the new Dove s Nest facility. CRM has not yet determined how the operating costs of the new facility will be funded. 17