AUDITED FINANCIAL STATEMENTS JUNE 30, 2017
TABLE OF CONTENTS Independent Auditors Report... 1 FINANCIAL STATEMENTS: Statements of Financial Position... 3 Statements of Activities and Changes in Net Assets... 4 Statements of Functional Expenses... 5 Statements of Cash Flows... 6 Notes to Financial Statements... 7 SUPPLEMENTARY INFORMATION: Schedule of Expenditures of Federal and State Awards... 15 Notes to Schedule of Expenditures of Federal and State Awards... 17 Supplemental Information Required by the County of San Diego... 19 Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards... 20 Independent Auditors Report on Compliance for Each Major Program and on Internal Control over Compliance Required by Uniform Guidance... 22 Schedule of Findings and Questioned Costs... 24
Accountants and business advisers To the Board of Directors Home Start, Inc. San Diego, California INDEPENDENT AUDITORS REPORT Report on the Financial Statements We have audited the accompanying financial statements of Home Start, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities and changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Home Start, Inc. as of June 30, 2017, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matters Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal and state awards, as required by Title 2 U.S. Code of Federal PKF, LLP 2020 Camino del Rio North, Suite 500, San Diego, CA 92108 Telephone: (619) 238.1040 Fax: (619) 237.5177 Website: www.pkfcalifornia.com PKF, LLP is a member of the PKF International Limited and Allinial Global, networks of legally independent member firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated November 28, 2017, on our consideration of Home Start, Inc. s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Home Start, Inc. s internal control over financial reporting and compliance. San Diego, California November 28, 2017 PKF, LLP - 2 -
STATEMENTS OF FINANCIAL POSITION JUNE 30, 2017 (with comparative totals of 2016) ASSETS 2016 2017 (Memorandum Only) Cash and cash equivalents $ 781,573 $ 981,889 Accounts and pledges receivable, net 751,585 1,051,390 Prepaid expenses and other 173,151 68,975 Investments 1,873,755 1,623,225 Property and equipment, net 2,614,353 2,682,389 TOTAL ASSETS $ 6,194,417 $ 6,407,868 LIABILITIES: Accounts payable $ 152,123 $ 113,640 Accrued expenses and other 316,443 299,619 Notes payable 862,617 857,667 Total liabilities 1,331,183 1,270,926 Commitments and contingencies (Notes 9 and 12) LIABILITIES AND NET ASSETS NET ASSETS: Unrestricted 4,743,305 5,081,268 Temporarily restricted 119,929 55,674 Total net assets 4,863,234 5,136,942 TOTAL LIABILITIES AND NET ASSETS $ 6,194,417 $ 6,407,868 The accompanying notes are an integral part of these financial statements. - 3 -
STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEAR ENDED JUNE 30, 2017 (with comparative totals for 2016) 2016 2017 (Memorandum Only) Temporarily Unrestricted Restricted Total Total REVENUES: Fundraising special events $ 216,482 $ - $ 216,482 $ 178,703 Costs of fundraising events 50,337-50,337 54,514 Net support from special events 166,145-166,145 124,189 Grant and subcontracts 5,308,173-5,308,173 5,763,329 Program service fees 49,170-49,170 51,842 Contributed services 247,973-247,973 233,596 Contributed materials 529,998-529,998 650,718 Contributions - Foundations 7,582 36,650 44,232 127,928 Contributions - Individuals and other 48,845 179,834 228,679 34,424 Thrift boutique sales 57,368-57,368 46,645 Interest and other income 168,111-168,111 64,937 Net assets released from use restrictions 152,229 (152,229) - - Total revenues 6,735,594 64,255 6,799,849 7,097,608 EXPENSES: Program Services: Therapeutic Services 452,485-452,485 672,160 Supportive Housing Services 704,471-704,471 686,328 Child Abuse Prevention Services 1,978,611-1,978,611 2,158,521 Family Strengthening Services 2,227,582-2,227,582 2,385,185 Social Enterprise 237,369-237,369 144,178 5,600,518-5,600,518 6,046,372 Supporting Services: Management and general 1,140,903-1,140,903 831,008 Fundraising and development 332,136-332,136 220,222 1,473,039-1,473,039 1,051,230 Total expenses 7,073,557-7,073,557 7,097,602 Change in net assets (337,963) 64,255 (273,708) 6 Beginning net assets 5,081,268 55,674 5,136,942 5,136,936 Ending net assets $ 4,743,305 $ 119,929 $ 4,863,234 $ 5,136,942 The accompanying notes are an integral part of these financial statements. - 4 -
STATEMENTS OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED JUNE 30, 2017 (with comparative totals for 2016) 2016 2017 (Memorandum Only) Supportive Child Abuse Family Social Program Management Fundraising EXPENSES Therapeutic Housing Prevention Strengthening Enterprise Total & General & Development Total Total Payroll $ 195,523 $ 294,297 $ 1,261,983 $ 706,570 $ 55,548 $ 2,513,921 $ 516,993 $ 109,071 $ 3,139,985 $ 3,324,179 Payroll taxes 14,656 22,345 94,094 53,196 4,223 188,514 33,370 8,307 230,191 246,971 Benefits and workers comp. 37,705 64,545 248,810 141,209 10,394 502,663 67,239 15,558 585,460 583,034 Subtotal personnel 247,884 381,187 1,604,887 900,975 70,165 3,205,098 617,602 132,936 3,955,636 4,154,184 Clinical supervision 42,718 2,745 8,915 - - 54,378 - - 54,378 55,471 Stipends - - - - - - 1,000-1,000 1,000 Subcontractors - - 11,180 30,263 110 41,553 61,278 41,240 144,071 113,122 Occupancy 41,791 25,827 50,419 105,869-223,906 126,576 7,681 358,163 314,291 Utilities 3,166 4,491 8,318 7,606 2,182 25,763 8,679 591 35,033 22,958 Communications 2,414 5,775 22,354 14,462 612 45,617 10,408 857 56,882 56,994 Repairs and maintenance 2,188 26,906 14,600 14,415 6,017 64,126 26,893 373 91,392 101,233 Client assistance - 88,177 62,848 779,338 800 931,163 82 94 931,339 845,460 Consumables 2,879 6,319 20,675 13,046 2,185 45,104 14,482 8,395 67,981 96,462 Equipment rental 104-3,549 1,148-4,801 7,046 23 11,870 12,433 Furniture/equipment 86 15,432 5,142 5,630-26,290 1,701-27,991 23,550 Depreciation - 54,139 - - 6,577 60,716 12,355-73,071 79,746 Mileage 6,804 4,998 55,060 12,005-78,867 2,928 799 82,594 99,061 Travel - 108 961 223-1,292 2,672-3,964 6,039 Meetings and events - 190 87 112-389 9,259 4,844 14,492 14,665 Seminars and education 1,984 4,442 8,593 125-15,144 2,294 330 17,768 30,000 Legal and accounting - - - - - - 30,000-30,000 28,926 Dues and subscriptions 149 389-5,999 2,523 9,060 12,087 3,809 24,956 20,453 Donated materials/services 98,849 52,585 98,781 333,611 120,402 704,228 13,523 60,220 777,971 884,312 Administrative fees - - - - 1,125 1,125 34,219 5,633 40,977 38,895 Insurance 1,089 8,264 827 989 1,708 12,877 32,667 198 45,742 38,610 Recruitment 380 780 1,265 1,533 647 4,605 4,717 1,358 10,680 10,663 Special events - - 150 48 110 308 8,250-8,558 3,151 Public relations/advertising - - - 185 13,736 13,921 73 62,755 76,749 15,104 Bad debt expense - - - - - - 100,000-100,000 - Interest expense - 21,717 - - 8,470 30,187 112-30,299 30,819 Total expenses $ 452,485 $ 704,471 $ 1,978,611 $ 2,227,582 $ 237,369 $ 5,600,518 $ 1,140,903 $ 332,136 $ 7,073,557 $ 7,097,602 The accompanying notes are an integral part of these financial statements. - 5 -
STATEMENTS OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, 2017 (with comparative totals for 2016) 2016 2017 (Memorandum Only) CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ (273,708) $ 6 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Bad debt expense 100,000 - Depreciation 73,071 79,746 Net income on investments (130,530) (16,131) Accrued interest on note payable 13,770 13,770 Decrease (increase) in: Accounts and pledges receivable, net 199,805 388,812 Prepaid expenses and other (104,176) 6,045 Increase (decrease) in: Accounts payable 38,483 (23,219) Accrued expenses and other 16,824 (29,608) Net cash (used in) provided by operating activities (66,461) 419,421 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of investments (120,000) (120,000) Purchases of property and equipment (5,035) (21,508) Net cash used in investing activities (125,035) (141,508) CASH FLOWS FROM FINANCING ACTIVITIES: Payments on note payable (8,820) (8,435) Net cash used in financing activities (8,820) (8,435) Net (decrease) increase in cash and cash equivalents (200,316) 269,478 Cash and cash equivalents at: Beginning of year 981,889 712,411 End of year $ 781,573 $ 981,889 Supplemental disclosure of cash flow information: Cash paid for interest $ 16,529 $ 17,049 The accompanying notes are an integral part of these financial statements. - 6 -
Notes to Financial Statements June 30, 2017 Note 1 - Organization Nature of Organization Home Start, Inc. ( Home Start or the Organization ) is a not-for-profit corporation organized under the laws of the State of California. The Organization has served San Diego County since 1972. Home Start is a community-based organization whose mission is to assure the safety and resiliency of children by strengthening families and their communities. Home Start s programs focus on home-based services (mental health and family support, self-sufficiency, and adolescent support), center-based services, and community development. These services are funded through a combination of Federal, California, and San Diego County contracts, program service fees, and public and private grants and donations. Note 2 - Summary of Significant Accounting Policies Basis of Accounting The financial statements are presented on the accrual basis, in accordance with accounting principles generally accepted in the United States of America ( GAAP ). 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. Significant estimates consist of accounts receivable, allowance for doubtful accounts, unbilled contract revenues and the value of donated services and materials. It is at least reasonably possible that a change used in the estimates to value accounts receivable and unbilled contract revenues will occur in the near term. Donated services and materials are recorded at their estimated fair value as of the date of the donation. Cash and Cash Equivalents Cash and cash equivalents consist of short-term, highly liquid investments with original maturity dates of three months or less. Accounts and Pledges Receivables Accounts receivable consists of amounts due from funding sources, lessees, agreements and special event attendees and/or sponsors and are presented net of an allowance for uncollectible receivables for special event attendees and/or sponsors based on historical experience. Bad debt expense is included in management and general expenses. Management has established an allowance for uncollectible accounts of $100,000 at June 30, 2017. - 7 -
Notes to Financial Statements June 30, 2017 Note 2 - Summary of Significant Accounting Policies (continued) Accounts and Pledges Receivable (continued) Unconditional pledges receivable are recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses depending on the form of the benefits received. Conditional pledges receivable are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Management determines the allowance for doubtful pledges receivable by regularly evaluating individual pledges receivable. There was no allowance for doubtful pledges receivable at June 30, 2017. Investments The Organization accounts for its investments in accordance with Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) 320, Investments Debt and Equity Securities, which requires investments to be classified into the following three categories: held-to-maturity, trading, or available-for-sale. Held-to-maturity securities are presented at amortized cost. Trading and available-for-sale securities are reported at fair value. Unrealized and realized gains and losses on trading and available-for-sale securities are reported in the statement of activities. Investments are classified as available-for-sale as of June 30, 2017. Property and Equipment Property and equipment purchased with Home Start funds are capitalized at cost. Donated equipment is recorded at estimated fair value. Home Start s policy is to capitalize acquisitions valued greater than $5,000, unless the acquisitions are program expenditures covered by the program budget. In such cases, Home Start s management may choose to expense the acquisitions in the year of purchase. Amortization of leasehold improvements is included within depreciation expense. Depreciation and amortization is provided over the shorter of the estimated useful lives or over the term of the respective assets on a straight-line basis as follows: Buildings Furniture, fixtures and equipment Leasehold improvements Vehicles 30-39 years 5-7 years 7-11 years 5 years Deferred Rent Rent expense from leases is recorded on a straight-line basis over the life of the lease. The difference between rent expense recorded and rental payments, as stipulated in the lease, is reflected as deferred rent with accrued expenses in the statement of financial position. Revenue Recognition The Organization recognizes revenues and public support on the accrual basis of accounting. Contributions are recorded when a donor makes a pledge to the Organization, that is, in substance, unconditional. Unconditional pledges are recognized at the estimated net present value of future cash flows. Program fees are recognized as revenue in the period in which the service is provided. - 8 -
Notes to Financial Statements June 30, 2017 Note 2 - Summary of Significant Accounting Policies (continued) Revenue Recognition (continued) Federal, state and local grants are conditioned upon the Organization incurring certain qualifying costs. They are considered to be exchange transactions, and therefore, are recognized as unrestricted revenue as those costs are incurred. Contributions and Net Assets Net assets, revenue, and expenses are classified as unrestricted, temporarily restricted, and permanently restricted based upon the following criteria: Unrestricted Net Assets represent expendable funds available for operations, which are not otherwise limited by donor restrictions. Temporarily Restricted Net Assets consist of contributed funds, subject to specific donorimposed restrictions, contingent upon specific performance of a future event, or a specific passage of time before expenditure of funds. Permanently Restricted Net Assets are subject to irrevocable donor restrictions, requiring that the assets be maintained in perpetuity, usually for generating investment income to fund current operations. Temporarily restricted contributions in which the restrictions are met in the same fiscal year as they are received are reported as unrestricted contributions. Donated Services and Materials If the contributed services (a) create or enhance non-financial assets, or (b) require specialized skills, are performed by individuals possessing those skills, and would typically need to be purchased if not provided by donation, then their fair value would be estimated and reported within the financial statements. Contributed materials and other assets are recorded as contributions at their estimated fair values at the date of receipt or during the period of use where applicable. Unearned Revenue and Contract Advances Home Start occasionally receives payments prior to performing services under contract agreements. These amounts are recorded as unearned revenue or contract advance liabilities until earned. Revenue Adjustments Revenue under third-party reimbursement agreements is subject to retroactive audit adjustment. Provisions for estimated third-party settlements are recorded in the period the related services are rendered. Differences between estimated accruals and final settlements are recorded in the year of settlement. - 9 -
Notes to Financial Statements June 30, 2017 Note 2 - Summary of Significant Accounting Policies (continued) Functional Allocation of Expenses The costs of providing various programs and activities have been summarized on a functional basis in the statements of activities and changes in net assets and the statements of functional expenses. Accordingly, certain costs have been allocated among programs and supporting services benefited. Advertising Costs It is the Organization s policy to expense advertising costs as they are incurred. For the year ended June 30, 2017, the Organization incurred advertising expenses totaling $12,413. Income Taxes Home Start is a California non-profit organization and is exempt from income taxes in accordance with Section 501(c) (3) of the Internal Revenue Code, and Section 2370 1(d) of the California Revenue and Taxation Code and is generally not subject to income taxes. The Organization recognizes and measures its uncertain tax positions in accordance with FASB ASC 740, Income Taxes ( ASC 740 ). This addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under ASC 740, the Organization may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position. The tax benefits recognized in the financial statements from such a position should be measured based on the largest benefit that has a greater than fifty percent likelihood of being realized upon ultimate settlement. ASC 740 also provides guidance on the de-recognition, classification, interest and penalties on income taxes, accounting in interim periods and requires increased disclosures. As of June 30, 2017, the Organization does not have a liability for uncertain tax positions. As of June 30, 2017, the Organization has no accrued interest or penalties related to uncertain tax positions. The Organization is subject to routine audits by taxing jurisdictions. However, currently no audits for any tax periods are in progress. Comparative Financial Information The financial statements include certain prior-year summarized comparative information in total, but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with the audited financial statements for year end June 30, 2016 from which the summarized information was derived. - 10 -
Notes to Financial Statements June 30, 2017 Note 3 - Concentrations Home Start maintains bank accounts at various financial institutions. During the year ended June 30, 2017, accounts were insured by the Federal Deposit Insurance Corporation ( FDIC ) up to $250,000. As of June 30, 2017, the Organization had approximately $293,000 in cash and cash equivalents in excess of FDIC limits. Home Start has not experienced any losses in such accounts and management does not believe it is exposed to any significant credit risk on its cash and cash equivalents. A significant portion of Home Start s revenue is provided by the County of San Diego ( County ), including Health and Human Services and First 5 Commission. The County contracts with Home Start on an annual basis and has done so for 40 years. These programs are subject to annual evaluation of services rendered, and periodic monitoring reviews and directives. Three contracts with the County represented 56% of total revenue for the year ended June 30, 2017. Receivables from the County represented 46% of accounts receivable at June 30, 2017. Note 4 - Accounts and Pledges Receivables At June 30, 2017, accounts and pledges receivables consisted of the following: Contracts receivable $ 728,977 Unbilled contracts revenue 109,092 Pledges and other 13,516 851,585 Less: allowance for doubtful accounts (100,000) Total accounts and pledges receivable, net $ 751,585 Receivable in less than one year $ 642,493 Receivable in one to five years 109,092 Total accounts and pledges receivable, net $ 751,585 Unbilled contracts revenue is comprised of amounts subject to significant estimation due to the nature of the contracts and timing of payments received. As of June 30, 2017, management has estimated this amount based on services performed and claims submitted for payment for the fiscal year ended June 30, 2016. Home Start adjusts receivables and revenues in the period in which the actual amounts become known. Pledges receivable expected to be received in one year or more are measured using the present value of future cash flows based on a discount rate determined by management. As of the year ended June 30, 2017, all pledges receivable are expected to be received in one year or less. - 11 -
Notes to Financial Statements June 30, 2017 Note 5 - Investments Investments are valued at fair value based on the Organization s interest in the Jewish Community Foundation s Long-Term and Mid-Term Pools. The Long-Term and Mid-Term Pools are comprised of securities which are listed on the active market and are valued based on the Organization s share of the fund s net asset value. The redemption policy for both the Long- Term and Mid-Term Pool is that the investments are 100% liquid and are not subject to any redemption limits or rules, and there are no unfunded commitments. As a result of investments being valued at net asset value, investments are exempt from fair value disclosures in accordance with FASB Accounting Standards Update ( ASU ) 2015-07. At June 30, 2017, the investments held by the Organization are summarized as follows: Long-term pool $ 985,304 Mid-term pool 888,451 Total investments $ 1,873,755 Investment income consists of the following for the year ended June 30, 2017: Interest and dividend income (net of investment fees) $ 32,761 Net realized loss (8) Net unrealized income 97,777 Total $ 130,530 Note 6 - Property and Equipment, Net The following is a summary of property and equipment at June 30, 2017: Buildings $ 1,842,035 Land 986,823 Computer equipment 130,943 Furniture and fixtures 84,686 Vehicle 65,745 Leasehold improvements 9,276 3,119,508 Less: accumulated depreciation (505,155) Property and equipment, net $ 2,614,353 Depreciation expense totaled $73,071 for the year ended June 30, 2017. - 12 -
Note 7 - Accrued Expenses and Other HOME START, INC. Notes to Financial Statements June 30, 2017 Accrued expenses and other consist of the following at June 30, 2017: Accrued salaries $ 125,516 Accrued leave benefits 117,962 Deferred rent 32,521 Other 40,444 Total accrued expenses and other $ 316,443 Note 8 - Accrued Leave Benefits Accumulated unpaid employee vacation benefits are recognized as a liability of Home Start by multiplying the accumulated hours of accrued vacation benefits per employee by the hourly rate per employee. Home Start s policy is to allow employees to carry leave from one fiscal year to the next. As of June 30, 2017, Home Start's accrued vacation pay liability totaled $117,962. Note 9 - Notes Payable In conjunction with the acquisition of a maternity shelter, the Department of Housing and Community Development issued the Organization a $459,000, 10 year promissory note which matures on December 20, 2022. The note is secured by a Deed of Trust on the property. Interest on the note shall accrue at 3% per annum and is included in the balance of the note. Repayment of principal and interest shall be deferred and will be forgiven at the maturity date of the note as long as the maternity shelter is operated as an emergency shelter or transition housing in compliance with the terms of the regulatory agreement. The note payable and accrued interest balance at June 30, 2017 was $520,965. In conjunction with a property acquisition, the Organization entered into a $370,000 note payable agreement with a financial institution. The agreement requires monthly principal and interest payments of $2,103 including interest at 4.64%. On February 15, 2019, the remaining principal of $327,443 and unpaid interest are due in full. The note is secured by the property. The note payable balance at June 30, 2017 was $341,652. Future maturities of the note payable is as follows: Years ending June 30, 2018 $ 9,328 2019 332,324 Total $ 341,652-13 -
Notes to Financial Statements June 30, 2017 Note 10 - Retirement Plan Home Start has a 401(k) plan that allows eligible employees who are over the age of 21 and have completed one year of service of at least 1,000 hours, to contribute up to 20 percent of their salary into the Plan, subject to annual limitations. Home Start made matching contributions to the plan totaling $76,371 for the year ended June 30, 2017. Note 11 - Contributed Services and Materials The estimated fair value of qualified volunteer services is recorded in the financial statements. For the year ended June 30, 2017, the estimated value of the donated services is $247,973. Home Start also received donated materials, such as clothing and household items. For the year ended June 30, 2017, Home Start has estimated the value of such donations at $529,998. Note 12 - Commitments and Contingencies Home Start leases its office facilities under non-cancellable operating leases, as well as equipment under long-term leases expiring in July 2021 or prior. For the year ended June 30, 2017, total office rent expense and parking was $358,163, storage rent was $4,360, and equipment rent was $11,870. Future minimum lease payments for leases that have remaining terms in excess of one year at June 30, 2017 are as follows: Years ending June 30, 2018 $ 338,419 2019 317,358 2020 265,871 2021 206,265 2022 26,712 Total $ 1,154,625 The Organization has received federal, state and other funds for specific purposes that are subject to review and audit by the funding agencies. Such audits could generate expenditure disallowances or refunds payable under terms of the agency contracts. Loss of governmental support would have a significant impact on the Organization s ability to provide its program services. Note 13 - Net Assets Temporarily restricted net assets for fiscal year ended June 30, 2017 consisted of contributions whose donors had stipulated that the funds be used for particular operating and program purposes. The temporarily restricted assets consisted of monies primarily for the following programs: Therapeutic Services, Supportive Housing, Family Strengthening Services, and Social Enterprise. Note 14 Subsequent Events The Organization has evaluated subsequent events, as defined by FASB ASC 855, Subsequent Events, through the date of the financial statements were available to be issued on November 28, 2017. - 14 -
SUPPLEMENTARY INFORMATION - 14 -
Schedule of Expenditures of Federal and State Awards For the Year Ended June 30, 2017 Program Pass-through /Contract No. - 15 - Federal CFDA Number Federal Amount Passed through to Sub-Rececipients Expenditures Federal State Total U.S. Department of Health & Human Services Pass-through from County of San Diego CSBG - Family Self-Sufficiency (FSS) Central Region 544431 93.569 $ 9,971 $ 631,693 $ 909,746 $ 1,541,439 East Region 544430 93.569 11,650 244,874 7,514 252,388 Subototal for CFDA 93.569 21,621 876,567 917,260 1,793,827 Pass-through from County of San Diego Child Welfare Services Community Service Family - East 551376 93.556-106,805 857,875 964,680 Pass-through from North County Lifeline Community Service Family (CFS) 551377 93.556-26,303 72,628 98,931 Pass-through from Social Advocates for Youth San Diego, Inc. (SAY) Community Service Family - SAY 551375 93.556 - - 208,807 208,807 Subtotal for CFDA 93.556-133,108 1,139,310 1,272,418 Transitional Living Program 90CX6919-04 93.550-178,014-178,014 Pass-through from County of San Diego Child Welfare Services Community Service Family - East 551376 93.590-17,496-17,496 Pass-through from North County Lifeline Community Service Family 551377 93.590-5,976 16,501 22,477 Subtotal for CFDA 93.590-23,472 16,501 39,973 Pass-through from County of San Diego Child Welfare Services Community Service Family - East 551376 93.645-39,768-39,768 Pass-through from North County Lifeline Community Service Family 551377 93.645-14,529 40,117 54,646 Subtotal for CFDA 93.645-54,297 40,117 94,414 Pass-through from County of San Diego Child Welfare Services Community Service Family - East 551376 93.658-132,150-132,150 Pass-through from North County Lifeline Community Service Family 551377 93.658-35,198 97,188 132,386 Subtotal for CFDA 93.658-167,348 97,188 264,536 Centers for Medicare and Medicaid Services Targeted Case Management 03-75085 93.778-40,000-40,000 Medi-Cal Outreach and Enrollment Services 550028 93.778-11,276-11,276 Subtotal for CFDA 93.778-51,276-51,276 Total U.S. Department of Health & Human Services 21,621 1,484,082 2,210,376 3,694,458 See accompanying independent auditors reports and notes to schedule of expenditures of federal and state awards.
Schedule of Expenditures of Federal and State Awards (Continued) For the Year Ended June 30, 2017 Program Pass-through /Contract No. Federal CFDA Number Federal Amount Passed through to Sub- Rececipients Expenditures Federal State Total U.S. Department of Justice Pass-through from State of California CHAT-SD AT 15-01-1373 16.575-61,288-61,288 CHAT-SD AT 16-02-1373 16.575-165,521-165,521 Total U.S. Department of Justice - 226,809-226,809 U.S. Department of Treasury Internal Revenue Service Volunteer Income Tax Assistance (VITA) 17VITA0153 21.009-27,553-27,553 Total U.S. Department of Treasury - 27,553-27,553 U.S. Department of Housing and Urban Development Pass-through from the County of San Diego Supportive Housing Program CA0999L9D011502 14.235-236,957-236,957 Supportive Housing Program CA0999L9D011603 14.235-140,381-140,381 Subtotal for CFDA 14.235-377,338-377,338 Total U.S. Department of Housing and Urban Development - 377,338-377,338 Pass-through from the County of San Diego Central Region 544431 10.561 5,000 29,239 42,109 71,348 East Region 544430 10.561 16,993 15,185 466 15,651 Subtotal 21,993 44,424 42,575 86,999 U.S. Department of Agriculture - Food and Nutrition Services California CalFresh Outreach Plan 16-SUB-00965 10.561-14,806-14,806 Total U.S. Department of Agriculture - Food and Nutrition Services 21,993 59,230 42,575 101,805 Total Expenditures of Federal/State Awards $ 43,614 $ 2,175,012 $ 2,252,951 $ 4,427,963 See accompanying independent auditors reports and notes to schedule of expenditures of federal and state awards. - 16 -
Notes to Schedule of Federal and State Awards For the Year Ended June 30, 2017 1. Basis of Presentation The accompanying schedule of federal and state awards includes the expenditures of federal and state awards (the Schedule ) of Home Start, Inc. for the year ended June 30, 2017. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards ( Uniform Guidance ). Therefore, some amounts presented in this Schedule may differ from amounts presented in, or used in the preparation of the basic financial statements. Due to the fact the Schedule presents only a selected portion of the operations of Home Start, Inc., it is not intended to and does not present the financial position, changes in net assets, or cash flows of Home Start, Inc. 2. Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or limited to reimbursement. 3. Multiple Funding Sources The accompanying schedule of expenditures of federal and state awards may include some awards that were funded by more than one source or by multiple federal programs. When the division or percentage of funds received from each source is not known, the awards have been designated as belonging to the highest level of origin. Therefore, the total expenditures of federal awards may include some amount of state funds and/or some amount of private or municipal funds. 4. Sub-recipients Home Start, Inc. passed federal awards to sub-recipients as follows: CFDA CFDA CFDA CFDA Non- 93.569 93.569 10.561 10.561 ID Recipient Total Federal FSS Central FSS East FSS Central FSS East 1015 Alliance for African Assistance $ 21,621 $ - $ 9,971 $ 11,650 $ - $ - 3263/3502 L H Avocado Inc 16,993 - - - - 16,993 3413 Project New Village 5,000 - - - 5,000 - $ 43,614 $ - $ 9,971 $ 11,650 $ 5,000 $ 16,993 5. Indirect Cost Rates Home Start, Inc. has elected and received approval to use an indirect cost rate other than the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. - 17 -
Notes to Schedule of Federal and State Awards For the Year Ended June 30, 2017 6. Reconciliation of the Schedule to Amounts Reported By the County of San Diego Amounts reported on the Schedule are reported on the accrual basis of accounting while certain amounts reported to Home Start, Inc. from the County of San Diego are reported on the cash basis of accounting. The following is a reconciliation of amounts reported: U.S. Department of Health & Human Services Pass-through from County of San Diego CSBG - Family Self-Sufficiency (FSS) As reported on the SEFA: Central Region 544431 93.569 $ 1,541,439 Central Region 544431 10.561 71,348 East Region 544430 93.569 252,388 East Region 544430 10.561 15,651 1,880,826 Child Welfare Services Community Serivce Family - East 551376 93.556 964,680 Community Serivce Family - East 551376 93.590 17,496 Community Serivce Family - East 551376 93.645 39,768 Community Serivce Family - East 551376 93.658 132,150 1,154,094 Accrual to cash adjustment 150,736 Adjusted amount as reported by the County of San Diego $ 3,185,656-18 -
Supplemental Information Required by the County of San Diego For the Year Ended June 30, 2017 Total federal funding received from the County of San Diego for the year ended June 30, 2017 was as follows: CFDA Program Pass-through/ Contract No. Number Amount U.S. Department of Health & Human Services Pass-through from County of San Diego CSBG - Family Self-Sufficiency (FSS): Central Region 544431 93.569 $ 631,693 Central Region 544431 10.561 29,239 East Region 544430 93.569 244,874 East Region 544430 10.561 15,185 920,991 Child Welfare Services: Community Service Family - East 551376 93.556 106,805 Community Service Family - East 551376 93.590 17,496 Community Service Family - East 551376 93.645 39,768 Community Service Family - East 551376 93.658 132,150 296,219 Total $ 1,217,210-19 -
Accountants and business advisers INDEPENDENT AUDITOR S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Home Start, Inc. San Diego, California We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Home Start, Inc. (the Organization ), which comprise the statement of financial position as of June 30, 2017, and the related statements of activities, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated November 28, 2017. Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Home Start, Inc. s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether Home Start, Inc. s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. PKF, LLP 2020 Camino del Rio North, Suite 500, San Diego, CA 92108 Telephone: (619) 238.1040 Fax: (619) 237.5177 Website: www.pkfcalifornia.com PKF, LLP is a member of the PKF International Limited and Allinial Global, networks of legally independent member firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. San Diego, California November 28, 2017 PKF, LLP - 21 -
Accountants and business advisers INDEPENDENT AUDITOR S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE To the Board of Directors Home Start, Inc. San Diego, California Report on Compliance for Each Major Federal Program We have audited Home Start, Inc. s (the Organization ) compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of the Organization s major federal programs for the year ended June 30, 2017. The Organization s major federal programs are identified in the summary of auditor s results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor s Responsibility Our responsibility is to express an opinion on compliance for each of the Organization s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about the Organization s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of the Organization s compliance. Opinion on Each Major Federal Program In our opinion, the Organization complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2017. PKF, LLP 2020 Camino del Rio North, Suite 500, San Diego, CA 92108 Telephone: (619) 238.1040 Fax: (619) 237.5177 Website: www.pkfcalifornia.com PKF, LLP is a member of the PKF International Limited and Allinial Global, networks of legally independent member firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.
Report on Internal Control over Compliance Management of the Organization is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Organization s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Organization s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. San Diego, California November 28, 2017 PKF, LLP - 23 -
Schedule of Findings and Questioned Costs For the Year Ended June 30, 2017 PART I - SUMMARY OF AUDITORS' RESULTS Schedule of Expenditures of Federal and State Awards Type of auditors' report issued on whether the financial statements were prepared in accordance with GAAP: Internal control over financial reporting: Material weaknesses identified? Significant deficiencies identified? Noncompliance material to financial statements noted Unmodified No No No Federal and State Awards Internal control over major programs: Material weaknesses identified? Significant deficiencies identified? Type of auditor's report issued on compliance for major programs: Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a) in this schedule? Dollar threshold used to distinguish between type A and type B programs; No No Unmodified No $750,000 Identification of specific programs tested: CFDA # Name of Federal Program Amount 93.556 Community Service Family - contract 551376 $ 106,805 93.590 Community Service Family - contract 551376 17,496 93.645 Community Service Family - contract 551376 39,768 93.658 Community Service Family - contract 551376 132,150 16.575 CHAT $ 226,809 Auditee qualified as low-risk X yes no - 24 -