text: SPECIAL CITIZENS FUTURES UNLIMITED. Financial Statements. June 30, 2016 and With Independent Auditors' Report - PDF
  Download "SPECIAL CITIZENS FUTURES UNLIMITED. Financial Statements. June 30, 2016 and With Independent Auditors' Report"
  1 SPECIAL CITIZENS FUTURES UNLIMITED Financial Statements With Independent Auditors' Report
  2 Table of Contents Independent Auditors Report... 1 Financial Statements Statements of Financial Position... 2 Statements of Activities and Changes in Net Assets... 3 Statements of Cash Flows... 4 Statements of Functional Expenses
  3 INDEPENDENT AUDITORS REPORT To the Board of Trustees, Special Citizens Futures Unlimited: We have audited the accompanying financial statements of Special Citizens Futures Unlimited (the Organization or SCFU ), which comprise the statements of financial position as of June 30, 2016 and 2015 and the related statements of activities and changes in net assets, 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. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization 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 Organization 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 Special Citizens Futures Unlimited as of, and the changes in its net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. November 29, 2016
  4 Statements of Financial Position Assets Current assets Cash and cash equivalents $ 203,173 $ 487,977 Accounts receivable - net of allowance for doubtful accounts 1,338,859 1,382,696 Prepaid expenses and other current assets 183, ,464 Total current assets 1,725,766 2,017,137 Non-current assets Property and equipment, net 3,054,323 2,942,029 Mortgage financing fees, net 104, ,278 Software, net 125,697 66,667 Debt service reserve fund 96,046 39,346 Other assets 458, ,201 Total non-current assets 3,839,370 3,419,521 Total assets $ 5,565,136 $ 5,436,658 Liabilities and Net Assets Current liabilities Line of credit $ 500,000 $ -- Current maturities of loans payable 201, ,843 Current maturities of mortgages payable 60, ,243 Current maturities of bonds payable 75, Accounts payable and accrued expenses 605, ,968 Accrued salaries and benefits 109, ,086 Deferred rent-short term 69,314 45,205 Grant advances payable 28, Due to funding sources ,761 Total current liabilities 1,649,704 1,552,106 Loans payable, net of current portion 626, ,893 Mortgages payable, net of current portion 108,923 1,041,099 Bonds payable, net of current portion and unamortized premium 937, Deferred rent-long term 33, ,101 Sub tenant security deposit 14,475 14,476 Total liabilities 3,369,536 3,225,675 Net assets Unrestricted 2,147,914 2,163,297 Temporarily restricted 47,686 47,686 Total net assets 2,195,600 2,210,983 $ 5,565,136 $ 5,436,658 The are an integral part of these statements. 2
  5 Statements of Activities and Changes in Net Assets Years Ended Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total Revenue and support Medicaid revenue $ 10,317,697 $ -- $ 10,317,697 $ 10,225,942 $ -- $ 10,225,942 Grant and contracts revenue 228, , , ,761 Client fees 595, , , ,846 New York State Supplemental Income 963, , , ,759 Contributions 45, ,158 20,169 20,000 40,169 Other revenue 416, , , ,845 12,566, ,566,108 11,547,322 20,000 11,567,322 Net assets released from restrictions ,070 (67,070) -- 12,566, ,566,108 11,614,392 (47,070) 11,567,322 Expenses Program services 10,273, ,273,379 9,164, ,164,504 Management and administration 2,308, ,308,112 2,441, ,441,038 12,581, ,581,491 11,605, ,605,542 Change in net assets (15,383) - (15,383) 8,850 (47,070) (38,220) Net assets, beginning of year 2,163,297 47,686 2,210,983 2,154,447 94,756 2,249,203 Net assets, end of year $ 2,147,914 $ 47,686 $ 2,195,600 $ 2,163,297 $ 47,686 $ 2,210,983 The are an integral part of these statements. 3
  6 Statements of Cash Flows Years Ended Cash flows from operating activities Change in net assets $ (15,383) $ (38,220) Adjustments to reconcile change in net assets to net cash (used) provided by operating activities Depreciation and amortization 442, ,504 Write off of deferred financing costs on refinance 61, Loss on disposal of property and equipment 11, Allowance for bad debts (recovery) 28,620 (82,068) Deferred rent (55,582) 64,661 Changes in assets and liabilities Accounts receivable 15,217 (201,675) Prepaid expenses and other current assets (234,038) (96,575) Accounts payable and accrued expenses 174, ,795 Accrued salaries and benefits (205,155) (126,990) Grant advances payable 28, Due to funding sources (450,761) (33,492) Sub tenant security deposit (1) 14,476 Net cash (used) provided by operating activities (198,593) 58,416 Cash flows from investing activities Capital acquisitions (484,984) (342,395) Purchase of software (123,360) (80,000) Net cash used by investing activties (608,344) (422,395) Cash flows from financing activities Increase in line of credit 500, Proceeds from issuance of loans payable 372, ,924 Repayments of loans payable (195,772) (135,225) Deferred financing costs incurred with issuance of bonds payable (73,601) -- Increase in debt service reserve fund (56,700) -- Proceeds from issuance of bonds payable 1,032, Repayments of bonds payable (20,000) -- Repayments of mortgage payable (1,036,419) (135,921) Net cash provided (used) by financing activities 522,133 (37,222) Net decrease in cash and cash equivalents (284,804) (401,201) Cash and cash equivalents Beginning of year 487, ,178 End of year $ 203,173 $ 487,977 Supplemental disclosure of cash flow information Interest paid $ 151,673 $ 143,215 Income taxes paid $ -- $ -- The are an integral part of these statements. 4
  7 Statements of Functional Expenses Year Ended June 30, 2016 Other Total Management Residential Day Habilitation Program Program and Services Disabled Services Services Administration Total Salaries $ 3,303,452 $ 1,306,966 $ 1,179,095 $ 5,789,513 $ 1,084,982 $ 6,874,495 Fringe benefits 701, , ,018 1,291, ,063 1,525,083 4,004,498 1,647,922 1,428,113 7,080,533 1,319,045 8,399,578 Occupancy 403, , ,751 1,165, ,413 1,382,733 Professional fees 158, ,206 38, , , ,106 Food 177,285 15,298 3, ,259 10, ,095 Travel and transportation 95, ,861 12, ,431 86, ,602 Repairs and maintenance 140,974 34, , ,986 Equipment and furnishings 8,090 18, ,648 8,171 34,819 Supplies 89,102 61,959 17, ,500 74, ,782 Client expenses 69,085 15,518 6,292 90, ,895 Telephone 30,372 32,343 7,647 70,362 33, ,816 Insurance 19,810 13,264 4,635 37,709 48,408 86,117 Depreciation and amortization 216, ,350 3, ,943 99, ,979 Interest 69,704 29,425 27, ,139 25, ,673 Bad debt (recovery) ,620 28, ,620 Miscellaneous 95,085 13,053 42, , , ,690 $ 5,578,491 $ 2,920,896 $ 1,773,992 $ 10,273,379 $ 2,308,112 $ 12,581,491 The are an integral part of this statement. 5
  8 Statements of Functional Expenses Year Ended June 30, 2015 Other Total Management Residential Day Habilitation Program Program and Services Disabled Services Services Administration Total Salaries $ 2,735,990 $ 1,150,404 $ 1,089,499 $ 4,975,893 $ 1,263,383 $ 6,239,276 Fringe benefits 605, , ,014 1,135, ,057 1,326,032 3,341,894 1,456,461 1,313,513 6,111,868 1,453,440 7,565,308 Occupancy 330, , ,253 1,029, ,048 1,543,473 Professional fees 87,344 73,326 34, , , ,703 Food 204,302 7,763 1, , ,634 Travel and transportation 129, ,787 15, ,192 40, ,087 Repairs and maintenance 163, ,169 15, ,127 82, ,003 Equipment and furnishings 4,641 15, ,483 3,618 24,101 Supplies 101,265 89,764 24, ,574 62, ,218 Client expenses 82,586 17,808 3, , ,991 Telephone 37,523 27,780 14,541 79,844 21, ,655 Insurance 22,830 11, ,363 50,223 84,586 Depreciation and amortization 265,583 51,543 5, ,248 48, ,504 Interest 111,780 2, ,082 28, ,215 Medicaid assessment 57, , ,154 Bad debt (recovery) (82,068) (82,068) Contracted services 36, , ,728 Advertising ,375 6,375 6,666 13,041 Miscellaneous 33,633 16,147 1,084 50,864 94, ,209 $ 5,009,916 $ 2,570,292 $ 1,584,296 $ 9,164,504 $ 2,441,038 $ 11,605,542 The are an integral part of this statement. 6
  9 1. Organization and Nature of Activities Special Citizens Futures Unlimited ("SCFU" or the Organization ) was organized in August 1976, under the Not-for-Profit Organization Law of the State of New York. The purpose of SCFU is to develop and implement residential and day programs specifically for autistic young adults, and create structured learning environments and experiences for developmentally disabled autistic adolescents. SCFU operates and maintains community residences for the developmentally disabled, including on-site and off-site facilities and day programs for autistic and developmentally disabled persons. 2. Summary of Significant Accounting Policies Basis of Presentation SCFU prepares its financial statements using the accrual basis of accounting. Financial reporting by not-for-profit organizations requires that resources be classified for accounting and reporting purposes into net asset categories according to externally (donor) imposed restrictions. For the years ended, the Organization had accounting transactions in the unrestricted net asset category and the temporary restricted net asset category. Unrestricted net assets are net assets that are not subject to donor imposed restrictions. Temporarily restricted net assets are those whose use limited by the donor. When a temporary 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 as net assets released from restriction. Revenue and Support Recognition Revenue from Medicaid billings and fee for service contracts is recognized at the time services are provided. Medicaid billing rates are established by the State of New York Department of Social Services. Billings are completed by entering the amount of units serviced into the database which is then sent to Medicaid. The amount of units is dependent on the type of service provided. Revenue from Medicaid billings comprised 82 percent and 88 percent of total revenue and support for the years ended, respectively. The Medicaid rates are provisionary rates and can be changed at any time. SCFU accounts for grants and contract revenues, which have been determined to be exchange transactions, in the statements of activities and changes in net assets to the extent that expenditures have been incurred for the purpose specific by the grantor during the period. Grant and contract funds received in advance of their usage are classified as grant advances payable in the statements of financial position. In applying this concept, the legal and contractual requirements of each individual contract are used as guidance. The Organization recognizes contributions as revenue when they are received or unconditionally pledged and records these revenues as unrestricted or restricted support according to donor stipulations that limit the use of these assets due to time or purpose restrictions. Client fees are generated from social security income paid to the Organization for rental services provided. These fees are recognized at the time services are provided. Rates are established by the Office of Persons with Developmental Disabilities ( OPWDD ) and are based on location. New York State Supplemental income is paid to the Organization by the State of New York to supplement costs associated with an individual s room and board that are not covered by the individual s social security income. These amounts are recognized at the time services are provided. Rates are established by New York State. Accounts Receivable Accounts receivable consists of unsecured, non-interest bearing amounts due from various New York State departments for services provided. SCFU records an estimate for uncollectible accounts receivable based on management's assessment of the aged basis of its governmental funding sources and other sources, current economic conditions and historical information. For each of the years ended, the Organization determined that no allowance for doubtful accounts was necessary. 7
  10 Accounting 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 and the reported amounts of revenues and expenses during the years then ended. Actual results could differ from these estimates. Significant estimates included in the financial statements include Medicaid revenue, allocation of expenses among program services, depreciation expense and the allowance for doubtful accounts. Fair Value Measurements The carrying amounts of financial instruments including accounts receivable, accounts payable and accrued salaries and expenses, and due to funding sources approximate their fair values because of the relatively short maturity of these instruments. Cash and Cash Equivalents Cash equivalents consist of money market funds. The Organization maintains its cash in deposit accounts, which at times exceed federally insured limits. Property and Equipment Property and equipment is stated at cost. Depreciation is provided over the estimated useful lives of the assets by the straight-line method. When an asset is sold or retired, the cost and accumulated depreciation are removed from the respective accounts, and any gain or loss is reflected in operations. Maintenance and repairs on property and equipment are charged to operations as incurred. Functional Allocation of Expenses The costs of providing various programs and other activities have been summarized on a functional basis in the statements of activities and changes in net assets. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Major program services include the following: Residential Services Individual Residential Alternatives and Intermediate Care Facilities Day Habilitation Disabled Site and Community Based Day Options Other Program Services Medicaid Service Coordination, Community Habilitation, Supported Employment, Pre-Vocational Support, Work Readiness, and Recreation Long-lived Assets The Organization reviews long-lived assets, including property and equipment, for impairment whenever events or changes in business circumstances indicate that the carrying amount of assets may not be fully recoverable. Management has determined that no assessment was required for periods presented in these financial statements. Income Taxes The Organization is exempt from Federal income taxes under Section 501(c)(3) of the Internal Revenue Code and state income taxes under similar provisions. The Organization had no unrecognized tax benefits at. In addition the Organization has no income tax related penalties or interest for the periods presented in these financial statements. Reclassifications Certain items in the 2015 financial statements have been reclassified to conform to the 2016 presentation. These reclassifications had no effect on previously reported net assets or changes in net assets. New Accounting Pronouncement In August 2016 the FASB issued ASU Not-for-profit Entities (Topic 958) Presentation of Financial Statements of Not-for-profit Entities. ASU , which is effective for fiscal years beginning after December 15, 2017 with early adoption permitted will require a change to two areas of not-for-profit accounting and significant new financial statement presentation and disclosure requirements. 8
  11 Under ASU (the ASU ) underwater funds will be accounted for within net assets with donor restrictions and not within net assets without donor restrictions as is the current practice. In addition, the ASU eliminates the accounting policy election to release donor imposed restrictions over the useful life of donated property and equipment when the donor does not explicitly specify the period of time the property must be used. Instead, entities will be required to relieve the donor s restrictions at the time the asset is place in service. The ASU also changes the presentation and disclosure requirements of not-for-profit entities in the following areas: expense disclosures, display of net asset classes, cash flow presentation, quantitative and qualitative liquidity disclosures and presentation of investment returns. The Organization is currently evaluating the impact these changes will have on its future financial statements. 3. Mortgage Financing Fees, Net Expenses incurred by the Organization in connection with obtaining financing, are being amortized using the straight-line method ranging between 7 and 25 years. Mortgage financing fees were as follows at June 30, 2016 and 2015: Deferred financing costs $ 236,822 $ 248,906 Accumulated amortization (132,487) (139,628) $ 104,335 $ 109,278 Amortization expense charged to operations for the years ended was $17,137 and $16,975, respectively. Future amortization of mortgage financing fees is as follows: Year Amount 2017 $ 20, , , , ,360 Thereafter $ 36, , Software, Net The Organization is amortizing purchased software over a useful life of 3 years. Software consisted of the following at June 30: Cost $ 200,000 $ 80,000 Accumulated amortization (74,303) (13,333) $ 125,697 $ 66,667 9
  12 Amortization expense during the years ended amounted to $64,330 and $13,333, respectively. Future amortization is as follows: Year Amount 2017 $ 66, , $ 2, , Property and Equipment Property and equipment consisted of the following at June 30: Asset Description Useful Life Land N/A $ 703,000 $ 703,000 Building and improvements 7 to 25 3,669,744 3,542,105 Vehicles 5 833, ,302 Furniture and fixtures 7 100,504 94,781 Office equipment 3 to 10 51,014 42,025 Leasehold improvements * 32,275 32,275 5,390,449 5,026,488 Less accumulated depreciation 2,336,126 2,084,459 Net book value $ 3,054,323 $ 2,942,029 *Lesser of lease life or asset life, whichever is shorter. Depreciation expense charged to operations for the years ended totaled $361,512 and $340,196, respectively. 6. Due to Funding Sources Due to funding sources as of June 30, 2015 included unrecovered debt service payments in the amount of $15,897 due to the New York State Office for People With Developmental Disabilities ("OPWDD") and $434,864 due to OPWDD representing funds paid by OPWDD to SCFU for the Day Habilitation program which were duplicate payments included in the NYS reimbursement rates. Settlement of these liabilities was paid through current billings. 10
  13 7. Mortgages Payable Mortgages payable consisted of the following as of June 30: Payable to the Facilities Development Corporation ("FDC") through February 15, 2019 with an average interest rate of percent and semi-annual principal payments of $30,000 secured by 5115 Tibbett Ave, Riverdale, NY (A) $ 168,923 $ 228,731 Payable to the Community Preservation Corporation ("CPC") through November 1, 2022 with an annual interest rate of 7.08 percent with monthly interest and principal installment payments of $14,136 secured by 5431 Fieldston Road, Bronx, NY (B) , ,923 1,205,342 Less current portion 60, ,243 $ 108,923 $ 1,041,099 (A) The mortgage with FDC effectively assigns or collateralizes the revenue received as well as the property and all equipment or improvements made, and restricts the use of the property. SCFU was required to deposit, into a pooled debt services reserve account with other agencies held by the FDC, amounts equal to the estimated last principal and interest payments the FDC will make to New York State, which totaled $39,346 for each of the years ended and is included in debt service reserve funds on the statements of financial position. (B) The mortgage was refinanced in 2016 through the issuance of bonds payable (see Note 9). Future maturities of mortgages payable are as follow at June 30: Year Amount 2017 $ 60, , $ 48, ,923 11
  14 8. Loans Payable Loans payable included the following as of June 30: Auto loan with a bank for various vehicles; monthly payments of principal and interest of $11,141 interest rates ranging from 0 percent to 6.89 percent, due various dates ranging from date 1 to date 2, secured by the vehicles $ 526,593 $ 250,788 Bank loan with proceeds used to renovate a residential facility located in Cortlandt Manor, New York. The interest rate is 6.60 percent, with monthly installments of $2,851, payable through May 15, The debt is secured by the property. 144, ,121 Bank loan with proceeds used for a day habilitation space renovation project in the Bronx, New York. The interest rate is 5.48 percent, with monthly installments of $7,180, payable through May 15, The debt is secured by the property. 156, , , ,736 Less current portion 201, ,843 $ 626,008 $ 504,893 Future maturities of long term debt are as follows: Year Amount 2017 $ 201, , , , ,286 Thereafter $ 23, ,573 12
  15 9. Bonds Payable Bonds payable consisted of the following at June 30: Bonds payable with the Dormitory Authority of the State of New York, payable in monthly installments of principal and interest of $8,332 in 2016, interest at 4.3 percent, due July 1, 2026, secured by mortgage on certain property of the Organization $ 905,000 $ -- Plus: Unamortized original issue premium 107, Less: Current portion (75,000) -- Bonds payable, net $ 937,016 $ -- SCFU, through the Interagency Council Pooled Loan Program Revenue Bonds Series 2016 A-1 and Series 2016 A-2, received an allocable share of the bond issuance proceeds. In addition, the Organization is required to hold $56,700 in a debt service reserve fund. As of June 30, 2016, the Organization had $56,700, which is included in debt service reserve fund in the statement of financial position. Future maturities of bonds payable are as follows: Year Amount 2017 $ 75, , , , ,000 Thereafter $ 495, , Line of Credit The Organization has an unsecured line of credit with HSBC Bank USA, N.A. that provides for borrowings up to $500,000 with interest payable at a rate equal to 3.50 percent above the bank s prime rate, which was 3.5 percent at June 30, As of, the outstanding balance on the line of credit was $500,000 and $-0-, respectively. The line of credit can be terminated by either party at any time, there is no set expiration date for this line of credit. 13
  16 11. Pension SCFU has a qualified defined contribution pension plan (the "Plan") under section 403(b) of the Internal Revenue Code covering all eligible employees. SCFU's Board of Directors may approve discretionary contributions to the Plan and the Board approval is made on an annual basis. There were no such contributions for the years ended. The Organization has not completed required tax returns or audits in accordance with the 403(b) plan regulations. Any interest or penalties related to this will be borne by the Organization. 12. Leases Rental Expense SCFU entered into two separate lease agreements for space in Westchester, New York and the Bronx, New York, both for a ten-year term expiring in 2018 and 2024, respectively. In addition, there are various leases entered into for rental units for program participants expiring through March 31, SCFU also entered into a lease agreement for administrative space in New York City for six and one-half years which expired September 30, Future minimum rental commitments for the years ended subsequent to June 30, 2016 are as follows: Year Amount 2017 $ 1,014, , , , ,561 Thereafter $ 2,792,581 7,385,283 Rent expense for the years ended amounted to $1,214,294 and $1,196,979, respectively, and is included in occupancy expense in the accompanying financial statements. Rental Income SCFU entered into a sublease agreement for their administrative space in New York City for one year and five months which expired on September 30, Future minimum rentals expected to be received under noncancellable sublease for the year ended June 30, 2017 amount to $217, Commitments and Contingencies Medicaid revenues are subject to audits by the funding source. Such audits could result in claims against the Organization for disallowed costs or noncompliance with the terms of the agreements. There were no audits conducted during the years ended. SCFU is a party to lawsuits and complaints generally arising in the ordinary course of business. In addition, SCFU is a defendant in a matter with a former employee. The final outcome of the matter cannot be determined at this time; however, if an amount is due it is expected to be covered by the insurance company. 14
  17 In addition, SCFU is a defendant in a legal matter relating to vacated premises of a leased property located at 22 Marble Hill, New York, NY. The landlord filed a law suit for breach of contract as well as damage to the premises and attorney s fees and costs. Regarding the breach of contract, the premises was subsequently leased approximately 7 months after SCFU vacated the premises and SCFU is counterclaiming in this matter for unjust enrichment by the landlord and violation by the landlord of the lease agreement. SCFU signed a settlement agreement during 2016 for $300,000 of which $105,000 was paid as of June 30, The remaining amount of $195,000 was accrued in accounts payable and accrued expenses on the statements of financial position. This amount has been included in occupancy expense on the statement of functional expense. 14. Temporarily Restricted Net Assets Temporarily restricted net assets are restricted for the following purposes at June 30: Emmons Hiller Supported Employment Program $ 47,686 $ 47,686 Net assets were released from donor restrictions by incurring expenses satisfying the purpose and/or time restrictions specified by donors as follows for the years ended June 30: Emmons Hiller Supported Employment Program $ 47,686 $ 47, Subsequent Events The Organization has evaluated subsequent events occurring after the statement of financial position date through the date of November 29, 2016, which is the date the financial statements were available for release. Based upon this evaluation, the Organization has determined that no subsequent events have occurred which require adjustment to or disclosure in the financial statements. 15