ATTACHMENT J. 1.
PROVIDENCE HOUSE, INC. and AFFILIATES Consolidated Financial Statements With Independent Auditors' Report June 30, 2013 and 2012
- 19 -
Providence House, Inc. and Affiliates Table of Contents
Independent Auditors' Report Consolidated Financial Statements Consolidated Statements of Financial Position Consolidated Statements of Activities Consolidated Statements of Cash Flows Consolidated Statements of Functional Expenses
3 4
5 6
Notes to Consolidated Financial Statements
7
Supplementary Data Independent Auditors' Report on Supplementary Data Temporary Shelter and Feeding Programs Schedule of Activities Providence House IV Compared to Approved County Funding
25 26
- 20 -
28
www.capin.rouse.com
,330 Avenue of thl) Americas, Suite 23A
New Yo;k., NY 10019
212.653,0081
INDEPENDENT AUDITORS' REPORT
The Board of Directors Providence House, Inc. and Affiliates Brooklyn, New York
We have audited the accompanying consolidated financial statements of Providence House, Inc. and Affiliates, which comprise the consolidated statement of fmancial position as of June 30, 2013, and the related consolidated statements of activities, cash flows and functional expenses for the year then ended, and the related notes to the consolidated financial statements.
Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated financial statements based on our audit. We conducted our audit 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 sllch 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 overaU presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
- 21 -
The Board of Directors Providence House, Inc. and Affiliates Brooklyn, New York
Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Providence House, Inc. and Affiliates as of June 30, 2013, and the changes in its net assets and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Prior Period Financial Statements The financial statements of Providence House, Inc. as of June 30, 2012, were audited by other auditors whose report dated August 13, 2013, expressed an unmodified opinion on those statements.
New York, New York March 12,2014
-2- 22 -
Providence House, Inc. and Affiliates Consolidated Statements of Financial Position
June30, 2012
2013 ASSETS : Cash and cash equivalents Contributions and grants receivable Program revenue receivable Prepaid expenses Property held for sale Investments Developer fees receivable Notes receivable from affiliates Property and equipment-net
$
Total Assets LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses Accrued payroll and related expenses Due to affiliate Mortgage payable Deferred developer rees
$
$
8,019.537
$
7,786.265
$
68.067 102.886
$
516.310 407,341
63,408 80,364 11,646 607.440 1,414,768
1,094.604
2,177,626
4,386,024 1,897.155 6,283.179
1.504,626 3,678.379 5.183,005
641,754
425,634
6,924,933
5,608.639
Total liabilities Net assets: Unrestricted: Undesignated Net investment in property and equipment
Temporarily restricted Total net assets Total Liabilities and Net Assets
$
See notes to consolidated financial statements
-3-
- 23 -
341,436 157,000 73. 141 16,286
476,323 241 ,624 186.477 7.056 1,819.030 595,110 820,684 1,459.768 2,413,465
8,019.537
648,773 804,042 1,459.768 4.285,819
$
7,786,265
Providence House, Inc. and Affiliates Consolidated Statements of Activities Year Ended lune 30, 2013 Temporarily Restricted
Unrestricted SUPPORT, REVENUE AND RELEASES: Donations and grants Religious donations and donated services
S
Contract revenue
CACFP and FEFP food grant NYSERDA gnmt NYC Housing HRA payments Rental income Invesbnent income Developer fees
- 24 -
Donated services value Fundraising even~ net of direct benefit costs
Miscellaneous income Satisfaction of purpose restrictions Total Suppo~ Revenue and Releases
S
513,268 407,920 1,808,894 60,177
Total
250,020
38,353 56,82 1 47,583 1,128,385 23,300 226,559 90,432 275,524
(275,524)
4,677,316
216,120
S
763,288 407,920 1,808,894 60,277
Unrestricted
S
38,353 56,82 1 47,583 1,128,385 23,300 468, 183 90,432
24 1,624
2012 Temporarily Restricted
354,519 401 ,630 1,496,575 31,940 45,000 36,957 91 ,670 6,789 400,617 12,500 414,583 39,954 328,540
S
299,300
Total
S
653,819 401,630 1,496,575 31,940 45,000 36,957 91,670 6,789 400,617 12,500 414,583 39,954
(328,540)
4,893,436
3,661,274
2,410,569 59,976 69,639 277, 121
2,410,569 59,976 69,639 277,1 21
759,837
759,837
2,550,870 36,638 63,041 5,209 700 680,816
2,550,870 36,638 63,041 5,209 700 680,816
Total Expenses
3,577, 142
3,577,142
3,337,274
3,337,274
Change in Net Assets
1,100,174
216,120
1,316,294
324,000
Net Assets. Beginning of Year
5,183,005
425,634
5,608,639
4,859,005
EXPENSES: Temporary shelter program Pennanent housing program Samaritan House Kosciusko Street projecr Lincoln Road project Central- program support
Net Assets, End of Year
S
6,283,179
•
S
641 ,754
S
6,924,933
S
See notes to consolidated financial statements -4-
5,183,005
(29,240)
3,632,034
(29,240)
294,760
454,874
S
425,634
5,313,879 S
5,608,639
Providence House, Inc. and Affiliates Consolidated Statements of Cash Flows
Year Ended June 30, 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES : Change in net assets Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation expense Net gain on transfer of assets Realized and unrealized (gain) loss on investments Changes in: Contributions and grants receivable Program revenue receivable Prepaid expenses Developer fees receivable Notes receivable from affiliate Accounts payable and accrued expenses Accrued payroll and related expenses Due to affiliate Deferred developer fees Net Cash Provided (Used) by Operating Activities
$
1,316,294
$
162,599
294,760
166,106 (12,480) 14,840
(30,220) (84,624) (113,336) 9,230 (16,642) 4,659 22,522 (11,646) (1 ,007,427) 251 ,409
(101,000) 242,218 (8,454) (994,032) (843,353) (212,125) (11,531) 1l,646 1,414,768 (38,637)
CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment Purchases of investments Proceeds from sale of investments Net Cash Provided (Used) by Investing Activities
(109,275) (16,117) 100,000 (25,392)
(58,710) (24,662) 207,948 124,576
CASH FLOWS FROM FINANCING ACTIVITIES: Repayment of principal Net Cash Used by Financing Activities
(91,130) (91,130)
(83,922) (83,922)
Change in Cash and Cash Equivalents
134,887
2,017
Cash and Cash Equivalents, Beginning of Year
341,436
339,419
Cash and Cash Equivalents, End of Year
$
476,323
$
341 ,436
SUPPLEMENTAL INFORMATION: Cash paid for interest
$
47,724
$
47,387
NON-CASH lNVESTlNG AND FINANCING ACTIVITIES: Transfer of property and equipment to assets held for sale
$
1,819,030
$
Transfer of construction in progress to affiliate Payment of loan payable by affiliate Net gain On transfer of assets See notes to consolidated financial statements -5-
- 25 -
$
$
$
$
112,520 (125,000) (12,480)
Providence House, Inc. and Affiliates Consolidated Stalements of Functional Expenses Year Ended June 30,
- 26 -
Salaries and wages Payroll taxes Employee benefits Rent Utilities Telephone Professional fees Food Scholarships Client assistance and gifts Other program expenses Travel Seminars and training Dues and subscriptions [nsurance
Equipment repairs, rental and maintenance Office expenses Supplies Printing Postage and delivery Interest expense Depreciation Other fundraising expenses Advertising Miscellaneous Donated services value Total expenses
Program $ 1,291,431 116, 118 242,729 133,183 205,954 36,936 18,291 49,926 8,000 9,300 37,993 12,760 1,485 906 107,050
2013 Development Management and Public and General Relations $ 109,318 $ 199,626 13, 135 7,607 20,436 14,885 4,6 14 3,699 74,709 2,612
1,774 3,678 2,630 4,877 1,886
71 ,451 60,319 65,867 5,810 3,785 45,283 155,100
7,454 3,192 3,007 1,037 762 1,851 5,734
700 20,884 300,000
2,720 14,022
$ 3,001,261
1,534 1,229 40,700
$
373,455
627
1,062 1,000 344 252 1,907 21,961
$
202,426
Totals
$ 1,600,375 136,860 278,050 133,183 212,1 02 41 ,864 133,700 52,538 8,000 9,300 39,767 16,438 4,115 5,783 109,563
Prollram $ 1, 197, 160 108,881 242,399 132,667 182,470 46,884 11,702 63,901 9,000 3,368 32,590 19,409 96 11 ,358 58,194
2012 Development Management and Public Relations and General $ 244,490 $ 109,374 17,476 8,064 38,904 17,955
72,480 13,127 29,421 8,822 2,980 51,324 159,478
78,905 64,573 69,874 7,191 4,799 47, 134 162,741 21,961 3,420 34,906 300,000
29,465 300,000
$ 3,577,142
$ 2,787,176
See notes to consolidated financial statements -6-
$
Totals
$ 1,551 ,024 134,421 299,258 132,667 188,261 48,336 88,637 63,901 9,000 3,368 33,752 19,718 119 12,510 58,352
3,963 994 36, 128
1,828 458 40,807
795 212 15 788 108
367 97 8 364 50
2,003 115 226 1,416 432
924 53 104 653 200
5,050
1,578 7,273
4,671
2, 155
36,291 300,000
192,312
$ 3,337,274
357,786
$
75,407 13,295 29,751 10,891 3,612 51 ,324 166,106 7,273
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30. 2013 and 2012
I. NATURE OF ORGANIZATION:
Providence House, Inc. ("Providence") is a not-for-profit organization as described in Section SOI(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes. Providence is principally engaged in the housing and feeding of homeless women and their children, and women leaving prison. These services are provided in the City of New York, and Westchester County, New York. Providence' s primary source of revenue consists of grants and contributions. Providence Kosciuszko Housing Development Fund Corporation ("PKHDFC"), a non-profit organization, was incorporated on August 21, 2009, pursuant to Article Xl of the New York Private Housing Finance Law and Section 402 of the Not-For-Profit Corporation Law. PKHDFC's mission is to develop and operate the K Street Project. Providence is the sole member ofPKHDFC. The board ofPKHDFC consists of members that are either board members of Providence or members that are approved by the Providence board. On April IS, 2010, Providence and Alembic Development Company, LLC ("ADC") formed a joint venture to construct, develop and operate the K Street Project. 273-277 Kosciuszko, G.P., LLC ("273 GP LLC") was established on November 22, 2010, as a limited liability company. 273 GP LLC consists of two members, PK LLC and ADC, with PK LLC owning the majority interest (51 %). 273 GP LLC's sole purpose is to allow PKHDFC, through PK LLC, to partner with ADC in the construction, development and operation of the K Street Project. Providence Kosciuszko LLC ("PK LLC") was incorporated on May 17,2011, as a limited liability company for the purpose of acquiring a membership interest and a partnership interest, respectively, in 273 GP LLC and the 273 Limited Partnership. PKHDFC is the sole member ofPK LLC. Providence I Housing Development Fund Corporation ("PlHDFC"), a non-profit organization, was incorporated on June 2, 200S, pursuant to Article Xl of the New York Private Housing Finance Law and Section 402 of the Not-For-Profit Corporation Law. PlHDFC's mission is to develop and operate the Lincoln Road Project. Providence is the sole member of PIHDFC. The board of PIHDFC consists of members that are either board members of Providence or members that are approved by the Providence board. On January 30, 2012, Providence and ADC formed another joint venture to construct, develop and operate the Lincoln Road Project. 329 Lincoln Road, G.P., LLC ("329 GP LLC") was established on January 30, 2010, as a limited liability company. 329 GP LLC consists of two members, PI LLC and ADC, with PI LLC owning the majority interest (51 %). 329 GP LLC's sole purpose is to allow PIHDFC, through PI LLC, to partner with ADC in the construction, development and operation of the Lincoln Road Project. Providence I LLC ("PI LLC") was incorporated as a limited liability company for the purpose of acquiring a membership interest and a partnership interest, respectively, in 329 GP LLC and the 329 Limited Partnership. PIHDFC is the sole member of PI LLC.
-7- 27 -
Providence House, Inc. and Affiliates Notcs to Consolidated Financial Statements June 30, 2013 and 2012
2. SIGNIFICANT ACCOUNTING POLICIES: The consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that atIect the reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The significant accounting policies followed are described below to enhance the usefulness of the consolidated financial statements to the reader. pRINCIPLES OF CONSOLlDATION The consolidated financial statements include the financial resources and activities of Providence, PKHDFC, 273 GL LLC, PK LLC, PIHDFC, 329 GP LLC and PI LLC. All material transactions and balances between the organizations have been eliminated in the consolidated financial statements. Providence House, Inc. and Affiliates shall be referred to as "Providence" throughout these notes to the consolidated financial statements. CASH AND CASH EQUIVALENTS Cash and cash equivalents include all unrestricted cash on hand and in banks. Providence also considers all highly liquid unrestricted investments with a maturity of three months or less when purchased to be cash equivalents. Providence's cash accounts are located in One institution. From time to time, these balances may exceed federal deposit insurance limits; however, Providence has not experienced any losses On these accounts and does not believe it is exposed to any significant risk. CONTRlBUTIONS AND GRANTS RECEIVABLE Unconditional promises to give are recognized as income when made and recorded at fair value based upon estimated future cash flows . Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value oftheir estimated future cash flows. INVESTMENTS lnvestments are reported at fair value based on quoted market prices. Investment income, including realized and unrealized gains and losses are reflected included in the consolidated statements of activities. Donated investments are reflected as contributions at fair market value at date of receipt. PARTNERSHIP INTERESTS Providence, indirectly through related entities described in Note 15, is a general partner in two permanent supportive housing project partnerships, 273. 277 Kosciusko, L.P. and 329 Lincoln Road, L.P. The limited partners have substantive participating rights; therefore, Providence does not consolidate these partnerships into its consolidated financial statements but accounts for the partnerships using the equity method. Due to immateriality, no amount has been included in these consolidated financial statements. These housing projects are referred to throughout the consolidated financial statements as the K Street Project and the Lincoln Road Project; see Notes 7, 8, 15 and 18 for further information.
路8路 - 28 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 20 \3 and 2012
2. SIGNIFICANT ACCOUNTING POLICIES, continued: PROPERTY HELD FOR SALE Property held for sale is recorded at the lower of cost Or estimated net realizable value, or if donated, at the estimated fair value at the date of the gift. All property for sale is actively marketed and is expected to be sold within one year. Subsequent gains from disposition of property held for sale are recorded as gain on sale of property in the period realized. Subsequent losses are recorded in the period when it is probable and able to be estimated. PROPERTY, EQUIPMENT AND DEPRECIATION Property, plant and equipment are stated at cost, or, if donated, at the estimated fair market value at the date of donation. Depreciation is recorded using the straight-line method at various rates calculated to allocate the cost of the respective items over their estimated useful lives. Estimated useful lives are: Buildings and improvements Leasehold improvements Furniture, fixtures and equipment
15 - 40 years Remaining life of the lease S - 10 years
DEFERRED DEVELOPMENT FEES Deferred developer fees are recorded for certain unearned developer fees promised under secured notes receivable, as specified in Note 8 herein. Since the developer fees relate to the completion of each project, the revenue is recognized on a percentage of completion method. NET ASSETS The consolidated financial statements report amounts separately by classes of net assets: Unrestricted net assets are those currently available for ministry purposes under the direction of the Board, those designated for specific USe and those resources invested in property and equipment. •
Temporarily restricted net assets carry specific, donor-imposed restrictions on the expenditure or other use of contributed funds. Temporary restrictions may expire either because certain actions are taken by Providence which fulfill the restrictions or because of the passage of time. Expirations of temporary restrictions on net assets are reported as reclassifications between the applicable classes of net assets.
-9- 29 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
2. SIGNIFICANT ACCOUNTING POLICIES, continued : CONTRIBUTIONS Contributions are recognized when a commitment is made, which may be when cash is received, an unconditional promise to give is made or when ownership of donated assets is transferred. Contributions are considered available for unrestricted use unless specifically restricted by the donor. Contributions of property, buildings and equipment without donor stipUlation concerning the use of such longlived assets are reported as revenues of the unrestricted net assets. Contributions of cash or other assets to be used to acquire property, plant and equipment are reported as revenue of the temporarily restricted net assets; the restrictions are considered to be released at the time of acquisition of such long-lived assets. GRANTS Grants are recorded as revenues to the extent that expenses have been incurred for the purposes specified by the grantors. Providence receives substantial support from the New York City Department of Homeless Services and the New York City Human Resources Administration. Providence is obligated under the terms of contracts 10 comply with specified conditions and program requirements set forth by the grantor. FUNDRAISING EVENT Providence hosts an annual fund raising event which is shown on the statements of activities net of direct benefit costs. Fundraising income consists of contributions from attendees and other revenue from the event. The fundraising event income consists of the following: Year Ended June 30, 2013 2012 $ 425,783 $ 391,350 Contributions Olherrevenue 42,400 46,952 (23,719) Less: costs of direct benefit to donors $
468,183
$
414,583
DEVELOPER FEES Developer fees are earned for developer services provided in connection with the K Street Project and the Lincoln Road Project, and are earned on a percentage of completion basis, as more specifically outlined in Note
7. DONATED SERVICES Donated services are recognized as contributions if the services (a) create Or enhance nonfinancial assets or (b) require specialized skills, are performed by individuals with those skills, and would otherwise be purchased by Providence. These services are valued based on the estimated cost of services that would have otherwise had to have been purchased.
-10- 30 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
2. SIGNIFICANT ACCOUNTING POLICIES. continued: ALLOCATION OF EXPENSES The costs of providing the various program services and supporting activities have been summarized below on a functional basis. Certain costs have been allocated among program services and supporting activities as follows :
Program services Supporting services: Management and general Development and public relations
$
Year Ended June 30, 2013 2012 3,OQI,261 $ 2,787,176 373,455 202,426
$
3,577,142
357,786 192,312
$
3,337,274
UNCERTAIN TAX POSITIONS Providence' s current accounting policy is to disclose liabilities for uncertain tax positions when a liability is probable and estimable. Management is not aware of any violation of its tax status as an organization exempt from income taxes, nor is it aware of any exposure to unrelated business income tax. Providence files information tax returns in the U.S. and New York. Providence is generally no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2009. RECLASSIFICATIONS Certain amounts have been reclassified from the prior year to conform to current year presentation.
-11-
- 31 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
3. CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of:
June 30, $
Payroll checking Central account checking Central account savings Permanent housing checking PH I checking PH II checking PH III checking PH IV checking PH V checking PH VI checking PH VII checking Kosciuszko Street checking Lincoln Road checking Samaritan House checking Various petty cash accounts
2013 4,173 174,426 263,138
$
6,029
20,415 5,084 3,058 $
476,323
$
2012 5,624 209,828 12,742 21,085 4,086 2,845 6,440 1,802 5,618 4,554 2,276 31,838 16,730 5,562 10,406 341,436
4. PROGRAM REVENUE RECEIVABLE: Program revenue receivable consist of the following agency grants receivable: June 30, PH I - DHS PHII-DHS PH III - DHS PH IV-WDSS PHVII-DHS Kosciuszko Street - DHS Department of Health and Mental Hygiene CACFP - various houses Other
$
2013 2,766 12,475 8,122 71,458 34,928 29,750 22,329
$
19,206
6,218 796
4,649 $
186,477
2012 16,886 19,662 10,373
$
73 ,141
5. PROPERTY HELD FOR SALE During the year ended June 30, 2013, Providence placed the two Samaritan House properties up for sale. The book values of these properties as of June 30, 2013, were $1,064,390 and $754,640. As of June 30,2013, both of the properties were under contract. Subsequent to year end they were sold for net proceeds of $1 ,239,083 and $835,650. -12- 32 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements
June 30, 2013 and 2012
6. INVESTMENTS: Investments at fair value consist of the following:
$
Mutual funds Certificate of deposit Money market funds
June 30, 2013 534,449 $ 25 ,173 35,488
2012 494,277 153,638 858
$
595,110
$
648,773
$
17,363 30,220
$
21,629 (14,840)
$
47,583
$
6,789
Investment income is composed of the following: Interest and dividends Realized and unrealized gain (loss) on investments
7. DEVELOPER FEES RECEIVABLE: Providence, together with a third-party development company, Alembic Development Company, LLC ("ADcn), provides developer services in connection with the K Street and Lincoln Road projects. Pursuant to development agreements signed in connection with both of the aforementioned housing projects, Providence is entitled to earn developer fees from 273-277 Kosciusko, L.P. and 329 Lincoln Road, L.P., respectively, when various project milestones and conditions are met as follows : Completion of plans and specifications Obtaining all building permits Achieving 25% completion Achieving 50% completion Aohieving 75% completion Achieving 100% completion and issuance of final certificate of occupancy
10% 20% 20% 10% 20% 20% 100%
-13-
- 33 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
7. DEVELOPER FEES RECEIVABLE. continued: Developer fees receivable consist of the following amounts: June 30, 2013 The K Street Project development services agreement entitles Providence to earn $1,421,415 of a $1,651 ,415 total development fee over the life of the K Street Project. On the first $460,000 of the total developer fee received, Providence and ADC will be paid in a 50/50 split. At June 30, 2013 and 2012, 100% and 60%, respectively, of the total developer fees were earned based upon completion status of the K Street Project. $616,415 of the development fees owed to Providence are secured by a note receivable and are included in notes receivable from affiliates.
$
The Lincoln Road Project development services agreement entitles Providence to earn $941 ,353 of a $1,018,353 total development fee over the life of the Lincoln Road Project. On the first $220,000 of the total developer fee received, Providence and ADC will be paid in a 65/35 split, respectively. At June 30, 2013 and 2012, 60% and 10%, respectively, of the total developer fees were earned based upon completion status of the Lincoln Road Project. $798,353 of the development fees owed to Providence are secured by a note receivable and are included in notes receivable from affiliates.
690,000
2012
$
130,684 $
820,684
737,849
66, 193 $
804,042
Actual payments of outstanding developer fees are expected to be received over several years as funds become available from capital contributions, loan proceeds or net cash flow of the projects.
-14- 34 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30,2013 and 2012
8. NOTES RECEIVABLE FROM AFFILIATES: Providence is the holder of mUltiple notes receivable from affiliated organizations. Payments on all notes are expected to be received as funds become available from net cash flow earned from operation of the respective housing projects. Any and all payments received require deposit into reserve accounts held for the benefit of each project. Receipt of principal payments on all notes receivable is expected to begin in 2024 and thereafter. Notes receivable consist of the following; June 30, 2012
2013 A $616,415 secured note receivable, from 273-277 Kosciusko, L.P., with interest at a fixed rate of 7.5% per annum, compounded annually. This note receivable represents deferred development fees in connection with the construction of the K Street Project. The note receivable is secured by a subordinate mortgage on the K Street Project property and has a maturity date not to exceed the 13th anniversary of the date the K Street Project is placed in service. The portion of deferred development fees represented by this note was earned by June 30, 2013, upon substantial completion of the K Street Project. $523,353 secured note receivable, from 329 Lincoln Road, L.P., with interest at a fixed rate of 8.92% per annum, compounded annually. This note receivable represents deferred development fees due in connection with the construction of the Lincoln Road Project. The note receivable is secured by a subordinate mortgage on the Lincoln Road Project property and has a maturity date not to exceed the 13th anniversary of the date the Lincoln Road Project is placed in service. The portion of deferred development fees represented by this note is expected to be earned by June 30, 2014, upon substantial completion of the Lincoln Road Project.
-15- 35 -
$
616,415
523,353
$
616,415
523,353
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
8. NOTES RECETVABLE FROM AFFILIATES. continued: June 30, 2013
2012
$275 ,000 secured note receivable, from 329 Lincoln Road, L.P., with interest at a fixed rate of 8.92% per annum, compounded annually . This note receivable represents permanent mortgage financing for the Lincoln Road Project paid from deferred development rees expected to be earned by Providence in connection with the construction of the Lincoln Road Project. These funds are intended to fund certain required reserve accounts. The note receivable is secured by a subordinate mortgage on the Lincoln Road Project property. The principal and all accrued, unpaid interest is due and payable in full on June 29, 2074.
275,000
275,000
$45,000 secured note receivable, with interest at a fixed rate of 8.92% per annum, compounded annually . This note receivable represents permanent mortgage financing for the Lincoln Road Project paid from New York State Energy Research and Development Authority grant proceeds given to Providence in connection with the construction of the Lincoln Road Project. The note receivable is secured by a subordinate mortgage on the Lincoln Road Project property. The principal and all accrued, unpaid interest is due and payable in full on June 29, 2074.
45,000
45,000
$
1,459,768
$
1,459,768
9. PROPERTY AND EQUIPMENT; Property and equipment consists of the following:
Land Buildings and improvements Leasehold improvements Furniture, fixtures and equipment
$
Less accumulated depreciation $
-16-
- 36 -
June 30, 2013 344,865 $ 3,463,241 223,336 206,584 4,238,026 (1,824,561 ) 2,413,465
$
2012 747,265 5,124,816 199,347 146,296 6,217,724 (1,931,905) 4,285,819
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 20\3 and 2012
10.MORTGAGE PAYABLE: Mortgage payable consists ofa mortgage secured by property, payable to a bank, with an interest rate of7 .78%. The loan is payable in monthly installments of principal and interest of$11,316. The loan is due and payable in full in October 2017. The balance of the loan as of June 30, 2013 and 2012, respectively, was $516,310 and $607,440. Estimated principal payments for the next five years ended June 30 and thereafter are as follows: 2014 2015 20 16 2017 2018
$
99,280 107,285 115,936 125,285 68,524
$
516,310
11. TEMIQRARlL Y RESTRlCTjill NET A:;JSJ;;TS: Temporarily restricted net assets are available for the following purposes : June 30, Annual scholarships NYS Homeless Housing (Restricted use building) Operations Fundraising event contributions receivable Pledges receivable K Street Video System Renovations, repairs and equipment
$
2013 13,000
$
172,943 101,615 241,624
190,062
150,000 20,000 55,072
20,000 92,572
$
641,754
2012 10,500
$
425,634
12. CONTRIBUTED SERVICES: During the years ended June 30, 2013 and 2012, Providence received donated services valued at $23,300 and $12,500, respectively . These services were recorded as a contribution and expensed to professional fees in the accompanying consolidated financial statements. During the years ended June 30, 2013 and 2012, Providence received various volunteer program services totaling $300,000 during each year. Providence has implemented a method of determining the value of these services donated by accumulating the number of hours worked at an assumed rate of $14.50 per hour. These services were recorded as a contribution and expensed to donated services in the accompanying consolidated financial statements.
路17路 - 37 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
13. RETIREMENT PLAN: Providence is a participant in the noncontributory lay pension plan established by the Diocese of Brooklyn, New York, covering employees who meet certain minimum service requirements. Pension expense charged to Providence was approximately $69,830 and $75,128, respectively, in the years ended June 30, 2013 and 2012. 14. OPERATING LEASES: Providence rents properties from several churches in the Diocese of Brooklyn and Queens as follows: Location
Lease Period
Monthly Ren!
PHI PH 1II PHV PH VI
Through December 31 , 2018 Through December 31, 2018 Through December 31, 2018 Through December 31, 2018
$ $ $ $
The future estimated minimum lease payments for each of the succeeding fiscal years are as follows: 2014 2015 2016 2017 2018 Thereafter
路18路 - 38 -
$
158,600 161,333 161,950 163,450 164,950 27,533
$
837,816
2,750 4,083 4,167 2,083
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
IS .RELATED PARTIES: In order to further its commitment to provide shelter and support to homeless, abused and formerly incarcerated women and their children in a hospitable, non-violent, compassionate atmosphere, Providence desired to develop two new permanent supportive housing buildings. These housing projects would be used to address the scarcity of permanent supportive housing for low-income and special needs individuals and families . In order to have these projects become a reality, Providence had to partner with the city, investors and developers. K Street Project: The first permanent supportive housing project partnership that Providence entered into was to develop a 46unit low-income residential rental apartment project at 273-277 Kosciuszko Street in Brooklyn, New York. The units are to be used and occupied in such a manner so as to fully utilize low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code. 273-277 Kosciuszko, L.P. ("273 Limited Partnership") was established on November 22, 2010, as a limited liability partnership, with 273 GP LLC as general partner and PKHDFC as limited partner. 273 Limited Partnership was organized under the laws of the State of New York and was established to acquire, develop, finance and construct the K Street Project. On June 13, 2011 , the 273 Limited Partnership agreement was amended and restated to reflect, among other changes, the admittance of PK LLC as general partner, removal of PKHDFC as limited partner, admittance of U.S.A. Institutional Tax Credit Fund LXXXIIl, L.P. as the investing partner, and admittance of The Richman Group Capital Corporation as the special limited partner. The terms of the First Amended and Restated Partnership Agreement provide that profits and losses be shared 99.99% by the investing partner and .01% by the general partners (273 GP LLC and PK LLC), with no allocation to the special limited partner. Providence is the holder of a note receivable from 273 Limited Partnership as outlined in Note 8. In June 201 I, PKHDFC and other related affiliated entities entered into multiple borrowing arrangements with different lenders for the purpose of obtaining financing for the construction and completion of the K Street Project. See Note 18 for loans that are guaranteed by Providence.
In June 2011 , title to the K Street Project site was conveyed to PKHDFC by the City of New York for consideration of $3 and PKHDFC's commitment to construct and provide housing for at least trurty years exclusively to persons of low income. Pursuant to the regulatory agreement with The New York City Department of Housing Preservation and Development (''NYCHPD''), the K Street Project is to be occupied by persons or families of low income, as such term is defined in the regulatory agreement. Simultaneously, the beneficial and equitable interest in the property was conveyed to 273 Limited Partnership. Construction began in June 2011 and was completed in March 2013 .
-19-
- 39 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
15.RELATED PARTIES. continued: As outlined in Notes 2 and 7, Providence is to receive fees for the developer services it provides to the K Street Project. $616,415 of these fees are secured by a note receivable as detailed in Note 8 and unearned as of June 30, 2012; therefore, they are included in deferred developer fees as of June 30, 2012. Development fees of $660,566 and $334,424 were earned during the years ended June 30, 2013 and 2012, respectively. Development fees were fully earned as of June 30, 2013 . Providence had a receivable from 273 Limited Partnership of $690,000 and $737,849 for cumulative earned developer fees, as of June 30, 3013 and 2012, respectively. Lincoln Road Project: The second permanent supportive housing project partnership that Providence entered into was to develop a 22路 unit low-income residential rental apartment project at 329 Lincoln Road in Brooklyn, New York. The units are to be used and occupied in such a manner so as to fully utilize low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code. 329 Lincoln Road Associates, L.P. ("329 Limited Partnership") was established on January 30, 2010, as a limited liability partnership, with 329 GP LLC as general partner and PIHDFC as limited partner. 329 Limited Partnership was organized under the laws of the State of New York and was established to acquire the property and financing for the Lincoln Road Project. On June 1, 2012, the 329 Limited Partnership agreement was amended and restated to reflect, among other changes, removal of PIHDFC as limited partner, the admittance of the U.S.A. Institutional Tax Credit Fund LXXXVI, L.P. as the investing partner, and the admittance of The Richman Group Capital Corporation as the special limited partner. The terms of the First Amended and Restated Partnership Agreement provide that profits and losses be shared 99.99% by the investing partner and .01% by the general partner (329 GP LLC), with no allocation to the special limited partner. Providence is the holder of two notes receivable from 329 Limited Partnership as outlined in Note 8 above.
-20路 - 40 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
15.RELATED PARTIES. continued: In June 2012, PIHDFC and other related affiliated entities entered into multiple borrowing arrangements with different lenders for the purpose of obtaining financing for the construction and completion of the Lincoln Road Project. From the proceeds of those borrowings, Providence received $160,412, which was used to pay the outstanding principal balance ($125,000) and accrued interest ($35,412) on a loan that Providence had acquired to finance certain pre-development costs in connection with the Lincoln Road Project. Consequently, accumulated Lincoln Road Project construction-in-progress assets at June 30, 2012, were transferred from Providence to 329 Limited Partnership. In addition, Providence owed 329 Limited Partnership $11,646 at June 30,2012. This amount was repaid during the year ended June 30, 2013 . See Note 18 for other loans that are guaranteed by Providence. On June 29, 2012, title to the Lincoln Project site was conveyed to PIHDFC by the City of New York for cpnsideration of $1 and PllIDFC's co=itrnent to construct and provide housing for at least thirty years exclusively to persons of low income. Pursuant to the regulatory agreement with NYCHPD, the Lincoln Project is to be occupied by persons Or families of low income, as such term is defined in the regulatory agreement. Simultaneously, the beneficial and equitable interest in the property was conveyed to 329 Limited Partnership. Construction began in July 2012 and is on-going as of June 30, 2013 . As outlined in Notes 2 and 7, Providence is to receive fees for the developer services it provides to the Lincoln Road Project. $798,353 of these fees are secured by notes receivable as detailed in Note 8 and unearned as of June 30, 2012 ; therefore, they are included in deferred developer fees as of year end. A portion of these fees were earned during the year ended June 30, 2013; $407,341 remains unearned as of June 30, 2013 . Development fees of $467,819 and $66,193 were earned during the years ended June 30, 2013 and 2012, respectively. Providence had a receivable from 329 Limited Partnership of $130,684 and $66,193 for cumulative earned developer fees, as of June 30, 2013 and 2012, respectively.
-21- 41 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
16. OPERATING AND REPLACEMENT RESERVES: In connection with the K Street and Lincoln Road Projects, Providence has entered into various agreements requiring the establishment of restricted reserves accounts, including replacement, operating and social services reserves for each housing development. The reserves, when received, must be maintained in separate bank accounts and are expected to be funded from developer fees received as follows: June 30, 2013 For the K Street Project, all development fees earned by Providence as outlined in Note 7, except for the initial $230,000, sball require deposit into reserve accounts. Installment payments totaling $115,000 are to be deposited annually into mUltiple reserve accounts beginning on or around April 2014. Additional deposits totaling $115,000 will continue annually thereafter on or around April of each subsequent year, through and including April 2018 . Thereafter, payments will be made as funds become available from net casb flow earned from operation of the K Street Project. Balance represents unfunded operating and replacement reserves expected to be paid from earned development fees in connection with the K Street Project.
$
For the Lincoln Road Project, all development fees earned by Providence as outlined in Note 7, except for the initial $143,000, shall require deposit into reserve accounts. Installment payments totaling $91,667 are to be deposited into multiple reserve accounts in connection with the Lincoln Road Project beginning on or around February 2016. Additional annual deposits totaling $91,667 will continue thereafter on or around February of each subsequent year through and including February 2018. Thereafter, payments will be made as funds become available from net cash flow earned from operation of the Lincoln Road Project. Balance represents unfunded operating and replacement reserves expected to be paid from earned development fees in connection with the Lincoln Road Project.
$
530,849
$
530,849
391,012 $
-22- 42 -
1,191,415
2012
1,582,427
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
17.FAlR VALUE MEASUREMENTS : Providence uses appropriate valuation techniques to determine fair value based on inputs available. When available, Providence measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are only used when Level I or Level 2 inputs are not available. The following table presents the fair value measurements of assets recognized in the accompanying consolidated statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and 2012: Quoted Prices in Active Markets for Identical Assets (Level 11
Total June 30, 2013: Mutual funds : Equity funds Bond funds
288,170 246,279 534,449 25,173 35,488
$
$
595,110
$
569,937
$
$
246,993 247,284 494,277 153,638 858
$
246,993 247,284 494,277
$
648,773
$
$
Certificates of deposit Money market funds
June 30,2012: Mutual funds : Equity funds Bond funds
Significant Other Observable Inputs (Level 2)
Certificates of deposit Money market funds $
288, 170 246,279 534,449
$
Significant Unobservable Inputs (Level 3)
$
25,173 35,488 25,173
$
$
153,638 858 495,135
$
153,638
.,;$==~==
Valuation techniques: The fair value of mutual funds and money market funds is based on quoted net asset values of the shares held by Providence at year-end. The fair values of the certificates of deposit are based on observable inputs other than the quoted prices included in Level I and thus are based on yields for securities of comparable maturity, quality, and type as obtained from market makers.
-23- 43 -
Providence House, Inc. and Affiliates Notes to Consolidated Financial Statements June 30, 2013 and 2012
I 8. CONTINGENCIES: Providence has guaranteed payment jointly and severally for construction financing for the K Street Project from NYCHPD, in the amount of $5,675,851. The maturity date of the note and mortgage is October 27, 2053. The balance of the loan as of June 30, 2013, is $5,675,851. Providence also guaranteed payment jointly and severally for construction financing for the Lincoln Road Project from NYCHPD, in the amount of $2,750,000. The maturity date of the note and mortgage is June 29, 2014, but may be extended to sixty years upon substantial completion and conversion. The balance of the loan as of June 30, 2013, is $2,590,260. 19. SUBSEQUENT EVENTS: On August 30, 2013, Providence purchased forty-four shares (22%) in 291 Bainbridge OP Corp. 291 Bainbridge OP Corp is a housing project similar to the K Street Project and Lincoln Road Project. The project required an unrelated non-profit to become a general partner minority shareholder. The majority shareholder, 291 Bainbridge Housing Development Fund Corporation, has signed an indemnity agreement to indemnify and hold Providence against any and all cost, liability, loss, damage or expense incurred by Providence as a result of Providence owning the shares. Subsequent events have been evaluated through the report date, which represents the date the consolidated financial statements were available to be issued. Subsequent events after that date have not been evaluated.
-24-- 44
SUPPLEMENTARY DATA
- 45 -
CAPINC~=-:. ' Y:c.:'.b:l.:ic .~'= :. : c'ยง'c~.'~c.;c'._----::::;:-:---~
------,-c-c-. 1330 AVdrlU8 oi tlle /l.msrlcas, Suit>3 23A Naw'fork. NY 100H} 212.653.0631
9:::::..::. "" \\'Ww.capi n.::rollst'.co m
INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY DATA
The Board of Directors Providence House, Inc. and Affiliates Brooklyn, New York
We have audited the consolidated financial statements of Providence House, Inc. and Affiliates as of and for the year ended June 30, 2013, and our report thereon dated March 12,2014, which expressed an unmodified opinion on those consolidated financial statements, appears on pages 1 and 2. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplemental schedules on pages 2528 are presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual sites, and it is not a required part of the consolidated 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 consolidated financial statements. The consolidated information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated 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 consolidated financial statements as a whole.
New York, New York March 12,2014
- 46 -
Providence House, Inc. and Affiliates Temporary Shelter and Feeding Programs Schedule of Activities by Site For tbe Year Ended June 3D, 2013 PH IX PerTrulIJeflt Housing PHI Revenues and gains: Donations and grants
- 47 -
Religious donaJjons and donated services Contract revenue CACFP and FEFP food grant NYC Housing HR.A payments Rental income Investment income Dc:\'cklper fees Donato::l senices value Fundnising and special events Miscellaneous: income TOlai unrestricted revenues
S
PH U $
78,000 11 4,748 11 ,228
PHll $
S
95,1 90 209,999 11,228
PH IV
72,830 114,182 13,839
PHV S 100,000 83,255
361,521 11,970
430
PH VI
S
PHVD
S 100,000
$
78,645 750,953
6,006 38,353 5,775
Totals
6,006
407,920 1,55 t ,403 60,277 3&.353 6,205
Program
S
Samaritan Lincoln Road D'Addario House Project Residence
S
S
S 6,675
Central O ~ rations
S
406,593
64,644
23,300 226,559 25,376
989,376
729,41 1
4,401,792
6,060 47,583 467,8 19
204,406
25
92
295
316,442
200,943
373,786
412 233,389
84,651
750,953
2,164,570
(continued)
See notes to consolidated financial statements -26-
44,556
6,060
467,819
S 513,268 407,920 1,808,894 60,277 38,353 56,821 47,583 1,128,385 23,300 226,559 90,432
257,491
44,556
Grand Total
660,566
Providence House, Inc. and Affiliates Temporary Shelter and Feeding Programs Scbedule of Activities by Site For the Year Ended June 30, 2013 (continued) PH IX Permanent
Housing
PHI
PHD
PHm
PH IV
PHV
PH VI
PHVD
109,214 9,863 19,820 27,600
104,704 9,628 11,479
201 , 127 18,968 46,585
25,446 2,382 6,575 14,583 17,843
363,084 34)02 64,732
26,247 2, 146
198,463 18,552 45,433 45,000 21,714 2,817 14,672
Totals
Pro~
Central
Samarilan Lincoln Road D'Addario
House
Project
QEerations
Re~delu
Grand Totals
Expenses and losses: Salaries and wages Payroll tax.. Employee benefits
Rent Utilities Telephone Professional fees Food
- 48 -
Scholarships Client assistance and gifts Other program expenses Travel Seminars and training Dues and subscriptlons Insurance EquJpment, purchase, rental and maintenance Office expenses Supplies Printing Postage and del ivcry Interest expense
Depreciation
1,751
13,900 3,988
116)72 10.399 28,835 46,000 10,936 3,728
4,193
10,865
9,224
5,644
SO
400
595 193
1,925 247
5,186 220
1,377 8,816
60 3,433
2,468
60 3.724
6,620 1,005 1,440 486 7,090
3,448 570 3,004
7,809 698 6,913
11,767 5,483 6,546
17,976 2,566 12,798 9
81
Donated services value
Talal expenses Net change
4,984
229
49,811
22
50 3,043 2)62
500 18,768 12,743 1,440 907 46,931
301 3,567
4,811
21 ,838
3,973
2)76
6,806
1,821
7,418 4,067 5)15 771
6,981
13,677
3,129
7,398
1,500
2,331
227 60,000
70 3,482 60,000
70 6,651 60,000
3,410
2,887 60,000
155 60,000
250,953
251 ,853
328,230
361,565
436,359
Other fundraising expenses Advertising
Miscellaneous
45,648 1,624
1,118.310 103,994 223,459 133, 183 136,288 16,054
S (46,547)
S 64,589
$ (127,287)
$
12,221
S (202,970)
44,071 38,472
54,127 13,384 43,103 771 91 44,071 73,488
8,626 815 2,404
9,768 942 2)79
119,640 10,367 14,585
344,031 20,742 35,323
6,249
9,115
31,849
28,601 22,920 133,700 2,612 8.000 6,150
2,89(J 115
3,125
10,095
36,551
14,777 729 1,806
1,392
96
556 30,668 6)31
17,119
33)88
1)12 3,299
210 18,336 300,000
30
143,229
638,380
2,410,569
59,976
S (58,578)
S 112,573
See notes to consolidated financial statements 路27路
$ (15,420)
69,639 S (6J,579)
I,m
16,087 18 45
4,296
70 1,524
S (245,999)
2,650 14
$467,819
3,677 2,630 4,876 11,690
1,600,375 136,860 278,050 133,183 212,102 41,864 133,700 52,538 8,000 9.300 39,767 16,438 4, 115 5,783 109,563
490 2,518
7,453 19,792 18,638 6,420 4,708 1,85 1 35,547 21,961 2,720 14,022
78,905 64,573 69,874 7,191 4,799 47,134 162,741 21,961 3,420 34,906 300,000
277, 121
759,837
3,577,142
(30,426)
$ 824,650
$712,255
S
Providence House, Inc. and Affiliates Providence House IV Compared to Approved County Funding For tbe Year Ended June 30, 2013
Revenues: • CACFP and FEFP food grant Westchester DSS payments
$
Total revenues
Approved Budget
Actual
2013-2014
2013-2014
11 ,970 355,426
$
11,970 361,521
367,396
373,491
202,830 65,897 24,913
201 , 127 65,553 26,247 2,146 5,644 50 6,620 1,005 1,440 486 7,090 17,976 2,566 12,798
Expenses: Salary expense
Payroll taxes and employee benefits Utilities Telephone Food expense Client assistance and gifts Other program expenses Travel Seminars and training Dues and SUbscriptions Insurance Repairs and maintenance Office expenses Supplies Occupancy Depreciation Postage and delivery Miscellaneous
11,970 495 1,077
6,077 26,029 12,360 15,748
7,398 9 3,410
Total expenses
367,396
Net change
$
• Revenues include only CACFP & DSS of Westchester funds.
See notes to consolidated financial statements - 49 --28-
361 ,565 $
11,926