FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT
FOR THE YEARS ENDED JUNE 30, 2023 AND 2022
To the Governing Board
San Gabriel Valley Habitat for Humanity, Inc.
Monrovia, California
Opinion
We have audited the accompanying consolidated financial statements of San Gabriel Valley Habitat for Humanity, Inc., which comprise the consolidated statement of financial position as of June 30, 2023 and 2022, and the related consolidated statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of San Gabriel Valley Habitat for Humanity, Inc. as of June 30, 2023 and 2022, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Basis for Opinion
We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of San Gabriel Valley Habitat for Humanity, Inc. and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Responsibilities of Management for the Financial Statements
Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.
In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about San Gabriel Valley Habitat for Humanity, Inc.'s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.
Auditor’s Responsibilities for the Audit of the Financial Statements
Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a
substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
• Exercise professional judgment and maintain professional skepticism throughout the audit
• Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements
• Obtain an understanding of internal control relevant to the audit 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 San Gabriel Valley Habitat for Humanity, Inc.'s internal control. Accordingly, no such opinion is expressed
• Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements
• Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about San Gabriel Valley Habitat for Humanity, Inc.'s ability to continue as a going concern for a reasonable period of time
We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters
Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplemental statements are presented for purposes of additional analysis and are 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
STATEMENT OF FINANCIAL POSITION
LIABILITIES AND NET ASSETS
JUNE 30, 2023 2022
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
CONSOLIDATED STATEMENT OF ACTIVITIES
THE YEARS ENDED JUNE 30,
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES
The accompanying notes are an integral part of this statement.
FOR THE YEARS ENDED JUNE 30, 2022
CONSOLIDATED STATEMENT OF CASH FLOWS
JUNE 30,
Adjustments to reconcile the change in net assets to cash provided by operating activities:
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS
JUNE 30, 2023 AND 2022
NATURE OF ORGANIZATION
San Gabriel Valley Habitat for Humanity (SGV Habitat) was incorporated in California in 1990 as a nonprofit corporation. SGV Habitat is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code (the Code), and is also exempt from state income taxes. SGV Habitat has been classified as a publicly supported organization, which is not a private foundation, under Section 509(a) of the Code. Contributions made by the public are deductible for income tax purposes.
SGV Habitat is an affiliate of Habitat for Humanity International, Inc. (Habitat International), a nondenominational Christian nonprofit organization whose purpose is to create decent, affordable housing for those in need, and to make decent shelter a matter of conscience with people everywhere. Although Habitat International assists with information resources, training, publications, prayer support, and in other ways, SGV Habitat is primarily and directly responsible for its own operations.
SGV Habitat's primary source of income consists of sales of homes, along with cash and in-kind contributions.
LIQUIDITY
The following table reflects SGV Habitat's financial assets as of June 30, 2023 and 2022, reduced by amounts not available for general expenditure within one year. Financial assets are considered unavailable when illiquid or not convertible to cash within one year, assets held for others, restricted by donors, or set aside by the Governing Board. The Board designations could be drawn upon if the Board approves of the action.
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
The financial statements of SGV Habitat have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (GAAP). Certain prior year amounts have been reclassified to conform to current year presentation. A summary of significant accounting policies follows, to enhance the usefulness of the financial statements to the reader. June 30,
1,844,430 $ 3,549,201
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
CONSOLIDATION
In accordance with GAAP, the financial statements of San Gabriel Valley Habitat for Humanity, Inc., SGVHFH Funding Company, LLC, and Neighborhood Housing Partners, Inc. are consolidated into the financial statements of San Gabriel Valley Habitat for Humanity, Inc. All material intercompany transactions as of June 30, 2023 and 2022 have been eliminated.
CASH AND CASH EQUIVALENTS
Cash consists of cash on hand and cash on deposit. For purposes of the statement of cash flows, SGV Habitat considers all short-term investments with a maturity of three months or less to be cash.
Financial instruments that potentially subject SGV Habitat to concentrations of credit risk consist principally of cash deposits at financial institutions and investments in marketable securities. At times, balances in SGV Habitat's cash and investment accounts exceeded the Federal Deposit Insurance Corporation (FDIC) or Securities Investors Protection Corporation (SIPC) limits.
INVESTMENTS
Investments consist of certificates of deposit, which are stated at the contract price plus accrued interest. The fair value of these investments is a level 2 classification (see FAIR VALUE MEASUREMENTS).
CONTRIBUTIONS RECEIVABLE
Contributions receivable represent unconditional promises-to-give, which are recognized as income when received and recorded at fair value based upon estimated future cash flows. All contributions receivable are expected to be collected within one year.
MORTGAGE LOANS RECEIVABLE
Mortgage loans receivable consist of non-interest bearing mortgage loans from homeowners that are secured by real estate and are received in monthly installments over the lives of the respective mortgages. Rent payments received before loans become effective are applied as deposits towards the buyer's purchase price through escrow. These non-interest bearing mortgages are recorded at their net realizable value and have been discounted at the inception of each mortgage based upon prevailing market rates for low-income housing. This rate is recommended by Habitat International and does not approximate current market conditions. Utilizing the effective interest method, this discount is recognized as interest income over the terms of the mortgages. A concentration of credit risk may arise from the mortgage loans receivable.
Certain grants provided by local governments or institutional investors (donating entities) would be required to be repaid to the donating entity in the event the projects for which the grants were provided are sold by the homeowners within a specified time period, between 5 and 45 years. These contingent obligations of the homeowners range from approximately $5,000 to $160,000 and are documented in the form of silent second and third trust deeds held by SGV Habitat (CalHome - restricted) or outside of SGV Habitat.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
ALLOWANCE FOR LOAN LOSSES
Before a mortgage is issued, the candidate is carefully screened for financial condition, cash flow, and ability to meet the loan repayment schedule. This screening is done to identify qualified borrowers who can repay the mortgages and mitigate the default rate on mortgages receivable. Loans are classified as delinquent when payments are 30 days overdue. At June 30, 2023 and 2022, no loans were past due. Because the mortgages are heavily discounted when recorded and the value of the collateral is in excess of the discounted mortgages, losses resulting from non-payment are not likely. Also, because of the contingent obligations in that the homeowners are liable for the second and third trust deeds on the properties (see MORTGAGE LOANS RECEIVABLE), the default rate of these mortgages is very low. However, if a loan becomes delinquent for more than 90 days and management determines that the homeowner will be unable to repay the mortgage balance, SGV Habitat will commence with foreclosure procedures.
RESTORE INVENTORY
ReStore inventory consists of purchased items and donated building materials available for sale to the general public; the recorded value of donated inventory is estimated based on prior year sales to approximate the gift-in-kind fair value when received.
PROPERTY AND EQUIPMENT
Property and equipment are reported at cost, or if donated, at the fair market value on the date received. Depreciation is computed on a straight-line basis over estimated useful lives of 3 to 5 years. Maintenance and repairs are recorded as expenses in the year incurred, and renewals and betterments exceeding $1,000 are capitalized.
INTANGIBLE ASSETS
Intangible assets are reported at cost. Amortization is computed on a straight-line basis over the estimated useful life.
LEASES
Effective July 1, 2022, SGV Habitat adopted FASB ASC Topic 842, Leases (ASC 842). The new standard requires recognition of a Right-of-Use (ROU) asset and liability for future lease payments for contracts that meet the definition of a lease and requires disclosure of certain other information about leasing arrangements.
In accordance with the transition guidance provided in ASC 842, SGV has recorded a cumulative-effect adjustment to net assets in the amount of $38,009. This adjustment was recorded to recognize the remaining deferred rent liability recorded under the former lease standards. In addition, ASC 842 offers various practical expedients upon adoption, of which SGV Habitat has elected the following:
1. An entity need not reassess whether any expired or existing contracts are or contain leases
2. An entity need not reassess the lease classification for any expired or existing leases (for example, all existing leases that were classified as operating leases in accordance with previous GAAP guidance for leases will be classified as operating leases, and all existing leases that were classified as capital leases in accordance with previous GAAP guidance for leases will be classified as finance leases)
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
LEASES (continued)
3. An entity need not reassess initial direct costs for any existing leases
4. An entity may use hindsight in determining the lease term (that is, when considering lessee options to extend or terminate the lease and to purchase the underlying asset) and in assessing impairment of the entity's right-of-use assets
SGV Habitat categorizes leases with contractual terms longer than 12 months as either operating or finance. Lease liabilities are recognized at the present value of the fixed lease payments, reduced by any incentives received. Lease ROU assets are recognized based on the initial present value of the fixed lease payments, less any lease incentives, plus any direct costs incurred in executing the lease. In measuring the present value, SGV Habitat uses the interest rate stated or implicit in the lease agreement. If the interest rate is not easily determinable based on the terms of the lease agreement, SGV Habitat uses the risk-free rate at the commencement of the lease. When the lease includes an option to extend the lease term, terminate the lease before the contractual expiration date, or purchase the leased asset, and it is reasonably certain that SGV Habitat will exercise the option, the option is considered in determining the classification and measurement of the lease. Lease agreements with lease and non-lease components are combined as a single lease component for all classes of underlying assets.
Costs associated with operating leases are recognized on a straight-line basis over the term of the lease. Finance lease assets are amortized on a straight-line basis over the lease term, with the interest component of the lease included in interest expense. Certain leases include variable payments based on factors such as price indices, common area maintenance, or the lessor's operating costs, which are expensed as incurred.
Leases with an initial term of 12 months or less are expensed on a straight-line basis over the lease term. SGV Habitat does not recognize a ROU asset or lease liability for leases with terms of less than 12 months.
AMOUNTS HELD FOR OTHERS
During the fiscal year ending June 30, 2020, SGV Habitat entered into an agreement with AmeriNat to service a majority of SGV Habitat's mortgage loans receivable. As the mortgage servicer, AmeriNat (agent) collects the monthly mortgage payments, HOA dues and property taxes from borrowers, and remits the payments to the respective principal.
SGV Habitat also sold a portfolio of its mortgage loans receivable to East West Bank, but remains the servicer of the loans. SGV Habitat collects the payments as per the original lending agreement and remits the payments to East West Bank. In the event that collections are delinquent, East West Bank may substitute a previously sold loan with a different loan held by SGV Habitat, as per the terms of the agreement with East West Bank. The amounts held for others balance at June 30, 2022 consists primarily of escrow funds held for borrowers that have not yet been transferred to AmeriNat.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
DEBT ISSUANCE COSTS
Costs incurred with obtaining financing are capitalized and amortized over the lives of the respective financing arrangements. Debt issuance costs of $98,205 and $98,205, net of accumulated amortization of $16,838 and $12,628, as of June 30, 2023 and 2022, respectively, are reported as a direct deduction of the related debt. Amortization of debt issuance costs is reported as a component of interest expense and is calculated using the straight-line method. GAAP requires that the effective interest rate method be used to amortize the costs; however, the effect of using the straight-line method is not materially different from the results that would have been obtained under the effective interest rate method.
NET ASSETS
SGV Habitat reports information regarding its financial position and activities according to two classes of net assets: without donor restriction and with donor restriction, as described below:
Without donor restriction includes funds which are expendable for the support of SGV Habitat's operations.
With donor restriction includes funds which donors have restricted for specific purposes and/or specific timetables.
REVENUE RECOGNITION
SGV Habitat’s material revenue-generating activities and related accounting policies are as follows:
ReStore Sales and Sales to Homeowners
SGV Habitat recognizes revenue on the sale of goods to customers at its ReStore locations and on the sale of homes at a point in time. Revenue is recognized when the title to goods is passed to its customers or homeowners, in an amount that reflects the consideration SGV Habitat expects to be entitled to in exchange for those products.
Contributions
Contributions are recorded when cash or unconditional promises-to-give have been received, or when ownership of donated assets is transferred to SGV Habitat. SGV Habitat records contributions as restricted if donors restrict their use for a specific purpose or time or both. When donor restrictions expire, that is, when the purpose restriction is fulfilled or the time restriction expires, net assets with donor restriction are reclassified to net assets without donor restriction and reported in the statement of activities as net assets released from restrictions. It is SGV Habitat's policy to record donor restricted contributions received and expended in the same accounting period as contributions without donor restrictions.
When contributions are restricted by donors for the acquisition of property or other long-lived assets, the restriction is considered to be met when the property or other long-lived asset is acquired.
In-kind Contributions
SGV Habitat receives donated building materials and various other building supplies for use in the construction of houses. Such donations are recorded in the statement of activities as in-kind contributions at their estimated fair value on the date received. Assets received with explicit
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
REVENUE RECOGNITION (continued)
In-kind Contributions (continued) restrictions regarding their use are reported as increases in net assets with donor restriction. Absent donor stipulations regarding how long those donated assets must be maintained, SGV Habitat reports expirations of donor restrictions when the amounts are expended as instructed by the donor. SGV Habitat reclassifies net assets with donor restriction to net assets without donor restriction at that time. During the years ended June 30, 2023 and 2022, in-kind contributions amounted to $2,443,402 and $2,816,805, and donated services amounted to $76,681 and $20,215 , respectively.
FUNCTIONAL ALLOCATION OF EXPENSES
The financial statements report certain categories of expenses that are attributable to more than one program or supporting function. Therefore, these expenses require allocation on a reasonable basis that is consistently applied. The expenses that are allocated include personnel expenses, and office and occupancy, which are allocated on a basis of time and efforts.
DONATED SERVICES
SGV Habitat receives substantial donated architectural, construction, and legal services in conjunction with home construction and sales to homeowners. Contributed services are recognized as in-kind contributions in accordance with Topic 958 of the Financial Accounting Standards Board (FASB) Accounting Standards Codification of Accounting for Contributions Received and Contributions Made, if the services (a) create or enhance nonfinancial assets, or (b) require specialized skills, that would otherwise be purchased by SGV Habitat.
In addition to donated services recorded in the financial statements, many other individuals routinely provide voluntary services to the overall work of SGV Habitat. These services have a significant impact on making the housing program effective. However, the value of these services is not reflected in the financial statements because it does not meet the criteria described above.
USE OF ESTIMATES
The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
FAIR VALUE MEASUREMENTS
Accounting principles generally accepted in the United States of America require that items recorded at fair market value be valued as level one, two or three, based on various inputs and methodologies as described below:
Level 1 - quoted prices and active markets for identical holdings
Level 2 - significant observable market-based inputs, other than Level 1 quoted prices, or unobservable inputs that are based on comparable market data
Level 3 - significant observable inputs that are not based on comparable market data
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
INCOME TAXES
SGV Habitat operates as a nonprofit corporation under section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes; accordingly, no provision is made for current or deferred income taxes. SGV Habitat uses the same accounting methods for tax and financial reporting.
MORTGAGE LOANS RECEIVABLE
During the year ended June 30, 2023 SGV Habitat sold four mortgages for $1,155,427 with aggregate face values of $1,425,713 and discounts on the notes in the amount of $844,246. This resulted in a gain of $573,960 for the year ended June 30, 2023.
Mortgage
As of June 30, 2023, there were no
June 30,
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
MORTGAGE LOANS RECEIVABLE (continued)
The future amounts to be received under mortgage loans receivable outstanding at June 30, 2023 are:
HOUSES UNDER CONSTRUCTION
6,243,339 $ 6,734,707
In accordance with GAAP, houses under construction are stated at cost, which is lower than market value.
PROPERTY AND EQUIPMENT
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
PROPERTY AND EQUIPMENT (continued)
INTANGIBLE ASSETS
Intangible assets consisted of:
Depreciation and amortization expense for the years ended June 30, 2023 and 2022 was $56,670 and $92,587, respectively. June 30,
amortization (12,286) (11,800) $ 973 $ -
Amortization expense for the years ended June 30, 2023 and 2022 was $486 and $0, respectively.
NOTES PAYABLE
Note secured by real property in Baldwin Park, California, noninterest bearing; paid back upon SGV Habitat's sale through the issuance of loans to buyers $ 1,410,000 $ 1,410,000
Note secured by real property in Pasadena, California, bearing interest at 5.3% per annum; paid back upon SGV Habitat's sale through the issuance of loans to buyers - 525,000
Note secured by mortgage loans receivable; noninterest bearing; monthly payments of $7,087; maturing October 2042
Note secured by real property in El Monte, California, bearing interest at 2% per annum; paid back upon SGV Habitat's sale through the issuance of loans to buyers - 276,482
Note secured by real property in Baldwin Park, California, bearing interest at 3% per annum; paid back upon SGV Habitat's sale through the issuance of loans to buyers 222,681 -
Note secured by real property in Altadena, California, bearing interest at 6% per annum; maturing February 2026 209,2683,261,939 3,716,511
$ 3,028,170 $ 3,458,904 June 30,
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
NOTES PAYABLE (continued)
The discount on notes payable is amortized based on the interest method over the lives of the loans. Amortized interest for the years ended June 30, 2023 and 2022 was $23,837 and $24,650, respectively, and is included in interest expense.
In March 2023, SGV Habitat entered into a note payable agreement with the City of Baldwin Park in the amount of $222,681 in exchange for land located in Baldwin Park to be used to build an affordable housing unit. Upon the sale of the affordable housing unit, the total note payable of $222,681 will be assumed by the purchaser of the affordable housing unit. This affordable housing unit was not completed as of June 30, 2023.
In November 2021, SGV Habitat entered into a note payable agreement with the City of Pasadena in the amount of $525,000 in exchange for land located in Pasadena to be used to build two affordable housing units. Upon completion of the project, the City of Pasadena will discount the loan to $400,000. The remaining balance of the note payable will be assumed by the purchasers of the affordable housing units. All units were completed and sold for this project during the year ended June 30, 2023.
In July 2021, Neighborhood Housing Partners, Inc. entered into a note payable agreement with the City of El Monte in the amount of $276,482 in exchange for land located in El Monte to be used to build an affordable housing unit. Upon the sale of the affordable housing unit, the total note payable of $276,482 will be assumed by the purchaser of the affordable housing unit. The affordable housing unit was sold in July 2022.
In March 2021, SGV Habitat entered into a note payable agreement with the City of Baldwin Park in the amount of $1,410,000 in exchange for land located in Baldwin Park to be used to build 12 affordable housing units. Upon completion of the affordable housing units, the total note payable of $1,410,000 will be divided equitably based on the number of units completed and assumed by each purchaser of an affordable housing unit. The agreement between SGV Habitat and the City of Baldwin Park requires all units to be sold by December 2024. No units were completed or sold for this project as of June 30, 2023.
The future minimum payments at June 30, 2023 are as follows:
Interest expense for the years ended June 30, 2023 and 2022 was $40,574 and $34,317, respectively.
Management believes SGV Habitat was in compliance with all loan covenants for the years ended June 30, 2023 and 2022.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
LINE OF CREDIT
SGV Habitat has a line of credit agreement with East West Bank with a maximum limit of $1,250,000. The line is unsecured and bears interest at the bank's prime lending rate, with a floor of 6.25%. Additional borrowings on the line during the years ended June 30, 2023 and 2022 were $395,000 and $0, respectively. Principal payments on the line of credit during the years ended June 30, 2023 and 2022 were $300,000 and $0, respectively. The outstanding principal balance on the line of credit as of June 30, 2023 and 2022 was $395,000 and $300,000, respectively.
In February 2022, Neighborhood Housing Partners, Inc. entered into a construction line of credit agreement with East West Bank with a maximum limit of $3,250,000. The line is secured by a construction deed of trust on the projects that the funds are drawn for, and bears interest at the bank's prime lending rate, with a floor of 3.75%. There were no borrowings or payments on the construction line of credit during the years ended June 30, 2023 and 2022, respectively. There was no outstanding balance on the line as of June 30, 2023 and 2022.
COMMITMENTS
At June 30, 2023 and 2022, SGV Habitat had executed commitments for various building-related services totaling $755,459 and $461,637, respectively. As of June 30, 2023 and 2022, $625,820 and $345,443 had been completed, respectively.
RENTAL INCOME
SGV Habitat subleases its Atwater Village, California property to one tenant. The tenant leases the property under a noncancelable lease agreement expiring in October 2023. The minimum monthly lease payments approximated $3,900 and $3,800, during the years ended June 30, 2023 and 2022, respectively.
At June 30, 2023, future minimum payments to be received are as follows:
Rental income for the years ended June 30, 2023 and 2022 was approximately $64,070 and $67,480, respectively, and is included in other income.
LEASES
SGV Habitat rents four properties in California located in the cities of Azusa, Atwater Village, Duarte and Monrovia. The leases expire at various dates between November 2023 and March 2025.
For the year ended June 30, 2023, SGV Habitat recognized the following lease expense:
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
LEASES (continued)
Other information regarding cash flows related to operating leases, ROU assets obtained in exchange for new operating lease liabilities, weighted average remaining lease terms for operating leases, as well as weighted average discount rates used in determining present value discounts are as follows:
The future maturities of operating lease liabilities are as follows:
Upon employment, all employees of SGV Habitat are eligible to participate in the San Gabriel Valley Habitat for Humanity, Inc.'s 403(b) plan (the Plan). Employees may contribute a portion of their salaries to the Plan as the legal limits allow. The plan allows for employer matching contributions, which are made at the discretion of SGV Habitat. Contributions made by SGV Habitat for the years ended June 30, 2023 and 2022 were $38,025 and $14,663, respectively.
SALE OF HOMES
During the year ended June 30, 2023, SGV Habitat and NHP sold six Habitat homes. Mortgages totaling $2,245,691 were issued through escrow.
During the year ended June 30, 2022, SGV Habitat sold six Habitat homes. Mortgages totaling $2,211,471 were issued through escrow.
RELATED PARTY TRANSACTIONS
SGV Habitat annually remits a portion of its contributions (excluding in-kind contributions) to Habitat International. These funds are used to construct homes in economically depressed areas around the world. During the years ended June 30, 2023 and 2022, SGV Habitat contributed to Habitat International $9,189 and $63,299, respectively for this purpose. SGV Habitat also paid Habitat International fees for stewardship and organizational sustainability totaling $25,000 and $25,000 for the years ended June 30, 2023 and 2022, respectively, which are included in tithes and dues on the statement of functional expenses.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
NOTES TO FINANCIAL STATEMENTS (CONTINUED)
JUNE 30, 2023 AND 2022
RELATED PARTY TRANSACTIONS (continued)
On September 30, 2019, SGV Habitat issued a promissory note to a related party, Neighborhood Housing Partners, Inc, in the amount of $10,000. The note is a zero-interest note, payable in 36 months. The outstanding balance on the note as of June 30, 2023 and 2022 was $0 and $10,000, respectively, which has been eliminated through consolidation.
On June 30, 2021, SGV Habitat issued two promissory notes to a related party, Neighborhood Housing Partners, Inc, in the total amount of $300,000. The notes bear interest at a rate equivalent to SGV Habitat's interest rate on its line of credit, and is due on demand. The outstanding balance on the note as of June 30, 2023 and 2022 was $0 and $300,000, respectively, which has been eliminated through consolidation.
BOARD DESIGNATED NET ASSETS
The Board designated net assets totaling $3,029,049 and $2,933,889 for the years ended June 30, 2023 and 2022, respectively, are to pay for current housing projects.
NET ASSETS WITH DONOR RESTRICTION
Net
subject to purpose restrictions are available for:
June 30,
SUBSEQUENT EVENTS
SGV Habitat has evaluated subsequent events through the date at which the financial statements were available to be issued. Based on its evaluation, management has determined the following requires disclosure:
In July 2023, SGV Habitat acquired a 50% interest in Presbyterian-Habitat Affordable Housing Partners, LLC and funded an initial capital contribution in the amount of $10. The purpose of this LLC is to develop low-incoming housing on a property located in Baldwin Park, California, and for that purpose, to acquire, develop, lease, rent, improve, pledge, mortgage, manage, hold, maintain, sell, donate and otherwise do anything else with respect to the property.
In October, SGV Habitat signed a construction loan agreement with the City of Baldwin Park totaling $1,200,000 and is secured by property in Baldwin Park, California. The loan bears interest at a rate of 3% per annum. Upon completion of construction, the loan shall be assumed by qualified home buyers at the date of sale.
In October, SGV Habitat signed a construction loan agreement with the City of Baldwin Park totaling $520,000 and is secured by property in Baldwin Park, California. The loan bears interest at a rate of 3% per annum. Upon completion of construction, the loan shall be assumed by qualified home buyers at the date of sale.
SUPPLEMENTARY INFORMATION
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
STATEMENT OF FINANCIAL POSITION
SUPPLEMENTAL SCHEDULE
JUNE 30, 2023
The accompanying notes are an integral part of this statement.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
STATEMENT OF ACTIVITIES
SUPPLEMENTAL SCHEDULE FOR THE YEAR ENDED JUNE 30, 2023
AND REVENUE
The accompanying notes are an integral part of this statement.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
SUPPLEMENTAL STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED JUNE 30, 2023
The accompanying notes are an integral part of this statement.
SGV Habitat and SGVHFH Funding Company, LLC Neighborhood Housing Partners, Inc.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
STATEMENT OF CASH FLOWS
SUPPLEMENTAL SCHEDULE FOR THE YEAR ENDED JUNE 30, 2023
CASH FLOWS FROM OPERATING ACTIVITIES
The accompanying notes are an integral part of this statement.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
STATEMENT OF CASH FLOWS (CONTINUED)
SUPPLEMENTAL SCHEDULE FOR THE YEAR ENDED JUNE 30, 2023 SGV Habitat and Neighborhood SGVHFH Funding
CASH FLOWS FROM INVESTING ACTIVITIES
The accompanying notes are an integral part of this statement.
SAN GABRIEL VALLEY HABITAT FOR HUMANITY, INC.
SUMMARY OF PROJECTS
SUPPLEMENTAL SCHEDULE
JUNE 30, 2023
The following is a schedule of projects and their status at June 30, 2023:
Olive Ave., Torch, Angelino, Stewart, Bresee, Lee Ln., Altadena Baldwin Park Azusa Baldwin Park Baldwin Park El Monte
Status of occupancy of Not occupied Not occupied Not occupied Not occupied Not occupied Not occupied homeowner
The accompanying notes are an integral part of this statement.
