UNITED WAY OF PORTAGE COUNTY, INC.
FINANCIAL STATEMENTS WITH INDEPENDENT AUDITOR’S REPORT
June 30, 2016
INDEX Page Independent Auditor’s Report
1
Financial Statements: Statement of Financial Position
2
Statement of Activities and Changes in Net Assets
3
Statement of Cash Flows
5
Statement of Functional Expenses
7
Notes to Financial Statements
8
INDEPENDENT AUDITOR'S REPORT Board of Directors United Way of Portage County, Inc. Ravenna, Ohio We have audited the accompanying financial statements of United Way of Portage County, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2016 and 2015, and the related statements of activities and changes in net assets, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United Way of Portage County, Inc. as of June 30, 2016 and 2015, and the results of 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.
MEADEN & MOORE, LTD. Cleveland, Ohio February 14, 2017
STATEMENT OF FINANCIAL POSITION United Way of Portage County, Inc. June 30 2016 ASSETS Cash and cash equivalents Investments Beneficial interest in trust Pledge receivables Prepaid expenses Property and equipment - net Total Assets
LIABILITIES Accounts payable Accrued expenses Deferred revenue Designations payable Allocations payable
2015
$
184,375 149,613 388,092 404,821 2,774 1,110
$
230,594 172,439 406,396 423,420 1,479
$
1,130,785
$
1,234,328
$
13,903 38,989 29,157 405,000
$
5,821 9,697 11,840 43,872 400,000
Total Liabilities
487,049
471,230
NET ASSETS Unrestricted Temporarily restricted Permanently restricted
132,095 406,702 104,939
209,311 445,954 107,833
Total Net Assets
643,736
763,098
Total Liabilities and Net Assets
$
See accompanying notes. -2-
1,130,785
$
1,234,328
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS United Way of Portage County, Inc. Year Ended June 30, 2016
Unrestricted PUBLIC SUPPORT Annual campaign Designation administration fees Beneficial interest in trust - change in value Special events - net Contributions and grants
$
Total Public Support OTHER REVENUE Investment loss
833,700 13,603
Temporarily Restricted $
Net Assets Released from Restrictions Satisfaction of program restrictions
-
$
Total -
$
833,700 13,603
15,425 1,912
3,400 -
-
3,400 15,425 1,912
864,640
3,400
-
868,040
(639)
Total Support and Revenue
Permanently Restricted
(3,545)
(1,181)
(5,365)
864,001
(145)
(1,181)
862,675
40,820
(39,107)
(1,713)
-
904,821
(39,252)
(2,894)
862,675
EXPENSES Program services General and administrative Fundraising and development
805,804 90,646 85,587
-
-
805,804 90,646 85,587
Total Expenses
982,037
-
-
982,037
Change in Net Assets
(77,216)
(39,252)
209,311
445,954
Beginning Net Assets Ending Net Assets
$
132,095
See accompanying notes. -3-
$
406,702
(2,894)
(119,362)
107,833 $
104,939
763,098 $
643,736
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS United Way of Portage County, Inc. Year Ended June 30, 2015 Temporarily Restricted
Unrestricted PUBLIC SUPPORT Annual campaign Designation administration fees Beneficial interest in trust - change in value Special events - net Contributions and grants
$
Total Public Support OTHER REVENUE Investment income Total Support and Revenue Net Assets Released from Restrictions Satisfaction of program restrictions
794,802 15,436
$
Permanently Restricted -
$
Total -
$
794,802 15,436
19,230 9,231
(3,924) 25,000
-
(3,924) 19,230 34,231
838,699
21,076
-
859,775
717
866
289
1,872
839,416
21,942
289
861,647
37,218
(35,557)
(1,661)
-
876,634
(13,615)
(1,372)
861,647
EXPENSES Program services General and administrative Fundraising and development
721,278 83,426 80,706
-
-
721,278 83,426 80,706
Total Expenses
885,410
-
-
885,410
Change in Net Assets
(8,776)
Beginning Net Assets Ending Net Assets
(13,615)
218,087 $
209,311
See accompanying notes. -4-
(1,372)
459,569 $
445,954
(23,763)
109,205 $
107,833
786,861 $
763,098
STATEMENT OF CASH FLOWS United Way of Portage County, Inc. Years Ended June 30 2016 CASH FLOWS FROM OPERATING ACTIVITIES: Cash received from support and revenue Cash paid for annual campaign Cash paid for other operating expenses and employees
$
Cash Used in Operating Activities
2015
871,399 $ (482,685) (474,098)
870,462 (684,490) (427,990)
(85,384)
(242,018)
25,711 (8,250) 21,704
16,826 (16,826) 21,878
39,165
21,878
Decrease in Cash and Equivalents
(46,219)
(220,140)
Cash and Cash Equivalents - Beginning of the Year
230,594
450,734
CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of investments Purchase of investments Distributions received from beneficial interest in trust Cash Provided by Investing Activities
Cash and Cash Equivalents - End of the Year
$
See accompanying notes. -5-
184,375
$
230,594
2016 RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH USED IN OPERATING ACTIVITIES: Change in Net Assets Adjustments to Reconcile Change in Net Assets to Net Cash Used In Operating Activities: Depreciation Gain on sale of investments Unrealized loss on investments Unrealized (gain) loss on beneficial interest in trust Interest and dividends reinvested Increase (Decrease) in Cash from Changes in: Pledges receivable Prepaid expenses Accounts payable Accrued expenses Deferred revenue Designations payable Allocations payable
$
Total Adjustments Cash Used in Operating Activities
$
-6-
(119,362) $
2015
(23,763)
369 (10,488) 19,275 (3,400) (3,422)
517 (16,826) 15,825 3,924 (871)
18,599 (2,774) 8,082 29,292 (11,840) (14,715) 5,000
2,173 (3,742) 4,494 4,590 (63,261) (165,078)
33,978
(218,255)
(85,384) $
(242,018)
STATEMENT OF FUNCTIONAL EXPENSES United Way of Portage County, Inc. Years Ended June 30
2016 General and Fundraising and Program Services Allocations to agencies Personnel costs Professional and contract services Occupancy Office expenses Advertising, printing and publications Staff development Other expense Total Expense
administrative
development
Total
$
472,970 175,581 4,398 27,915 5,006 2,708 9,802 107,424
$
58,875 5,999 5,768 3,693 387 2,601 13,323
$
63,236 2,686 7,940 2,686 2,083 4,647 2,309
$
472,970 297,692 13,083 41,623 11,385 5,178 17,050 123,056
$
805,804
$
90,646
$
85,587
$
982,037
2015 General and administrative
Program Services Allocations to agencies Personnel costs Professional and contract services Occupancy Office expenses Advertising, printing and publications Staff development Other expense Total Expense
Fundraising and development
Total
$
456,151 160,138 3,802 28,339 4,906 3,090 9,744 55,108
$
53,331 5,186 5,312 2,329 291 2,915 14,062
$
57,575 2,322 7,982 2,970 2,377 4,594 2,886
$
456,151 271,044 11,310 41,633 10,205 5,758 17,253 72,056
$
721,278
$
83,426
$
80,706
$
885,410
See accompanying notes.
-7-
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
1
Summary of Significant Accounting Policies Nature of the Organization: United Way of Portage County, Inc. (United Way) is incorporated in the state of Ohio as a not-forprofit organization. The United Way was established to collect and distribute public donations to various local charities. The United Way's mission is to unite people and resources in a communitywide effort to care for one another. Basis of Accounting: The financial statements of the United Way have been prepared on the accrual basis of accounting. Use of Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Classification of Net Assets: In accordance with U.S. GAAP, contributions are classified as unrestricted, temporarily restricted and permanently restricted based on donor specifications. Assets, liabilities, revenue and gains are presented under these classifications. Designations by the Board, while separately stated, are considered unrestricted. Grants and contributions received with donor-imposed restrictions are recorded as unrestricted if the restrictions are expected to be met within the same period. This policy is also followed for investment income received with donor-imposed restrictions. Cash and Cash Equivalents: For the purposes of the Statement of Cash Flows, The United Way considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Temporarily uninvested cash in investment accounts is considered an investment rather than a cash equivalent. Beneficial Interest Investments: The United Way is named as an income and remainder beneficiary of a split interest agreement, which was created in 1971 upon the death of the trust settler. Through a court settlement, the United Way is to receive 25% of the annual income from the trust and 25% of the principal upon termination of the trust in 2021. The United Way records the interest at fair value and distributions from the trust are recorded as releases from restriction. The United Way received $21,704 (2016) and $21,878 (2015) in distributions from the trust.
-8-
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
1
Summary of Significant Accounting Policies, Continued Marketable Securities: Marketable securities are recorded at fair market value based on published market prices. The difference between their cost and fair market value is recorded as an unrealized gain or loss in the Statement of Activities and Changes in Net Assets. Specific-identification is used to identify securities sold. Revenue Recognition: An annual campaign is conducted each year to fund the United Way's operations and allocations and grants for local charitable agencies. Allocations to local agencies are determined by a volunteer committee and are based on a percentage of the total funds raised in the annual campaign. The actual dollar allocations are calculated once total proceeds from the campaign are determined, which is typically in the following calendar year of the campaign. The allocations are recorded as a liability, once the Board has approved the recommendations of the allocations committee and paid to the agencies during the following fiscal year. Contributions and grants are recognized when awarded as unrestricted, temporarily restricted or permanently restricted in accordance with donor specifications. When a restriction expires through accomplishment of purpose or passage of time, the restricted net assets are reclassified to unrestricted and reported in the Statement of Activities as net assets released from restrictions. Grants and contributions received with donor imposed restrictions are recorded as unrestricted if the restrictions are expected to be met within the same period. Revenue that has been received but is not earned during the period is classified as deferred in the Statement of Financial Position. Donated Services: The United Way received donated services (general assistance, fundraising events, governance, etc.) which do not meet the criteria for recognition under FASB ACS 958-605 or cannot be objectively measured. These donations, while not recognized in the financial statements, provide valuable resources to the United Way.
-9-
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
1
Summary of Significant Accounting Policies, Continued Property and Equipment: Property and equipment purchased by the United Way are carried at cost. Donated property and equipment are recorded at estimated fair value at the date of donation. Expenditures for maintenance and repairs are charged to income as incurred. Additions and betterments are capitalized. The cost and related accumulated depreciation of properties sold or otherwise disposed of are removed from the accounts and any gain or loss is reflected in the current years’ activities.
2016 Equipment Office furniture
$
2015
51,377 9,548
$
60,925 (59,815)
Less: Accumulated depreciation
Depreciation Expense
51,377 9,548 60,925 (59,446)
$
1,110
$
1,479
$
369
$
517
The United Way provides for depreciation of property and equipment generally using straight-line methods of depreciation over the following estimated useful lives of the assets:
Class
Years
Equipment Office furniture
5 3-5
Designations Payable: The amount in designations payable is an estimate based on the total designated payable income for fiscal years 2016 and 2015. Donors have the ability to designate their pledge to a specific organization; and therefore, the United Way is required to remit the amount of the pledges collected less a 18.37% administration fee to the designated agency. Allocations Payable: The amount in allocations payable is an estimate based on the total amount to be payable to organizations supported by United Way. The amount allocated from the current year campaign to be paid in the next year amounted to $405,000 (2016) and $400,000 (2015). Functional Expense Allocations Expenses are charged to functional areas based on specific-identification when possible. Expenses that cannot be specifically identified to a function are allocated to the functional areas based on factors such as direct relationship of expense, time spent by employees and square footage of space used for various programs. - 10 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
1
Summary of Significant Accounting Policies, Continued Income Tax Status: The United Way is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and operates as a public charity. The United Way is required to operate in conformity with the Code to maintain its tax-exempt status. Accounting for Uncertainty in Income Taxes: Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the United Way and recognize a tax liability if the United Way has taken certain tax positions that more-likely-than-not would not be sustained upon examination by applicable taxing authorities. The United Way would recognize interest and penalties accrued, if any, related to unrecognized tax uncertainties in income tax expense. Management has analyzed tax positions taken and has concluded that there are no material uncertain tax positions taken, or expected to be taken, that would require recognition of a liability or disclosure in the financial statements. Reclassifications: Certain prior year amounts have been reclassified to conform with the current year presentation. Subsequent Events: Management evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affect the financial statements. Subsequent events have been evaluated through February 14, 2017, which is the date the financial statements were available to be issued.
- 11 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
2
Investments
2016 Cost Common stocks Mutual funds
$
157,750
Total
$
157,750
2015 Market
$
Less: Cost
Cost
Market
149,613
$
2,157 $ 159,144
13,080 159,359
149,613
$
161,301
172,439
157,750
Net Unrealized Gains (losses) on Marketable Securities
$
161,301
(8,137)
$ 2016
Investment income (loss) consists of the following: Interest and dividends Realized gains Unrealized losses
11,138 2015
$
3,422 $ 10,488 (19,275)
871 16,826 (15,825)
$
(5,365) $
1,872
Fair Value Measurements: FASB ASC 820, "Fair Value Measurements", applies to all financial instruments that are measured and reporting on a fair value basis. As defined in FASB ASC 820, fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. In determining fair value, the United Way utilizes certain assumptions that market participants would use in pricing the asset or liability, including assumptions about risk and/or the risks inherent in the inputs to the valuation technique. These inputs can be readily observable, market corroborated, or generally unobservable firm inputs. The United Way utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs. Based on the examination of the inputs used in the valuation techniques, the United Way is required to provide the following information according to the fair value hierarchy. The fair value hierarchy ranks the quality and reliability of the information used to determine fair values.
- 12 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
2
Investments, Continued Fair Value Measurements, Continued: Financial assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. * * * *
Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical assets or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the asset or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means.
Level 3: Unobservable inputs that are not corroborated by market data. A financial instrument's categorization within the valuation hierarchy is based upon the lowest level of input that is significant to the fair value measurement. The following descriptions of the valuation methodologies used for instruments measured at fair value include the general classification of such instruments pursuant to the valuation hierarchy. There have been no changes in the methodologies used at June 30, 2016 and 2015. Common Stocks and Mutual Funds: The fair value of the equities and mutual funds is based on quoted market prices. Beneficial Interest in Trust: The net present value of future cash flows is recorded based on the United Way's ownership percentage of the value of the underlying assets as confirmed by the Trustees.
- 13 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
2
Investments, Continued The following table presents the financial instruments carried at fair value as of June 30, 2016 by the FASB ASC 820 valuation hierarchy:
Unobservable Models with Inputs that Total Carrying Significant are Not Observable Corroborated Value in the Market by Market Statement of Parameters Financial Data (Level 2) (Level 3) Position
Quoted Market Prices in Active Markets (Level 1) Mutual Funds: Blend
$
149,613
Beneficial interest in trust
$
$
149,613
- $ 388,092
$
388,092
$
- $
149,613
-
388,092
- $
537,705
The following table presents the financial instruments carried at fair value as of June 30, 2015 by the FASB ASC 820 valuation hierarchy:
Quoted Market Prices in Active Markets (Level 1) Common Stock: Value Mutual Funds: Blend Growth
$
13,080 $
-
Total Carrying Value in the Statement of Financial Position
$
$
-
13,080
156,917 2,442
-
-
156,917 2,442
172,439
-
-
172,439
-
406,396
-
406,396
406,396 $
-
Beneficial interest in trust $
Models with Significant Observable Market Parameters (Level 2)
Unobservable Inputs that are Not Corroborated by Market Data (Level 3)
172,439 $
- 14 -
$
578,835
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
3
Pledge Receivables All contributions are considered available for unrestricted use, unless specifically restricted by the donor. Pledges are recorded in the Statement of Financial Position when the United Way is notified of the pledge and allowances are provided for amounts estimated as uncollectible. An allowance for uncollectible pledges is applied to the aggregate of pledges receivable. United Way considers all prior year campaign pledges that have not been received as 100% uncollectible and as such the allowance at June 30, 2016 represents approximately four years of uncollected campaign balances as well as managements’ estimate of the uncollectible amounts related to the current year campaign.
Uncollected pledges are due as follows: Promises to give due within 1 year Less: Allowance for uncollectible pledges
$
Total
4
$
2016
2015
698,424 $ (293,603)
658,907 (235,487)
404,821
$
423,420
Leases The United Way has a lease agreement for a facility, located at 218 West Main Street, Ravenna, Ohio through December 31, 2016, with the option to extend for an additional five years. Rent is adjusted annually on January 1 in accordance with the inflation Consumer Price Index and cannot exceed 3%. The United Way is responsible for maintaining general liability insurance as well as content, fire and extended coverage insurance. Rent expense was $33,288 (2016) and $33,042 (2015). The United Way continued to lease the facility on a month to month arrangement through February 2017. In March 2017, the United Way will move to a new location on Main Street in Ravenna, Ohio. The United Way also leases various office equipment with expiration dates through June 2019. Rent expense for this equipment was $5,144 (2016) and $5,280 (2015). Minimum lease payments due under the operating lease obligations are due as follows:
Real Estate 2017 2018 2019 Total
Equipment
Total
$
16,644 $ -
4,864 $ 4,584 4,584
21,508 4,584 4,584
$
16,644 $
14,032 $
30,676
- 15 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
5
Temporarily Restricted Net Assets Temporarily restricted net assets consist of the following:
Endowment Fund Beneficiary Interest in Trust Community Projects
Beginning Net Assets
2016 Contributions Net Assets and Released Investment from Income (Loss) Restriction
$
23,253 406,396 16,305
$
(3,545) $ 3,400 -
(5,138) $ (21,704) (12,265)
14,570 388,092 4,040
$
445,954
$
(145) $
(39,107) $
406,702
Ending Net Assets
2015 Beginning Net Assets Endowment Fund Beneficiary Interest in Trust Community Projects
6
Contributions Net Assets and Released from Income (Loss) Restriction
Ending Net Assets
$
27,371 $ 432,198 -
866 $ (3,924) 25,000
(4,984) $ (21,878) (8,695)
23,253 406,396 16,305
$
459,569 $
21,942 $
(35,557) $
445,954
Retirement Plan The United Way has a defined contribution pension plan covering all eligible employees. An employee becomes eligible on January 1 immediately following earning at least $300 during the preceding calendar year. The total contribution by the United Way is 6% of wages. The United Way contributions to this Plan amounted to $9,919 (2016) and $11,197 (2015).
7
Related Party Transactions The United Way pays dues and membership fees to United Way Worldwide. Total amounts paid were $7,191 (2016) and $7,976 (2015). The United Way also pays dues to United Way Ohio which represents .3% of campaign revenues. Total amounts paid were $2,309 (2016) and $2,141 (2015).
- 16 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
8
Endowment Funds The United Way's endowments consist of numerous funds, established for a variety of purposes, which have been pooled together for investment purposes. The endowments include donor-restricted funds. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Board to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law: The Board of Trustees of the United Way has interpreted the "Uniform Prudent Management of Institutional Funds Act" (UPMIFA) as requiring the preservation of the original gift as donorrestricted endowment absent explicit donor restrictions to the contrary. As a result of this interpretation, the United Way classifies as permanently restricted net assets (a) the original value of the gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The Board of Trustees of the United Way has interpreted the "Uniform Prudent Management of Institutional Funds Act" (UPMIFA) as requiring the preservation of the fair value of undesignated and board-designated endowment funds. The United Way considers: 1 2 3 4 5 6 7
The duration and preservation of the fund The purpose of the United Way and the endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the United Way The investment policies of the United Way
Endowment Spending and Investment Policy: The Board has adopted a spending policy where the annual amount included in the budget for withdrawal, including interest and dividend income and capital gains, must fall within the UPMIFA guidelines and not exceed 5% of the average endowment balance at the end of the three subsequent calendar years. Additional withdrawals are permitted with specific Board approval.
- 17 -
NOTES TO FINANCIAL STATEMENTS United Way of Portage County, Inc.
8
Endowment Funds, Continued Changes in endowment net assets are as follows:
Temporarily Restricted Balance - June 30, 2014
$
Investment return Distributions to operating under spending policy Balance- June 30, 2015
Permanently Restricted
Total
27,371 $
109,205 $
866
289
1,155
(4,984)
(1,661)
(6,645)
136,576
23,253
107,833
131,086
Investment loss
(3,545)
(1,181)
(4,726)
Distributions to operating under spending policy
(5,138)
(1,713)
(6,851)
Balance - June 30, 2016
$
14,570
- 18 -
$
104,939
$
119,509
