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HomeMy WebLinkAboutHorizons, A Family Service Alliance - Audit Financial Review Report Horizons, A Family Service Alliance Cedar Rapids, Iowa FINANCIAL REPORT June 30, 2021 and 2020 C O N T E N T S Page INDEPENDENT AUDITOR'S REPORT ON THE FINANCIAL STATEMENTS 3-4 FINANCIAL STATEMENTS Statements of financial position 5 Statements of activities 6 Statements of functional expenses 7-10 Statements of cash flows 11 Notes to financial statements 12-20 SUPPLEMENTARY INFORMATION 21 Schedule of expenditures of federal awards 22-23 INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS 24-25 INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE 26-27 Schedule of findings and questioned costs 28-30 Corrective action plan 31 INDEPENDENT AUDITOR'S REPORT Board of Directors Horizons, A Family Service Alliance Cedar Rapids, Iowa Report on the Financial Statements We have audited the accompanying financial statements of Horizons, A Family Service Alliance (a nonprofit corporation), which comprise the statements of financial position as of June 30, 2021 and 2020, and the related statements of activities, 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the 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 Horizons, A Family Service Alliance as of June 30, 2021 and 2020, 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. -4- Other Matters Other Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated December 6, 2021, on our consideration of Horizons, A Family Service Alliance's internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is solely to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the effectiveness of Horizons, A Family Service Alliance’s internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Horizons, A Family Service Alliance’s internal control over financial reporting and compliance. DENMAN & COMPANY, LLP West Des Moines, Iowa December 6, 2021 See Notes to Financial Statements. -5- Horizons, A Family Service Alliance STATEMENTS OF FINANCIAL POSITION June 30 2021 2020 ASSETS CURRENT ASSETS Cash $2,046,832 $1,448,910 Cash – restricted, custodial funds 184,528 192,241 Certificates of deposit 33,704 33,224 Receivables, net 318,776 372,208 Grants and contributions receivable 208,000 260,000 Prepaid expenses 22,871 16,992 Assets held for sale 315,020 – Total current assets 3,129,731 2,323,575 PROPERTY AND EQUIPMENT Land and improvements 292,533 424,627 Buildings and improvements 2,575,099 2,812,554 Equipment 683,312 720,755 Vehicles 302,074 304,410 Software 96,301 66,301 Total 3,949,319 4,328,647 Accumulated depreciation 1,809,355 1,834,007 Net property and equipment 2,139,964 2,494,640 OTHER ASSETS Beneficial interest in assets held by Community Foundations 83,760 67,122 Long-term certificates of deposit 41,815 40,814 Total other assets 125,575 107,936 Total assets $5,395,270 $4,926,151 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 73,786 $ 75,852 Accrued expenses 218,418 203,581 Custodial funds held 182,801 190,754 Total current liabilities 475,005 470,187 PAYCHECK PROTECTION PROGRAM LOAN – 472,400 Total liabilities 475,005 942,587 NET ASSETS Without donor restrictions Undesignated 4,628,506 3,646,440 Designated – endowment 46,032 36,692 Total net assets without donor restrictions 4,674,538 3,683,132 With donor restrictions 245,727 300,432 Total net assets 4,920,265 3,983,564 Total liabilities and net assets $5,395,270 $4,926,151 See Notes to Financial Statements. -6- Horizons, A Family Service Alliance STATEMENTS OF ACTIVITIES Year ended June 30, 2021 Year ended June 30, 2020 Without donor With donor Without donor With donor restrictions restrictions Total restrictions restrictions Total SUPPORT AND REVENUE Public support Contributions $ 702,030 $ – $ 702,030 $ 589,372 $ 10,000 $ 599,372 United Way 7,725 208,000 215,725 37,501 260,000 297,501 County and city support 623,313 – 623,313 788,632 – 788,632 Other grants 1,590,930 – 1,590,930 1,781,521 – 1,781,521 Total public support 2,923,998 208,000 3,131,998 3,197,026 270,000 3,467,026 Program service fees 608,501 – 608,501 707,097 – 707,097 Rent 115,358 – 115,358 131,014 – 131,014 Interest 11,214 7,295 18,509 7,079 (738) 6,341 Miscellaneous – – – 32 – 32 Net assets released from restrictions 270,000 (270,000) – 447,500 (447,500) – Total support and revenue 3,929,071 (54,705) 3,874,366 4,489,748 (178,238) 4,311,510 EXPENSES Program services Consumer credit counseling 220,232 – 220,232 304,016 – 304,016 Youth and senior meals 1,793,826 – 1,793,826 1,935,984 – 1,935,984 Neighborhood transportation service 905,823 – 905,823 866,828 – 866,828 Total program services 2,919,881 – 2,919,881 3,106,828 – 3,106,828 Supporting activities Management and general 630,466 – 630,466 804,967 – 804,967 Marketing and fundraising 121,745 – 121,745 138,694 – 138,694 Total supporting activities 752,211 – 752,211 943,661 – 943,661 Total expenses 3,672,092 – 3,672,092 4,050,489 – 4,050,489 CHANGE IN NET ASSETS, from operations 256,979 (54,705) 202,274 439,259 (178,238) 261,021 OTHER GAINS AND LOSSES Discontinued operations 18,341 – 18,341 (38,558) – (38,558) Paycheck Protection Program loan forgiveness 472,400 – 472,400 – – – Insurance proceeds 225,967 – 225,967 – – – Gain on sale of assets 17,719 – 17,719 – – – Total other gains and losses 734,427 – 734,427 (38,558) – (38,558) CHANGE IN NET ASSETS 991,406 (54,705) 936,701 400,701 (178,238) 222,463 NET ASSETS, beginning 3,683,132 300,432 3,983,564 3,282,431 478,670 3,761,101 NET ASSETS, ending $4,674,538 $ 245,727 $4,920,265 $3,683,132 $ 300,432 $3,983,564 See Notes to Financial Statements. -7- Horizons, A Family Service Alliance STATEMENTS OF FUNCTIONAL EXPENSES Year ended June 30, 2021 Program services Consumer Youth Neighborhood credit and transportation Counseling counseling senior meals service Total Salaries $ 25,943 $ 131,199 $ 693,129 $ 421,770 $1,272,041 Employee benefits 7,315 20,205 96,486 52,961 176,967 Payroll taxes 4,078 11,296 59,468 34,014 108,856 Total salaries and related benefits 37,336 162,700 849,083 508,745 1,557,864 Travel and conferences 661 878 1,331 117 2,987 Printing and publications – – 10,203 26,483 36,686 Postage, shipping and delivery 468 3,236 6,890 417 11,011 Telephone and internet 1,159 11,858 53,822 39,342 106,181 Occupancy 1,003 18,863 148,537 125,568 293,971 Transportation – – 14,352 64,668 79,020 Supplies – 3,458 140,221 61,000 204,679 Repairs and maintenance 117 – 31,937 6,671 38,725 Meals – – 441,739 – 441,739 Professional fees and contracted services 159 5,337 19,578 2,841 27,915 Depreciation – 13,902 76,133 69,971 160,006 Total expenses 40,903 220,232 1,793,826 905,823 2,960,784 Less discontinued operations (40,903) – – – (40,903) Totals $ – $ 220,232 $1,793,826 $ 905,823 $2,919,881 See Notes to Financial Statements. -8- Supporting activities Management Marketing and and Grand general fundraising Total total $ 308,665 $ 66,631 $ 375,296 $1,647,337 66,350 12,058 78,408 255,375 25,144 5,491 30,635 139,491 400,159 84,180 484,339 2,042,203 12,510 280 12,790 15,777 110 3,166 3,276 39,962 1,035 2,865 3,900 14,911 24,482 8,982 33,464 139,645 87,736 9,979 97,715 391,686 196 – 196 79,216 31,004 2,638 33,642 238,321 1,040 – 1,040 39,765 – – – 441,739 44,321 3,566 47,887 75,802 27,873 6,089 33,962 193,968 630,466 121,745 752,211 3,712,995 – – – (40,903) $ 630,466 $ 121,745 $ 752,211 $3,672,092 See Notes to Financial Statements. -9- Horizons, A Family Service Alliance STATEMENTS OF FUNCTIONAL EXPENSES Year ended June 30, 2020 Program services Consumer Youth Neighborhood credit and transportation Counseling counseling senior meals service Total Salaries $ 429,051 $ 191,823 $ 684,313 $ 510,547 $1,815,734 Employee benefits 82,127 39,296 131,986 57,788 311,197 Payroll taxes 36,380 16,240 57,537 43,836 153,993 Total salaries and related benefits 547,558 247,359 873,836 612,171 2,280,924 Travel and conferences 18,172 3,503 8,048 1,942 31,665 Printing and publications 2,799 435 10,665 1,405 15,304 Postage, shipping and delivery 433 3,154 8,006 247 11,840 Telephone and internet 28,531 10,622 66,327 26,198 131,678 Occupancy 38,394 17,632 77,679 35,027 168,732 Transportation – – 28,250 75,571 103,821 Supplies 46,037 3,271 181,715 46,611 277,634 Repairs and maintenance 925 – 13,575 2,750 17,250 Meals – – 589,866 – 589,866 Professional fees and contracted services 14,895 8,239 13,456 3,396 39,986 Depreciation 15,107 9,801 64,561 61,510 150,979 Total expenses 712,851 304,016 1,935,984 866,828 3,819,679 Less discontinued operations (712,851) – – – (712,851) Totals $ – $ 304,016 $1,935,984 $ 866,828 $3,106,828 See Notes to Financial Statements. -10- Supporting activities Management Marketing and and Grand general fundraising Total total $ 498,285 $ 90,641 $ 588,926 $2,404,660 64,406 14,391 78,797 389,994 36,650 7,255 43,905 197,898 599,341 112,287 711,628 2,992,552 7,789 1,344 9,133 40,798 225 3,941 4,166 19,470 918 839 1,757 13,597 20,110 8,225 28,335 160,013 67,931 7,819 75,750 244,482 – – – 103,821 14,353 2,886 17,239 294,873 1,075 – 1,075 18,325 – – – 589,866 65,014 1,295 66,309 106,295 28,211 58 28,269 179,248 804,967 138,694 943,661 4,763,340 – – – (712,851) $ 804,967 $ 138,694 $ 943,661 $4,050,489 See Notes to Financial Statements. -11- Horizons, A Family Service Alliance STATEMENTS OF CASH FLOWS Year ended June 30 2021 2020 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 936,701 $ 222,463 Adjustments to reconcile change in total net assets to net cash flows from operating activities Depreciation 193,968 179,248 Change in beneficial interest in assets held by Community Foundations (16,638) (3,279) Reinvested interest (1,481) (1,245) Gain on disposal of property and equipment (17,719) – Contributions restricted for long-term purposes (27,500) – Paycheck Protection Program loan forgiveness (472,400) – Change in assets and liabilities Receivables 53,432 95,085 Unconditional promises to give 52,000 185,000 Prepaid expenses (5,879) 25,603 Accounts payable (2,066) (67,937) Refundable advances – (2,300) Accrued expenses 14,837 (77,568) Custodial funds (7,953) 104,140 Net cash flows from operating activities 699,302 659,210 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (139,843) (118,120) Proceeds from sale of property and equipment 30,750 – Net cash flows from investing activities (109,093) (118,120) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from issuance of Paycheck Protection Program Loan – 472,400 Net cash flows from financing activities – 472,400 NET CHANGE IN CASH 590,209 1,013,490 CASH Beginning 1,641,151 627,661 Ending $2,231,360 $1,641,151 RECONCILIATION OF CASH PER STATEMENTS OF CASH FLOWS TO STATEMENTS OF FINANCIAL POSITION Cash $2,046,832 $1,448,910 Cash – restricted, custodial funds 184,528 192,241 $2,231,360 $1,641,151 SUPPLEMENTAL DISCLOSURE OF NONCASH INVESTING AND FINANCING ACTIVITIES In-kind contributions of property and equipment $ 27,500 $ – Paycheck Protection Program loan forgiveness $ 472,400 $ – Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -12- NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES Nature of Activities Horizons, A Family Service Alliance (the Organization) was incorporated in the State of Iowa on July 1, 2005. The purpose of the Organization is to provide services to youth and families through assessing their social needs, providing education, advocacy and providing services to meet those needs. Description of Programs Counseling – Individual and family counseling programs with a focus on intervention and treatment for mental health concerns. These programs were closed effective June 30, 2020. Consumer Credit Counseling – Individual counseling and group education to help individuals overcome debt problems. Youth and Senior Meals – Programs to assist the elderly, ill, persons with disabilities, and youth with their daily nutritional needs. Neighborhood Transportation Services – A program providing curb-to-curb and shuttle van services, affordable night and weekend transportation to work, school, or life skill classes typically during times when the fixed route city buses do not operate. The city of Cedar Rapids provides some of the vehicles for this program at no cost to Horizons. Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. As required by the Not-for-Profit Organizations Topic of the FASB Accounting Standards Codification, the Organization reports information regarding its financial position and activities according to two classes of net assets: Net assets without donor restrictions are those assets which are not restricted by donor-imposed stipulations. The Organization's Board of Directors has earmarked portions of its net assets without donor restrictions as board designated for various purposes. Net assets with donor restrictions result from contributions and other inflows of assets whose use by the Organization is limited to donor-imposed stipulations. As donor-imposed stipulations expire, net assets with donor restrictions are reclassified as net assets without donor restrictions and reported in the statement of activities as net assets released from restriction. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Certificates of Deposit The Organization recognizes certificates of deposit at cost plus accrued interest. Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -13- NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued) Receivables Receivables are recorded at the estimated net realizable amount expected to be received from third party payors, clients, grantors and others. The Organization records an allowance for uncollectible account balances based on an evaluation of the collectability of the receivables, including historical loss experience, payer base, and economic conditions. At June 30, 2021 and 2020, the allowance for uncollectible accounts was $18,421 and $38,130, respectively. Property and Equipment The Organization capitalizes all property and equipment expenditures with a cost basis of greater than $1,000. Property and equipment is recorded at cost. Depreciation is computed utilizing the straight-line method over the estimated useful lives of the assets. Donated property and equipment are recorded at their estimated fair value at the date of the gift. The estimated useful lives of assets are as follows: Asset Class Estimated useful lives Land impovements 25 years Buildings and improvements 10 – 40 years Equipment 3 – 10 years Vehicles 5 years Software 5 years Beneficial Interest in Assets Held by Community Foundations Beneficial interest in assets held by community foundations consists of assets held at the Greater Cedar Rapids Community Foundation and the Community Foundation of Johnson County (the Community Foundations) under designated agency agreements. Beneficial interests are carried at fair value, with gains and losses resulting from market fluctuations recognized in the period in which the fluctuations occur. Investment income is reported as an increase or decrease in net assets without donor restrictions, unless the use of the assets is restricted by the donor and the restrictions have not been met in the reporting period in which the income was recognized. The Organization holds a share of the pooled funds and not direct ownership of the underlying investments. The funds are subject to policies and governing documents of the Community Foundations, including control over investment and asset management. Distributions from the funds are paid to the Organization according to the Community Foundations’ distribution policies. Revenue Recognition Government and Private Grants and Contributions Revenue from government and private grants are generally considered to be subject to conditions that must be met before the Organization is entitled to funding. The Organization recognizes revenue from grants and contracts when all material barriers have been overcome in order for the Organization to be entitled to the funding. Typically these barriers are overcome when qualifying expenditures have been incurred or defined outcomes have been achieved. Revenues from grants and contracts whose conditions have been met are recorded as grants and contributions receivable until funded by the grantor. Funding received prior to the conditions being met is recorded as refundable advances. Contributions are recognized as revenue when the donor makes a promise to give to the Organization which is, in substance, unconditional. Conditional promises to give are recognized only when the conditions on which they depend are substantially met. Unconditional contributions are recorded as with or without donor restrictions, depending on the existence and/or nature of any donor restrictions. An allowance for doubtful accounts is provided based upon management’s judgment, including such factors as prior history and nature of the contribution. Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -14- NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued) Revenue Recognition (continued) Public support that is expected to be collected within one year is recorded at its net realizable value. Public support that is expected to be collected in future years is reported at fair value using present value techniques. The discount on those amounts is computed using an interest rate applicable in the year in which the contribution was received. All grants and contributions receivable as of June 30, 2021 are anticipated to be collected in the following year and, therefore, no discount has been recorded. Fee for Service Fee for service revenues consist primarily of counseling services, billed to Medicaid MCO’s and private insurance carriers, and transportation services. These revenues are reported at the amount that reflects the consideration the Organization expects to be entitled to in exchange for providing the service. The transaction price is based on standard charges for services provided, reduced by contractual adjustments provided to third-party payors, discounts provided to clients, and/or implicit price concessions provided to clients. The Organization determines its estimates of contractual adjustments, discounts, and implicit price concessions based on contractual agreements and historical experience. Performance obligations for counseling and transportation services are satisfied at the point-in-time the service is provided (i.e. a counseling appointment occurs or a client is provided transportation). Generally, these services are billed within days of the service being performed or at the end of the month. Contributed Goods and Services Contributions of donated goods are recorded at their fair values in the period received. Contributions of donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at their fair values in the period received. Numerous volunteers have donated significant amounts of time to the Organization. The value of these services has not been recorded to the financial statements as the criteria for recognition has not been met. Contributed property and equipment are recorded at their estimated fair value at the date of the gift. Such donations are reported as unrestricted support unless the donor has restricted the donated asset for a specific purpose. The Organization recognized $27,500 and $-0- of in-kind property and equipment contributions for the years ended June 30, 2021 and 2020, respectively. The Organization recognized $56,180 and $41,950 of in-kind vehicle expense for the years ended June 30, 2021 and 2020, respectively. The Organization recognized $1,321 and $15,220 of in-kind food and advertising for the years ended June 30, 2021 and 2020, respectively. The in-kind expenses benefited program and supporting services. Income Taxes The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and, accordingly, no provision for income taxes has been made. Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Organization and recognize a tax liability (or asset) for an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has evaluated their material tax positions and determined there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Organization is subject to routine audits by tax authorities; however, there are currently no audits for any tax periods in progress. Management believes the Organization is no longer subject to income tax examinations for years prior to 2017. Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -15- NOTE 1 NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued) Allocations of Functional Expenses The Organization allocates its functional expenses among its various programs and supporting activities. Expenses that can be identified with a specific program or supporting activity are allocated directly to that specific program or supporting activity. Other expenses that are common to several programs or supporting activities are allocated on the basis of estimates of square footage and time and effort. Credit Risk The Organization at various times throughout the year has amounts on deposit with financial institutions in excess of FDIC limits. Advertising Advertising costs are expensed as incurred. Advertising expense for the years ended June 30, 2021 and 2020 was $39,962 and $19,470, respectively. NOTE 2 LIQUIDITY AND AVAILABILITY The Organization regularly monitors the availability of resources required to meet its operating needs and other commitments while striving to maximize the investment of its available funds. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the Organization considers all expenditures related to its ongoing activities as well as the conduct of services to support those activities to be general expenditures. In addition to the financial assets available to meet general expenditures over the next 12 months, the Organization operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures. The Organization considers contributions and grants restricted for programs which are ongoing, major, and central to its annual operations to be available to meet cash needs for general expenditures. The following table shows the total financial assets held by the Organization, which are available to meet the general expenditures and future needs of the Organization as of the statement of financial position date: June 30 2021 2020 Cash $2,046,832 $1,448,910 Certificates of deposit 33,704 33,224 Receivables, net 318,776 372,208 Grants and contributions receivable 208,000 260,000 Totals $2,607,312 $2,114,342 NOTE 3 GRANTS AND CONTRIBUTIONS RECEIVABLE Grants and contributions receivable are expected to be collected within one year and totaled $208,000 and $260,000 at June 30, 2021 and 2020, respectively. Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -16- NOTE 4 BENEFICIAL INTEREST IN ASSETS HELD BY COMMUNITY FOUNDATIONS The Organization’s beneficial interest in assets held by Community Foundations consists of assets held by the Greater Cedar Rapids Community Foundation and the Community Foundation of Johnson County (Community Foundations). The Organization holds a share of the Community Foundations’ pooled funds and not direct ownership of the underlying investments. Although the pooled funds include investments in equity, fixed income, real assets, and other marketable securities, the pool itself is not a publicly traded instrument. Management estimates the fair value of its pooled investments at the statement of financial position date based on its relative ownership investment in the pool. All funds held at the Community Foundations are measured at fair value using the net asset value per share, or its equivalent, practical expedient. Investments Measured Using the Net Asset Value per Share Practical Expedient Redemption Redemption Fair value Unfunded frequency notice 2021 2020 commitments (if currently eligible) period Beneficial interests in assets held at Community Foundations $ 83,760 $ 67,122 None Daily None NOTE 5 LINE OF CREDIT The Organization has a $500,000 revolving line of credit available at a bank. The line of credit bears interest at a rate equal to 1% below the U.S Prime rate, not to be less than 4.0% (rate of 4.0% at June 30, 2021). The line of credit matures on April 1, 2022. The agreement is collateralized by the Organization’s real property located at 819 5th Street SE in Cedar Rapids, Iowa. The balance of the line of credit at June 30, 2021 and 2020 was $-0-. NOTE 6 PAYCHECK PROTECTION PROGRAM LOAN Through a loan agreement dated April 21, 2020, the Organization received loan proceeds of $472,400 from a financial institution under the federal Paycheck Protection Program (PPP) administered by the Small Business Administration (SBA) and the United States Department of Treasury. The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (CARES Act), provides loans to qualifying business for amounts up to 2.5 times the average monthly payroll expenses of the qualifying business. The loans and accrued interest are forgivable as long as the borrower uses the loan proceeds for eligible purposes, including payroll, benefits, rent and utilities as well as meets all other requirements as described in the CARES Act. The loan was forgiven by the SBA in December 2020 and, accordingly, has been recognized as a gain from loan forgiveness in the accompanying statements of activities. NOTE 7 NET ASSETS Net assets with donor restrictions are available for the following purposes: June 30 2021 2020 United Way – for subsequent year’s operations $ 208,000 $ 260,000 Capital improvements – 10,000 Accumulated earnings on perpetual endowment 20,727 13,432 Perpetual endowment 17,000 17,000 $ 245,727 $ 300,432 Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -17- NOTE 7 NET ASSETS (continued) Net assets were released from donor restrictions by incurring expenses satisfying the restricted purpose or through the passage of time as follows: Year ended June 30 2021 2020 Expiration of time restrictions $ 260,000 $ 445,000 Programs 10,000 2,500 $ 270,000 $ 447,500 NOTE 8 ENDOWMENT FUNDS The Organization's endowment funds consist of board designated endowment net assets, investment return on donor- restricted endowment funds which is available for appropriation, and net assets with donor restrictions which provide that the corpus be invested in perpetuity and only the income be used. As required by generally accepted accounting principles, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The Organization follows the endowment fund disclosure requirements of the Not-for-Profit Entities Topic of the FASB Accounting Standards Codification as well as the Uniform Prudent Management of Institutional Funds Act (Act) which was adopted as law in the State of Iowa. The Organization has adopted the practice of preserving the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as net assets with donor restrictions, held in perpetuity the original value of gifts donated to the permanent endowment, the original value of subsequent gifts to the permanent endowment, and 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 remaining portion of the donor-restricted endowment funds that is classified as net assets with donor restrictions, held in perpetuity is classified as endowment earnings on donor-restricted endowment funds that are held until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by the Act. In accordance with the Act, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: • the duration and preservation of the various funds • the purposes of the donor-restricted endowment funds • general economic conditions • the possible effect of inflation and deflation • the expected total return from income and the appreciation or depreciation of investments • other resources of the Organization • the Organization’s investment policies. In addition to the endowment funds described above, the Organization’s board of directors has designated unrestricted net assets as endowment funds. These funds and their investment earnings are reported with net assets without donor restrictions on the statements of financial position. Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -18- NOTE 8 ENDOWMENT FUNDS (continued) The Organization’s endowment consists of interest in assets held at the Greater Cedar Rapids Community Foundation and the Community Foundation of Johnson County (Community Foundations) and is governed by endowment agreements between the Organization and the Community Foundations. Per the Community Foundations’ investment policies, the assets of the endowment fund are to be invested with the primary objective of providing consistent flow of funds in support of the Organization’s mission and a secondary objective of preserving the real value (inflation adjusted) of current assets and future gifts. Endowment assets are invested in a well-diversified asset mix that is intended to result in a moderate level of investment risk. Annually, the Organization may request from the Community Foundations distributions consistent with the Community Foundations’ distribution policies. The Organization did not request distributions for the years ending June 30, 2021 and 2020. Endowment net asset composition by type of fund as of June 30, 2021 and 2020 is as follows: 2021 2020 With donor Without donor With donor Without donor restrictions restrictions Total restrictions restrictions Total Board-designated endowment funds $ – $ 46,032 $ 46,032 $ – $ 36,692 $ 36,692 Donor-restricted endowment funds Original donor-restricted gift amounts required to be held in perpetuity 17,000 – 17,000 17,000 – 17,000 Accumulated earnings on perpetual endowment 20,728 – 20,728 13,432 – 13,432 $ 37,728 $ 46,032 $ 83,760 $ 30,432 $ 36,692 $ 67,124 The change in endowment net assets was as follows: Year ended June 30, 2021 Year ended June 30, 2020 With donor Without donor With donor Without donor restrictions restrictions Total restrictions restrictions Total Balance, beginning of year $ 30,432 $ 36,692 $ 67,124 $ 31,170 $ 32,674 $ 63,844 Investment return 7,296 9,340 16,636 (738) 4,018 3,280 Balance, end of year $ 37,728 $ 46,032 $ 83,760 $ 30,432 $ 36,692 $ 67,124 Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -19- NOTE 9 OPERATING LEASES The Organization rents out portions of its property and facilities under two operating leases. The leases have termination clauses which would allow for the expiration of the leases on September 30, 2022 and August 1, 2025, respectively. The future minimum lease payments on these leases are as follows: Year ending June 30 2022 $ 65,482 2023 52,357 2024 47,982 2025 51,501 2026 4,318 $ 221,640 Rental income for the years ended June 30, 2021 and 2020 was $115,358 and $131,014, respectively. NOTE 10 EMPLOYEE BENEFITS The Organization maintains a defined contribution 401(k) plan covering employees who have one month of service and are age 21 or older. The plan allows employees to defer their income on a pretax basis through contributions to the plan. In addition, the Organization matches 50% of the participants’ eligible contributions, up to 6% of their compensation. The Organization’s expense under the plan for the years ended June 30, 2021 and 2020 was $26,053 and $36,752, respectively. NOTE 11 MAJOR FUNDING SOURCES A substantial portion of the Organization’s total support and revenue is received from the Heritage Area Agency on Aging (HAAA). This funding concentration is summarized as follows: 2021 2020 Source Revenue % of total Revenue % of total HAAA $ 824,474 18% $1,313,596 26% Receivables as of June 30, 2021 and 2020 included $66,419 and $205,073 from HAAA, respectively. Horizons, A Family Service Alliance NOTES TO FINANCIAL STATEMENTS -20- NOTE 12 DISCONTINUED OPERATIONS During the year ended June 30, 2020, the Organization elected to discontinue its four primary counseling service programs. Accordingly, the accompanying financial statements have been prepared with the results of the activities of these programs displayed separately. The operating results of the discontinued operations for the years ended June 30, 2021 and 2020, are summarized as follows: 2021 2020 Support and revenue Contributions $ – $ 47,774 Other grants 59,244 556,130 Program service fees – 70,389 Total support and revenue 59,244 674,293 Expenses Salaries and related expenses 37,336 547,558 Other operating expenses 3,567 165,293 Total expenses 40,903 712,851 Income (loss) on discontinued operations $ 18,341 $ (38,558) NOTE 13 ASSETS HELD FOR SALE During the year ended June 30, 2021, the Organization began to actively market the sale of one of its facilities, as it is no longer being used by the Organization. The carrying value of these assets held for sale at June 30, 2021 was $315,020 and is reported as assets held for sale in the 2021 statement of financial position. NOTE 14 SUBSEQUENT EVENTS The Organization has evaluated subsequent events through December 6, 2021, the date the financial statements were available to be issued. There were no subsequent events which require accrual or disclosure. -21- SUPPLEMENTARY INFORMATION See Independent Auditor's Report. -22- Horizons, A Family Service Alliance SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS Year ended June 30, 2021 Assistance Agency or Federal Grantor/Program Title/ Listing pass-through Federal Grant Description number Pass-through Grantor number expenditures U.S. Department of Agriculture Child and Adult Care Food Program 10.558 $ 92,556 U.S. Department of Housing and Urban Development Community Development Block Grant Program 14.218 City of Cedar Rapids, Iowa N/A 17,837 (COVID-19) Community Development Block Grant 14.218 City of Iowa City, Iowa N/A 20,000 Housing Counseling Assistance Program 14.169 12,089 Total U.S. Department of Housing and Urban Development 49,926 U.S. Department of Justice Crime Victim Assistance 16.575 Iowa Department of Justice VS-20-35-HP 51,165 U.S. Department of Health and Human Services National Family Caregiver Support, Title III, Part E 93.052 Heritage Area Agency on Aging N/A 49,475 Aging Cluster Special Programs for the Aging, Title III, Part C Nutrition Services 93.045 Heritage Area Agency on Aging N/A 354,661 Nutrition Services Incentive Program 93.053 Heritage Area Agency on Aging N/A 224,002 Total Aging Cluster 578,663 Total U.S. Department of Health and Human Services 628,138 U.S. Department of Homeland Security Emergency Food and Shelter National Board Program 97.024 Linn County, Iowa N/A 50,675 U.S. Department of Treasury Coronavirus Relief Fund 21.019 MHDS-East Central Region N/A 50,000 Total federal expenditures $ 922,460 See Independent Auditor's Report. -23- Horizons, A Family Service Alliance SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS (continued) Year ended June 30, 2021 NOTE A BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards (the Schedule) includes the federal grant activity of the Organization under programs of the federal government for the year ended June 30, 2021. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets or cash flows of the Organization. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Expenditures Expenditures reported in the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Indirect Cost Allocation Rate The Organization has elected not to use the 10 percent de minimus indirect cost rate as allowed under the Uniform Guidance. NOTE C IN-KIND SUPPORT In-kind support for volunteer hours in the amount of $-0- for congregate meals and $159,255 for home delivered meals, totaling $159,255, was obtained for the Aging Cluster (Assistance Listing numbers 93.045 and 93.053), which is required by the grant. -24- INDEPENDENT AUDITOR'S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Directors Horizons, A Family Service Alliance Cedar Rapids, Iowa We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Horizons, A Family Service Alliance (a nonprofit corporation), which comprise the statement of financial position as of June 30, 2021, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated December 6, 2021. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered Horizons, A Family Service Alliance's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Horizons, A Family Service Alliance's internal control. Accordingly, we do not express an opinion on the effectiveness of Horizons, A Family Service Alliance's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. We did identify a deficiency in internal control, described in the accompanying schedule of findings and questioned costs as item 2021-001 that we consider to be a significant deficiency. Compliance and Other Matters As part of obtaining reasonable assurance about whether Horizons, A Family Service Alliance's financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. -25- Horizons, A Family Service Alliance’s Response to Finding Horizons, A Family Service Alliance’s response to the finding identified in our audit is described in the accompanying schedule of findings and question costs. Horizons, A Family Service Alliance’s response is not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Horizons, A Family Service Alliance’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. DENMAN & COMPANY, LLP West Des Moines, Iowa December 6, 2021 -26- INDEPENDENT AUDITOR'S REPORT ON COMPLIANCE FOR EACH MAJOR PROGRAM AND ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Directors Horizons, A Family Service Alliance Cedar Rapids, Iowa Report on Compliance for Each Major Federal Program We have audited Horizons, A Family Service Alliance’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on each of Horizons, A Family Service Alliance’s major federal programs for the year ended June 30, 2021. Horizons, A Family Service Alliance’s major federal programs are identified in the summary of the independent auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility Management is responsible for compliance with federal statutes, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility Our responsibility is to express an opinion on compliance for each of Horizons, A Family Service Alliance’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Horizons, A Family Service Alliance’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Horizons, A Family Service Alliance’s compliance. Opinion on Each Major Federal Program In our opinion, Horizons, A Family Service Alliance complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended June 30, 2021. -27- Report on Internal Control Over Compliance Management of Horizons, A Family Service Alliance is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Horizons, A Family Service Alliance’s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Horizons, A Family Service Alliance’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that have not been identified. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, we did identify a deficiency in internal control over compliance, as described in the accompanying schedule of findings and questioned costs as item 2021-001 that we consider to be a significant deficiency. Horizons, A Family Service Alliance’s response to the internal control over compliance finding identified in our audit is described in the accompanying schedule of findings and question costs. Horizons, A Family Service Alliance’s response was not subjected to the auditing procedures applied in the audit of the compliance and, accordingly, we express no opinion on the response. The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. DENMAN & COMPANY, LLP West Des Moines, Iowa December 6, 2021 -28- Horizons, A Family Service Alliance SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year ended June 30, 2021 SECTION 1 – SUMMARY OF INDEPENDENT AUDITOR’S RESULTS Financial Statements Type of report the auditor issued on whether the financial statements audited were prepared in accordance with GAAP: Unmodified opinion Internal control over financial reporting:  Material weakness(es) identified? Yes X No  Significant deficiency(ies) identified? X Yes None Reported Noncompliance material to financial statements noted? Yes X No Federal Awards Internal control over major federal programs:  Material weakness(es) identified? Yes X No  Significant deficiency(ies) identified? X Yes None Reported Type of auditor’s report issued on compliance for major federal programs: Unmodified opinion  Any audit findings disclosed that are required to be reported in accordance with 2 CFR 200.516(a)? Yes X No Identification of major federal programs: Assistance Listing Number 93.045, 93.053 – Aging Cluster Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? Yes X No -29- Horizons, A Family Service Alliance SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued) Year ended June 30, 2021 SECTION II – FINANCIAL STATEMENT FINDINGS INTERNAL CONTROL DEFICIENCY Finding 2021-001 – Approval of Disbursements Significant Deficiency Criteria In order to ensure all disbursements are authorized and properly accounted for, all invoices and similar supporting documentation should either be (a) reviewed and approved by supervisory personnel directly responsible for the disbursement prior to the payment of the invoice or (b) be included within a pre-determined set of recurring transactions for which the accounting staff have authority to pay upon receipt. Evidence of review of approval of disbursements should be retained with the supporting documentation. Condition During our audit procedures, we selected 25 disbursements to trace to supporting documentation. Of the 25 disbursements selected, we identified 13 instances in which approval of the disbursement was not maintained with the supporting documentation. Of the 13 disbursements noted, 8 were recurring monthly invoices, however, management does not maintain a specific list of these recurring invoices which the accounting staff have authorization to pay upon receipt. Cause The review and approval process for disbursements appears to be fairly informal. Staff will make inquiries of other team members when necessary, however, evidence of approval of these disbursements is not required to be retained with the supporting documentation in all instances. Effect There may be an increased risk of unauthorized disbursement occurring or disbursements being recorded to the financial statements incorrectly. Recommendation We recommend management establish a formal list of recurring transactions which may be paid by accounting staff upon receipt without further authorization. Other disbursement transactions should be reviewed by supervisory personnel directly responsible for the disbursement and evidence of their review and approval should be retained with the supporting documentation. Views of Responsible Officials Additional processes will be implemented to provide additional evidence of staff review and approval of disbursements. Conclusions Response accepted. INSTANCES OF NONCOMPLIANCE No matters were noted. -30- Horizons, A Family Service Alliance SCHEDULE OF FINDINGS AND QUESTIONED COSTS (continued) Year ended June 30, 2021 SECTION III – FEDERAL AWARD FINDINGS AND QUESTIONED COSTS INTERNAL CONTROL DEFICIENCY Finding 2021-001 – Approval of Disbursements All Federal Programs See page 29 of the Schedule of Findings and Questioned Costs for details regarding this finding. INSTANCES OF NONCOMPLIANCE No matters were noted. -31- Horizons, A Family Service Alliance CORRECTIVE ACTION PLAN Year ended June 30, 2021 Comment Number Comment Title Corrective Action Plan Contact Person, Title, Phone Number Anticipated Date of Completion 2021-001 Approval of Disbursements The corrective action plan was documented in our response to the auditor’s comment. See the Schedule of Findings and Questioned Costs. Cathy Ondler, Controller (319) 375-3152 December 31, 2021