The report accompanying these financial statements was issued by BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of BDO International Limited, a UK company limited by guarantee. Providence House, Inc. Financial Statements Years Ended June 30, 2015 and 2014
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The report accompanying these financial statements was issued by
BDO USA, LLP, a Delaware limited liability partnership and the U.S. member of
BDO International Limited, a UK company limited by guarantee.
Providence House, Inc.
Financial StatementsYears Ended June 30, 2015 and 2014
Providence House, Inc.
Financial StatementsYears Ended June 30, 2015 and 2014
Providence House, Inc.
Contents
2
Independent Auditor’s Report 3-4
Financial Statements
Statements of Financial Position 6-7
Statements of Activities 8-9
Statements of Functional Expenses 10-11
Statements of Cash Flows 12
Notes to Financial Statements 13-20
BDO USA, LLP, a Delaware limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of the international BDO network of independent member firms.
BDO is the brand name for the BDO network and for each of the BDO Member Firms.
3
Independent Auditor’s Report
To the Board of Trustees of
Providence House, Inc.
Cleveland, Ohio
We have audited the accompanying financial statements of Providence House, Inc.
(a nonprofit organization), which comprise the statement of financial position as of
June 30, 2015, and the related statements of activities, functional expenses and cash flows
for the year 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 audit.
We conducted our audit in accordance with auditing standards generally accepted in the
United States of America. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the 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’sjudgment, 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 polices 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.
32125 Solon Road Cleveland, OH 44139
Tel: 440-248-8787 Fax: 440-248-0841 www.bdo.com
4
Opinion
In our opinion, the financial statements referred to above present fairly, in all material
respects, the financial position of Providence House, Inc. as of June 30, 2015, and the
changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.
Other Matter
The 2014 financial statements of Providence House, Inc. were audited by SS&G, Inc. whose
directors and professional staff joined BDO USA, LLP as of January 1, 2015, and has subsequently ceased operations. SS&G, Inc.’s report dated September 16, 2014 expressed an
unmodified opinion on those statements.
September 16, 2015
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Financial Statements
June 30, 2015 2014
Assets
Cash and cash equivalents 632,094$ 993,283$
Cash, restricted 475,561 292,994
Current portion of unconditional promises to give, net 276,167 249,773
Supplies inventory 280,480 232,009
Grants receivable 30,500 41,180
Prepaid expenses 34,193 53,216
Other receivables - 10,906
Total Current Assets 1,728,995 1,873,361
Property and Equipment
Land and improvements 308,433 269,433
Building and improvements 3,137,660 2,634,373
Equipment 203,917 194,837
Furniture and fixtures 55,036 55,036
3,705,046 3,153,679
Less: accumulated depreciation 994,238 777,603
2,710,808 2,376,076
Construction in progress 589,936 447,079
Net Property and Equipment 3,300,744 2,823,155
Other Assets
Unconditional promises to give, net 270,162 10,000
Total Assets 5,299,901$ 4,706,516$
See accompanying independent auditor's report
and notes to financial statements.
Providence House, Inc.
Statements of Financial Position
6
June 30, 2015 2014
Liabilities and Net Assets
Liabilities
Accounts payable 101,993$ 28,364$
Accrued payroll 31,895 37,619
Other accrued expenses 55,152 53,417
Total Liabilities 189,040 119,400
Net Assets
Unrestricted
Undesignated 539,821 1,136,554
Net investment in property and equipment 3,300,744 2,823,155
3,840,565 3,959,709
Temporarily restricted 1,270,296 627,407
Total Net Assets 5,110,861 4,587,116
Total Liabilities and Net Assets 5,299,901$ 4,706,516$
See accompanying independent auditor's report
and notes to financial statements.
Statements of Financial Position
Providence House, Inc.
7
Unrestricted
TemporarilyYear ended June 30, 2015 Undesignated Restricted Total
Public Support and Revenue
Public Support
Contributions and grants 917,202$ 1,069,519$ 1,986,721$
Government funding 246,275 - 246,275
Federated income 164,178 - 164,178
Donated items 203,851 - 203,851
Restricted funds released for current activities 419,896 (419,896) -
Total Public Support 1,951,402 649,623 2,601,025
Revenue
Special event revenue 436,521 - 436,521
Less: direct benefit to donor (167,779) - (167,779)
Other income 31,400 (6,754) 24,646
Interest and dividend income 1,705 20 1,725
Total Revenue 301,847 (6,734) 295,113
Total Public Support and Revenue 2,253,249 642,889 2,896,138
Expenses and Losses
Program services 1,899,650 - 1,899,650
Management and general 184,886 - 184,886
Fundraising 287,857 - 287,857
Total Expenses and Losses 2,372,393 - 2,372,393
Change in Net Assets (119,144) 642,889 523,745
Net Assets, beginning of year 3,959,709 627,407 4,587,116
Net Assets, end of year 3,840,565$ 1,270,296$ 5,110,861$
See accompanying independent auditor's report
and notes to financial statements.
Providence House, Inc.
Statement of Activities
8
Unrestricted
TemporarilyYear ended June 30, 2014 Undesignated Restricted Total
Public Support and Revenue
Public Support
Contributions and grants 949,465$ 182,289$ 1,131,754$
Government funding 209,226 - 209,226
Federated income 40,863 - 40,863
Donated items 180,141 - 180,141
Restricted funds released for current activities 494,142 (494,142) -
Total Public Support 1,873,837 (311,853) 1,561,984
Revenue
Special event revenue 378,276 - 378,276
Less: direct benefit to donor (128,112) - (128,112)
Other income 47,820 - 47,820
Interest and dividend income 1,146 150 1,296
Total Revenue 299,130 150 299,280
Total Public Support and Revenue 2,172,967 (311,703) 1,861,264
Expense and Losses
Program services 1,774,422 - 1,774,422
Management and general 224,111 - 224,111
Fundraising 217,360 - 217,360
Total Expense and Losses 2,215,893 - 2,215,893
Change in Net Assets (42,926) (311,703) (354,629)
Net Assets, beginning of year 4,032,635 909,110 4,941,745
Reclassification of Net Assets (30,000) 30,000 -
Net Assets, end of year 3,959,709$ 627,407$ 4,587,116$
See accompanying independent auditor's report
and notes to financial statements.
Statement of Activities
Providence House, Inc.
9
Year ended June 30, 2015 Program Services
Management
and General Fundraising Total
Salaries and related payroll expenses 1,075,042$ 97,115$ 137,768$ 1,309,925$
Special events - - 167,779 167,779
Printing and other fundraising expenses 21,129 6,355 58,344 85,828
Insurance 40,741 3,683 5,260 49,684
Professional fees 196,794 39,540 35,000 271,334
Utilities and real estate taxes 73,036 6,486 7,969 87,491
Office and miscellaneous 69,643 6,291 8,925 84,859
Interest expense 4,216 - - 4,216
Supplies and food 149,386 - - 149,386
Repairs and maintenance 89,035 8,050 11,494 108,579
Automobile 2,987 1,305 164 4,456
Total Expenses 1,722,009 168,825 432,703 2,323,537
Less: expenses netted with revenues
on the statement of activities - - 167,779 167,779
Total functional expenses before depreciation 1,722,009 168,825 264,924 2,155,758
Depreciation 177,641 16,061 22,933 216,635
Total Functional Expenses 1,899,650$ 184,886$ 287,857$ 2,372,393$
See accompanying independent auditor's report
and notes to financial statements.
Statement of Functional Expenses
Providence House, Inc.
10
Year ended June 30, 2014 Program Services
Management and
General Fundraising Total
Salaries and related payroll expenses 1,072,599$ 120,585$ 114,863$ 1,308,047$
Special events - - 128,112 128,112
Printing and other fundraising expenses 16,861 - 59,025 75,886
Insurance 38,412 4,319 4,114 46,845
Professional fees 121,421 58,885 1,194 181,500
Utilities and real estate taxes 69,016 7,614 5,959 82,589
Office and miscellaneous 60,385 6,789 6,469 73,643
Interest expense 4,600 - - 4,600
Supplies and food 153,501 - - 153,501
Repairs and maintenance 72,678 8,171 7,783 88,632
Automobile 6,161 320 525 7,006
Total Expenses 1,615,634 206,683 328,044 2,150,361
Less: expenses netted with revenues
on the statement of activities - - 128,112 128,112
Total functional expenses before depreciation 1,615,634 206,683 199,932 2,022,249
Depreciation 158,788 17,428 17,428 193,644
Total Functional Expenses 1,774,422$ 224,111$ 217,360$ 2,215,893$
See accompanying independent auditor's report
and notes to financial statements.
Statement of Functional Expenses
Providence House, Inc.
11
Year ended June 30, 2015 2014
Operating Activities
Change in net assets 523,745$ (354,629)$
Adjustment to reconcile change in net assets to cash
from (for) operating activities:
Depreciation 216,635 193,644
Gain on sale of property and equipment - (44,860)
Change in the present value discount on pledges receivable 6,754 (5,658)
Change in allowance for doubtful pledges - (15,943)
Change in supplies inventory (48,471) (19,025)
(Increase) decrease in assets:
Unconditional promises to give (706,060) 35,671
Grants receivable 10,680 (41,180)
Prepaid expenses 19,023 (32,439)
Other receivables 10,906 1,865
(Decrease) increase in liabilities:
Accounts payable (13,374) (4,306)
Accrued payroll (5,724) 4,572
Other accrued expenses 1,735 983
Net cash from (for) operating activities 15,849 (281,305)
Investing Activities
Proceeds from sale of land - 1,339,497
Proceeds from sale of investments - 159,975
Purchases of property and equipment (607,221) (551,701)
Net cash (for) from investing activities (607,221) 947,771
Financing Activities
Proceeds from payment of capital pledges 412,750 331,434
Net cash from financing activities 412,750 331,434
Net (Decrease) Increase in Cash and Cash Equivalents (178,622) 997,900
Cash and Cash Equivalents, beginning of the year 1,286,277 288,377
Cash and Cash Equivalents, end of the year 1,107,655$ 1,286,277$
Purchases of Property and Equipment Included in Accounts Payable 87,003$ -$
Transfer of Construction in Progress into Property and Equipment 3,616$ -$
See accompanying independent auditor's report
and notes to financial statements.
Statements of Cash Flows
Providence House, Inc.
12
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
13
1. Organization Background
Providence House, Inc. (the Organization), an Ohio nonprofit corporation, was formed in 1981 for
the purpose of providing emergency shelter and residential care on a short-term basis for children
in crisis situations which place them at risk for abuse and neglect. The Organization’s programs
currently support a range of services to children and their families including 24/7 residential
childcare for children 0-10 years old in placements lasting up to 60 days (90 days in special circumstances), child and family case management services, educational and visitation programs
for children and parents, trauma services and therapies, and a 6-month Aftercare Program with a
focus on child protection, abuse/neglect prevention, and family preservation. This is the first
such facility, and one of only two currently operating in the State of Ohio, licensed under
AM.Sub.S.B.258 with subsequent modifications through S.B.242 and Ohio Revised Code 5101:2-5 and 5101:2-9. Revenue is principally received from private donations from foundations, corporations, individuals and government grants.
2. Summary of Significant Accounting Policies
Basis of Accounting
The Organization's financial statements have been prepared as recommended by the American
Institute of Certified Public Accountants’ (AICPA) Audit and Accounting Guide for Not-for-Profit Organizations. The AICPA Audit and Accounting Guide includes the requirements of Financial
Accounting Standards Board (FASB) Codification, Financial Statements of Not-for-Profit Organizations (the Codification). Under the Codification, the Organization is required to report
information regarding its financial position and activities according to three classes of net assets:
unrestricted, temporarily restricted, and permanently restricted.
Unrestricted Net AssetsNet assets not restricted by donors. This category includes net assets available for the
Organization’s operating purposes and designated by the Board for specific purposes.
Temporarily Restricted Net AssetsNet assets limited by donor-imposed restrictions that either expire by the passage of time or
can be fulfilled and removed by actions of the Organization pursuant to the stipulations.
Permanently Restricted Net Assets
Net assets subject to donor imposed stipulations that neither expire with the passage of time nor be fulfilled or removed by actions of the Organization, unless otherwise provided by law.
As of June 30, 2015 and 2014, there were no permanently restricted net assets.
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
14
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 certain reported amounts. Accordingly, actual results could differ from
those estimates.
Cash and Cash Equivalents
The Organization considers all unrestricted highly liquid investments with an initial maturity of
three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of these financial instruments.
Management internally designates certain cash balances held for future purposes as Cash,
restricted on the accompanying statements of financial position.
Concentrations of Risk
Financial instruments that potentially subject the Organization to concentrations of credit risk
consist primarily of cash and cash equivalents, and receivables. Cash accounts are insured by the Federal Deposit Insurance Corporation and cash balances may exceed the insured amount from
time to time. As of June 30, 2015, two (2) individuals comprised 71% of the grants and net pledges receivable; and as of June 30, 2014, two organizations comprised 78% of the grants and net pledges
receivable. As of June 30, 2015, one (1) individual comprised 17% of the total public support and
revenue. The Organization had no other significant concentrations of credit risk as of June 30, 2015 and 2014.
Revenue Recognition on Government Grants
The Organization recognizes revenue related to fees for service government grants as the related services are performed or expenses are incurred.
Promises to Give
Conditional promises to give are recognized when the conditions on which they depend are substantially met. Unconditional promises to give are recognized as pledges receivable and a related
contribution when made. Pledges spanning over multiple periods are discounted at an adjusted risk-
free rate of 2.5%.
The Organization uses the allowance method to determine uncollectible unconditional promises to give. The allowance is based on prior experience and management’s analysis of specific promises
made. In the opinion of management, no allowance was necessary at June 30, 2015 and 2014.
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
15
Unconditional promises to give are comprised of the following:
June 30, 2015 2014
Receivable in less than one year $ 276,167 $ 249,773
Receivable in one to five years 276,916 10,000
Total unconditional promises to give 553,083 259,773
Less: allowance for present value adjustment 6,754 -
Unconditional promises to give, net $ 546,329 $ 259,773
Supplies Inventory
The Organization receives a significant portion of its supplies via donated items. Supplies
inventory represents the unused portion of these supplies as of June 30, 2015 and 2014. The Organization estimates the fair value of contributed supplies based on external pricing data to
determine an estimated value.
Grants Receivable
Grants receivable represents reimbursable grants from the State of Ohio for use in the
Organization’s activities.
Land Available for Sale
On May 17, 2013, the Organization entered into an agreement with St. Ignatius High School of
Cleveland (St. Ignatius) in which the Organization agreed to sell approximately 1.0069 acres of
land bounded by West 32nd Street on the West, Keene Court on the North, West 31st Street on the
East, and various residential parcels on the South. The purchase price was set at $1,350,000. The purchase was paid in two tranches, the first tranche of $1,000,000 was paid on September 9,
2013, and the second tranche of $350,000 was paid on September 13, 2013. During the prior fiscal
year, the Organization recognized a gain on sale in the amount of $59,890 which is included in
other income on the statement of activities.
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
16
Property and Equipment
The Organization records property and equipment, including construction in progress, at cost for
purchased items and at fair market value for donated items. The policy of the Organization is generally to capitalize assets over $2,500 in value and with a useful life greater than one year.
Property and equipment are depreciated using the straight-line method over the estimated useful
lives of the related assets. Estimated lives for building and improvements, equipment, and furniture
and fixtures range from five to thirty-one and one half years.
Fully depreciated property and equipment costs of $322,865 were written off during the year ended
June 30, 2014. No property and equipment was written off during the year ended June 30, 2015.
Special Event Revenue
Special event revenue primarily consists of gross proceeds from various events held by the
Organization. The Organization also received support from special events that are sponsored by
other independent organizations. Net support from these independently sponsored events is reported on the statement of activities.
Donated Items and Services
The fair market value of certain donated items and services represent rents for facility, various
supplies and food, repairs, and capital items, which have been recorded as revenue and have either been capitalized or expensed in the statement of activities.
A number of volunteers have donated time to the Organization’s program services and fundraising
campaigns. While an individual must attend several hours of training before volunteering for certain
program services, these services do not meet the criteria for recognition as contributed services
since the volunteers are not required to have advanced educational degrees or credentials. The Organization benefitted from more than 5,811 (unaudited) volunteer hours in the year ended June
30, 2015, representing a dollar value of approximately $131,038 in volunteer services for the
representative fiscal year based on the 2014 Bureau of Labor Statistics Dollar Value of a Volunteer
Hour.
Functional Allocation of Expenses
The costs of providing the Organization’s various programs and supporting services have been
summarized on a functional basis in the statement of activities. Expenses are generally charged to
the specific program for which they are incurred; in some cases, however, certain common costs are
allocated among the programs and supporting services benefited.
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
17
Evaluation of Subsequent Events
The Organization has evaluated subsequent events through September 16, 2015, the date which
the financial statements were available to be issued, and has determined that no further
adjustments or additional disclosures are necessary.
Reclassifications
Certain prior year financial statement amounts have been reclassified to conform to the current
year presentation with no impact on previously reported net assets.
3. Revolving Line of Credit
The Organization has a revolving line of credit with a bank which will expire in May 2016. The Organization can draw from this line as needed, in an amount not to exceed $400,000. Interest is
payable monthly and is equal to the prime rate (3.25% at June 30, 2015 and 2014). The line is
secured by the Organization’s assets, except for real property. The Organization had no borrowings outstanding as of June 30, 2015 and 2014.
4. Pension Plan
The Organization sponsors a Simple IRA that covers employees that are 21 years old and have at
least one year of service. The amount of pension expense was $18,871 and $16,621 for the years ended June 30, 2015 and 2014, respectively.
5. Forgivable Mortgages and Loan
During the year ended June 30, 2013, Providence House received a forgivable mortgage from the
Ohio Department of Mental Health and Addiction Services, now known as the Ohio Department of Mental Health and Addiction Services (OMHAS), and a forgivable loan from the City of Cleveland (the
City).
The forgivable mortgage from OMHAS bears no interest, is secured by real estate, and need not
be repaid as long as the Organization uses the property for the provision of approved mental
health services for at least 30 years. The mortgage is forgiven on a monthly basis, through the
maturity date which is March, 2042. If the Organization defaults under the terms of the
agreement, the balance remaining to be forgiven is immediately due and payable. The balance of the note still to be forgiven was approximately $178,400 and $184,000 at June 30, 2015 and
2014, respectively.
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
18
The forgivable loan from the City of Cleveland bears interest at 6% annually, and matures on November 1, 2017. Principal payments on the loan are deferred and payable on the maturity
date; however, the Organization will be released from the obligation to repay the loan and the
related accrued interest once the City receives written confirmation from the Director of
Economic Development that certain terms and conditions, as defined, have been met. To date,
the Organization has met these terms. The balance on the loan, plus accrued interest, was approximately $78,800 and $74,600 at June 30, 2015 and 2014, respectively.
During the year ended June 30, 2015, Providence House received a forgivable mortgage from OMHASnot to exceed $191,640. The forgivable mortgage from OMHAS bears no interest, is secured by real
estate, and need not be repaid as long as the Organization uses the property for the provision of
approved mental health services for at least 30 years. The mortgage is forgiven on a monthly basis
beginning in the month in which the project is used for mental health services. The proceeds from the mortgage are to be used towards additional capital improvements for Leo’s House. Providence
house can request up to 90% of the funds before the project is completed by submitting the appropriate documentation for the project expenditures and the remaining 10% upon completion, as
defined. As of June 30, 2015, Providence House had not submitted any requests for reimbursement
nor received any proceeds from the forgivable mortgage.
6. Net Assets
Temporarily Restricted
Temporarily restricted net assets have donor restrictions for time and/or purpose and are as
follows:
June 30, 2015 2014
Case Western Reserve University study $ - $ 30,000
Forgivable mortgage and loan 248,407 254,334CARF accreditation, training and certification 17,523 -
Staffing and consultants 22,377 -
Charles Bowlus Charities 10,365 -
Capital improvements 5,309 -Elisabeth’s House: Prentiss Wellness Nursery 405,602 66,151
Medical services 306 1,138
Miscellaneous 12,297 10,666
Outdoor equipment 240 240
Unconditional promises to give, net 546,329 259,773Technology upgrades 1,541 5,105
$ 1,270,296 $ 627,407
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
19
Net assets were released from temporarily restricted funds as follows:
Promises to give 305,190 441,504Case Western Reserve University study 30,000 856
Technology upgrades 9,564 14,520
$ 419,896 $ 494,142
7. Operating Leases
The Organization leases copiers and security services under non-cancellable operating lease agreements. Expenses for non-cancellable operating leases and contract services totaled $25,467
and $22,822 for the years June 30, 2015 and 2014, respectively. The following is a schedule of future minimum lease payments required under these agreements as of June 30, 2014:
Years ended June 30, Amount
2016
201720182019
$ 6,189
6,1896,1892,063
Thereafter -
$ 20,630
8. Income Taxes
The Internal Revenue Service has ruled that the Organization qualifies under Section 501(c)(3) of the
Internal Revenue Code and is, therefore, not subject to tax under present federal income tax laws.
The Organization has not been classified as a private foundation within the meaning of Section 509(a).
Providence House, Inc.
Notes To Financial Statements
See accompanying independent auditor’s report.
20
The Organization’s income tax filings are subject to audit by various taxing authorities. The Organization’s open audit periods are 2012 through the current year. In evaluating the
Organization’s activities, management believes its position of tax-exempt status is appropriate
based on current facts and circumstances. Management has assessed that there are no activities
unrelated to the purpose of the Organization and therefore no tax is to be recognized.
It is the policy of the Organization to include in management and general expenses penalties and
interest assessed by income taxing authorities. There were no penalties or interest from taxing
authorities included in management and general expenses for the years ended June 30, 2015 and