D.C. CENTRAL KITCHEN, INC A · MEMBER OF CPAMERICA INTERNATIONAL, ... purchased 35,514 4,070 10,970...

CONSOLIDATED FINANCIAL STATEMENTS

D.C. CENTRAL KITCHEN, INC.

AND AFFILIATE

FOR THE YEAR ENDED JUNE 30, 2016WITH SUMMARIZED FINANCIAL

INFORMATION FOR 2015

D.C. CENTRAL KITCHEN, INC. AND AFFILIATE

CONTENTS

PAGE NO.

INDEPENDENT AUDITOR'S REPORT 2 - 3

EXHIBIT A - Consolidated Statement of Financial Position, as of June 30,2016, with Summarized Financial Information for 2015 4 - 5

EXHIBIT B - Consolidated Statement of Activities and Change in Net Assets,for the Year Ended June 30, 2016, with Summarized FinancialInformation for 2015 6

EXHIBIT C - Consolidated Statement of Functional Expenses, for the YearEnded June 30, 2016, with Summarized Financial Information for2015 7 - 8

EXHIBIT D - Consolidated Statement of Cash Flows, for the Year EndedJune 30, 2016, with Summarized Financial Information for 2015 9

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS 10 - 19

SUPPLEMENTAL INFORMATION

SCHEDULE 1 - Consolidating Schedule of Financial Position, as of June 30,2016 20 - 21

SCHEDULE 2 - Consolidating Schedule of Activities, for the Year EndedJune 30, 2016 22

SCHEDULE 3 - Consolidating Schedule of Change in Net Assets, for the YearEnded June 30, 2016 23

1

INDEPENDENT AUDITOR'S REPORT

To the Board of DirectorsD.C. Central Kitchen, Inc. and AffiliateWashington, D.C.

We have audited the accompanying consolidated financial statements of D.C. Central Kitchen,Inc. and Affiliate (the Organizations), which comprise the consolidated statement of financial position asof June 30, 2016, and the related consolidated statements of activities and change in net assets,functional expenses and cash flows for the year then ended, and the related notes to the consolidatedfinancial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with accounting principles generally accepted in the United States ofAmerica; this includes the design, implementation and maintenance of internal control relevant to thepreparation and fair presentation of consolidated financial statements that are free from materialmisstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based onour audits. We conducted our audits in accordance with auditing standards generally accepted in theUnited States of America. Those standards require that we plan and perform the audits to obtainreasonable assurance about whether the consolidated financial statements are free of materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the consolidated financial statements. The procedures selected depend on the auditor’sjudgment, including the assessment of the risks of material misstatement of the consolidated financialstatements, whether due to fraud or error. In making those risk assessments, the auditor considersinternal control relevant to the entity’s preparation and fair presentation of the consolidated financialstatements in order to design audit procedures that are appropriate in the circumstances, but not for thepurpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, weexpress no such opinion. An audit also includes evaluating the appropriateness of accounting policiesused and the reasonableness of significant accounting estimates made by management, as well asevaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in allmaterial respects, the consolidated financial position of the Organizations as of June 30, 2016, and theconsolidated changes in their net assets and their consolidated cash flows for the year then ended inaccordance with accounting principles generally accepted in the United States of America.

4550 MONTGOMERY AVENUE · SUITE 650 NORTH · BETHESDA, MARYLAND 20814(301) 951-9090 · FAX (301) 951-3570 · WWW.GRFCPA.COM

___________________________

MEMBER OF CPAMERICA INTERNATIONAL, AN AFFILIATE OF HORWATH INTERNATIONAL

MEMBER OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS' PRIVATE COMPANIES PRACTICE SECTION

2

Report on Summarized Comparative Information

We have previously audited the Organizations' 2015 financial statements, and we expressed anunmodified audit opinion on those audited financial statements in our report dated October 29, 2015. Inour opinion, the summarized comparative information presented herein as of and for the year endedJune 30, 2015, is consistent, in all material respects, with the audited financial statements from which ithas been derived.

Other Matter

Our audits were conducted for the purpose of forming an opinion on the consolidated financialstatements as a whole. The Consolidating Schedule of Financial Position, Consolidating Schedule ofActivities, and Consolidating Schedule of Change in Net Assets on pages 20 - 23 are presented forpurposes of additional analysis and are not a required part of the consolidated financial statements. Suchinformation is the responsibility of management and was derived from and relates directly to theunderlying accounting and other records used to prepare the consolidated financial statements. Theinformation has been subjected to the auditing procedures applied in the audit of the consolidatedfinancial statements and certain additional procedures, including comparing and reconciling suchinformation directly to the underlying accounting and other records used to prepare the consolidatedfinancial statements or to the consolidated financial statements themselves, and other additionalprocedures in accordance with auditing standards generally accepted in the United States of America. Inour opinion, the information is fairly stated in all material respects in relation to the consolidated financialstatements as a whole.

October 24, 2016

3


CONSOLIDATED STATEMENT OF FINANCIAL POSITIONAS OF JUNE 30, 2016

WITH SUMMARIZED FINANCIAL INFORMATION FOR 2015

ASSETS

2016 2015CURRENT ASSETS

Cash and cash equivalents $ 721,143 $ 111,855Investments 680,191 593,721Accounts receivable 751,434 612,846Contributions and grants receivable 410,609 816,186Inventory 50,506 60,548Prepaid expenses 203,545 104,978

Total current assets 2,817,428 2,300,134

FIXED ASSETS

Equipment 878,774 837,257Vehicles 843,006 656,367Leasehold improvements 554,637 522,521

2,276,417 2,016,145Less: Accumulated depreciation and amortization (1,717,453) (1,437,217)

Net fixed assets 558,964 578,928

OTHER ASSETS

Security deposit 14,000 14,000Investments, long-term 1,200,000 1,200,000Contributions and grants receivable, net of current portion 846,759 75,000

Total other assets 2,060,759 1,289,000

TOTAL ASSETS $ 5,437,151 $ 4,168,062

See accompanying notes to consolidated financial statements. 4

EXHIBIT A

LIABILITIES AND NET ASSETS

2016 2015CURRENT LIABILITIES

Notes payable $ 73,544 $ 253,747Accounts payable and accrued liabilities 237,507 361,593Accrued salaries and related benefits 448,303 374,579Deferred revenue 171,456 2,089Deferred rent - 7,100

Total current liabilities 930,810 999,108

LONG-TERM LIABILITIES

Notes payable, net of current portion 131,983 32,849Deferred rent, net of current portion 8,027 -

Total long-term liabilities 140,010 32,849

Total liabilities 1,070,820 1,031,957

NET ASSETS

Unrestricted:Board designated 1,200,000 1,200,000Undesignated 1,816,582 1,288,231

Total unrestricted 3,016,582 2,488,231

Temporarily restricted 1,349,749 647,874

Total net assets 4,366,331 3,136,105

TOTAL LIABILITIES AND NET ASSETS $ 5,437,151 $ 4,168,062


EXHIBIT B


CONSOLIDATED STATEMENT OF ACTIVITIES AND CHANGE IN NET ASSETSFOR THE YEAR ENDED JUNE 30, 2016


2016 2015

UnrestrictedTemporarilyRestricted Total Total

REVENUE

Contracts $ 7,038,958 $ - $ 7,038,958 $ 6,493,988Contributions - General 4,212,103 1,430,000 5,642,103 3,884,506Contributions - United Way 130,390 - 130,390 197,628Government grants 565,644 - 565,644 396,788Contributed services and materials 1,762,803 - 1,762,803 1,528,625Interest and dividends 60,752 - 60,752 18,360Special events, net 511,942 - 511,942 862,874Other revenue 188,846 - 188,846 157,871Program service sales 953,774 - 953,774 893,321Net assets released from donor

restrictions 728,125 (728,125) - -

Total revenue 16,153,337 701,875 16,855,212 14,433,961

EXPENSES

Program Services:Food Recycling and Meal Distribution 4,607,494 - 4,607,494 4,566,134Healthy School Food 4,898,160 - 4,898,160 4,704,176Fresh Start Catering 589,350 - 589,350 542,307The Campus Kitchens Project, Inc. 1,109,129 - 1,109,129 1,055,251Culinary Job Training 1,178,845 - 1,178,845 1,098,489Healthy Corners 708,717 - 708,717 577,457

Total program services 13,091,695 - 13,091,695 12,543,814

Supporting Services:Development 920,941 - 920,941 852,873Management and General 1,641,127 - 1,641,127 1,447,164

Total supporting services 2,562,068 - 2,562,068 2,300,037

Total expenses 15,653,763 - 15,653,763 14,843,851

Change in net assets before other item 499,574 701,875 1,201,449 (409,890)

OTHER ITEM

Realized and unrealized gain oninvestments 28,777 - 28,777 46,880

Change in net assets 528,351 701,875 1,230,226 (363,010)

Net assets at beginning of year 2,488,231 647,874 3,136,105 3,499,115

NET ASSETS AT END OF YEAR $ 3,016,582 $ 1,349,749 $ 4,366,331 $ 3,136,105


Food

Recycling Healthy Fresh The Campus Culinary

and Meal School Start Kitchens Job

Distribution Food Catering Project, Inc. Training

Personnel expenses 1,976,556$ 2,384,005$ 280,881$ 411,552$ 801,074$ Food and beverages - purchased 865,514 1,771,930 166,175 16,550 25,859 Food and beverages - donated 919,632 - - 223,681 - Professional services - purchased 35,514 4,070 10,970 36,475 39,101 Professional services - donated - - - - - Facilities space - purchased - - - - - Facilities space - donated - - - 159,018 - Depreciation and amortization 123,594 29,202 - - - Insurance other than vehicle 4,887 1,397 - 9,157 - Interest and bank fees - - - - - Kitchen costs 261,872 356,020 71,695 4,714 16,618 Program expenses - - - 128,133 188,266 Meetings and conventions 175 1,582 - 5,977 2,739 Office expenses 34,294 19,660 1,720 5,544 24,280 Miscellaneous 35,801 2,628 695 9,401 4,413 Technology and communication 19,333 4,724 3,079 14,856 4,071 Travel expenses 3,971 2,338 2,827 28,385 6,168

Vehicle expenses 67,193 45,530 18,212 - -

Subtotal 4,348,336 4,623,086 556,254 1,053,443 1,112,589

Management and general allocation 259,158 275,074 33,096 55,686 66,256

TOTAL 4,607,494$ 4,898,160$ 589,350$ 1,109,129$ 1,178,845$


CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

Program Services

FOR THE YEAR ENDED JUNE 30, 2016WITH SUMMARIZED FINANCIAL INFORMATION FOR 2015

2016

See accompanying notes to consolidated financial statements 7

2015

Total Total

Healthy Program Management Supporting Total Total

Corners Services Development and General Services Expenses Expenses

352,372$ 6,206,440$ 652,175$ 1,100,383$ 1,752,558$ 7,958,998$ 7,403,035$ 106,098 2,952,126 548 483 1,031 2,953,157 2,724,483

- 1,143,313 - - - 1,143,313 1,075,841 1,375 127,505 44,149 173,876 218,025 345,530 357,124

- - - 187,372 187,372 187,372 47,516 - - - 274,612 274,612 274,612 248,767 - 159,018 7,000 266,100 273,100 432,118 405,268 - 152,796 33,027 94,413 127,440 280,236 259,376 - 15,441 - 30,580 30,580 46,021 36,222 - - 17,305 71,544 88,849 88,849 94,663

9,375 720,294 3,973 15,540 19,513 739,807 782,461 102,531 418,930 - - - 418,930 418,987

1,414 11,887 6,508 12,273 18,781 30,668 36,272 52,408 137,906 50,892 53,391 104,283 242,189 430,074

247 53,185 14,785 46,648 61,433 114,618 235,555 4,437 50,500 34,424 81,266 115,690 166,190 144,352 2,235 45,924 4,436 13,436 17,872 63,796 75,792

36,424 167,359 - - - 167,359 68,063

668,916 12,362,624 869,222 2,421,917 3,291,139 15,653,763 14,843,851

39,801 729,071 51,719 (780,790) (729,071) - -

708,717$ 13,091,695$ 920,941$ 1,641,127$ 2,562,068$ 15,653,763$ 14,843,851$

EXHIBIT C

Supporting Services

See accompanying notes to consolidated financial statements 8

EXHIBIT D


CONSOLIDATED STATEMENT OF CASH FLOWSFOR THE YEAR ENDED JUNE 30, 2016


2016 2015CASH FLOWS FROM OPERATING ACTIVITIES

Change in net assets $ 1,230,226 $ (363,010)

Adjustments to reconcile change in net assets to net cash provided by operating activities:

Depreciation and amortization 280,236 259,376Net realized and unrealized gain on investments (28,777) (46,880)Deferred rent abatement 927 (19,463)Donated stock (266,642) (24,247)

(Increase) decrease in:Accounts receivable (138,588) (58,551)Contributions and grants receivable (366,182) 503,314Inventory 10,042 73Prepaid expenses (98,567) 44,235Security deposit - 2,500

Increase (decrease) in:Accounts payable and accrued liabilities (124,086) 144,742Accrued salaries and related benefits 73,724 19,968Deferred revenue 169,367 (4,346)

Net cash provided by operating activities 741,680 457,711

CASH FLOWS FROM INVESTING ACTIVITIES

Purchase of fixed assets (260,272) (165,133)Purchase of investments (60,751) (18,359)Proceeds from sale of investments 269,700 182,700

Net cash used by investing activities (51,323) (792)

CASH FLOWS FROM FINANCING ACTIVITIES

Payments on notes payable (266,069) (253,109)Proceeds from notes payable 185,000 -Net decrease in bank overdraft - (106,475)

Net cash used by financing activities (81,069) (359,584)

Net increase in cash and cash equivalents 609,288 97,335

Cash and cash equivalents at beginning of year 111,855 14,520

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 721,143 $ 111,855


Interest Paid $ 25,532 $ 35,296



NOTES TO CONSOLIDATED FINANCIAL STATEMENTSJUNE 30, 2016

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION

Organization -

D.C. Central Kitchen, Inc. (DCCK) was organized in the District of Columbia in 1988 as a not-for-profit organization for the purposes of fighting hunger and creating opportunity.

DCCK uses food as a tool to:

Strengthen Bodies, by safely recovering unserved foods from area foodservice

businesses to feed children and adults at partner agencies throughout the greater

Washington area.

Empower Minds by providing foodservice job training for unemployed men and women

and community service opportunities for youth and adults.

Build Communities by providing working examples, innovative solutions, and shared

technology to a cooperative and effective national network of community kitchens.

Related Entity - Principles of Consolidation

In 2002, The Campus Kitchens Project, Inc. (the CKP) was incorporated as an affiliatedcorporation under common control with DCCK. These financial statements include the accountsof DCCK and the CKP (collectively “the Organizations”). Inter-company accounts andtransactions have been eliminated as part of the consolidation.

The CKP owns and operates five Campus Kitchens and has affiliate agreements with anotherthirty. The contracts that define the CKP’s relationships with its “owned” and “affiliate” schoolsdiffer mainly in the burden of cost and assumption of liability.

Owned: The CKP provides 100% of the staffing, funding and ongoing assistance to

Campus Kitchens who operate under the “owned” model. These were the first of the CKP’s

Campus Kitchens, and therefore, acted as “pilot” programs. The CKP retains control over

the owned Campus Kitchens, assumes liability, and provides indemnification to the host

school for the work of the program.

Affiliate: For Campus Kitchens operating under the “affiliate” model, the host school

assumes the staffing responsibilities, ongoing costs and liability for the Campus Kitchens

program. Based on available funding and the school’s proposed budget, the CKP provides

a multi-year grant to the school to help defray these costs. The CKP provides ongoing

technical support, training and licensing of its name and marks to all affiliate schools.

Each of the owned Campus Kitchens is organized as a limited liability company and operates aCampus Kitchen at a single college or university. Both owned and affiliated Campus Kitchensprograms coordinate food donations, prepare and deliver meals to area community serviceagencies, teach basic food preparation and culinary skills to the unemployed, and provideservice-learning opportunities for students.

Since its inception in 2001, the CKP has engaged more than 86,190 students who haveprovided more than 660,929 volunteer hours recycling food, working in the kitchen, anddelivering approximately 2,863,493 meals to local partner agencies.

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION(Continued)

Basis of presentation -

The accompanying consolidated financial statements are presented on the accrual basis ofaccounting, and in accordance with FASB ASC 958-10, Not-for-Profit Entities, Consolidation.

The consolidated financial statements include certain prior year summarized comparativeinformation in total but not by net asset class. Such information does not include sufficient detailto constitute a presentation in conformity with generally accepted accounting principles.Accordingly, such information should be read in conjunction with the Organizations'consolidated financial statements for the year ended June 30, 2015, from which thesummarized information was derived.

Cash and cash equivalents -

The Organizations consider all cash and other highly liquid investments with initial maturities ofthree months or less, excluding money market funds held by investment managers in theamount of $152 for the year ended June 30, 2015, to be cash equivalents.

Bank deposit accounts are insured by the Federal Deposit Insurance Corporation (FDIC) up toa limit of $250,000. At times during the year, the Organizations maintain cash balances inexcess of the FDIC insurance limits. Management believes the risk in these situations to beminimal.

Investments -

Investments are recorded at their readily determinable fair value. Interest and dividends and netrealized and unrealized gains are reported separately in the Consolidated Statement ofActivities and Change in Net Assets.

Accounts receivable -

Accounts receivable approximate fair value and are to be collected within one year.Management considers all amounts to be fully collectible. Accordingly, an allowance fordoubtful accounts has not been established.

Contributions and grants receivable

Contributions and grants receivable are recorded at their net realizable value, whichapproximates fair value. Grant funding received in advance of incurring the related expenses isrecorded as a refundable advance. Contributions and grants receivable that are expected to becollected in future years are recorded at fair value, measured as the present value of theirfuture cash flows. The discount on these amounts are computed using risk-adjusted interestrates applicable to the years in which the promises are received. Amortization of the discountsis included in grants and contribution revenue. Conditional promises to give are not included assupport until the conditions are substantially met.

Fixed assets -

Fixed assets in excess of $10,000 are capitalized and stated at cost. Fixed assets aredepreciated on a straight-line basis over the estimated useful lives of the related assets,generally two to ten years. Leasehold improvements are amortized over the remaining life of thelease. The cost of maintenance and repairs is recorded as expenses are incurred. Depreciationand amortization expense for the year ended June 30, 2016 totaled $280,236.

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Income taxes -

The Organizations are exempt from Federal income taxes under Section 501(c)(3) of theInternal Revenue Code. Accordingly, no provision for income taxes has been made in theaccompanying consolidated financial statements. The Organizations are not privatefoundations.

As discussed in the “Organization” section above, each of the "owned" Campus Kitchens is asingle-member LLC owned entirely by the CKP. Each of the "owned" Campus Kitchens istreated as a disregarded entity for income tax purposes and, as such, its financial activity isreported in conjunction with the Federal tax filings of the CKP.

Uncertain tax positions -

For the year ended June 30, 2016, the Organizations have documented their consideration ofFASB ASC 740-10, Income Taxes, that provides guidance for reporting uncertainty in incometaxes and has determined that no material uncertain tax positions qualify for either recognitionor disclosure in the consolidated financial statements.

Inventory -

Inventory, consisting of disposable serving supplies, raw food and cooking ingredients, arestated at the lower of cost or market using the first-in, first-out (FIFO) method of determiningcost.

Net asset classification -

The net assets are reported in two self-balancing groups as follows:

Unrestricted net assets include unrestricted revenue and contributions received without

donor-imposed restrictions. These net assets are available for the operation of the

Organizations and include both internally designated and undesignated resources.

Temporarily restricted net assets include revenue and contributions subject to donor-

imposed stipulations that will be met by the actions of the Organizations and/or the passage

of time. When a restriction expires, temporarily restricted net assets are reclassified to

unrestricted net assets and reported in the Consolidated Statement of Activities and Change

in Net Assets as net assets released from restrictions.

Contributions and grants -

Unrestricted and temporarily restricted contributions and grants are recorded as revenue in theyear notification is received from the donor. Temporarily restricted contributions and grants arerecognized as unrestricted support only to the extent of actual expenses incurred in compliancewith the donor-imposed restrictions and satisfaction of time restrictions. Such funds in excess ofexpenses incurred are shown as temporarily restricted net assets in the accompanyingconsolidated financial statements.

The Organizations receive funding under grants and contracts from the U.S. Government andother grantors for direct and indirect program costs. This funding is subject to contractualrestrictions, which must be met through incurring qualifying expenses for particular programs.Accordingly, such grants are considered exchange transactions and are recorded asunrestricted income to the extent that related expenses are incurred in compliance with thecriteria stipulated in the grant agreements.

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Contributed services and materials -

Contributed services and materials consist of office space, services and food. Contributedservices and materials are recorded at their fair market value as of the date of the gift.

In addition, volunteers have donated significant amounts of their time to the Organizations;these donated services are not reflected in the consolidated financial statements since theseservices do not meet the criteria for recognition as contributed services.

Use of estimates -

The preparation of the consolidated financial statements in conformity with accountingprinciples generally accepted in the United States of America requires management to makeestimates and assumptions that affect the reported amounts of assets and liabilities at the dateof the consolidated financial statements and the reported amounts of revenue and expensesduring the reporting period. Accordingly, actual results could differ from those estimates.

Functional allocation of expenses -

The costs of providing the various programs and other activities have been summarized on afunctional basis in the Consolidated Statement of Activities and Change in Net Assets.Accordingly, certain costs have been allocated among the programs and supporting servicesbenefited.

The following are the major programs of the Organizations:

Food Recycling and Meal Distribution: For the year ended June 30, 2016, DCCK recoveredover 685,948 pounds of food that would otherwise have gone to waste. In conjunction with over15,000 volunteers and culinary job training students, our staff used this food to create morethan 1,847,155 meals for 82 homeless shelters, transitional homes and social service agenciesthroughout the Washington metropolitan area. Agencies receiving meals include communityand youth centers, children’s after-school programs, senior centers, addiction recoveryprograms, English as a Second Language (ESL) and General Equivalency Diploma (GED)programs and halfway homes. Healthy Returns is a program of DCCK focused on feeding ouryoung people healthier foods that will help develop life-long improved eating habits. Theprogram’s goal is to enable D.C. agencies to encourage our youth to eat better and leadhealthier lives by consistently providing more substantial, more nutritious foods that remain “kidfriendly.” Healthy Returns distributes these snacks and meals to agencies serving low-incomechildren and at-risk youth as well as agencies serving struggling families across the WashingtonMetropolitan Area. Not only will the children be provided healthier food, but they will alsoreceive nutrition education. The invaluable information that they are taught will empower thestudents to make smarter food and health choices.

Healthy School Food Program: DCCK provides healthy breakfasts, lunches and suppers toeight public schools and two private schools in Washington, D.C. This service aims to bringlocal, seasonable and sustainable cost-effective dining service to local schools that want toserve healthy, locally sourced meals to low-income student populations. In addition topromoting access to good nutrition, the program creates and sustains employmentopportunities for at-risk men and women who have completed DCCK’s Culinary Job Trainingprogram.

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Functional allocation of expenses (continued) -

Fresh Start Catering: Fresh Start Catering is a full-service, professional catering and contractfoods company that employs graduates of DCCK’s job training program and generates revenuefor DCCK. With Fresh Start, graduates build on the skills they acquired in the Culinary JobTraining program by focusing on advanced culinary skills, presentation techniques, and formalservice that will enable them to obtain jobs in the competitive hospitality industry. This programsupports DCCK’s training program as well as serving as a model for what we believe corporatephilanthropy can be.

The Campus Kitchens Project, Inc.: The CKP is a nationwide program that has opened,staffed, and supported DCCK-style community kitchens in university and high school settings.The pilot site of the CKP at Saint Louis University was opened in October 2001. The project is acollaborative venture between the CKP, the university dining contractor, and the university.Food is donated from campus dining facilities, re-prepared by student volunteers and thendistributed, by students, to social service agencies and individuals located in the immediatecommunity. At June 30, 2016, there were 54 Campus Kitchens Projects located around thecountry.

Culinary Job Training: DCCK operates an intense, nationally recognized fourteen-weekCulinary Job Training program for unemployed and/or formerly incarcerated men and womenliving in homeless shelters or receiving welfare benefits. The program offers comprehensivetraining in food preparation and sanitation in combination with job readiness and life skillstraining. For the year ended June 30, 2016, DCCK operated eight such programs andgraduated 91 students.

Healthy Corners: DCCK offers affordable wholesale delivery service for fresh produce andhealthy snack items in communities where healthy retail options are scarce, known as ‘fooddeserts. DCCK delivers nutritious options to 74 corner stores and other small retailers, primarilythose located in the underserved neighborhoods of Wards 5, 7 and 8. In addition to offeringthese partner businesses new products for sale, we provide them with free infrastructure,nutrition education, marketing support, and technical assistance.

Risks and uncertainties -

The Organizations invest in various investment securities. Investment securities are exposed tovarious risks such as interest rates, market and credit risks. Due to the level of risk associatedwith certain investment securities, it is at least reasonably possible that changes in the values ofinvestment securities will occur in the near term and that such changes could materially affectthe amounts reported in the accompanying consolidated financial statements.

Fair value measurement -

The Organizations adopted the provisions of FASB ASC 820, Fair Value Measurement. FASBASC 820 defines fair value, establishes a framework for measuring fair value, establishes a fairvalue hierarchy based on the quality of inputs (assumptions that market participants would usein pricing assets and liabilities, including assumptions about risk) used to measure fair value,and enhances disclosure requirements for fair value measurements. The Organizations accountfor a significant portion of their financial instruments at fair value or consider fair value in theirmeasurement.

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2. INVESTMENTS

Investments consisted of the following at June 30, 2016:

Fair Value

Mutual Funds - Torray Fund $ 1,390,527Equity Mutual Funds 488,984Exchange Traded Products 528Money Market Funds 152

TOTAL INVESTMENTS $ 1,880,191

The following summarizes investment income:

Interest and dividends $ 60,752Net realized and unrealized gain 28,777

TOTAL INVESTMENT INCOME $ 89,529

3. CONTRIBUTIONS AND GRANTS RECEIVABLE

Contributions and grants receivable are due as follows at June 30, 2016:

Receivable due in less than one-year $ 410,609Receivable due in one to five years 900,000

Total 1,310,609Less: Allowance to discount balance to present value (53,241)Less: Current portion (410,609)

CONTRIBUTIONS AND GRANTS RECEIVABLE, NET OFCURRENT PORTION $ 846,759

4. NOTES PAYABLE

DCCK borrowed $81,760 in the form of two separate notes from Bank of America to financeequipment. The notes require 60 monthly payments of $1,523, consisting of principal and interestcomputed at 4.50%. The notes are secured by the equipment that was purchased. As ofJune 30, 2016, the outstanding principal of these two notes was $5,149.

On July 6, 2011, DCCK borrowed $300,000 from Bank of America, which is secured by existingequipment, inventory and receivables. The note requires 60 monthly payments of $5,638,consisting of principal and interest computed at 4.68%. As of June 30, 2016, the outstandingprincipal of this note payable was $5,615.

On November 13, 2013, DCCK borrowed $150,000 through the RSF Social Investment Fund. Theloan carries an interest rate of 5% and matures on November 15, 2016. The loan is collateralizedby DCCK motor vehicles. As of June 30, 2016, the outstanding principal on this note payable was$22,977.

On July 14, 2015, DCCK borrowed $185,000 through the RSF Social Investment Fund, which issecured by the vehicles purchased. The loan carries an interest rate of 5%. As of June 30, 2016,the outstanding principal of the note payable was $171,786.

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4. NOTES PAYABLE (Continued)

The above notes are cross collaterized. DCCK's assets, inventory and receivables are sufficient tocover all of the existing notes.

Principal payments are due as follows:

Year Ending June 30,

2017 $ 73,5442018 41,8232019 43,9632020 46,197

$ 205,527

For the year ended June 30, 2016, interest expense was $25,532.

5. LINE OF CREDIT

DCCK has a $1,250,000 bank line of credit, which matures December 31, 2016. Amountsborrowed under this agreement bear interest at the bank’s prime rate plus 1.5% (3.25% atJune 30, 2016).

As of June 30, 2016, there was no outstanding balance on the line. The line is secured byinventory, receivables and equipment.

6. BOARD DESIGNATED NET ASSETS

The Board of Directors has elected to designate a portion of its unrestricted net assets as areserve for operating cash needs. The amount designated is approximately one and half months ofcash expenses.

7. TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets consisted of the following at June 30, 2016:

Local Food Capacity $ 800,000Fighting Food Waste 69,750Culinary Job Training 479,999

$ 1,349,749

The following temporarily restricted net assets were released from donor restrictions by incurringexpenses (or through the passage of time) which satisfied the restricted purposes specified by thedonors:

Capital Food Fight $ 50,000Fighting Food Waste 80,250Passage of Time 597,875

$ 728,125

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8. CONTRIBUTED SERVICES AND MATERIALS

During the year ended June 30, 2016, the Organizations were the beneficiary of donated goodsand services which allowed the Organizations to provide greater resources toward variousprograms. To properly reflect total program expenses, the following donations have been includedin revenue and expense for the year ended June 30, 2016:

Donated food and beverages $ 1,143,313Donated professional services 187,372Donated rent 432,118

$ 1,762,803

The following programs have benefited from these donated services for the year endedJune 30, 2016:

Food Recycling and Meal Distribution $ 919,632The Campus Kitchens Project, Inc. 382,699Development 7,000Management and General 453,472

$ 1,762,803

The Organizations depend on a variety of volunteers to assist in the Organizations' programs.However, the value of time donated by volunteers is not recognized in the consolidated financialstatements since the services do not meet the criteria for recognition.

DCCK received approximately 60,000 hours of volunteer services for the year ended

June 30, 2016. These services are primarily related to food preparation. At $23.56 per hour, this

amounts to $1,413,600 of additional contributions and program service expenses to the Food

Recycling and Meal Distribution Program.

CKP, through the combined efforts of its "owned" and "affiliate" Campus Kitchens, received

approximately 88,039 hours of donated services from approximately 28,697 volunteers. These

volunteers assisted in the recovery of over 1.3 million pounds of food and the serving of over

349,376 meals. At $23.56 per hour, this amounts to $2,074,199 of additional contributions and

program expenses.

These hourly rates are the average estimated values per hour of volunteer time for the District ofColumbia (for DCCK) and the United States (for CKP) as determined by Independent Sector,http://www.independentsector.org/volunteer_time.

9. LEASE COMMITMENTS

The Organizations lease office space under a five-year agreement, which originated inNovember 2010. The Organizations extended the lease in 2015 for an additional five years. Baserent is $194,758 per year, plus a proportionate share of expenses, increasing by a factor of 3% peryear. DCCK receives donated rent for the five Campus Kitchens that are owned and operated bythe Campus Kitchen Project. The amounts received are included in donated rent in Note 7.

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9. LEASE COMMITMENTS (Continued)

Accounting principles generally accepted in the United States of America require that the total rentcommitment should be recognized on a straight-line basis over the term of the lease. Accordingly,the difference between the actual monthly payments and the rent expense being recognized forfinancial statement purposes is recorded as a deferred rent liability on the Consolidated Statementof Financial Position.

The following is a schedule of the future minimum lease payments:

Year Ending June 30,

2017 $ 198,6532018 204,6132019 210,7512020 217,0732021 73,067

$ 904,157

Rent expense for the year ended June 30, 2016 was $220,329 and is included in Facilities space -purchased on the accompanying Statement of Functional Expenses. For the year endedJune 30, 2016, the deferred rent liability was $8,027.

10. RETIREMENT PLAN

On January 1, 2014, the Organizations switched their retirement plan from a 403(b) Plan to a SafeHarbor 401(k). The Organizations use the Basic Match: 100% of the first 3% of pay that isdeferred; and 50% of the next 2 % of pay. Contributions to the plan during the year endedJune 30, 2016 totaled $169,260.

11. CONCENTRATION OF REVENUE

Approximately 53% of the Organizations' contract revenue for the year ended June 30, 2016 wasderived from a contract with the District of Columbia Primary Schools. The Organizations have noreason to believe that relationship with the District of Columbia Primary Schools will bediscontinued in the foreseeable future. However, any interruption of this relationships (i.e., thefailure to renew grant agreements or withholding of funds) would adversely affect theOrganizations' ability to finance ongoing operations.

12. FAIR VALUE MEASUREMENT

In accordance with FASB ASC 820, Fair Value Measurement, the Organizations have categorizedtheir financial instruments, based on the priority of the inputs to the valuation technique, into athree-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted pricesin active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservableinputs (Level 3). If the inputs used to measure the financial instruments fall within different levels ofhierarchy, the categorization is based on the lowest level input that is significant to the fair valuemeasurement of the instrument.

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12. FAIR VALUE MEASUREMENT (Continued)

Investments recorded in the Consolidated Statement of Financial Position are categorized basedon the inputs to valuation techniques as follows:

Level 1. These are investments where values are based on unadjusted quoted prices for identicalassets in an active market the Organizations have the ability to access.

Level 2. These are investments where values are based on quoted prices for similar instruments inactive markets, quoted prices for identical or similar instruments in markets that are not active, ormodel-based valuation techniques that utilize inputs that are observable either directly or indirectlyfor substantially the full-term of the investments.

Level 3. These are investments where inputs to the valuation methodology are unobservable andsignificant to the fair value measurement.

Following is a description of the valuation methodology used for investments measured at fairvalue. There have been no changes in the methodologies used at June 30, 2016.

Mutual funds - The fair value is equal to the reported net asset value of the fund, which is the

price at which additional shares can be obtained.

Exchange traded products - Valued at the closing price reported on the active market in which

the individual securities are traded.

Money market funds - Fair value is equal to the reported net asset value of the fund.

The table below summarizes, by level within the fair value hierarchy, the Organizations'investments as of June 30, 2016:

Level 1 Level 2 Level 3 TotalAsset Class:

Mutual Funds - Torray Fund $ 1,390,527 $ - $ - $ 1,390,527Equity Mutual Funds 488,984 - - 488,984Exchange Traded Products 528 - - 528Money Market Funds 152 - - 152

TOTAL $ 1,880,191 $ - $ - $ 1,880,191

13. SUBSEQUENT EVENTS

In preparing these consolidated financial statements, the Organizations have evaluated events andtransactions for potential recognition or disclosure through October 24, 2016, the date theconsolidated financial statements were issued. At the end of the fiscal year, the Organizationswere in the process of purchasing two new vehicles and had secured additional funding from RSFSocial Investment Fund in the amount of $120,000.

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CONSOLIDATING SCHEDULE OF FINANCIAL POSITIONAS OF JUNE 30, 2016

ASSETS

DCCK CKP TotalCURRENT ASSETS

Cash and cash equivalents $ 569,466 $ 151,677 $ 721,143Investments 191,207 488,984 680,191Accounts receivable 748,434 3,000 751,434Contributions and grants receivable 335,609 75,000 410,609Inventory 50,506 - 50,506Prepaid expenses 197,884 5,661 203,545

Total current assets 2,093,106 724,322 2,817,428

FIXED ASSETS

Equipment 851,603 27,171 878,774Vehicles 843,006 - 843,006Leasehold improvements 554,637 - 554,637

2,249,246 27,171 2,276,417Less: Accumulated depreciation and amortization (1,690,282) (27,171) (1,717,453)

Net fixed assets 558,964 - 558,964

OTHER ASSETS

Security deposit 14,000 - 14,000Investments, long-term 1,200,000 - 1,200,000Contributions and grants receivable, net of current

portion 846,759 - 846,759

Total other assets 2,060,759 - 2,060,759

TOTAL ASSETS $ 4,712,829 $ 724,322 $ 5,437,151

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SCHEDULE 1

LIABILITIES AND NET ASSETS

DCCK CKP TotalCURRENT LIABILITIES

Notes payable $ 73,544 $ - $ 73,544Accounts payable and accrued liabilities 232,799 4,708 237,507Accrued salaries and related benefits 413,901 34,402 448,303Deferred revenue 170,256 1,200 171,456

Total current liabilities 890,500 40,310 930,810

LONG-TERM LIABILITIES

Notes payable, net of current portion 131,983 - 131,983Deferred rent, net of current portion 8,027 - 8,027

Total long-term liabilities 140,010 - 140,010

Total liabilities 1,030,510 40,310 1,070,820

NET ASSETS

Unrestricted:Board designated 1,200,000 - 1,200,000Undesignated 1,202,320 614,262 1,816,582

Total unrestricted 2,402,320 614,262 3,016,582

Temporarily restricted 1,279,999 69,750 1,349,749

Total net assets 3,682,319 684,012 4,366,331

TOTAL LIABILITIES AND NETASSETS $ 4,712,829 $ 724,322 $ 5,437,151

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SCHEDULE 2


CONSOLIDATING SCHEDULE OF ACTIVITIESFOR THE YEAR ENDED JUNE 30, 2016

DCCK CKP Eliminations TotalUNRESTRICTED REVENUE

Contracts $ 7,038,958 $ - $ - $ 7,038,958Contributions - General 3,985,567 226,536 - 4,212,103Contributions - United Way 130,390 - - 130,390DCCK grants - 200,000 (200,000) -Government grants 565,644 - - 565,644Contributed services and materials 1,357,004 405,799 - 1,762,803Interest and dividends 55,761 4,991 - 60,752Special events, net 511,942 - - 511,942Other revenue 76,451 112,395 - 188,846Program service sales 953,774 - - 953,774Net assets released from donor

restrictions 200,000 528,125 - 728,125

Total unrestricted revenue 14,875,491 1,477,846 (200,000) 16,153,337

EXPENSES

Program Services:Food Recycling and Meal Distribution 4,607,494 - - 4,607,494Healthy School Food 4,898,160 - - 4,898,160Fresh Start Catering 589,350 - - 589,350The Campus Kitchens Project, Inc. 200,000 1,109,129 (200,000) 1,109,129Culinary Job Training 1,178,845 - - 1,178,845Healthy Corners 708,717 - - 708,717

Total program services 12,182,566 1,109,129 (200,000) 13,091,695

Supporting Services:Development 854,787 66,154 - 920,941Management and General 1,489,108 152,019 - 1,641,127

Total supporting services 2,343,895 218,173 - 2,562,068

Total expenses 14,526,461 1,327,302 (200,000) 15,653,763

Change in unrestricted net assetsbefore other item 349,030 150,544 - 499,574

OTHER ITEM

Realized and unrealized gain oninvestments 9,934 18,843 - 28,777

CHANGE IN UNRESTRICTED NETASSETS $ 358,964 $ 169,387 $ - $ 528,351

TEMPORARILY RESTRICTEDREVENUEContributions - General $ 1,280,000 $ 150,000 $ - $ 1,430,000Net assets released from donor

restrictions (200,000) (528,125) - (728,125)

CHANGE IN TEMPORARILYRESTRICTED NET ASSETS $ 1,080,000 $ (378,125) $ - $ 701,875

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SCHEDULE 3


CONSOLIDATING SCHEDULE OF CHANGE IN NET ASSETSFOR THE YEAR ENDED JUNE 30, 2016

DCCK CKP TotalUNRESTRICTED NET ASSETS

Net assets at beginning of year $ 2,043,356 $ 444,875 $ 2,488,231Change in unrestricted net assets 358,964 169,387 528,351

NET ASSETS AT END OF YEAR $ 2,402,320 $ 614,262 $ 3,016,582

TEMPORARILY RESTRICTED NET ASSETS

Net assets at beginning of year $ 199,999 $ 447,875 $ 647,874Change in temporarily restricted net assets 1,080,000 (378,125) 701,875

NET ASSETS AT END OF YEAR $ 1,279,999 $ 69,750 $ 1,349,749

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D.C. CENTRAL KITCHEN, INC A · MEMBER OF CPAMERICA INTERNATIONAL, ... purchased 35,514 4,070 10,970...

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Transcript of D.C. CENTRAL KITCHEN, INC A · MEMBER OF CPAMERICA INTERNATIONAL, ... purchased 35,514 4,070 10,970...