Hibiscus Children’s Center, Inc. ANNUAL FINANCIAL ......Hibiscus Children's Center, Inc. STATEMENT...

Hibiscus Children’s Center, Inc.

ANNUAL FINANCIAL REPORT

June 30, 2016

Hibiscus Children’s Center, Inc. Annual Financial Report

June 30, 2016

CONTENTS Page Independent Auditors’ Report 1 Financial Statements Statement of Financial Position 4 Statement of Activities 5 Statement of Functional Expenses 6 Statement of Cash Flows 7 Notes to Financial Statements 8 Supplementary Information Combining Schedule of Financial Position 21 Combining Schedule of Activities 22 Compliance Section Independent Auditors’ 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 23 Independent Auditors’ Report on Compliance with Requirements That Could Have a Direct and Material Effect on Each Major Federal Program and on Internal Control Over Compliance in Accordance with the Single Audit Act 25 Schedule of Findings and Questioned Costs 28 Schedule of Expenditures of Federal Awards 29 Notes to Schedule of Expenditures of Federal Awards 30

Hibiscus Children's Center, Inc.STATEMENT OF FINANCIAL POSITION

June 30, 2016 (With comparative totals at June 30, 2015)

2016 2015

Assets

Current assets

Cash and cash equivalents $ 647,600 $ 980,874

Accounts receivable, net 403,931 511,810

Contributions receivable, net 3,500 3,500

Prepaid and other assets 4,721 4,627

Total current assets 1,059,752 1,500,811

Property, plant and equipment, net of

accumulated depreciation 3,146,273 3,206,398

Other assets

Investments 3,036,525 3,507,355

Contributions receivable, net 72,456 74,956

Deposits 19,355 19,455

Total other assets 3,128,336 3,601,766

Total assets $ 7,334,361 $ 8,308,975

Liabilities and Net Assets

Current liabilities

The accompanying notes are an integral part of these financial statements. Page 4

Current liabilities

Accounts payable $ 25,664 $ 21,504

Accrued compensation and related expenses 411,441 321,194

Line of credit 83,466 400,000

Deferred revenues 3,995 9,951

Total current liabilities 524,566 752,649

Net Assets

Unrestricted

Undesignated 3,239,735 3,454,987

Designated 2,858,510 3,226,213

Temporarily restricted 593,158 756,734

Permanently restricted 118,392 118,392

Total net assets 6,809,795 7,556,326

Total liabilities and net assets $ 7,334,361 $ 8,308,975


Hibiscus Children's Center, Inc.STATEMENT OF ACTIVITIES

For the Year Ended June 30, 2016(With Summarized Comparative Information for the Year Ended June 30, 2015)

Revenues, gains and other support

Support:

Donations $ 452,469 $ 156,986 $ - $ 609,455 $ 817,398

Thrift shop 288,690 - - 288,690 307,900

Less direct thrift shop costs (242,252) - - (242,252) (234,827)

Total net support 498,907 156,986 - 655,893 890,471

Fundraising events: 905,236 5,319 - 910,555 830,091

Less direct costs (185,548) - - (185,548) (237,831)

Net fundraising events 719,688 - - 725,007 592,260

Total support and fundraising 1,218,595 162,305 - 1,380,900 1,482,731

Revenues and gains:

Program service revenues 5,018,184 150,589 - 5,168,773 4,786,366

Investment income 15,886 1,835 - 17,721 60,528

Net assets released from restrictions 478,305 (478,305) - - -

Total revenues and gains 5,512,375 (325,881) - 5,186,494 4,846,894

Total revenues, gains and other

support 6,730,970 (163,576) - 6,567,394 6,329,625

Expenses

2016 2015Unrestricted

Permanently

Restricted

Temporarily

Restricted


Expenses

Program services

Residential programs 3,851,998 - - 3,851,998 3,725,131

Clinical 1,587,523 - - 1,587,523 1,352,385

Support for families in crisis 163,360 - - 163,360 157,295

Total program services 5,602,881 - - 5,602,881 5,234,811

Supporting services:

General and administrative 1,037,517 - - 1,037,517 857,393

Fundraising activities 673,527 - - 673,527 654,104

Total supporting services 1,711,044 - - 1,711,044 1,511,497

Total expenses 7,313,925 - - 7,313,925 6,746,308

Changes in net assets (582,955) (163,576) - (746,531) (416,683)

Net assets - beginning of year 6,681,200 756,734 118,392 7,556,326 7,973,009

Net assets - end of year $ 6,098,245 $ 593,158 $ 118,392 $ 6,809,795 $ 7,556,326


Hibiscus Children's Center, Inc.STATEMENT OF FUNCTIONAL EXPENSES

Year Ended June 30, 2016(With Summarized Comparative Information for the Year Ended June 30, 2015)

Support for Total General Total Totals

Residential Families Program and Fund SupportPrograms Clinical In Crisis Services Administrative Raising Services 2016 2015

OutreachAid to families $ - $ - $ 6,263 $ 6,263 $ - $ - $ - $ 6,263 26,964$ Camp and recreation 71,105 - - 71,105 - - - 71,105 45,766

Total outreach 71,105 - 6,263 77,368 - - - 77,368 72,460

CompensationSalaries and temporary staff 2,265,087 1,057,087 96,446 3,418,620 598,539 339,047 937,586 4,356,206 4,191,920 Employee benefits 379,574 133,330 16,142 529,046 113,477 31,457 144,934 673,980 513,183 Payroll taxes 197,101 85,600 7,531 290,232 53,009 28,005 81,014 371,246 356,016

Total compensation and related expenses 2,841,762 1,276,017 120,119 4,237,898 765,025 398,509 1,163,534 5,401,432 5,061,118

Services and suppliesOffice supplies and maintenance 46,572 19,117 2,129 67,818 35,694 33,304 68,998 136,816 108,275 General operating supplies 215,351 674 522 216,547 194 - 194 216,741 187,100 Equipment rental and maintenance 111,571 18,244 3,369 132,784 24,698 17,374 42,072 174,856 167,063 Dues, licenses and subscriptions 9,430 1,085 1,340 11,855 14,964 6,455 21,419 33,274 32,320 Professional fees and services 33,636 72,799 6,491 112,926 68,427 16,578 85,005 197,931 175,411 Travel and transportation 33,238 45,787 7,674 86,699 8,766 7,497 16,263 102,962 105,544 Training 27,497 5,261 109 32,867 10,883 1,217 12,100 44,967 41,831 Occupancy 95,390 26,792 7,552 129,734 28,052 26,555 54,607 184,341 172,237 Shelter improvements 10,291 - - 10,291 - - - 10,291 - Interest 116 - - 116 16,036 - 16,036 16,152 12,733 Telephone 24,667 20,124 2,109 46,900 10,926 8,701 19,627 66,527 85,297 Insurance 126,362 5,714 1,578 133,654 29,408 3,225 32,633 166,287 161,861

Total services and supplies 733,721 215,597 32,873 982,191 248,048 120,906 368,954 1,351,145 1,249,672

Totals


Total services and supplies 733,721 215,597 32,873 982,191 248,048 120,906 368,954 1,351,145 1,249,672

Promotion and developmentPublic education, advocacy and promotion 130 51 - 181 - 27,644 27,644 27,825 19,251 Event expenses - - - - - 121,569 121,569 - 5,377 Printing and distribution 592 824 46 1,462 2,323 1,841 5,626 5,626 31,557 Donor appreciation - - - - - 3,019 3,019 3,019 2,859

Total promotion and development 722 875 46 1,643 2,323 154,073 156,396 158,039 59,044

Program expenses 21,748 25,028 4,059 50,835 - 39 39 50,874 30,034 Bad debts - 65,682 - 65,682 - - - 65,682 73,900 Depreciation 182,940 4,324 - 187,264 22,121 - 22,121 209,385 200,080

Total expenses $ 3,851,998 $ 1,587,523 $ 163,360 $ 5,602,881 $ 1,037,517 $ 673,527 $ 1,711,044 $ 7,313,925 6,746,308$


Hibiscus Children's Center, Inc.

STATEMENT OF CASH FLOWSFor the Year Ended June 30, 2016

(With comparative totals for the year ended June 30, 2015)

2016 2015

Cash flows from operating activities:

Cash received for program services 5,309,198$ 4,665,397$

Cash received from donors 578,772 817,398

Cash received from fundraisers 674,923 592,260

Cash received from thrift shop 288,690 307,900

Cash received from investments 7,342 87,452

Cash paid to suppliers for goods and services (2,229,210) (1,753,741)

Cash paid for interest (16,152) (12,733)

Cash paid to employees for services (4,962,252) (5,022,757)

Net cash used in operating activities (348,689) (318,824)

Cash flows from investing activities:

Purchases of property and equipment (138,881) (55,098)

Proceeds from sale of investments 479,612 29,556

Purchase of investments (8,782) (48,265)

Net cash provided by (used in) investing activities 331,949 (73,807)

Cash flows from financing activities:

Proceeds from line of credit 83,466 150,000

Principal payments on line of credit (400,000) -

Net cash provided by (used in) financing activities (316,534) 150,000


Net increase (decrease) in cash and cash equivalents (333,274) (242,631)

Cash and cash equivalents, beginning of year 980,874 1,223,505

Cash and cash equivalents, end of year 647,600$ 980,874$

Reconciliation of change in net assets to net cash provided

by operating activities

Change in net assets (746,531)$ (416,683)$

Adjustments to reconcile change in net assets to net cash provided

by operating activities:

Depreciation 209,385 200,080

Net realized and unrealized (gains) losses on investments 18,546 28,006

(Increase) decrease in accounts receivable 110,379 (121,421)

(Increase) decrease in prepaid and other assets (94) 14,801

Increase (decrease) in accounts payable 4,160 (61,968)

Increase (decrease) in accrued expenses 55,466 38,361

(348,689)$ (318,824)$


Hibiscus Children's Center, Inc. NOTES TO FINANCIAL STATEMENTS

June 30, 2016

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NOTE A - DESCRIPTION OF ORGANIZATION Hibiscus Children's Center, Inc. (“Hibiscus”) is a Florida not-for-profit corporation organized and licensed by the Florida Department of Children and Families to operate a number of well defined programs to meet the critical needs of Florida’s abused or neglected children and their families. These programs are varied in scope to focus directly on the needs of these troubled children and include high quality residential care, assistance to families in trouble, therapeutic services and support for foster families. Serving principally the Martin, Okeechobee, St. Lucie and Indian River counties of Florida, Hibiscus was incorporated on September 11, 1985 and opened the first shelter in October 1989. Hibiscus provided the following social, health and welfare services to the community during the fiscal years ended June 30, 2016 and 2015: Hibiscus Residential Programs provide a safe environment for newborns to 17-year olds with 24-hour supervision, medical and dental care, plus psychological counseling through facilities at its Jensen Beach Shelter and Vero Beach Children’s Village. At these facilities, children live in a home-like environment where they can more naturally prepare for successful transition into foster or adoptive homes. Hibiscus is the only licensed residential child caring shelter on the Treasure Coast of Florida. The facilities care for children removed from their families by court order. Hibiscus Clinical Programs provide a wide range of mental health services to residential and outpatient clients. These services include individual, family and group therapy, psychiatric evaluation, medication management and many more critical services that support children and their families in our community. Hibiscus Support for Families in Crisis is a nationally recognized abuse prevention program for families who seek help voluntarily offering respite care, counseling, housing and mental health services. NOTE B - AFFILIATED CORPORATION The Hibiscus Children's Center Foundation, Inc. (“Foundation”) was established for the purpose of conducting fundraising activities and for generating and maintaining endowment funds exclusively for Hibiscus. Both Hibiscus and Foundation are related organizations with a majority of the same board of governors. The accompanying financial statements include the accounts of both entities. Inter-company transactions and balances have been eliminated.


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NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: Financial Statements The accompanying financial statements have been prepared in accordance with generally accepted accounting principles. Assets and related revenues are recorded when earned, and liabilities and related expenses are recognized as incurred. In applying generally accepted accounting principles to program service revenues, the legal and contractual requirements of the individual programs are used as guidance. Net assets, revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows: Permanently Restricted

Represents an endowment whose principal must be maintained by the organization in perpetuity. The income earned on the principal may be used to further the operations of Hibiscus’ activities.

Temporarily Restricted Represents the portion of expendable funds that are restricted by the grantor or donor as

to the way they may be utilized. Hibiscus uses this fund primarily to account for grant and donor funds received for specific purposes or time in the future.

Unrestricted

Represents the portion of net assets that are not subject to donor restriction and that are available for support of operations.

All contributions are considered available for unrestricted use unless specifically restricted by the donor. Contributions are considered temporarily restricted if a donor imposes a restriction that may be satisfied by the passage of time or the actions of the organization. A permanently restricted contribution stipulates that the contribution be maintained permanently but may allow the organization to use all or part of the income derived from the underlying asset for unrestricted purposes. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.


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NOTE C – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Summarized Information The financial statements include certain prior-year summarized comparative information in total but not by asset class. Such information does not include sufficient detail to constitute a presentation in conformity with U. S. Generally Accepted Accounting Principles. Accordingly, such information should be read in conjunction with Hibiscus’s financial statements for the year ended June 30, 2015, from which the summarized information was derived. Cash Equivalents Cash equivalents include cash on hand, time deposits, certificates of deposit and all highly liquid debt instruments with original maturities of three months or less. Investments Debt and equity securities with readily determinable fair values purchased for investment are recorded at fair value based on quoted market prices. Net appreciation (depreciation) in the fair value of investments, which includes realized gains and losses and unrealized appreciation (depreciation) on those investments, is reported in the statement of activities. Cost basis is determined on the date of purchase. Hibiscus, on occasion, receives short-term investments, generally consisting of stocks or bonds, from donors in satisfaction of pledges made. The organization sells the contributed investments as soon as is practical after receipt. Promises to Give Unconditional promises to give (Contributions Receivable) that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. Property, Plant and Equipment Property, plant and equipment are generally accounted for as unrestricted net assets and are recorded at cost, or fair market value if donated plus additional capitalized expenditures which are required on certain constructed assets. If donors of property stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. Hibiscus has elected to capitalize those assets costing or having a fair market value at time of donation of $1,000 or more. Depreciation is provided for all classes of property, plant and equipment using straight-line methods over estimated useful lives ranging from 3 to 40 years. Income Taxes Hibiscus is exempt from federal and state income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code. Neither Hibiscus nor its affiliate Foundation are considered private foundations.


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NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) In-kind Contributions Hibiscus records in-kind contributions of services requiring special skills that create or enhance the value of non-financial assets at their fair market values consistent with those amounts which would be paid for similar products and services. Donated Services While Hibiscus receives donated services throughout the year that enhance the effectiveness of the programs, these services do not create or enhance non-financial assets nor do they require specialized skills that if not provided by a volunteer would be purchased. Accordingly, while these services contribute to the success of the programs, they have not been reflected in the accompanying financial statements. Accounting 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 the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Fair Value of Financial Measurements The Center reports its financial assets and liabilities using a three-tier hierarchy, which prioritizes the inputs used in measuring fair value as required by the Financial Accounting Standards Board’s Accounting Standards Codification (ASC). The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:

Level 1 – Unadjusted quoted prices in active markets that are accessible at the measurement date for identical, unrestricted assets or liabilities.

Level 2 – Inputs other than quoted prices included within Level 2 that are observable for the assets or liability, either directly or indirectly, including quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not active; inputs other than quoted prices that are observable for the asset or liability (e.g., interest rates); and inputs that are derived principally from or corroborated by observable market data by correlation or other means.

Level 3 – Inputs that are both significant to the fair value measurement and unobservable.

A financial instrument’s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement.


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NOTE C - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value of Financial Measurements (Continued) Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management as of June 30, 2016. The respective carrying value of certain on-balance-sheet financial instruments approximates their fair values due to the short-term nature of these instruments. These financial instruments include cash, receivables, accounts payable and accrued expenses. The fair values of the Center’s pledges receivable are estimated based on current rates that would be available for debt of similar terms which is not significantly different from its stated value. The Center’s Level 1 financial assets consist of investments as identified in Note H and are valued based on quoted market prices. These investments are valued on a daily basis in an active market. The fair value of the Center’s Level 3 investments is estimated using information provided to the Center by the investment managers, given the absence of market quotations. The values are based on estimates that require varying degrees of judgment and are determined based on net asset values (NAV) of the investment as supplied by the investment managers of the underlying funds. NOTE D – CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of demand deposits and short term money market funds. These financial instruments are potentially subject to concentrations of credit risk as follows. Cash balances are maintained at several financial institutions located in Martin County. For the year ended June 30, 2016 deposit accounts are insured by the FDIC up to $250,000, regardless of whether they are interest bearing or not. Uninsured cash equivalent balances were $117,827 and $184,217 at June 30, 2016 and June 30, 2015, respectively. NOTE E – CONTRIBUTIONS RECEIVABLE Contributions receivable, net of discount, as of June 30, 2016 and 2015 consist of unconditional promises to give in future years as follows: 2016 2015 Within one year (current) $ 3,500 $ 3,500 Within one to five years 23,454 23,454 Over five years 49,002 51,502 75,956 78,456 Less remaining current portion in contributions receivable (3,500) (3,500)

Long-term portion of contributions receivable $ 72,456 $ 74,956


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NOTE E – CONTRIBUTIONS RECEIVABLE (CONTINUED) Receivables of promises to give, net of discount at a rate of .59%, of $75,956 and $78,456 at June 30, 2016 and June 30, 2015, respectively, are concentrated principally among one donor. NOTE F – ACCOUNTS RECEIVABLE Accounts receivable of $403,931 at June 30, 2016 and $511,810 at June 30, 2015 consist primarily of vendor contracts from federal and state funding sources and Medicaid. The above amounts are reported net of the allowance of $113,040 at June 30, 2016 and $159,900 at June 30, 2015. NOTE G - INVESTMENTS The cost basis and approximate fair values of investment securities as of June 30, 2016 and 2015 are summarized as follows:

2016

Cost Basis

Net Unrealized

Gains/(Losses)

Fair

Value Exchange Traded Products $ 2,553,959 $ 432,524 $ 2,986,483 Corporate Bonds 50,000 42 50,042 $ 2,603,959 $ 432,566 $ 3,036,525

2015

Cost Basis

Net Unrealized

Gains/(Losses)

Fair

Value

Exchange Traded Products $ 2,836,948 $ 620,428 $ 3,457,376 Corporate Bonds 50,115 (136) 49,979 $ 2,887,063 $ 620,292 $ 3,507,355

The composition of investment income includes the following for the years ended June 30:

2016 2015 Interest and dividends $ 36,267 $ 87,452 Net realized and unrealized gains and (losses) on investments

(18,546)

(26,924)

$ 17,721 $ 60,528


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NOTE G – INVESTMENTS (CONTINUED) Securities held by brokerage institutions are insured by the Securities Investor Protection Corporation (SIPC) up to $500,000. The asset protection provided by the SIPC is not against losses from fluctuations in the value of the securities, but rather only if the brokerage firm ceases doing business. Investments of $3,036,525 and $3,507,355 at June 30, 2016 and June 30, 2015, respectively, consisting primarily of exchange traded products and corporate bonds which are subject to market risk of fluctuations in value. NOTE H – FAIR VALUE MEASUREMENTS The organization reports its fair value measures using a three level hierarchy that prioritizes the inputs used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted process in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of inputs used to measure fair value are as follows: Level 1 – Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the organization has the ability to access. Level 2 – Inputs to the valuation methodology include: Quoted prices for similar assets or liabilities in active markets; Quoted prices for identical or similar assets or liabilities in inactive markets; Inputs other than quoted prices that are observable for the assets or liability; Inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 – Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at June 30, 2016 and 2015. Exchange traded products: Valued at the net asset value of the shares held by the entity at year end, which approximates fair value. Corporate bonds: Valued at the net asset value of units held by the entity at year end, which approximates fair value. Promises to give: Valued at the pledge amount discounted to the present value of the future cash flows to be received.


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NOTE H – FAIR VALUE MEASUREMENTS (CONTINUED) Assets measured at fair value as of June 30, 2016 on a recurring basis comprise the following: Level 1 Level 2 Level 3 Total Exchange Traded Products $ 2,986,483 $ - $ - $ 2,986,483 Corporate Bonds 50,042 - - 50,042 Total securities 3,036,525 - - 3,036,525 Promises to give - - 75,956 75,956 Total Assets at Fair Value $ 3,036,525 $ - $ 75,956 $ 3,112,481 Level 3 Gains and Losses The following table sets forth a summary of changes in the fair value of the entity’s level 3 assets for the fiscal year ended June 30, 2016.

Level 3 Assets Year Ended June 30, 2016

Unrealized gains/losses Beginning relating to instruments Purchases, sales, Ending Balance still held at the issuances, and Balance 6/30/15 reporting date settlements (net) 6/30/16

Promises to give $ 78,456 $ -0- $ (2,500) $ 75,956 Assets measured at fair value as of June 30, 2015 on a recurring basis comprise the following: Level 1 Level 2 Level 3 Total Exchange Traded Products $ 3,457,376 $ - $ - $ 3,457,376 Corporate Bonds 49,979 - - 49,979 Total securities 3,507,355 - - 3,507,355 Promises to give - - 78,456 78,456 Total Assets at Fair Value $ 3,507,355 $ - $ 78,456 $ 3,585,811


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NOTE H – FAIR VALUE MEASUREMENTS (CONTINUED) Level 3 Gains and Losses The following table sets forth a summary of changes in the fair value of the entity’s level 3 assets for the fiscal year ended June 30, 2015.

Level 3 Assets Year Ended June 30, 2015 Unrealized gains/losses Beginning relating to instruments Purchases, sales, Ending Balance still held at the issuances, and Balance 6/30/14 reporting date settlements (net) 6/30/15

Promises to give $ 81,956 $ -0- $ (3,500) $ 78,456 Generally, for equity securities, fixed income securities, corporate bonds and mutual funds which are considered as available for sale, fair value is determined by reference to quoted market prices and other relevant information generated by market transactions (Level 1). The Organization does not hold significant assets recorded at fair value using other observable inputs (Level 2) for the year ended June 30, 2016 or 2015. Other assets held and used are recorded at cost less applicable depreciation, which approximates fair value. NOTE I – PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following at June 30:

2016 2015 Building and improvements $ 4,213,328 $ 4,153,839 Land and improvements 156,131 156,131 Furniture and equipment 426,757 410,860 Data processing equipment 185,269 111,074 Vehicles and improvements 264,812 275,512 5,246,297 5,107,416 Less: accumulated depreciation 2,100,024 1,901,018 $ 3,146,273 $ 3,206,398

NOTE J – LINE OF CREDIT Hibiscus Children’s Center has also entered into an agreement for a line of credit in an amount not to exceed $600,000 with interest at the Wall Street Journal Prime Rate less ½%. At June 30, 2016 and 2015 the outstanding balance due was $83,466 and $400,000, respectively.


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NOTE K – LEASE COMMITMENTS Hibiscus has committed to office space and equipment leases expiring in November 2019. Future minimum rental payments are as follows:

Year ending June 30,

2017 159,200 2018 41,040 2019 39,846 2020 13,176

Total minimum future rentals $ 253,262

Rent expense was $177,484 and $164,120 for the years ended June 30, 2016 and June 30, 2015, respectively. NOTE L - RETIREMENT PLANS Hibiscus Children’s Center sponsors a 401(k) plan that covers all employees who have completed their initial 90 day probationary period. Employees deferring compensation into the plan receive up to a 100 percent match, on their first 3% contribution, which is optional at the discretion of the Board of Governors. For the years ended June 30, 2016 and June 30, 2015, the amount of pension expense was $65,100 and $18,738 respectively. In October 2015 Hibiscus Children’s Center switched to a different plan administrator for a new 401(k) plan and has enrolled all eligible employees unless they positively decline enrollment. This resulted in the termination of the previous plan. NOTE M - NET ASSETS RELEASED FROM RESTRICTIONS Net assets were released from donor/grantor restrictions by incurring expenses satisfying restricted purposes or passage of time as follows:

Residential and other programs $ 478,305 NOTE N – COMPOSITION OF UNRESTRICTED AND UNDESIGNATED NET ASSETS The composition of unrestricted and undesignated net assets at June 30, 2016 is as follows:

Property, plant and equipment $ 3,146,273 Cash and accounts receivable 93,462 $ 3,239,735


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NOTE O - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes or sources at June 30, 2016:

Capital funds $ 311,830 Residential and other programs 263,063 Martin County Guild 17,250 Indian River Guild 1,015 $ 593,158

NOTE P – PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets are restricted to: Investment in perpetuity, the income from which is expendable to support:

Program activities $ 118,392 NOTE Q - BOARD DESIGNATED NET ASSETS Unrestricted net assets have been designated by the Board for the following purposes or sources at June 30, 2016:

Endowment $ 2,810,317 Capital funds 44,682 Village programs 365 Agency reserve 3,146 $ 2,858,510

NOTE R – SUPPORT FROM OTHER GOVERNMENTAL AGENCIES Hibiscus entered into various agreements during the year ended June 30, 2016 with The Children’s Services Councils of St. Lucie County and Okeechobee County to receive local matching financial assistance necessary to qualify for federal and state grants. The following represents the revenues, donations and expenditures associated with each program and funding agency. Support for

Families in Crisis

Clinical

Grant Revenues from Children’s Services Councils serving:

St. Lucie County $ 134,039 $ - Okeechobee County - 12,500 134,039 12,500

Program expenditures (159,334) (1,584,290) Excess from other sources $ (25,295) $ (1,571,790)


June 30, 2016

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NOTE S – ENDOWMENT FASB ASC 958-205 provides guidance on the net asset classification of donor-restricted and board-designated endowment funds for a nonprofit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 (UPMIFA). FASB ASC 958-205 also requires additional disclosures about an organization’s endowment funds (both donor-restricted endowment funds and board-designated endowment funds) whether or not the organization is subject to UPMIFA. The Organization has adopted the provisions of UPMIFA in accordance with the requirements of the State of Florida and the recommendations of FASB 958-205. The Organization’s donors have not placed restrictions on the use of investment income or net appreciation resulting from the donor-restricted endowment funds. The Organization has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to functions supported by its endowment while seeking to maintain the purchasing power of these endowment assets over the long-term. The Organization’s spending and investing policies work together to achieve this objective. The investment policy establishes an achievable return objective through diversification of asset classes. To satisfy its long term rate of return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation that places an emphasis on investments to achieve its long-term return objectives within prudent risk parameters. The spending policy establishes prudent objectives for the uses and purposes for which the endowment fund is established, consistent with the goal of conserving the purchasing power of the endowment. In making its decisions, the Organization uses reasonable care, skill, and caution in considering the purposes of the Organization, the intent of the donors of the endowment, the terms of applicable instruments, the long-term and short-term needs of the Organization in carrying out its purposes, the general economic conditions, the possible effect of inflation or deflation, or other resources of the Organization, and perpetuation of the endowment. Endowment net asset composition by type of fund as of June 30, 2016 is as follows: Temporarily Permanently Restricted Designated Restricted Total Endowment funds and appreciation $ 18,432 $2,810,317 $ 118,392 $2,947,141


June 30, 2016

Page 20

NOTE S – ENDOWMENT (CONTINUED) Changes in endowment net assets as of June 30, 2016 are as follows: Temporarily Permanently Restricted Designated Restricted Total Endowment net assets, beginning of year $ 18,432 $ 3,145,499 $ 118,392 $ 3,282,323 Revenues - 33,291 - 33,291 Appropriated for expense - (368,473) - (368,473) Endowment net assets, end of year $ 18,432 $ 2,810,317 $ 118,392 $ 2,947,141 Endowment net asset composition by type of fund as of June 30, 2015 is as follows: Temporarily Permanently Restricted Designated Restricted Total Endowment funds and appreciation $ 18,432 $3,145,499 $ 118,392 $3,282,323 NOTE T – MANAGEMENT’S REVIEW OF SUBSEQUENT EVENTS In preparing the financial statements, management has evaluated events and transactions for potential recognition or disclosure through February 9, 2017, the date that the financial statements were available to be issued. NOTE U – INCOME TAXES The Organization has adopted accounting guidance which clarifies the accounting and recognition for tax positions taken or expected to be taken in its income tax returns. The Organization’s tax filings are subject to audit by various taxing authorities. The Organization’s income tax returns for 2015, 2014 and 2013 remain open to examination by the Internal Revenue Service. In evaluating the Organization’s tax provisions and accrual, management believes that the estimates are appropriate based on current facts and circumstances.

SUPPLEMENTARY INFORMATION

Hibiscus Children's Center, Inc.COMBINING SCHEDULE OF FINANCIAL POSITION

June 30, 2016(With Comparative Totals at June 30, 2015)

Hibiscus Hibiscus

Children's Children's Center

Center, Inc. Foundation, Inc. 2016 2015

Assets

Current Assets

Cash and cash equivalents 309,250$ 338,350$ 647,600$ 980,874$

Accounts receivable 395,599 8,332 403,931 511,810

Contributions receivable, net - 3,500 3,500 3,500

Prepaid expenses 1,708 3,013 4,721 4,627

Due from Foundation - - - 231,434

Total current assets 706,557 353,195 1,059,752 1,732,245

Furniture, fixtures and equipment net of

accumulated depreciation 3,146,273 - 3,146,273 3,206,398

Other Assets

Investments - 3,036,525 3,036,525 3,507,355

Contributions receivable, net - 72,456 72,456 74,956

Deposits 14,155 5,200 19,355 19,455

Total other assets 14,155 3,114,181 3,128,336 3,601,766

Total assets 3,866,985$ 3,467,376$ 7,334,361$ 8,540,409$

Combined Total

Page 21

Liabilities and Net Assets

Current LiabilitiesAccounts payable 23,339$ 2,325$ 25,664$ 21,504$ Accrued compensation and related expenses 404,627 6,814 411,441 321,194 Line of credit 83,466 - 83,466 400,000 Deferred revenue - 3,995 3,995 9,951 Due to Center - - - 231,434

Total current liabilities 511,432 13,134 524,566 984,083

Net AssetsUnrestricted

Undesignated 3,037,600 202,135 3,239,735 3,454,987 Designated 48,193 2,810,317 2,858,510 3,226,213

Temporarily restricted 269,760 323,398 593,158 756,734 Permanently restricted - 118,392 118,392 118,392

Total net assets 3,355,553 3,454,242 6,809,795 7,556,326

Total liabilities and net assets 3,866,985$ 3,467,376$ 7,334,361$ 8,540,409$

Page 21

Hibiscus Children's Center, Inc.COMBINING SCHEDULE OF ACTIVITIES

For the Year Ended June 30, 2016(With Comparative Totals for Year Ended June 30, 2015)

Hibiscus Hibiscus

Children's Children's Center

Center, Inc. Foundation, Inc. 2016 2015

Revenues, gains and other support

Support:

Donations 151,875$ 457,580$ 609,455$ 817,398$

Thrift shop 288,690 - 288,690 307,900

Less direct thrift shop costs (242,252) - (242,252) (234,827)

Total net support 198,313 457,580 655,893 890,471

Fundraising events: - 910,555 910,555 830,091

Less direct costs - (185,548) (185,548) (237,831)

Net fundraising events - 725,007 725,007 592,260

Total support and fundraising 198,313 1,182,587 1,380,900 1,482,731

Revenues and gains

Program service revenues 5,168,773 - 5,168,773 4,786,366

Investment income 86 17,635 17,721 60,528

Total revenue and gains 5,168,859 17,635 5,186,494 4,846,894

Total revenues, gains and other

support 5,367,172 1,200,222 6,567,394 6,329,625

Expenses

Program services:

Residential programs 3,851,998 - 3,851,998 3,725,131

Clinical 1,587,523 - 1,587,523 1,352,385

Combined Total

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Clinical 1,587,523 - 1,587,523 1,352,385

Support for families in crisis 163,360 - 163,360 157,295

Total programm services 5,602,881 - 5,602,881 5,234,811

Supporting services:

General and administrative 1,037,517 - 1,037,517 857,393

Fundraising activities 76,952 596,575 673,527 654,104

Total supporting services 1,114,469 596,575 1,711,044 1,511,497

Total expenses 6,717,350 596,575 7,313,925 6,746,308

Change in net assets before transfer between entities (1,350,178) 603,647 (746,531) (416,683)

Transfer from Foundation to Center 845,000 (845,000) - -

Change in net assets after transfer between entities (505,178) (241,353) (746,531) (416,683)

Net assets - beginning of year 3,860,731 3,695,595 7,556,326 7,973,009

Net assets - end of year 3,355,553$ 3,454,242$ 6,809,795$ 7,556,326$

Page 22

COMPLIANCE SECTION

Hibiscus Children’s Center, Inc. SCHEDULE OF FINDINGS AND QUESTIONED COSTS

Year Ended June 30, 2016

Page 28

SECTION I – SUMMARY OF AUDITOR’S RESULTS Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting Material weakness(es) identified ____ yes X no Significant deficiency(ies) identified not considered to be material weaknesses? ____ yes X none reported Noncompliance material to financial statements noted? ____ yes X no Federal Awards Internal Control over major programs: Material weakness(es) identified? ____ yes X no Significant deficiency(ies) identified not considered to be material weaknesses? ____ yes X none reported Type of auditor's report issued on compliance for major programs: Unmodified Any audit findings disclosed that were required to be reported in accordance with Subpart F of Title 2 U.S. Code of Federal Regulations? ____ yes X no Identification of major programs: CFDA Number: 93.658 Foster Care – Title IV-E CFDA Number: 93.667 Social Services Block Grant Dollar threshold used to distinguish between Type A and Type B programs: $750,000 Auditee qualified as low-risk auditee? yes X no SECTION II - FINANCIAL STATEMENT FINDINGS No matters were reported. SECTION III - FEDERAL AWARD FINDINGS AND QUESTIONED COSTS No findings or questioned costs are reported. SECTION IV – SUMMARY OF PRIOR AUDIT FINDINGS No prior year audit findings are reported.

Hibiscus Children's Center, Inc.SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

Year ended June 30, 2016

FEDERAL GRANTOR/PASS-THROUGH PROGRAM FEDERAL FUNDING TOTALGRANTOR/PROGRAM TITLE YEAR Grant/Contract I.D. # CFDA # PERIOD EXPENDED

UNITED STATES DEPARTMENT OF HEALTH AND HUMAN SERVICES

PASS-THROUGH FROM COMMUNITY BASED CARE: FOSTER CARE - TITLE IV-E 2015/2016 DCBC16-301 93.658 7/01/15-6/30/16 367,181$ FOSTER CARE - TITLE IV-E 2015/2016 DCBC16-302 93.658 7/01/15-6/30/16 576,309

943,490

SOCIAL SERVICES BLOCK GRANT 2015/2016 DCBC16-301 93.667 7/01/15-6/30/16 110,175 SOCIAL SERVICES BLOCK GRANT 2015/2016 DCBC16-302 93.667 7/01/15-6/30/16 172,925

283,100

TOTAL U.S. DEPARTMENT OF HEALTH AND HUMAN SERVICES 1,226,590 UNITED STATES DEPARTMENT OF JUSTICE

PASS-THROUGH FROM:OFFICE OF THE ATTORNEY GENERAL

VICTIMS OF CRIMES ACT 2014/2015 V14085 16.575 10/01/14-09/30/15 54,474 VICTIMS OF CRIMES ACT 2015/2016 V14085 16.575 10/01/15-09/30/16 16,730

TOTAL U. S. DEPARTMENT OF JUSTICE 71,204

TOTAL EXPENDITURES OF FEDERAL AWARDS 1,297,794$

See accompanying Notes to Schedule of Expenditures of Federal Awards. Page 29

See accompanying Notes to Schedule of Expenditures of Federal Awards. Page 29

Hibiscus Children’s Center, Inc. NOTES TO SCHEDULE OF EXPENDITURES

OF FEDERAL AWARDS Year Ended June 30, 2016

Page 30

NOTE 1 - BASIS OF PRESENTATION The accompanying schedule of expenditures of federal awards includes the federal grant activity of Hibiscus Children's Center, Inc. (“Center”) and is presented on the accrual basis of accounting. The information in the schedule is presented in accordance with the requirements of the Single Audit Act and Subpart F of Title 2 U.S. Code of Federal regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards. Therefore, some amounts presented in this schedule may differ from amounts presented in, or used in the preparation of, the financial statements. NOTE 2 – SUB-RECIPIENT MONITORING The Center has provided no federal awards to subrecipients. NOTE 3 – CONTINGENCIES Amounts received, or receivable, from grantor agencies are subject to audit and adjustment by grantor agencies. If any expenditures are disallowed as a result of these audits the claims for reimbursement to the grantor agency would become a liability of the Center. In the opinion of management, any such adjustment would not be significant.

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