PH FY2013 Audit

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PROVIDENCE HOUSE, INC. and AFFILIATES

Consolidated Financial Statements With Independent Auditors' Report

June 30, 2013 and 2012

DP

Typewritten Text

ATTACHMENT J. 1.

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Providence House, Inc. and Affiliates

Table of Contents

Independent Auditors' Report

Consolidated Financial Statements Consolidated Statements of Financial Position Consolidated Statements of Activities Consolidated Statements of Cash Flows Consolidated Statements of Functional Expenses

Notes to Consolidated Financial Statements

Supplementary Data Independent Auditors' Report on Supplementary Data Temporary Shelter and Feeding Programs Schedule of Activities Providence House IV Compared to Approved County Funding

3

4

5 6

7

25 26 28

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www.capin.rouse.com

INDEPENDENT AUDITORS' REPORT

The Board of Directors Providence House, Inc. and Affiliates Brooklyn, New York

,330 Avenue of thl) Americas, Suite 23A New Yo;k., NY 10019 212.653,0081

We have audited the accompanying consolidated financial statements of Providence House, Inc. and Affiliates, which comprise the consolidated statement of fmancial position as of June 30, 2013, and the related consolidated statements of activities, cash flows and functional expenses for the year then ended, and the related notes to the consolidated financial statements.

Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditors' Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 sllch opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overaU presentation of the consolidated financial statements.

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

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Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Providence House, Inc. and Affiliates as of June 30, 2013, and the changes in its net assets and cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Prior Period Financial Statements The financial statements of Providence House, Inc. as of June 30, 2012, were audited by other auditors whose report dated August 13, 2013, expressed an unmodified opinion on those statements.

New York, New York March 12,2014

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Consolidated Statements of Financial Position

ASSETS: Cash and cash equivalents Contributions and grants receivable Program revenue receivable Prepaid expenses Property held for sale Investments Developer fees receivable Notes receivable from affiliates Property and equipment-net

Total Assets

LIABILITIES AND NET ASSETS: Liabilities:

Accounts payable and accrued expenses Accrued payroll and related expenses Due to affiliate Mortgage payable Deferred developer rees

Total liabilities

Net assets: Unrestricted:

Undesignated Net investment in property and equipment

Temporarily restricted

Total net assets

Total Liabilities and Net Assets

See notes to consolidated financial statements -3-

$

$

$

$

June30,

2013 2012

476,323 $ 341,436 241 ,624 157,000

186.477 73. 141

7.056 16,286

1,819.030 595,110 648,773 820,684 804,042

1,459.768 1,459.768 2,413,465 4.285,819

8,019.537 $ 7,786.265

68.067 $ 63,408

102.886 80,364 11,646

516.310 607.440 407,341 1,414,768

1,094.604 2,177,626

4,386,024 1.504,626 1,897.155 3,678.379 6,283.179 5.183,005

641,754 425,634

6,924,933 5,608.639

8,019.537 $ 7,786,265

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Consolidated Statements of Activities

Year Ended lune 30, 2013 2012

Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total

SUPPORT, REVENUE AND RELEASES: Donations and grants S 513,268 S 250,020 S 763,288 S 354,519 S 299,300 S 653,819 Religious donations and donated services 407,920 407,920 401 ,630 401,630 Contract revenue 1,808,894 1,808,894 1,496,575 1,496,575 CACFP and FEFP food grant 60,177 60,277 31,940 31,940 NYSERDA gnmt 45,000 45,000 NYC Housing HRA payments 38,353 38,353 36,957 36,957 Rental income 56,821 56,821 91 ,670 91,670 Invesbnent income 47,583 47,583 6,789 6,789 Developer fees 1,128,385 1,128,385 400,617 400,617 Donated services value 23,300 23,300 12,500 12,500 Fundraising even~ net of direct benefit costs 226,559 241,624 468, 183 414,583 414,583 Miscellaneous income 90,432 90,432 39,954 39,954 Satisfaction of purpose restrictions 275,524 (275,524) 328,540 (328,540)

Total Suppo~ Revenue and Releases 4,677,316 216,120 4,893,436 3,661,274 (29,240) 3,632,034

EXPENSES: Temporary shelter program 2,410,569 2,410,569 2,550,870 2,550,870 Pennanent housing program 59,976 59,976 36,638 36,638 Samaritan House 69,639 69,639 63,041 63,041 Kosciusko Street projecr 277, 121 277,1 21 5,209 5,209 Lincoln Road project 700 700 Central- program support 759,837 759,837 680,816 680,816

Total Expenses 3,577, 142 3,577,142 3,337,274 3,337,274

Change in Net Assets 1,100,174 216,120 1,316,294 324,000 (29,240) 294,760

Net Assets. Beginning of Year 5,183,005 425,634 5,608,639 4,859,005 454,874 5,313,879

Net Assets, End of Year S 6,283,179 S 641 ,754 S 6,924,933 S 5,183,005 S 425,634 S 5,608,639 •


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Consolidated Statements of Cash Flows

Year Ended June 30,

2013 2012

CASH FLOWS FROM OPERATING ACTIVITIES:

Change in net assets $ 1,316,294 $ 294,760

Adjustments to reconcile change in net assets

to net cash provided (used) by operating activities:

Depreciation expense 162,599 166,106

Net gain on transfer of assets (12,480)

Realized and unrealized (gain) loss on investments (30,220) 14,840

Changes in:

Contributions and grants receivable (84,624) (101,000)

Program revenue receivable (113,336) 242,218

Prepaid expenses 9,230 (8,454)

Developer fees receivable (16,642) (994,032)

Notes receivable from affiliate (843,353)

Accounts payable and accrued expenses 4,659 (212,125)

Accrued payroll and related expenses 22,522 (11,531)

Due to affiliate (11,646) 1l,646

Deferred developer fees (1 ,007,427) 1,414,768

Net Cash Provided (Used) by Operating Activities 251 ,409 (38,637)

CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (109,275) (58,710)

Purchases of investments (16,117) (24,662)

Proceeds from sale of investments 100,000 207,948 Net Cash Provided (Used) by Investing Activities (25,392) 124,576

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayment of principal (91,130) (83,922)

Net Cash Used by Financing Activities (91,130) (83,922)

Change in Cash and Cash Equivalents 134,887 2,017

Cash and Cash Equivalents, Beginning of Year 341,436 339,419

Cash and Cash Equivalents, End of Year $ 476,323 $ 341 ,436

SUPPLEMENTAL INFORMATION: Cash paid for interest $ 47,724 $ 47,387

NON-CASH lNVESTlNG AND FINANCING ACTIVITIES: Transfer of property and equipment to assets held for sale $ 1,819,030 $

Transfer of construction in progress to affiliate $ $ 112,520

Payment of loan payable by affiliate (125,000) Net gain On transfer of assets $ $ (12,480)


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Consolidated Stalements of Functional Expenses

Year Ended June 30, 2013 2012

Development Development Management and Public Management and Public

Program and General Relations Totals Prollram and General Relations Totals Salaries and wages $ 1,291,431 $ 199,626 $ 109,318 $ 1,600,375 $ 1,197,160 $ 244,490 $ 109,374 $ 1,551 ,024 Payroll taxes 116,118 13,135 7,607 136,860 108,881 17,476 8,064 134,421 Employee benefits 242,729 20,436 14,885 278,050 242,399 38,904 17,955 299,258 Rent 133,183 133,183 132,667 132,667 Utilities 205,954 4,6 14 1,534 212,1 02 182,470 3,963 1,828 188,261 Telephone 36,936 3,699 1,229 41 ,864 46,884 994 458 48,336 Professional fees 18,291 74,709 40,700 133,700 11,702 36,128 40,807 88,637 Food 49,926 2,612 52,538 63,901 63,901 Scholarships 8,000 8,000 9,000 9,000 Client assistance and gifts 9,300 9,300 3,368 3,368 Other program expenses 37,993 1,774 39,767 32,590 795 367 33,752 Travel 12,760 3,678 16,438 19,409 212 97 19,718 Seminars and training 1,485 2,630 4,115 96 15 8 119 Dues and subscriptions 906 4,877 5,783 11 ,358 788 364 12,510 [nsurance 107,050 1,886 627 109,563 58,194 108 50 58,352 Equipment repairs, rental

and maintenance 71 ,451 7,454 78,905 72,480 2,003 924 75,407 Office expenses 60,319 3,192 1,062 64,573 13,127 115 53 13,295 Supplies 65,867 3,007 1,000 69,874 29,421 226 104 29,751 Printing 5,810 1,037 344 7,191 8,822 1,416 653 10,891 Postage and delivery 3,785 762 252 4,799 2,980 432 200 3,612 Interest expense 45,283 1,851 47,134 51,324 51 ,324 Depreciation 155,100 5,734 1,907 162,741 159,478 5,050 1,578 166,106 Other fundraising expenses 21,961 21,961 7,273 7,273 Advertising 700 2,720 3,420 Miscellaneous 20,884 14,022 34,906 29,465 4,671 2,155 36,291 Donated services value 300,000 300,000 300,000 300,000

Total expenses $ 3,001,261 $ 373,455 $ 202,426 $ 3,577,142 $ 2,787,176 $ 357,786 $ 192,312 $ 3,337,274

See notes to consolidated financial statements

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June 30. 2013 and 2012

I. NATURE OF ORGANIZATION: Providence House, Inc. ("Providence") is a not-for-profit organization as described in Section SOI(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes. Providence is principally engaged in the housing and feeding of homeless women and their children, and women leaving prison. These services are provided in the City of New York, and Westchester County, New York. Providence' s primary source of revenue consists of grants and contributions.

Providence Kosciuszko Housing Development Fund Corporation ("PKHDFC"), a non-profit organization, was incorporated on August 21, 2009, pursuant to Article Xl of the New York Private Housing Finance Law and Section 402 of the Not-For-Profit Corporation Law. PKHDFC's mission is to develop and operate the K Street Project. Providence is the sole member ofPKHDFC. The board ofPKHDFC consists of members that are either board members of Providence or members that are approved by the Providence board.

On April IS, 2010, Providence and Alembic Development Company, LLC ("ADC") formed a joint venture to construct, develop and operate the K Street Project.

273-277 Kosciuszko, G.P., LLC ("273 GP LLC") was established on November 22, 2010, as a limited liability company. 273 GP LLC consists of two members, PK LLC and ADC, with PK LLC owning the majority interest (51 %). 273 GP LLC's sole purpose is to allow PKHDFC, through PK LLC, to partner with ADC in the construction, development and operation of the K Street Project.

Providence Kosciuszko LLC ("PK LLC") was incorporated on May 17,2011, as a limited liability company for the purpose of acquiring a membership interest and a partnership interest, respectively, in 273 GP LLC and the 273 Limited Partnership. PKHDFC is the sole member ofPK LLC.

Providence I Housing Development Fund Corporation ("PlHDFC"), a non-profit organization, was incorporated on June 2, 200S, pursuant to Article Xl of the New York Private Housing Finance Law and Section 402 of the Not-For-Profit Corporation Law. PlHDFC's mission is to develop and operate the Lincoln Road Project. Providence is the sole member of PIHDFC. The board of PIHDFC consists of members that are either board members of Providence or members that are approved by the Providence board.

On January 30, 2012, Providence and ADC formed another joint venture to construct, develop and operate the Lincoln Road Project.

329 Lincoln Road, G.P., LLC ("329 GP LLC") was established on January 30, 2010, as a limited liability company. 329 GP LLC consists of two members, PI LLC and ADC, with PI LLC owning the majority interest (51 %). 329 GP LLC's sole purpose is to allow PIHDFC, through PI LLC, to partner with ADC in the construction, development and operation of the Lincoln Road Project.

Providence I LLC ("PI LLC") was incorporated as a limited liability company for the purpose of acquiring a membership interest and a partnership interest, respectively, in 329 GP LLC and the 329 Limited Partnership. PIHDFC is the sole member of PI LLC.

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Notcs to Consolidated Financial Statements

June 30, 2013 and 2012

2. SIGNIFICANT ACCOUNTING POLICIES: The consolidated financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. The preparation of consolidated financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that atIect the reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The significant accounting policies followed are described below to enhance the usefulness of the consolidated financial statements to the reader.

pRINCIPLES OF CONSOLlDA TION The consolidated financial statements include the financial resources and activities of Providence, PKHDFC, 273 GL LLC, PK LLC, PIHDFC, 329 GP LLC and PI LLC. All material transactions and balances between the organizations have been eliminated in the consolidated financial statements. Providence House, Inc. and Affiliates shall be referred to as "Providence" throughout these notes to the consolidated financial statements.

CASH AND CASH EQUIVALENTS Cash and cash equivalents include all unrestricted cash on hand and in banks. Providence also considers all highly liquid unrestricted investments with a maturity of three months or less when purchased to be cash equivalents. Providence's cash accounts are located in One institution. From time to time, these balances may exceed federal deposit insurance limits; however, Providence has not experienced any losses On these accounts and does not believe it is exposed to any significant risk.

CONTRlBUTIONS AND GRANTS RECEIVABLE Unconditional promises to give are recognized as income when made and recorded at fair value based upon estimated future cash flows . Unconditional promises to give 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 oftheir estimated future cash flows.

INVESTMENTS lnvestments are reported at fair value based on quoted market prices. Investment income, including realized and unrealized gains and losses are reflected included in the consolidated statements of activities. Donated investments are reflected as contributions at fair market value at date of receipt.

PARTNERSHIP INTERESTS Providence, indirectly through related entities described in Note 15, is a general partner in two permanent supportive housing project partnerships, 273.277 Kosciusko, L.P. and 329 Lincoln Road, L.P. The limited partners have substantive participating rights; therefore, Providence does not consolidate these partnerships into its consolidated financial statements but accounts for the partnerships using the equity method. Due to immateriality, no amount has been included in these consolidated financial statements. These housing projects are referred to throughout the consolidated financial statements as the K Street Project and the Lincoln Road Project; see Notes 7, 8, 15 and 18 for further information.

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June 30, 20 \3 and 2012

2. SIGNIFICANT ACCOUNTING POLICIES, continued:

PROPERTY HELD FOR SALE Property held for sale is recorded at the lower of cost Or estimated net realizable value, or if donated, at the estimated fair value at the date of the gift. All property for sale is actively marketed and is expected to be sold within one year. Subsequent gains from disposition of property held for sale are recorded as gain on sale of property in the period realized. Subsequent losses are recorded in the period when it is probable and able to be estimated.

PROPERTY, EQUIPMENT AND DEPRECIATION Property, plant and equipment are stated at cost, or, if donated, at the estimated fair market value at the date of donation. Depreciation is recorded using the straight-line method at various rates calculated to allocate the cost of the respective items over their estimated useful lives.

Estimated useful lives are:

Buildings and improvements Leasehold improvements Furniture, fixtures and equipment

DEFERRED DEVELOPMENT FEES

15 - 40 years Remaining life of the lease S - 10 years

Deferred developer fees are recorded for certain unearned developer fees promised under secured notes receivable, as specified in Note 8 herein. Since the developer fees relate to the completion of each project, the revenue is recognized on a percentage of completion method.

NET ASSETS The consolidated financial statements report amounts separately by classes of net assets:

Unrestricted net assets are those currently available for ministry purposes under the direction of the Board, those designated for specific USe and those resources invested in property and equipment.

• Temporarily restricted net assets carry specific, donor-imposed restrictions on the expenditure or other use of contributed funds. Temporary restrictions may expire either because certain actions are taken by Providence which fulfill the restrictions or because of the passage of time. Expirations of temporary restrictions on net assets are reported as reclassifications between the applicable classes of net assets.

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June 30, 2013 and 2012

2. SIGNIFICANT ACCOUNTING POLICIES, continued:

CONTRIBUTIONS Contributions are recognized when a commitment is made, which may be when cash is received, an unconditional promise to give is made or when ownership of donated assets is transferred. Contributions are considered available for unrestricted use unless specifically restricted by the donor.

Contributions of property, buildings and equipment without donor stipUlation concerning the use of such longlived assets are reported as revenues of the unrestricted net assets. Contributions of cash or other assets to be used to acquire property, plant and equipment are reported as revenue of the temporarily restricted net assets; the restrictions are considered to be released at the time of acquisition of such long-lived assets.

GRANTS Grants are recorded as revenues to the extent that expenses have been incurred for the purposes specified by the grantors.

Providence receives substantial support from the New York City Department of Homeless Services and the New York City Human Resources Administration. Providence is obligated under the terms of contracts 10 comply with specified conditions and program requirements set forth by the grantor.

FUNDRAISING EVENT Providence hosts an annual fund raising event which is shown on the statements of activities net of direct benefit costs. Fundraising income consists of contributions from attendees and other revenue from the event. The fundraising event income consists of the following:

Year Ended June 30, 2013 2012

Contributions $ 425,783 $ 391,350 Olherrevenue 42,400 46,952 Less: costs of direct benefit to donors (23,719)

$ 468,183 $ 414,583

DEVELOPER FEES Developer fees are earned for developer services provided in connection with the K Street Project and the Lincoln Road Project, and are earned on a percentage of completion basis, as more specifically outlined in Note 7.

DONATED SERVICES Donated services are recognized as contributions if the services (a) create Or enhance nonfinancial assets or (b) require specialized skills, are performed by individuals with those skills, and would otherwise be purchased by Providence. These services are valued based on the estimated cost of services that would have otherwise had to have been purchased.

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June 30, 2013 and 2012

2. SIGNIFICANT ACCOUNTING POLICIES. continued:

ALLOCATION OF EXPENSES The costs of providing the various program services and supporting activities have been summarized below on a functional basis. Certain costs have been allocated among program services and supporting activities as follows:

Program services

Supporting services: Management and general

Development and public relations

UNCERTAIN TAX POSITIONS

$

$

Year Ended June 30,

2013 2012 3,OQI,261 $ 2,787,176

373,455 357,786 202,426 192,312

3,577,142 $ 3,337,274

Providence' s current accounting policy is to disclose liabilities for uncertain tax positions when a liability is probable and estimable. Management is not aware of any violation of its tax status as an organization exempt from income taxes, nor is it aware of any exposure to unrelated business income tax.

Providence files information tax returns in the U.S. and New York. Providence is generally no longer subject to U.S. federal and state income tax examinations by tax authorities for years before 2009.

RECLASSIFICATIONS Certain amounts have been reclassified from the prior year to conform to current year presentation.

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June 30, 2013 and 2012

3. CASH AND CASH EQUIVALENTS: Cash and cash equivalents consist of:

June 30, 2013 2012

Payroll checking $ 4,173 $ 5,624 Central account checking 174,426 209,828 Central account savings 263,138 12,742 Permanent housing checking 21,085 PH I checking 4,086 PH II checking 2,845 PH III checking 6,029 6,440 PH IV checking 1,802 PH V checking 5,618 PH VI checking 4,554 PH VII checking 2,276 Kosciuszko Street checking 20,415 31,838 Lincoln Road checking 5,084 16,730 Samaritan House checking 5,562 Various petty cash accounts 3,058 10,406

$ 476,323 $ 341,436

4. PROGRAM REVENUE RECEIVABLE: Program revenue receivable consist of the following agency grants receivable:

June 30, 2013 2012

PH I - DHS $ 2,766 $ 16,886 PHII-DHS 12,475 19,662 PH III - DHS 8,122 10,373 PH IV-WDSS 71,458 PHVII-DHS 34,928 19,206 Kosciuszko Street - DHS 29,750 Department of Health and Mental Hygiene 22,329 CACFP - various houses 6,218 Other 4,649 796

$ 186,477 $ 73 ,141

5. PROPERTY HELD FOR SALE During the year ended June 30, 2013, Providence placed the two Samaritan House properties up for sale. The book values of these properties as of June 30, 2013, were $1,064,390 and $754,640. As of June 30,2013, both of the properties were under contract. Subsequent to year end they were sold for net proceeds of $1 ,239,083 and $835,650.

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June 30, 2013 and 2012

6. INVESTMENTS: Investments at fair value consist of the following:

Mutual funds $

Certificate of deposit Money market funds

$

Investment income is composed of the following:

Interest and dividends $ Realized and unrealized gain (loss) on investments

$

June 30, 2013

534,449 25 ,173 35,488

595,110

17,363 30,220

47,583

$

$

$

$

2012 494,277 153,638

858

648,773

21,629 (14,840)

6,789

7. DEVELOPER FEES RECEIVABLE: Providence, together with a third-party development company, Alembic Development Company, LLC ("ADcn), provides developer services in connection with the K Street and Lincoln Road projects. Pursuant to development agreements signed in connection with both of the aforementioned housing projects, Providence is entitled to earn developer fees from 273-277 Kosciusko, L.P. and 329 Lincoln Road, L.P., respectively, when various project milestones and conditions are met as follows:

Completion of plans and specifications Obtaining all building permits Achieving 25% completion Achieving 50% completion Aohieving 75% completion Achieving 100% completion and issuance

of final certificate of occupancy

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10% 20% 20% 10% 20%

20%

100%

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June 30, 2013 and 2012

7. DEVELOPER FEES RECEIVABLE. continued: Developer fees receivable consist of the following amounts:

The K Street Project development services agreement entitles Providence to earn $1,421,415 of a $1,651 ,415 total development fee over the life of the K Street Project. On the first $460,000 of the total developer fee received, Providence and ADC will be paid in a 50/50 split. At June 30, 2013 and 2012, 100% and 60%, respectively, of the total developer fees were earned based upon completion status of the K Street Project. $616,415 of the development fees owed to Providence are secured by a note receivable and are included in notes receivable from affiliates. $

The Lincoln Road Project development services agreement entitles Providence to earn $941 ,353 of a $1,018,353 total development fee over the life of the Lincoln Road Project. On the first $220,000 of the total developer fee received, Providence and ADC will be paid in a 65/35 split, respectively. At June 30, 2013 and 2012, 60% and 10%, respectively, of the total developer fees were earned based upon completion status of the Lincoln Road Project. $798,353 of the development fees owed to Providence are secured by a note receivable and are included in notes receivable from affiliates.

$

June 30, 2013 2012

690,000 $ 737,849

130,684 66,193

820,684 $ 804,042

Actual payments of outstanding developer fees are expected to be received over several years as funds become available from capital contributions, loan proceeds or net cash flow of the projects.

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June 30,2013 and 2012

8. NOTES RECEIVABLE FROM AFFILIATES: Providence is the holder of mUltiple notes receivable from affiliated organizations. Payments on all notes are expected to be received as funds become available from net cash flow earned from operation of the respective housing projects. Any and all payments received require deposit into reserve accounts held for the benefit of each project. Receipt of principal payments on all notes receivable is expected to begin in 2024 and thereafter. Notes receivable consist of the following;

A $616,415 secured note receivable, from 273-277 Kosciusko, L.P., with interest at a fixed rate of 7.5% per annum, compounded annually. This note receivable represents deferred development fees in connection with the construction of the K Street Project. The note receivable is secured by a subordinate mortgage on the K Street Project property and has a maturity date not to exceed the 13th anniversary of the date the K Street Project is placed in service. The portion of deferred development fees represented by this note was earned by June 30, 2013, upon substantial completion of the K Street Project. $

$523,353 secured note receivable, from 329 Lincoln Road, L.P., with interest at a fixed rate of 8.92% per annum, compounded annually. This note receivable represents deferred development fees due in connection with the construction of the Lincoln Road Project. The note receivable is secured by a subordinate mortgage on the Lincoln Road Project property and has a maturity date not to exceed the 13th anniversary of the date the Lincoln Road Project is placed in service. The portion of deferred development fees represented by this note is expected to be earned by June 30, 2014, upon substantial completion of the Lincoln Road Project.

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June 30, 2013

616,415 $

523,353

2012

616,415

523,353

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June 30, 2013 and 2012

8. NOTES RECETV ABLE FROM AFFILIATES. continued:

9.

$275,000 secured note receivable, from 329 Lincoln Road, L.P., with interest at a fixed rate of 8.92% per annum, compounded annually . This note receivable represents permanent mortgage financing for the Lincoln Road Project paid from deferred development rees expected to be earned by Providence in connection with the construction of the Lincoln Road Project. These funds are intended to fund certain required reserve accounts. The note receivable is secured by a subordinate mortgage on the Lincoln Road Project property. The principal and all accrued, unpaid interest is due and payable in full on June 29, 2074.

$45,000 secured note receivable, with interest at a fixed rate of 8.92% per annum, compounded annually . This note receivable represents permanent mortgage financing for the Lincoln Road Project paid from New York State Energy Research and Development Authority grant proceeds given to Providence in connection with the construction of the Lincoln Road Project. The note receivable is secured by a subordinate mortgage on the Lincoln Road Project property. The principal and all accrued, unpaid interest is due and payable in full on June 29, 2074.

PROPERTY AND EQUIPMENT; Property and equipment consists of the following:

Land Buildings and improvements Leasehold improvements Furniture, fixtures and equipment

Less accumulated depreciation

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$

$

$

June 30, 2013 2012

275,000 275,000

45,000 45,000

1,459,768 $ 1,459,768

June 30, 2013 2012

344,865 $ 747,265 3,463,241 5,124,816

223,336 199,347 206,584 146,296

4,238,026 6,217,724 (1,824,561 ) (1,931,905)

2,413,465 $ 4,285,819

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June 30, 20\3 and 2012

10.MORTGAGE PAYABLE: Mortgage payable consists ofa mortgage secured by property, payable to a bank, with an interest rate of7.78%. The loan is payable in monthly installments of principal and interest of$11,316. The loan is due and payable in full in October 2017. The balance of the loan as of June 30, 2013 and 2012, respectively, was $516,310 and $607,440.

Estimated principal payments for the next five years ended June 30 and thereafter are as follows:

2014 $ 99,280 2015 107,285 20 16 115,936 2017 125,285 2018 68,524

$ 516,310

11. TEMIQRARlL Y RESTRlCTjill NET A:;JSJ;;TS: Temporarily restricted net assets are available for the following purposes:

June 30, 2013 2012

Annual scholarships $ 13,000 $ 10,500 NYS Homeless Housing (Restricted use building) 172,943 190,062

Operations 101,615 Fundraising event contributions receivable 241,624 Pledges receivable 150,000 K Street Video System 20,000 20,000 Renovations, repairs and equipment 92,572 55,072

$ 641,754 $ 425,634

12. CONTRIBUTED SERVICES: During the years ended June 30, 2013 and 2012, Providence received donated services valued at $23,300 and $12,500, respectively . These services were recorded as a contribution and expensed to professional fees in the accompanying consolidated financial statements.

During the years ended June 30, 2013 and 2012, Providence received various volunteer program services totaling $300,000 during each year. Providence has implemented a method of determining the value of these services donated by accumulating the number of hours worked at an assumed rate of $14.50 per hour. These services were recorded as a contribution and expensed to donated services in the accompanying consolidated financial statements.

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June 30, 2013 and 2012

13. RETIREMENT PLAN: Providence is a participant in the noncontributory lay pension plan established by the Diocese of Brooklyn, New York, covering employees who meet certain minimum service requirements. Pension expense charged to Providence was approximately $69,830 and $75,128, respectively, in the years ended June 30, 2013 and 2012.

14. OPERATING LEASES: Providence rents properties from several churches in the Diocese of Brooklyn and Queens as follows:

Location Lease Period Monthly Ren!

PHI Through December 31 , 2018 $ 2,750 PH 1II Through December 31, 2018 $ 4,083 PHV Through December 31, 2018 $ 4,167 PH VI Through December 31, 2018 $ 2,083

The future estimated minimum lease payments for each of the succeeding fiscal years are as follows:

2014 $ 158,600 2015 161,333 2016 161,950 2017 163,450 2018 164,950

Thereafter 27,533

$ 837,816

·18·

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June 30, 2013 and 2012

IS .RELATED PARTIES: In order to further its commitment to provide shelter and support to homeless, abused and formerly incarcerated women and their children in a hospitable, non-violent, compassionate atmosphere, Providence desired to develop two new permanent supportive housing buildings. These housing projects would be used to address the scarcity of permanent supportive housing for low-income and special needs individuals and families . In order to have these projects become a reality, Providence had to partner with the city, investors and developers.

K Street Project: The first permanent supportive housing project partnership that Providence entered into was to develop a 46-unit low-income residential rental apartment project at 273-277 Kosciuszko Street in Brooklyn, New York. The units are to be used and occupied in such a manner so as to fully utilize low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code.

273-277 Kosciuszko, L.P. ("273 Limited Partnership") was established on November 22, 2010, as a limited liability partnership, with 273 GP LLC as general partner and PKHDFC as limited partner. 273 Limited Partnership was organized under the laws of the State of New York and was established to acquire, develop, finance and construct the K Street Project.

On June 13, 2011 , the 273 Limited Partnership agreement was amended and restated to reflect, among other changes, the admittance of PK LLC as general partner, removal of PKHDFC as limited partner, admittance of U.S.A. Institutional Tax Credit Fund LXXXIIl, L.P. as the investing partner, and admittance of The Richman Group Capital Corporation as the special limited partner. The terms of the First Amended and Restated Partnership Agreement provide that profits and losses be shared 99.99% by the investing partner and .01% by the general partners (273 GP LLC and PK LLC), with no allocation to the special limited partner. Providence is the holder of a note receivable from 273 Limited Partnership as outlined in Note 8.

In June 201 I, PKHDFC and other related affiliated entities entered into multiple borrowing arrangements with different lenders for the purpose of obtaining financing for the construction and completion of the K Street Project. See Note 18 for loans that are guaranteed by Providence.

In June 2011 , title to the K Street Project site was conveyed to PKHDFC by the City of New York for consideration of $3 and PKHDFC's commitment to construct and provide housing for at least trurty years exclusively to persons of low income. Pursuant to the regulatory agreement with The New York City Department of Housing Preservation and Development (''NYCHPD''), the K Street Project is to be occupied by persons or families of low income, as such term is defined in the regulatory agreement. Simultaneously, the beneficial and equitable interest in the property was conveyed to 273 Limited Partnership. Construction began in June 2011 and was completed in March 2013.

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June 30, 2013 and 2012

15.RELATED PARTIES. continued: As outlined in Notes 2 and 7, Providence is to receive fees for the developer services it provides to the K Street Project. $616,415 of these fees are secured by a note receivable as detailed in Note 8 and unearned as of June 30, 2012; therefore, they are included in deferred developer fees as of June 30, 2012. Development fees of $660,566 and $334,424 were earned during the years ended June 30, 2013 and 2012, respectively. Development fees were fully earned as of June 30, 2013. Providence had a receivable from 273 Limited Partnership of $690,000 and $737,849 for cumulative earned developer fees, as of June 30, 3013 and 2012, respectively.

Lincoln Road Project: The second permanent supportive housing project partnership that Providence entered into was to develop a 22· unit low-income residential rental apartment project at 329 Lincoln Road in Brooklyn, New York. The units are to be used and occupied in such a manner so as to fully utilize low-income housing tax credits in accordance with Section 42 of the Internal Revenue Code.

329 Lincoln Road Associates, L.P. ("329 Limited Partnership") was established on January 30, 2010, as a limited liability partnership, with 329 GP LLC as general partner and PIHDFC as limited partner. 329 Limited Partnership was organized under the laws of the State of New York and was established to acquire the property and financing for the Lincoln Road Project.

On June 1, 2012, the 329 Limited Partnership agreement was amended and restated to reflect, among other changes, removal of PIHDFC as limited partner, the admittance of the U.S.A. Institutional Tax Credit Fund LXXXVI, L.P. as the investing partner, and the admittance of The Richman Group Capital Corporation as the special limited partner. The terms of the First Amended and Restated Partnership Agreement provide that profits and losses be shared 99.99% by the investing partner and .01% by the general partner (329 GP LLC), with no allocation to the special limited partner. Providence is the holder of two notes receivable from 329 Limited Partnership as outlined in Note 8 above.

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June 30, 2013 and 2012

15.RELA TED PARTIES. continued: In June 2012, PIHDFC and other related affiliated entities entered into multiple borrowing arrangements with different lenders for the purpose of obtaining financing for the construction and completion of the Lincoln Road Project. From the proceeds of those borrowings, Providence received $160,412, which was used to pay the outstanding principal balance ($125,000) and accrued interest ($35,412) on a loan that Providence had acquired to finance certain pre-development costs in connection with the Lincoln Road Project. Consequently, accumulated Lincoln Road Project construction-in-progress assets at June 30, 2012, were transferred from Providence to 329 Limited Partnership. In addition, Providence owed 329 Limited Partnership $11,646 at June 30,2012. This amount was repaid during the year ended June 30, 2013. See Note 18 for other loans that are guaranteed by Providence.

On June 29, 2012, title to the Lincoln Project site was conveyed to PIHDFC by the City of New York for cpnsideration of $1 and PllIDFC's co=itrnent to construct and provide housing for at least thirty years exclusively to persons of low income. Pursuant to the regulatory agreement with NYCHPD, the Lincoln Project is to be occupied by persons Or families of low income, as such term is defined in the regulatory agreement. Simultaneously, the beneficial and equitable interest in the property was conveyed to 329 Limited Partnership. Construction began in July 2012 and is on-going as of June 30, 2013.

As outlined in Notes 2 and 7, Providence is to receive fees for the developer services it provides to the Lincoln Road Project. $798,353 of these fees are secured by notes receivable as detailed in Note 8 and unearned as of June 30, 2012; therefore, they are included in deferred developer fees as of year end. A portion of these fees were earned during the year ended June 30, 2013; $407,341 remains unearned as of June 30, 2013. Development fees of $467,819 and $66,193 were earned during the years ended June 30, 2013 and 2012, respectively. Providence had a receivable from 329 Limited Partnership of $130,684 and $66,193 for cumulative earned developer fees, as of June 30, 2013 and 2012, respectively.

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June 30, 2013 and 2012

16. OPERATING AND REPLACEMENT RESERVES: In connection with the K Street and Lincoln Road Projects, Providence has entered into various agreements requiring the establishment of restricted reserves accounts, including replacement, operating and social services reserves for each housing development. The reserves, when received, must be maintained in separate bank accounts and are expected to be funded from developer fees received as follows:

For the K Street Project, all development fees earned by Providence as outlined in Note 7, except for the initial $230,000, sball require deposit into reserve accounts. Installment payments totaling $115,000 are to be deposited annually into mUltiple reserve accounts beginning on or around April 2014. Additional deposits totaling $115,000 will continue annually thereafter on or around April of each subsequent year, through and including April 2018. Thereafter, payments will be made as funds become available from net casb flow earned from operation of the K Street Project. Balance represents unfunded operating and replacement reserves expected to be paid from earned development fees in connection with the K Street Project.

For the Lincoln Road Project, all development fees earned by Providence as outlined in Note 7, except for the initial $143,000, shall require deposit into reserve accounts. Installment payments totaling $91,667 are to be deposited into multiple reserve accounts in connection with the Lincoln Road Project beginning on or around February 2016. Additional annual deposits totaling $91,667 will continue thereafter on or around February of each subsequent year through and including February 2018. Thereafter, payments will be made as funds become available from net cash flow earned from operation of the Lincoln Road Project. Balance represents unfunded operating and replacement reserves expected to be paid from earned development fees in connection with the Lincoln Road Project.

-22-

$

$

June 30, 2013 2012

1,191,415 $ 530,849

391,012

1,582,427 $ 530,849

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June 30, 2013 and 2012

17.FAlR VALUE MEASUREMENTS: Providence uses appropriate valuation techniques to determine fair value based on inputs available. When available, Providence measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are only used when Level I or Level 2 inputs are not available.

The following table presents the fair value measurements of assets recognized in the accompanying consolidated statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall at June 30, 2013 and 2012:

Quoted Prices Significant in Active Other Significant

Markets for Observable Unobservable Identical Assets Inputs Inputs

Total (Level 11 (Level 2) (Level 3)

June 30, 2013: Mutual funds :

Equity funds $ 288,170 $ 288,170 $ $

Bond funds 246,279 246,279 534,449 534,449

Certificates of deposit 25,173 25,173

Money market funds 35,488 35,488

$ 595,110 $ 569,937 $ 25,173 $

June 30,2012: Mutual funds :

Equity funds $ 246,993 $ 246,993 $ $

Bond funds 247,284 247,284 494,277 494,277

Certificates of deposit 153,638 153,638

Money market funds 858 858

$ 648,773 $ 495,135 $ 153,638 .,;$==~==

Valuation techniques: The fair value of mutual funds and money market funds is based on quoted net asset values of the shares held by Providence at year-end. The fair values of the certificates of deposit are based on observable inputs other than the quoted prices included in Level I and thus are based on yields for securities of comparable maturity, quality, and type as obtained from market makers.

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June 30, 2013 and 2012

I 8. CONTINGENCIES: Providence has guaranteed payment jointly and severally for construction financing for the K Street Project from NYCHPD, in the amount of $5,675,851. The maturity date of the note and mortgage is October 27, 2053. The balance of the loan as of June 30, 2013, is $5,675,851.

Providence also guaranteed payment jointly and severally for construction financing for the Lincoln Road Project from NYCHPD, in the amount of $2,750,000. The maturity date of the note and mortgage is June 29, 2014, but may be extended to sixty years upon substantial completion and conversion. The balance of the loan as of June 30, 2013, is $2,590,260.

19. SUBSEQUENT EVENTS: On August 30, 2013, Providence purchased forty-four shares (22%) in 291 Bainbridge OP Corp. 291 Bainbridge OP Corp is a housing project similar to the K Street Project and Lincoln Road Project. The project required an unrelated non-profit to become a general partner minority shareholder. The majority shareholder, 291 Bainbridge Housing Development Fund Corporation, has signed an indemnity agreement to indemnify and hold Providence against any and all cost, liability, loss, damage or expense incurred by Providence as a result of Providence owning the shares.

Subsequent events have been evaluated through the report date, which represents the date the consolidated financial statements were available to be issued. Subsequent events after that date have not been evaluated.

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SUPPLEMENTARY DATA

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CAP IN C~=-::' .. 9:::::..::."" Y:c.::.::.:'blic:..:..::c'~'=§'c..~'~c.c.;'_----::::;:-:---~ ------,-c-c-. \\'Ww.capi n.::rollst'.com 1330 AVdrlU8 oi tlle /l.msrlcas, Suit>3 23A Naw'fork. NY 100H} 212.653.0631

INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY DATA


We have audited the consolidated financial statements of Providence House, Inc. and Affiliates as of and for the year ended June 30, 2013, and our report thereon dated March 12,2014, which expressed an unmodified opinion on those consolidated financial statements, appears on pages 1 and 2. Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The supplemental schedules on pages 25-28 are presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position and results of operations of the individual sites, and it is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The consolidated information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

New York, New York March 12,2014

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PHI PH U PHll Revenues and gains: Donations and grants S $ S $ Religious donaJjons and donated services 78,000 95,190 72,830

Contract revenue 11 4,748 209,999 114,182 CACFP and FEFP food grant 11 ,228 11,228 13,839 NYC Housing HR.A payments Rental income 430 Investment income Dc:\'cklper fees Donato::l senices value Fundnising and special events Miscellaneous: income 25 92

TOlai unrestricted revenues 204,406 316,442 200,943

Providence House, Inc. and Affiliates Temporary Shelter and Feeding Programs

Schedule of Activities by Site For tbe Year Ended June 3D, 2013

PH IV PHV PH VI PHVD Totals

S 100,000 S $ S 100,000

83,255 78,645 407,920 361,521 750,953 1,55 t ,403

11,970 6,006 6,006 60,277 38,353 3&.353

5,775 6,205

295 412

373,786 233,389 84,651 750,953 2,164,570

(continued)


PH IX PerTrulIJeflt Housing Samaritan Lincoln Road D'Addario Central Grand Program House Project Residence O~rations Total

S S S S 6,675 S 406,593 S 513,268

407,920 257,491 1,808,894

60,277 38,353

44,556 6,060 56,821 47,583 47,583

467,8 19 660,566 1,128,385 23,300 23,300

226,559 226,559 64,644 25,376 90,432

44,556 6,060 467,819 989,376 729,41 1 4,401,792

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PHI PHD PHm Expenses and losses: Salaries and wages 109,214 104,704 116)72 Payroll tax .. 9,863 9,628 10.399 Employee benefits 19,820 11,479 28,835 Rent 27,600 46,000 Utilities 13,900 10,936 Telephone 1,751 3,988 3,728 Professional fees Food 4,193 10,865 9,224 Scholarships Client assistance and gifts Other program expenses 595 1,925 5,186 Travel 193 247 220 Seminars and training Dues and subscriptlons 60 60 Insurance 3,433 2,468 3.724 EquJpment, purchase, rental

and maintenance 3,448 7,809 11,767 Office expenses 570 698 5,483 Supplies 3,004 6,913 6,546 Printing Postage and del ivcry Interest expense Depreciation 6,981 13,677 3,129 Other fundraising expenses Advertising 70 70 Miscellaneous 227 3,482 6,651 Donated services value 60,000 60,000 60,000

Talal expenses 250,953 251 ,853 328,230

Net change S (46,547) S 64,589 $ (127,287) $

Providence House, Inc. and Affiliates Temporary Shelter and Feeding Programs

Scbedule of Activities by Site For the Year Ended June 30, 2013

(continued)

PH IX Permanent Housing Samarilan Lincoln Road D' Addario

PH IV PHV PH VI PHVD Totals Pro~ House Project Re~delu

201 ,127 198,463 25,446 363,084 1,118.310 8,626 9,768 119,640 18,968 18,552 2,382 34)02 103,994 815 942 10,367

46,585 45,433 6,575 64,732 223,459 2,404 2)79 14,585 45,000 14,583 133,183

26,247 21,714 17,843 45,648 136,288 6,249 9,115 31,849 2,146 2,817 1,624 16,054 2,89(J

5,644 14,672 4,984 229 49,811 115

SO 400 50 500 2,650 6,620 1,377 22 3,043 18,768 3,125 14 16,087 1,005 8,816 2)62 12,743 18 1,440 1,440 45

486 301 907 7,090 3,567 4,811 21 ,838 46,931 4,296 10,095 36,551

17,976 3,973 2)76 7,418 54,127 14,777 1,392 556 2,566 4,067 13,384 729 30,668

12,798 6,806 1,821 5)15 43,103 1,806 96 6)31 771 771

9 81 91 44,071 44,071 1)12

7,398 1,500 2,331 38,472 73,488 17,119 33)88 3,299

70 210 490 3,410 2,887 155 1,524 18,336 30 2,518

60,000 60,000 300,000

361,565 436,359 143,229 638,380 2,410,569 59,976 69,639 277,121

12,221 S (202,970) S (58,578) S 112,573 S (245,999) $ (15,420) S (6J,579) $467,819 $712,255

See notes to consolidated financial statements ·27·

Central Grand QEerations Totals

344,031 1,600,375 20,742 136,860 35,323 278,050

133,183 28,601 212,102 22,920 41,864

133,700 133,700 2,612 52,538 8.000 8,000 6,150 9.300 I,m 39,767 3,677 16,438 2,630 4,115 4,876 5,783

11,690 109,563

7,453 78,905 19,792 64,573 18,638 69,874 6,420 7,191 4,708 4,799 1,85 1 47,134

35,547 162,741 21,961 21,961

2,720 3,420 14,022 34,906

300,000

759,837 3,577,142

S (30,426) $ 824,650

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Providence House, Inc. and Affiliates Providence House IV Compared to Approved County Funding

For tbe Year Ended June 30, 2013

Approved Budget

2013-2014

Revenues: • CACFP and FEFP food grant $ 11 ,970

Westchester DSS payments 355,426

Total revenues 367,396

Expenses: Salary expense 202,830

Payroll taxes and employee benefits 65,897

Utilities 24,913

Telephone Food expense 11,970

Client assistance and gifts Other program expenses 495

Travel 1,077

Seminars and training Dues and SUbscriptions Insurance 6,077

Repairs and maintenance 26,029

Office expenses Supplies 12,360

Occupancy 15,748

Depreciation Postage and delivery Miscellaneous

Total expenses 367,396

Net change $

• Revenues include only CACFP & DSS of Westchester funds.


Actual 2013-2014

$ 11,970 361,521

373,491

201 ,127 65,553 26,247 2,146 5,644

50 6,620 1,005 1,440

486 7,090

17,976 2,566

12,798

7,398 9

3,410

361 ,565

$ 11,926

PH FY2013 Audit

Documents

Transcript of PH FY2013 Audit