St. Joseph s Hospital and Medical Center Foundation, Inc. Financial Statements. December 31, 2015

Transcription

1 St. Joseph s Hospital and Medical Center Foundation, Inc. Financial Statements December 31, 2015

2 Independent Auditors Report Board of Directors of St. Joseph s Hospital and Medical Center Foundation, Inc. We have audited the accompanying financial statements of St. Joseph's Hospital & Medical Center Foundation, which comprise the statement of financial position as of December 31, 2015, and the related statements of activities and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. PKF O CONNOR DAVIES, LLP Dorothy B. Kraft Center, 15 Essex Road, Suite 503, Paramus, NJ I Tel: I Fax: I PKF O Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

3 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of St. Joseph's Hospital & Medical Center Foundation as of December 31, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited the St. Joseph's Hospital & Medical Center Foundation s December 31, 2014 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated March 6, In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2014 is consistent, in all material respects, with the audited financial statements from which it has been derived. Report on Supplementary Information Our 2015 and 2014 audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The supplementary schedules on pages 14 to 17 are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit s of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. March 7, 2016

4 St. Joseph's Hospital and Medical Center Foundation, Inc. Statement of Financial Position December 31, 2015 (with comparative amounts at December 31, 2014) ASSETS Current Assets Cash and cash equivalents $ 5,189,042 $ 3,720,145 Unconditional promises to give 1,816,633 2,229,189 Prepaid expenses and other current assets 110,401 54,859 Notes receivable 111, ,733 Total Current Assets 7,227,759 6,112,926 Assets whose use is limited 3,409,849 3,492,941 Unconditional promises to give, net 2,261,511 3,799,610 Notes receivable 1,291,330 1,404,724 Investment property, net of accumulated depreciation of $490,104 and $475, , ,566 Cash surrender value of life insurance 6,809 3,637 Investments held by trustee 1,654,845 1,787,156 Beneficial interests in trust 2,946,840 2,041,320 $ 19,248,944 $ 19,106,880 LIABILITIES AND NET ASSETS Liabilities St. Joseph's Hospital and Medical Center payable $ 1,182,089 $ 65,047 St. Joseph's Wayne Hospital Foundation payable - 25,591 Accounts payable and accrued expenses 31, ,568 Total Current Liabilities 1,213, ,206 Annuities payable 94,687 77,638 Total Liabilities 1,308, ,844 Commitments and contingencies Net Assets Unrestricted 5,703,729 5,011,327 Temporarily restricted 9,290,145 11,781,389 Permanently restricted 2,946,840 2,041,320 Total Net Assets 17,940,714 18,834,036 $ 19,248,944 $ 19,106,880 See notes to financial statements 3

5 St. Joseph's Hospital and Medical Center Foundation, Inc. Statement of Activities Year Ended December 31, 2015 (with summarized totals for 2014) Temporarily Permanently Unrestricted Restricted Restricted Total Total REVENUES Annual fund $ 1,327,962 $ 1,635,428 $ - $ 2,963,390 $ 1,468,047 Contributed service revenue (see note 2) 10,412 10,412 10,114 Special events 1,092, ,092,340 1,313,436 Net rental income - 57 Willowbrook 235, , ,346 Interest and dividend income, net of investment fees of $2,200 and $2, ,134 46, , ,804 Net realized and unrealized gain on investments (144,428) (95,864) - (240,292) 119,781 Net assets released from restrictions 4,077,560 (4,077,560) ,711,249 (2,491,244) - 4,220,005 3,293,528 EXPENSES Program Expense Contribution - St. Joseph Hospital and Medical Center 2,174, ,174,583 2,709,249 Contributions - other 65, ,962 70,104 Fundraising Expense Special events 593, , ,129 Payment to affiliates ,737 Fundraising expenses and other costs 1,033, ,033,641 1,161,830 Bad debts 2,151, ,151, ,942 6,018, ,018,847 5,595,991 NON-OPERATING ACTIVITY Change in beneficial interests in trust - - (258,890) (258,890) (31,750) Transfer of beneficial interests in trusts (see note 5) - - 1,164,410 1,164,410 - Excess/deficit of revenue over expenses before transfer from Hospital 692,402 (2,491,244) 905,520 (893,322) (2,334,213) Transfer from Hospital ,572 Change in Net Assets 692,402 (2,491,244) 905,520 (893,322) (1,466,641) NET ASSETS Beginning of year 5,011,327 11,781,389 2,041,320 18,834,036 20,300,677 End of year $ 5,703,729 $ 9,290,145 $ 2,946,840 $ 17,940,714 $ 18,834,036 See notes to financial statements 4

6 St. Joseph's Hospital and Medical Center Foundation, Inc. Statement of Cash Flows Year Ended December 31, 2015 (with comparative amounts for 2014) CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (893,322) $ (1,466,641) Adjustments to reconcile change in net assets to net cash from operating activities Depreciation 14,565 22,036 Net realized and unrealized loss (gain) on investments 240,292 (119,781) Change in investments held by trustee 132,311 (51,047) Change in beneficial interests in trusts (905,520) 31,750 Bad debts 2,151, ,942 Net change in operating assets and liabilities Unconditional promises to give (200,775) 726,269 Rents receivable (55,542) (9,903) Cash surrender value of life insurance (3,172) (3,073) Accounts payable and accrued expenses (73,114) 24,671 Annuities payable 17,049 37,592 St. Joseph's Hospital and Medical Center payable 1,117,042 (9,266) St. Joseph's Wayne Hospital Foundation payable (25,591) 25,591 Net Cash from Operating Activities 1,515,653 (124,860) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (1,426,666) (3,148,501) Proceeds from investments sold 1,269,466 1,149,081 Net Cash from Investing Activities (157,200) (1,999,420) CASH FLOWS FROM FINANCING ACTIVITIES Collection on notes receivable 110, ,674 Change in cash and cash equivalents 1,468,897 (2,019,606) CASH AND CASH EQUIVALENTS Beginning of year 3,720,145 5,739,751 End of year $ 5,189,042 $ 3,720,145 See notes to financial statements 5

7 St. Joseph s Hospital and Medical Center Foundation, Inc. Notes to Financial Statements December 31, 2015 and History of St. Joseph's Hospital and Medical Center Foundation, Inc. St. Joseph s Hospital and Medical Center Foundation, Inc. ( the Foundation ) is a public charity incorporated in The Foundation raises funds for St. Joseph's Hospital and Medical Center (the Medical Center ), its affiliated organizations, as well as other area charitable organizations. 2. Summary of Significant Accounting Policies Basis of Presentation The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America ( U.S. GAAP ). The Foundation reports information regarding its financial position and activities according to the following three classes of net assets based on donor imposed restrictions: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Net Asset Classification Resources for various purposes are classified for accounting and reporting purposes into net asset categories established according to nature and purpose as follows: Unrestricted consist of resources available for the general support of the Foundation s operations. Unrestricted net assets may be used at the discretion of the Foundation s management and Board of Directors. Temporarily restricted represent amounts restricted by donors for specific activities of the Foundation or to be used at some future date. The Foundation records contributions as temporarily restricted if they are received with donor stipulations that limit their use either through purpose or time restrictions. When a donor restriction expires, that is, when a time restriction ends or a purpose restriction is fulfilled, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. However, when restrictions on donor-restricted contributions and investment return are met in the same accounting period, such amounts are reported as part of unrestricted net assets. Permanently restricted consist of funds that are subject to restrictions of gift instruments requiring that the principal be invested in perpetuity and the income be used for specific or general purposes. Income and gains earned on endowment fund investments are available to be used in the unrestricted or temporarily restricted net asset classes based upon stipulations by the donors. 6

8 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Summary of Significant Accounting Policies (continued) Use of Estimates The preparation of financial statements 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. Contributed Services During 2015 the Foundation adopted new U.S. GAAP guidance which specifies guidance for recognizing and measuring services received from personnel of an affiliate that directly benefit a recipient not-for-profit entity and for which the affiliate does not charge the recipient not-for-profit entity. Under this provision the Foundation has elected to apply the retrospective approach. As a result, the prior year s balances have been adjusted to conform to this new presentation and there is no cumulative effect on the change in net assets or total assets. The Foundation has recognized in-kind revenue and a corresponding expense for this contribution associated with personnel who are paid directly by the Hospital and are not subject to reimbursement by the Foundation. Cash and Cash Equivalents For cash flows presentation purposes, cash includes highly liquid cash investments with a maturity of ninety days or less at the time of purchase, however, cash considered as investments are not included in cash and cash equivalents. Fair Value Measurements The Foundation follows U.S. GAAP guidance on Fair Value Measurements which defines fair value and establishes a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets. Level 1 inputs have the highest reliability and are related to assets with unadjusted quoted prices in active markets. Level 2 inputs relate to assets with other than quoted prices in active markets which may include quoted prices for similar assets or liabilities or other inputs which can be corroborated by observable market data. Level 3 inputs are unobservable inputs and are used to the extent that observable inputs do not exist. Investments Investments in debt and equity securities are carried at fair value in the statements of financial position. Concentration of credit risk with respect to investments is reduced by diversification, professional management, and limited exposure to any single investment. 7

9 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Summary of Significant Accounting Policies (continued) Investment Property and Equipment The investment property relates to the Foundation s ownership of two condominium units located at 57 Willowbrook, Wayne, New Jersey. Such investment is carried at cost. Depreciation is provided on the straight-line basis over the estimated useful life of 31.5 years. Maintenance and repairs are charged to expense as incurred. Major renewals and betterments are capitalized. Upon sale or other disposition of assets, the cost and related accumulated depreciation are removed from the accounts and any resulting gain or loss is reflected in the statement of activities. Contributions and Pledges Receivable The Foundation recognizes revenue from charitable donations at the time the unconditional promise to give is made, at estimated net realizable value. Contributions receivable over a period of time beyond one year are discounted to present value using a credit adjusted discount rate and the discount is amortized into contribution income over the discount period. Allowance for Uncollectible Receivables An allowance for uncollectible receivables is estimated based on a combination of writeoff history, aging analysis and any specific known troubled accounts. Tax Status The Foundation is a not-for-profit corporation as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes on related income pursuant to Section 501(a) of the Code. The Foundation recognizes the effect of tax positions when they are more likely than not to be sustained. Management has determined that the Foundation had no uncertain tax positions that would require financial statement recognition or disclosure. The Foundation is no longer subject to examinations by the applicable taxing jurisdictions for periods prior to Assets Whose Use is Limited Assets whose use is limited include assets held to be used for temporarily restricted purposes. 8

10 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Summary of Significant Accounting Policies (continued) Annuities Payable Included in the investments held by the Foundation are investments in annuity income funds arising from contributions which are subject to agreements to pay donors a fixed annuity over the remainder of their lives. The net present value of the actuarially expected annuity payments is recorded as a liability. The liabilities are adjusted annually for accretion of the discount and changes in actuarial assumptions. Subsequent Events Evaluation by Management Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, which date is March 7, Prior Year Information The statement of activities includes certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with U.S. GAAP. Accordingly, such information should be read in conjunction with the Foundation's financial statements for the year ended December 31, 2014 from which the summarized information was derived. 4. Investments held by Trustee The investments held by trustee are investments restricted for St. Vincent s Nursing Home. The disbursements from these investment accounts as well as the investment decisions are made by a court-appointed trustee. 5. Beneficial Interests in Trust During 2015, the Foundation was designated as a beneficiary of two trusts as ordered by a New Jersey court. The total value at the date of the judgement was $1,164,410 which was presented as an addition in the permanently restricted net assets on the Statement of Activities. In addition to the above two trusts, the Foundation is also a beneficiary of a Caspers Memorial Fund trust established by donors. As such the Foundation receives annual distributions from the trusts which are included in unrestricted income for the year. Future distributions from these trusts are subject to the Foundation continuing to exist and function. The trusts are held and managed by independent trustees. 9

11 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Fair Value and Investment Income Assets whose use is limited amounts included in the accompanying statement of financial position categorized by the fair value hierarchy are all level 1. They are presented as follows at December 31: Fixed income Government bonds $ 442,725 $ 401,224 Corporate bonds 392, ,698 Municipal bonds 37,521 38,726 Foreign bonds 25,149 36,721 Government asset backed securities 192, ,439 Equity securities 1,731,177 1,811,222 Mutual funds 57,333 58,751 Total Investment at Fair Value 2,878,537 2,942,781 Cash equivalents 531, ,160 Total Assets Whose use is Limited $ 3,409,849 $ 3,492,941 Investments held by trustee of $1,654,845 and $1,787,156 at December 31, 2015 and 2014 were valued using level 2 inputs. Beneficial interests in trust of $2,946,840 and $ 2,041,320 at December 31, 2015 and 2014 were valued using level 3 inputs. Investment income is composed of the following for the years ended December 31: Interest and dividend income $ 161,086 $ 166,157 Less investment fees (2,200) (2,353) Realized gain (loss) (21,387) (44,276) Unrealized gain (loss) (218,905) 164,057 Rental income, net 235, ,346 $ 153,863 $ 501,931 10

12 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Note Receivable During 2007 the Foundation converted its property at 57 Willowbrook, Wayne, into a condominium entity containing three units and sold a portion of the condominium units to unrelated parties. As of December 31, 2015 and 2014 the Foundation owns approximately one and one third of the original three units. The following table lists the notes receivable that are due from the sale of units: Note secured by a condominium interest. The note will amortize over 20 years. Interest was set at 4.04% in 2015 and will adjust every five years to 2.5% over the five year Treasury bill rate. $ 782,779 $ 848,146 Note secured by a condominium interest. The note will amortize over 20 years. Interest was set at 3.33% in 2012 and will adjust every five years to 2.5% above the five year Treasury bill rate. 365, ,323 Note secured by a condominium interest. The note will amortize over 20 years. Interest was set at 3.31% in 2012 and will adjust every five years to 2.5% above the five year Treasury bill rate. 254, ,988 1,403,013 1,513,457 Less current portion 111, ,733 $ 1,291,330 $ 1,404,724 The annual principal payments for the next five years and thereafter are due as follows: Amount 2016 $ 111, , , , ,586 Thereafter 793,351 $ 1,403,013 11

13 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Unconditional Promises to Give Unconditional promises to give by donors are considered contributions by the Foundation and are recognized as revenue and receivables in the period the promises are received. The unconditional promises to give which extend beyond one year are discounted at a range of 3.50% to 4.50% to their fair value as of December 31, 2015 and Unconditional promises to give are expected to be collected as follows: One year $ 1,992,633 $ 2,378,082 Two years to five years 4,532,011 4,767,217 More than five years 887, ,500 7,412,144 8,032,799 Present value discount (417,000) (834,000) Allowance for uncollectibles (2,917,000) (1,170,000) $ 4,078,144 $ 6,028,799 The unconditional promises to give from one donor accounted for approximately 53% and 49% of the total receivable before present value discount and allowance at December 31, 2015 and Temporarily Restricted Net Assets Temporarily restricted net assets are available for future periods or for specific purposes. Net assets during the year were released from donor restrictions by incurring expenditures satisfying the restricted purpose. Temporarily restricted net assets as of December 31, 2015 and 2014 are available for the following purposes: Restricted As To Purpose: Capital campaign $ 3,744,280 $ 6,369,643 Medical equipment and programs 758, ,143 Adult and Children Services 4,625,618 4,484,532 Other health care programs 161,266 84,071 $ 9,290,145 $ 11,781,389 12

14 St. Joseph s Hospital and Medical Center Foundation, Inc, Notes to Financial Statements December 31, 2015 and Temporarily Restricted Net Assets Net assets released from restrictions during the year ended December 31, 2015 and 2014, represent revenue from various restricted net assets expended as follows: Capital campaign $ 3,175,699 $ 1,939,375 Medical equipment and programs 182, ,290 Adult and Children Services 713, ,639 Other health care programs 6,050 28,705 Total Net Assets Released from Restrictions $ 4,077,560 $ 3,083, Rental Income During 2015 and 2014, the Foundation rented its condominium units of 57 Willowbrook, Wayne, New Jersey. An unrelated company leases one unit under an operating lease expiring on December 1, Minimum rental income to be received in each of the years until the end of the lease is $179,852. The Medical Center leases the remaining one third of the unit on a month-to-month basis. 11. Related Party Transactions (not disclosed elsewhere) The Foundation receives certain services from the Medical Center. These services include various operating expenses such as salaries, rent, utilities and other administrative expenses. These services amounted to $834,622 and $867,572 in 2015 and During 2014, the Medical Center forgave the payment of these services. 12. Concentration of Credit Risk Financial instruments that potentially subject the Foundation to concentrations of credit risk consist principally of cash and investments. The Foundation maintains its cash in bank deposit accounts, the balances of which, at times, may exceed Federally insured limits. Exposure to credit risk is reduced by placing deposits and investments in highly regarded financial institutions. 13. Commitments and Contingencies The Foundation is part of the obligated group for the outstanding 2008 bonds payable by the Hospital. The bond payable by the Hospital amounted to $222,945,000 and $227,160,000 at December 31, 2015 and The Foundation has not recognized a liability for this guarantee, as payment by the Foundation is not considered probable. * * * * * 13

15 St. Joseph's Hospital and Medical Center Foundation, Inc. Supplementary Schedules December 31, 2015 (with comparative amounts for 2014)

16 St. Joseph's Hospital and Medical Center Foundation, Inc. Supplementary Schedule on Statement of Financial Position (in thousands) December 31, 2015 (with comparative amounts at December 31, 2014) ASSETS CURRENT ASSETS Cash and cash equivalents $ 5,189 $ 3,720 Grants, notes, and other receivables Unconditional promises to give - net 1,817 2,229 Prepaid expenses and other current assets Total Current Assets 7,228 6,113 ASSETS WHOSE USE IS LIMITED 3,410 3,493 UNCONDITIONAL PROMISES TO GIVE Net 2,262 3,800 NOTES RECEIVABLE 1,291 1,405 PROPERTY AND EQUIPMENT Net CASH SURRENDER VALUE OF LIFE INSURANCE 6 4 INVESTMENTS HELD BY TRUSTEE 1,655 1,787 BENEFICIAL INTERESTS IN TRUST 2,947 2,041 Total $ 19,249 $ 19,107 See independent auditors' report 14

17 St. Joseph's Hospital and Medical Center Foundation, Inc. Supplementary Schedule on Statement of Financial Position (in thousands) December 31, 2015 (with comparative amounts at December 31, 2014) LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 31 $ 104 Due to affiliates 1, Total Current Liabilities 1, OTHER LIABILITIES Total Liabilities 1, COMMITMENTS AND CONTINGENCIES NET ASSETS Unrestricted 5,704 5,011 Temporarily restricted 9,290 11,782 Permanently restricted 2,947 2,041 Total Net Assets 17,941 18,834 Total $ 19,249 $ 19,107 See independent auditors' report 15

18 St. Joseph's Hospital and Medical Center Foundation, Inc. Supplementary Schedule on Statement of Unrestricted Operations (in thousands) Year Ended December 31, 2015 (with comparative amounts at December 31, 2014) REVENUES Other revenue $ 2,760 $ 1,827 Net assets released from restrictions 4,077 3,083 Total Revenues 6,837 4,910 EXPENSES Salaries and wages Employee benefits Supplies and other 3,044 3,983 Provision for bad debts 2, Total Expenses 6,019 5,586 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENSES 818 (676) CHANGE IN NET UNREALIZED GAIN (LOSS) ON INVESTMENTS (126) 77 TRANSFER FROM HOSPITAL INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS $ 692 $ 268 See independent auditors' report 16

19 St. Joseph's Hospital and Medical Center Foundation, Inc. Supplementary Schedule on Statements of Changes in Net Assets (in thousands) Year Ended December 31, 2015 (with comparative amounts at December 31, 2014) UNRESTRICTED NET ASSETS Excess (deficiency) of revenues over expenses $ 818 $ (676) Change in net unrealized gain (loss) on investments (126) 77 Transfer from Hospital Increase (Decrease) in Unrestricted Net Assets TEMPORARILY RESTRICTED NET ASSETS Contributions 1,635 1,207 Income from investment (49) 173 Net assets released from restrictions for operations (4,077) (3,083) Increase (Decrease) in Temporarily Restricted Net Assets (2,491) (1,703) PERMANENTLY RESTRICTED NET ASSETS Change in beneficial interests in trusts (258) (32) Transfer of beneficial interests in trusts 1,164 - Increase (Decrease) in Permanently Restricted Net Assets 906 (32) INCREASE (DECREASE) IN NET ASSETS (893) (1,467) NET ASSETS - Beginning of year 18,834 20,301 NET ASSETS - End of year $ 17,941 $ 18,834 See independent auditors' report 17