FINANCIAL STATEMENTS. Years Ended June 30, 2014 and 2013

Transcription

1 FINANCIAL STATEMENTS Years Ended June 30, 2014 and 2013

2 Habitat for Humanity of Brevard County, Inc. Table of Contents June 30, 2014 and 2013 REPORT: Independent Auditors Report 1 FINANCIAL STATEMENTS: Statements of Financial Position 3 Statements of Activities 6 Statements of Cash Flows 8 Notes to Financial Statements 11 Supplementary Information Statement of Functional Expenses 24

3 Carr, Riggs & Ingram, LLC 215 Baytree Drive Melbourne, Florida (321) (321) (fax) INDEPENDENT AUDITORS REPORT To the Board of Directors Habitat for Humanity of Brevard County, Inc. We have audited the accompanying financial statements of Habitat for Humanity of Brevard County, Inc. (the Organization ) (a nonprofit organization), which comprise the statements of financial position as of June 30, 2014 and 2013, and the related statements of activities and cash flows for the years 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 audits. We conducted our audits 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of June 30, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. 1

4 Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of functional expenses on page 24 is presented for purposes of additional analysis and is 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 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. Melbourne, Florida December 15,

5 Habitat for Humanity of Brevard County, Inc. Statements of Financial Position June 30, ASSETS Current assets: Cash and cash equivalents $ 398,194 $ 295,027 Temporarily restricted cash 124, ,831 Mortgages receivable, current portion 341, ,718 Agent mortgages receivable, current portion 6,013 3,207 Inventory 429, ,937 Construction in progress 354, ,895 ReStore inventory 40,590 30,230 Investments 40,076 39,694 Prepaid expenses 13,804 28,040 Deposits 1,206 1,306 Total current assets 1,748,508 2,417,885 Noncurrent assets: Property, plant and equipment at cost, less accumulated depreciation of $94,227 and $65,834 for the years ended June 30, 2014 and 2013, respectively 1,176, ,421 Mortgages receivable, long-term net of a discount of $3,346,394 and $3,122,791 for the years ended June 30, 2014 and 2013, respectively 1,791,981 1,731,728 Agent mortgages receivable, long-term 160,275 91,657 Forgivable mortgages net of a discount of $593,598 and $483,868 and an allowance of $1,023,462 and $973,219 for the years ended June 30, 2014 and 2013, respectively - - Total noncurrent assets 3,129,231 2,662,806 Total assets $ 4,877,739 $ 5,080,691 The accompanying notes are an integral part of these financial statements 3

6 Habitat for Humanity of Brevard County, Inc. Statements of Financial Position (continued) June 30, LIABILITIES AND FUND BALANCE Current liabilities Bank overdraft $ 26,538 $ - Accounts payable and accrued expenses 64, ,946 Homeowner deposits for new homes 22,460 34,650 Homeowner escrow deposits 90,380 86,694 Line of credit 80, ,000 Current portion of mortgage payable 24,624 23,742 Current portion of agent mortgages payable 6,013 5,343 Total current liabilities 314, ,375 Long-term liabilities Mortgage payable, net of current portion 616, ,525 Agent mortgages payable, net of current portion 160,275 91,657 Total long-term liabilities 776, ,182 Total liabilities 1,090,666 1,193,557 Net assets Unrestricted 3,626,823 3,658,195 Temporarily restricted 124, ,831 Permanently restricted 36,108 36,108 Total net assets 3,787,073 3,887,134 Total liabilities and net assets $ 4,877,739 $ 5,080,691 The accompanying notes are an integral part of these financial statements 4

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8 Habitat for Humanity of Brevard County, Inc. Statements of Activities For the years ended June 30, 2014 Unrestricted Temporarily Restricted Permanently Restricted Total Support: Contributions $ 109,913 $ 699,058 $ - $ 808,971 In-kind donations 65,999 34, ,271 Home sales and late fees 949, ,218 Fundraising 315, ,134 ReStore 476, ,110 Gain on sale of property, plant and equipment 1, ,738 Miscellaneous revenue 1, ,510 Net assets released from restriction 802,019 (802,019) - - Total revenue and other support 2,721,641 (68,689) - 2,652,952 Expenses: Program services Mortgage program 541, ,475 Construction 1,623, ,623,811 ReStore 278, ,667 Support services Management and general 87, ,576 Fundraising 221, ,484 Total expenses 2,753, ,753,013 Change in net assets (31,372) (68,689) - (100,061) Net assets, beginning of year, 3,658, ,831 36,108 3,887,134 Net assets, end of year $ 3,626,823 $ 124,142 $ 36,108 $ 3,787,073 The accompanying notes are an integral part of these financial statements. 6

9 Unrestricted 2013 Temporarily Restricted Permanently Restricted Total $ 85,522 $ 874,147 $ - $ 959,669 60,136 20,205-80, , , , , , , , , ,459 (964,459) - - 2,018,310 (70,107) - 1,948, , , , , , ,732 98, , , ,872 1,509, ,509, ,821 (70,107) - 438,714 3,149, ,938 36,108 3,448,420 $ 3,658,195 $ 192,831 $ 36,108 $ 3,887,134 7

10 Habitat for Humanity of Brevard County, Inc. Statements of Cash Flows For the years ended June 30, Cash flows from operating activities: Cash received from customers and other sources $ 2,399,076 $ 2,157,791 Cash paid to suppliers and employees (1,861,971) (2,293,213) Interest paid (24,611) (6,458) Net cash provided by (used in) operating activities 512,494 (141,880) Cash flows from investing activities: Purchase of property, plant and equipment (366,694) (813,080) Proceeds from the sale of property, plant and equipment 2,000 - Purchase of investments - (26,511) Sale of investments - 25,751 Net cash used in investing activities (364,694) (813,840) Cash flows from financing activities: Net proceeds (payments) under line of credit (80,000) 160,000 Proceeds from mortgage payable - 680,000 Payments on mortgage payable (33,322) (5,733) Proceeds from construction loan 255,217 - Payments on construction loan (255,217) - Net cash provided by (used in) financing activities (113,322) 834,267 Increase (decrease) in cash and cash equivalents 34,478 (121,453) Cash and cash equivalents, beginning of year 487, ,311 Cash and cash equivalents, end of year $ 522,336 $ 487,858 Cash and cash equivalents $ 398,194 $ 295,027 Restricted cash 124, ,831 Cash and cash equivalents, end of year $ 522,336 $ 487,858 The accompanying notes are an integral part of these financial statements 8

11 Habitat for Humanity of Brevard County, Inc. Statements of Cash Flows (continued) For the years ended June 30, RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES: Change in net assets $ (100,061) $ 438,714 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation 28,878 13,028 Bad debt expense 10,148 46,535 Accrued Interest on certificate of deposit (555) - (Increase) decrease in inventory 262,920 (312,891) (Increase) decrease in construction in progress 453,459 (686,141) Increase in ReStore inventory (10,360) (6,796) (Increase) decrease in prepaid expenses 14,236 (3,634) (Increase) decrease in deposits 100 (1,207) (Increase) decrease in mortgages receivable (83,713) 273,189 Increase in agent mortgages receivable (71,424) (94,864) Increase (decrease) in accounts payable and accrued expenses (50,353) 68,650 Increase (decrease) in homeowner deposits for new homes (12,190) 16,036 Increase in homeowner escrow deposits 3,686 10,501 Gain on sale of property, plant and equipment (1,738) - Unrealized loss on investment Increase in mortgages payable to Titusville 69,288 97,000 Net cash provided by (used in) operating activities $ 512,494 $ (141,880) $ - Supplemental schedule of noncash operating activities: Donated services and materials $ 100,271 $ 80,341 The accompanying notes are an integral part of these financial statements 9

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13 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Entity Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements Habitat for Humanity of Brevard County, Inc. (the Organization ) is a nonprofit, Christian affordable housing developer dedicated to the elimination of substandard housing in Brevard County, Florida. It is affiliated with Habitat for Humanity International, Inc. ( HFHI ) based in Americus, Georgia. To be considered for home ownership, families must be low-income families who demonstrate a need for better housing, an ability to make mortgage payments, and a willingness to work in partnership with the Organization. The partnership consists, in part, of each family completing 200 hours of sweat equity and meeting monthly mortgage payments. Houses are sold at no profit and with no interest on the mortgage. The Organization also operates a ReStore. The ReStore program provides access to quality used building materials and household items to economically disadvantaged people to help them create a better human habitat in which to live and work. The ReStore receives donated materials and sells them. Basis of Accounting The financial statements of the Organization have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables and other liabilities. Basis of Presentation Financial statement presentation follows the recommendations of the Financial Accounting Standards Board. Under these standards, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Subsequent events have been reviewed through the date of the auditors report. This is the date the financial statements were available to be issued. Tax Status The Organization is exempt from income taxes under Section 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3) and is classified as other than a private foundation. Contributions to the Organization qualify as deductions for charitable contributions. Cash and Cash Equivalents For purposes of the statement of cash flows, cash and cash equivalents include time deposits, and all highly liquid debt instruments with original maturities of three months or less. 11

14 Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Temporarily Restricted Cash Donations received for a specific purpose are restricted by the donor. $70,410 and $79,296 is temporarily restricted for construction of future homes at June 30, 2014 and 2013, respectively. $53,732 and $113,535 is temporarily restricted for the Critical Home Repair Program at June 30, 2014 and 2013, respectively. Home Sales and Mortgages Receivable Home sales represent the sale to qualified families of houses built in Brevard County by the Organization. The home sales are financed by the Organization utilizing non-interest bearing 20 to 30 year mortgages due in monthly installments from the families. The mortgages are secured by the underlying real estate, and are less than the appraised value of the home; therefore, there is no allowance for doubtful accounts. The mortgages receivable are discounted based upon prevailing market interest rates for low-income housing determined by HFHI. The financing discounts are amortized and reflected as revenue when mortgage payments are collected, which is included net of discount in mortgages expense within the low-cost housing program. There are $1,060,846 and $775,076, of mortgages receivable at June 30, 2014, and 2013, respectively that are over 90 days old and are still accruing interest. The present value discount on mortgages for homes sold is shown as amortization of discount in mortgages receivable within the mortgage program. Mortgages are placed on nonaccrual status when they are foreclosed upon. Depreciation The cost of property, plant and equipment is depreciated over the estimated useful lives of the related assets. Depreciation is computed using the straight-line method. Construction in Progress Construction in progress represents home construction and land costs incurred on incomplete homes in progress and completed homes not yet conveyed to the recipient family. Construction in progress is expensed to cost of homes sold expense within the low-cost housing program when the home is transferred to the recipient family. Inventory Inventory consists of land, purchased or donated, and foreclosed land and homes that have not yet been transferred to a family. The land is valued at fair value, which is the purchase price, or the appraised value at the date of donation. Any foreclosed land and homes are at the lower of fair market value or the remaining mortgage receivable. 12

15 Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Restore Inventory ReStore Inventory consists of items donated for resale with an estimated value greater than $500 that have not yet been sold. All ReStore inventory is finished goods. Contribution Revenue Contributions are recognized when donors make a promise to give to the Organization that is, in substance, unconditional. Contributions are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. When a restriction expires, net assets are reclassified to unrestricted net assets and are reported in the statement of activities as net assets released from restrictions. In-Kind Donations In-kind donations consist of advertising and other supplies or services that the Organization would have to purchase if not otherwise donated. The amount recognized for the year ended June 30, 2014 and 2013 was $100,271 and $80,341, respectively. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the program and supporting service categories. Allocations are based primarily on the actual costs incurred by the activity or square footage of space utilized for the activity. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Advertising The Organization s advertising costs are expensed as incurred. Advertising expenses for the year ended June 30, 2014 and 2013 were $52,459 and $42,921, respectively, of which $34,272 and $20,205, respectively, were in-kind donations. The in-kind advertising was for the Strawberry Festival. 13

16 Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes The Organization received approval for exemption from federal income tax under Section 501(c)(3) of the Internal Revenue Code, and is considered to be an organization which is not a private foundation. Change in Accounting Estimate Non-interest bearing mortgages are recorded as homes are purchased from the Organization. Mortgage receivables are discounted based on prevailing market interest rates for low-income housing determined by HFHI. On June 30, 2013, the Organization changed how the financing discount was being calculated. The change in the calculation resulted in a change in estimate of the mortgage receivables discount. The amount of the adjustment for the year ended June 30, 2013 was $214,580, which was netted against the amortization of interest discount of $138,544 for the year ending June 30, The $76,036 was included in miscellaneous revenue on the statement of activities. NOTE 2 CONCENTRATION OF CREDIT RISK The Organization maintains its cash balances with several financial institutions, which are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The amount of credit exposure in excess of federally-insured limits at June 30, 2014 and 2013 was $0, and $91,032, respectively. NOTE 3 MORTGAGES RECEIVABLE Mortgages receivable (including agent mortgage receivables) consisted of the following at June 30: Mortgages receivable $ 5,645,693 $ 5,277,101 Financing discount based upon imputed interest at rates ranging from 7.39% to 7.81% (3,346,394) (3,122,791) Total $ 2,299,299 $ 2,154,310 14

17 NOTE 3 MORTGAGES RECEIVABLE (Continued) Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements Future maturities of the mortgages receivable for the year ended June 30, 2014 are as follows: Year ending June 30: 2015 $ 347, , , , ,217 Thereafter 4,062,197 $ 5,645,693 NOTE 4 FORGIVABLE MORTGAGES In addition to the first mortgages, which make up the mortgages receivable, the Organization also has forgivable mortgages. These mortgages are for the difference between the fair market value of the house and the total of all other mortgages. Some homeowners receive forgivable mortgages from municipalities that reduce the forgivable mortgage they receive from the Organization. The Organization s forgivable mortgages are forgiven in equal installments on the anniversary of the mortgage over ten to fifteen years. These mortgages are also non-interest bearing. Forgivable mortgages as of June 30: Forgivable mortgages receivable $ 1,617,060 $ 1,457,087 Financing discount based upon imputed interest at rates ranging from 7.39% to 7.69% (593,598) (483,868) Net forgivable mortgages 1,023, ,219 Less allowance for doubtful accounts (1,023,462) (973,219) Total $ - $ - NOTE 5 FAIR VALUE MEASUREMENTS FASB ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. 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). 15

18 NOTE 5 FAIR VALUE MEASUREMENTS (Continued) Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1: Level 2: Level 3: 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. 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 asset 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. 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. The 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, 2014 or Mortgages receivable: Valued at amortized cost. Common Stock: Valued at quoted market prices. Certificates of deposit: Valued at fair value by discounting the related cash flows based on current yields of similar investments with comparable durations considering the credit-worthiness of the issuer. The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. 16

19 NOTE 5 FAIR VALUE MEASUREMENTS (Continued) Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements The following table sets forth by level, within the fair value hierarchy, the Organization s assets at fair value as of June 30, Quoted Prices in Active Markets for Identical Assets (Level 1) Observable Inputs other than Quoted Prices (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Mortgages receivable $ 2,133,011 $ - $ - $ 2,133,011 Agent mortgages receivable 166, ,288 Common stock 1,946 1, Certificates of Deposit 38,130-38,130 - $ 2,339,375 $ 1,946 $ 38,130 $ 2,299,299 The following table sets forth by level, within the fair value hierarchy, the Organization s assets at fair value as of June 30, Quoted Prices in Active Markets for Identical Assets (Level 1) Observable Inputs other than Quoted Prices (Level 2) Significant Unobservable Inputs (Level 3) Fair Value Mortgages receivable $ 2,059,446 $ - $ - $ 2,059,446 Agent mortgages receivable 94, ,864 Common stock 2,119 2, Certificates of Deposit 37,575-37,575 - $ 2,194,004 $ 2,119 $ 37,575 $ 2,154,310 Level 3 Gains and Losses The following table sets forth a summary of changes in the fair value of the plan s level 3 assets for the year ended June 30, Agent Mortgages Receivable Mortgages Receivable Beginning balance $ 2,059,446 $ 94,864 Issuances 667,398 84,200 Payments (376,126) (6,880) Amortization of interest (217,707) (5,896) Ending balance $ 2,133,011 $ 166,288 17

20 NOTE 6 PROPERTY, PLANT AND EQUIPMENT Property and equipment consists of the following at June 30: Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements 2014 Accumulated Net Book Estimated Cost Depreciation Value Life Vehicles $ 76,333 $ (47,354) $ 28,979 5 years Furniture and fixtures 24,246 (24,246) - 5 years Office equipment 11,979 (2,749) 9,230 5 years Building 641,580 (19,878) 621, years Building improvements 357, , years Land 160, ,000 Total $ 1,271,202 $ (94,227) $ 1,176, Accumulated Net Book Estimated Cost Depreciation Value Life Vehicles $ 76,333 $ (36,647) $ 39,686 5 years Furniture and fixtures 24,246 (24,246) - 5 years Office equipment 3,096 (1,514) 1,582 5 years Building 641,580 (3,427) 638, Years Land 160, ,000 Total $ 905,255 $ (65,834) $ 839,421 Depreciation expense for 2014 and 2013 was $28,878 and $13,028, respectively. NOTE 7 ACCOUNTS PAYABLE AND ACCRUED EXPENSES The following is the summary of accounts payable and accrued expenses as of June 30, 2014 and Accounts payable $ 9,149 $ 92,650 Accrued payroll 25,036 20,693 Accrued leave 24,535 22,260 Other accrued expenses 5,335 5,343 $ 64,055 $ 140,946 18

21 Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements NOTE 7 OPERATING LEASE OBLIGATION The Organization leases a mail meter, and their office under operating leases expiring during the Organization s fiscal year ending June 30, 2014, with monthly payments ranging from $50 to $9,998. Minimum future rental payments under non-cancelable operating lease as of June 30, 2014 are for the years ending June 30: 2015 $ Total $ 1,900 The total rent expense for the years ended June 30, 2014 and 2013 was $30,594 and $120,579, respectively. NOTE 8 LINE OF CREDIT The Organization has a $525,000 line of credit from Brevard County Housing Authority. At June 30, 2014 and 2013, the outstanding amount under the line of credit was $80,000 and $160,000, respectively. There is no interest on the line of credit. The money has to be used for purchases of land or property. The line expires December 31, The Organization renewed a $250,000 line of credit in fiscal year 2014 with a bank. At June 30, 2014, and 2013, $0 was outstanding under this line of credit. Interest on the line of credit's outstanding balance is charged on a monthly basis and is at the bank's prime rate (3.25 percent at June 30, 2014 and 2013). The account is collateralized by the Organization s assets. The line expired on November 30, Interest expense under this line of credit was $0 for the years ended June 30, 2014 and NOTE 9 LONG TERM DEBT The Organization had a mortgage note payable to a bank totaling $640,945 as of June 30, The mortgage note payable is secured by the land and the building and is payable in monthly installments of $3,996 including interest, beginning May 3, The interest is calculated at 3.65%. The mortgage note payable matures in March 2023 as a balloon payment of approximately $408,000. The Organization took out a construction loan on July 25, 2013 to renovate the building for approximately $255,000 and paid it off during the year with a donation restricted for that purpose. The loan was secured by the building and required monthly interest only payments beginning September 25, Interest was calculated at 3.65% of the outstanding balance and was scheduled to mature March Interest of $358 was paid during fiscal year

22 Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements NOTE 9 LONG TERM DEBT (Continued) Future annual maturities of the mortgage note payable as of June 30, 2014 are as follows: 2015 $ 24, , , , ,488 Thereafter 508,341 Total $ 640,945 NOTE 10 AGENT ACCOUNTS The Organization administers some mortgages for the City of Titusville. The mortgages are separately stated on the statement of financial position as agent mortgages receivable, and are offset by agent mortgages payable. The mortgages payable to Titusville are repaid when the money is received from the home owners. The amount payable also includes an additional $0 and $2,136 for settlement charges due to City of Titusville at June 30, 2014 and 2013, respectively. NOTE 11 ENDOWMENT The balance of the Endowment assets consists of donor restricted funds. The Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The entire endowment fund is included in the certificate of deposit, and therefore the Organization expects an annual return of approximately 1%. The Organization has adopted a policy that 100% of the earnings will be available to be spent. Permanently Restricted Temporarily Restricted Unrestricted Earnings Donor restricted Board Designated Board designated Total June 30, 2012 $ 36,108 $ - $ 884 $ 36,992 Investment earnings Amounts appropriated for expenditure - (583) June 30, ,108-1,467 37,575 Investment earnings Amounts appropriated for expenditure - (555) June 30, 2014 $ 36,108 $ - $ 2,022 $ 38,130 20

23 Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements NOTE 12 RELATED PARTY TRANSACTIONS The Organization tithes to Habitat for Humanity International, Inc. and remitted $7,363 and $5,800 during the year ended June 30, 2014 and 2013, respectively. The Organization hired an employee during fiscal year 2014 who received a mortgage from the program. The employee began working for the Organization after completing the normal procedures required to obtain a mortgage. NOTE 13 RETIREMENT PLAN Any employee of the Organization can contribute to a tax deferred annuity plan. The Organization does not make any contributions to the plan. NOTE 14 ECONOMIC DEPENDENCY The Organization provides services to residents located in Brevard County. The Organization is dependent on the local economy for contributions and fundraising revenue to support its operations. NOTE 15 DONATED SERVICES Donated services with an estimated value of $565,141 and $627,770 for the years ended June 30, 2014 and 2013, respectively, were not recognized in the financial statements because they did not meet the criteria for recognition. Donated services are estimated strictly for maintaining the Organization s tax exempt status. NOTE 16 FUNDRAISING The Organization received approximately 13% and 17% of its total revenue from fund-raising, including in-kind revenue, for the years ending June 30, 2014 and 2013, respectively. The Strawberry Festival fund-raising event provided approximately 67% and 63% of the total fundraising revenue for the years ending June 30, 2014 and 2013, respectively. 21

24 NOTE 17 ACCOUNTING FOR UNCERTAIN INCOME TAX POSITIONS Habitat for Humanity of Brevard County, Inc. Notes to Financial Statements The Organization is exempt from federal and state income tax under section 501(a) of the Internal Revenue Code as an organization described in section 501(c)(3). Therefore, only income from business unrelated to the Organization's charitable purpose is subject to federal or state income tax. The Organization follows the accounting guidance for uncertainty in income taxes using the provisions of Financial Accounting Standards Board (FASB) ASC 740, Income Taxes. Using that guidance, tax positions initially need to be recognized in the financial statements when it is morelikely-than-not the position will be sustained upon examination by the tax authorities. As of June 30, 2014, the Organization had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. Additionally, the Organization had no interest and penalties related to income taxes. With few exceptions, the Organization is no longer subject to U.S. federal, state and local income tax examinations by tax authorities for years before

25 SUPPLEMENTARY INFORMATION 23

26 Habitat for Humanity of Brevard County, Inc. Statement of Functional Expenses For the year ended June 30, 2014 PROGRAM SERVICES Mortgage Program Construction ReStore Accounting $ 14,330 $ - Advertising 3,490-3,269 Amortization of interest discount 223, Construction - 920,357 - Costs of goods sold ,661 Closing costs - 41,348 - Food Fuel ,805 10,953 Fundraising supplies Insurance - 42,009 6,545 Interest 13,368 2,060 8,944 Land sold - 310,864 - Legal 14, Licenses & taxes 16,151 1,301 4,094 Miscellaneous 29,990 8,551 12,080 Office rent 7,321 2,808 27,551 Office supplies 6, Postage 3, Rental equipment 5,752-2,249 Repairs and maintenance 15,864 5,102 8,036 Salaries and benefits 133, , ,449 Tithe 7, Training and travel 8, Telephone 5,699 4,102 - Utilities 9,638-3,868 Subtotal expenses before depreciation and bad debt expense 519,034 1,613, ,705 Bad debt expense 10, Depreciation 12,293 10,707 2,962 Total expenses reported by function $ 541,475 $ 1,623,811 $ 278,

27 SUPPORTING SERVICES Management And General Fundraising TOTALS $ 6,441 $ - $ 20,771 4,776 40,924 52, , , , ,348-49,078 49, ,092-33,294 33, , , , ,663 3,130-24, ,921 59, ,617 1,043 1,154 9, , ,127 42, ,056 62,796 53, , , ,806 1,720-11,521 2, ,216 84, ,484 2,713, ,148 2,916-28,878 $ 87,576 $ 221,484 $ 2,753,

28 Habitat for Humanity of Brevard County, Inc. Statement of Functional Expenses (continued) For the year ended June 30, 2013 PROGRAM SERVICES Mortgage Program Construction ReStore Accounting $ 10,587 $ - $ - Advertising 2,657-12,362 Construction - 198,944 - Cost of goods sold ,712 Closing costs - 23,415 - Food Fuel 56 7,714 10,321 Fundraising supplies Insurance - 30,050 6,320 Interest 6, Land sold - 78,493 - Legal 8, Licenses & taxes 475 1, Miscellaneous 19,447 10,629 13,563 Office rent 26,283-89,187 Office supplies 6, ,159 Postage 2, Rental equipment 1, Repairs and maintenance 16,932 7,780 3,835 Salaries and benefits 125, , ,079 Tithe 5, Training and travel 2,014 1,751 8,374 Telephone 5, Utilities 7, Subtotal expenses before depreciation 249, , ,720 Bad debt expense 46, Depreciation 1,012 8,981 1,012 Total expenses reported by function $ 296,681 $ 577,947 $ 312,

29 SUPPORTING SERVICES Management And General Fundraising TOTALS $ 6,871 $ - $ 17,458-27,902 42, , , ,415-41,431 41, ,091-33,764 33, , , , , ,043-19,408 63,047 3, , ,723 17, , ,311 28, ,547 81,595 63, , , ,893 1, ,247 2, ,642 97, ,861 1,449, ,535 1,012 1,011 13,028 $ 98,257 $ 223,872 $ 1,509,