MANNA ON MAIN STREET. FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended September 30, 2012 (With Comparative Totals for 2011)

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1 FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended September 30, 2012 (With Comparative Totals for 2011)

2 TABLE OF CONTENTS Page Number Independent Auditors Report 1 Statement of Assets, Liabilities and Net Assets 2 Statement of Support, Revenue and Expenses 3 Statement of Functional Expenses 4 Notes to Financial Statements 5-8 Supplementary Information 9-10

3 INDEPENDENT AUDITORS REPORT To the Board of Directors Manna on Main Street We have audited the accompanying statement of assets, liabilities, and net assets - modified cash basis of Manna on Main Street (a non-profit organization) as of September 30, 2012, and the related statements of support, revenue, and expenses and functional expenses - modified cash basis for the year then ended. These financial statements are the responsibility of the Organization s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Organization s 2011 financial statements and, in our report dated February 15, 2012 we expressed a qualified opinion on those financial statements. Except as discussed in the following paragraph, we conducted our audit in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. Because of incomplete documentation for the quantity of donated food for the year ending September 30, 2012, we were unable to form an opinion regarding the value at which the in-kind donations of food are recorded in the accompanying statement of support, revenues, and expenses (stated at approximately $300,000 for both the contribution and the expense). As described in Note A, these financial statements were prepared on the modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S. generally accepted accounting principles. In our opinion, except for the effect of such adjustment to the valuation of the in-kind donations of food, the financial statements referred to in the first paragraph present fairly, in all material respects, the assets, liabilities, and net assets of Manna on Main Street as of September 30, 2012, and for the year then ended, on the basis of accounting described in Note A. Baum, Smith & Clemens, LLP Lansdale, PA March 25, 2013

4 STATEMENT OF ASSETS, LIABILITIES AND NET ASSETS - MODIFIED CASH BASIS SEPTEMBER 30, 2012 (With Comparative Totals for 2011) ASSETS Current Assets Cash - operating $ 250,622 $ 299,164 Cash - agency fund 1,634 10,016 Total current assets 252, ,180 Fixed assets, net 441,999 38,828 Other Assets Certificates of deposit 53,160 52,200 Security deposit Cash - building fund - 34,818 Total other assets 54,010 87,868 Total assets $ 748,265 $ 435,876 LIABILITIES AND NET ASSETS Current Liabilities Payroll taxes payable $ 896 $ 849 Funds held in agency 1,634 10,016 Total liabilities 2,530 10,865 Net assets Unrestricted Board designated 100, ,000 Undesignated 614, ,624 Total unrestricted net assets 714, ,624 Temporarily restricted net assets 30,990 57,387 Total net assets 745, ,011 Total liabilities and net assets $ 748,265 $ 435,876 See Accompanying Notes to Financial Statements -2-

5 STATEMENT OF SUPPORT, REVENUE AND EXPENSES - MODIFIED CASH BASIS YEAR ENDED SEPTEMBER 30, 2012 (With Comparative Totals for 2011) Temporarily Unrestricted Restricted Total Total Support and Revenue Contributions $ 819,441 $ - $ 819,441 $ 515,688 Special events, net of expenses 67,355 30,990 98,345 29,702 In-kind contributions 408, , ,230 Interest income 1,161-1,161 1,812 Loss on disposal of assets (4,266) - (4,266) (756) Net assets released from restrictions 57,387 (57,387) - - Total support and revenue 1,349,990 (26,397) 1,323,593 1,070,676 Expenses Program services 751, , ,344 Administrative 145, , ,119 Fundraising 105, ,168 62,721 Total expenses 1,002,869-1,002, ,184 Support and revenue over expenses 347,121 (26,397) 320,724 94,492 Net assets, beginning of year 367,624 57, , ,519 Net assets, end of year $ 714,745 $ 30,990 $ 745,735 $ 425,011 See Accompanying Notes to Financial Statements -3-

6 STATEMENT OF FUNCTIONAL EXPENSES - MODIFIED CASH BASIS YEAR ENDED SEPTEMBER 30, 2012 (With Comparative Totals for 2011) _ Program Services Administrative Fundraising Total Total Payroll $ 112,023 $ 85,600 $ 67,204 $ 264,827 $ 241,497 Payroll taxes 12,656 9,671 7,592 29,919 24,719 Employee benefits 8,876 5,072 11,412 25,360 28,055 Capacity building ,521 Client assistance 465, , ,959 Depreciation 54,177 2,330 1,748 58,255 8,873 Dues & fees 1,267 2, ,817 5,923 Fund raising ,150 10,150 6,743 Insurance 6,945 2,977-9,922 7,720 Miscellaneous expense - 2,571-2,571 1,357 Newsletter costs 2, ,800 8,908 Occupancy expenses 21,292 7,604 1,521 30,417 17,366 Office expense 15,447 2,207-17,654 11,866 Professional fees - 6,925-6,925 11,108 Rent 35,156 12,556 2,511 50,223 12,000 Repairs & maintenance 13,620 2, ,025 5,042 Telephone 2,048 1,565 1,228 4,841 2,527 Workshops & seminars Total expenses $ 751,731 $ 145,970 $ 105,168 $ 1,002,869 $ 976,184 * * Using the large corps of volunteers, Manna is able to provide services for its clients beyond the capacity of the paid staff. Volunteers serve in the soup kitchen, food pantry, administrative areas; are members of the Board of Directors and Board committees; and lead client education programs. Outside of Manna they conduct food drives, make snack bags and help run fundraising events. The contributions of Manna s volunteers are invaluable and they are at the heart of the community s involvement with Manna. See Accompanying Notes to Financial Statements -4-

7 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization and Activities Manna on Main Street (Manna) operates a soup kitchen, food cupboard, emergency aid and youth programs for the needy in the North Penn area of Pennsylvania. The soup kitchen provides hot meals seven days a week and is open to anyone who is hungry. The food pantry serves the elderly and working poor who live in Lansdale and the surrounding communities. Manna also offers emergency financial aid to individuals who live in the North Penn area. In addition, various programs are offered for disadvantaged youth. Basis of Accounting It is Manna's policy to prepare its financial statements on the modified cash basis of accounting, which is a comprehensive basis of accounting other than U.S. generally, accepted accounting principles. This basis differs from U.S. generally accepted accounting principles in that revenues are recognized when received rather than when earned and most expenses are recognized when paid rather than when the obligation is incurred. Expenditures for equipment are capitalized and expensed over their useful lives. Non-cash donations for professional services, office and program space and food and other client assistance have been included in the financial statements. Inventory for food pantry items has not been recorded on the accompanying modified cash-basis financial statements. Cash Cash includes cash in checking accounts and cash invested in money market accounts. Fixed Assets All acquisitions of property and equipment in excess of $1,000 are capitalized. Purchased equipment is stated at cost and depreciated on the straight line and declining balance methods over the estimated useful lives of the assets. When assets are retired or otherwise disposed of, the cost and related depreciation are removed from the books and any resulting gain or loss is reflected in income for the period. The cost of maintenance and repairs is charged to income as incurred and costs of significant replacements and improvements are capitalized and amortized over the periods benefited. Agency Fund Manna administered funds for Lansdale Farmers Market and Community Nutrition Coalition. Manna did not retain title to these funds and performed solely as their fiscal agent. The agency relationship with the Lansdale Farmers Market ended during the current fiscal year. Income Taxes Manna was granted not-for-profit status in 1989 by the Internal Revenue Service (IRS) and Commonwealth of Pennsylvania. Manna is exempt from federal income tax under Sec. 501(c)(3) of the IRS code. It is also recognized by the Bureau of Charitable Organizations of the Commonwealth of Pennsylvania as a charitable organization. The Organization is required to recognize, measure, classify, and disclose in the financial statements uncertain tax positions taken or expected to be taken in the Company s tax returns. Management has determined that the Organization does not have any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures. Generally, the Organization is no longer subject to federal or state income tax examinations by tax authorities for years prior to As of September 30, 2012, Manna had no uncertain tax positions that qualify for either recognition or disclosure in the financial statements. -5-

8 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE A: ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Use of Estimates The preparation of financial statements in conformity with the modified cash basis of accounting requires management to make estimates and assumptions that affect certain reported amounts and disclosures in the financial statements. Actual results could differ from those estimates. Significant estimates used in preparing these financial statements include valuing in-kind contributions. Management s estimate of the value of the in-kind contributions for food received is based on the pounds of food provided to clients and other local food pantries, and assigned a value based on an average value calculated on pounds of food donated to the community during the year. Board Designated Assets The board has designated assets to create a Capacity Building Fund of $100,000 to expand services to support Manna s clients and the Organization s commitment to the Lansdale Collaboration Project. Contributions Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, that is, when a stipulated time restriction ends or a purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. There were no permanently restricted net assets. Contributed Services No amounts have been reflected in the financial statements for donated services. Manna generally pays for services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist Manna, but these services do not meet the criteria for recognition as contributed services. Functional Expense Allocation Expenses are charged to program services, administrative and fundraising based on the direct function of the expenditures or an allocation. Subsequent Events Management has evaluated events through the date the financial statements were available to be issued which was March 25, NOTE B: CONCENTRATIONS OF CREDIT RISK Manna maintains cash in bank deposit accounts with several financial institutions insured by the Federal Deposit Insurance Corporation (FDIC). Effective through December 31, 2012, all noninterestbearing accounts are fully insured, regardless of the balance of the account and the ownership capacity of the funds. Accounts bearing interest are covered by the current FDIC limit for each bank. Manna has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk. -6-

9 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE C: CERTIFICATES OF DEPOSIT Certificates of deposit with a combined face value of $50,000 were held by Manna at September 30, The certificates bear interest at rates ranging from 0.2% to 1.0 % with maturities from 9 months to 3 years. Manna placed its certificates of deposit with a different federally insured financial institution than the cash deposits. The certificates of deposit do not exceed the FDIC insured limits. NOTE D: FIXED ASSETS Estimated Fixed assets consist of the following: Useful Lives Office equipment $ 17, years Kitchen equipment 135, years Leasehold improvements 352, years Automobile 7,029 5 years 512,254 Accumulated depreciation (70,255) Total $ 441,999 Depreciation expense for the year ended September 30, 2012 was $58,255. NOTE E: LINE OF CREDIT Manna has an unsecured line of credit with a borrowing limit of $50,000 with interest at 5.25%. There were no outstanding borrowings at September 30, NOTE F: RESTRICTED NET ASSETS Temporarily restricted net assets are restricted for time. NOTE G: DONATED FACILITIES AND MATERIALS Contributed office and dining space were provided to Manna. The fair value of this space for 2012 is estimated at $6,000 and has been recorded in the statement of support, revenue and expense. Donations of food and other items valued at approximately $403,000 have been recorded in the statement of support, revenue and expenses under client services for the year ended September 30, NOTE H: EMPLOYEE BENEFIT PLAN Manna maintains a 403(b) plan for its employees. Employees may contribute a percentage of their salary subject to Internal Revenue Service limits. -7-

10 NOTES TO FINANCIAL STATEMENTS SEPTEMBER 30, 2012 NOTE I: OPERATING LEASE Manna entered into a five year lease on November 17, 2011 for office and facility space to run its operations. During the initial lease term, payments of $3,800 are due monthly for the first three and $4,000 for the remaining two years. The lease can be renewed for additional two year terms. If the lease is terminated before forty-eight months there is a cancellation fee. Manna leased storage space in North Wales on a month to month basis with a monthly payment of $650. The rent expense for this lease for the current year was $4,550. Future minimum payments on the non-cancellable operating lease at September 30, 2012 are as follows: Year Amount 2013 $ 45, , , , ,000 $ 193,000 Total rent expense, paid and donated, for the year ended September 30, 2012 was $50,223. NOTE J: PRIOR-YEAR INFORMATION The financial statements include 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 the modified cash basis of accounting. Accordingly, such information should be read in conjunction with the organization s financial statements for the year ended September 30, 2011, from which the summarized information was derived. Certain reclassifications have been made to the 2011 information to conform to the 2012 presentation. NOTE K: JOINT VENTURE During the year, Manna entered into a joint venture agreement to jointly develop, construct and operate a co-located community real estate facility. The continuation of the joint venture is dependent upon obtaining tax credit funding by April 15, As part of the joint venture, Manna entered into a fundraising agreement where the parties intend to work with an independent consulting firm to develop and conduct a joint fundraising strategy for a $5 million capital campaign. The costs of the campaign will be paid from the campaign funds earned. All contributions to the campaign will be collected and held in a donor advised fund. NOTE L: SPECIAL EVENTS During the current fiscal year, the Organization held several special events. In 2012, the support received and expenses paid for these events were as follows: Support $ 114,983 Expenses 16,638 Net Support $ 98,345-8-

11 Independent Auditors Report on Supplementary Information To the Board of Directors Manna on Main Street We have audited the financial statements of Manna on Main Street as of and for the year ended September 30, 2012 and our report thereon dated March 25, 2013, which expressed a qualified opinion on those financial statements, appears on page 1. Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of contributions received by source - modified cash basis, which is the responsibility of management, is presented for purposes of additional analysis and is not a required part of the financial statements. Such information has not been subject to the auditing procedures applied in the audit of the financial statements, and, accordingly, we do not express an opinion or provide any assurance on it. Baum, Smith & Clemens, LLP Lansdale, PA March 25,

12 SCHEDULE OF CONTRIBUTIONS RECEIVED BY SOURCE - MODIFIED CASH BASIS YEAR ENDED SEPTEMBER 30, 2012 (With Comparative Totals for 2011) Individuals $ 309,496 $ 251,427 Businesses 193, ,006 Service organizations 101,658 73,521 United Way 39,948 37,342 Foundations 174,457 34,392 $ 819,441 $ 515,688 See Auditors' Report on Supplemental information -10-