Community Food Bank
Report of Independent Auditors and Financial Statements with Supplementary Information
Community Food Bank June 30, 2016
CONTENTS
REPORT OF INDEPENDENT AUDITORS FINANCIAL STATEMENTS Statement of financial position Statement of activities Statement of functional expenses Statement of cash flows Notes to financial statements
1
4 5 6 7 8
SUPPLEMENTARY INFORMATION Schedule of expenditures of federal awards Notes to schedule of expenditures of federal awards
18 19
REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
21
SINGLE AUDIT REPORTS
REPORT OF INDEPENDENT AUDITORS ON COMPLIANCE FOR THE MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE Schedule of findings and questioned costs Summary schedule of prior audit findings
23 25 27
REPORT OF INDEPENDENT AUDITORS To the Board of Directors Community Food Bank Fresno, CA
Report on the Financial Statements We have audited the accompanying financial statements of Community Food Bank (a non-profit organization), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, 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. Auditor’s 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 auditor’s 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. 1
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Community Food Bank as of June 30, 2016, 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. Other Matters
Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 2, 2017, on our consideration of Community Food Bank’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Community Food Bank’s internal control over financial reporting and compliance. Fresno, California March 2, 2017
2
FINANCIAL STATEMENTS
COMMUNITY FOOD BANK
STATEMENT OF FINANCIAL POSITION JUNE 30, 2016 ASSETS Current assets Cash and cash equivalents Investments in mutual funds ‒ at fair value Accounts receivable, net Grants receivable Promises to give, net Inventory Prepaid expenses
$
Total current assets
5,920,829
Property and equipment, net
645,165
Deposits
LIABILITIES AND NET ASSETS Current liabilities Accounts payable Accrued expenses
21,786
$
6,587,780
$
294,065 205,409 499,474
Total current liabilities
Commitments and contingencies
-
Net assets Temporarily restricted Unrestricted
299,871 5,788,435 $
4
250,681 1,592,813 79,851 467,287 27,215 3,424,958 78,024
6,088,306
6,587,780
See report of independent auditors and notes to financial statements
COMMUNITY FOOD BANK
STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016
Revenues, gains, and other support Contributions ‒ commodities Grants ‒ commodities Grants ‒ operations and administrative Contributions ‒ other Fundraising and direct mail campaigns Agency fees and charges Gain on sale of assets Interest and dividend income, net
Unrestricted $ 48,850,350 4,771,604 782,725 1,575,255 1,514,216 1,163,977 10,250 16,777
645,147 1,072,585
5,788,435
See report of independent auditors and notes to financial statements
59,063,154 -
59,063,154
-
56,825,132
-
58,542,864
-
58,542,864
$
$ 48,850,350 4,771,604 782,725 1,953,255 1,514,216 1,163,977 10,250 16,777
(91,530)
56,825,132
611,820 5,176,615
Total
(469,530)
59,154,684
Total expenses
378,000 -
378,000
469,530
Expenses Program Supporting services Management and general Fundraising
Net assets, end of year
$
58,685,154
Net assets released from restriction Total revenues, gains, and other support
Change in net assets Net assets, beginning of year
Temporarily Restricted
$
(91,530) 391,401 299,871
645,147 1,072,585
$
520,290 5,568,016 6,088,306
5
COMMUNITY FOOD BANK
STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2016
Management Program Contributed commodities
Salaries and related expenses
Purchased commodities
$
Outside services
and General
52,626,446
1,487,615
1,420,821
$
10,750
Rents
186,035
Freight, fuel and transportation Professional fees
54,424
Repairs and maintenance Special events
29,064
23,676
23,106
18,822
Accounting and auditing
15,238
4,589
Telephone
Miscellaneous
6
$
2,266
56,825,132
$
645,147
118,654 77,366
45,134 52,103
7,709
48,596
3,883
24,480
3,738
4,444
-
163,427
8,265
4,767
14,758
197,347
15,949
9,463
15,830
84,165
120,500
77,366
-
31,424
172,460
3,375
-
10,146
305,908
29,602
4,143
23,565
3,620 $
1,222
1,072,585
2,300,540
1,420,821 287,696
13,351
76,726
52,626,446
447,346
-
19,735
29,185
$
45,637
18,075
33,692
Travel and meetings
-
433,359
Insurance
Seminars, training and workshops
364,936
3,237
16,390
-
Dues and subscriptions
-
12,050
155,909
Utilities
-
Total
90,375
148,010
Supplies and materials
447,989
$
-
119,720
Depreciation
-
56,024
305,908
Office expenses
Fundraising
22,822 $
3,488
58,542,864
See report of independent auditors and notes to financial statements
COMMUNITY FOOD BANK
STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2016
Cash flows from operating activities Change in net assets Adjustment to reconcile change in net assets to net cash used in operating activities: Depreciation Contributed commodities Distribution of contributed commodities Contributed commodities - grants Distribution of contributed commodities - grants Interest and dividend income Unrealized loss on investments Changes in operating assets and liabilities: Decrease in receivables Decrease in inventory Increase in prepaid expenses Increase in accounts payable Increase in accrued expenses Net cash used in operating activities
$
120,500 (48,821,228) 48,333,128 (4,767,604) 4,263,681 (60,608) 43,831 15,240 17,700 (19,784) 46,156 15,622 (293,076)
Cash flows from investing activities: Proceeds from sales of investments in mutual funds Purchase of property and equipment Net cash provided by investing activities Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year
See report of independent auditors and notes to financial statements
520,290
499,985 (125,143) 374,842 81,766 $
168,915 250,681
7
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of activities – Community Food Bank (the “Organization”) is a California non-profit corporation established to conduct a program that provides food pantries and agencies of Fresno, Madera, Tulare, Kern and Kings Counties with an organizational resource whose volume purchasing, warehousing, and food product management capacity efficiently and effectively deliver food and goods. The Organization is affiliated with the national network of food banks known as Feeding America.
Food and commodities are donated by the general public and government agencies. Revenues are primarily derived from fundraising, direct mail campaigns, grants, and contributions.
Basis of presentation – 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 as follows:
Unrestricted net assets – These are resources available to support operations. The only limits on the use of unrestricted new assets are the broad limits resulting from the nature of the Organization, the environment in which it operates, the purposes specified In its corporate documents and its application for tax-exempt status, and any limits resulting from contractual agreements with creditors and others that are entered into in the course of its operations. Temporarily restricted net assets – These are resources that are restricted by a donor for use for a particular purpose or in a particular future period. The Organization’s unspent contributions are reported in this class if the donor limited their use, as are promised contributions that are not yet due.
Contributions of property and equipment or cash restricted to acquisition of property and equipment are reported as temporarily restricted new assets if the donor has restricted the use of the property or equipment to a particular program. If donors specify a length a time over which the property or equipment must be used, the restrictions expire evenly over the required period. Absent that type of restriction for use, the Organization considers the restriction met when assets are placed in service. When a donor’s restriction is satisfied, either by using the resources in the manner specified by the donor or by the passage of time, the expiration of the restriction is reported in the financial statements by reclassifying the net assets from temporarily restricted to unrestricted net assets. Permanently restricted net assets – These are resources whose use is limited by donor-imposed restrictions that neither expire by being used in accordance with a donor’s restriction nor by the passage of time. At June 30, 2016, the Organization did not have any permanently restricted net assets. Method of accounting – The Organization uses the accrual basis method of accounting in accordance with accounting principles generally accepted in the United States of America.
8
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 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. The Organization’s method of valuation for commodities donated from the general public is considered a significant estimate.
Cash and cash equivalents – For purposes of reporting the Statement of Cash Flows, the Organization considers all highly liquid investments with an original maturity of three (3) months or less to be cash equivalents. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At June 30, 2016 uninsured cash balances totaled $26,000.
Fair value of financial instruments – The carrying values of cash and cash equivalents, promises to give and other receivables, inventory, and prepaid expenses approximate fair value because of the terms and relative short maturity.
Investment in mutual funds – Investments in mutual funds consist of two (2) open-end mutual funds and are carried at fair value. These investments are covered by the Securities Investor Protection Corporation up to $500,000 (including $100,000 of cash). Investment income and unrealized gains and losses are included in the change in net assets.
Accounts and grants receivable – Accounts receivable consist primarily of shared maintenance fees charged to agencies. Receivables are written off through an allowance for doubtful accounts when the Organization determines the payments will not be received. Allowance for doubtful accounts at June 30, 2016 was $646. All accounts receivable are non-interest bearing.
Grants receivable consist of amounts due from funding sources for services performed under cost reimbursement grants or contracts. Grants receivable are considered fully collectible and, therefore, no allowance for doubtful accounts has been reported.
Contributions and promises to give – Unconditional contributions, including promises to give at estimated net realizable value, are recognized as revenue in the period received.
9
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Donated goods and services – The Organization reports the fair value of donated commodities over which it has control as unrestricted public support and, shortly thereafter, as expense when distributed. During the year ended June 30, 2016, the Organization received and distributed approximately 29.25 million pounds and 26.6 million pounds, respectively. The approximate average wholesale value of one pound of donated product was determined to be $1.67 based upon a product valuation study performed by Feeding America. The dollar amount of the received and distributed pounds is approximately $48,850,000 and $44,450,000 respectively, and is reported in the Statement of Activities.
Contributions of non-cash assets are utilized by the Organization in providing services and are recorded at their fair values in the period received. Contributions of donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at their fair values in the period received. A number of unpaid volunteers have made significant contributions of their time to the Organization. However, the values of these services are not reflected in these financial statements since the recognition criteria was not met.
Advertising costs – Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. Advertising costs were $33,518 during the year ended June 30, 2016.
Exchange transactions – Revenues earned from contracts and grants with State and Federal agencies are considered to be exchange transactions. Revenue from exchange transactions are reported gross of any related expense in the accompanying financial statements. Functional expenses – The costs of providing the Organization's food programs and supporting services have been summarized on a functional basis in the statements of activities and functional expenses. Indirect or shared costs are allocated among program, support services and fundraising by a method that measures the relative degree of benefit, such as hours worked. Accordingly, certain costs have been allocated to program, supporting services and fundraising benefited.
Fundraising expenses – Fundraising expenses are expensed as incurred. Revenue from fundraising events is recognized in the period in which the event takes place.
10
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and equipment – It is the Organization’s policy to capitalize property and equipment over $2,500. Purchased property and equipment is capitalized at cost, donated property and equipment is recorded at fair value. Contributions of property and equipment are recorded as unrestricted support, unless the donor stipulates how long the assets must be used. Expenditures that increase the life of the related assets are capitalized. Repairs and maintenance, including planned major maintenance activities, are charged to operations when incurred. Leasehold improvements are depreciated over the lesser of the remaining lease agreement or the estimated useful life. Depreciation is computed using the straight-line method over the following estimated useful lives: Furnishings, equipment, and vehicles Leasehold improvements
3 ‒ 10 years 5 ‒ 39 years
Long-lived assets – Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset and long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. No impairment losses were recognized during the year ended June 30, 2016.
Income taxes – The Organization is a tax-exempt corporation under section 501(c)(3) of the Internal Revenue Code (IRC) and section 23701(d) of the State of California Corporate Code.
Uncertain tax positions – The Organization recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. The Organization does not believe its financial statements include any uncertain tax positions. Inventory – Inventory consists of donated food and non-food items, purchased food, and commodities received from the United States Department of Agriculture (USDA) and California Department of Social Services (CDSS). The USDA, as passed through the CDSS, contributes commodities to the Organization. USDA commodities are valued based on published USDA prices. CDSS provides additional food assistance to communities with high levels of unemployment due to the drought. The Drought Food Assistance Program (DFAP) was established and those commodities are valued based on estimated CDSS prices. Donated inventory is valued based on a product valuation survey conducted for Feeding America. Purchased food is valued at the latest purchase price.
11
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30, 2016:
Vehicles Equipment Office equipment and furnishings Leasehold improvements
Less: accumulated depreciation
$
$
1,108,411 441,277 142,381 538,014 2,230,083 (1,584,918) 645,165
NOTE 3 – INVESTMENTS IN MUTUAL FUNDS Investments in mutual funds carried at fair value consisted of the following at June 30, 2016:
Mutual funds: Lord Abbett Short Duration Income Fund Eaton Vance Low Duration Fund
$
$
Carrying Value
873,499 719,314 1,592,813
During the year ended June 30, 2016, interest and dividend income was $60,608 and unrealized losses were $43,831. NOTE 4 – FAIR VALUE MEASUREMENTS The Organization’s investments are reported at fair value in the accompanying statement of financial position. The methods used to measure fair value may produce an amount 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.
12
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 – FAIR VALUE MEASUREMENTS (CONTINUED) The following table sets forth by level, within the fair value hierarchy, the Organization’s assets at fair value as of June 30, 2016: Mutual funds Fixed income funds Total assets at fair value
Level 1
$ 1,592,813 $ 1,592,813
Assets at Fair Value as of June 30, 2016 Level 2 Level 3 $ $
-
$ $
Total
-
$ 1,592,813 $ 1,592,813
The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Organization uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, the Organization measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. No Level 2 or 3 inputs were available to the Organization. Level 1 fair value measurements – The fair value of mutual funds is based on quoted net asset values of the shares held by the Organization at year-end on the active market where the funds are traded. NOTE 5 – INVENTORY The Organization’s inventory as of June 30, 2016 consisted of the following:
Donated commodities USDA/CDSS commodities Purchased commodities
$ $
Amount
2,138,333 1,059,461 227,164 3,424,958 13
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 6 – GRANT REVENUE Grant revenue is recognized when expenditures are incurred in accordance with the applicable grant agreements. The Organization also receives commodities from the USDA and CDSS, revenues for these contributions are recognized when the commodities are received. Grant revenue for the year ended June 30, 2016 consisted of the following: Agency or Organization
Federal grants USDA ‒ commodities, distributed USDA - beginning inventory USDA - ending inventory USDA - commodities, received
Amount
$
USDA ‒ cost reimbursements Department of Homeland Security Fresno County Department of Public Health California Nutrition Network
Non-Federal grants CDSS Administratrive cost reimbursements California Nutrition Network
2,530,100 (535,019) 1,046,993 3,042,074 206,260 272,052 83,758 17,576 3,621,720
$
1,729,530 190,828 12,251 1,932,609 5,554,329
Amounts received from grant agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the Organization. There are no pending audit adjustments from grantor agencies at this time.
14
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 – FUNDRAISING AND DIRECT MAIL CAMPAIGNS The Organization conducts various fundraising events and direct mail campaigns. Revenue from fundraising and direct mail campaigns for the year ended June 30, 2016 is as follows:
Event or Campaign
Cultivation and acquisition mailings Various Gala
$ $
Amount
1,068,693 274,269 171,254 1,514,216
NOTE 8 – PROMISES TO GIVE, NET The Organization reports promises to give that are expected to be collected in less than one year at the estimated amount to be ultimately realized. If the promises to give are to be paid to the Organization over a period of years, they are recorded at the present value of their estimated cash flows using the prime rate as of the fiscal year-end in the year of donation. Amounts due in excess of one year after June 30, 2016 have been discounted to net realizable value at a discount rate 3.25%. Promises to give within one year are $27,215 as of June 30, 2016. Promises to give are considered fully collectible and, therefore, no allowance for uncollectible promises to give has been reported. NOTE 9 – TEMPORARILY RESTRICTED NET ASSETS Donor restrictions on temporarily restricted net assets consist of the following at June 30, 2016: Food purchases Related programs
$ $
Amount
102,397 197,474 299,871
NOTE 10 – EMPLOYEE RETIREMENT PROGRAM The Organization has a defined contribution retirement plan. Eligibility is based upon age and service requirements. Participants of the plan are allowed to make before-tax contributions and the Organization may make additional contributions to the plan on the participants’ behalf. Retirement expense for the year ended June 30, 2016 was $50,738.
15
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 11 – LEASE COMMITMENTS The Organization leases office and warehouse space and office equipment under operating leases, which require certain minimum monthly rental payments. The leases vary in terms and expire between March and November of 2017. The future minimum rental payments as of June 30, 2016 are as follows: 2017 2018
Years ended June 30,
$
$
Amount
172,286 2,990 175,276
Total rent expense included in the statement of functional expenses for the year ended June 30, 2016 was $287,696. NOTE 12 – SUBSEQUENT EVENTS The date to which events occurring after June 30, 2016, the date of the most recent statement of financial position, have been evaluated for possible adjustment to the financial statements or disclosure is March 2, 2017, which is the date on which the financial statements were available to be issued. There were no subsequent events required to be disclosed.
16
SUPPLEMENTARY INFORMATION
COMMUNITY FOOD BANK
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2016
Federal Grantor/Pass-through Grantor/Program Title Food Distribution Cluster
U.S. Department of Agriculture
Passed through California State Department of Social Services:
Emergency Food Assistance Program ‒ administrative costs Emergency Food Assistance Program ‒ commodities Total Food Distribution Cluster
Federal CFDA #
Pass-through Entity Identifying #
10.568 10-6031/15-MOU-00114 $ 10.569 10-6031/15-MOU-00114
Other Programs
U.S. Department of Homeland Security Direct Award:
Emergency Food and Shelter National Board Program
U.S. Department of Agriculture
Passed through California Association of Food Banks:
State Administrative Matching Grants for the Supplemental Nutrition Assistance Program
U.S. Department of Agriculture
Passed through the County of Fresno:
State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Total Other Programs
Total Expenditures of Federal Awards
18
Federal Expenditures
206,260
2,530,100
2,736,360
97.024
N/A
272,052
10.561
14-3035
17,576
10.561
13-724
83,758
373,386
$ 3,109,746
See report of independent auditors and notes to schedule of expenditures of federal awards
COMMUNITY FOOD BANK
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation – The accompanying Schedule of Expenditures of Federal Awards (“Schedule”) includes the federal grant activity of Community Food Bank (the “Organization”) reported on the accrual basis of accounting for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to, and does not, present the financial position, changes in net assets, or cash flows of the Organization. Relationship to financial reports – Information included in the accompanying Schedule of Expenditures of Federal Awards is in substantial agreement with the information reported in the related financial reports for major programs.
Program costs – The Organization accounts for and reports on the costs of program activities covered under the federal grant awards on an accrual basis. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Subrecipients – The Organization does not pass through funds to subrecipients.
Indirect costs – The Organization has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.
19
SINGLE AUDIT REPORTS
REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Community Food Bank Fresno, CA
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Community Food Bank (a non-profit organization), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 2, 2017. Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered Community Food Bank’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Community Food Bank’s internal control. Accordingly, we do not express an opinion on the effectiveness of Community Food Bank’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable probability that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 21
Compliance and Other Matters As part of obtaining reasonable assurance about whether Community Food Bank’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fresno, California March 2, 2017
22
REPORT OF INDEPENDENT AUDITORS ON COMPLIANCE FOR THE MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE
To the Board of Directors Community Food Bank
Report on Compliance for the Major Federal Program We have audited Community Food Bank’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Community Food Bank’s major federal program for the year ended June 30, 2016. Community Food Bank’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for the Community Food Bank’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Community Food Bank’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance on the major federal program. However, our audit does not provide a legal determination of Community Food Bank’s compliance. 23
Opinion on the Major Federal Program In our opinion, Community Food Bank complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the major federal program for the year ended June 30, 2016. Report on Internal Control Over Compliance
The management of Community Food Bank is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Community Food Bank’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Community Food Bank’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Fresno, California March 2, 2017
24
COMMUNITY FOOD BANK
SCHEDULE OF FINDINGS AND QUESTIONED COSTS JUNE 30, 2016
Section I - Summary of Auditor's Results Financial Statements Type of auditor's report issued on whether the finanical statements audited were prepared in accordance with GAAP: Internal control over financial reporting: Material weakness(es) identified?
Significant deficiency(s) identified that are not considered to be material weaknesses?
Noncompliance material to financial statements noted? Federal Awards
Internal control over major federal programs: Material weakness(es) identified?
Significant deficiency(s) identified that are not considered to be material weaknesses?
Any audit findings disclosed that are required to be reported in accordance with section 2 CFR 200.516(a)?
Unmodified
Yes X No None reported
Yes X No
Yes X No None reported Yes X No
Identification of Major Federal Programs and Type of Auditor's Report Issued on Compliance for Major Federal Program Type of Auditor's Report Issued on Compliance for CFDA Name of Federal Program/Cluster Major Federal Program Food Distribution Cluster 10.568 U.S. Department of Agriculture - Emergency Food Assistance Program - Administrative Costs
Unmodified
10.569 U.S. Department of Agriculture - Emergency Food Assistance Program - Commodities
Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as "low-risk auditee"?
$750,000
Yes X No
25
COMMUNITY FOOD BANK
SCHEDULE OF FINDINGS AND QUESTIONED COSTS JUNE 30, 2016
Section II - Financial Statement Findings None reported None reported
26
Section III - Federal Award Findings and Questioned Costs
COMMUNITY FOOD BANK
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS JUNE 30, 2016 TYPES OF FINDINGS There were no reportable findings related to federal award reporting for the fiscal year ended June 30, 2015.
27
Community Food Bank June 30, 2016
CONTENTS
REPORT OF INDEPENDENT AUDITORS FINANCIAL STATEMENTS Statement of financial position Statement of activities Statement of functional expenses Statement of cash flows Notes to financial statements
1
4 5 6 7 8
SUPPLEMENTARY INFORMATION Schedule of expenditures of federal awards Notes to schedule of expenditures of federal awards
18 19
REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS
21
SINGLE AUDIT REPORTS
REPORT OF INDEPENDENT AUDITORS ON COMPLIANCE FOR THE MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE Schedule of findings and questioned costs Summary schedule of prior audit findings
23 25 27
REPORT OF INDEPENDENT AUDITORS To the Board of Directors Community Food Bank Fresno, CA
Report on the Financial Statements We have audited the accompanying financial statements of Community Food Bank (a non-profit organization), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, 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. Auditor’s 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 and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 auditor’s 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. 1
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Community Food Bank as of June 30, 2016, 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. Other Matters
Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, 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.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated March 2, 2017, on our consideration of Community Food Bank’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Community Food Bank’s internal control over financial reporting and compliance. Fresno, California March 2, 2017
2
FINANCIAL STATEMENTS
COMMUNITY FOOD BANK
STATEMENT OF FINANCIAL POSITION JUNE 30, 2016 ASSETS Current assets Cash and cash equivalents Investments in mutual funds ‒ at fair value Accounts receivable, net Grants receivable Promises to give, net Inventory Prepaid expenses
$
Total current assets
5,920,829
Property and equipment, net
645,165
Deposits
LIABILITIES AND NET ASSETS Current liabilities Accounts payable Accrued expenses
21,786
$
6,587,780
$
294,065 205,409 499,474
Total current liabilities
Commitments and contingencies
-
Net assets Temporarily restricted Unrestricted
299,871 5,788,435 $
4
250,681 1,592,813 79,851 467,287 27,215 3,424,958 78,024
6,088,306
6,587,780
See report of independent auditors and notes to financial statements
COMMUNITY FOOD BANK
STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2016
Revenues, gains, and other support Contributions ‒ commodities Grants ‒ commodities Grants ‒ operations and administrative Contributions ‒ other Fundraising and direct mail campaigns Agency fees and charges Gain on sale of assets Interest and dividend income, net
Unrestricted $ 48,850,350 4,771,604 782,725 1,575,255 1,514,216 1,163,977 10,250 16,777
645,147 1,072,585
5,788,435
See report of independent auditors and notes to financial statements
59,063,154 -
59,063,154
-
56,825,132
-
58,542,864
-
58,542,864
$
$ 48,850,350 4,771,604 782,725 1,953,255 1,514,216 1,163,977 10,250 16,777
(91,530)
56,825,132
611,820 5,176,615
Total
(469,530)
59,154,684
Total expenses
378,000 -
378,000
469,530
Expenses Program Supporting services Management and general Fundraising
Net assets, end of year
$
58,685,154
Net assets released from restriction Total revenues, gains, and other support
Change in net assets Net assets, beginning of year
Temporarily Restricted
$
(91,530) 391,401 299,871
645,147 1,072,585
$
520,290 5,568,016 6,088,306
5
COMMUNITY FOOD BANK
STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2016
Management Program Contributed commodities
Salaries and related expenses
Purchased commodities
$
Outside services
and General
52,626,446
1,487,615
1,420,821
$
10,750
Rents
186,035
Freight, fuel and transportation Professional fees
54,424
Repairs and maintenance Special events
29,064
23,676
23,106
18,822
Accounting and auditing
15,238
4,589
Telephone
Miscellaneous
6
$
2,266
56,825,132
$
645,147
118,654 77,366
45,134 52,103
7,709
48,596
3,883
24,480
3,738
4,444
-
163,427
8,265
4,767
14,758
197,347
15,949
9,463
15,830
84,165
120,500
77,366
-
31,424
172,460
3,375
-
10,146
305,908
29,602
4,143
23,565
3,620 $
1,222
1,072,585
2,300,540
1,420,821 287,696
13,351
76,726
52,626,446
447,346
-
19,735
29,185
$
45,637
18,075
33,692
Travel and meetings
-
433,359
Insurance
Seminars, training and workshops
364,936
3,237
16,390
-
Dues and subscriptions
-
12,050
155,909
Utilities
-
Total
90,375
148,010
Supplies and materials
447,989
$
-
119,720
Depreciation
-
56,024
305,908
Office expenses
Fundraising
22,822 $
3,488
58,542,864
See report of independent auditors and notes to financial statements
COMMUNITY FOOD BANK
STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2016
Cash flows from operating activities Change in net assets Adjustment to reconcile change in net assets to net cash used in operating activities: Depreciation Contributed commodities Distribution of contributed commodities Contributed commodities - grants Distribution of contributed commodities - grants Interest and dividend income Unrealized loss on investments Changes in operating assets and liabilities: Decrease in receivables Decrease in inventory Increase in prepaid expenses Increase in accounts payable Increase in accrued expenses Net cash used in operating activities
$
120,500 (48,821,228) 48,333,128 (4,767,604) 4,263,681 (60,608) 43,831 15,240 17,700 (19,784) 46,156 15,622 (293,076)
Cash flows from investing activities: Proceeds from sales of investments in mutual funds Purchase of property and equipment Net cash provided by investing activities Net increase in cash and cash equivalents
Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year
See report of independent auditors and notes to financial statements
520,290
499,985 (125,143) 374,842 81,766 $
168,915 250,681
7
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of activities – Community Food Bank (the “Organization”) is a California non-profit corporation established to conduct a program that provides food pantries and agencies of Fresno, Madera, Tulare, Kern and Kings Counties with an organizational resource whose volume purchasing, warehousing, and food product management capacity efficiently and effectively deliver food and goods. The Organization is affiliated with the national network of food banks known as Feeding America.
Food and commodities are donated by the general public and government agencies. Revenues are primarily derived from fundraising, direct mail campaigns, grants, and contributions.
Basis of presentation – 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 as follows:
Unrestricted net assets – These are resources available to support operations. The only limits on the use of unrestricted new assets are the broad limits resulting from the nature of the Organization, the environment in which it operates, the purposes specified In its corporate documents and its application for tax-exempt status, and any limits resulting from contractual agreements with creditors and others that are entered into in the course of its operations. Temporarily restricted net assets – These are resources that are restricted by a donor for use for a particular purpose or in a particular future period. The Organization’s unspent contributions are reported in this class if the donor limited their use, as are promised contributions that are not yet due.
Contributions of property and equipment or cash restricted to acquisition of property and equipment are reported as temporarily restricted new assets if the donor has restricted the use of the property or equipment to a particular program. If donors specify a length a time over which the property or equipment must be used, the restrictions expire evenly over the required period. Absent that type of restriction for use, the Organization considers the restriction met when assets are placed in service. When a donor’s restriction is satisfied, either by using the resources in the manner specified by the donor or by the passage of time, the expiration of the restriction is reported in the financial statements by reclassifying the net assets from temporarily restricted to unrestricted net assets. Permanently restricted net assets – These are resources whose use is limited by donor-imposed restrictions that neither expire by being used in accordance with a donor’s restriction nor by the passage of time. At June 30, 2016, the Organization did not have any permanently restricted net assets. Method of accounting – The Organization uses the accrual basis method of accounting in accordance with accounting principles generally accepted in the United States of America.
8
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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 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. The Organization’s method of valuation for commodities donated from the general public is considered a significant estimate.
Cash and cash equivalents – For purposes of reporting the Statement of Cash Flows, the Organization considers all highly liquid investments with an original maturity of three (3) months or less to be cash equivalents. Accounts at each financial institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At June 30, 2016 uninsured cash balances totaled $26,000.
Fair value of financial instruments – The carrying values of cash and cash equivalents, promises to give and other receivables, inventory, and prepaid expenses approximate fair value because of the terms and relative short maturity.
Investment in mutual funds – Investments in mutual funds consist of two (2) open-end mutual funds and are carried at fair value. These investments are covered by the Securities Investor Protection Corporation up to $500,000 (including $100,000 of cash). Investment income and unrealized gains and losses are included in the change in net assets.
Accounts and grants receivable – Accounts receivable consist primarily of shared maintenance fees charged to agencies. Receivables are written off through an allowance for doubtful accounts when the Organization determines the payments will not be received. Allowance for doubtful accounts at June 30, 2016 was $646. All accounts receivable are non-interest bearing.
Grants receivable consist of amounts due from funding sources for services performed under cost reimbursement grants or contracts. Grants receivable are considered fully collectible and, therefore, no allowance for doubtful accounts has been reported.
Contributions and promises to give – Unconditional contributions, including promises to give at estimated net realizable value, are recognized as revenue in the period received.
9
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Donated goods and services – The Organization reports the fair value of donated commodities over which it has control as unrestricted public support and, shortly thereafter, as expense when distributed. During the year ended June 30, 2016, the Organization received and distributed approximately 29.25 million pounds and 26.6 million pounds, respectively. The approximate average wholesale value of one pound of donated product was determined to be $1.67 based upon a product valuation study performed by Feeding America. The dollar amount of the received and distributed pounds is approximately $48,850,000 and $44,450,000 respectively, and is reported in the Statement of Activities.
Contributions of non-cash assets are utilized by the Organization in providing services and are recorded at their fair values in the period received. Contributions of donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at their fair values in the period received. A number of unpaid volunteers have made significant contributions of their time to the Organization. However, the values of these services are not reflected in these financial statements since the recognition criteria was not met.
Advertising costs – Advertising costs, except for costs associated with direct-response advertising, are charged to operations when incurred. Advertising costs were $33,518 during the year ended June 30, 2016.
Exchange transactions – Revenues earned from contracts and grants with State and Federal agencies are considered to be exchange transactions. Revenue from exchange transactions are reported gross of any related expense in the accompanying financial statements. Functional expenses – The costs of providing the Organization's food programs and supporting services have been summarized on a functional basis in the statements of activities and functional expenses. Indirect or shared costs are allocated among program, support services and fundraising by a method that measures the relative degree of benefit, such as hours worked. Accordingly, certain costs have been allocated to program, supporting services and fundraising benefited.
Fundraising expenses – Fundraising expenses are expensed as incurred. Revenue from fundraising events is recognized in the period in which the event takes place.
10
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 1 – NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Property and equipment – It is the Organization’s policy to capitalize property and equipment over $2,500. Purchased property and equipment is capitalized at cost, donated property and equipment is recorded at fair value. Contributions of property and equipment are recorded as unrestricted support, unless the donor stipulates how long the assets must be used. Expenditures that increase the life of the related assets are capitalized. Repairs and maintenance, including planned major maintenance activities, are charged to operations when incurred. Leasehold improvements are depreciated over the lesser of the remaining lease agreement or the estimated useful life. Depreciation is computed using the straight-line method over the following estimated useful lives: Furnishings, equipment, and vehicles Leasehold improvements
3 ‒ 10 years 5 ‒ 39 years
Long-lived assets – Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. When required, impairment losses on assets to be held and used are recognized based on the fair value of the asset and long-lived assets to be disposed of are reported at the lower of the carrying amount or fair value less cost to sell. No impairment losses were recognized during the year ended June 30, 2016.
Income taxes – The Organization is a tax-exempt corporation under section 501(c)(3) of the Internal Revenue Code (IRC) and section 23701(d) of the State of California Corporate Code.
Uncertain tax positions – The Organization recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. The Organization does not believe its financial statements include any uncertain tax positions. Inventory – Inventory consists of donated food and non-food items, purchased food, and commodities received from the United States Department of Agriculture (USDA) and California Department of Social Services (CDSS). The USDA, as passed through the CDSS, contributes commodities to the Organization. USDA commodities are valued based on published USDA prices. CDSS provides additional food assistance to communities with high levels of unemployment due to the drought. The Drought Food Assistance Program (DFAP) was established and those commodities are valued based on estimated CDSS prices. Donated inventory is valued based on a product valuation survey conducted for Feeding America. Purchased food is valued at the latest purchase price.
11
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 2 – PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30, 2016:
Vehicles Equipment Office equipment and furnishings Leasehold improvements
Less: accumulated depreciation
$
$
1,108,411 441,277 142,381 538,014 2,230,083 (1,584,918) 645,165
NOTE 3 – INVESTMENTS IN MUTUAL FUNDS Investments in mutual funds carried at fair value consisted of the following at June 30, 2016:
Mutual funds: Lord Abbett Short Duration Income Fund Eaton Vance Low Duration Fund
$
$
Carrying Value
873,499 719,314 1,592,813
During the year ended June 30, 2016, interest and dividend income was $60,608 and unrealized losses were $43,831. NOTE 4 – FAIR VALUE MEASUREMENTS The Organization’s investments are reported at fair value in the accompanying statement of financial position. The methods used to measure fair value may produce an amount 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.
12
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 4 – FAIR VALUE MEASUREMENTS (CONTINUED) The following table sets forth by level, within the fair value hierarchy, the Organization’s assets at fair value as of June 30, 2016: Mutual funds Fixed income funds Total assets at fair value
Level 1
$ 1,592,813 $ 1,592,813
Assets at Fair Value as of June 30, 2016 Level 2 Level 3 $ $
-
$ $
Total
-
$ 1,592,813 $ 1,592,813
The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 – Quoted prices in active markets for identical assets or liabilities.
Level 2 – Observable inputs, other than Level 1 prices, such as quoted prices for similar assets or liabilities, quoted prices in inactive markets, or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 – Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities.
The Organization uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, the Organization measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. No Level 2 or 3 inputs were available to the Organization. Level 1 fair value measurements – The fair value of mutual funds is based on quoted net asset values of the shares held by the Organization at year-end on the active market where the funds are traded. NOTE 5 – INVENTORY The Organization’s inventory as of June 30, 2016 consisted of the following:
Donated commodities USDA/CDSS commodities Purchased commodities
$ $
Amount
2,138,333 1,059,461 227,164 3,424,958 13
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 6 – GRANT REVENUE Grant revenue is recognized when expenditures are incurred in accordance with the applicable grant agreements. The Organization also receives commodities from the USDA and CDSS, revenues for these contributions are recognized when the commodities are received. Grant revenue for the year ended June 30, 2016 consisted of the following: Agency or Organization
Federal grants USDA ‒ commodities, distributed USDA - beginning inventory USDA - ending inventory USDA - commodities, received
Amount
$
USDA ‒ cost reimbursements Department of Homeland Security Fresno County Department of Public Health California Nutrition Network
Non-Federal grants CDSS Administratrive cost reimbursements California Nutrition Network
2,530,100 (535,019) 1,046,993 3,042,074 206,260 272,052 83,758 17,576 3,621,720
$
1,729,530 190,828 12,251 1,932,609 5,554,329
Amounts received from grant agencies are subject to audit and adjustment by grantor agencies. Any disallowed claims, including amounts already collected, may constitute a liability of the Organization. There are no pending audit adjustments from grantor agencies at this time.
14
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 7 – FUNDRAISING AND DIRECT MAIL CAMPAIGNS The Organization conducts various fundraising events and direct mail campaigns. Revenue from fundraising and direct mail campaigns for the year ended June 30, 2016 is as follows:
Event or Campaign
Cultivation and acquisition mailings Various Gala
$ $
Amount
1,068,693 274,269 171,254 1,514,216
NOTE 8 – PROMISES TO GIVE, NET The Organization reports promises to give that are expected to be collected in less than one year at the estimated amount to be ultimately realized. If the promises to give are to be paid to the Organization over a period of years, they are recorded at the present value of their estimated cash flows using the prime rate as of the fiscal year-end in the year of donation. Amounts due in excess of one year after June 30, 2016 have been discounted to net realizable value at a discount rate 3.25%. Promises to give within one year are $27,215 as of June 30, 2016. Promises to give are considered fully collectible and, therefore, no allowance for uncollectible promises to give has been reported. NOTE 9 – TEMPORARILY RESTRICTED NET ASSETS Donor restrictions on temporarily restricted net assets consist of the following at June 30, 2016: Food purchases Related programs
$ $
Amount
102,397 197,474 299,871
NOTE 10 – EMPLOYEE RETIREMENT PROGRAM The Organization has a defined contribution retirement plan. Eligibility is based upon age and service requirements. Participants of the plan are allowed to make before-tax contributions and the Organization may make additional contributions to the plan on the participants’ behalf. Retirement expense for the year ended June 30, 2016 was $50,738.
15
COMMUNITY FOOD BANK
NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 NOTE 11 – LEASE COMMITMENTS The Organization leases office and warehouse space and office equipment under operating leases, which require certain minimum monthly rental payments. The leases vary in terms and expire between March and November of 2017. The future minimum rental payments as of June 30, 2016 are as follows: 2017 2018
Years ended June 30,
$
$
Amount
172,286 2,990 175,276
Total rent expense included in the statement of functional expenses for the year ended June 30, 2016 was $287,696. NOTE 12 – SUBSEQUENT EVENTS The date to which events occurring after June 30, 2016, the date of the most recent statement of financial position, have been evaluated for possible adjustment to the financial statements or disclosure is March 2, 2017, which is the date on which the financial statements were available to be issued. There were no subsequent events required to be disclosed.
16
SUPPLEMENTARY INFORMATION
COMMUNITY FOOD BANK
SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS YEAR ENDED JUNE 30, 2016
Federal Grantor/Pass-through Grantor/Program Title Food Distribution Cluster
U.S. Department of Agriculture
Passed through California State Department of Social Services:
Emergency Food Assistance Program ‒ administrative costs Emergency Food Assistance Program ‒ commodities Total Food Distribution Cluster
Federal CFDA #
Pass-through Entity Identifying #
10.568 10-6031/15-MOU-00114 $ 10.569 10-6031/15-MOU-00114
Other Programs
U.S. Department of Homeland Security Direct Award:
Emergency Food and Shelter National Board Program
U.S. Department of Agriculture
Passed through California Association of Food Banks:
State Administrative Matching Grants for the Supplemental Nutrition Assistance Program
U.S. Department of Agriculture
Passed through the County of Fresno:
State Administrative Matching Grants for the Supplemental Nutrition Assistance Program Total Other Programs
Total Expenditures of Federal Awards
18
Federal Expenditures
206,260
2,530,100
2,736,360
97.024
N/A
272,052
10.561
14-3035
17,576
10.561
13-724
83,758
373,386
$ 3,109,746
See report of independent auditors and notes to schedule of expenditures of federal awards
COMMUNITY FOOD BANK
NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS JUNE 30, 2016 NOTE 1 – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation – The accompanying Schedule of Expenditures of Federal Awards (“Schedule”) includes the federal grant activity of Community Food Bank (the “Organization”) reported on the accrual basis of accounting for the year ended June 30, 2016. The information in this Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to, and does not, present the financial position, changes in net assets, or cash flows of the Organization. Relationship to financial reports – Information included in the accompanying Schedule of Expenditures of Federal Awards is in substantial agreement with the information reported in the related financial reports for major programs.
Program costs – The Organization accounts for and reports on the costs of program activities covered under the federal grant awards on an accrual basis. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Subrecipients – The Organization does not pass through funds to subrecipients.
Indirect costs – The Organization has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance.
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SINGLE AUDIT REPORTS
REPORT OF INDEPENDENT AUDITORS ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors Community Food Bank Fresno, CA
We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Community Food Bank (a non-profit organization), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated March 2, 2017. Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered Community Food Bank’s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Community Food Bank’s internal control. Accordingly, we do not express an opinion on the effectiveness of Community Food Bank’s internal control.
A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable probability that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 21
Compliance and Other Matters As part of obtaining reasonable assurance about whether Community Food Bank’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit and, accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report
The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Fresno, California March 2, 2017
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REPORT OF INDEPENDENT AUDITORS ON COMPLIANCE FOR THE MAJOR PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY UNIFORM GUIDANCE
To the Board of Directors Community Food Bank
Report on Compliance for the Major Federal Program We have audited Community Food Bank’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on the Community Food Bank’s major federal program for the year ended June 30, 2016. Community Food Bank’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. Management’s Responsibility
Management is responsible for compliance with federal statutes, regulations and the terms and conditions of its federal awards applicable to its federal programs. Auditor’s Responsibility
Our responsibility is to express an opinion on compliance for the Community Food Bank’s major federal program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”). Those standards and Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Community Food Bank’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.
We believe that our audit provides a reasonable basis for our opinion on compliance on the major federal program. However, our audit does not provide a legal determination of Community Food Bank’s compliance. 23
Opinion on the Major Federal Program In our opinion, Community Food Bank complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on the major federal program for the year ended June 30, 2016. Report on Internal Control Over Compliance
The management of Community Food Bank is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Community Food Bank’s internal control over compliance with the types of requirements that could have a direct and material effect on the major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major federal program and to test and report on internal control over compliance in accordance with Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Community Food Bank’s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.
Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.
The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Fresno, California March 2, 2017
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COMMUNITY FOOD BANK
SCHEDULE OF FINDINGS AND QUESTIONED COSTS JUNE 30, 2016
Section I - Summary of Auditor's Results Financial Statements Type of auditor's report issued on whether the finanical statements audited were prepared in accordance with GAAP: Internal control over financial reporting: Material weakness(es) identified?
Significant deficiency(s) identified that are not considered to be material weaknesses?
Noncompliance material to financial statements noted? Federal Awards
Internal control over major federal programs: Material weakness(es) identified?
Significant deficiency(s) identified that are not considered to be material weaknesses?
Any audit findings disclosed that are required to be reported in accordance with section 2 CFR 200.516(a)?
Unmodified
Yes X No None reported
Yes X No
Yes X No None reported Yes X No
Identification of Major Federal Programs and Type of Auditor's Report Issued on Compliance for Major Federal Program Type of Auditor's Report Issued on Compliance for CFDA Name of Federal Program/Cluster Major Federal Program Food Distribution Cluster 10.568 U.S. Department of Agriculture - Emergency Food Assistance Program - Administrative Costs
Unmodified
10.569 U.S. Department of Agriculture - Emergency Food Assistance Program - Commodities
Dollar threshold used to distinguish between Type A and Type B programs: Auditee qualified as "low-risk auditee"?
$750,000
Yes X No
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COMMUNITY FOOD BANK
SCHEDULE OF FINDINGS AND QUESTIONED COSTS JUNE 30, 2016
Section II - Financial Statement Findings None reported None reported
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Section III - Federal Award Findings and Questioned Costs
COMMUNITY FOOD BANK
SUMMARY SCHEDULE OF PRIOR AUDIT FINDINGS JUNE 30, 2016 TYPES OF FINDINGS There were no reportable findings related to federal award reporting for the fiscal year ended June 30, 2015.
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