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HomeMy WebLinkAboutHabitat FinancialIOWA VALLEY HABITAT FOR HUMANITY FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2023 TABLE OF CONTENTS Page No. INDEPENDENT AUDITOR'S REPORT . . . . . . . . . . . . . . . . . . 1 - 2 FINANCIAL STATEMENTS Statement of Financial Position . . . . . . . . . . . . . . . . . . . . .3 - 4 Statement of Activities . . . . . . . . . . . . . . . . . . . . . . . . . . .5 Statement of Functional Expenses. . . . . . . . . . . . . . . . . . .6 Statement of Cash Flows . . . . . . . . . . . . . . . . . . . . . . . . . 7 Notes to Financial Statements . . . . . . . . . . . . . . . . . . . . . 8 - 19 1 Independent Auditor's Report Board of Directors Iowa Valley Habitat for Humanity Iowa City, Iowa Opinion We have audited the consolidated financial statements of Iowa Valley Habitat for Humanity, which comprise the statement of financial position as of June 30, 2023, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of Iowa Valley Habitat for Humanity as of June 30, 2023, 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. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Iowa Valley Habitat for Humanity, and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Iowa Valley Habitat for Humanity's ability to continue as a going concern for one year after the date that the financial statements are issued. 2 Auditor's Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor's report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with GAAS will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with GAAS, we: •Exercise professional judgment and maintain professional skepticism throughout the audit. •Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements. •Obtain an understanding of internal control relevant to the audit 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 Iowa Valley Habitat for Humanity's internal control. Accordingly, no such opinion is expressed. •Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements. •Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Iowa Valley Habitat for Humanity's ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control–related matters that we identified during the audit. Waterloo, Iowa December 19, 2023 ASSETS CURRENT ASSETS Cash 310,991$ Restricted Cash 7,719 Accounts Receivable 160,803 Escrow Receivable 33,134 Grant Receivables 83,465 Inventory - Land 308,844 Inventory - Houses 146,409 Inventory - Houses Under Construction 696,576 Inventory - ReStore 27,556 Current Portion Contributed Rent 70,000 Current Maturities of Mortgages Receivable 304,615 Total Current Assets 2,150,112 PROPERTY AND EQUIPMENT Land 85,500 Buildings and Improvements 258,897 Leasehold Improvements 40,857 Equipment and Vehicles 93,171 Right of Use Assets - operating leases 73,202 Right of Use Assets - finance leases 42,258 Total 593,885 Less: Accumulated Depreciation and Amortization (226,059) Net Property and Equipment 367,826 OTHER ASSETS Prepaid Loan Reserve 16,930 Contributed Rent, Net 164,052 Mortgages Receivable, Net 1,837,627 Total Other Assets 2,018,609 Total Assets 4,536,547$ IOWA VALLEY HABITAT FOR HUMANITY STATEMENT OF FINANCIAL POSITION JUNE 30, 2023 See accompanying Notes to Financial Statements. 3 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts Payable 31,317$ Accrued Payroll Liabilities 232,716 Other Accrued Expenses 15,928 Short-Term Notes Payable 46,291 Current Portion Operating Lease Liabilities 21,857 Current Portion Finance Lease Liabilities 17,351 Current Maturities of Long-Term Notes Payable 138,282 Current Maturities of Refundable Advances 3,500 Total Current Liabilities 507,242 LONG-TERM LIABILITIES Notes Payable 1,075,732 Operating Lease Liabilities 53,780 Finance Lease Liabilities 26,070 Refundable Advances 298,500 Total Long-Term Liabilities 1,454,082 Total Liabilities 1,961,324 NET ASSETS Without Donor Restriction 2,156,166 With Donor Restriction 419,057 Total Net Assets 2,575,223 Total Liabilities and Net Assets 4,536,547$ STATEMENT OF FINANCIAL POSITION JUNE 30, 2023 See accompanying Notes to Financial Statements. 4 IOWA VALLEY HABITAT FOR HUMANITY Without Donor With Donor Restiction Restiction Total PUBLIC SUPPORT AND REVENUE Public Support Contributions 266,770$ 37,987$ 304,757$ Contributed Materials 652,988 - 652,988 Contributed Services 20,285 - 20,285 Grants 268,924 - 268,924 Special Events, Net 46,905 - 46,905 Total Public Support 1,255,872 37,987 1,293,859 Revenue Transfer of Homes 1,182,511 - 1,182,511 Mortgage Discount Amortization 371,338 - 371,338 ReStore Sales 525,526 - 525,526 Other Construction Income 41,453 - 41,453 Miscellaneous Income 73,125 - 73,125 Interest Income 157 - 157 Gain on Sale of Assets 16,320 - 16,320 Total Revenue 2,210,430 - 2,210,430 Net Assets Released for Expiration of Time and Satisfaction of Purpose Restrictions 74,000 (74,000) - Total Public Support and Revenue 3,540,302 (36,013) 3,504,289 EXPENSES Program Services 2,825,589 - 2,825,589 Management and General 405,610 - 405,610 Fundraising 92,787 - 92,787 Total Expenses 3,323,986 - 3,323,986 CHANGE IN NET ASSETS 216,316 (36,013) 180,303 Net Assets - Beginning of Year 1,939,850 455,070 2,394,920 NET ASSETS - END OF YEAR 2,156,166$ 419,057$ 2,575,223$ See accompanying Notes to Financial Statements. 5 IOWA VALLEY HABITAT FOR HUMANITY STATEMENT OF ACTIVITIES YEAR ENDED JUNE 30, 2023 Management Total Housing ReStore Total and General Fundraising Total Expenses EXPENSES Salaries and Wages 282,141$ 161,313$ 443,454$ 190,466$ 51,864$ 242,330$ 685,784$ Employee Benefits 27,522 11,460 38,982 21,574 6,199 27,773 66,755 Employee Pension 4,349 1,086 5,435 5,122 1,307 6,429 11,864 Payroll Tax 21,977 12,935 34,912 15,827 4,571 20,398 55,310 Professional Fees 1,532 - 1,532 57,115 - 57,115 58,647 Advertising and Marketing 156 737 893 1,205 5,175 6,380 7,273 Bad Debt Expense 17,214 - 17,214 31,987 - 31,987 49,201 Office and General Supplies 34,178 25,369 59,547 27,542 15,565 43,107 102,654 Operating Lease Expense 2,675 3,710 6,385 4,570 5,429 9,999 16,384 Occupancy 24,786 91,651 116,437 4,833 1,944 6,777 123,214 Travel 13,548 4,816 18,364 - - - 18,364 Conferences 932 - 932 415 - 415 1,347 Interest 10,521 147 10,668 33,950 733 34,683 45,351 Depreciation and Amortization 15,870 - 15,870 - - - 15,870 Insurance 16,507 16,506 33,013 11,004 - 11,004 44,017 Cost of Homes Transferred 1,347,277 - 1,347,277 - - - 1,347,277 Other Construction Expenses 147,274 - 147,274 - - - 147,274 Tithe - Habitat for Humanity International 6,000 - 6,000 - - - 6,000 Contributed Inventory - 508,212 508,212 - - - 508,212 Purchased Inventory - 13,188 13,188 - - - 13,188 Total Expenses 1,974,459$ 851,130$ 2,825,589$ 405,610$ 92,787$ 498,397$ 3,323,986$ See accompanying Notes to Financial Statements. 6 Program Services Supporting Activities IOWA VALLEY HABITAT FOR HUMANITY STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2023 CASH FLOWS FROM OPERATING ACTIVITIES Change in Net Assets 180,303$ Adjustments to Reconcile Change in Net Assets to Net Cash Used by Operating Activities: Bad Debt 49,201 Depreciation and Amortization 15,870 In-Kind Contributions (635,740) Forgiveness of Debt (7,000) Discount on Contributed Lease 56,748 Amortization of Mortgages Receivable Discount 371,338 Gain on Sale of Assets (16,320) Changes in Operating Assets and Liabilities: Accounts and Grants Receivable (209,565) Inventory (364,534) Accounts Payable (14,683) Accrued Expenses 153,888 Operating Lease Liability (24,303) Net Cash Used In Operating Activities (444,797) CASH FLOWS FROM INVESTING ACTIVITIES Collections on Mortgages Receivable 548,958 Proceeds from Sale of Property and Equipment 128,159 Net Cash Provided by Investing Activities 677,117 CASH FLOWS FROM FINANCING ACTIVITIES Payments on Short-Term Debt (124,668) Borrowings on Long-Term Debt 160,261 Payments on Long-Term Debt (138,487) Payments on Finance Lease Liabilities (9,118) Net Cash Used in Financing Activities (112,012) NET CHANGE IN CASH 120,308 Cash and Restricted Cash - Beginning 198,402 CASH AND RESTRICTED CASH - ENDING 318,710$ Cash 310,991$ Restricted Cash 7,719 Total Cash and Restricted Cash 318,710$ SUPPLEMENTARY CASH FLOW INFORMATION Interest Paid 28,799$ NONCASH ITEMS 652,988$ Inventory and Equipment Contributed by Donors IOWA VALLEY HABITAT FOR HUMANITY STATEMENT OF CASH FLOWS YEAR ENDED JUNE 30, 2023 See accompanying Notes to Financial Statements. 7 IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 8 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organizational Description Iowa Valley Habitat for Humanity (the Organization) is an Iowa nonprofit corporation, incorporated in 1993. The Organization provides housing for persons that would not otherwise qualify for conventional financing in Iowa City, Iowa and surrounding areas. The Organization provides interest free mortgages to families with payments over fifteen to thirty- year periods. Each family receiving a home is required to provide five hundred hours of donated labor to the construction of their home. The title of the home transfers to the homebuyer at the date of sale. The Organization also acts as a helping hand by assisting low-income households with repairs and aging-in-place modifications. The Organization funds its operations through contributions, grants, and other fundraising events, and uses these funds to construct the housing. The Organization operates a “ReStore” facility that offers new and used construction materials and supplies to the public. The ReStore receives substantially all items for sale through donation from businesses and individuals. All proceeds from ReStore sales are used in the operations of the Organization. The Organization’s fiscal year ends on June 30. Significant accounting policies are presented below. Use of Estimates in Preparing Financial Statements The preparation of financial statements in conformity with generally accepted accounting principles 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, expenses, gains, losses and other changes in net assets during the reporting period. Actual results could differ from those estimates. Restricted Cash Restricted cash consists of cash held in separate accounts as escrow payments related to mortgages receivable. Revenue and Revenue Recognition The Organization recognizes revenue from sales of homes at the time of closing. The Organization records unconditional contributions in accordance with the requirements of accounting principles generally accepted in the United States of America for nonprofit entities. The Organization recognizes revenue for contributions (and grants considered to be contributions) based upon the presence or absence of donor-imposed conditions. For those contributions absent of donor-imposed conditions, revenues are recognized at the time the Organization is notified of the contribution and that promise is verified, regardless of the timing of cash receipt. For contributions with donor-imposed conditions – that is, those with a measurable performance or other barrier and a right of return or release – revenues are recognized at the time the conditions are substantially met, regardless of the timing of cash receipt. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 9 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Revenue and Revenue Recognition (Continued) When a donor restriction expires, that is, when a stipulated time restriction ends, or the purpose of the restriction is accomplished, net assets with restrictions are reclassified to net assets without restrictions and reported in the statement of activities as Net Assets Released from Restrictions. Accounts receivable are stated at net realizable value. All amounts are deemed collectible therefore no allowance has been established. The Organization received donated materials for use in home construction. Contributions of donated goods for home construction are recorded at their fair values in the period received. Contributions of donated services that create or enhance nonfinancial assets, during home construction, 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. The Organization also receives contributions of donated services from unpaid volunteers. No amounts have been recognized in the statement of activities when the criteria for revenue recognition under financial accounting standards have not been satisfied. Donated materials not used in home construction are made available to the public at salvage values through the ReStore. Materials sold through the ReStore are recorded as revenue at the time of the sale, which is when the customer takes ownership of the goods. Donated materials not used in home construction are recognized at their fair value at the time of receipt and purchased inventory for the ReStore is recognized at average cost at the time of purchase. Contributed property and equipment are recorded at estimated fair value at the date of gift. If donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as without donor restrictions. Mortgages Receivable Mortgage notes receivable represent the amount charged to the homeowners for Habitat houses built and secured by real estate that are to be paid back over an established and mutually agreed period of time. Mortgages are typically paid back on a monthly basis over fifteen to thirty years. The mortgages receivable bear no interest. Notes are discounted for reporting purpose based on the date of origination. Habitat for Humanity International develops a discount rate once a year on June 30. The difference between the face amount of the note and its present value is accounted for as a discount that is recorded as a reduction to the mortgages receivable and amortized over the life of the mortgage. As of June 30, 2023, the Organization has individually evaluated mortgage notes for impairment. Management believes all mortgages receivable are realizable through either collection or foreclosure proceeds therefore no allowance is deemed necessary. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 10 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Inventories Inventories consist of land, houses, and houses under construction. Inventories are valued at cost based on a specific identification method. In-kind inventory is recorded at its estimated market value when received. Inventory for homeownership is expensed to cost of production sold at time of sale to homeowners. Inventories held in the ReStore consist primarily of donated items as well as small amounts purchased for resale. Inventories in the ReStore are recorded as assets on the statement of financial position at estimated fair value if donated, and average cost if purchased. Property and Equipment Property and equipment purchased are stated at cost. The Organization typically capitalizes items over $3,000. Depreciation of property and equipment is computed on a straight-line basis over the estimated useful lives of the assets, which range from five to thirty-nine years. Impairment of Long-Lived Assets The Organization reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying value of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to the future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount of by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or the fair value less costs to sell. Leases The Organization classifies leases as either operating or finance leases at the commencement date of the lease. A lease is classified as a finance lease if any of the five criteria are met: (1) ownership transfers at the end of the lease term, (2) there is an option to purchase the underlying assets and the lessee is reasonably certain to exercise the option, (3) the term of the lease is for a major part of the remaining economic life of the underlying assets, (4) the present value of the sum of the lease payments and any residual value guaranteed by the lessee equals or exceeds substantially all of the fair value of the underlying assets or (5) the underlying assets are of such a specialized nature that they are expected to have no alternative use to the lessor at the end of the lease term. Leases that do not meet any of the five criteria above for a finance lease are classified as operating leases. The Organization recognizes a right-of-use (ROU) asset and lease liability for each operating and finance lease with a term greater than 12 months at the time of lease inception. The Organization does not record a ROU asset or lease liability for leases with an initial term of 12 months or less but continues to record rent expense on a straight-line basis over the lease term. Options to extend or terminate at the sole discretion of the Organization are included in the determination of lease term when they are reasonably certain to be exercised. The lease liability represents the present value of future lease payments over the lease term. The Organization has elected the practical expedient that allows for private companies to utilize the risk-free rate based on asset class. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 11 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Assets Net assets and revenues, gains, and losses are classified based on donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as follows: Net Assets Without Donor Restriction – Net assets available for use in general operations and not subject to donor- (or certain grantor-) imposed restrictions. Net Assets With Donor Restriction – Net assets subject to donor- (or certain grantor-) imposed restrictions. Some donor-imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. The Organization reports contributions restricted by donors as increases in net assets without donor restrictions if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donor-restricted contributions are reported as increases in net assets with donor restrictions, depending on the nature of the restrictions. When a restriction expires, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statement of activities as net assets released from restrictions. Functional Allocation of Expenses The costs of providing various program and supporting activities have been summarized on a functional basis in the statement of activities. The statement of functional expenses presents the natural classification detail of expenses by function. Accordingly, certain costs have been allocated among the programs and supporting activities benefitted. The expenses that are allocated include occupancy, donated rent, insurance and interest, which are allocated on a square footage basis, as well as salaries and wages, benefits, payroll taxes, which are allocated on the basis of estimates of time and effort. Income Taxes The Organization is a not-for-profit corporation as described in Section 501(c)(3) of the Internal Revenue Code (the Code) and is exempt from federal income taxes pursuant to Section 501(a) of the Code. NOTE 2 CONTRIBUTED RENT The Organization entered into a lease agreement with the City of Iowa City for office and warehouse space beginning in January 2012. The lease agreement calls for semi-annual rental payments of $10,066. The lease was renewed in December 2021 for a five-year term. The lease has two additional options to renew for five-year terms each. It is unknown at this time if further renewal options will be exercised. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 12 NOTE 2 CONTRIBUTED RENT (CONTINUED) Based on the estimated fair value of the space, the Organization has recorded an asset for the present value of the land and building usage lease. The calculation of the present value of the lease and the related discount to present value, 5%, are based on certain estimates of the fair value of the space, its annual lease value, and a discount rate. The land and building usage receivable is amortized to rent expense over the life of the lease. For the year ending June 30, 2023, the Organization recognized $70,000 of rent expense under this lease. The calculation of the land and building usage receivable from the City of Iowa City and the related discount to present value is based on certain estimates of the fair value of the space, its annual lease value, and a discount. Management believes the land and building usage receivable and discount to present value are reasonable estimates based on information currently known. However, circumstances impacting these estimates could occur which could significantly change these calculations. Land and Building Usage Receivable 256,648$ Less: Discount to Present Value (22,596) Net Present Value of Land and Building Usage Receivable 234,052$ Amounts due in Years Ending June 30: Less than One Year 70,000$ One to Five Years 164,052 More than Five Years - Total 234,052$ Future minimum rental payments to the City of Iowa City are $20,132 for each of the years ending June 30, 2024 through 2026, and $10,066 for the year ending June 30, 2027. NOTE 3 MORTGAGES RECEIVABLE Mortgages receivables consisted of 80 mortgages bearing no interest. The mortgages mature from October 2025 to June 2067 and are discounted for reporting purposes at rates ranging from 7.23% to 9.0%. Many of these mortgages serve as collateral for the various notes and grants payable of the Organization. When the first mortgage on each home is less than the market value, the Organization also obtains a second mortgage for the difference between the first mortgage and market value. The second mortgage, which is forgiven at the end of the first mortgage term, is assumed to have no economic value and, accordingly, is not recognized in the Organization’s financial statements. Each mortgage package is based on the affordability for the homeowner, and the funding received. Mortgage packages may consist of a combination of mortgages including, a third- party lender, a 0% interest with the Organization, a forgivable mortgage with the Organization, a silent or forgivable mortgage with additional funders that is not due unless the grant terms are not met or will be due at the time of sale. Mortgages in forbearance are in the process of being re-written to increase probability of collection and make payments affordable to homeowners. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 13 NOTE 3 MORTGAGES RECEIVABLE (CONTINUED) As of June 30, 2023, the composition of mortgages receivable is as follows: Mortgages Receivable 3,943,622$ Less: Unamortized Discount (1,801,380) Subtotal 2,142,242 Less: Current Portion (304,615) Mortgages Receivable, Net 1,837,627$ The following table shows an aging analysis of the loan portfolio by time past due as of June 30, 2023: Current 30-89 Days Past Due 90 days or More Past Due Total Mortgages Receivable 3,446,757$ 294,659$ 202,206$ 3,943,622$ NOTE 4 NOTES PAYABLE Short-term notes payable consist of the following as of June 30, 2023: The Organization has note payable to Great Western Bank secured by property located in Iowa City, Iowa. The note requires monthly payments of $389 at 0% interest, with final payment due November 2023. Subsequent to year-end, this note was extended to November 2028. The note carries a balance of $46,291 as of June 30, 2023. The Organization has a $100,000 revolving line of credit with Hills Bank. The line bears interest rate equal to 1.0 percentage points over the prime rate as published in the Wall Street Journal, which amounted to 5.75% as of June 30, 2023 and has a maturity date of July 2024. The line is secured by substantially all assets of the Organization. There were no borrowings on the line of credit during the year ended June 30, 2023. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 14 NOTE 4 NOTES PAYABLE (CONTINUED) Long-term notes payable consist of the following as of June 30, 2023: Description Notes payable to Habitat for Humanity of Iowa, requiring monthly installments ranging from $246 to $1,321, interest ranging from 2% to 4% with final payments due between September 2024 and December 2033. Notes are secured by certain mortgage notes secured by property in Coralville, Iowa City, Marengo, North Liberty, Tipton, and Washington, Iowa.237,267$ Notes payable to the City of Iowa City, requiring annual installments ranging from $1,619 to $2,320, at 0% interest, with final payment due March 2032. Notes are secured by certain mortgage notes that are also secured by property in Iowa City, Iowa.35,859 Notes payable to the Housing Trust Fund of Johnson County, requiring monthly installments ranging from $131 to $1,192, with interest rates ranging from 0% to 1%, with final payments due between December 2026 and January 2029. Imputed interest totals $19,653 as of June 30, 2023. Notes are secured by certain mortgage notes that are also secured by property in Iowa City, Coralville, and Hills, Iowa.268,966 Note payable to the Housing Trust Fund of Johnson County, requiring annual payment of $1,000, at 0% interest, with final payment due April 2025. 1,000 Three Notes payable to the Housing Trust Fund of Johnson County, each requiring payment of $20,000 at closing, then monthly installments of $167, at 0% interest. The notes mature December 2040. Imputed interest totals $7,175 as of June 30, 2023. Notes are secured by certain mortgage notes that are also secured by property in Iowa City, Iowa.84,500 IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 15 NOTE 4 NOTES PAYABLE (CONTINUED) Description (Continued) Notes payable to MidWestOne Bank, requiring monthly payments ranging from $385 to $2,077 at interest rates ranging from 0% to 5%, with final payments due between November 2025 and October 2037. Imputed interest totals $6,471 as of June 30, 2023. Notes are secured by property located in Iowa City, Iowa.$269,194 Note payable to Green State Credit Union, requiring monthly payments of $375, at 0% interest, with final payment due January 2034. Imputed interest totals $7,482 as of June 30, 2023. This note is secured by property located in Iowa City, Iowa.48,000 Note payable to Hills Bank, requiring monthly payments of $333, at 0% interest, with final payment due October 2038. Imputed interest totals $13,082 as of June 30, 2023. This note is secured by property located in Iowa City, Iowa.61,334 Note payable to Hills Bank, requiring monthly payments of $435, at 1.5% interest, with final payment due October 2033. Imputed interest totals $4,031 as of June 30, 2023. This note is secured by property located in Iowa City, Iowa.49,829 Notes payable to Hills Bank, requiring monthly payments ranging from $491 to $1,292, carrying interest rates at rates ranging from 3.90% to 5.08%, with final payments of principal and interest due between August 2025 and April 2026. The notes are secured by specific properties located in Iowa City and Kalona, Iowa.215,959 Total Long-Term Notes Payable 1,271,906 Less: Current Portion (138,282) Less: Imputed Interest on 0% Loans (57,894) Long-Term Notes Payable, Net 1,075,730$ Maturities of long-term notes payable are as follows: Year ending June 30: 2024 138,282$ 2025 138,927 2026 410,173 2027 166,645 2028 130,230 Thereafter 287,649 Total 1,271,906$ IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 16 NOTE 5 REFUNDABLE ADVANCES Grants received with conditions and or continuing compliance requirements are recognized when earned and conditions are satisfied. If mortgages are obtained to secure the grantor’s interest, grant revenue is recognized over the term of mortgages. Refundable advances consist of the following as of June 30, 2023: Description Refundable Advance from the City of Iowa City at 0% interest, with release on February 2033, provided certain terms are fulfilled. This advance is pledged by property located in Iowa City, Iowa.295,000$ Refundable Advance from Iowa Finance Authority at 0% interest, with release based on ten year retention by the owners of property located in Iowa City, Iowa.7,000 Total Refundable Advances 302,000 Less: Current Portion (3,500) Total Refundable Advances, Net 298,500$ Refundable advances are scheduled to be released over the following years: Year ending June 30: 2024 3,500$ 2025 3,500 2026 - 2027 - 2028 - Thereafter 295,000 Total 302,000$ NOTE 6 NET ASSETS WITH DONOR RESTRICTION Net assets with donor restriction are available for the following purposes for the years ending June 30, 2023: Home Construction $127,111 Future Operations 57,894 Building Lease 234,052 Total $419,057 IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 17 NOTE 7 RETIREMENT PLAN The Organization sponsors a SIMPLE IRA Plan (the Plan) covering all employees who received at least $5,000 in compensation, as defined by the Plan, during the previous year and who are reasonably expected to receive at least $5,000 in compensation during the current year. The Organization matches participant’s contributions to the Plan up to 3% of the individual participant’s compensation. The Organization’s contribution into the Plan for the year ended June 30, 2023 totaled $11,864. NOTE 8 LEASES The Organization has operating leases for communication services and finance leases for office equipment and construction equipment with remaining lease terms of one to five years. Payments under these lease arrangements are all fixed. Future minimum lease payments under non-cancellable leases are as follows as of June 30, 2023: Year Ending June 30 Finance Leases Operating Leases 2024 17,351$ 21,857$ 2025 14,225 20,131 2026 9,634 20,131 2027 4,344 20,131 2028 1,851 - Thereafter - - Undiscounted Cash Flows 47,405 82,250 Less: Imputed Interest (3,984) (6,613) Total Present Value 43,421$ 75,637$ Lease costs for the year ended June 30, 2023 were as follows: Finance lease cost, amortization 9,478$ Finance lease cost, interest 1,466 Operating lease costs 27,091 Total lease costs 38,035$ Supplemental Disclosures of Cash Flow Information: Operating cash outflows from operating leases $27,091 Financing cash outflows from finance leases 10,584 Supplemental Schedule of Noncash Investing and Financing Activities: ROU asset obtained in exchange for finance lease liability $19,252 ROU asset obtained in exchange for operating lease liability $19,352 The following table presents the weighted-average lease term and discount rate for finance and operating leases as of June 30, 2023: Weighted-average remaining lease term, finance leases 3.2 years Weighted-average remaining lease term, operating leases 4.1 years Weighted-average discount rate, finance leases 5.0% Weighted-average discount rate, operating leases 5.0% IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 18 NOTE 9 RELATED PARTY TRANSACTIONS The Organization contributed $6,000 to Habitat for Humanity International for the year ended June 30, 2023. The Organization paid $7,500 to Habitat for Humanity International for association fees for the year ended June 30, 2023. The Organization has outstanding notes payable to Habitat for Humanity of Iowa (HFHIA) totaling $237,267 as of June 30, 2023. Total payments to HFHIA were $61,009 for the year ended June 30, 2023. The Organization also paid HFHIA $4,400 for AmeriCorp fees for the year ended June 30, 2023. The Organization paid HFHIA $3,500 for IFA HOME grant fees for down-payment assistance for the year ended June 30, 2023. The Organization paid HFHIA $3,500 for advocacy during the year ended June 30, 2023. NOTE 10 LIQUIDITY The Organization regularly monitors the availability of resources required to meet its operating needs and other commitments, while also striving to maximize the investment of its available funds. For purposes of analyzing resources available to meet general expenditures over a 12-month period, the Organization considers all expenditures related to its ongoing activities as well as the conduct of services to support those activities to be general expenditures. Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of the date of the statement of financial position, comprise the following: Cash 170,347$ Accounts Receivable 160,803 Escrow Receivable 32,852 Grants Receivable 83,465 Current Portion of Mortgages Receivable 304,615 752,082$ In addition to the financial assets available to meet general expenditures over the next 12 months, the Organization operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures. NOTE 11 CONCENTRATION OF CREDIT RISK Financial instruments that potentially subject the Organization to concentrations of credit risk consist principally of cash deposits. Amounts at each financial institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Organization may at times have balances in excess of FDIC insured limits. IOWA VALLEY HABITAT FOR HUMANITY NOTES TO FINANCIAL STATEMENTS JUNE 30, 2023 19 NOTE 14 SUBSEQUENT EVENTS Management has evaluated subsequent events through December 19, 2023, the date the financial statements were available to be issued. Events or transactions occurring after June 30, 2023, but prior to December 19, 2023, that provided additional evidence about conditions that existed at June 30, 2023, have been recognized in the financial statements for the year ended June 30, 2023. Events or transactions that provided evidence about conditions that did not exist at June 30, 2023, but arose before the financial statements were available to be issued, have not been recognized in the financial statements for the year ended June 30, 2023. Subsequent to year-end the Organization obtained new debt financing through the Iowa Small Business Administration to replace the warehouse destroyed by tornado in March 2023. The loan allows for borrowings up to $212,000 and no funds have been received as of fieldwork date.