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HomeMy WebLinkAboutInside Out FinancialINSIDE OUT REENTRY INC. Financial Statements Year Ended July 31, 2023 TABLE OF CONTENTS Page No. INDEPENDENT AUDITOR'S REPORT 1 - 2 FINANCIAL STATEMENTS Statement of Financial Position - Modified Cash Basis 3 Statement of Activities - Modified Cash Basis 4 Statement of Functional Expenses - Modified Cash Basis 5 Notes to Financial Statements 6 - 9 -1- Independent Auditor’s Report To the Board of Directors Inside Out Reentry Inc. Report on the Audit of the Financial Statements Opinion We have audited the financial statements of Inside Out Reentry Inc., which comprise the statement of financial position – modified cash basis as of July 31, 2023, and the related statements of activities – modified cash basis and functional expenses – modified cash basis 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 assets, liabilities, and net assets of Inside Out Reentry Inc. as of July 31, 2023, and its support, revenue, and expenses for the year then ended in accordance with the modified cash basis of accounting described in Note 1. 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 Inside Out Reentry Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Emphasis of Matter — Basis of Accounting We draw attention to Note 1 of the financial statements, which describes the basis of accounting. The financial statements are prepared on the modified cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Change in Accounting Principle As discussed in Note 1 to the financial statements, the entity has elected to change its method of accounting from the cash basis of accounting to the modified cash basis of accounting. Our opinion is not modified with respect to this matter. 1529 Indian Avenue, Tipton, Iowa 52772 (563) 886-4533 susan@sstutzelcpa.com -2- Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with the modified cash basis of accounting described in Note 1, and for determining that the modified cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible 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. 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 Inside Out Reentry Inc.’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 Inside Out Reentry Inc.’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. S Stutzel, CPA Tipton, Iowa December 15, 2023 Assets Current Assets Cash 66,363$ Total Current Assets 66,363 Property Reentry House 370,403 Less: Accumulated Depreciation (3,957) Net Property 366,446 Total Assets 432,809$ Liabilities and Net Assets Current Liabilities Accrued Payroll Liabilities 4,005$ Current Portion Note Payable 5,000 Total Current Liabilities 9,005 Long-Term Liabilities Note Payable 70,000 Forgivable Notes Payable 200,000 Total Long-Term Liabilities 270,000 Net Assets without Donor Restriction 146,017 Net Assets with Donor Restriction 7,787 Total Net Assets 153,804 Total Liabilities and Net Assets 432,809$ -3- See accompanying notes to financial statements. INSIDE OUT REENTRY INC. STATEMENT OF FINANCIAL POSITION - MODIFIED CASH BASIS July 31, 2023 Net Assets Without Donor Restriction: Unrestricted Revenues, Gains and Other Support Grants 164,093$ Donations 75,455 Fundraising 16,455 Other Revenues 164 Unrestricted Revenues, Gains and Other Support 256,167 Satisfaction of Program Restriction 32,852 Total Unrestricted Revenues, Gains and Other Support 289,019 Expenses Program Services 170,727 Management and General 31,625 Fundraising 8,620 Total Expenses 210,972 Change in Net Assets Without Donor Restriction 78,047 Net Assets Without Donor Restriction at Beginning of Year 67,970 Net Assets Without Donor Restriction at End of Year 146,017$ Net Assets With Donor Restriction: Grants 4,503$ Satisfaction of Program Restriction (32,852) Change in Net Assets With Donor Restriction (28,349) Net Assets With Donor Restriction at Beginning of Year 36,136 Net Assets With Donor Restriction at End of Year 7,787$ -4- INSIDE OUT REENTRY INC. STATEMENT OF ACTIVITIES - MODIFIED CASH BASIS Year Ended July 31, 2023 See accompanying notes to financial statements. Program Services Management & General Fundraising Total Wages 105,500$ 16,731$ 4,780$ 127,011$ Payroll Taxes 8,436 1,280 - 9,716 Insurance 4,652 587 - 5,239 Professional Fees - 9,444 - 9,444 Participant Assistance 8,326 - - 8,326 Office Expenses 6,281 294 3,840 10,415 Occupancy 24,225 1,672 - 25,897 Information Technology 2,374 1,577 - 3,951 Program Supplies 5,088 - - 5,088 Special Projects 426 - - 426 Depreciation 3,957 - - 3,957 Miscellaneous 1,462 40 - 1,502 Total Expenses 170,727$ 31,625$ 8,620$ 210,972$ See accompanying notes to financial statements. -5- Supporting Services INSIDE OUT REENTRY INC. STATEMENT OF FUNCTIONAL EXPENSES - MODIFIED CASH BASIS Year Ended July 31, 2023 INSIDE OUT REENTRY INC. NOTES TO FINANCIAL STATEMENTS - 6 - NOTE 1: Nature of Business and Summary of Significant Accounting Policies Nature of Activities Inside Out Reentry Inc. (the Organization) is a public non-profit organization based in Iowa City and serves people returning to Johnson County after incarceration. The mission of Inside Out Reentry Inc. is to support people involved in the criminal legal system and educate the public in order to promote healing, restore relationships and reduce recidivism. The organization aims to reduce the social sigma returning citizens often feel by offering a drop-in resource center, mentoring, and community meetings. Basis of Accounting The accompanying financial statements have been prepared on the modified cash basis of accounting. The modified cash basis method of accounting differs from accounting principles generally accepted in the United States of America primarily because certain revenues are recognized when received rather than when earned and certain expenses are recognized when paid rather than when the obligation is incurred. The Organization has modified the cash basis of accounting as follows: • major expenditures for property and equipment are capitalized and depreciated over their estimated useful lives; • accrued payroll and benefit expenses are reported as liabilities. Noncash transactions, except depreciation, are not recognized. Change in Accounting Principles During fiscal year ended July 31, 2023, the Organization changed from the cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America to the modified cash basis of accounting primarily due to purchasing property that is significant to the financial statements and will be depreciated over an estimated useful life. Use of Estimates in Preparing Financial Statements Management uses estimates and assumptions in preparing these financial statements in accordance with the modified cash basis of accounting. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements, and the reported revenues, expenses, gains, losses, and other changes in net assets during the reporting period. Actual results could vary from the estimates that were used. Property Property is recorded at cost when purchased. Additions and improvements with a cost of $10,000 or more and a useful life of greater than three years are capitalized. Ordinary maintenance and repairs are charged to expense as incurred. Property consists of a house to be used for reentry participants. Depreciation is provided for by the straight-line method over the estimated useful life of the house, which is 39 years. INSIDE OUT REENTRY INC. NOTES TO FINANCIAL STATEMENTS - 7 - NOTE 1: Nature of Business and Summary of Significant Accounting Policies (Continued) Financial Statement Presentation The Organization is required to report information regarding its financial position and activities according to two classes of net assets: net assets without donor restriction and net assets with donor restriction. Net Assets with Donor Restriction: Net assets subject to donor (or certain grantor) 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. Donor-imposed restrictions are released when a restriction expires, that is, when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both. Net Assets without Donor Restriction: Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions. Contributions are recognized as support and revenues when they are received. Contributions that are restricted by the donor are reported as increases in net assets without donor restriction 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 restriction. When a restriction expires, net assets with donor restriction are reclassified to net assets without donor restriction and reported in the statement of activities – modified cash basis as net assets released from restrictions. Functional Expense Allocation The costs of providing various program and supporting services have been summarized on a functional basis in the statement of functional expenses – modified cash basis. Accordingly, certain costs have been allocated among the programs and supporting services benefited. The expenses that are allocated include office expenses, insurance and occupancy which are allocated based on square footage and wages and payroll taxes which are allocated based on time studies. Income Tax Status The Organization is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to the Organization’s tax-exempt purpose is subject to taxation as unrelated business income. Management has determined the Organization did not receive any unrelated business income for the year ended July 31, 2023. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as an organization other than a private foundation under Section 509(a)(2). INSIDE OUT REENTRY INC. NOTES TO FINANCIAL STATEMENTS - 8 - NOTE 2: Notes Payable and Forgivable In March 2023, the Organization obtained a long-term note payable from the Housing Trust Fund of Johnson County with an original amount of $75,000 bearing no interest. The note calls for monthly payments of $417 beginning September 2023 until maturity, September 2038. The loan is secured by a mortgage on a property in Iowa City, Iowa with a net book value of approximately $366,000 as of July 31, 2023. In March 2023, the Organization also obtained a long-term forgivable note payable from the Housing Trust Fund of Johnson County in the amount of $100,000 bearing no interest, with release in September 2038, provided certain terms are fulfilled. In March 2023, the Organization also obtained a long-term forgivable note payable from the City of Iowa City in the amount of $100,000 bearing no interest, with release in September 2038, provided certain terms are fulfilled. NOTE 3: Designated Agency Quasi-Endowment Fund The Community Foundation of Johnson County (“Foundation”) holds assets reserved for Inside Out Reentry Inc. and is designated by the Foundation to the First Baptist Church Fund FBO Inside Out Reentry Inc. Endowment Fund. Assets held by the Foundation consist of donations by third parties, therefore, no balance is reflected on the financial statements of Inside Out Reentry Inc. The Organization can request approved amounts to be paid out of the Quasi-Endowment fund to support the charitable activities of the Organization. During the year ended July 31, 2023, the organization requested and received support in the amount of $57,553 and the endowment assets totaled approximately $521,000 at year-end. NOTE 4: Concentrations For the year ended July 31, 2023, the Organization received approximately 12% of its revenues from Johnson County and 18% from the City of Iowa City. NOTE 5: Lease Commitments The Organization leases facilities in Iowa City, Iowa with a third party under an operating lease agreement beginning April 2023 and ending March 2024. The lease calls for monthly rent payments of $1,072 from April through September, and then no rent is due from October through March. Rent payments for the year ended July 31, 2023 were $12,864. Commitments for the year ending July 31, 2024 are $2,144. The Organization will relocate at the end of the lease term. NOTE 6: Liquidity It is the Organization’s policy to structure its financial assets to be available as its general expenditures, liabilities, and other obligations come due. The Organization has $66,363 of financial assets available within one year of the statement of financial position date to meet cash needs for general expenditures. As of July 31, 2023, $7,787 of the financial assets are subject to donor or other contractual restrictions that make them unavailable for general expenditures within one year of the statement of financial position date. INSIDE OUT REENTRY INC. NOTES TO FINANCIAL STATEMENTS - 9 - NOTE 7: Fundraising Activities The Organization engages in minor fundraising efforts and related fundraising income and expense have been presented separately on the statement of activities – modified cash basis. NOTE 8: Net Assets With Donor Restriction Net assets with donor restriction for a purpose restriction are available for the following purposes as of July 31, 2023: Reentry House 3,284$ Writers Workshop 753 Financial Literacy Program 3,750 7,787$ NOTE 9: Subsequent Events In preparing the accompanying financial statements, management evaluated subsequent events through December 15, 2023, the date the financial statements were available to be issued, for material subsequent events requiring recognition or disclosure. Subsequent to year-end, the Organization received a property located in the Iowa City area from a donor. A value has not yet been determined as the organization is awaiting an appraisal as of the report date.