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HomeMy WebLinkAboutNCJC Financial NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Financial Statements Years Ended June 30, 2023 and 2022 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Contents Page(s) Independent Auditors’ Report 1-3 Financial Statements: Statements of Financial Position 4 Statements of Activities and Changes in Net Assets 5 Statements of Cash Flows 6 Statement of Functional Expenses - 2023 7 Statement of Functional Expenses - 2022 8 Notes to Financial Statements 9-16 Supplementary Information: Schedules of Program Revenue and Support 17 Schedule of Expenditures of Federal Awards 18-19 Independent Auditors’ Report on Internal Control over Financial Reporting and on Compliance Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 20-21 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance required by the Uniform Guidance 22-24 Schedule of Findings and Response and Prior Audit Findings 25-26 FORGEAHEAD.COM 1245 JORDAN CREEK PKWY #100 WEST DES MOINES, IA 50266 515.620.3050 Independent Auditors’ Report To the Board of Directors of Neighborhood Centers of Johnson County Iowa City, Iowa Report on the Financial Statements Opinion We have audited the accompanying financial statements of Neighborhood Centers of Johnson County as of and for the years ended June 30, 2023 and 2022, which comprise the statements of financial position, the related statements of activities and changes in net assets, cash flows, and functional expenses for the years then ended, and the related notes to the financial statements. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Neighborhood Centers of Johnson County as of June 30, 2023 and 2022, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinions We conducted our audits 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. 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 Neighborhood Centers of Johnson County and to meet our other ethical responsibilities, in accordance with 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 opinions. Responsibilities of Management 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, 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 Neighborhood Centers for Johnson County’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued. Auditors’ 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 opinions. 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 generally accepted auditing standards and Government Auditing Standards 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 judgement made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we: x Exercise professional judgment and maintain professional skepticism throughout the audit. x 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. x 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 the Organization’s internal control. Accordingly, no such opinion is expressed. x 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. x Conclude whether, in our judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization’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. 2 Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements of Neighborhood Centers of Johnson County taken as a whole. The accompanying schedules of program revenue and support and expenditures of federal awards are presented for purposes of additional analysis and are not a required part of the financial statements. The schedule of expenditures of federal awards is presented as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. 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 audits 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 7, 2024, on our consideration of Neighborhood Centers of Johnson County’s internal control over financial reporting and our tests of its compliance with certain provisions of laws, regulations, contracts, 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 Neighborhood Centers of Johnson County’s internal control over financial reporting and compliance. Emphasis of Matter - Prior Period Adjustment As discussed in Note 15 to the financial statements, the June 30, 2022 financial statements have been restated to correct a misstatement. Our opinion is not modified with respect to this matter. Forge Financial and Management Consulting, Inc. West Des Moines, Iowa March 7, 2024 3 2023 2022 Assets: Cash and cash equivalents $ 870,479 1,795,616 Certificate of deposit 1,321,240 199,614 Program receivables 153,267 245,793 Unconditional promises to give - United Way 125,333 127,500 Unconditional promises to give - Johnson County 91,281 88,622 Property and equipment, net of accumulated depreciation 637,982 547,435 Total assets $ 3,199,582 3,004,580 2023 2022 Liabilities: Accounts payable $ 26,603 45,959 Accrued wages 49,342 54,485 Accrued and withheld payroll taxes 8,293 8,698 Accrued compensated absences 98,375 108,677 Refundable advance 983,270 866,282 Other liabilities 6,544 6,544 Long-term debt 404,973 406,811 Total liabilities 1,577,400 1,497,456 Net assets: Without donor restrictions 1,288,164 1,178,809 With donor restrictions 334,018 328,315 Total net assets 1,622,182 1,507,124 Total liabilities and net assets $ 3,199,582 3,004,580 See accompanying notes to financial statements. NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Statements of Financial Position June 30, 2023 and 2022 Liabilities and Net Assets Assets 4 Without Donor With Donor Without Donor With Donor Restrictions Restrictions Total Restrictions Restrictions Total Revenue: Service fees $ 2,252,719 - 2,252,719 2,275,604 - 2,275,604 Interest revenue 15,110 - 15,110 2,753 - 2,753 COVID stipends - - - 96,000 - 96,000 Other 30,051 - 30,051 9,767 - 9,767 Total revenue 2,297,880 - 2,297,880 2,384,124 - 2,384,124 Support: Contributions 56,858 69,776 126,634 38,941 56,336 95,277 General support 65,794 219,273 285,067 14,399 216,122 230,521 Grants and awards 199,745 - 199,745 201,573 - 201,573 ARPA funds 407,709 - 407,709 162,368 - 162,368 Total support 730,106 289,049 1,019,155 417,281 272,458 689,739 Net assets released from restrictions 283,346 (283,346) - 290,200 (290,200) - Total revenue and support 3,311,332 5,703 3,317,035 3,091,855 (17,742) 3,074,113 Expenses: Program services: Education and support 2,163,332 - 2,163,332 2,095,836 - 2,095,836 Prevention 235,691 - 235,691 248,365 - 248,365 Total program services 2,399,023 - 2,399,023 2,344,201 - 2,344,201 Supporting activities: Management and general 767,341 - 767,341 534,946 - 534,946 Fundraising 35,613 - 35,613 36,224 - 36,224 Total supporting activities 802,954 - 802,954 571,170 - 571,170 Total expenses 3,201,977 - 3,201,977 2,915,371 - 2,915,371 Change in net assets 109,355 5,703 115,058 176,484 (17,742) 158,742 Beginning net assets, restated 1,178,809 328,315 1,507,124 1,002,325 346,057 1,348,382 Ending net assets $ 1,288,164 334,018 1,622,182 1,178,809 328,315 1,507,124 See accompanying notes to financial statements. 2022 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Statements of Activities and Changes in Net Assets For the Years Ended June 30, 2023 and 2022 2023 5 2023 2022 Operating activities: Change in net assets $ 115,058 158,742 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 68,620 54,705 Gain on disposal of fixed assets - 250 Increase in assets: Program receivables and unconditional promises to give 92,034 (2,962) Increase (decrease) in liabilities: Accounts payable (19,356) (4,152) Accrued expenses (15,850) (45,625) Deferred revenue - (9,078) Refundable advance 116,988 866,282 Net cash provided by operating activities 357,494 1,018,162 Investing activities: Purchase of property, furniture and equipment (159,167) (72,952) Purchase of certificate of deposit (1,110,811) - Interest reinvested from certificate of deposit (10,815) (1,481) Net cash used by investing activities (1,280,793) (74,433) Financing activity: Payments on long-term debt (1,838) (1,838) Net cash used by financing activity (1,838) (1,838) Net increase (decrease) in cash (925,137) 941,891 Cash, beginning of year 1,795,616 853,725 Cash, end of year $ 870,479 1,795,616 See accompanying notes to financial statements. NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Statements of Cash Flows For the Years Ended June 30, 2023 and 2022 6 Education and Support Prevention Total Management and General Fundraising Total Total Expenses Salaries and wages $ 1,607,030 161,606 1,768,636 458,304 22,941 481,245 2,249,881 Payroll taxes and benefits 221,666 21,045 242,711 62,510 5,108 67,618 310,329 Payroll fees 65,349 6,568 71,917 19,083 927 20,010 91,927 Food and supplies 74,250 6,565 80,815 4,130 - 4,130 84,945 Program expenses (lic. fee/rec./other) 19,860 2,932 22,792 1,362 - 1,362 24,154 Vehicle expenses 2,074 1,864 3,938 1,742 - 1,742 5,680 Transportation - bus 129 - 129 - - - 129 Conference travel - 497 497 3,625 - 3,625 4,122 Mileage and parking 5,587 1,347 6,934 531 - 531 7,465 Utilities and occupancy 15,695 - 15,695 5,250 - 5,250 20,945 Job recruitment 874 - 874 50 - 50 924 Advertisement - - - 918 73 991 991 Staff appreciation 283 - 283 469 - 469 752 Fundraising - - - 36 5,691 5,727 5,727 Insurance - - - 35,016 - 35,016 35,016 Educational materials and program supplies 53,358 6,165 59,523 23,699 - 23,699 83,222 Telephone 7,786 - 7,786 2,317 - 2,317 10,103 Office expenses 5,577 - 5,577 6,142 65 6,207 11,784 Postage - - - 1,133 - 1,133 1,133 Stipends and incentives 30 15,689 15,719 3,061 - 3,061 18,780 Staff development and training 23,184 7,697 30,881 9,132 311 9,443 40,324 Dues and subscriptions 7,675 321 7,996 2,311 497 2,808 10,804 Internet 2,782 - 2,782 927 - 927 3,709 Audit expense 10,010 - 10,010 17,140 - 17,140 27,150 Other expenses 3,338 24 3,362 9,427 - 9,427 12,789 Bad debt expense 10,495 - 10,495 - - - 10,495 Contract services 335 3,197 3,532 - - - 3,532 Equipment service expense 3,567 - 3,567 606 - 606 4,173 Space rental - 100 100 1,200 - 1,200 1,300 Depreciation - - - 68,620 - 68,620 68,620 Maintenance 22,398 74 22,472 27,255 - 27,255 49,727 Interest expense - - - 1,345 - 1,345 1,345 Total expenses $ 2,163,332 235,691 2,399,023 767,341 35,613 802,954 3,201,977 See accompanying notes to financial statements. Supporting ActivitiesProgram Services NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Statement of Functional Expenses For the Year Ended June 30, 2023 7 Education and Support Prevention Total Management and General Fundraising Total Total Expenses Salaries and wages $ 1,571,807 180,919 1,752,726 301,954 26,682 328,636 2,081,362 Payroll taxes and benefits 222,739 26,919 249,658 41,668 5,823 47,491 297,149 Payroll fees 64,393 7,412 71,805 17,769 1,093 18,862 90,667 Food and supplies 79,883 7,475 87,358 1,611 34 1,645 89,003 Program expenses (lic. fee/rec./other) 15,534 4,889 20,423 868 - 868 21,291 Vehicle expenses 3,149 3,228 6,377 5,842 - 5,842 12,219 Transportation - bus - 65 65 87 - 87 152 Mileage and parking 3,180 1,006 4,186 22 - 22 4,208 Utilities and occupancy 15,860 - 15,860 5,327 - 5,327 21,187 Job recruitment 160 - 160 2,354 - 2,354 2,514 Advertising 175 - 175 65 - 65 240 Staff appreciation 582 - 582 8,496 - 8,496 9,078 Fundraising - - - - 1,619 1,619 1,619 Insurance - - - 28,837 - 28,837 28,837 Educational materials and program supplies 43,265 3,647 46,912 4,195 10 4,205 51,117 Telephone 5,467 - 5,467 1,160 - 1,160 6,627 Office expenses 16,937 163 17,100 4,181 65 4,246 21,346 Postage - 8,529 8,529 933 400 1,333 9,862 Stipends and incentives 330 1,289 1,619 14,556 - 14,556 16,175 Staff development and training 7,807 351 8,158 53 63 116 8,274 Dues and subscriptions 6,154 - 6,154 3,579 435 4,014 10,168 Internet 2,422 - 2,422 807 - 807 3,229 Audit expense 6,650 - 6,650 11,600 - 11,600 18,250 Other expenses 8,276 175 8,451 9,392 - 9,392 17,843 Contract services 597 2,132 2,729 87 - 87 2,816 Equipment service expense 461 - 461 116 - 116 577 Space rental - - - 1,400 - 1,400 1,400 Depreciation - - - 54,705 - 54,705 54,705 Maintenance 20,008 166 20,174 12,890 - 12,890 33,064 Interest expense - - - 392 - 392 392 Total expenses $ 2,095,836 248,365 2,344,201 534,946 36,224 571,170 2,915,371 See accompanying notes to financial statements. Program Services Supporting Activities For the Year Ended June 30, 2022 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Statement of Functional Expenses 8 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 1 - Summary of Significant Accounting Policies Nature of Activities - Neighborhood Centers of Johnson County (the Organization) is a publicly supported organization that provides activity services to low-income residents of the Iowa City, Iowa area. Neighborhood Centers of Johnson County is dedicated to creating a better future for people and neighborhoods through programs that educate, strengthen families, and create a sense of community. The Organization is supported primarily by grants, awards, and general governmental allocations. The Organization’s fiscal year ends June 30. Significant accounting policies followed by the Organization are presented below. Basis of Accounting - The financial statements of the Organization have been prepared on the accrual basis of accounting and accordingly reflect significant receivables, payables and other liabilities. Basis of Presentation - The financial statements of the Organization have been prepared to report information regarding its financial position and activities according to the following net asset classifications: Net assets without donor restrictions - Net assets that are not subject to donor-imposed restrictions and may be expended for any purpose in performing the primary objectives of the organization. These net assets may be used at the discretion of the Organization’s management and the board of directors. Net assets with donor restrictions - Net assets subject to stipulations imposed by donors and grantors. All donor restrictions are temporary in nature; those restrictions will be met by actions of the Organization or by the passage of time. Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions. Expirations of donor restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. Contributions, including unconditional promises to give, are recognized as revenue in the period received. Conditional promises to give are not recognized until they become unconditional; that is, when the conditions on which they depend are substantially met. Contributions of assets other than cash are recorded at their estimated fair value. Contributions with donor-imposed restrictions that are met within the same reporting period are reported as donor restricted revenues, and a reclassification to net assets without donor restrictions is made to reflect the expiration of such restrictions. Contributions of land, buildings, and equipment without donor restrictions concerning the use of such long-lived assets are reported as revenues without donor restrictions. Contributions of cash or other assets to be used to acquire land, buildings, and equipment are reported as revenues with donor restrictions; the restrictions are considered to be released at the time of acquisition of such long-lived assets. 9 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 1 - Summary of Significant Accounting Policies (Continued) Contributions of donated goods 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. Community Development Block Grants (CDBG) received with terms that are forgivable as long as the entity does not sell, assign or transfer its interest are recorded as long-term debt. Revenue is recognized upon completion of the agreement terms as debt payments are not required to be made as long as the agreement is honored. Conditional occupancy loans are recorded as long-term debt until the end of the agreements, at which time the Organization will recognize revenue for the full amount. New Accounting Pronouncement – Leases – In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which supersedes existing guidance in Topic 840, Leases. The FASB subsequently issued the following additional ASUs, which amend and clarify Topic 842: ASU 2018-01, Land Easement Practical Expedient for Transition to Topic 842; ASU 2018-10, Codification Improvements to Topic 842, Leases; ASU 2018-11, Leases (Topic 842): Targeted Improvements; ASU 2018-20, Narrow-scope Improvements for Lessors; and ASU 2019-01, Leases (Topic 842): Codification Improvements. Topic 842 amends both lessor and lessee accounting with the most significant change being the requirement for lessees to recognize right-to-use (ROU) assets and lease liabilities on the balance sheet for operating leases. The Organization adopted the leasing standards effective July 1, 2022, using the modified retrospective approach with July 1, 2022 as the initial date of application. The Organization elected to use all available practical expedients provided in the transition guidance. These allowed the Organization to not reassess the identification, classification and initial direct costs of lessor agreements and to use hindsight in lessee and lessor agreements for determining lease term and right-of-use asset impairment. As of July 1, 2022, adoption of Topic 842 did not result in any material adjustments to balance sheet accounts related to lessor accounting. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents - Cash and cash equivalents include all monies in banks and highly liquid investments with an original maturity date of less than three months. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of those financial instruments. Income Taxes - The Organization is a nonprofit organization as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes. The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. 10 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 1 - Summary of Significant Accounting Policies (Continued) Program Receivables and Unconditional Promises to Give - The Organization carries its program receivables and unconditional promises at cost less an allowance for doubtful accounts, when necessary. On a periodic basis, the Organization evaluates its program receivables and unconditional promises and determines if an allowance is necessary based on history of past write-offs and collections and current credit conditions. Currently there is no allowance deemed necessary. Unconditional promises to give are receivable within one year. Impairment of Long-Lived Assets - The Organization reviews long-lived assets for impairment whenever events or changes in circumstances indicate the carrying amount 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 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 which the carrying amount of the asset exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of carrying amount or fair value less costs to sell. Revenue Recognition – The Organization receives revenue from contracts aimed to increase the ability to provide the services to low-income residents of the Iowa City, Iowa area. Revenue is recognized based on the progress of complete satisfaction of the performance obligation (the service stated in the contract) using the input method. The performance obligations under these contracts include providing the services and assistance to school-aged children. Under the input method, revenue is recognized based on labor hours expended, costs incurred, and time elapsed. Revenue from client service grants and contracts are recognized as the performance obligations are completed. Cost-reimbursable Grants - The majority of the Organization’s revenue is derived from cost-reimbursable federal grants, which are conditioned upon certain performance requirements and the incurrence of allowable qualifying expenses. Amounts received are recognized as revenue when the Organization has incurred expenditures in compliance with specific contract or grant provisions. Amounts received prior to incurring qualifying expenditures are reported as refundable advances in the statement of financial position. The Organization received advance funding from cost-reimbursable grants of $983,270 and $866,282 that has not been recognized at June 30, 2023, and 2022, respectively, because qualifying expenditures have not yet been incurred. These funds were reported as a refundable advance. Awarded grant contracts for which qualifying expenditures had not yet been incurred by year-end totaled $1,078,714 for the year ended June 30, 2023. Functional Expenses - The costs of providing various program and supporting activities have been summarized on a functional basis in the statement of functional expenses. Expenses that can be identified with a specific program or supporting activity are allocated directly according to their natural expenditure classification. Other expenses that are common to several functions are allocated based on time estimates made by management. Reclassifications - Certain prior year amounts in the financial statements have been reclassified to conform to the current year presentation. These reclassifications had no effect on previously reported change in net assets. Date of Management’s Review - Management has evaluated subsequent events through March 7, 2024, the date which the financial statements were available to be issued. 11 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 2 - Availability and Liquidity The following represents the Organization’s financial assets at June 30, 2023 and 2022: Financial assets at year-end: 2023 2022 Cash and cash equivalents $ 870,479 1,795,616 Certificates of deposit 1,321,240 199,614 Program receivables 153,267 245,793 Unconditional promises to give 216,614 216,122 Total financial assets 2,561,600 2,457,145 Less amounts not available to be used within one year: Net assets with donor restrictions (334,018) (328,315) Financial assets available to meet general expenditures Over the next twelve months $ 2,227,582 2,128,830 The Organization has a policy to build and maintain an adequate level of net assets without donor restrictions to support the Organization’s day-to-day operations in the event of unforeseen shortfalls. There is an operating reserve set aside as a designated fund to maintain ongoing operations and programs, with a target minimum equal to one month of average recurring operating costs. Note 3 - Property and Equipment Acquisitions of property and equipment in excess of $500 and a useful life of more than one year are capitalized. Property and equipment are carried at cost or, if donated, at the approximate fair value at the date of donation. Depreciation is computed using the straight-line method over the useful lives of the assets which range from 3 to 31.5 years. 2023 2022 Land improvements $ 134,063 79,617 Buildings and improvements 1,548,155 1,483,185 Office equipment 118,195 110,687 Vehicles 127,589 127,589 1,928,002 1,801,078 Less: accumulated depreciation 1,290,020 1,253,643 Net property and equipment $ 637,982 547,435 Depreciation expense for the years ended June 30, 2023 and 2022 was $68,620 and $54,705, respectively. Note 4 - Line of Credit The Organization had a line of credit with a local bank of $100,000. It had a variable interest rate based on the Wall Street Journal Prime Rate. The line of credit expired in January 2022 and has not been renewed. 12 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 5 - Long-Term Debt The Organization received CDBG funding of $185,000 through the City of Iowa City to complete the construction of the Pheasant Ridge location on the west side of Iowa City in 1997. The funding was in the form of a grant of $85,000 and a loan of $100,000. In the event that the Organization sells, assigns, or transfers its interest in the property prior to November 1, 2032, the Organization is required to pay back to the City of Iowa City the outstanding balance of the loan and an amount based on the fair market value of the property less any portion attributable to non-CDBG funds. In the event that the Organization ceases its services and/or programs at this location, all real and personal property secured by CDBG funds shall revert to the City of Iowa City. The loan agreement provides that the loan will be repaid in annual installments of $1,838, with interest at a rate of 1% per annum. The final payment is due November 1, 2032. The total amount payable at June 30, 2023 and 2022 was $16,025 and $17,863, respectively. A portion of the loan will not need to be repaid if the Organization does not sell the property or cease services prior to November 1, 2032. This amount is recorded as a conditional occupancy loan and will be forgiven at the end of the agreement. The total amount payable at June 30, 2023 and 2022 was $47,439. The Organization received a CDBG loan of $87,355 through the City of Iowa City to remodel the kitchen of the Pheasant Ridge location in 2009. The loan is considered a conditional occupancy loan. If the Organization does not sell the property or cease operations prior to June 30, 2036, the entire amount will be forgiven. The Organization received a CDBG loan of $29,600 through the City of Iowa City to replace the roof at the Pheasant Ridge center in 2012. The loan is considered a conditional occupancy loan. If the Organization does not sell the property or cease operations prior to September 1, 2023, the entire amount will be forgiven. The Organization received a CDBG loan of $74,547 through the City of Iowa City during the year ended June 30, 2014, to remodel the basement at the Broadway Center. The loan is considered a conditional occupancy loan. If the Organization does not sell the property or cease operations prior to September 1, 2023, the entire amount will be forgiven. The Organization received $108,307 through the City of Iowa City during the year ended June 30, 2017 as part of a CDBG loan for parking lot construction and building improvements at the Broadway Street location. The loan is considered a conditional occupancy loan. If the Organization does not sell the property or cease operations prior to September 30, 2026, the entire amount will be forgiven. The Organization received a CDBG loan of $41,700 through the City of Iowa City during the year ended June 30, 2019 for parking lot construction and building improvements at the Broadway Street location. The loan is considered a conditional occupancy loan. If the Organization does not sell the property or cease operations prior to June 30, 2024, the entire amount will be forgiven. 13 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 5 - Long-Term Debt (Continued) Future maturities of long-term debt are as follows: 2024 $ 147,493 2025 1,663 2026 1,679 2027 110,004 2028 1,714 Thereafter 142,420 Total $ 404,973 Note 6 - Economic Dependency The Organization is dependent upon federal, state and local monies to maintain its operations. In the event that grant monies are not available from such sources, Neighborhood Centers of Johnson County may not continue as a going concern. Note 7 - Contingent Liability The Organization is contingently liable to grantors for monies received until each grant has been closed by the grantor. Note 8 - Restrictions on Net Assets Net assets with donor restrictions consist of the following for the years ended June 30, 2023 and 2022: 2023 2022 Time restriction: United Way allocation $ 125,333 127,500 Johnson County allocation 91,281 88,622 Purpose restrictions: Community Development Block Grant 85,000 85,000 Youth sports contributions 29,852 27,193 GWorld program donation 2,552 - Total $ 334,018 328,315 The Community Development Block Grant of $85,000 states that the property purchased with the funds must be operated as a Neighborhood Center facility until 2032, at which time the restriction will be released. 14 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 8 - Restrictions on Net Assets (Continued) Net assets released from restrictions during the years ended June 30, 2023 and 2022 are as follows: 2023 2022 United Way allocation $ 127,500 127,500 Johnson County allocation 88,622 88,622 Summer camp contributions Youth sports contributions 14,625 3,124 21,111 41 GWorld program donations 49,475 35,964 Other grants - 16,962 Total $ 283,346 290,200 Note 9 - Major Revenue and Support Sources For the years ended June 30, 2023 and 2022, the major revenue and support sources consisted of the following percentages: 2023 2022 Grants and Awards: Johnson County Empowerment 11% 12% Iowa City School District 9% 13% Iowa Department of Education 15% 16% Program Services: Iowa Department of Human Services 13% 12% Note 10 - Cash Flow Disclosures Cash paid for interest for the years ended June 30, 2023 and 2022 was $1,345 and $392, respectively. Note 11 - Simple Plan The Organization initiated an elective SIMPLE IRA plan in 2007 covering substantially all employees. The Organization will match employee contributions up to 3% of gross income. The expense charged to operations for the plan was $22,442 and $24,323, for the years ended June 30, 2023 and 2022, respectively. Note 12 - Concentration of Credit Risk Cash in excess of daily requirements is invested in interest bearing accounts of qualified financial institutions in amounts that may exceed federal insured limits. The Organization believes the credit risk related to these deposits is minimal; however, the amount over the limit at June 30, 2023 and 2022 was $1,693,169 and $1,679,271, respectively. 15 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to Financial Statements June 30, 2023 and 2022 Note 14 - Refundable Advance (ARPA) During the years ended June 30, 2023 and 2022, the Organization received government assistance under the American Rescue Plan Act (ARPA) in the amount of $1,390,970 and $1,028,650, respectively. The Organization incurred eligible costs and recognized an amount of $407,709 and $162,368 as revenue in the statement of activities and changes in net assets as of June 30, 2023 and 2022, respectively. $983,270 and $866,282 of the amount was received in the year ended June 30, 2023 and 2022, respectively, but was not expended in the year then ended. These amounts have been recorded as deferred revenue at June 30, 2023 and 2022. Note 15 - Prior Period Adjustment During the year ended June 30, 2023, management determined that a reconciling item to cash was improperly recorded at June 30, 2021. The financial statements and notes have been restated to reduce cash and the beginning balance of net assets without donor restrictions by $94,827 for the year ended June 30, 2022. 16 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Supplementary Information June 30, 2023 and 2022 2023 2022 Service fees: Parent fees $ 330,390 284,139 Other 47,058 75,531 Iowa Department of Education at Risk Grants 491,931 490,292 Johnson County Empowerment Projects 362,521 379,997 Iowa Department of Human Services 420,147 358,592 Iowa City School District 309,698 403,702 State of Iowa Income-WRAP/PASS funding 100,800 90,168 VOCA Grant 94,178 118,742 Juvenile Crime Prevention Grants 95,996 74,441 Total service fees $ 2,252,719 2,275,604 General support: City of Iowa City $ 62,195 9,851 City of Coralville 1,628 1,628 Johnson County 93,940 88,622 United Way allocations 127,304 130,420 Total general support $ 285,067 230,521 Grants and awards: Child Care Food Program $ 140,986 144,573 Community Development Block Grant 58,759 57,000 Total grants and awards $ 199,745 201,573 For the Years Ended June 30, 2023 and 2022 Schedules of Program Revenue and Support NEIGHBORHOOD CENTERS OF JOHNSON COUNTY 17 Pass- Federal through CFDA Entity Federal Number Number Expenditures U.S. Department of Justice: Passed through the Iowa Department of Justice: Crime Victim Assistance 16.575 $ 82,378 U.S. Department of Health and Human Services: CCDF Cluster Passed through the Iowa Department of Human Services: * Child Care and Development Block Grant 93.575 100,800 * Child Care and Development Block Grant (ARP Child Care Stabilization Grants) COVID-19 93.575 407,709 Total for Assistance Listing #93.575 508,509 Total for CCDF Cluster 508,509 U.S. Department of the Treasury: Passed through Johnson County: Coronavirus State and Local Fiscal Recovery Funds 21.027 42,658 Passed through the city of Iowa City: Coronavirus State and Local Fiscal Recovery Funds 21.027 15,718 Total for Assistance Listing #21.027 58,376 U.S. Department of Agriculture: Passed through the State of Iowa Department of Education: Child and Adult Care Food Program 10.558 528037 140,986 Total Expenditures of Federal Awards $ 790,249 * - Denotes major program Program Title/Cluster NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2023 Federal Grantor/Pass-Through Grantor/ 18 Note 1 - Basis of Presentation The accompanying schedule of expenditures of federal awards (Schedule) includes the federal award activity of Neighborhoood Centers of Johnson County under programs of the federal government for the year ended June 30, 2023. 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 Neighborhood Centers of Johnson County, it is not intended to and does not present the financial position, changes in net assets, or cash flows of Neighborhood Centers of Johnson County. Note 2 - Summary of Significant Accounting Policies Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited to reimbursement. Note 3 - Indirect Cost Rate Neighborhood Centers of Johnson County opted not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. Note 4 - Subrecipients There were no awards passed through to subrecipients. NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Notes to the Schedule of Expenditures of Federal Awards For the Year Ended June 30, 2023 19 FORGEAHEAD.COM 1245 JORDAN CREEK PKWY #100 WEST DES MOINES, IA 50266 515.620.3050 Independent Auditors' Report on Internal Control over Financial Reporting and on Compliance Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards To the Board of Directors of Neighborhood Centers of Johnson County Iowa City, Iowa We have audited, in accordance with the 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 Neighborhood Centers of Johnson County, which comprise the financial statements as listed in the table of contents as of and for the year ended June 30, 2023, and have issued our report thereon dated March 7, 2024. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Neighborhood Centers of Johnson County’s internal control over financial reporting (internal control) as a basis for designing 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 Neighborhood Centers of Johnson County’s internal control. Accordingly, we do not express an opinion on the effectiveness of the Organization’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 possibility 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 and therefore, material weaknesses or significant deficiencies may exist that were not identified. We did identify a certain deficiency in internal control, described as 2023- 001 in the accompanying schedule of findings and response that we consider to be a material weakness. Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether Neighborhood Centers of Johnson County’s financial statements are free of 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. Forge Financial and Management Consulting, Inc. West Des Moines, Iowa March 7, 2024 21 FORGEAHEAD.COM 1245 JORDAN CREEK PKWY #100 WEST DES MOINES, IA 50266 515.620.3050 Independent Auditors’ Report on Compliance for Each Major Program and on Internal Control Over Compliance Required by the Uniform Guidance To the Board of Directors of Neighborhood Centers of Johnson County Iowa City, Iowa Report on Compliance for Each Major Federal Program Opinion on Each Major Federal Program We have audited Neighborhood Centers of Johnson County’s compliance with the types of compliance requirements described in the OMB Compliance Supplement that could have a direct and material effect on Neighborhood Centers of Johnson County’s major federal program for the year ended June 30, 2023. Neighborhood Centers of Johnson County’s major federal program is identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs. In our opinion, Neighborhood Centers of Johnson County complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on its major federal program for the year ended June 30, 2023. Basis for Opinion on Each Major Federal Program We conducted an 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 the audit 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). Our responsibilities under those standards and the Uniform Guidance are further described in the Auditor’s Responsibilities for the Audit of Compliance section of our report. We are required to be independent of Neighborhood Centers of Johnson County and to meet our other ethical responsibilities, in accordance with 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 opinion on compliance for each major federal program. Our audit does not provide a legal determination of Neighborhood Centers of Johnson County’s compliance with the compliance requirements referred to above. Responsibilities of Management for Compliance Management is responsible for compliance with the requirements referred to above and for the design, implementation, and maintenance of effective internal control over compliance with the requirements of laws, statutes, regulations, rules, and provisions of contracts or grant agreements applicable to Neighborhood Centers of Johnson County’s federal program. Auditors’ Responsibilities for the Audit of Compliance Our objectives are to obtain reasonable assurance about whether material noncompliance with the compliance requirements referred to above occurred, whether due to fraud or error, and express an opinion on Neighborhood Centers of Johnson County’s compliance based on our audit. 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 generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance will always detect material noncompliance when it exists. The risk of not detecting material noncompliance resulting from fraud is higher than for that resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Noncompliance with the compliance requirements referred to above is considered material if there is a substantial likelihood that, individually or in the aggregate, it would influence the judgement made by a reasonable user of the report on compliance about Neighborhood Centers of Johnson County’s compliance with the requirements of each major federal program as a whole. In performing and audit in accordance with generally accepted auditing standards, Government Auditing Standards, and the Uniform Guidance, we: x Exercise professional judgement and maintain professional skepticism throughout the audit. x Identify and assess the risks of material noncompliance, 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 Neighborhood Centers of Johnson County’s compliance with the compliance requirements referred to above and performing such other procedures as we considered necessary in the circumstances. x Obtain an understanding of Neighborhood Center of Johnson County’s internal control over compliance relevant to the audit in order to design audit procedures that are appropriate in the circumstances and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of Neighborhood Centers of Johnson County’s internal control over compliance. Accordingly, no such opinion is expressed. We are required to communicate with those charges with governance regarding, among other matters, the planned scope and timing of the audit and any significant deficiencies and material weaknesses in internal control over compliance that we identified during the audit. Report on 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 a 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. 23 Our consideration of internal control over compliance was for the limited purpose described in the Auditors’ Responsibilities for the Audit of Compliance section above and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses or significant deficiencies in internal control over compliance may exist that were not identified. Our audit was not designed for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, no such opinion is expressed. 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 the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Forge Financial and Management Consulting, Inc. West Des Moines, Iowa March 7, 2024 24 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Schedule of Findings and Response and Prior Audit Findings For the Year Ended June 30, 2023 Part I: Summary of independent auditors’ results 1. An unmodified opinion was issued on the financial statements. 2. The audit of the financial statements uncovered one material weakness in internal control over financial reporting. Additional material weaknesses may exist that have not been uncovered. 3. The audit did not disclose any non-compliance that is material to the financial statements. 4. There were no significant deficiencies or material weaknesses disclosed during the audit of compliance over major programs. 5. Auditor issued an unmodified opinion on compliance of major programs. 6. There were no reported audit findings relative to the major federal award programs. 7. The following program was considered to be a major program: a. CFDA #93.575 Child Care and Development Block Grant 8. The threshold between a Type A and Type B program was $750,000. 9. The auditee did not qualify as a low-risk auditee. Part II: Finding(s) related to the financial statements Material Weakness: Finding 2023-001: Material Audit Adjustments Condition: A key element of financial reporting is the ability of management to select and apply the appropriate accounting principles to prepare financial statements in accordance with accounting principles generally accepted in the United States of America. Material audit adjustments were necessary during this year’s audit in order for the financial statements to be in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Criteria: Internal controls should be in place that provide reasonable assurance that the financial statements are prepared in accordance with U.S. GAAP. Recommendation: We recommend that management review the audit adjustments and have proper procedures in place so that all material entries are made in QuickBooks to be in accordance with accounting principles generally accepted in the United States of America (U.S. GAAP). Response: Management will review material audit adjustments and will ensure that future adjustments are made or identified prior to the audit. Accounting personnel will request assistance from the auditor in cases of non-routine transactions. Conclusion: Response accepted. Part III: Finding(s) and questioned costs for federal awards: None 25 NEIGHBORHOOD CENTERS OF JOHNSON COUNTY Schedule of Findings and Response and Prior Audit Findings For the Year Ended June 30, 2023 Summary Schedule of Prior Audit Findings Findings Status 2022-001 Repeated as 2023-001 26