AUDIT REPORT FOR THE YEAR ENDED DECEMBER 31, 2018
Leave No Veteran Behind, Inc. Audit Report For the Year Ended December 31, 2018 Table of Contents
Independent Auditor's Report
1-2
Financial Statements: Statement of Financial Position
3
Statement of Activities
4
Statement of Functional Expenses Statement of Cash Flows Notes to the Financial Statements
5-6 7 8 - 13
INDEPENDENT AUDITOR’S REPORT
Board of Directors Leave No Veteran Behind, Inc. Chicago, Illinois
We have audited the accompanying financial statements of Leave No Veteran Behind, Inc., which comprise the statement of financial position as of December 31, 2018 and 2017, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Leave No Veteran Behind, Inc. as of December 31, 2018 and 2017, and the changes in its net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Effect of Adopting a New Accounting Standard As discussed in Note 1, the Organization adopted the Financial Accounting Standards Board’s Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities (Topic 958) – Presentation of Financial Statements of Not-for-Profit Entities as of and for the year ended December 31, 2018. The requirements of the ASU have been applied retrospectively to all periods presented. Our opinion is not modified with respect to this matter.
March 3, 2020
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Leave No Veteran Behind, Inc. Statement of Financial Position December 31,
2018
2017
Assets Cash Accounts receivable Grant receivable, current portion Due from employees Prepaid insurance
$
Total current assets Grant receivable, noncurrent portion Computer equipment, net Total assets
14,398 82,752 140,000 323,843 2,481
$
17,442 64,063 316,686 -
563,474
398,191
241,255 -
-
$
804,729
$
398,191
$
10,041 453,401 20,000 5,500
$
422,200 17,500 3,500
Liabilities and Net Assets (Deficit) Accounts payable Accrued liabilities Current portion of long-term debt Related party short-term advances Total current liabilities
488,942
443,200
Long-term debt, net of current portion
90,000
105,000
Total liabilities
578,942
548,200
Net assets (deficit): With donor restrictions Without donor restrictions
381,255 (155,468)
(150,009)
225,787
(150,009)
Total net assets (deficit) Total liabilities and net assets (deficit)
See accompanying notes and independent auditor's report. -3-
$
804,729
$
398,191
Leave No Veteran Behind, Inc. Statement of Activities December 31,
2018 Change in net assets (deficit) without donor restrictions: Revenue: Contract services Corporate contributions Individual contributions Foundation contributions Event-generated contributions Interest income In-kind
$
Total revenues without donor restrictions Expenses: Program services Administrative Fund-raising Total expenses Decrease in net assets (deficit) without donor restrictions
902,685 157,934 45,211 140,000 7,157 7,154
2017
$
1,260,141
1,011,402
897,447 234,695 133,458
775,170 145,414 120,642
1,265,600
1,041,226
(5,459)
Change in net assets with donor restrictions: Revenue: Foundation contributions
673,100 36,125 27,374 252,155 1,972 5,676 15,000
(29,824)
381,255
-
Increase in net assets with donor restrictions
381,255
-
Increase (decrease) in total net assets (deficit)
375,796
(29,824)
(150,009)
(120,185)
Net deficit, beginning of the year Net assets (deficit), end of the year
$
See accompanying notes and independent auditor's report. -4-
225,787
$
(150,009)
Leave No Veteran Behind, Inc. Statement of Functional Expenses For the Year Ended December 31, 2018
Program Services Officers' salaries Other salaries Veteran-provided services Payroll taxes and benefits Payroll processing fees Stipends Rent Insurance Telephone and internet services Professional fees Interest and bank charges Office supplies Travel and meals Auto expense Training Computer Other program expense Miscellaneous Total expenses
Administrative
Fund-raising
$
85,000 112,461 607,614 7,003 35,864 18,976 10 1,206 1,252 7,933 3,338 16,790 -
$
42,500 47,552 17,357 5,075 5,693 3,266 24,737 58,271 3,559 1,137 13,635 8,193 55 528 3,137
$
42,500 56,231 3,501 24,226 6,252 214 534
$
897,447
$
234,695
$
133,458
See accompanying notes and independent auditor's report. -5-
Total $
170,000 216,244 607,614 27,861 5,075 35,864 5,693 22,242 24,747 82,497 3,559 2,343 21,139 16,340 3,393 528 16,790 3,671
$ 1,265,600
Leave No Veteran Behind, Inc. Statement of Functional Expenses For the Year Ended December 31, 2017
Program Services Officers' salaries Other salaries Veteran-provided services Payroll taxes and benefits Payroll processing fees Stipends Rent Insurance Telephone and internet services Professional fees Interest and bank charges Office supplies Travel and meals Auto expense Computer Other program expense Miscellaneous Depreciation Total expenses
Administrative
Fund-raising
$
85,000 106,475 473,042 12,225 37,934 9,018 129 13,360 5,114 13,954 18,919 -
$
42,500 53,238 924 3,533 4,200 19,833 9,492 3,501 5,990 78 385 176 1,564
$
42,500 53,238 6,113 158 17,962 204 467 -
$
775,170
$
145,414
$
120,642
See accompanying notes and independent auditor's report. -6-
Total $
170,000 212,951 473,042 19,262 3,533 37,934 4,200 9,018 20,120 9,492 3,501 13,360 29,066 14,236 385 18,919 643 1,564
$ 1,041,226
Leave No Veteran Behind, Inc. Statement of Cash Flows For the Year Ended December 31,
2018 Cash flows from operating activities: Change in net assets (deficit) Adjustments to reconcile change in net assets (deficit) to net cash from operating activities: Depreciation Change in assets and liabilities: (Increase) decrease in accounts receivables Increase in grant receivable Increase in due from employees Increase in prepaid insurance Increase in accounts payable Increase in accrued liabilities
$
2017
375,796
$
-
1,564
(18,689) (381,255) (7,157) (2,481) 10,041 31,201
Net cash from operating activities
(29,824)
4,974 (125,446) 159,012
7,456
10,280
99,700 (97,700) (12,500)
21,500 (18,000) (12,500)
Net cash from financing activities
(10,500)
(9,000)
Net change in cash
(3,044)
1,280
17,442
16,162
Cash flows from financing activities: Proceeds from related party short-term advances Repayments on related party short-term advances Payments on long-term debt
Cash, beginning of the year Cash, end of the year
$
14,398
$
17,442
Supplemental disclosures of cash flow information: Cash paid during the year for interest
$
1,529
$
940
See accompanying notes and independent auditor's report. -7-
Leave No Veteran Behind, Inc. Notes to the Financial Statements
1. Summary of Significant Accounting Policies Purpose – Leave No Veteran Behind, Inc. (Organization) is an Illinois not-for-profit corporation. The Organization provides educational and employment services to veterans who face economic hardship. Through its innovative educational debt relief scholarship, community service, employment training, and job placement programs, Leave No Veteran Behind, Inc. invests in heroes who have honorably served our Nation and seek to continue their service as productive citizens in their communities. Basis of Presentation – The financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (hereafter referred to “U.S. GAAP”). In accordance with these principles, the Organization adheres to guidance provided by Accounting Standards Codification (ASC) No. 958-205. Under ASC 958-205, “Presentation of Financial Statements”, the Organization, if applicable, is required to report information regarding its financial position and activities according to two classes of net assets, namely without donor restrictions and with donor restrictions. Support that is restricted by donors as being available only in future accounting periods or for other specified events, is reported as with donor restrictions. Additionally, promises to give or pledges are recognized when the conditions of the promise or pledge have been substantially met by the Organization. Donor-restricted support whose restrictions are met in the same reporting period are reported as without donor restrictions support. Revenue and Expense Recognition – The financial statements of the Organization have been prepared on the accrual basis of accounting and, accordingly, all significant receivables, payables, and other liabilities have been reflected. Thus, revenue is recognized when earned and expenses are recognized when incurred. Support Recognition – Contributions, received or pledged, are recorded as without donor restrictions unless specifically restricted by the donor. All donor-restricted contributions are reported as an increase in net assets with donor restrictions and are reclassified to net assets without donor restrictions as the restrictions are met. In-Kind Services – Contributions of donated services or use of facilities that create or enhance non-financial 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. The value of in-kind services at December 31, 2018, consisted of $7,154 for audit and tax preparation services. The value of in-kind services at December 31, 2017, consisted of $15,000 for audit and tax preparation services.
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Leave No Veteran Behind, Inc. Notes to the Financial Statements (cont’d)
1. Summary of Significant Accounting Policies (cont’d) Use of Estimates – The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets, liabilities, activities, and the related disclosures at the date of the financial statements and during the reporting period. Actual results may differ from those estimates. New Accounting Pronouncement – The Financial Accounting Standards Board (FASB) issued ASU 2016-14, Not-for-Profit Entities (Topic 958) – Presentation of Financial Statements for Not-for-Profit Entities. This update addresses the complexity and understandability of net asset classification, deficiencies in information about liquidity and availability of resources, and the lack of consistency in the type of information provided about expenses and investment return. The Organization has adjusted the presentation of these statements accordingly. The ASU has been applied retrospectively to all periods presented. The amounts previously presented as temporarily restricted net assets and unrestricted net assets are now presented as net assets with donor restrictions and net assets without donor restrictions, respectively. In addition, disclosures regarding liquidity and availability in Note 2 were added. There were no changes to the balance of net assets or changes in net assets. Functional Expenses – The costs of program and supporting activities have been summarized on a functional basis in the statement of activities. The statements of functional expenses present the natural classification detail of expenses by function. Accordingly, certain costs have been allocated among the programs and supporting services benefitted. Expenses that can be identified with a specific program are applied to program service or supporting services directly. Other expenses that are attributed to more than one program or supporting function requires allocation on a reasonable basis. Officers’ salaries and other salaries are allocated based on estimated time spent by employee. Payroll taxes and benefits are allocated in proportion to officers and other salaries. Accounts Receivable and Due From Employees – Accounts receivable represent amounts due from service contracts entered into with governmental agencies and are stated at the unpaid balances, less any allowance for doubtful accounts. It is the Organization’s policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected. At December 31, 2018 and 2017, there was no balance in the allowance for doubtful accounts as the Organization determined the outstanding balance was fully collectible. With respect to amounts due from employees, amounts are considered fully collectible. Computer Equipment – Computer equipment is capitalized at cost. Depreciation has been provided on the straight-line method over a three-year estimated useful life.
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Leave No Veteran Behind, Inc. Notes to the Financial Statements (cont’d)
2. Liquidity and Availability The following represents the Organization’s financial assets available to meet general expenditures over the next twelve months at December 31: 2018 Financial assets at year-end: Cash Accounts receivable Grant receivable expected to be collected in next fiscal year
$
14,398 82,752
2017
$
140,000
Financial assets available to meet general expenditures over the next twelve months
$
237,150
17,442 64,063 -
$
81,505
The Organization’s goal is generally to maintain financial assets to meet six months of general operational expenses (approximately $300,000) and one month of veteran-provided services expense (approximately $50,000). Veteran-provided services costs are subject to reimbursement from funding agencies, and the Organization typically is reimbursed within one month of incurring the related costs. The Organization has in the past procured short-term advances, including those from related parties, to help meet cash flow needs. The Organization actively seeks out donations from foundations to help fund operations. 3. Due from Employees At the end of 2015, the audited financial statements reflected employee advances of $68,017. By the end of 2016, those advances rose to $191,240. Upon review, Management and the Board realized that the two employees who were advanced the monies were entitled to deferred salary, in accordance with a Board action dating back to before 2015. To document this understanding, the Board drafted a “Retroactive Salary Agreement”, which was ratified in January 2019. The total of the advances at December 31, 2018 and 2017, were $323,843 and $316,686, respectively. The agreement stipulates that the two employees in question were entitled to deferred compensation to be paid over time at the Board’s direction and discretion, as cash flow permitted. At December 31, 2018 and 2017, in conformity with the “Retroactive Salary Agreement”, the financial statements reflect accrued salaries aggregating $375,016 and $309,235, respectively. For financial statement presentation purposes, the receivable and related accrued liability have been reflected separately. If presented on a net basis, the employee advances net balance payable at December 31, 2018, would be $51,173 (net balance receivable of $7,451 at December 31, 2017). - 10 -
Leave No Veteran Behind, Inc. Notes to the Financial Statements (cont’d)
4. Grant Receivable The amount of unconditional grants receivable, discounted at 5%, at December 31, 2018, by expected year of receipt, is as follows: Amount Less than one year One to five years Less present value discount
$ 140,000 280,000 (38,745) $ 381,255
5. Computer Equipment 2018 Computer equipment Accumulated depreciation
$
$
2017
19,369 (19,369) -
$
$
19,369 (19,369) -
There was no depreciation expense for the year ended December 31, 2018. Depreciation expense for the year ended December 31, 2017, was $1,564. 6. Long-Term Debt The Organization has an unrestricted “program-related investment� loan from a local foundation. This is an interest free loan. As of December 31, 2018 and 2017, the outstanding balance was $110,000 and $122,500, respectively. According to the debt agreement, the principal is to be repaid in ten annual installments of $15,000 due on or before December 15 of each year commencing in 2015. The Organization did not make its first payment until December 2016, and then paid only $12,500 in 2018 and 2017, which is $2,500 less than the required payment under terms of the agreement for each year. The Organization paid the remaining $2,500 due with the 2017 payment along with the 2019 installment in June 2019. The Organization had a short-term small business revolving credit with an online lending platform. The Organization drew down $3,000 and $6,000, respectively, in 2018 and 2017. There was no balance outstanding at December 31, 2018 and 2017. The applicable interest rate varies based on several factors agreed online prior to borrowing. At an effective interest rate of 7%, the interest payments for the years 2018 and 2017 were $902 and $940, respectively.
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Leave No Veteran Behind, Inc. Notes to the Financial Statements (cont’d)
7. Related Party Short-Term Advances The Organization received a short-term advance from a Board member totaling $15,500 in November 2017 to assist with cash flow for payroll and repaid $12,000 prior to year-end. The outstanding balance of $3,500 at December 31, 2017, is reported as a related party shortterm advance. During 2018, the Organization received additional short-term advances from employees and Board members totaling $99,700 to assist with cash flow for payroll. The Organization made repayments totaling $97,700 during 2018. The outstanding balance of $5,500 at December 31, 2018, is reported as a related party short-term advance. 8. Income Tax Status The Organization is incorporated as a not-for-profit corporation as described in Section 501(c)(3) of the Internal Revenue Code, and is exempt from income taxes, except to the extent of any unrelated business income. There was no unrelated business income for the years ended December 31, 2018 or 2017. Accordingly, no provision for income tax is included in the financial statements. The Company has never been examined by the Internal Revenue Service. All years under the statute of limitations (2015-2017) are open for examination. In 2019, the Organization learned the Internal Revenue Service revoked their tax-exempt status due to misfiled tax returns. The Organization worked with legal counsel and its new auditing firm and was able to have its nonprofit status reestablished on November 14, 2019. 9. Concentration of Risk – Accounts Receivable and Revenue In 2018 and 2017, the Organization received 49% and 59%, respectively, of its total revenue from a single governmental agency. Accounts receivable outstanding from this agency at the end of the years ended December 31, 2018 and 2017, respectively, were 54% and 100% of total accounts receivable. In 2018, a large donation from a single foundation contributed 34% of the total revenue, including 11% of revenue without donor restrictions and 100% of revenue with donor restrictions. 10. Going Concern The financial statements were prepared on a going concern basis. The going concern basis assumes that the Organization will continue in operation in the foreseeable future and will be able to realize its assets and discharge its liabilities and commitments in the normal course of operations. As presented in the statement of financial position and the statement of activities, the Organization has reported a net deficit in net assets without donor restrictions of $157,949 and $150,009 for the years ended December 31, 2018 and 2017, respectively.
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Leave No Veteran Behind, Inc. Notes to the Financial Statements (cont’d)
10. Going Concern (cont’d) In order to address the financial deficit, the Organization is continuing to seek additional grants and contributions. During 2018, the Organization received a four-year pledge to support general operations for $560,000, payable in four annual installments of $140,000, with the first installment received in 2018. The remaining installments are reported with net assets with donor restrictions at their net present value of $381,255 at December 31, 2018. During 2019, the Organization also received a $50,000 grant that will cover 70% of the salary for the current staff member who oversees the VYC program. The Organization has more than doubled the foundation and corporate support in 2018 and 2019, although such support remains concentrated in a few providers. The Organization is also working to reduce expenses and manage its cash flow by implementing payment plans with large invoices, reducing administrative costs, including travel and meeting charges, and performing an immediate review of the vouchering process to ensure all allowable administrative and overhead expenses are being charged to grants under the Safe Passage program. As described above, management has a reasonable expectation that the Organization will be able to continue as a going concern within one year from the date these financial statements were available to be issued. 11. Concentration of Credit Risk The Organization maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. 12. Subsequent Event Subsequent events have been evaluated through March 3, 2020, which is the date the financial statements were available to be issued.
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