LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015
INDEPENDENT AUDITOR’S REPORT
To those Charged with Governance of Leave No Veteran Behind, Inc. Chicago, Illinois We have audited the accompanying financial statements of Leave No Veteran Behind, Inc. (an Illinois not for profit corporation), which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities 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 audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 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, 2016 and 2015 , 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.
Going Concern The accompanying financial statements have been prepared assuming that the Organization will continue as a going concern. Note H discusses Management’s plan regarding this matter. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter.
Chicago, Illinois February 13, 2019
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) STATEMENTS OF FINANCIAL POSITION
ASSETS December 31, 2016 CURRENT ASSETS Cash and cash equivalents Accounts receivable Due from employees Total current assets
$
16,162 69,037 191,240 276,439
FURNITURE AND EQUIPMENT, NET Total assets
2015 $
1,564 $
30,060 11,221 68,017 109,298 2,247
278,003
$
111,545
263,188 15,000 278,188
$
4,000 59,895 30,000 7,472 101,367
LIABILITIES AND NET DEFICIT CURRENT LIABILITIES Accounts payable Accrued liabilities Current portion of long-term debt Short term loan Total current liabilities
$
LONG-TERM DEBT, NET OF CURRENT PORTION Total liabilities NET DEFICIT Unrestricted Total liabilities and net deficit
$
120,000
120,000
398,188
221,367
(120,185)
(109,822)
278,003
$
See Independent Auditors' Report and Notes to Financial Statements. -2-
111,545
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) STATEMENT OF ACTIVITIES
Administrative REVENUE Contract services Corporate contributions Individual contributions Foundation contributions Interest Income In kind Total revenue
$
EXPENSES Officers' salaries Other salaries Veteran-provided services Payroll taxes and benefits Payroll processing fees
105,557 $ 2,462 27,500 135,519
Year ended December 31, 2016 Unrestricted Program Fundraising
Total
422,230 $ 42,077 8,488 361,381 4,200 838,376
$ 18,033 15,816 33,849
34,000 23,308 3,118 1,036
93,501 93,230 379,515 27,691 4,145
42,500 -
5,471
21,886 4,200 43,824
527,787 $ 60,110 24,304 361,381 2,462 31,700 1,007,744 170,001 116,538 379,515 30,809 5,181
Stipends Rent Insurance Telephone and internet services
18,375
15,283
2,729
36,387
Professional fees Interest and bank charges Office supplies Travel and meals Auto expense
57,483 1,849 335 10,108 462
4,313 9,529 15,063 1,079
15,821 14 16,781 489
73,304 6,162 9,878 41,952 2,030
-
Training Computer Other program expense Miscellaneous Depreciation Total expenses CHANGE IN NET ASSETS
360
6,220 -
-
25,521
275 205 156,385 $
(20,866) $
640 477 746,117 92,259 $
-
27,357 4,200 43,824
-
-
6,220 360
-
25,521
37,271 115,605
38,186 682 1,018,107
(81,756) $
(109,822)
NET DEFICIT - BEGINNING NET DEFICIT - ENDING
See Independent Auditors' Report and Notes to Financial Statements. -3-
(10,363) $
$
(120,185) $
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) STATEMENT OF ACTIVITIES
Administrative REVENUE Contract services Corporate contributions Individual contributions Foundation contributions In kind Total revenue
$
103,918 $ 1,746 105,664
Year ended December 31, 2015 Unrestricted Program Fundraising 935,258 $ 100,995 12,799 150,000 9,894 1,208,946
Total
$ 43,284 14,514 57,798
1,039,176 144,279 27,313 150,000 11,640 1,372,408
EXPENSES Officers' salaries Other salaries Veteran-provided services Youth-provided services Payroll taxes and benefits Payroll processing fees
16,457 23,085 2,995 1,670
45,257 92,342 849,358 71,764 6,679
Rent Other program expense Education schlolarship Insurance
4,124
5,100 33,837 13 54,364
15,434 16,623 954 8 17,045
11,078 6,000 2,225 17,258 0
2,033 3,976 765 11,364
28,545 26,599 3,179 18,031 28,409
56 964 781 589 100,785
129 1,401 1,373 1,198,178
1,695 23,654 64,058
1,880 2,365 781 23,654 1,962 1,363,021
Telephone and internet services Professional fees Interest and bank charges Office supplies Travel and meals Auto expense Training Computer Miscellaneous Depreciation Total expenses CHANGE IN NET ASSETS
$
4,879 $
10,768 $
20,571 -
82,285 115,427 849,358 0 74,759 8,349
-
5,100 33,837 13 58,488
(6,260) $
(119,209)
NET DEFICIT - BEGINNING NET DEFICIT - ENDING
See Independent Auditors' Report and Notes to Financial Statements. -4-
9,387
$
(109,822)
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) STATEMENTS OF CASH FLOWS
Years Ended December 31, 2016 2015 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation Change in assets and liabilities (Increase) decrease in accounts receivable (Increase) in due from employees (Decrease) in accounts payable Increase (decrease) in accrued liabilities Total adjustments
$
$
682
CASH FLOWS FROM FINANCING ACTIVITIES Proceeds (repayments) on short-term debt Payments on long-term debt Net cash provided by (used in) financing activities NET DECREASE IN CASH CASH AND CASH EQUIVALENTS - BEGINNING
9,387
1,962
(57,816) (123,223) (4,000) 203,294 18,937
Net cash provided by (used in) operating activities
CASH AND CASH EQUIVALENTS- ENDING
(10,363)
88,968 (68,017) (5,946) (38,130) (21,163)
8,574
(11,776)
(7,472) (15,000)
7,472 -
(22,472)
7,472
(13,898)
(4,304)
30,060
34,364
$
16,162
$
30,060
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION Cash paid during the year for interest $
1,660
$
1,035
See Independent Auditors' Report and Notes to Financial Statements. -5-
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Leave No Veteran Behind, Inc. (the 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 three classes of net assets, namely unrestricted, temporarily restricted and permanently restricted. Support that is restricted by donors as being available only in future accounting periods, is reported as restricted support. 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 unrestricted support. During fiscal year 2016 and 2015, no amounts were pledged, received, earned, and released from restriction hence for 2016 and 2015, the Organization has only unrestricted net assets. 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 unrestricted unless specifically restricted by the donor. All donor-restricted contributions are reported as an increase in temporarily restricted net assets and are transferred to unrestricted net assets 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.
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LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE A - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Estimates The preparation of financial statements in conformity with U.S. GAAP requires Management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results may differ from those estimates. Functional Expenses The Organization allocates its expenses on a functional basis among its various programs. Expenses that can be identified with a specific program are allocated according to their natural expenditure classification. Other expenses that are common to several functions are allocated by various formulas. Accounts Receivable and Due From Employee Accounts receivable represent amounts due from service contracts entered into with governmental agencies (not subject to OMB Circular A-133 audit requirements) 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, 2016 and 2015, 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 serviceable and fully collectible. Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash on deposit and money market accounts that are readily convertible into cash and purchased with original maturities of three months or less. NOTE B – 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 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, 2016, in conformity with the “Retroactive Salary Agreement”, the financial statements reflect accrued salaries aggregating $139,235. -7-
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE B – DUE FROM EMPLOYEES (CONTINUED) For financial statement presentation purposes, the asset and related accrued liability have been reflected separately. If presented on a net basis, the employee advances net balance receivable at December 31, 2016 would be $52,005.
NOTE C - PROPERTY AND EQUIPMENT Purchases in excess of $500 are considered for capitalization. Property and equipment are recorded at cost and depreciated over the estimated lives (3 years) of the assets using the two hundred percentage double declining balance method. The asset cost and related accumulated depreciation are as follows: 2016 2015 Property and equipment Accumulated depreciation
$ 19,369 (17,805)
$ 19,369 (17,122)
Net book value
$
$ 2,247
1,564
Depreciation expense for the years ended December 31, 2016 and 2015 was $ 682 and $1,962. NOTE D – 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, 2016 and 2015, the outstanding balance was $135,000 and $150,000, 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. Based on the repayments, the lender has accepted the late payments and holds the Organization in good standing. The Organization had a short-term small business revolving credit with an online lending platform. As of December 31, 2016 and 2015 the balance was zero and $7,472, respectively. 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 2016 and 2015 were $1,660 and $1,035, respectively. NOTE E – IN-KIND The value of in-kind services at December 31, 2016 was $31,700, the audit and tax preparation services was $27,500 and the remainder was in-kind rent. For the year ended December 31, 2015 the Organization had $11,640 of in-kind services for rent, computer expense, and audit and tax preparation services -8-
LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE F - INCOME TAX STATUS The Organization is a not-for-profit Organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and classified by the Internal Revenue Service as other than a private foundation. Due to its tax-exempt status, the Organization is not subject to U.S. federal or state income taxes. The Organization has evaluated its tax positions for all open tax years. Currently the tax years 2013, 2014, 2015 and 2016 are open and subject to examination by the Internal Revenue Service. However, the Organization is not currently under audit nor has the Organization been contacted by any jurisdiction. Based on the evaluation of the Organization’s tax positions, management believes all tax positions taken would be upheld under an examination. Therefore, no provision for the effects of uncertain tax positions has been recorded for the fiscal years ended December 31, 2016 and 2015. NOTE G – CONCENTRATION OF RISK - ACCOUNTS RECEIVABLE AND REVENUE In 2016 and 2015, the Organization received 43% and 68% 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, 2016 and 2015, respectively were 54% and 100%. In 2016 a large donation from a single foundation contributed 25% of the total revenue. NOTE H – GOING CONCERN At the end of 2015, the financial statements reflected a net deficit of $109,822. By the end of 2016, the deficit net assets rose to $120,185. A review of the Organization’s unaudited statement of financial position at December 31, 2017 and 2018 indicates net assets of $8,756 and $65,629, respectively. Management’s projection of operations from January 2019 through February 2020, reflects an increase in net assets of approximately $135,000. For the same period, Management’s projected cash flow reflects a positive result. However, for both 2017 and 2018 the largest asset on the unaudited financial statements is employee advances of approximately $308,000 and $314,000 respectively. Although Management has a plan to collect these advances, the facts, taken in the aggregate, raise substantial doubt about the Organization’s ability to continue as a going concern. Management asserts that the decrease of net assets in 2016 was fueled by reductions in contract service revenue and grant revenue precipitated by the State of Illinois budget crisis. However, the above projected results indicate that trend reversed itself in 2017 through February 2020, based upon executed contracts in force.
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LEAVE NO VETERAN BEHIND, INC. (AN ILLINOIS NOT-FOR-PROFIT CORPORATION) NOTES TO FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2016 AND 2015
NOTE H – GOING CONCERN (CONTINUED) With respect to 2019, Management asserts that the Organization will continue to increase fundraising efforts. As of the audit report date, fundraising commitments have been secured to fuel a projected 2019 net profit from operations. Therefore, it is Management’s opinion that the Organization will be able to continue as a going concern through February 13, 2020. NOTE I – 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. NOTE J – SUBSEQUENT EVENTS In accordance with the U.S. GAAP the Organization has evaluated the need for disclosures and/or adjustments resulting from subsequent event through February 13, 2019, the date of the auditors’ opinion in this report. Except as disclosed elsewhere, this evaluation did not result in any subsequent events that necessitated disclosure and/or adjustment. NOTE K – RECLASSIFICATIONS Certain accounts in the prior-year financial statements have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements.
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