LATIN AMERICAN YOUTH CENTER Financial Statements …€¦ · The accompanying notes are an integral part of this financial statement. 6 Social Services Community Wellness Education

LATIN AMERICAN YOUTH CENTER

Financial Statements Together with

Report of Independent Public Accountants

For the Years Ended September 30, 2016 and 2015

SEPTEMBER 30, 2016 AND 2015

CONTENTS

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1

FINANCIAL STATEMENTS

Statements of Financial Position 3

Statements of Activities and Changes in Net Assets 4

Statements of Cash Flows 5

Statements of Functional Expenses 6

Notes to the Financial Statements 8

1299 Pennsylvania Avenue NW Suite 1120 Washington District of Columbia 20004 P 202.803.2335 F 202.756.1301

REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS

Board of Directors

Latin American Youth Center

Report on the Financial Statements

We have audited the accompanying statements of financial position of Latin American Youth

Center (the Center) as of September 30, 2016 and 2015, and the related statements of activities and

changes in net assets, 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 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.

2

Opinion

In our opinion, the accompanying financial statements referred to above present fairly, in all

material respects, the financial position of the Center as of September 30, 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.

Other Reporting Required by Government Auditing Standards

In accordance with Government Auditing Standards, we have also issued our report dated June

28, 2017, on our consideration of the Center’s internal control over financial reporting and on

our tests of its compliance with certain provisions of laws, regulations, contracts and 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 the Center’s internal control over financial reporting and compliance.

Washington, DC

June 28, 2017

lmclain

SBC SIGNATURE


Statements of Financial Position

As of September 30, 2016 and 2015

The accompanying notes are an integral part of these financial statements.

3

2016 2015

ASSETS

Cash and cash equivalents 349,258$ 1,150,542$

Accounts receivable

Grants, net 1,326,804 1,517,232

Pledges, net 279,430 841,929

Other 219,921 86,547

Due from related party - 29,211

Prepaid expenses 76,079 50,816

Property and equipment, net 4,703,251 4,949,948

Other assets 79,571 75,033

Total Assets 7,034,314$ 8,701,258$

LIABILITIES AND NET ASSETS

Liabilities

Bank overdraft 121,990$ -$

Accounts payable and accrued expenses 215,979 411,629

Accrued salaries and benefits 604,596 558,962

Due to related party 59,778 -

Deferred revenue 513,841 734,658

Notes payable 4,800,000 4,500,000

Total Liabilities 6,316,184 6,205,249

Net Assets

Unrestricted 568,130 1,637,342

Temporarily restricted 150,000 858,667

Total Net Assets 718,130 2,496,009

Total Liabilities and Net Assets 7,034,314$ 8,701,258$


Statements of Activities and Changes in Net Assets



4

2016 2015

UNRESTRICTED NET ASSETS

Operating Revenue and Other Support

Contributions 209,375$ 271,955$

Foundation and other grants 1,739,459 2,272,398

Federal grants 4,581,780 2,690,136

State and city grants 6,169,238 8,057,584

Rental income 322,857 318,659

Management services 371,641 488,308

Special events, net of $148,373 and $164,281, in

direct expenses 694,679 568,817

Other 136,861 60,521

Total Operating Revenue and Other Support 14,225,890 14,728,378

Net assets released from restrictions 858,667 914,530

Total Operating Revenue 15,084,557 15,642,908

Operating Expenses

Program services:

Social services 3,286,544 2,578,483

Community wellness 1,952,886 2,077,179

Education 2,080,466 1,786,866

Workforce investment and social enterprise 326,285 337,036

Maryland 3,882,168 3,863,900

Arts & media house 437 3,303

Promotores 903,647 1,098,605

Advocacy - 4,030

Supporting services:

General and administrative 2,958,448 2,575,489

Fundraising 762,888 771,743

Total Operating Expenses 16,153,769 15,096,634

Change in Unrestricted Net Assets (1,069,212) 546,274

TEMPORARILY RESTRICTED NET ASSETS

Foundation grants 150,000 433,667

Net assets released from restrictions (858,667) (914,530)

Change in Temporarily Restricted Net Assets (708,667) (480,863)

Changes in net assets (1,777,879) 65,411

Net assets, beginning of the year 2,496,009 2,430,598

Net Assets, End of Year 718,130$ 2,496,009$


Statements of Cash Flows



5

2016 2015

Cash Flows from Operating Activities

Changes in net assets (1,777,879)$ 65,411$

Adjustments to reconcile changes in net assets to net

cash from operating activities:

Depreciation 329,736 323,596

Amortization - 38,152

Effect of changes in non-cash operating assets and

liabilities:

Grants receivable, net 190,428 (160,443)

Pledges receivable, net 562,499 449,423

Other receivable (133,374) (14,131)

Due from related party 29,211 (26,264)

Prepaid expenses (25,263) (30,025)

Other assets (4,538) (25,704)

Accounts payable and accrued expenses (195,650) (106,763)

Accrued salaries and benefits 45,634 (79,656)

Due to related party 59,778 -

Deferred revenue (220,817) 418,234

Net Cash from Operating Activities (1,140,235) 851,830

Cash Flows from Investing Activities

Purchase of property and equipment (83,039) -

Cash Flows from Financing Activities

Proceeds from promissory note 300,000 -

Bank overdraft 121,990 -

Net Cash from Financing Activities 421,990 -

Net change in cash and cash equivalents (801,284) 851,830

Cash and cash equivalents, beginning of year 1,150,542 298,712

Cash and Cash Equivalents, End of Year 349,258$ 1,150,542$

Supplemental Cash Flow Disclosure

Cash paid for interest 260,564$ 269,886


Statement of Functional Expenses

For the Year Ended September 30, 2016, with Comparable Totals for 2015

The accompanying notes are an integral part of this financial statement.

6

Social Services

Community

Wellness Education

Workforce

Investment

and Social

Enterprise Maryland

Arts & Media

House Promotores Total Program

General and

Administrative Fundraising Total 2015 Total

Salaries & fringe benefits 2,280,872$ 1,191,578$ 1,211,998$ 253,407$ 2,455,203$ -$ 802,484$ 8,195,542$ 789,598$ 595,905$ 9,581,045$ 9,173,333$

Occupancy 296,175 283,473 2,901 - 301,060 - 15,838 899,447 222,130 110 1,121,687 919,964

Client services 439,654 107,984 259,251 11,804 452,705 - 6,950 1,278,348 53,656 - 1,332,004 1,308,037

Training 28,817 8,601 14,021 6,912 21,762 - 3,761 83,874 6,556 674 91,104 73,952

Supplies 30,008 46,121 45,019 7,248 47,921 - 8,309 184,626 103,504 2,911 291,041 270,975

Professional & contractual 29,128 185,545 348,037 33,370 413,255 - 19,078 1,028,413 606,715 101,814 1,736,942 1,536,340

Printing 212 342 287 540 3,128 - 968 5,477 1,215 1,365 8,057 8,406

Rental & maintenance 41,355 16,776 4,300 - 665 180 312 63,588 21,324 6,695 91,607 122,168

Insurance - - - - - - - - 219,362 - 219,362 223,996

Communications 54,818 28,975 12,374 4,114 39,392 154 13,341 153,168 32,102 6,951 192,221 194,214

Travel & transportation 17,710 21,731 35,249 1,994 48,053 - 16,590 141,327 27,272 185 168,784 131,458

Depreciation 3,160 - - - 25,372 - - 28,532 301,205 - 329,737 323,596

Provision for uncollectible - -

receivables - - 25,000 - - - - 25,000 216,101 - 241,101 105,813

Interest - - - - - - - - 260,564 - 260,564 308,038

Other 64,635 61,760 122,029 6,896 73,652 103 16,016 345,091 97,144 46,278 488,513 396,344

Total 3,286,544$ 1,952,886$ 2,080,466$ 326,285$ 3,882,168$ 437$ 903,647$ 12,432,433$ 2,958,448$ 762,888$ 16,153,769$ 15,096,634$

2016

Program Services


Statement of Functional Expenses

For the Year Ended September 30, 2015

The accompanying notes are an integral part of this financial statement.

7

Social Services

Community

Wellness Education

Workforce

Investment

and Social

Enterprise Maryland

Arts & Media

House Promotores Advocacy Total Program

General and

Administrative Fundraising Total

Salaries & fringe benefits 1,766,660$ 1,288,954$ 1,113,100$ 231,634$ 2,378,755$ -$ 841,715$ 3,938$ 7,624,756$ 868,111$ 680,466$ 9,173,333$

Occupancy 166,595 301,273 2,103 - 279,007 - 8,304 - 757,282 162,453 229 919,964

Client services 362,978 145,104 229,611 12,038 494,830 93 21,031 - 1,265,685 41,435 917 1,308,037

Training 15,697 18,239 5,918 2,899 22,678 - 5,864 - 71,295 2,582 75 73,952

Supplies 20,120 64,906 49,565 1,359 43,782 - 7,772 - 187,504 75,845 7,626 270,975

Professional & contractual 57,921 113,609 198,382 73,185 390,244 - 140,425 - 973,766 542,361 20,213 1,536,340

Printing 875 2,455 540 334 3,188 - 69 - 7,461 305 640 8,406

Rental & maintenance 13,652 4,908 5,308 - 7,077 - 2,695 - 33,640 88,528 - 122,168

Insurance - - - - 8,849 - - - 8,849 215,147 - 223,996

Communications 45,809 25,766 11,770 2,689 35,914 223 18,248 - 140,419 47,369 6,426 194,214

Travel & transportation 15,473 17,642 30,334 272 36,662 2,925 16,847 - 120,155 11,201 102 131,458

Depreciation 2,827 - - - 22,696 - - - 25,523 298,073 - 323,596

Provision for uncollectible - -

receivables 3,079 - - - - - - - 3,079 102,734 - 105,813

Interest 51,381 41,370 35,609 6,715 77,010 62 21,902 92 234,141 58,526 15,371 308,038

Other 55,416 52,953 104,626 5,911 63,208 - 13,733 - 295,847 60,819 39,678 396,344

Total 2,578,483$ 2,077,179$ 1,786,866$ 337,036$ 3,863,900$ 3,303$ 1,098,605$ 4,030$ 11,749,402$ 2,575,489$ 771,743$ 15,096,634$

Program Services


Notes to the Financial Statements

September 30, 2016 and 2015

8

1. BACKGROUND OF THE ORGANIZATION

The Latin American Youth Center (the Center) was organized under the laws of the District

of Columbia as a not-for-profit corporation. The Center’s purpose is to provide Latino,

African-American and other multicultural youth and families with the education, skills,

training and support they need to live, work and study with dignity, in good health and in

neighborhoods that are safe and secure.

Negative Operations

During the year ended September 30, 2016, the Center had negative changes in net assets of

$1,777,875, due to discontinued grant funding, billing issues, and inadequate tracking of

expenses. This led to negative cash flow from operations of $1,140,235. Also, the Center is in

violation of its debt covenants with the bank and has received a waiver. These amounts mature

on February 1, 2018 and June 17, 2018. The Center’s management and board of directors are

committed to the financial health of the Center. Management has been working closely with the

Board of Directors to develop a strategy to address its financial condition. The Center is

expecting an increase in its individual donations in 2017. The Center has also reduced its

expenses through various cost reduction efforts including the evaluation of existing programs. In

addition, the Center is seeking more grant opportunities and has undertaken new initiatives to

boost grant revenue. Finally, management and the board of directors are looking for alternatives

to replace the current building loan.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The accompanying financial statements of the Center are presented on the accrual basis of

accounting in accordance with accounting principles generally accepted in the United States

of America.

Use of Estimates

The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America requires the Center’s management to make

estimates and assumptions that affect the reported amounts of assets and liabilities and

disclosure of contingent assets and liabilities as of the date of the financial statements and the

reported amounts of support and revenue and expenses during the reporting period. Actual

results could differ from those estimates.




9

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

Cash and Cash Equivalents

Cash and cash equivalents include amounts invested in short-term investments with original

maturities of three months or less. Cash equivalents as of September 30, 2016 and 2015,

consisted of overnight investment accounts and money market funds.

Financial Instruments

Financial instruments consist of cash, accounts receivable, accounts payable and notes

payable. The carrying value of the Center’s financial instruments in the accompanying

statements of financial position approximated their respective fair values as of September 30,

2016 and 2015. Fair values are estimated based on current market rates, prices or liquidation

value.

Accounts Receivable

Receivables are valued at management’s estimate of the amount that will ultimately be

collected. The allowance for doubtful accounts is based on specific identification of

uncollectible accounts and the Center’s historical collection experience.

Grants receivable represent unpaid amounts associated with various grants. As of September

30, 2016 and 2015, the allowance was $161,756 respectively.

For pledges receivable expected to be collected in over one year, the Center discounts those

pledges using a 1.56% and 1.58% discount rate for the years ended September 30, 2016, and

2015, respectively. For the years ended September 30, 2016 and 2015, the discount was

$4,570 and $16,738, respectively. The rate is based on the Center’s borrowing rate as of the

statement of financial position date.

Other receivables represent advances to various Center programs in which the expenses have

not been identified.

Property and Equipment

Property and equipment purchases over $1,000 and with a useful life of more than one year

are recorded at cost. Donated property and equipment are capitalized at the estimated fair

market value on the date received. Depreciation of property and equipment is recorded using

the straight-line method over the estimated useful life of the assets.

Net Assets

Unrestricted net assets are assets and contributions that are not restricted by donors or for

which restrictions have expired.




10


Net Assets (continued)

Temporarily restricted net assets are those whose use by the Center has been limited by

donors, primarily for a specific time period or purpose. When a donor restriction is met,

temporarily restricted net assets are reclassified to unrestricted net assets. If a donor

restriction is met in the same reporting period in which the contribution is received, the

contribution (to the extent that the restrictions have been met) is reported as unrestricted net

assets.

Permanently restricted net assets are those that are restricted by donors to be maintained by

the Center in perpetuity. There were no permanently restricted net assets as of September 30,

2016 and 2015.

Restricted and Unrestricted Support and Revenue

Contributions received are recorded as unrestricted or temporarily restricted support,

depending on the existence and/or nature of any donor imposed restrictions. Donor-restricted

support is reported as an increase in temporarily restricted net assets, depending on the nature

of the restriction.

Rental revenue is recognized on a straight-line basis over the term of each respective lease.

The Center has several grants from Federal, state, and local governments and other entities.

Revenue from such grants was recognized only to the extent of actual expenses incurred in

compliance with those grants. For government grants, expenses incurred in excess of funds

collected are reflected as grants receivable and funds collected in excess of expenses incurred

are reflected in deferred revenue.

The management fee revenue is earned as a flat percentage of cash basis expenses paid by the

Latin American Youth Center Career Academy Public Charter School (the Career Academy)

during the year. See footnote 9 for more information on this arrangement. This flat

percentage will be reduced when certain enrollment goals are met by the Career Academy.

Special event revenue is earned when the event occurs.

Functional Allocation of Expenses

The costs of providing the various programs and other activities have been summarized on a

functional basis in the accompanying statements of activities and changes in net assets and in

the statements of functional expenses. Accordingly, certain costs have been allocated among

the programs and supporting services that benefit from those costs. General and

administrative expenses include those expenses that are not directly identified with any other

specific function but provide for the overall support and direction of the Center.




11


Income Taxes

The Center is a not-for-profit organization exempt from Federal income other than net

unrelated business income tax under Section 501(c)(3) of the Internal Revenue Code and is

recognized as such by the Internal Revenue Service.

The provisions included in accounting principles generally accepted in the United States of

America provide consistent guidance for the accounting for uncertainty in income taxes

recognized in an entity's financial statements and prescribe a threshold of "more likely than not"

for recognition of tax positions taken or expected to be taken in a tax return. The Center

performed an evaluation of uncertain tax positions as of September 30, 2016, and determined

that there were no matters that would require recognition in the accompanying financial

statements or which may have any effect on its tax-exempt status. As of September 30,

2016, the statute of limitations for fiscal years 2013 through 2016 remains open with the U.S.

Federal jurisdiction and the various states and local jurisdictions in which the Center files tax

returns. It is the Center's policy to recognize interest and/or penalties for uncertain tax

positions, if any, as income tax expense in the statement of activities and changes in net

assets.

Reclassification

Certain 2015 amounts have been reclassified to conform to the 2016 presentation. This

reclassification did not have an effect on the statement of activities and changes in net assets.

Subsequent Events

The Center evaluated the accompanying financial statements for subsequent events and

transactions through June 28, 2017, the date these financial statements were available for

issue, and has determined that no material subsequent events have occurred that would affect

the information presented in the accompanying financial statements or require additional

disclosure.




12

3. PLEDGES RECEIVABLE

Pledges receivable as of September 30, 2016, and 2015, were as follows:

2016 2015

Amounts due in:

One year 234,000$ 641,334$

Two or more years 50,000 217,333

Total 284,000 858,667

Less: discount at 1.56% and 1.58% 4,570 16,738

Pledges receivable, net 279,430$ 841,929$

4. PROPERTY AND EQUIPMENT

Property and equipment as of September 30, 2016 and 2015, consisted of the following:

2016 2015 Useful Life

Land 37,180$ 37,180$ N/A

Buildings 7,410,996 7,410,996 30 years

Leasehold improvements 559,533 559,533 2-7 years

Furniture and office equipment 1,562,269 1,501,763 5 years

Automobiles 90,353 80,353 5 years

Software 179,254 166,721 5 years

Total 9,839,585 9,756,546

Less: accumulated depreciation 5,136,334 4,806,598

Property and equipment, net 4,703,251$ 4,949,948$

Depreciation expense for the years ended September 30, 2016 and 2015, was $329,736 and

$323,596, respectively.




13

5. DEBT

As of September 30, 2016 and 2015, the Center had the following notes payable outstanding:

2016 2015

Mortgage payable $ 4,500,000 $ 4,500,000

Promissory note payable 300,000 -

Total $ 4,800,000 $ 4,500,000

In February 2013, the Center entered into a loan agreement with a financial institution for

$5,200,000, which was secured by a first deed of trust on the Center’s properties at 1419

Columbia Rd. N.W., Washington, DC, and the Center assigned its interest in leases resulting

in rent earned on space rented on the premises. The note has a fixed interest rate equal to

5.75% per annum. The note calls for monthly interest only payments until maturity. On

February 1, 2016, the loan agreement was amended and the maturity date was moved to February

1, 2018.

Interest expense incurred during the year ended September 30, 2016 and 2015, was $256,424

and $269,886, respectively. The note includes a covenant that audited financial statements

must be presented to the bank within 120 days after fiscal year end and the note includes a

covenant that requires a debt service coverage ratio of at least 1.15 to 1.00, as of the last day

of each fiscal year. The Center did not meet these 2 covenants as of and for the year

September 30, 2016, and received a waiver.

In June 2016, the Center entered into a loan agreement with a financial institution for $300,000.

The note has a fixed interest rate equal to 5.50% per annum. The principal is due on June 16,

2018. Interest is payable monthly. Interest expense incurred during the year ended September

30, 2016 was $4,230.

6. TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets as of September 30, 2016 and 2015, were available for the

following purposes:

2016 2015

General Operating Support (Time Restricted) 100,000$ 425,000$

Futuro Fund 50,000 433,667

Total 150,000$ 858,667$




14

7. COMMITMENTS AND CONTINGENCIES

Operating Leases

The Center leases office space under operating leases that expire at various dates through

June 30, 2021. Minimum future rental commitments as of September 30, 2016, on leases with

a commitment of one year or more, were as follows:

Years Ending September 30, Amount

2017 $ 61,586

2018 33,832

2019 34,847

2020 35,892

2021 36,969

Total $ 203,126

Rental expenses for all operating space leases were $835,993 and $667,729 for the years

ended September 30, 2016 and 2015, respectively. Rent revenue earned on these properties

were $322,857 and $318,659, for the years ended September 30, 2016 and 2015,

respectively. These leases are on a month to month basis.

Grants

Reimbursed costs under the Center’s government awards are subject to final determination of

allowability by the government agency. Until such audits have been completed and final settlement

reached, there exists a contingency to refund any amount received in excess of allowable costs.

Management is of the opinion that no material liability will result from such audits.

8. DEFINED CONTRIBUTION PLAN

The Center provides benefits to all eligible employees under a defined contribution plan at a

rate determined annually by the Board of Directors. Eligible employees are able to contribute

up to the annual Federal cap after completing 24 months of service at the Center. The

employer contribution for the years ended September 30, 2016 and 2015, was $74,569 and

$68,508, respectively.




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9. RELATED-PARTY TRANSACTIONS

The Center provides services to a charter school it previously managed. The Youth Build

Public Charter School, a separate not-for-profit organization. The Charter School reimbursed

the Center $137,318 and $122,222, for shared costs during the years ended September 30,

2016 and 2015, respectively.

The Center provides management services to the LAYC Career Academy Charter School

(the Career Academy). The Center earned $371,641 and $488,308, respectively, related to

management fees, for the years ended September 30, 2016 and 2015, under this agreement.

As of September 30, 2016, the Center owed the Career Academy $59,778, and as of

September 30, 2015, the Career Academy owed the Center $29,211.

Documents

LATIN AMERICAN YOUTH CENTER Financial Statements …€¦ · The accompanying notes are an integral part of this financial statement. 6 Social Services Community Wellness Education