Lutheran Family Services of Nebraska, Inc. and Affiliates€¦ · Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Activities For the Year Ended

Lutheran Family Services of Nebraska, Inc. and Affiliates

Consolidated Financial Statements December 31, 2013, with Comparative Totals for 2012

and Supplementary Information December 31, 2013

Together with Independent Auditor's Report

Lutheran Family Services of Nebraska, Inc. and Affiliates Table of Contents

Page

Independent Auditor's Report .............................................................................................................. 1 – 2

Consolidated Financial Statements:

Consolidated Statement of Financial Position December 31, 2013, with Comparative Totals for 2012 ........................................................ 3

Consolidated Statement of Activities For the Year Ended December 31, 2013, with Comparative Totals for 2012 ........................ 4 – 5

Consolidated Statement of Cash Flows For the Year Ended December 31, 2013, with Comparative Totals for 2012 ........................ 6

Consolidated Statement of Functional Expenses For the Year Ended December 31, 2013, with Comparative Totals for 2012 ........................ 7

Notes to Consolidated Financial Statements December 31, 2013, with Comparative Totals for 2012 ........................................................ 8 – 20

Supplementary Information:

Exhibit 1 - Consolidating Statement of Financial Position December 31, 2013 ................................................................................................ 21 – 22

Exhibit 2 - Consolidating Statement of Activities For the Year Ended December 31, 2013 ............................................................... 23 – 25

Exhibit 3 - Lutheran Family Services of Nebraska, Inc. Statement of Activities by Core Competencies

For the Year Ended December 31, 2013 ............................................................... 26

Schedule of Expenditures of Federal Awards December 31, 2013 ............................................................................................................... 27 – 28

Notes to Schedule of Expenditures of Federal Awards December 31, 2013 ............................................................................................................... 29

Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance With Government Auditing Standards ................................................. 30 – 31

Independent Auditor’s Report on Compliance For Each Major Federal Program and Report on Internal Control Over Compliance as Required by OMB Circular A-133 ..................... 32 – 33

Schedule of Findings and Questioned Costs For the Year Ended December 31, 2013 ...................................................................................... 34

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Independent Auditor's Report To the Board of Directors of Lutheran Family Services of Nebraska, Inc. Omaha, Nebraska:

Report on the Financial Statements

We have audited the accompanying consolidated financial statements of Lutheran Family Services of Nebraska, Inc. and Affiliates (the Organization), which comprise the consolidated statement of financial position as of December 31, 2013, and the related consolidated statements of activities, cash flows and functional expenses for the years then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated financial statements based on our audit. We conducted our audit 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 of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated 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 consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of the Organization as of December 31, 2013, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

2

Report on Summarized Comparative Information

We have previously audited the Organization’s 2012 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated May 2, 2013. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2012, is consistent, in all material respects, with the audited consolidated financial statements from which it has been derived.

Other Matters

Other Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information included in Exhibits 1 through 3 is presented for purposes of additional analysis rather than to present the financial position, changes in net assets, and cash flows of the individual entities and is not a required part of the consolidated financial statements. The accompanying schedule of expenditures of federal awards, as required by the U.S. Office of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations, is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. 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 consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated 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 consolidated 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 May 6, 2014 on our consideration of the Organization’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 Organization’s internal control over financial reporting and compliance. Omaha, Nebraska, May 6, 2014.

Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Financial Position December 31, 2013, with Comparative Totals for 2012

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2013 2012ASSETS

Current assets:Cash and cash equivalents $ 682,680 1,157,142 Short-term investments 2,800,409 2,493,542 Receivables -

Service accounts, net of allowance for uncollectible accountsand contractual adjustments of $43,000 in 2013 and 2012 739,887 608,539

Unrestricted pledges, net 150,313 145,419 Restricted pledges for specific purposes 548,250 543,395 Grants and bequests 901,641 591,655 Other 8,034 6,975 Prepaid expenses 157,689 99,672

Total current assets 5,988,903 5,646,339

Investment in Josiah Place, Inc. 4,652 4,652 Interest in Fremont Area Community Foundation 477,285 388,199 Unrestricted pledges, less current portion 39,298 52,298 Restricted pledges for specific purposes, less current portion 8,000 57,500 Interest in perpetual trust 925,714 901,395 Assets limited as to use for specific purposes and endowment 1,210,162 1,236,192 Property and equipment, net 5,245,499 5,112,582

Total assets $ 13,899,513 13,399,157

LIABILITIES AND NET ASSETS

Current liabilities:Current portion of long-term debt $ 522,360 500,000 Accounts payable 382,793 227,489 Accrued salaries, wages, vacation and payroll taxes payable 1,091,464 951,544 Retirement plan payable 39,039 14,237 Deferred revenue 1,788,181 1,803,932

Total current liabilities 3,823,837 3,497,202

Long term debt, net of current portion 545,580 1,000,000 Deferred compensation liability 201,226 148,599

Total liabilities 4,570,643 4,645,801

Commitments

Net assets:Unrestricted net assets 6,360,685 5,275,274 Temporarily restricted net assets 1,195,415 1,734,102 Permanently restricted net assets 1,772,770 1,743,980

Total net assets 9,328,870 8,753,356

Total liabilities and net assets $ 13,899,513 13,399,157

See notes to consolidated financial statements

Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Activities For the Year Ended December 31, 2013, with Comparative Totals for 2012

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Temporarily Permanently Unrestricted Restricted Restricted Total 2012

REVENUE, GAINS AND OTHER SUPPORT:Public support -

Congregations and individuals $ 1,451,878 135,429 22,364 1,609,671 2,338,585 United Ways 443,775 463,750 -- 907,525 832,115 LCMS - Nebraska District 109,850 -- -- 109,850 110,598 ELCA - Nebraska Synod 182,568 -- -- 182,568 183,369 Private grants 1,644,072 -- -- 1,644,072 1,470,699 Government grants 4,738,287 -- -- 4,738,287 4,042,004 Net assets released from restrictions, including United

Ways of $370,895 in 2013 and $375,895 in 2012 1,215,154 (1,215,154) -- -- -- Individual gifts and bequests, net 307,917 -- -- 307,917 174,973

Total public support 10,093,501 (615,975) 22,364 9,499,890 9,152,343

Program service revenue - Program service fees, net 2,957,507 -- -- 2,957,507 3,385,464 Purchase of service contracts 5,088,175 -- -- 5,088,175 4,207,396

Total program service revenue, net 8,045,682 -- -- 8,045,682 7,592,860

Other -Investment income and other, net 117,010 50,549 -- 167,559 130,318 Building rental 180,826 -- -- 180,826 21,745 Loss on disposal of property and equipment -- -- -- -- (5,289)

Total other, net 297,836 50,549 -- 348,385 146,774

Total revenue, gains and other support $ 18,437,019 (565,426) 22,364 17,893,957 16,891,977


2013

Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Activities (Continued) For the Year Ended December 31, 2013, with Comparative Totals for 2012

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Temporarily Permanently Unrestricted Restricted Restricted Total 2012

Total revenue, gains and other support - forward $ 18,437,019 (565,426) 22,364 17,893,957 16,891,977 EXPENSES:Operating expenses -

Salaries 9,356,292 -- -- 9,356,292 9,058,872 Employee benefits 953,974 -- -- 953,974 938,035 Payroll taxes 720,957 -- -- 720,957 677,321

Total salaries and related expenses 11,031,223 -- -- 11,031,223 10,674,228

Legal and accounting fees 58,242 -- -- 58,242 52,298 Professional fees 1,445,482 -- -- 1,445,482 1,200,089 Foster parent fees 460,776 -- -- 460,776 260,929 Supplies 657,894 -- -- 657,894 474,154 Telephone 384,883 -- -- 384,883 335,008 Postage and shipping 65,136 -- -- 65,136 58,836 Occupancy cost 734,204 -- -- 734,204 701,117 Travel expense 403,531 -- -- 403,531 370,562 Conference expense 168,282 -- -- 168,282 178,125 Assistance to individuals 922,491 -- -- 922,491 679,698 Equipment and maintenance 375,982 -- -- 375,982 283,070 Insurance 119,729 -- -- 119,729 98,048 Printing 182,925 -- -- 182,925 159,118 Subscriptions and publications 5,904 -- -- 5,904 5,094 Board expense 2,154 -- -- 2,154 6,309 Organization dues 49,664 -- -- 49,664 76,635 Uncollectible accounts 102,140 -- -- 102,140 126,359 Miscellaneous 25,456 -- -- 25,456 30,020 Interest expense 3,923 -- -- 3,923 -- Grants to other organizations 35,363 -- -- 35,363 29,500 Depreciation 351,728 -- -- 351,728 241,559

Total expenses 17,587,112 -- -- 17,587,112 16,040,756

EXCESS OF REVENUE OVER (UNDER) EXPENSES 849,907 (565,426) 22,364 306,845 851,221

CHANGE IN VALUE OF INTEREST IN PERPETUAL TRUST -- -- 24,319 24,319 58,050

CHANGES IN UNREALIZED GAINS ON OTHERTHAN TRADING SECURITIES, NET 228,177 16,173 -- 244,350 132,673

TRANSFER OF NET ASSETS 7,327 10,566 (17,893) -- --

CHANGE IN NET ASSETS 1,085,411 (538,687) 28,790 575,514 1,041,944

NET ASSETS, beginning of year 5,275,274 1,734,102 1,743,980 8,753,356 7,711,412

NET ASSETS, end of year $ 6,360,685 1,195,415 1,772,770 9,328,870 8,753,356


2013

Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Cash Flows For the Year Ended December 31, 2013, with Comparative Totals for 2012

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2013 2012CASH FLOWS FROM OPERATING ACTIVITIES:

Change in net assets $ 575,514 1,041,944 Adjustments to reconcile change in net assets to

net cash provided by operating activities -Depreciation expense 351,728 241,559 Realized losses on investments determined to

be other than temporary -- 16,829 Changes in unrealized gains on other than

trading securities, net (244,350) (132,673) Change in value of perpetual trust (24,319) (58,050) Loss on disposal of property and equipment -- 5,289 (Increase) decrease in assets -

Receivables -Service accounts (131,348) 313,499 Unrestricted pledges, net 8,106 (57,483) Restricted pledges for specific purposes 44,645 457,798 Grants and bequests (309,986) (126,760) Other (1,059) 1,350

Prepaid expenses (58,017) (888) Increase (decrease) in current liabilities -

Accounts payable 155,304 (54,592) Accrued salaries, wages, vacation and payroll taxes payable 139,920 43,364 Retirement plan payable 24,802 (19,595) Deferred revenue (15,751) 598,232

Net cash provided by operating activities 515,189 2,269,823

CASH FLOWS FROM INVESTING ACTIVITIES:Purchases of property and equipment, net (393,098) (666,492) Change in interest in Fremont Area Community Foundation (89,086) (35,973) Deposits to short term investments (62,517) (826,972) Withdrawals from (deposits to) assets limited to use for specific

purposes and endowment 78,657 (268,340)

Net cash used in investing activities (466,044) (1,797,777)

CASH FLOWS FROM FINANCING ACTIVITIES:Payments on long-term debt (523,060) -- Debt financing costs paid (547) --

Net cash used in financing activities (523,607) --

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (474,462) 472,046

CASH AND CASH EQUIVALENTS:Beginning of year 1,157,142 685,096

End of year $ 682,680 1,157,142

SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION:Cash paid for interest $ 3,923 --

SUPPLEMENTAL SCHEDULE OF NONCASH INVESTING ANDFINANCING ACTIVITIES:

Acquistion of property $ 91,000 2,001,750 Less debt financed (91,000) (1,500,000)

$ -- 501,750


Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Functional Expenses For the Year Ended December 31, 2013, with Comparative Totals for 2012

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Behavioral Total TotalHealth Children Community Program Agency Fund Raising/ Support

Services Services Services Services Management Public Relations Services Affiliates Eliminations 2013 2012

Salaries $ 3,350,609 2,606,777 1,559,052 7,516,438 1,211,532 625,387 1,836,919 100,435 (97,500) 9,356,292 9,058,872Employee benefits 359,768 259,864 122,785 742,417 149,436 62,121 211,557 19,500 (19,500) 953,974 938,035Payroll taxes 254,709 199,390 121,773 575,872 89,148 43,812 132,960 19,925 (7,800) 720,957 677,321

Total salaries andrelated expenses 3,965,086 3,066,031 1,803,610 8,834,727 1,450,116 731,320 2,181,436 139,860 (124,800) 11,031,223 10,674,228

Legal and accounting fees 885 -- -- 885 53,794 -- 53,794 25,529 (21,966) 58,242 52,298 Professional fees 580,450 223,004 261,224 1,064,678 281,015 48,271 329,286 51,518 -- 1,445,482 1,200,089 Foster parent fees -- 460,776 -- 460,776 -- -- -- -- -- 460,776 260,929 Supplies 72,441 251,823 184,170 508,434 30,139 100,648 130,787 18,673 -- 657,894 474,154 Telephone 87,503 50,223 13,914 151,640 229,868 2,707 232,575 668 -- 384,883 335,008 Postage and shipping 6,397 16,146 7,067 29,610 9,029 26,497 35,526 -- -- 65,136 58,836 Ocupancy cost 345,289 240,175 178,198 763,662 87,441 21,019 108,460 134,062 (271,980) 734,204 701,117 Travel expenses 151,822 114,338 72,759 338,919 27,752 36,154 63,906 706 -- 403,531 370,562 Conference expense 21,796 32,652 13,900 68,348 20,087 79,847 99,934 -- -- 168,282 178,125 Assistance to individuals -- 10,262 912,229 922,491 -- -- -- -- -- 922,491 679,698 Equipment and maintenance 89,505 38,641 21,149 149,295 140,050 21,966 162,016 64,671 -- 375,982 283,070 Insurance 30,406 23,645 14,142 68,193 10,817 5,629 16,446 35,090 -- 119,729 98,048 Printing 22,246 24,546 5,028 51,820 11,371 118,944 130,315 790 -- 182,925 159,118 Subscriptions and publications 723 989 162 1,874 2,415 1,615 4,030 -- -- 5,904 5,094 Board expense -- -- -- -- 2,154 -- 2,154 -- -- 2,154 6,309 Organization dues 4,319 3,802 2,734 10,855 37,856 953 38,809 -- -- 49,664 76,635 Uncollectible accounts 80,625 17,090 -- 97,715 -- -- -- 4,425 -- 102,140 126,359 Miscellaneous 76 156 658 890 2,218 450 2,668 21,898 -- 25,456 30,020 Interest expense -- -- -- -- 3,923 -- 3,923 -- -- 3,923 -- Grants to affiliates and

other organizations -- -- -- -- -- -- -- 309,004 (273,641) 35,363 29,500 Total expense before

depreciation 5,459,569 4,574,299 3,490,944 13,524,812 2,400,045 1,196,020 3,596,065 806,894 (692,387) 17,235,384 15,799,197

Depreciation expense 47,542 38,359 20,951 106,852 19,193 9,132 28,325 216,551 -- 351,728 241,559

Total expenses $ 5,507,111 4,612,658 3,511,895 13,631,664 2,419,238 1,205,152 3,624,390 1,023,445 (692,387) 17,587,112 16,040,756


Lutheran Family Services of Nebraska, Inc.

Program Services Support Services

Total Expense

Lutheran Family Services of Nebraska, Inc. and Affiliates Notes to Consolidated Financial Statements December 31, 2013, with Comparative Totals for 2012

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(1) Description of Organization The consolidated financial statements include the accounts of Lutheran Family Services of Nebraska, Inc.

and its affiliates (the Organization). These affiliates are Omaha Church Center, Inc., Lutheran Family Services Foundation, Inc., and LFS 25th Avenue Apartments, LLC. Lutheran Family Services of Nebraska, Inc. is the sole voting member of Lutheran Family Services Foundation, Inc. and Omaha Church Center, Inc. The LFS 25th Avenue Apartments, LLC is a limited liability company wholly owned by Lutheran Family Services of Nebraska, Inc. All are non-profit organizations organized under the laws of the State of Nebraska. Lutheran Family Services of Nebraska, Inc., Lutheran Family Services Foundation, Inc. and Omaha Church Center, Inc. are also exempt from federal income taxes on related income pursuant to Section 501(a) of the Internal Revenue Code.

Lutheran Family Services of Nebraska, Inc. is a multi-service organization whose purpose is to build and

strengthen individual, family and community life across Nebraska. The Organization offers major outpatient services and assistance to individuals through multiple office locations. Many of Lutheran Family Services of Nebraska, Inc. programs are offered on a sliding-fee "ability to pay" basis. The Organization's corporate members are the Evangelical Lutheran Church of America - Nebraska Synod and the Lutheran Church Missouri Synod - Nebraska District.

Omaha Church Center, Inc. provides rental space to Lutheran Family Services of Nebraska, Inc. Lutheran Family Services Foundation, Inc.'s purpose is to manage and distribute funds, solicited from the

statewide Lutheran constituency and the general public, in order to further the services of Lutheran Family Services of Nebraska, Inc. and the operations of Omaha Church Center, Inc.

Lutheran Family Services of Nebraska, Inc. organized LFS 25th Avenue Apartments, LLC. in connection

with the purchase and operation of an apartment building on its campus. (2) Summary of Significant Accounting Policies These policies are in accordance with the accounting principles generally accepted in the United States of

America (GAAP). A. Use of Estimates The presentation of consolidated financial statements in conformity 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 and liabilities and disclosure of contingent assets and liabilities at the date of the consolidated financial statements. Estimates also affect the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates.

B. Cash and Cash Equivalents Cash and cash equivalents for purposes of the statement of cash flows includes investments in

highly liquid debt instruments with original maturities of three months or less. C. Service Accounts Receivable, Net Net service accounts receivable consist of fees due from clients and their insurance companies

and amounts due on various contracts reduced by a valuation allowance for uncollectible accounts and contractual adjustments from third party payors. These receivables are unsecured. The allowances reflect management’s estimate of amounts that will not be collected in the future and are based on reviews of account balances by payor classes. Percentages are applied to each payor class based on contractual agreements and historical collection and recovery information to determine the net realizable value of the service accounts receivable.


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Payment for services is expected within thirty days of receipt of the billing. Any amounts deemed

uncollectible are written off on a monthly basis. The Organization does not charge interest on outstanding balances owed.

D. Investments Investments in equity securities with readily determinable fair values and all investments in debt

securities are measured at fair value in the consolidated statement of financial position. Investment income or loss (including realized gains and losses on investments, interest and dividends) is included in excess of revenue over (under) expenses unless the income or loss is restricted by donor or law. Changes in unrealized gains and losses on investments are excluded from excess of revenue over (under) expenses unless the investments are trading securities. Periodically the Organization reviews its investments to determine whether any unrealized losses are other than temporary. During 2013 and 2012, there were $-0- and $16,829, respectively, in investment declines that were determined to be other than temporary.

E. Assets Limited as to Use Assets limited as to use primarily include assets with donor restrictions and designated assets set

aside by the Board of Directors for specific purposes, over which the Board retains control and may at its discretion subsequently use for other purposes.

F. Property and Equipment Property and equipment are stated at cost. Depreciation is provided over the estimated useful lives

of each class of depreciable assets and is computed using the straight-line method. The useful lives of property and equipment for purposes of computing depreciation are:

Land improvements 7 – 10 Years Building 5 – 40 Years Building improvements 7 – 10 Years Furniture and equipment 3 – 20 Years Vehicles 2 – 5 Years

Gifts of long-lived assets such as land, buildings or equipment are reported as unrestricted support

unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how long those long-lived assets must be maintained, expirations of donor restrictions are reported when the donated or acquired long-lived assets are placed in service.

G. Deferred Revenue Deferred revenue consists primarily of revenue received to fund future program activities. Deferred

revenue consists of the following:

2013 2012

Children services $ 874,964 804,601 Behavioral health 227,824 343,689 Community services 212,885 485,261 Disaster relief 90,512 89,915 Technology 40,000 -- General program services 341,996 80,466

$ 1,788,181 1,803,932


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H. Temporarily and Permanently Restricted Net Assets The Organization maintains the following classes of net assets:

Unrestricted – Represents net assets that are not subject to donor-imposed restrictions.

Temporarily Restricted – Represents net assets whose use by the Organization has been limited by donor as to a specific time period or purpose.

Permanently Restricted – Represents net assets that have been restricted by donors to be

maintained by the Organization in perpetuity. I. Endowments

The Organization’s endowments consist of funds established to invest permanently restricted donations. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. As of December 31, 2013, the Organization had no Board designated endowments. The Board of Directors of the Organization has interpreted the Nebraska Uniform Prudent Management of Institutional Funds Act (NUPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by NUPMIFA. In accordance with NUPMIFA, the organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

1. The duration and preservation of the fund 2. The purposes of the organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the organization 7. The investment policies of the organization

J. Donor-Restricted Gifts Unconditional promises to give cash and other assets to the Organization are reported at fair value

at the date the promise is received or given. Conditional promises to give and indications of intentions to give are reported at fair value at the date the gift is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose of restriction is accomplished, temporarily restricted net assets are reclassified as unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. Donor-restricted contributions whose restrictions are met within the same year as received are reported as unrestricted contributions in the accompanying consolidated financial statements.


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K. Advertising The Organization expenses advertising costs as incurred. At December 31, 2013 and 2012

advertising expense of $74,224 and $54,304, respectively, is included in printing expense in the consolidated statement of activities.

L. Functional Allocation of Expenses The costs of providing the various programs and other activities of the Organization have been

summarized on a functional basis in the consolidated statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

M. Excess of Revenue Over (Under) Expenses The statement of activities includes excess of revenue over (under) expenses as a performance

indicator. Changes in net assets which are excluded from the performance indicator include change in unrealized gains and losses on other than trading securities and changes in the value of interest in perpetual trust.

N. Fair Value of Financial Instruments The carrying amounts of all financial instruments approximate estimated fair value. Cash and cash

equivalents, receivables and payables are reasonable estimates of their fair values due to their short term nature. Fair values for short-term investments, assets limited as to use interest in Fremont Area Community Foundation and beneficial interest in perpetual trust are stated at fair value as discussed in Note 5. The carrying value of long-term debt approximates fair value since the interest rates closely reflect current market rates.

O. Income Taxes All affiliated entities are not-for-profit corporations as described in Section 501(c)(3) of the Internal

Revenue Code. All entities have received determination letters that they are exempt from federal income taxes on related income pursuant to Section 501(a) of the Internal Revenue Code. The Internal Revenue Service has established standards to be met to maintain the Organization’s tax-exempt status.

The Organization accounts for uncertainties in accounting for income tax assets and liabilities using

guidance included in FASB ASC Topic 740, Income Taxes. The Organization recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. At December 31, 2013 and 2012, the Organization had no uncertain tax positions accrued. The Organization is no longer subject to income tax examinations for years ended prior to December 31, 2010.

P. Comparative Amounts The amounts shown for 2012 in the accompanying consolidated financial statements are included

to provide a basis for comparison with 2013, and are not intended to present all information necessary for a fair presentation of the 2012 consolidated financial statements in conformity with accounting principles generally accepted in the United States of America.

Q. Subsequent Events The Organization considered events occurring through May 6, 2014 for recognition or disclosure in

the consolidated financial statements as subsequent events. That date is the date the financial statements were available to be issued.


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(3) Pledges Receivable Promises to give outstanding, which have been reflected in the consolidated financial statements as

unrestricted and restricted pledges receivable, are due as follows:

Year Ended December 31: Unrestricted Restricted 2014 $ 150,313 548,250 2015 13,000 2,000 2016 13,000 2,000 2017 13,298 2,000 2018 -- 2,000

Pledges receivable 189,611 556,250

Less current portion (150,313) (548,250)

Pledges receivable, net of current portion $ 39,298 8,000 (4) Investments, Including Assets Limited as to Use The composition of investments, including assets limited as to use, at December 31, 2013 and 2012 is as

follows:

2013 2012

Short-term investments $ 2,800,409 2,493,542

Assets limited as to use – By donor 908,943 1,024,950 By Board 99,993 62,643 Deferred compensation 201,226 148,599

Total assets limited as to use 1,210,162 1,236,192

Total at fair value $ 4,010,571 3,729,734 The Organization has outsourced the management of a majority of their investment portfolios to third-party

investment managers. Third-party investment managers follow the Organization’s investment policies; however, no restrictions on buying or selling specific securities are imposed. Therefore, the Organization does not consider any impairment loss to be temporary. Impairment losses are included with investment income and other, net, and a new cost basis is established for each security for which an impairment loss is recognized.

Investment return for the years ended December 31, 2013 and 2012 is summarized as follows:

2013 2012

Interest and dividends $ 51,079 66,178 Net realized gains 72,054 56,910 Realized losses on investments determined to be other-than-temporary -- (16,829)Change in unrealized gains 244,350 132,673

Total investment return $ 367,483 238,932


13

(5) Fair Value Fair Value Hierarchy The Organization applies FASB ASC Topic 820 for fair value measurements of financial assets and

financial liabilities that are recognized or disclosed at fair value in the financial statements on a recurring basis. FASB ASC Topic 820 establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows:

Level 1 inputs are quoted market prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included in Level 1 that are observable for the asset or liability either directly or indirectly through either corroboration or observable market data. Level 3 inputs are inputs are unobservable for the asset or liability. Therefore, unobservable inputs shall reflect the entity’s own assumptions about the assumptions that market participants would use in pricing the asset or liability (including assumptions about risk) developed based on the best information available in the circumstances.

The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the

lowest level input that is significant to the fair value measurement in its entirety. The following methods and assumptions were used to estimate the fair value for each class of financial

instrument measured at fair value:

Cash and cash equivalents – The fair value of cash and cash equivalents, consisting primarily of money market funds, is classified as Level 1 as these funds are valued using quoted market prices. Mutual funds – The fair value of mutual funds are classified as Level 1 as the market values based on quoted market prices, when available, or market prices provided by recognized broker dealers. Corporate stocks – Corporate stocks are classified as Level 1 as they are traded in an active market for which closing prices are readily available. Fixed income securities – Investments in fixed income securities are comprised of mortgage backed securities and corporate bonds and notes. Fixed income securities are classified as Level 2 based on multiple sources of information, which may include market data and/or quoted market prices from either markets that are not active or are for the same or similar assets in active markets. Interest in Fremont Area Community Foundation – The interest in Fremont Area Community Foundation is classified as Level 2 as the fair value of the interest is measured using the fair value of the underlying assets included in the trust as provided by the trustee. Beneficial interest in perpetual trust – The fair value of the beneficial interest in perpetual trust is classified as Level 3 as the beneficial interest is valued based on the trust’s underlying assets which are unobservable to market participants and the Organization will never receive the perpetual trust’s assets. The underlying assets consist of cash and cash equivalents, domestic and international stocks corporate and government obligations, and real estate. Cash surrender value of life insurance – The fair value of cash surrender value of life insurance is classified as Level 2 as it is the amount that could be realized under the insurance contract upon discontinuance or surrender of the contract before its maturity.


14

Total Level 1 Level 2 Level 3

Cash & cash equivalents $ 1,670,804 1,670,804 -- -- Mutual funds- Commodities-precious metals 34,836 34,836 -- -- Corporate stocks- Domestic 1,138,985 1,138,985 -- -- International 198,203 198,203 -- -- Fixed income- Corporate bonds 434,126 -- 434,126 -- Mortgage backed 293,492 -- 293,492 -- Interest in Fremont Area Community Foundation 477,285 -- 477,285 -- Beneficial interest in perpetual trust 925,714 -- -- 925,714 Cash surrender value of life insurance 240,125 -- 240,125 --

$ 5,413,570 3,042,828 1,445,028 925,714

2013

Total Level 1 Level 2 Level 3

Cash & cash equivalents $ 1,760,093 1,760,093 -- -- Mutual funds- Commodities-precious metals 48,606 48,606 -- -- Corporate stocks- Domestic 923,477 923,477 -- -- International 135,104 135,104 -- -- Fixed income- Corporate bonds 502,783 -- 502,783 -- Mortgage backed 175,569 -- 175,569 -- Interest in Fremont Area Community Foundation 388,199 -- 388,199 -- Beneficial interest in perpetual trust 901,395 -- -- 901,395 Cash surrender value of life insurance 184,102 -- 184,102 --

$ 5,019,328 2,867,280 1,250,653 901,395

2012

For the years ended December 31, 2013 and 2012, the application of valuation techniques applied to

similar assets and liabilities has been consistent. The following tables present the financial instruments that are measured at fair value on a recurring basis

(including items that are required to be measured at fair value) at December 31, 2013 and 2012:


15

Reconciliation of Level 3 assets for the year ended December 31, 2013 is as follows:

Balance, December 31, 2012 $ 901,395 Unrealized gains 24,319 Balance, December 31, 2013 $ 925,714

(6) Investment in Josiah Place, Inc. The Organization is the sponsor of Josiah Place, Inc., a Nebraska not-for-profit Agency. Josiah Place, Inc.

was incorporated in December 2004 for the purpose of constructing and operating very low income independent living housing for persons with chronic mental illnesses. The housing project was funded by the U.S. Department of Housing and Urban Development Section 811 capital advance.

(7) Interest in Fremont Area Community Foundation In 2008, the Organization established an interest in the Fremont Area Community Foundation (FACF) for

the purpose of supporting programs and services in the Fremont Area Center for Healthy Families (CHF). Because the Organization does not have the authority to appoint a majority of the Board Members of the FACF, the consolidated financial statements do not include the accounts of this organization. All funds raised, except funds required for administrative fees incurred by the FACF, are to be distributed, or held for the purpose of supporting the programs and services of the CHF, or as required to comply with the purposes specified by donors.

The Organization has recognized its transfers to the FACF and net assets of the FACF restricted for the

Organization’s use as an interest in the foundation in the accompanying consolidated statement of financial position. Increases and decreases in the Organization’s interest in FACF relating to investment income and contributions are recognized with investment income and other, net, in the accompanying consolidated financial statements.

(8) Interest in Perpetual Trust In 2010, the Organization became a beneficiary of a donor created trust in which the donor established a

trust from their estate. The Organization will receive 40% of the trust’s net income annually to be used for fulfilling their charitable purposes.

(9) Property and Equipment, Net A summary of property and equipment at December 31, 2013 and 2012 is as follows:

2013 2012 Land and improvements $ 1,122,753 1,164,854 Land held for future use 500,000 500,000 Building 1,910,190 1,910,870 Building improvements 2,462,477 2,315,630 Furniture and equipment 1,267,799 1,237,673 Vehicles 47,868 47,360 Construction in progress 821,828 754,917 8,132,915 7,931,304 Less accumulated depreciation (2,887,416) (2,818,722) $ 5,245,499 5,112,582


16

Depreciation expense of $309,564 and $241,559 in 2013 and 2012, respectively, is included in the

accompanying consolidated statement of activities. Depreciation expense includes an impairment loss of $42,164 due to write down of value of land held.

Construction in progress in 2012 and 2013 is related to the acquisition and remodeling of a property near

the Organization’s campus. (10) Long-Term Debt Long-term debt as of December 31, 2013, consists of the following:

2013 2012 2%, $250,000 note payable to Bison Leasing Corp. Interest

payments due annually with principal due in full on November 15, 2014. Note collateralized by building (included in Omaha Church Center, Inc.). $ 250,000 250,000

0%, $1,250,000 note payable to LDI Holdings, LLC. First payment of $500,000 due on March 1, 2013 with payments of $250,000 due annually thereafter until March 1, 2016. Note is collateralized by building (included in LFS 25th Avenue Apartments, LLC.). 750,000 1,250,000

4.50%, $91,000 capital lease in monthly payments of $2,080, including principal and interest through December 2016 to CSC Leasing Company, secured by equipment under lease. 67,940 --

1,067,940 1,500,000 Less current portion 522,360 500,000 Total long-term debt $ 545,580 1,000,000

The aggregate future maturities of long-term debt as of December 31, 2013 are as follows:

2014 $ 522,360 2015 273,387 2016 272,193

$ 1,067,940


17

(11) Temporarily and Permanently Restricted Net Assets Temporarily restricted net assets are available for the following purposes at December 31, 2013 and 2012:

2013 2012 United Way allocations for program services $ 463,750 370,895 Fremont Area Center for Healthy Families 118,056 38,268 Campus 100,000 -- Education Leadership and Development 91,007 93,479 Grace Hansen Children’s Fund 87,000 149,000 Pledges receivable, future general program services 80,000 225,000 Prison ministry 79,269 97,233 Technology 75,000 150,000 Capital projects 62,140 52,140 Children services 39,193 39,000 25th Avenue Apartments -- 500,000 Council Bluffs Center for Healthy Families -- 13,287 International adoption -- 5,800 $ 1,195,415 1,734,102

Permanently restricted net assets have been restricted by donors to be maintained in perpetuity.

Permanently restricted net assets of the Organization at December 31, 2013 and 2012, are restricted to:

2013 2012

Beneficial interest in perpetual trust $ 925,714 901,395 Support of general operations 485,327 485,327 Fremont Area Center for Healthy Families 361,729 357,258

$ 1,772,770 1,743,980 During 2013, the Organization transferred $17,893 from permanently restricted net assets to temporarily

restricted net assets and $7,327 from temporarily restricted net assets to unrestricted net assets. These transfers were made as additional information became known relating to the restricted nature of contributions received in prior years.

(12) United Ways Support The following is the detail of "United Ways" support included in unrestricted activities in the accompanying

consolidated statement of activities:

2013 2012

United Way of the Midlands $ 514,152 556,207 United Way of the Midlands (International Center) 186,221 158,000 Fremont Area United Way 70,000 70,000 Heartland United Way, Inc. 16,506 23,927 Mid-Plains United Way 12,500 17,500 Lexington United Way 6,000 6,000 United Way of Lincoln and Lancaster County 3,957 1,087 United Way of McCook 2,880 2,394 Cozad United Way, Inc. 2,000 2,000 United Way of the Kearney Area 454 --

$ 814,670 837,115


18

(13) Contributions Contributions are included in the consolidated statement of activities. Total contributions recognized for the

years ended December 31, 2013 and 2012 were:

2013 2012 Unrestricted contributions - Congregations and individuals (including in-kind contributions) $ 1,451,878 1,454,445 LCMS – Nebraska District 109,850 110,598 ELCA – Nebraska Synod 182,568 183,369 Individual gifts and bequests, net 307,917 174,973 Total unrestricted contributions 2,052,213 1,923,385 Temporarily restricted contributions 599,179 1,255,035 Total contributions $ 2,651,392 3,178,420

Donated professional services, space and other in-kind contributions are reported at fair value when

received and reported in the consolidated statement of activities. The value of these contributions is as follows:

2013 2012 Professional fees $ 241,389 123,547 Supplies and other 274,601 186,412 Occupancy costs 101,879 116,919 Legal and accounting fees 35,659 65,698 $ 653,528 492,576

The Organization also received donated clerical services during the year to benefit existing programs and

activities. These contributions were not recognized as revenue in the consolidated statement of activities since they did not meet the recognition requirements of FASB ASC Topic 958 Subtopic 605, Revenue Recognition. The fair value of these contributions amounted to $82,321 in 2013 and $109,064 in 2012.


19

(14) Government Service Contracts and Grants The following is a detail of government grants and purchase of service contracts included in the

accompanying consolidated statement of activities:

2013 2012 Grants: Nebraska Health and Human Services $ 1,146,222 976,088 Learning Community of Douglas and Sarpy Counties 771,695 587,498 Lutheran Immigration and Refugee Service 750,459 650,224 Church World Services 692,331 584,002 NHHS – Refugee Education and Employability Partnership 447,305 387,100 AmeriCorps 346,671 282,273 Nebraska Families Collaborative 235,240 107,750 U.S. Department of Justice 159,542 228,575 Nebraska Commission on Public Advocacy 47,085 95,016 Nebraska Commission on Law Enforcement and Criminal Justice 13,850 14,788 Other 127,887 128,690 $ 4,738,287 4,042,004 Purchase of Service Contracts: Region 6 Behavioral Healthcare $ 3,779,994 3,024,330 Region V 986,899 916,505 Region II and Region III 168,586 174,524 Other 152,696 92,037 $ 5,088,175 4,207,396

(15) Lease Commitments The Organization leases its various office facilities, equipment and vehicles under operating lease

arrangements ranging in duration from one to five years. Rental expense relating to these leases amounted to $406,434 and $405,093 for the years ended December 31, 2013 and 2012, respectively.

The following is a schedule by years of future minimum rental commitments under non-cancelable leases as

of December 31, 2013:

Year Ending December 31

Total

2014 $ 177,2192015 95,8142016 28,5392017 1,364

(16) Pension Plan The Organization has an Employer's Profit Sharing Plan created in accordance with Internal Revenue Code

Section 401(k). Substantially all employees of the Organization are eligible to participate in the 401(k) plan. Employer contributions to the 401(k) plan are made based on the length of service of individual employees and range from 50% to 100% match of employee contributions up to 5% of eligible salaries. Total pension expense included in the consolidated statement of activities for the years ended December 31, 2013 and 2012, was $161,392 and $163,797, respectively.


20

(17) 457(b) Deferred Compensation Plan The Organization has established a deferred compensation plan for a select group of management or highly

compensated employees in accordance with Internal Revenue Code 457(b). The plan permits eligible employees to defer a portion of their salaries until future years. The deferred compensation is not available to the employees until retirement, separation from employment, death, unforeseeable emergency or attaining age 65. The employer is the beneficial owner of all assets the employee places in the plan. The employee is fully vested in all amounts credited to his or her account. The Organization made contributions of $22,276 and $21,774 to the plan on behalf of participants for the year ended December 31, 2013 and 2012, respectively.

(18) Concentrations of Credit Risk The Organization has locations throughout the State of Nebraska. The Organization grants credit without

collateral to its clients, most of whom are local residents and are insured under third-party payor agreements. The mix of receivables from clients and third-party payors at December 31, 2013 and 2012 were as follows:

2013 2012 Medicare and Medicaid 22% 26% Other state/governmental funding 60 50 Client and other payors 18 24 100% 100%

The Organization, at times, maintains cash deposits in excess of Federal Deposit Insurance Corporation

insurance limits. Management believes the risk relating to these deposits is minimal. (19) Lancaster County Community Mental Health Center In 2013, Lancaster County, Nebraska indicated its intent to Region V Services to cease the operations of

the Lancaster County Community Mental Health Center (CMHC). In December 2013, Lutheran Family Services of Nebraska, Inc. entered into an agreement with the County of Lancaster, Nebraska to transition the operations of the CMHC to Lutheran Family Services of Nebraska, Inc. The agreement provided that Lutheran Family Services of Nebraska, Inc. will provide staffing to CMHC on an interim basis until the services provided by CMHC are completely transitioned to Lutheran Family Services of Nebraska, Inc. Lutheran Family Services of Nebraska, Inc. took control of the operations of CMHC on February 1, 2014.

Lutheran Family Services of Nebraska, Inc. and Affiliates Exhibit 1 Consolidating Statement of Financial Position December 31, 2013

21

Lutheran Family Omaha Lutheran FamilyServices of Church Services LFS 25th Avenue

ASSETS Nebraska, Inc. Center, Inc. Foundation, Inc. Apartments, LLC Eliminations Consolidated

Current assets:Cash and cash equivalents $ 598,444 22,073 -- 62,163 -- 682,680 Short-term investments 314,066 320,001 2,166,342 -- -- 2,800,409 Receivables -

Service accounts, net of allowance for uncollectible accountsand contractual adjustments of $43,000 739,887 -- -- -- -- 739,887

Unrestricted pledges, net 150,313 -- -- -- -- 150,313 Restricted pledges for specific purposes 543,750 2,000 2,500 -- -- 548,250 Grants and bequests 901,641 -- -- -- -- 901,641 Affiliates 922,493 15,237 -- -- (937,730) -- Other 1,320 4,200 -- 2,514 -- 8,034 Prepaid expenses 155,529 -- 2,160 -- -- 157,689

Total current assets 4,327,443 363,511 2,171,002 64,677 (937,730) 5,988,903

Investment in Josiah Place, Inc. -- 4,652 -- -- -- 4,652 Investment in 25th Avenue Apartments, LLC 509,195 -- -- -- (509,195) -- Interest in Fremont Area Community Foundation -- -- 477,285 -- -- 477,285 Unrestricted pledges, less current portion 39,298 -- -- -- -- 39,298 Restricted pledges for specific purposes, less current portion -- 8,000 -- -- -- 8,000 Interest in perpetual trust -- -- 925,714 -- -- 925,714 Assets limited as to use for specific purposes and endowment 201,226 52,140 956,796 -- -- 1,210,162 Property and equipment, net 641,637 3,378,219 -- 1,225,643 -- 5,245,499

Total assets $ 5,718,799 3,806,522 4,530,797 1,290,320 (1,446,925) 13,899,513

Lutheran Family Services of Nebraska, Inc. and Affiliates Exhibit 1 Consolidating Statement of Financial Position (continued) December 31, 2013

22


LIABILITIES AND NET ASSETS Nebraska, Inc. Center, Inc. Foundation, Inc. Apartments, LLC Eliminations Consolidated

Current liabilities:Current portion of long-term debt $ 22,360 250,000 -- 250,000 -- 522,360 Payables -

Trade 352,320 22,574 4,162 3,737 -- 382,793 Affiliates -- 61,506 860,987 15,237 (937,730) --

Accrued salaries, wages, vacation and payroll taxes payable 1,091,464 -- -- -- -- 1,091,464 Retirement plan payable 39,039 -- -- -- -- 39,039 Deferred revenue 1,976,429 150 -- 12,151 (200,549) 1,788,181

Total current liabilities 3,481,612 334,230 865,149 281,125 (1,138,279) 3,823,837

Long term debt, net of current portion 45,580 -- -- 500,000 -- 545,580 Deferred compensation liability 201,226 -- -- -- -- 201,226

Total liabilities 3,728,418 334,230 865,149 781,125 (1,138,279) 4,570,643

Commitments

Net assets:Unrestricted net assets 1,446,631 3,410,152 1,303,353 509,195 (308,646) 6,360,685 Temporarily restricted net assets 543,750 62,140 589,525 -- -- 1,195,415 Permanently restricted net assets -- -- 1,772,770 -- -- 1,772,770

Total net assets 1,990,381 3,472,292 3,665,648 509,195 (308,646) 9,328,870

Total liabilities and net assets $ 5,718,799 3,806,522 4,530,797 1,290,320 (1,446,925) 13,899,513

Lutheran Family Services of Nebraska, Inc. and Affiliates Exhibit 2 Consolidating Statement of Activities For the Year Ended December 31, 2013

23


Nebraska, Inc. Center, Inc. Foundation, Inc. Apartments, LLC Eliminations Consolidated

UNRESTRICTED REVENUE:Public support -

Congregations and individuals $ 1,450,235 -- 1,643 -- -- 1,451,878 United Ways 443,775 -- -- -- -- 443,775 LCMS - Nebraska District 109,850 -- -- -- -- 109,850 ELCA - Nebraska Synod 182,568 -- -- -- -- 182,568 Grants from affiliate 225,235 -- -- -- (225,235) -- Private grants 1,644,072 -- -- -- -- 1,644,072 Government grants 4,738,287 -- -- -- -- 4,738,287 Net assets released from restrictions,

including United Ways of $370,895 538,395 -- 176,759 500,000 -- 1,215,154 Individual gifts and bequests, net -- 1,686 306,231 -- -- 307,917

Total public support 9,332,417 1,686 484,633 500,000 (225,235) 10,093,501

Program service revenue - Program service fees, net 2,957,507 -- -- -- -- 2,957,507 Purchase of service contracts 5,249,941 -- -- -- (161,766) 5,088,175

Total program service revenue, net 8,207,448 -- -- -- (161,766) 8,045,682

Other -Investment income and other, net 17,557 4,377 87,582 7,494 -- 117,010 Change in investment in 25th Avenue Apartments, LLC 9,195 -- -- -- (9,195) -- Building rental -- 278,724 -- 159,082 (256,980) 180,826

Total other, net 26,752 283,101 87,582 166,576 (266,175) 297,836

Total unrestricted revenue, gains and other support $ 17,566,617 284,787 572,215 666,576 (653,176) 18,437,019

Lutheran Family Services of Nebraska, Inc. and Affiliates Exhibit 2 Consolidating Statement of Activities (continued) For the Year Ended December 31, 2013

24



Total unrestricted revenue, gains and other support - forward $ 17,566,617 284,787 572,215 666,576 (653,176) 18,437,019

EXPENSES:Operating expenses -

Salaries 9,353,357 -- 97,500 2,935 (97,500) 9,356,292 Employee benefits 953,974 -- 19,500 -- (19,500) 953,974 Payroll taxes 708,832 -- 7,800 12,125 (7,800) 720,957

Total salaries and related expenses 11,016,163 -- 124,800 15,060 (124,800) 11,031,223

Legal and accounting fees 54,679 14,520 11,009 -- (21,966) 58,242 Professional fees 1,393,964 13,746 19,683 18,089 -- 1,445,482 Foster parent fees 460,776 -- -- -- -- 460,776 Supplies 639,221 12,771 -- 5,902 -- 657,894 Telephone 384,215 -- -- 668 -- 384,883 Postage and shipping 65,136 -- -- -- -- 65,136 Occupancy cost 872,122 98,567 4,505 30,990 (271,980) 734,204 Travel expense 402,825 -- -- 706 -- 403,531 Conference expense 168,282 -- -- -- -- 168,282 Assistance to individuals 922,491 -- -- -- -- 922,491 Equipment and maintenance 311,311 45,864 -- 18,807 -- 375,982 Insurance 84,639 18,614 -- 16,476 -- 119,729 Printing 182,135 -- -- 790 -- 182,925 Subscriptions and publications 5,904 -- -- -- -- 5,904 Board expense 2,154 -- -- -- -- 2,154 Organization dues 49,664 -- -- -- -- 49,664 Uncollectible accounts 97,715 -- -- 4,425 -- 102,140 Miscellaneous 3,558 -- 21,593 305 -- 25,456 Interest expense 3,923 -- -- -- -- 3,923 Grants to affiliates and other organizations -- 18,012 290,992 -- (273,641) 35,363 Depreciation 135,177 171,388 -- 45,163 -- 351,728

Total expenses 17,256,054 393,482 472,582 157,381 (692,387) 17,587,112

EXCESS OF REVENUE OVER (UNDER) EXPENSES 310,563 (108,695) 99,633 509,195 39,211 849,907

CHANGES IN UNREALIZED GAINS ON OTHERTHAN TRADING SECURITIES, NET -- -- 228,177 -- -- 228,177

TRANSFER OF NET ASSETS -- -- 7,327 -- -- 7,327

INCREASE (DECREASE) IN UNRESTRICTED NET ASSETS $ 310,563 (108,695) 335,137 509,195 39,211 1,085,411

Lutheran Family Services of Nebraska, Inc. and Affiliates Exhibit 2 Consolidating Statement of Activities (continued) For the Year Ended December 31, 2013

25



Increase (decrease) in unrestricted net assets - forward $ 310,563 (108,695) 335,137 509,195 39,211 1,085,411

TEMPORARILY RESTRICTED NET ASSETS:Contributions, grants and bequests 486,250 10,000 102,929 -- -- 599,179 Investment income, net -- -- 50,549 -- -- 50,549 Change in unrealized gains on other than trading securities, net -- -- 16,173 -- -- 16,173 Net assets released from restrictions (538,395) -- (176,759) (500,000) -- (1,215,154) Transfer of net assets -- -- 10,566 -- -- 10,566

Increase (decrease) in temporarily restricted net assets (52,145) 10,000 3,458 (500,000) -- (538,687)

PERMANENTLY RESTRICTED NET ASSETS:Contributions, grants and bequests -- -- 22,364 -- -- 22,364 Change in value of interest in perpetual trust -- -- 24,319 -- -- 24,319 Transfer of net assets -- -- (17,893) -- -- (17,893)

Increase in permanently restricted net assets -- -- 28,790 -- -- 28,790

INCREASE (DECREASE) IN NET ASSETS 258,418 (98,695) 367,385 9,195 39,211 575,514

NET ASSETS:Beginning of year 1,731,963 3,570,987 3,298,263 500,000 (347,857) 8,753,356

End of year $ 1,990,381 3,472,292 3,665,648 509,195 (308,646) 9,328,870

Lutheran Family Services of Nebraska, Inc. and Affiliates Exhibit 3 Statement of Activities by Core Competencies For the Year Ended December 31, 2013

26

BehavioralAgency Fund Raising/ Health Children Community

Management Public Relations Services Services Services TotalSUPPORT AND REVENUE

Contributions $ -- 772,032 49,519 382,868 24,206 1,228,625 In-Kind Contributions, including unrecorded,

footnote disclosed in-kind contributionsin the amount of $82,321 56,218 121,100 54,539 156,198 375,794 763,849

LFS Foundation Grants 16,136 70,000 25,000 99,099 15,000 225,235 Private Grants -- 87,330 491,867 880,873 184,002 1,644,072 Government Grants -- -- 42,339 1,793,505 2,902,443 4,738,287 United Ways -- 89,826 160,339 360,717 203,788 814,670 Program Service Fees -- -- 1,206,410 1,703,460 47,637 2,957,507 Purchase of Service Contracts 64,266 124,800 4,729,731 205,748 125,396 5,249,941 Interest and Other 20,820 -- 4,042 1,871 19 26,752

Total Support and Revenue 157,440 1,265,088 6,763,786 5,584,339 3,878,285 17,648,938

EXPENSES

Personnel 1,450,116 731,320 3,965,086 3,066,031 1,803,610 11,016,163Professional Fees, including unrecorded,

footnote disclosed in-kind contributionsin the amount of $82,321 350,947 67,524 584,227 727,817 261,224 1,991,739

Occupancy Costs 87,441 21,019 345,289 240,175 178,198 872,122Travel and Conference Expenses 47,839 116,001 173,618 146,990 86,659 571,107Other Operating Expenses 475,918 279,409 394,241 427,061 249,024 1,825,653Specific Assistance to Individuals -- -- -- 10,262 912,229 922,491Interest Expense 3,923 -- -- -- -- 3,923Depreciation Expense 19,193 9,132 47,542 38,359 20,951 135,177Administration Allocation (1,815,137) (366,814) 927,297 799,342 455,312 --

Total Expenses 620,240 857,591 6,437,300 5,456,037 3,967,207 17,338,375

CHANGE IN UNRESTRICTEDNET ASSETS $ (462,800) 407,497 326,486 128,302 (88,922) 310,563

Lutheran Family Services of Nebraska, Inc. and Affiliates Schedule of Expenditures of Federal Awards December 31, 2013

27

Federal CFDA Pass through Entity

Federal Agency / Pass-Through Entity Federal Grant / Program Number Identifying Number Expenditures

U.S. Department of Health and Human Services

Passed through the Nebraska Department of Health and Human Services Foster Care_Title IV-E 93.658 0G1301NE1401 $ 7,551

Passed through the Nebraska Department of Health and Human Services Personal Responsibility Education Program 93.092 0G1001NEPREP 40,147

Passed through the Nebraska Department of Health and Human Services Refugee TAG Formula 93.584 0G1201NERRTA 214,182

Passed through the Nebraska Department of Health and Human Services Maternal, Infant and Early Childhood Home Visiting - FY12 Competitive Grant 93.505 D89MC25209 41,486

Passed through the Substance Abuse and Mental Health Services Administration

Passed through the Office of the Courts Substance Abuse and Mental Health Services - Project Safe Start - Nebraska 93.243 1H79TI023356-01 17,635

Passed through Administration for Children and Families:

Passed through Nebraska Department of Health and Human Services Refugee and Entrant Assistance - Refugee Preventative Health 93.576 0G90RX020202 122,676

Refugee and Entrant Assistance - Discretionary Grants 93.576 0G90RT015102 76,805

Total Refugee and Entrant Assistance - Discretionary Grants 199,481

Passed through Lutheran Immigration and Refugee Service Services for Unaccompanied Alien Children 93.676 90ZU0067/0390ZU0103/01 10,496

Passed through Lutheran Immigration and Refugee Service Refugee and Entrant Assistance - Voluntary Agency Programs 93.567 90RV0062/0190RV0062/02 94,448

Passed through Church World Services Refugee and Entrant Assistance - Voluntary Agency Programs 93.567 90RV0056-0290RV0056-03 36,000

Total Refugee and Entrant Assistance - Voluntary Agency Programs 130,448

Passed through Region 6 Behavioral Healthcare Child Care and Development Block Grant 93.575 0G0601NECCDF 12,173

Passed through Nebraska Department of Health and Human Services Refugee Social Services Program 93.566 0G12AANE7110 447,305

Passed through Region 6 Behavioral Healthcare Block Grant for Community Mental Health Services 93.958 R6 13-14 119,288

Passed through Region 6 Behavioral Healthcare Block Grants for Prevention and Treatment of Substance Abuse 93.959 R6 13-14 3,783

Passed through Region V Block Grants for Prevention and Treatment of Substance Abuse 93.959 R5 13-14 24,812

Total Block Grants for Prevention and Treatment of Substance Abuse 28,595

Passed through Nebraska Department of Health and Human Services Temporary Assistance for Needy Families (TANF) 93.558 N/A 70,731

Subtotal $ 1,339,518

The accompanying notes are an integral part of this schedule

Lutheran Family Services of Nebraska, Inc. and Affiliates Schedule of Expenditures of Federal Awards (Continued) December 31, 2013

28

Federal CFDA Pass through Entity

Federal Agency / Pass-Through Entity Federal Grant / Program Number Identifying Number Expenditures

Balance forward $ 1,339,518

U.S. Department of Health and Human Services (Continued)

Passed through the Centers for Disease Control and Prevention:

Passed through the Nebraska Department of Health and Human Services HIV Care Formula Grants 93.917 N/A 1,821

Passed through the U.S. Committee for Refugees and Immigrants National Human Trafficking Victim Assistance 93.598 90ZV0101/01 4,223

Total U.S. Department of Health and Human Services 1,345,562

U.S. Department of State

Passed through Church World Services Reception and Placement Program 19.510 SPRMCO13CA1022SPRMCO13CA1010 306,563

Passed through Lutheran Immigration and Refugee Service Reception and Placement Program 19.510 SPRMCO12CA006SPRMCO13CA1025SPRMCO13CA1006 626,246

Total U.S. Department of State 932,809

U.S. Department of Justice

Passed through the Office of Juvenile Justice & Delinquency Prevention Youth With Sexual Behavior Problems 16.543 2010-MC-CX-K061 159,542

Corporation for National and Community Services

Passed through the Nebraska Volunteer Service Commission AmeriCorps 94.006 12ACHNE001 346,671

U.S. Department of Housing and Urban Development

Passed through the City of Omaha Fair Housing Assistance Program 14.401 FF207K117008 22,059

Corporation for National and Community Services

Passed through the Nebraska Volunteer Service Commission Program Development & Technical Assistance 94.009 11PTHNE001 725

Total Expenditures of Federal Awards $ 2,807,368

The accompanying notes are an integral part of this schedule

Lutheran Family Services of Nebraska, Inc. and Affiliates Notes to Schedule of Expenditures of Federal Awards December 31, 2013

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Note 1: Basis of Presentation

The accompanying schedule of expenditures of federal awards includes the federal grant activity of the Organization under the programs of the federal government for the year ended December 31, 2013. The information in this schedule is presented in accordance with the requirements of the Office of Management and Budget (OMB) Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Because the schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets or cash flows of the Organization.

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 OMB Circular A-122, Cost Principles for Non-Profit Organizations, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Pass-through entity identifying numbers are presented where available.

Note 3: Subrecipients

Of the federal expenditures presented in the schedule, the Organization provided federal awards to subrecipients as follows:

CFDA Number Program Name Amount Provided To Subrecipients

16.543 Youth with Sexual Behavior Problems $29,349

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Independent Auditor’s Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial

Statements Performed in Accordance With Government Auditing Standards

To the Board of Directors of Lutheran Family Services of Nebraska, Inc. Omaha, Nebraska: 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 Lutheran Family Services of Nebraska, Inc. (the Organization), which comprise the consolidated statement of financial position as of December 31, 2013, and the related consolidated statements of activities, cash flows and functional expenses for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated May 6, 2014. The financial statements of Omaha Church Center, Inc., Lutheran Family Services Foundation, Inc., and LFS 25th Avenue Apartments, LLC were not audited in accordance with Government Auditing Standards.

Internal Control Over Financial Reporting

In planning and performing our audit of the consolidated financial statements, we considered the Organization's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the consolidated financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Organization’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 a 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. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Organization's consolidated financial statements are free from 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.

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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 entity’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 entity’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Omaha, Nebraska, May 6, 2014.

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Independent Auditor’s Report on Compliance For Each Major Federal

Program and Report on Internal Control Over Compliance as Required by OMB Circular A-133

To the Board of Directors Lutheran Family Services of Nebraska, Inc. Omaha, Nebraska:

Report on Compliance for Each Major Federal Program

We have audited Lutheran Family Services of Nebraska, Inc’s. compliance with the types of compliance requirements described in the OMB Circular A-133 Compliance Supplement that could have a direct and material effect on each of Lutheran Family Services of Nebraska, Inc.’s major federal programs for the year ended December 31, 2013. Lutheran Family Services of Nebraska, Inc.’s major federal programs are identified in the summary of auditor’s results section of the accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with the requirements of laws, regulations, contracts, and grants applicable to its federal programs.

Auditor’s Responsibility

Our responsibility is to express an opinion on compliance for each of Lutheran Family Services of Nebraska, Inc.’s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our 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 OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about Lutheran Family Services of Nebraska, Inc.’s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of Lutheran Family Services of Nebraska, Inc.’s compliance.

Opinion on Each Major Federal Program

In our opinion, Lutheran Family Services of Nebraska, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, 2013.

Report on Internal Control Over Compliance

Management of Lutheran Family Services of Nebraska, Inc. is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered Lutheran Family Services of Nebraska, Inc.’s internal

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control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with OMB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of Lutheran Family Services of Nebraska, Inc.’s 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. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of the section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. 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 OMB Circular A-133. Accordingly, this report is not suitable for any other purpose. Omaha, Nebraska, May 6, 2014.

Lutheran Family Services of Nebraska, Inc. and Affiliates Schedule of Findings and Questioned Costs For the Year Ended December 31, 2013

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I. SUMMARY OF INDEPENDENT AUDITOR'S RESULTS Financial Statements Type of auditor's report issued: Unmodified Internal control over financial reporting:

Material weakness(es) identified? Yes x No Significant deficiency(ies) identified? Yes x None Reported

Noncompliance material to financial statements noted? Yes x No

Federal Awards Internal control over major programs:

Material weakness(es) identified? Yes x No Significant deficiency(ies) identified? Yes x None Reported

Type of auditor's report issued on compliance for major programs: Unmodified

Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-133? Yes x No

Identification of major programs:

CFDA Number(s) Name of Federal Program or Cluster

93.576 Refugee and Entrant Assistance – Refugee Preventative Health 93.958 Block Grant for Community Mental Health Services 93.566 Refugee Social Services Program

Dollar threshold used to distinguish between type A and type B programs

$300,000

Auditee qualified as low-risk auditee? x Yes No

II. FINANCIAL STATEMENT FINDINGS None noted. III. FEDERAL AWARD FINDINGS AND QUESTIONED COSTS None noted.

Documents

Lutheran Family Services of Nebraska, Inc. and Affiliates€¦ · Lutheran Family Services of Nebraska, Inc. and Affiliates Consolidated Statement of Activities For the Year Ended