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PROJECT HOSPITALITY, INC. AND
SUBSIDIARIES
Consolidated Financial Statements and
Single Audit Reports
For the years ended June 30, 2017 and 2016
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Financial Statements
June 30, 2017 and 2016
Contents
Page
Independent Auditors’ Report ...................................................................................................... 1-2
Consolidated Statements of Financial Position................................................................................3
Consolidated Statements of Activities ......................................................................................... 4-5
Consolidated Statements of Cash Flows ..........................................................................................6
Notes to Consolidated Financial Statements.............................................................................. 7-18
Supplementary Information
Schedules of Government Grants Revenue ...................................................................................19
Consolidated Schedules of Functional Expenses ..................................................................... 20-21
Schedule of Expenditures of Federal Awards .......................................................................... 22-23
Notes to Schedule of Expenditures of Federal Awards .................................................................24
Independent Auditors’ 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 ....................................... 25-26
Independent Auditors’ Report on Compliance for Each Major Federal Program and on
Internal Control over Compliance Required by the Uniform Guidance .............................. 27-28
Schedule of Findings and Questioned Costs ............................................................................ 29-30
Summary Schedule of Prior Audit Findings ..................................................................................31
Corrective Action Plan ...................................................................................................................32
1
40 Wall Street, 32nd F loor
New York, NY 10005
T 212 785 0100
F 212 785 9168
www.ncheng.com
Independent Auditors’ Report
To the Board of Directors of
Project Hospitality, Inc.
Watershed Associates, Inc.
New Vision HDFC
Report on the financial statements
We have audited the accompanying consolidated financial statements of Project Hospitality, Inc.
and subsidiaries (Watershed Associates, Inc. and New Vision HDFC), which comprise the
consolidated statements of financial position as of June 30, 2017 and 2016, and the related
consolidated statements of activities, functional expenses, and cash flows 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.
Auditors’ responsibility Our responsibility is to express an opinion on these consolidated financial statements based on
our audits. We conducted our audits in accordance with auditing standards generally accepted in
the United States of America and the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States. 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 the significant accounting estimates made by management, as well as evaluating the overall
presentation of the consolidated financial statements.
2
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 Project Hospitality, Inc. and subsidiaries as of June
30, 2017 and 2016, 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 matters
Supplementary information
Our audits were conducted for the purpose of forming an opinion on the consolidated financial
statements as a whole. The accompanying supplementary information shown on pages 19-21 is
presented for purposes of additional analysis and is not a required part of the consolidated financial
statements. The accompanying schedule of expenditures of federal awards shown on pages 22-23,
as required by Title 2 U.S. Code of Federal Regulation Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards, 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 April 20,
2018 on our consideration of Project Hospitality, Inc.‘s internal control over financial reporting 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 Project Hospitality, Inc.‘s internal control over financial reporting and compliance.
New York, New York
April 20, 2018
See notes to consolidated financial statements.
3
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Statements of Financial Position As of June 30, 2017 and 2016
2017 2016
Assets
Cash and cash equivalents $ 6,050,127 $ 6,988,545
Investments – Note 13 1,970,852 1,820,370 Due from funding sources 8,343,470 8,348,687 Contributions receivable – Note 7 679,000 253,500 Accounts receivable 61,377 51,371 Prepaid expenses 12,136 57,354 Due from related parties – Note 3 499,210 369,355 Security deposits 116,127 91,789 Loans receivable 65,000 65,000
Fixed assets, net – Note 6 6,131,009 4,899,331 Total assets $ 23,928,308 $ 22,945,302
Liabilities and net assets
Liabilities Accounts and accrued expenses payable $ 2,852,238 $ 2,615,810 Due to funding sources 762,755 570,935 Loans payable, net – Note 16 2,715,853 2,881,888
Mortgage payable – Note 14 128,161 154,472 Total liabilities 6,459,007 6,223,105 Net assets Unrestricted:
Undesignated 7,710,165 8,603,097 Board designated endowment fund – Note 4 1,920,251
1,896,152
Fixed assets 6,131,009
4,899,331 Total unrestricted net assets 15,761,425 15,398,580 Temporarily restricted – Note 11 1,707,876 1,323,617 Total net assets 17,469,301 16,722,197 Total liabilities and net assets $ 23,928,308 $ 22,945,302
See notes to consolidated financial statements.
4
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Statement of Activities For the year ended June 30, 2017
Temporarily
Unrestricted restricted Total
Revenue
Government grants $ 22,939,723 $ 22,939,723
Medicaid reimbursements 5,254,998 5,254,998
Contributions – Note 12 430,366 $ 1,108,256 1,538,622
Special events 284,094 284,094
Direct expenses on special events ( 24,799 ) ( 24,799 )
Rental income 1,485,971 1,485,971
Net investments income – Note 13 157,193 157,193
Other income 88,064 88,064
In-kind contributions – Note 5 183,508 183,508 Total revenue 30,799,118 1,108,256 31,907,374
Net assets released from restriction 723,997 ( 723,997 ) Total revenue 31,523,115 384,259 31,907,374 Expenses
Program services
Support and treatment services 8,144,558 8,144,558
Re-housing services 8,529,529 8,529,529
Homeless care and prevention services 11,213,802 11,213,802 Total program services 27,887,889 27,887,889 Supporting services
Management and general 3,034,980 3,034,980
Fund raising 237,401 237,401 Total supporting services 3,272,381 3,272,381 Total expenses 31,160,270 31,160,270
Changes in net assets 362,845 384,259 747,104
Net assets at beginning of year 15,398,580 1,323,617 16,722,197 Net assets at end of year $ 15,761,425 $ 1,707,876 $ 17,469,301
See notes to consolidated financial statements.
5
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Statement of Activities For the year ended June 30, 2016
Temporarily
Unrestricted restricted Total
Revenue
Government grants $ 23,481,620 $ 23,481,620
Medicaid reimbursements 5,252,272 5,252,272
Contributions – Note 12 349,294 $ 966,000 1,315,294
Special events 293,271
293,271
Direct expenses on special events ( 34,690 )
( 34,690 )
Rental income 1,440,405
1,440,405
Net investments income – Note 13 3,271 24 3,295
Gain on insurance proceeds 127,287 127,287
Other income 86,103 86,103
In-kind contributions – Note 5 183,675 183,675 Total revenue 31,182,508 966,024 32,148,532
Net assets released from restriction 1,004,068 ( 1,004,068 ) Total revenue 32,186,576 ( 38,044 ) 32,148,532 Expenses
Program services
Support and treatment services 7,193,028 7,193,028
Re-housing services 8,489,156 8,489,156
Homeless care and prevention services 11,045,145 11,045,145 Total program services 26,727,329 26,727,329 Supporting services
Management and general 3,644,245 3,644,245
Fund raising 235,960 235,960 Total supporting services 3,880,205 3,880,205 Total expenses 30,607,534 30,607,534 Changes in net assets 1,579,042 ( 38,044 ) 1,540,998
Net assets at beginning of year 13,819,538 1,361,661 15,181,199 Net assets at end of year $ 15,398,580 $ 1,323,617 $ 16,722,197
See notes to consolidated financial statements.
6
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Statements of Cash Flows For the years ended June 30, 2017 and 2016
2017 2016
Cash flows from operating activities
Changes in net assets $ 747,104 $ 1,540,998
Adjustments to reconcile changes in net assets to
net cash provided by (used in) operating activities: Depreciation and amortization 587,944 437,796
Amortization of capitalized debt issuance costs 4,712 16,343
Change in contributions receivable ( 425,500 ) 29,000
Change in accounts receivable ( 10,006 ) ( 5,716 )
Change in due from funding sources 5,217 ( 4,865,358 )
Change in prepaid expenses 45,218 4,498
Change in security deposits ( 24,338 ) ( 16,905 )
Change in accounts and accrued expenses payable 236,428 478,824
Change in due to funding sources 191,820 ( 520 ) Net cash provided by (used in) operating activities 1,358,599 ( 2,381,040 ) Cash flows from investing activities
Purchase of fixed assets ( 1,819,621 ) ( 728,363 )
Purchase of investments ( 150,482 )
Sale of investments 640
Repayment from related parties ( 129,855 ) 124,288 Net cash provided by (used in) investing activities ( 2,099,958 ) ( 603,435 ) Cash flows from financing activities
Payments of mortgage ( 26,311 ) ( 40,412 )
Payments on loans ( 2,886,600 )
Proceeds from loans 2,715,852 1,521,607 Net cash provided by (used in) financing activities ( 197,059 ) 1,481,195 Net increase (decrease) in cash ( 938,418 ) ( 1,503,280 )
Cash – beginning of year 6,988,545 8,491,825 Cash – end of year $ 6,050,127 $ 6,988,545
Supplemental disclosures of cash flow information
Cash paid during the year for interest $ 7,865 $ 10,672
7
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
Note 1 Organization
The consolidated financial statements include the accounts of Project Hospitality, Inc.,
Watershed Associates, Inc. and New Vision HDFC which were organized to provide
counseling, food and shelter to homeless individuals.
Project Hospitality, Inc. (hereinafter referred to as “PHI”), is a not-for-profit corporation,
incorporated on April 14, 1984, whose main purpose is to reach out to community members
who are hungry, homeless or otherwise in need, to work with them to achieve their self-
sufficiency. PHI seeks to realize its mission both by advocating for those in need and by
establishing a comprehensive continuum of care that begins with the provision of food,
clothing and shelter and extends to other services which include health care, mental health
services, alcohol and substance abuse treatment, HIV care, education, vocational training, legal
assistance and transitional and permanent housing. PHI is exempt from Federal income taxes
under Section 501(c)(3) of the Internal Revenue Code.
Watershed Associates, Inc. (“Watershed”) is a 501(c)(2) corporation. Watershed was
incorporated in March 2003. The executive offices of Watershed are located at 100 Park
Avenue, Staten Island, New York. Watershed’s main purpose is to provide counseling, food
and shelter to homeless individuals living on Staten Island, New York with the objective of
removing the financial and social burdens from federal, state and local governments. In
fulfilling this purpose and objective, the Corporation will hold title to real and personal
property, collect income thereof, and remit the entire amount thereof, less expenses to PHI, a
New York not-for-profit corporation organized under Section 402 of the Not-for-Profit
Corporation Law and exempt under Section 501(c)(3) of the Internal Revenue Code.
New Vision HDFC (“New Vision”) Development Fund Corporation is a 501(c)(3) corporation.
New Vision was incorporated in July 2010. The executive offices of New Vision are located
at 100 Park Avenue, Staten Island, New York. New Vision’s main purpose is to acquire,
develop and manage housing projects for persons of low income.
Project Hospitality 385 Housing Development Fund Corporation is a not-for-profit corporation, incorporated in September 2000. Project Hospitality 385 Housing Development Fund Corporation's main purpose is to develop a housing project for persons of low income. It is exempt from federal income taxes in accordance with Section 501(c)(3) of the Internal Revenue Code. The criteria of control and economic interest over Project Hospitality 385 HDFC are not met and therefore, it is not consolidated in the accompanying consolidated financial statements.
Note 2 Summary of significant accounting policies
Basis of accounting. The consolidated financial statements of PHI and subsidiaries have been
prepared on the accrual basis of accounting in accordance with accounting principles generally
accepted in the United States of America. All significant interfund accounts and transactions
have been eliminated.
8
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
Note 2 Summary of significant accounting policies – (continued)
Recent accounting standard adopted. In 2017, PHI and subsidiaries adopted new requirements to present debt issuance costs as a reduction of the carrying amount of the related debt rather than as an asset. Amortization of the debt issuance costs is reported as interest expense rather than as amortization expense. The effect of the change for 2017 was to decrease capitalized debt issuance costs, net of amortization and loans payable by $0. The financial statements of 2016 have been retroactively restated for this change, which resulted in a decrease in capitalized debt issuance costs, net of amortization and loans payable by $4,712. This change does not impact changes in net assets.
Cash and cash equivalents. Included in cash and cash equivalents are short-term investments in certificate of deposit and money market funds with original maturities of 90 days or less when purchased. The securities are carried at cost, which approximates fair market value.
Financial statement presentation. The financial statement presentation follows the accounting standards for not-for-profit organizations. Under these standards, an organization is required to report information regarding its financial position and activities according to three classes of net assets depending on the existence and/or nature of any donor restrictions as follows: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Unrestricted net assets consist of unrestricted contributions and other resources not subject to donor-imposed restrictions. Temporarily restricted net assets consist of contributions and other inflow of assets whose use by the recipient is limited by donor-imposed stipulation. When donor restrictions expire, that is, when a stipulated time restriction ends or a purpose restriction is fulfilled, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. However, if a restriction is fulfilled in the same time period in which the contribution is received, PHI and subsidiaries report that support as unrestricted.
Support. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designed for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes.
Promises to give. Unconditional promises to give that are expected to be collected within one
year are recorded at net realizable value. Unconditional promises to give that are expected to
be collected in future years are recorded at fair value, which is measured as the present value
of their future cash flows. The discounts on those amounts are computed using risk-adjusted
interest rates applicable to the years in which the promises are received. Amortization of the
discounts is included in contribution revenue. Conditional promises to give are not included as
support until the conditions are substantially met.
9
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
Note 2 Summary of significant accounting policies – (continued)
Contributed property and equipment. Contributed property and equipment is recorded at fair value at the date of donation. If donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support.
Investments. Investments are stated at fair value. The fair value of all debt and equity securities with readily determinable fair value is based on quotations obtained from national securities exchanges.
Allowance for doubtful accounts. Management has determined that no allowance for
uncollectible accounts for accounts receivable or contributions receivable is necessary as of
June 30, 2017 and 2016. Such estimate is based on management’s assessments of the
creditworthiness of its donors, the aged basis of its receivables, as well as current economic
conditions and historical information.
Fixed assets. Buildings, building improvements, leasehold improvements, vehicles, furniture
and equipment, and capitalized costs are stated at cost, less accumulated depreciation or
amortization computed on the straight-line method. Improvements are capitalized, while
expenditures for maintenance and repairs are charged to expense as incurred.
The estimated useful lives are as follows:
Estimated life
Buildings 27.5 or 39 years
Building improvements 10 years
Leasehold improvements related lease term
Vehicles 4 years
Furniture and equipment 3 or 5 years
Capitalized costs 15 years
Unrestricted board designated endowment fund. The Endowment fund consists of
unrestricted net assets designated by the Board of Directors to function as a long-term
investment portfolio. Beginning in 2007, the Board undertook a multi-year campaign for the
express purpose of creating a board designated investment fund. The Board of Directors has
implemented an investment policy for these funds and is charged with making decisions on
how and where Endowment funds are invested. The Board of Directors is also charged with
selecting an investment firm or an investor who has the requisite skills and capabilities to
manage the Endowment portfolio.
Use of estimates. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.
10
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
Note 2 Summary of significant accounting policies – (continued)
The overall investment objective of the endowment fund is to preserve and enhance the real
(inflation-adjusted) purchasing power of the fund’s assets while providing a relatively
predictable, stable and constant (in real terms) stream of distributions in line with spending
needs. Although it is the goal of the organization to set a spending rate of 5% of the interest
earned for the operating needs of the agency, the amount of distribution shall be determined
annually in consultation with the Executive Committee.
The endowment fund seeks an effectively diversified portfolio by employing the portfolio
theory of investing. The fund’s assets shall be diversified to avoid undue exposure to any
single economic or industry sector, or individual security. Accordingly, over the long-term,
PHI expects the current spending policy to minimally match 5% of annual interest earnings of
the endowment for the operating needs of the agency. This is consistent with PHI’s objective
to maintain the purchasing power of the endowment assets held in perpetuity.
Functional allocation of expenses. The costs of providing various programs and activities have been summarized on a functional basis in the combining statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Concentrations of credit risk. Financial instruments, which potentially subject PHI and subsidiaries to concentrations of credit risk, include cash, investments, accounts and loans receivable. PHI and subsidiaries’ maintain cash in bank deposits which, at times, may exceed the current insured amount under the Federal Deposit Insurance Corporation (FDIC). As of June 30, 2017 and 2016, PHI and subsidiaries cash balance exceeded the current insured amount under FDIC by approximately $5,415,745 and $6,344,246, respectively. PHI and subsidiaries’ have not experienced any losses in such accounts and believes it is not exposed to any significant financial risk therein.
Income taxes. Project Hospitality, Inc., Watershed Associates, Inc., and New Vision HDFC are exempts from income taxes under Sections 501(c)(3), 501(c)(2) and 501(c)(3) (status pending), respectively, of the Internal Revenue Code and state jurisdictions where they operate. PHI and subsidiaries do not anticipate any significant uncertain tax positions that would require recognition in the consolidated financial statements. Periods ending June 30, 2014 and subsequent remain subject to examination by the taxing authorities.
Note 3 Related party transactions
Project Hospitality, Inc. and subsidiaries provide various program implementation, staff and
office support to each other. At June 30, 2017 and 2016, the amount due to Project Hospitality,
Inc. and subsidiaries for the services provided amounted to $499,210 and $369,355, respectively.
11
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
Note 4 Unrestricted board designated endowment fund
Unrestricted board designated endowment fund consists of the following:
2017 2016
Money market fund account at fair market value $ 10,144 $ 10,109
Investments at fair market value 1,908,457 1,758,133
Checking account 1,650 127,910
Total $ 1,920,251 $ 1,896,152
Note 5 In-kind contributions
In-kind contributions are recorded as income and expenses at the time the items are received,
which is also the time they are placed into service or distributed. Donated services are reported
as income at their fair value if such services create or enhance non-financial assets or would
have been purchased if not provided by donation, require specialized skills, and are provided
by individuals possessing such specialized skills.
In-kind contributions for the years ended June 30, 2017 and 2016 were food donations from
Food Bank for New York City valued at $183,508 and $183,675, respectively.
Note 6 Fixed assets and capitalized costs
Fixed assets and capitalized costs are as follows:
2017 2016
Land $ 1,254,942 $ 1,254,942
Buildings 4,828,145 3,917,380
Leasehold improvements 1,368,790 1,000,429
Vehicles 63,146 63,146
Furniture, fixtures and equipment 1,960,452 1,379,241
Total fixed assets 9,475,475 7,615,138
Less: accumulated depreciation and amortization ( 3,344,466 ) ( 2,715,807 )
Net fixed assets $ 6,131,009 $ 4,899,331
Buildings include properties that New York State Homeless Housing and Assistance
Corporation provided funding under the Homeless Housing Assistance Program (HHAP) to
purchase, rehabilitate and operate as homeless shelters. Certain provisions of the agreements
require PHI, among others, to use the properties to provide homeless shelter services for a
period of twenty five years. Noncompliance with the provisions may result in the recapture of
the HHAP funds. The agreements expire at various dates ranging from 2017 to 2042.
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
12
Note 7 Contributions receivable
Contributions receivable are recorded at the full amount and discounted using a discount rate
reflective of the PHI and subsidiaries’ borrowing rate for the year the pledge was made. As of
June 30, 2017 and 2016, all contributions receivable were due in less than one year, in the
amounts of $679,000 and $253,500, respectively.
Note 8 Commitments and contingencies
Lease commitments.
Project Hospitality, Inc. and subsidiaries are obligated to make minimum annual rental payments
under operating leases, principally for office space, program facilities, vehicles and office
equipment. Total expense for all leased equipment and office space for the years ended June 30,
2017 and 2016 was $1,533,341 and $1,465,927, respectively.
The future minimum lease payments are as follows:
Year ending June 30, Amount
2018 $ 928,018
2019 552,673
2020 345,010
2021 300,037
2022 277,739
Thereafter 4,501,857
Total $ 6,905,334
Government funded activities Government funded activities are subject to audits and technical reviews by the applicable funding
agencies. At June 30, 2017 and 2016, there were no material obligations outstanding as a result of
such audits, and management believes that unaudited projects would not result in any material
obligations.
The current third-party-pay or programs, including Medicaid-funded programs, are based upon
complex laws and regulations. Noncompliance with such laws and regulations could result in
fines, penalties, and exclusion from such programs.
Note 9 Employee benefit plan
PHI has a defined contribution salary deferral 403(b) plan covering all eligible employees. PHI may make a discretionary contribution to the plan. In order to be eligible for the employer discretionary contribution, an employee must have two years of service as of December 31 of the plan year that the contribution is being made. Employer discretionary contribution amounted to $135,378 and $135,269 for the years ended June 30, 2017 and 2016, respectively.
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
13
Note 10 Repayment of leasehold improvements funded by the New York State Office of
Mental Health
In 1994, New York State Office of Mental Health (“OMH”) funded the renovation of a leased
building located at 103 Targee Street in Staten Island. The work was completed in 1995. On
January 25, 2006, a “Mortgage and Security Agreement” (“the Agreement”) was signed
between PHI and the Dormitory Authority of the State of New York (“DASNY”) in the amount
of $1,092,000 at an annual interest rate of 8.85%. The agreement calls for a first payment of
$60,178.77 on June 1st 2006 and semi-annual payments of $74,789.35 thereafter until
December 1st 2017 when the entire unpaid balance of principal and interest together with fees
and other charges are due and payable. Payments were adjusted to annual payments of
$149,579. These payments have no gross impact on PHI as this amount is added to the amount
of funding from OMH.
Note 11 Temporarily restricted net assets
Changes in temporarily restricted net assets are as follows for the year ended June 30, 2017:
Beginning Ending
Balance Additions Releases Balance
Housing, food and legal $ 468,111 $ 836,000 ( $ 517,978 ) $ 786,133 Hurricane Sandy relief 553,712 38,048 ( 110,014 ) 481,746
IT and capacity building 301,794 234,208 ( 96,005 ) 439,997
Total $ 1,323,617 $ 1,108,256 ( $ 723,997 ) $ 1,707,876
Changes in temporarily restricted net assets are as follows for the year ended June 30, 2016:
Beginning Ending Balance Additions Releases Balance
Housing, food and legal $ 339,576 $ 908,476 ( $ 779,941 ) $ 468,111 Hurricane Sandy relief 717,786 37,548 ( 201,622 ) 553,712 IT and capacity building 304,299 20,000 ( 22,505 ) 301,794
Total $ 1,361,661 $ 966,024 ( $ 1,004,068 ) $ 1,323,617
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
14
Note 12 Contribution revenue
Contribution revenue is as follows:
2017 2016
Private grants $ 1,291,628 $ 1,067,266
Contributions and solicitations 246,994 248,028
Total $ 1,538,622 $ 1,315,294
Note 13 Investments and investment income The fair value of investments as of June 30, 2017 and 2016 are as follows:
Recurring fair market measurements Total
Quoted
prices in
active
markets
Level 1
Fair value measurements at June 30, 2017
Money market funds $ 66,883 $ 66,883
Common stock 3,895 3,895
Sub-total 70,778 70,778
Equity securities:
U.S. Large-Cap value 138,779 138,779
U.S. Large-Cap growth 262,106 262,106
U.S. Large-Cap blend 104,954 104,954
U.S. Mid-Cap value 120,712 120,712
U.S. Small-Cap value 111,316 111,316
U.S. Small-Cap growth 102,795 102,795
Sub-total 840,662 840,662
Fixed income securities:
U.S. gov’t, corporate bonds and other fixed income 1,059,412 1,059,412
Total assets measured at fair value $ 1,970,852 $ 1,970,852
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
15
Note 13 Investments and investment income – (continued)
Recurring fair market measurements Total
Quoted
prices in
active
markets
Level 1
Fair value measurements at June 30, 2016
Money market funds $ 64,051 $ 64,051
Common stock 3,772 3,772
Sub-total 67,823 67,823
Equity securities:
U.S. Large-Cap value 107,248 107,248
U.S. Large-Cap growth 203,029 203,029
U.S. Large-Cap blend 118,725 118,725
U.S. Mid-Cap value 114,589 114,589
U.S. Small-Cap value 86,827 86,827
U.S. Small-Cap growth 87,142 87,142
Sub-total 717,560 717,560
Fixed income securities:
U.S. gov’t, corporate bonds and other fixed income 1,034,987 1,034,987
Total assets measured at fair value $ 1,820,370 $ 1,820,370
Investment income consists of:
2017 2016
Interest and dividends $ 51,480 $ 40,445
Realized gains 3,974 20,631
Unrealized gains 108,196 ( 45,526 )
Investment fees ( 6,457 ) ( 12,255 )
Net investment income $ 157,193 $ 3,295
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
16
Note 14 Mortgage payable Mortgage payable by Watershed Associates, Inc. consists of the following: 2017 2016
Park Avenue location – original loan amount $247,352, with
monthly payments of $2,861 including interest at 7.75% per
annum. Mortgage paid in full during the year. $ - $ 17,002
Castleton Avenue location – original loan amount $170,000, with
monthly payments of $1,396 including interest at 5.5% per
annum. Mortgage matures on June 1, 2027 and is secured by the
real estate property. 128,161 137,470
Total $ 128,161 $ 154,472
The following are the maturities of mortgages for the next five years and beyond: Year ending June 30, Amount
2018 9,974
2019 10,537
2020 11,131
2021 11,759
2022 12,417
Thereafter 72,343
Total $ 128,161
Note 15 Workers compensation retention assessment
PHI purchased Workers Compensation Insurance through CRISP Self Insured Trust from 1998 to 2011. Crisp went out of business in 2011 and the Workers Compensation Board (“Board”) assumed the administration of the assets and liabilities. It was determined that the fund’s assets would not cover the outstanding open workers compensation case liabilities. The Board invoiced each trust member for their respective share of the liability. As of June 30, 2017 and 2016, the assessed accrued liability was $0 and $233,496, respectively. PHI is making payments per the Memorandum of Understanding (MOU). The Board reserves the right to adjust the assessment as open claims either increase or close. PHI will re-assess this liability as additional information is provided by the Board.
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
17
Note 16 Loans payable
Project Hospitality, Inc. and subsidiaries have outstanding loans as follows:
2017 2016
a) In January 2017, PHI received a grant with a recoverable
portion of $120,000. The loan bears no interest and has annual
payments of $40,000 payable by November 30, 2019, 2020 and
2021. $ 120,000 $ -
b) In September 2016, PHI and New Vision HDFC entered into
agreement with NYS HHAP to finance a Homeless Project.
Funds are to be used for the repayment of the existing mortgage
and rehabilitation for the building located at 411 Vanderbilt Ave
in Staten Island, NY. The funds bear no interest and require no
monthly payments. Terms of the agreement include the
establishment and operation of a homeless shelter for a minimum
of 25 years. The funds provided by HHAP are fully recoverable
in the event the project ceases to be used as a shelter for the
homeless within 25 years. The loan will be forgiven at the end
of 25 years, provided PHI and New Vision HDFC comply with
the terms of the agreement. 2,595,853 -
c) During fiscal year 2016, PHI received interest free loans in
the amount of $1,446,600 from the Fund for the City of New
York (FCNY). The loans were provided to PHI to cover costs for
the provision of emergency program expenses due to the delayed
registration of contracts between PHI and NYC Department of
Homeless Services (NYC DHS). The loan was repaid in full. - 1,446,600
d) On November 14, 2014, New Vision HDFC obtained a loan in the amount of $1,314,000 from Supportive Housing Solutions Fund LLC for the acquisition and predevelopment expenses related to the rehabilitation of a supportive housing project on Staten Island. The loan bears interest at 6% per annum. The outstanding balance was paid in full during the year. - 1,440,000
Total loans payable 2,715,853 2,886,600
Less: Unamortized capitalized loan closing costs - ( 4,712 ) Total $ 2,715,853 $ 2,881,888
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements June 30, 2017 and 2016
18
Note 17 Subsequent events
PHI and subsidiaries have evaluated events and transactions for potential recognition or
disclosure through April 20, 2018 which is the date the consolidated financial statements
were available to be issued. There were no subsequent events requiring adjustment to the
consolidated financial statements or disclosures.
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Schedule of Government Grants Revenue June 30, 2016 and 2015
19
Funding source 2017 2016
United Way of New York City (pass-through grant) $ 14,545 $ 15,153
NYC Department of Youth and Community Development 1,564,912 1,374,769
NYC Department of Homeless Services 7,046,687 8,615,532
NYC Department of Health and Mental Hygiene 2,838,892 2,881,268
NYC Human Resource Administration 1,150,506 1,158,000
Public Health Solutions (pass-through grant) 2,437,707 2,403,995
NYS Department of Health 1,841,429 1,630,838
Health Research, Inc. (pass-through grant) 116,923
NYS Office of Temporary and Disability Assistance 1,691,425 1,090,617
NYS Office of Alcoholism and Substance Abuse Services 950,387 959,553
NYS Office of Mental Health 1,394,312 1,342,403
NYS Office of Family & Children Services 69,969 69,032
Department of Housing and Urban Development 1,938,952 1,732,519
Department of Health and Human Services 91,018
Total $ 22,939,723 $ 23,481,620
20
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Schedule of Functional Expenses
For the year ended June 30, 2017
Program services Supporting services Total
Support and Homeless program and
treatment Re-housing care and Management Fund supporting
services services prevention Total and general raising Total services
Salaries $ 4,480,489 $ 2,803,689 $ 4,982,695 $ 12,266,873 $ 1,025,588 $ 127,885 $ 1,153,473 $ 13,420,346
Fringe benefits 1,361,985 840,743 1,514,668 3,717,396 346,560 39,094 385,654 4,103,050
Total personnel costs 5,842,474 3,644,432 6,497,363 15,984,269 1,372,148 166,979 1,539,127 17,523,396
Client expenses 213,850 3,642,171 1,598,280 5,454,301 - - - 5,454,301
Insurance 53,069 69,071 83,010 205,150 40,032 2,388 42,420 247,570
Rent 754,215 294,888 251,014 1,300,117 57,378 3,970 61,348 1,361,465
Auto 104,697 110,095 148,256 363,048 37,000 - 37,000 400,048
Equipment lease and purchase 33,383 102,598 137,095 273,076 8,064 558 8,622 281,698
Utilities 71,583 81,362 247,128 400,073 56,497 3,909 60,406 460,479
Repairs and maintenance 123,195 90,076 225,839 439,110 58,343 4,037 62,380 501,490
Telephone 143,918 80,264 131,072 355,254 63,700 3,249 66,949 422,203
Supplies 64,636 48,225 69,756 182,617 63,615 1,555 65,170 247,787
Contract services 94,162 70,534 1,445,872 1,610,568 60,158 8,627 68,785 1,679,353
Professional fees 451,384 30,106 297,007 778,497 485,497 - 485,497 1,263,994
Printing and postage 10,150 10,574 11,542 32,266 15,876 41,121 56,997 89,263
Community relations - - 1,600 1,600 146,259 788 147,047 148,647
Advertising 13,441 11,625 8,089 33,155 9,925 - 9,925 43,080
Per diem 126,175 65,250 16,160 207,585 90,395 - 90,395 297,980
Staff related expenses 16,711 18,407 40,982 76,100 77,527 220 77,747 153,847
Real estate taxes 31,541 31,541 31,541
Interest expense 79,274 79,274 79,274
Other 37,660 37,660 37,660 8,117,043 8,480,493 11,210,065 27,807,601 2,680,074 237,401 2,917,475 30,725,076
Capitalization (152,750) - - (152,750) - - - (152,750)
Depreciation and amortization 180,265 49,036 3,737 233,038 354,906 - 354,906 587,944 Total expenses $ 8,144,558 $ 8,529,529 $ 11,213,802 $ 27,887,889 $ 3,034,980 $ 237,401 $ 3,272,381 $ 31,160,270
.
21
PROJECT HOSPITALITY, INC. AND SUBSIDIARIES
Consolidated Schedule of Functional Expenses
For the year ended June 30, 2016
Program services Supporting services Total
Support and Homeless program and
treatment Re-housing care and Management Fund supporting
services services prevention Total and general raising Total services
Salaries $ 4,021,993 $ 3,020,140 $ 4,188,455 $ 11,230,588 $ 1,906,294 $ 137,751 $ 2,044,045 $ 13,274,633
Fringe benefits 1,192,832 905,508 1,183,769 3,282,109 524,321 39,948 564,269 3,846,378
Total personnel costs 5,214,825 3,925,648 5,372,224 14,512,697 2,430,615 177,699 2,608,314 17,121,011
Client expenses 179,588 3,360,647 2,748,303 6,288,538 6,288,538
Insurance 46,208 70,633 62,696 179,537 43,393 753 44,146 223,683
Rent 768,753 278,763 203,540 1,251,056 33,008 2,284 35,292 1,286,348
Auto 98,839 109,276 146,412 354,527 32,729 32,729 387,256
Equipment lease and purchase 219,520 124,751 173,272 517,543 19,592 1,356 20,948 538,491
Utilities 50,318 103,477 222,714 376,509 26,547 1,837 28,384 404,893
Repairs and maintenance 58,281 96,426 177,550 332,257 39,146 2,709 41,855 374,112
Telephone 113,707 92,008 107,308 313,023 45,893 2,517 48,410 361,433
Supplies 69,090 60,252 66,459 195,801 48,243 3,089 51,332 247,133
Contract services 48,980 77,377 1,667,322 1,793,679 66,140 4,208 70,348 1,864,027
Professional fees 408,438 38,201 261,048 707,687 275,676 275,676 983,363
Printing and postage 10,934 11,895 17,771 40,600 4,959 37,632 42,591 83,191
Community relations 3,070 3,070 77,197 476 77,673 80,743
Advertising 14,583 10,199 26,055 50,837 10,127 1,400 11,527 62,364
Per diem 28,244 51,660 50,920 130,824 16,835 16,835 147,659
Staff related expenses 22,054 24,206 31,962 78,222 74,023 74,023 152,245
Real estate taxes 12,985 12,985 12,985
Interest expense 102,021 102,021 102,021
Other 37,176 37,176 37,176 7,352,362 8,550,425 11,338,626 27,241,413 3,281,299 235,960 3,517,259 30,758,672
Capitalization (180,346) (111,247) (297,341) (588,934) (588,934)
Depreciation and amortization 21,012 49,978 3,860 74,850 362,946 362,946 437,796 Total expenses $ 7,193,028 $ 8,489,156 $ 11,045,145 $ 26,727,329 $ 3,644,245 $ 235,960 $ 3,880,205 $ 30,607,534
The accompanying notes are an integral part of this schedule.
22
PROJECT HOSPITALITY, INC.
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2017
Federal grantor / Pass-through
grantor / Program or Cluster title
Federal
CFDA
number
Pass-through
entity identifying
number
Passed
through to
subrecipients
Total
federal
expenditures
Department of Homeland Security programs:
United Way of New York City
Emergency food and shelter national board program 97.024 LRO#31631400649 $ 15,153
Total Department of Homeland Security programs 15,153
Department of Health and Human Services programs:
NYS Department of Health
HHS programs for disaster relief appropriations act –
non construction 93.095 C029205 24,629
NYS Office of Temporary and Disability Assistance
HHS programs for disaster relief appropriations act –
non construction 93.095 C021866 1,260,955
Total for program 1,285,584
NYC Department of Health and Mental Hygiene
Projects for assistance in transition from homelessness
(PATH) 93.150 8161214653 133,119
NYS Office of Temporary and Disability Assistance
Temporary assistance for needy families 93.558 C021629 129,743
NYC Department of Homeless Services
Temporary assistance for needy families 93.558 20130000256 2,046,419
Total for program 2,176,162
NYS Department of Health
Children’s health insurance program 93.767 00000476 5,004
NYS Department of Health
Medical assistance program 93.778 00000476 32,564
Public Health Solutions
HIV emergency relief project grants 93.914 15-NMG-535 280,853
HIV emergency relief project grants 93.914 07-HRR-535 314,132
HIV emergency relief project grants 93.914 06-ADV-535 273,045
HIV emergency relief project grants 93.914 07-MSV-535 351,103
HIV emergency relief project grants 93.914 14-STH-535 665,014
HIV emergency relief project grants 93.914 16-EIP-535 42,546
HIV emergency relief project grants 93.914 11-FNS-535 370,390
HIV emergency relief project grants 93.914 16-CSH-535 140,625
Total for program 2,437,708
Total Department of Health and Human Services programs 6,070,141
The accompanying notes are an integral part of this schedule.
23
PROJECT HOSPITALITY, INC.
Schedule of Expenditures of Federal Awards
For the year ended June 30, 2017
Federal grantor / Pass-through
grantor / Program or Cluster title
Federal
CFDA
number
Pass-through
entity identifying
number
Passed
through to
subrecipients
Total
federal
expenditures
Department of Housing and Urban Development programs:
NYC Department of Homeless Services
Community development block grants/state’s program
and non-entitlement grants in Hawaii 14.228 20140000610 553,000
NYC Department of Homeless Services
Supportive housing program 14.235 5,000
NYC Department of Health and Mental Hygiene
Housing opportunities for persons with AIDS 14.241 20141417747-SPH1-010 432,217
Housing opportunities for persons with AIDS 14.241 20141417101-HPA-010 346,532
Housing opportunities for persons with AIDS 14.241 20141417018-SPH2-010 417,305
NYC Department of Social Service and Human Resources
Administration
Housing opportunities for persons with AIDS 14.241 CT106920141417841 241,954
Total for program 1,438,008
Continuum of care program 14.267 NY0940L2T001401 1,397,205
Continuum of care program 14.267 NY0936L2T001401 189,786
Continuum of care program 14.267 NY0936L2T001502 351,961
Total for program 1,938,952
Total Department of Housing and Urban Development programs 3,934,960
Department of Agriculture programs:
NYS Department of Health
Child and adult care food program 10.558 5150 93,543
NYS Office of Temporary and Disability Assistance
State administrative matching grant for the supplemental
nutrition assistance program 10.561 C021223 300,727
Food Bank for New York City
Emergency food assistance program (food commodities) 10.569 A436-81034 183,508
Total Department of Agriculture programs 577,778
Total Expenditures of Federal Awards $ 10,598,032
24
PROJECT HOSPITALITY, INC.
Notes to Schedule of Expenditures of Federal Awards
June 30, 2017
Note 1 Basis of presentation
The accompanying schedule of expenditures of federal awards (the “Schedule”) includes
the federal grant activity of Project Hospitality, Inc. under programs of the federal government
for the year ended June 30, 2017. The information in this Schedule is presented in accordance
with the requirements of Title 2 Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance). Because the Schedule presents only a selected portion of the operations of Project
Hospitality, Inc., it is not intended to and does not present the financial position, changes in net
assets or cash flows of Project Hospitality, Inc.
Note 2 Summary of significant accounting policies
Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such
expenditures are recognized following the cost principles contained in the Uniform Guidance,
wherein certain types of expenditures are not allowable or are limited as to reimbursement.
Negative amounts shown on the Schedule represent adjustments or credits made in the normal
course of business to amounts reported as expenditures in prior years.
Note 3 Indirect cost rate
Project Hospitality, Inc. has elected not to use the 10 percent de minimis indirect cost rate
allowed under the Uniform Guidance.
25
40 Wall Street, 32nd F loor
New York, NY 10005
T 212 785 0100
F 212 785 9168
www.ncheng.com
Independent Auditors’ 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
Project Hospitality, Inc.
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 consolidated
financial statements of Project Hospitality, Inc., which comprise the consolidated statements
of financial position as of June 30, 2017, and the related consolidated statements of activities,
functional expenses, and cash flows for the year ended, and the related notes to the consolidated
financial statements, and have issued our report thereon dated April 20, 2018.
Internal control over financial reporting
In planning and performing our audit of the consolidated financial statements, we considered
Project Hospitality, Inc.’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 Project Hospitality, Inc.’s internal control.
Accordingly, we do not express an opinion on the effectiveness of Project Hospitality, Inc.’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.
26
Our consideration of internal control was for the limited purpose described in the first paragraph
of this section and was not designed to identify all deficiencies in internal control that might be
material weaknesses or significant deficiencies and therefore, material weaknesses and significant
deficiencies may still exist that were not identified. Given these limitations, during our audit we
did not identify any deficiencies in internal control that we consider to be material weaknesses.
We did identify certain deficiencies in internal control, described in the accompanying schedule
of findings and questioned costs, as item 2017-001, that we consider to be significant deficiency.
Compliance and other matters
As part of obtaining reasonable assurance about whether Project Hospitality, Inc.‘s consolidated
financial statements are free from material misstatement, we performed tests of its compliance
with certain provisions of laws, regulations, contracts and grants 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.
Project Hospitality, Inc.’s Response to findings
Project Hospitality, Inc. response to the finding identified in our audit is described in the
accompanying schedule of findings and questioned costs. Project Hospitality, Inc.’s response was
not subjected to the auditing procedures applied in the audit of financial statements and,
accordingly, we express no opinion on it.
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 Project Hospitality, Inc.’s internal control or on compliance. This report is an integral part of
an audit performed in accordance with Government Audit Standards in considering the Project
Hospitality, Inc.’s internal control and compliance. Accordingly, this communication is not
suitable for any other purpose.
New York, New York
April 20, 2018
27
40 Wall Street, 32nd F loor
New York, NY 10005
T 212 785 0100
F 212 785 9168
www.ncheng.com
Independent Auditors’ Report on Compliance for Each Major Federal Program and on
Internal Control over Compliance Required by the Uniform Guidance
To the Board of Directors
Project Hospitality, Inc.
Report on compliance for each major federal program We have audited Project Hospitality, Inc.’s compliance with the types of compliance
requirements described in the OMB Compliance Supplement that could have a direct and
material effect on each of Project Hospitality, Inc.’s major federal programs for the year ended
June 30, 2017. Project Hospitality, 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 federal statutes, regulations and the terms and
conditions of its federal awards applicable to its federal programs.
Auditors’ responsibility
Our responsibility is to express an opinion on compliance for each of Project Hospitality, 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 the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
(Uniform Guidance). Those standards and the Uniform Guidance 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
Project Hospitality, 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 Project
Hospitality, Inc.’s compliance.
28
Opinion on each major federal program
In our opinion, Project Hospitality, 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 June 30, 2017.
Report on internal control over compliance
Management of Project Hospitality, 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 Project Hospitality, Inc.’s
internal 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 the Uniform Guidance, 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 Project Hospitality, 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 this 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 over compliance 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 the Uniform Guidance. Accordingly, this report is not suitable for any other
purpose.
New York, New York
April 20, 2018
29
PROJECT HOSPITALITY, INC.
Schedule of Findings and Questioned Costs
For the year ended June 30, 2017
Section I – Summary of auditor’s results
Financial statements
Type of report the auditor issued on whether the
financial statements audited were prepared in
accordance with GAAP:
Unmodified
Internal control over financial reporting:
Material weakness(es) identified? yes X no
Significant deficiency(ies) identified? X yes none reported
Noncompliance material to financial statements noted? yes X no
Federal awards
Internal control over major federal 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 federal programs: Unmodified
Any audit findings disclosed that are required to be
reported in accordance with 2 CFR 200.516(a)? yes X no
Identification of major federal programs:
CFDA number(s) Name of federal program or cluster
93.914 HIV Emergency Relief Project Grants
93.558 Temporary Assistance for Needy Families
Dollar threshold used to distinguish between type A and
type B programs:
$750,000
Auditee qualified as low-risk auditee? yes X no
30
PROJECT HOSPITALITY, INC.
Schedule of Findings and Questioned Costs
For the year ended June 30, 2017 Section II – Financial statement findings 2017-001 Late submission of the single audit reporting package and data collection
form to Federal Audit Clearinghouse (“FAC”) Criteria or specific requirements: The single audit reporting package and data collection form shall be submitted to Federal Audit Clearinghouse 30 days after receipt of the auditor’s report, or 9 months after the end of the fiscal year whichever comes first. Condition: Submission of the single audit reporting package and data collection form to FAC was not done within the timeframe as required by the Uniform Guidance. Context: During the audit we noted that single audit reporting package and data collection form is expected to be submitted to FAC approximately in April 2018 for the fiscal year ended June 30, 2017. Effect: Late filing will result in noncompliance with timely submission of financial information to the grantor agencies. Cause: Management did not have adequate procedures in place to ensure the timely filing of the single audit reporting package and data collection form to FAC. Recommendation: We recommend that management of Project Hospitality, Inc. strengthen its procedures over filing of the single audit reporting package and data collection form with FAC to ensure timely filing. Views of responsible officials and planned corrective actions: See page 32. Section III – Federal award findings and questioned costs None
31
PROJECT HOSPITALITY, INC.
Summary Schedule of Prior Audit Findings
For the year ended June 30, 2017
Financial statement findings Index#: 2015-001 Summary of finding: Late submission of the single audit reporting package and data collection form to Federal Audit Clearinghouse (“FAC”) Status: Repeat finding in current year report, refer to index# 2017-001 Federal award findings and questioned costs None
32
PROJECT HOSPITALITY, INC.
Corrective Action Plan
For the year ended June 30, 2017 2017-001 Late submission of the single audit reporting package and data collection form
to Federal Audit Clearinghouse (“FAC”) Views of responsible officials and planned corrective actions: In 2017 Project Hospitality restructured its administrative organization with the goal of improving financial and operational effectiveness. Former Executive Director, Terry Troia was elevated to CEO/President and, in July of 2017, the Board hired a new Executive Director with direct oversight of the agency's fiscal department, government funded programs and operations. The Executive Director reports directly to the Board of Directors. In (December) of 2017 the CFO retired after 20 years of tenure with the organization. The organization recognizes the importance of a timely audit completion and submission to the Federal Audit Clearinghouse; consequently a primary organizational goal in 2018 is to streamline and modernize the organization's operations with particular emphasis on its financial functions so that the audit process may begin three months earlier and deadlines may be met.