SHARE OUR SELVES CORPORATION FINANCIAL STATEMENTS JUNE …€¦ · · 2015-08-31SHARE OUR SELVES CORPORATION FINANCIAL STATEMENTS JUNE 30, 2014 WITH INDEPENDENT AUDITORS' ... Statement

SHARE OUR SELVES CORPORATION

FINANCIAL STATEMENTS

JUNE 30, 2014

WITH INDEPENDENT AUDITORS' REPORT THEREON


TABLE OF CONTENTS

Page

Organizational Data……………………………………………………………………….…… i Independent Auditors' Report………………………………………….………………………..1 Statement of Financial Position……………………………………….…………………………4 Statement of Activities…………………………………………………………………………..6 Statement of Functional Expenses…………………………………….…………………………7 Statement of Cash Flows……………………………………………….………………………..8 Notes to Financial Statements………………………………………….………………………..9

i

ORGANIZATIONAL DATA

SOS Mission Statement

“We are servants who provide care and assistance to those in need and act as advocates for

systemic change.”

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OUR MISSION & CORE VALUES MISSION We are servants who provide care and assistance to those in need and act as advocates for systemic change. 4 CORE VALUES DIGNITY We recognize our responsibility to insure the inherent dignity and worth of each person.

• We treat others as we would want to be treated. • We value the contribution of all with whom we serve. • We respect the right of each person to define their needs and to actively

participate in their care. • We encourage open and honest conversation.

SERVICE We serve our community in a way that is compassionate and non-judgmental.

• We listen and respond to the needs of the whole person, body, mind and spirit. • We humbly serve those in need through a generous and responsible use of

resources. • We adapt and balance programs and resources to meet the social and healthcare

needs of the most vulnerable members of our community. EXCELLENCE We strive to provide high and consistent quality in all our services.

• We work to continually improve and measure the quality of our services. • We foster the continuous growth and development of all who serve at SOS. • We hold ourselves accountable for the quality of service and adherence to

professional standards. • We work to make the most of the resources given to us.

JUSTICE We advocate for change in those structures and systems that unjustly affect the vulnerable and disadvantaged.

• We give a voice to the needs of the poor. • We actively support and encourage those who champion and strive for social

justice. • We seek to preserve mercy as the foundation of justice in our community.

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SOS POSITIONING STATEMENT

Just as putting a bandage on a wound will not necessarily treat an illness, we know that simply providing access to medical care will not cure the conditions of poverty. Poor health, homelessness, insufficient nutrition, and lack of education are symptoms of poverty. To make any lasting difference, a person’s care must address this vicious cycle. This understanding does not just define our philosophy of care at Share Our Selves, it illuminates the injustice of structural inequality and ignites our passion to change it. Poverty is not just an individual’s issue – for if those around us are refused basic human rights, we allow injustice to endure in our community. Share Our Selves acts as an access point to services and advocacy, caring for those who cannot care for themselves and shouting for those with no voice. Some are blind to the poverty that plagues many corners of our county while others blatantly ignore it, but we stand firm against this injustice, providing services in order to promote systemic change, caring for the individual in order to care for our community. We are leaders and innovators fighting for the change that Orange County deserves, and striving to make it a place where mercy and justice prevail, and we care for each individual – body, mind, and spirit. Through healed ailments and bags of food, through filled cavities and filled backpacks, each of us serves in different ways, but our call for justice is the same. Some of us are doctors. Some of us are givers of goods. But all of us are caretakers, and we’re all striving to transform the systems that deny members of our community the dignity they deserve.

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SHARE OUR SELVES CARING FOR THOSE IN NEED SINCE 1970

SOCIAL JUSTICE AND CONDITIONS OF POVERTY

Share Our Selves (SOS) was founded in 1970 in Costa Mesa as a social justice organization committed to addressing conditions of poverty in Orange County. SOS provides vulnerable and low-income families and individuals in Orange County with direct access to the health, food and safety net services they need to improve their lives. In 2013, SOS offered care and assistance to 120,000 neighbors in need. SOS HISTORY OF CARE

• 1970 Share Our Selves (SOS) founded in Costa Mesa • 1984 SOS free Medical Clinic opens • 1987 SOS free Dental Clinic opens • 1993 SOS full-service Medication Dispensary opens • 2005 SOS integrated Behavioral Health services begin • 2010 SOS opens SOS-El Sol Wellness Center at El Sol Science and Arts Academy in Santa Ana • 2012 SOS opens SOS and PEACE Center Health Clinic in Lake Forest • 2012 SOS receives nationally recognized Federally Qualified Health Center (FQHC) designation • 2014 SOS Children & Family Health Center in Newport Beach

COMMUNITY NEEDS

Poverty and financial insecurity is a reality for thousands in Orange County. • More than one-third of all Orange County families are living in unstable financial conditions (at or

below 185% of the federal poverty level) and another one-third of OC families are barely making ends meet, or “moderately stable.” (OC Community Indicators Report 2014.)

• Close to 400,000 in OC will face food insecurity during the year. (2009 Cal. Health Interview Survey) • During the 2012/13 school year, 30,542 of OC’s students, PreK – 12th grade, were identified as

homeless or living in unstable housing - a 7% increase over the previous year. (OC Community Indicators Report 2014)

• There are 50,000 applicants on the waiting list for rental assisted housing through the OC Housing Authority. (OC Community Indicators Report 2014.)

• The hourly wage needed to afford a one-bedroom apartment in OC, is over $25 per hour, equivalent to annual income over $52,400. A minimum wage earner must work 126 hours per week to afford a one-bedroom rental. (OC Indicators Report 2014)

SOS COMMUNITY HEALTH CENTERS

SOS is proud to be the largest community health center in Orange County to combine wrap-around social services with health care. Our values of dignity, justice, service and excellence are translated through every service offered at SOS. SOS currently operates four Community Health Centers located in Costa Mesa, Santa Ana, Lake Forest and Newport Beach – dedicated to improving health outcomes of low-income and at-risk populations in Orange County. No one is ever turned away for inability pay. SOS’s new SOS Children & Family Health Center is located on Placentia Avenue in Newport Beach, offering needed health resources to low-income families and children living in our community.

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SOS SOCIAL SERVICES – SAFETY NET OF CARE

SOS Comprehensive Social Services Center and Food Pantry are located on our flagship Costa Mesa location and offers anyone in need with immediate and direct access to critical safety net services including food, financial aid, benefits enrollment, utilities assistance, case management, patient and client navigation, referrals, education, free legal assistance and tax preparation, homeless services, and much more. SEASONAL PROGRAMS

SOS Adopt A Family Christmas Program – In 2013, the 44th Annual Adopt A Family event distributed thousands of Christmas toys, gifts and needed household items to 1,337 families (4,420 children), identified by our local school district and community partners, in greatest need. SOS Thanksgiving Food Distribution Program – With food drive assistance from local businesses, schools and individuals, SOS was able to offer 1,420 families in 2013 with the ingredients they needed to prepare this important holiday meal. SOS Back To School Program - In partnership with OC Fair & Event Center’s We Care Wednesday Program, SOS packed and distributed 3,700 new backpacks, filled with school supplies, to our most vulnerable student populations, helping them to be prepared and excited for the new school year. SUPPORT FROM THE COMMUNITY

SOS engages hundreds of volunteers and generous donors in their community, improving conditions of poverty and offering compassionate services to those in need. We welcome you to learn more about our efforts by visiting our website at www.shareourselves.org, or contact us to schedule a tour our facilities. SOS is a registered nonprofit charity organization with the Internal Revenue Service. Our nonprofit Tax Identification Number is: 95-3222316.

OUR MISSION: We are servants who provide care and assistance to those in need and act as advocates for systemic change.

OUR CORE VALUES: Dignity • Service • Excellence • Justice

http://www.shareourselves.org/

SOS Operational Budget

The following financial statements of SOS provide a partial picture of the services provided to SOS clients. However, to truly understand the nature and scope of SOS's service to the community, it is important to understand the Operating Budget as well. The pie chart below is included to provide a graphic description of that budget, demonstrating that SOS manages a much larger budget than the picture presented in the financial statements. Staff time and expertise are needed to manage these important services.

Revenue and other support is the information presented in the following financial statements. Hoag Ancillary/In-kind Services represent the value of services Hoag Memorial Hospital Presbyterian provides to the patients of the SOS Medical Clinic and includes advanced diagnostics, surgery, and medication. SOS Cares Pharmacy is the value of medications donated through pharmaceutical companies' Patient Assistance Programs and additional in-kind medications. Volunteer Providers refers to the value of services by licensed healthcare professionals donating their services to SOS patients. Financial Aid refers to the value of emergency financial assistance provided to SOS clients in the form of utility bill payments.

Source AmountRevenue and other support 9,168,134$ Hoag Ancillary/In-kind Services 1,980,191$ SOS Cares Pharmacy 910,864$ Volunteer Providers 47,943$ Financial Aid 59,902$ Total Services 12,167,034$

Statement of ActivitiesFor the Year Ended June 30, 2014

Total Revenue Including Services Not Reflected in the Financial Statements

$9,168,134

$1,980,191

$910,864 $47,943 $59,902 Revenue and othersupport

Hoag Ancillary/In-kindServices

SOS Cares Pharmacy

Volunteer Providers

Financial Aid

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3

FINANCIAL STATEMENTS

Temporarily Permanently Totals Totals

Unrestricted Restricted Restricted 2014 2013

326,745$ 159,430$ -$ 486,175$ 816,692$

Grants - other 593,260 135,000 - 728,260 111,723 Grants - Federal 86,554 - - 86,554 26,942 Other 732,264 - - 732,264 412,143 Pledge - 50,000 - 50,000 -

17,470 - - 17,470 39,651 39,625 - - 39,625 42,310

Total current assets 1,795,918 344,430 - 2,140,348 1,449,461

2,452,472 - - 2,452,472 2,447,660 900,000 - - 900,000 900,000 729,687 - - 729,687 607,116

Leasehold improvements in progress 256,776 - - 256,776 - 49,198 - - 49,198 47,092

4,388,133 - - 4,388,133 4,001,868

Less accumulated depreciation (1,704,763) - - (1,704,763) (1,509,267)

Property and equipment, net 2,683,370 - - 2,683,370 2,492,601

Investments 470,002 49,464 439,210 958,676 921,229 Pledge receivable, net of current portion - 75,000 - 75,000 - Deposits 12,628 - - 12,628 30,761 Unamortized software development cost - - - - 40,400

Total other assets 482,630 124,464 439,210 1,046,304 992,390

Total Assets 4,961,918$ 468,894$ 439,210$ 5,870,022$ 4,934,452$

Automobiles

Other Assets:

Receivables:

InventoryPrepaid expenses

Property and Equipment:Building and improvementsLand

SHARE OUR SELVES CORPORATIONSTATEMENT OF FINANCIAL POSITION

Current Assets:Cash and cash equivalents

Equipment

JUNE 30, 2014(WITH SUMMARIZED TOTALS AT JUNE 30, 2013)

See accompanying notes. 4



Accounts payable 293,753$ -$ -$ 293,753$ 248,901$ Accrued expenses:

Accrued vacation 220,378 - - 220,378 163,959 Accrued salaries 199,426 - - 199,426 156,932 Other 34,556 - - 34,556 123,678

Deferred lease incentive 23,538 - - 23,538 - Deferred revenue 5,000 - - 5,000 5,000

Due to OCCAA 1,626 - - 1,626 3,695

Total current liabilities 778,277 - - 778,277 702,165

Long-Term Liability - Deferred Lease Incentive, Net 233,238 - - 233,238 -

Total liabilities 1,011,515 - - 1,011,515 702,165

Net Assets:Unrestricted:

Undesignated 267,033 - - 267,033 175,364 Designated for cash reserve 1,000,000 - - 1,000,000 1,000,000 Net investment in property and equipment 2,683,370 - - 2,683,370 2,492,601

Temporarily restricted - 468,894 - 468,894 142,612 Permanently restricted - - 439,210 439,210 421,710

Total net assets 3,950,403 468,894 439,210 4,858,507 4,232,287

Total Liabilities and Net Assets 4,961,918$ 468,894$ 439,210$ 5,870,022$ 4,934,452$

Current Liabilities:

SHARE OUR SELVES CORPORATIONSTATEMENT OF FINANCIAL POSITION

JUNE 30, 2014(WITH SUMMARIZED TOTALS AT JUNE 30, 2013)




Contributions 2,118,139$ 125,000$ 17,500$ 2,260,639$ 3,174,936$ Grants - other 2,395,745 307,310 - 2,703,055 1,821,285 Grants - Federal 1,051,750 - - 1,051,750 843,548 In-kind - other 888,078 - - 888,078 778,888 Fundraising, net of direct benefit to donors of $38,840 225,333 - - 225,333 264,616 Fees for service, net of adjustments 1,946,466 - - 1,946,466 1,286,652 Incentive payments to implement EHR 59,566 - - 59,566 127,500 Investment income 3,744 9,230 - 12,974 18,554 Net unrealized investment gains (losses) 5,220 2,838 - 8,058 (12,763) Other income, net 12,215 - - 12,215 7,643

Total revenues and other support 8,706,256 444,378 17,500 9,168,134 8,310,859

Net Assets Released From Restrictions:Restrictions satisfied by payments 25,216 (25,216) - - - Expiration of time restrictions 92,880 (92,880) - - -

Total revenues and other support 8,824,352 326,282 17,500 9,168,134 8,310,859

Program services:Social services 1,396,269 - - 1,396,269 1,289,561 Health Center 5,625,469 - - 5,625,469 5,332,505

Supporting services:Management and general 1,162,580 - - 1,162,580 1,083,679

Fundraising 357,596 - - 357,596 274,712

Total expenses 8,541,914 - - 8,541,914 7,980,457

282,438 326,282 17,500 626,220 330,402

3,667,965 142,612 421,710 4,232,287 3,901,885

3,950,403$ 468,894$ 439,210$ 4,858,507$ 4,232,287$

(WITH SUMMARIZED TOTALS FOR THE YEAR ENDED JUNE 30, 2013)

STATEMENT OF ACTIVITIESSHARE OUR SELVES CORPORATION

Net Assets, Beginning of Year

Net Assets, End of Year

Increase in Net Assets

Revenues and Other Support:

Expenses:

FOR THE YEAR ENDED JUNE 30, 2014


Totals Totals

Social Services Health Center Total Social Services Health Center Fundraising 2014 2013

435,390$ 2,990,461$ 3,425,851$ 58,844$ 398,598$ 227,226$ 4,110,519$ 3,305,605$ 80,458 551,841 632,299 13,349 69,556 40,687 755,891 637,904

Total personnel 515,848 3,542,302 4,058,150 72,193 468,154 267,913 4,866,410 3,943,509

Bank and investment fees 9,298 17,266 26,564 - - - 26,564 23,759 31,187 442,086 473,273 51,783 409,523 14,887 949,466 1,584,449 5,792 73,625 79,417 - - 848 80,265 70,108

452,978 - 452,978 - - - 452,978 491,380 - - - - - 20,483 20,483 28,047

Hosting fees - 112,018 112,018 - - - 112,018 78,211 In-kind 131,170 700,522 831,692 5,927 39,667 - 877,286 778,889

16,811 36,483 53,294 - - - 53,294 44,685 - 83,763 83,763 - - - 83,763 65,217

11,925 55,760 67,685 5,568 38,272 48,955 160,480 162,601 16,045 35,050 51,095 1,624 10,866 2,669 66,254 64,702

- 502 502 - - - 502 - - 181,052 181,052 - - - 181,052 112,639

Professional services 1,262 85,395 86,657 6,401 42,837 - 135,895 56,602 41,123 16,389 57,512 3,463 3,463 - 64,438 60,280 33,477 71,131 104,608 306 - - 104,914 109,268 31,201 59,469 90,670 329 2,204 1,841 95,044 98,142

Expenses before depreciation 1,298,117 5,512,813 6,810,930 147,594 1,014,986 357,596 8,331,106 7,772,488

Depreciation 98,152 112,656 210,808 - - - 210,808 207,969

Total Expenses 1,396,269$ 5,625,469$ 7,021,738$ 147,594$ 1,014,986$ 357,596$ 8,541,914$ 7,980,457$


Program Services Supporting ServicesManagement and General

(WITH SUMMARIZED TOTALS FOR THE YEAR ENDED JUNE 30, 2013)FOR THE YEAR ENDED JUNE 30, 2014

STATEMENT OF FUNCTIONAL EXPENSES

Salaries Payroll taxes and benefits

Contract professionalsDues, fees and educationEmergency aid

Repairs and maintenance

Outreach

Utilities

Rent

Events

InsuranceLab feesOffice suppliesOther

Pharmaceutical and supplies


2014 2013Cash Flows from Operating Activities:

Increase in net assets 626,220$ 330,402$ Adjustments to reconcile increase in net assets to

net cash provided by (used in) operating activities:Depreciation 210,808 207,969 Loss on disposal of equipment 692 5,906 Contributions restricted for permanent endowment (17,500) (37,500) Net unrealized investment (gains) losses (8,058) 12,763 Net change in-kind donations of inventory 4,363 8,183 Donated property and equipment (2,106) - Changes in assets and liabilities:

(Increases) decreases in:Receivables (1,121,270) (243,606) Inventory 17,818 (15,699) Prepaid expenses 2,685 3,162 Deposits 18,133 (25,133) Unamortized software development cost - (15,500)

Increases (decreases) in:Accounts payable 44,852 59,516 Accrued expenses 9,791 208,385 Deferred revenue - (31,500) Due to OCCAA (2,069) (1,206)

Total adjustments (841,861) 135,740

Net cash provided by (used in) operating activities (215,641) 466,142

Cash Flows from Investing Activities:Purchases of equipment (102,987) (46,214) Purchases of investments (32,257) (113,274) Proceeds from sale of investments 2,868 52,392

Net cash used in investing activities (132,376) (107,096)

Cash Flows from Financing Activities:Investment in permanent endowment 17,500 37,500

Net cash provided by financing activities 17,500 37,500

Net Increase (Decrease) in Cash and Cash Equivalents (330,517) 396,546

816,692 420,146

486,175$ 816,692$

Supplemental Disclosure of Cash Flow Information:Cash paid during the year for:

Interest -$ -$ Taxes -$ -$

Noncash investing activity:Allowance for tenant improvements 256,776$ -$

(WITH SUMMARIZED TOTALS FOR THE YEAR ENDED JUNE 30, 2013)

Cash and Cash Equivalents, End of Year

Cash and Cash Equivalents, Beginning of Year

SHARE OUR SELVES CORPORATIONSTATEMENT OF CASH FLOWS

FOR THE YEAR ENDED JUNE 30, 2014


SHARE OUR SELVES CORPORATION NOTES TO FINANCIAL STATEMENTS

JUNE 30, 2014

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1. ORGANIZATION AND NATURE OF SERVICES Share Our Selves Corporation ("SOS") was founded in 1970 and incorporated in the State of

California as a community‐based 501(c)(3) non‐profit corporation. SOS is the largest Community Health Center in Orange County to combine wrap-around social services with health care. The focus is on providing safety net services to children, adults, and seniors. SOS provides comprehensive quality healthcare at three clinical sites located in Costa Mesa, Santa Ana, and Lake Forest. In June 2012, SOS received designation as a Federally Qualified Health Center (FQHC). FQHCs are community-based health centers that provide high quality, comprehensive medical, dental, and behavioral health services to the Orange County Community. SOS is a patient-centered medical home and values the concept of the right person, the right treatment, at the right time. SOS also secured designation as the Health Care for the Homeless (HCH) Program, section 330(h) of the Public Health Service Act. The purpose of the HCH is to improve the health status and outcome of care for homeless individuals and families by improving access to primary care and substance abuse services

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting SOS prepares its financial statements using the accrual basis of accounting. The significant

accounting policies followed are described below to enhance the usefulness of the financial statements to the reader.

Basis of Presentation SOS is required to report information regarding its financial position and activities

according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets.

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 the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statement and the reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Cash and Cash Equivalents For purposes of the Statement of Cash Flows, SOS considers all money market funds,

mutual funds and highly liquid investments with an initial maturity of three months or less to be cash equivalents.

Fair Value Measurements The carrying value of cash and cash equivalents, receivables, prepaid expenses, accounts

payable, accrued expenses, deferred lease incentive, deferred revenue, and due to OCCAA approximate their respective fair values due to their short term maturities.

SOS reports investments in equity securities with readily determinable fair values and all investments in debt securities at quoted market values. The gains and losses are included in the Statement of Activities. Grants Receivable

Grants receivable are all receivable within one year. At June 30, 2014, SOS considered all grants receivable to be fully collectible. Accordingly, there was no allowance for doubtful accounts. Promises to Give Contributions are recognized when the donor makes a promise to give to SOS that is, in substance, unconditional. SOS uses the allowance method to determine uncollectible promises receivable. The allowance is based on prior years’ experience and management’s analysis of specific promises made. Inventory Inventory, consisting of pharmaceutical supplies and gift cards, is stated at the lower of cost or market or, if donated, at the approximate fair value on the date of donation. Cost is determined by the first-in, first-out method.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Property and Equipment Assets are carried at cost, if purchased, or fair market value at date of contribution, if

contributed. Donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. SOS follows the practice of capitalizing all expenditures for equipment in excess of $1,000. Depreciation is calculated using the straight-line method over the estimated useful lives of five to forty years for buildings and improvements, and three to ten years for equipment and automobiles. Equipment includes internal-use software. Leasehold improvements in progress are the costs spent on SOS’ leased healthcare center space in Newport Beach, California. The leasehold improvements will begin depreciating when construction of the tenant improvements is complete.

Long lived assets, such as property and equipment are reviewed on an ongoing basis for

impairment based on comparison of carrying value against undiscounted future cash flows. If impairment is identified, the assets’ carrying amounts are adjusted to fair value. There were no such adjustments during the year ended June 30, 2014.

Deferred Lease Incentive

SOS entered into a sublease in December 2013 which commenced in August 2014. This lease includes an allowance for tenant improvements. The deferred rent will be amortized over the life of the lease, which is ten years, using the straight-line method.

Deferred Revenue Deferred revenue is sponsorships collected in advance for the Celebrity Chef fundraising

event to be held in November 2014. Accrued Vacation SOS has a policy permitting employees to accumulate unused vacation benefits. Upon

termination or retirement, unused vacation benefits will be paid at the employee’s regular payroll rate. A liability is reflected in the accompanying financial statements for unpaid vacation incurred through the statement of financial position date.

Contributions and Fees For Service

Although SOS receives donations on a regular and recurring basis from some of its donors,

there are no written promises to give agreements. SOS records these monthly contributions as revenue as they are received.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Contributions and Fees For Service (Continued)

Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. Contributions received with donor-imposed restrictions that are met in the same year in which the contributions are received are classified as unrestricted contributions.

All donor-restricted contributions are reported as an increase in temporarily or permanently

restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily or permanently restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

Fees for service are for amounts received when patients are provided medical services.

Revenues are recorded when the allowable costs have been incurred or the services have been performed.

Donated Materials and Services Donated materials and other non-cash contributions are reflected in the accompanying

statements at their estimated fair market value at the date of donation.

Contributions of services are recognized if the services received (a) create or enhance non-financial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased. Donated laboratory services are provided by Hoag Memorial Hospital Presbyterian at no cost to the patients served. The basis for estimating the value of these services is based on estimates provided by the contributor for the same services provided in the normal course of business or at estimated costs in instances where contributor estimates are not available. A substantial number of unpaid volunteers have made significant contributions to SOS’s program services. The value of these contributions is not reflected in these statements since they do not meet the criteria for recognition as contributed services.

Income Taxes SOS is a California nonprofit corporation which has qualified for tax exempt status under

Section 501(c)(3) of the Internal Revenue Code and the California Revenue and Tax Code Section 23701(d). Accordingly, no provision of income taxes has been made in the accompanying financial statements.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income Taxes (Continued)

The accounting standard on accounting for uncertainty in income taxes addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under that guidance, the SOS may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by taxing authorities based on the technical merits of the position. Examples of tax positions include the tax-exempt status of the organization and various positions related to the potential sources of unrelated business taxable income (UBIT). The tax benefits recognized in the financial statements from such a position are measured based on the largest benefit that has a greater than 50% likelihood of being realized upon ultimate settlement. There were no unrecognized tax benefits identified or recorded as liabilities for the year ended June 30, 2014. The SOS’s Form 990, Return of Organization Exempt from Income Tax, for the years ended June 30, 2011 to June 30, 2013 are subject to examination by the Internal Revenue Service, generally for three years after they were filed. The filings with the state of California are subject to examination for the years ended June 30, 2010 to June 30, 2013.

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

functional basis in the Statement of Activities. SOS records some rent, utilities, professional fees, contract professionals, dues, fees, and

education, fundraising expenses, supplies and some salaries as supporting services. The Executive Director also functions as the Social Services Director. The Social Services Director’s salary is allocated between program services and supporting services.

SOS provides the following programs:

Social Services SOS Comprehensive Services provides food, emergency financial assistance, case management, legal aid, education and training for low-income and homeless Orange County residents.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Functional Allocation of Expenses (Continued)

Community Health Center SOS is a nationally recognized health center providing high quality, comprehensive medical, dental, and behavioral health services to the Orange County Community. SOS is a patient-centered medical home and values the concept of the right person, the right treatment, at the right time.

Advertising

SOS follows the policy of charging the costs of advertising to expenses as incurred.

There is no advertising expense for the year ended June 30, 2014.

Concentration of Credit Risk SOS occasionally maintains cash deposits in excess of federally insured limits. These

items are identified as a concentration of credit risk requiring disclosure, regardless of the degree of risk. The risk is managed by maintaining all deposits in high quality financial institutions. Recently Adopted Accounting Standard

In October 2012, the FASB issued an accounting standards update that amends the standards for preparing the statement of cash flows. This guidance requires the SOS to classify cash receipts from the sale of donated financial assets consistently with cash donations received if those cash receipts were from the sale of donated financial assets that upon receipt were directed without any organization-imposed limitations for sale and were converted nearly immediately into cash. Accordingly, the cash receipts from the sale of those financial assets should be classified as cash inflows from operating activities, unless the donor restricted the use of the contributed resources to long-term purposes. If the donor restricted the use to long-term purposes, those cash receipts should be classified as cash flows from financing activities. Otherwise, cash receipts from the sale of donated financial assets should be classified as cash flows from investing activities by the organization. This guidance became effective prospectively for fiscal years and interim periods within those years, beginning after June 15, 2013, which will be the organization’s fiscal year 2013. Retrospective application to all prior periods presented upon the date of adoption is permitted but not required. Earlier adoption from the beginning of the fiscal year of adoption is permitted. SOS adopted the provisions of the guidance in 2013. The adoption did not have a material impact on the SOS’s financial statements.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) New Accounting Standards Not Yet Adopted In April 2013, the FASB issued an accounting standards update that requires a recipient not-for-profit entity to recognize all services received from personnel of an affiliate that directly benefit the recipient not-for-profit entity. Those services should be measured at the cost recognized by the affiliate for the personnel providing those services. However, if measuring a service received from personnel of an affiliate at cost will significantly overstate or understate the value of the service received, the recipient not-for-profit entity may elect to recognize that service received at either (1) the cost recognized by the affiliate for the personnel providing that service or (2) the fair value of that service. The amendments in this update are effective prospectively for fiscal years beginning after June 15, 2014, and interim and annual periods thereafter. A recipient not-for-profit entity may apply the amendments using a modified retrospective approach under which all prior periods presented upon the date of adoption should be adjusted, but no adjustment should be made to the beginning balance of net assets of the earliest period presented. Early adoption is permitted. SOS does not expect the adoption of the guidance will have a material impact on the SOS’ financial statements.

Subsequent Events SOS has evaluated subsequent events through November 24, 2014, the date the financial

statements were available to be issued.

In October 2014, SOS entered into a clinic transfer agreement and line of credit agreement with a local healthcare system. Certain assets and employees were transferred to SOS in November 2014. SOS assumed operations of the clinic at its new healthcare center space located in Newport Beach, California. The line of credit agreement provides financial assistance for the construction, equipment, fixtures, furniture, and information technology of the new healthcare center space. The proceeds will also be used to bridge timing issues associated with government reimbursement. SOS may request advances up to $800,000 through June 30, 2015. The line of credit matures in December 2017. Interest accrues at a rate of 4.50% per annum. The line of credit is secured by certain assets of SOS.

In November 2014, SOS entered into a two year lease agreement for the SOS and PEACE Center Health Clinic in Lake Forest, California with Saddleback Valley Community Church. The commencement date of this lease is December 1, 2014. Base monthly rent is $4,240.


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2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Subsequent Events (Continued) A lease agreement for healthcare center space in Newport Beach, California commenced in August 2014. (See Note 12).

The sublease agreement for healthcare center space in Santa Ana, California is expected to commence in April 2015. (See Note 12).

3. PROMISES TO GIVE

The unconditional pledge receivable of $125,000 is time restricted at June 30, 2014. Amounts due in less than one year will be $50,000 and in two to three years will be $75,000. Management believes this pledge receivable is fully collectible. Accordingly, no provision has been made for uncollectible amounts.

4. OTHER RECEIVABLES

Other receivables include approximately $83,000 of contributions and $649,000 of fees for service at June 30, 2014.

5. INVENTORY, INVESTMENTS AND FAIR VALUE MEASUREMENTS

SOS’s investments and donated inventory items are reported at fair value in the accompanying Statement of Financial Position. The methods used to measure fair value may produce an amount that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although SOS believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The fair value measurement accounting literature establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three broad levels: Level 1 – defined as observable inputs such as quoted prices in active markets; Level 2 – defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and


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5. INVENTORY, INVESTMENTS AND FAIR VALUE MEASUREMENTS (Continued) Level 3 – defined as unobservable inputs in which little or no market data exists, therefore, requiring an entity to develop its own assumptions.

SOS uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments and donated inventory. When available, SOS measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs were only used when Level 1 or Level 2 inputs were not available.

The following table sets forth, by level within the fair value hierarchy, SOS’s investments and donated inventory at fair value on a recurring basis at June 30, 2014, as described above:

Cost Fair

Value

Level 1

Level 2 Investments – Money Market $ 39,162 $ 41,661 $ 41,661 $ - Investments – Mutual Funds Government bonds 420,265 421,032 421,032 - Corporate bonds 391,769 402,322 402,322 - International bonds 44,194 45,841 45,841 - High-yield bonds 18,600 18,737 18,737 - Long-term bonds 11,625 11,429 11,429 - Intermediate-term bonds 11,625 11,227 11,227 - Bank loan fund 4,650 4,617 4,617 - Small-cap equity 1,012 1,810 1,810 - Total Investments – Mutual Funds 903,740 917,015 917,015 - Total Investments 942,902 958,676 958,676 - Inventory-donated - 8,685 - 8,685 Total at fair value $ 942,902 $ 967,361 $ 958,676 $ 8,685 SOS recognizes transfers into and out of levels as of the date an event or change in circumstances causes the transfer. There were no transfers between levels in the year ended June 30, 2014.


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5. INVENTORY, INVESTMENTS AND FAIR VALUE MEASUREMENTS (Continued) Net investment income (investment income net of unrealized losses) for the year ended June 30, 2014 is approximately $21,000. Investment fees are reported as an expense.

6. LINE OF CREDIT

In April 2014, SOS entered into a line of credit agreement with a local healthcare system. The agreement provides for advances up to $1,000,000 for the benefit of the clinics located in Santa Ana and Costa Mesa, California. The line of credit matures in April 2019. Interest accrues at a rate of 2.17% per annum. The line of credit is secured by certain assets of SOS. At June 30, 2014, there was no balance owed under this line of credit. There was no interest expense for the year ended June 30, 2014.

7. DUE TO ORANGE COUNTY CERTIFIED APPLICATION ASSISTANCE TASK FORCE

SOS acts in an agency capacity for the Orange County Certified Application Task Force (“OCCAA”), whereby all financial transactions relating to OCCAA are handled by SOS’s accounting personnel and flow through SOS’s bank account. At June 30, 2014, approximately $1,600 is due to OCCAA.

8. ENDOWMENT FUND

SOS’s endowment consists of cash and mutual funds established from donor restricted funds. As required by U.S. Generally Accepted Accounting Principles (“U.S. GAAP”), net assets associated with endowment funds, are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Directors of SOS has interpreted the Uniform Prudent Management of Institutional Funds Act of 2006 (“UPMIFA”) 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, SOS classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent 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


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8. ENDOWMENT FUND (Continued) assets until those amounts are appropriated for expenditure by SOS in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, SOS 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 SOS 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 SOS (7) The investment policies of SOS

The following table presents changes for the year ended June 30, 2014:

Endowment Fund Temporarily Permanently Restricted Restricted Total

Endowment net assets at July 1, 2013 $ 37,396 $ 421,710 $ 459,106

Contribution - 17,500 17,500

Investment return: Investment income 9,230 - 9,230 Net appreciation 2,838 - 2,838

Endowment net assets at June 30, 2014 $ 49,464 $ 439,210 $ 488,674 From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires SOS to retain as a fund of perpetual duration. In accordance with U.S. GAAP, deficiencies of this nature are reported in unrestricted or temporarily restricted net assets. SOS has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of revenue while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the organization must hold in perpetuity or for a donor-specified period. Under this policy the endowment assets have return objectives that are weighted against


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8. ENDOWMENT FUND (Continued) income needs and risk tolerances. SOS evaluates the portfolio’s performance using the S&P 500 index as a benchmark. Actual returns in any given year may vary from these comparisons. To satisfy its long-term rate-of-return objectives, SOS relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). SOS targets a diversified asset allocation that contains equity-based and fixed income investments to achieve its long-term return objectives within prudent risk constraints.

SOS’s policy allows it to appropriate for distribution each year the lesser of the income earned or 5% of the corpus. SOS has not appropriated funds for distribution in certain years. In establishing this policy, SOS considered the long-term expected return on its endowment funds. Accordingly, over the long-term, SOS expects the current spending policy to allow its endowment fund to grow. This policy is consistent with SOS’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a donor-specified term as well as to provide additional real growth through new gifts and investment return.

9. NET ASSETS

Unrestricted net assets include board designations of $1,000,000 for SOS’s cash reserve. Temporarily restricted net assets consist of contributions restricted for a specific purpose. The donor imposed restrictions for the contributions are expected to be satisfied in future periods. Temporarily restricted net assets consist of the following: Community Health Center $ 226,930 Social Services 192,500 Endowment 49,464 $ 468,894

10. REVENUES AND OTHER SUPPORT SOS is primarily funded through private and government grants, contributions from

individuals and organizations, and in-kind contributions. SOS’s largest donor is Hoag Memorial Hospital Presbyterian, representing approximately 31% of total revenues and other support. Hoag Memorial Hospital Presbyterian’s support also includes in-kind contributions for medical supplies, pharmaceuticals and laboratory services.


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11. CONTRIBUTED SERVICES AND SUPPLIES SOS receives free pharmaceuticals, approximately $911,000 for the year ended June 30,

2014, from various drug companies for specific patients. There was approximately $184,000 of inventory from these companies on hand at June 30, 2014. The value of this inventory is not included in the financial statements, as they do not meet the criteria of revenue recognition, as SOS is merely a pass-through entity. SOS provides gifts and food to over 1,330 Orange County families in need through a program entitled Adopt-A-Family. The families include more than 4,260 children. The program, which has been operating every year since 1970, works with area schools to identify the families, then matches donors to families. The value of donations contributed directly to these families are not included in the financial statements, as they do not meet the criteria of revenue recognition, as SOS is a pass-through entity. Cash donations of approximately $72,700 to buy gifts for the families are recorded in the financial statements. SOS also receives donations of food and other items that are essential to the success of SOS’s Social Services program service. These items are received and distributed daily and are not included in the financial statements recognition. Contributions include in-kind donations in the following categories for the year ended June 30, 2014.

Laboratory services $ 564,269 Pharmaceuticals 11,325 Supplies and equipment 92,901 Professional services 89,946 Adopt-A-Family 21,950 Back-To-School 96,895 $ 877,286

SOS’s year-end property and equipment includes a donated automobile in the amount of

$2,106. Year-end inventory includes $8,684 of in-kind pharmaceuticals. 12. LEASE COMMITMENTS On September 15, 2005, SOS signed a lease for office space in Costa Mesa, California. The

commencement date of this lease was May 1, 2006. Base monthly rent was $5,000 with a 3% step increase each year on May 1. The lease was for five years and was extended in


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12. LEASE COMMITMENTS (Continued) December 2010 through October 2013 with a beginning base rent of $4,500 with

incremental increases each year. On August 1, 2013 the lease was extended for an additional three years commencing on November 1, 2013 and expiring October 31, 2016, with a beginning base rent of $5,250 with incremental increases each year.

SOS leases equipment under noncancelable operating leases. In December 2009, SOS signed a lease for a copier. The lease is for five years with a base monthly rent of $1,010. In March 2014, SOS signed a lease which superceded the previous lease for five years with a base monthly rent of $1,119. The lease will be effective until March 2019. SOS also entered into a lease for a copier at its El Sol location in December 2013. The lease is for three years with a base monthly rent of $198. The lease will be effective until December 2016.

Future minimum annual lease payments under these non-cancelable operating leases are as

follows:

Year Ending June 30, Building Equipment Total

2015 $ 64,260 $ 15,804 $ 80,064 2016 66,188 15,804 81,992 2017 22,279 14,616 36,895 2018 - 13,428 13,428 2019 - 10,071 10,071

$ 152,727 $ 69,723 $ 222,450

In December 2013, SOS entered into a lease agreement for the SOS Children and Family Health Center in Newport Beach, California with Newport Healthcare Center, LLC. The lease requires a security deposit of $19,367 and monthly base rent of $13,494 with incremental increases of 3% each year. SOS is entitled to a one-time tenant improvement allowance of approximately $320,000, for the cost relating to the initial design and construction of tenant improvements. The lease also requires SOS to pay a construction supervision fee equal to five percent of the cost of construction of the tenant improvements. The lease is for ten years, commencing the earliest of substantial completion of construction of the tenant improvements or the date SOS commences clinic operations in the space. Substantial completion of construction of the tenant improvements occurred in August 2014.


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12. LEASE COMMITMENTS (Continued)

In January 2014, SOS entered into a sublease agreement for the SOS El Sol Wellness Center (“Center”) in Santa Ana, California with El Sol Science & Arts Academy of Santa Ana (“El Sol”). The Center was initiated by both SOS and El Sol in 2011. The Center has had a positive impact on El Sol’s students, families, and the community. The Center currently operates in an overcrowded module. This sublease reflects the intent of both parties to relocate and continue the operations of the Center in a new building that will be constructed. This sublease requires SOS to contribute $600,000 towards the construction of the building. In October 2014, SOS paid $300,000 towards the construction of the building improvements. SOS is to provide the second and final installment of $300,000 to El Sol within ten days of notice that not less than $300,000 has been spent on construction hard costs for the improvements. In recognition of SOS’s contribution, El Sol agreed that the base rent will be fully abated during the initial term which is ten years. This sublease will commence on the earlier of the date the building is deemed ready for occupancy or the date SOS commences its regular clinic activities within the building. The expected commencement date is April 15, 2015.

Office and equipment rent expense, including common area maintenance charges, for the

year ended June 30, 2014 is approximately $85,000. 13. RETIREMENT PLAN In June 2003, SOS adopted a Section 403(b) tax deferred annuity plan for substantially

all employees. Discretionary employer matching contributions for the year ended June 30, 2014 is approximately $21,000.

14. RECLASSIFICATIONS Certain figures for the year ended June 30, 2013 have been reclassified to conform to the

year ended June 30, 2014 presentation.

Documents

SHARE OUR SELVES CORPORATION FINANCIAL STATEMENTS JUNE …€¦ · · 2015-08-31SHARE OUR SELVES CORPORATION FINANCIAL STATEMENTS JUNE 30, 2014 WITH INDEPENDENT AUDITORS' ... Statement