HABITAT FOR HUMANITY KANSAS CITY, INC. FINANCIAL STATEMENTS Year Ended December 31, 2015
Mayer Hoffman McCann P.C. An Independent CPA Firm 700 West 47th Street, Suite 1100 Kansas City, MO 64112 Main: 816.945.5600 Fax: 816.897.1280 www.mhmcpa.com INDEPENDENT AUDITORS' REPORT To the Board of Directors HABITAT FOR HUMANITY KANSAS CITY, INC. We have audited the accompanying statement of financial position of Habitat for Humanity Kansas City, Inc. (the Organization), as of December 31, 2015, and we were engaged to audit the related statements of activities and changes in net assets, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on conducting our audit in accordance with auditing standards generally accepted in the United States of America. Because of the matter described in the Basis for Disclaimer of Opinion paragraph, however, we were not able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the results of activities or cash flows. We conducted our audit of the statement of financial position in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the statement of position is free of from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statement. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statement. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion on the statement of financial position. Basis for Disclaimer of Opinion on Results of Activities and Cash Flows We did not observe the donated inventory (stated at $1,284,554) as of January 1, 2015, since that date was prior to our initial engagement to audit Habitat for Humanity Kansas City, Inc. The Organization s records do not permit adequate retroactive tests of inventory quantities, and we have not obtained sufficient appropriate audit evidence about inventory quantities at that date by other auditing procedures. The amount of inventory at January 1, 2015 materially affects the determination of the results of activities and cash flows for the year ended December 31, 2015. Disclaimer of Opinion on Results of Activities and Cash Flows Because of the significance of the matter discussed in the Basis for Disclaimer of Opinion on Results of Activities and Cash Flows paragraph, we have not been able to obtain sufficient appropriate audit evidence to provide a basis for an audit opinion on the results of activities, functional expenses, and cash flows for the year ended December 31, 2015. Accordingly, we do not express an opinion on the results of activities, functional expenses, and cash flows, and the related notes to the financial statements, for the year ended December 31, 2015. Opinion on the Statement Financial Position In our opinion, the statement of financial position referred to in the first paragraph presents fairly, in all material respects, the financial position of Habitat for Humanity Kansas City, Inc. as of December 31, 2015, in accordance with accounting principles generally accepted in the United States of America. Kansas City, Missouri June 29, 2016 Member of Kreston International a global network of independent accounting firms - 1 -
STATEMENT OF FINANCIAL POSITION December 31, 2015 A S S E T S Affiliate ReStore Total CURRENT ASSETS Cash $ 1,445,603 $ - $ 1,445,603 Accounts receivable 6,242 2,500 8,742 Merchandise inventory, net - 817,821 817,821 Property held for sale and development 242,027-242,027 Construction in progress, net 302,656-302,656 Current portion of non-interest bearing loans, net 328,948 328,948 Prepaid expenses 15,327-15,327 TOTAL CURRENT ASSETS 2,340,803 820,321 3,161,124 FIXED ASSETS Property and equipment, net 105,521 127,294 232,815 OTHER ASSETS Escrows and deposits 24,101-24,101 Non-interest bearing mortgage loans, net 2,655,128-2,655,128 Payroll advances 5,961-5,961 TOTAL OTHER ASSETS 2,685,190-2,685,190 TOTAL ASSETS $ 5,131,514 $ 947,615 $ 6,079,129 L I A B I L I T I E S CURRENT LIABILITIES Accounts payable $ 31,814 $ 33,593 $ 65,407 Accrued liabilities 53,637-53,637 Other current liabilities 11,485-11,485 TOTAL CURRENT LIABILITIES 96,936 33,593 130,529 N E T A S S E T S NET ASSETS Unrestricted 4,161,108 914,022 5,075,130 Unrestricted - Board designated 707,747-707,747 TOTAL UNRESTRICTED NET ASSETS 4,868,855 914,022 5,782,877 TEMPORARILY RESTRICTED NET ASSETS 165,723-165,723 TOTAL NET ASSETS 5,034,578 914,022 5,948,600 TOTAL LIABILITIES AND NET ASSETS $ 5,131,514 $ 947,615 $ 6,079,129 See Notes to Financial Statements - 2 -
STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS For the Year Ended December 31, 2015 UNRESTRICTED NET ASSETS Affiliate ReStore Total NET PROGRAM SERVICE REVENUE Sales $ 191,555 $ 2,819,390 $ 3,010,945 Cost of sales (251,538) (2,758,011) (3,009,549) Net income (loss) on sales (59,983) 61,379 1,396 Rental income 5,630-5,630 Mortgage loan discount amortization 201,799-201,799 NET PROGRAM SERVICE REVENUE 147,446 61,379 208,825 GRANTS, CONTRIBUTIONS AND OTHER REVENUE Contributions 269,300-269,300 In-kind contributions 89,642 2,138,004 2,227,646 Other 14,687 44,277 58,964 Gain (loss) on disposal of assets 768 (41,873) (41,105) TOTAL GRANTS, CONTRIBUTIONS AND OTHER REVENUE 374,397 2,140,408 2,514,805 Net assets released from restrictions 32,616-32,616 TOTAL REVENUES 554,459 2,201,787 2,756,246 EXPENSES Program services 1,030,626 1,208,852 2,239,478 Supporting services Management and general 338,128 270,188 608,316 Fundraising 140,068-140,068 Total supporting services 478,196 270,188 748,384 TOTAL EXPENSES 1,508,822 1,479,040 2,987,862 CHANGES IN UNRESTRICTED NET ASSETS (954,363) 722,747 (231,616) TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted contributions 70,255-70,255 Net assets released from restrictions (32,616) - (32,616) CHANGES IN TEMPORARILY RESTRICTED NET ASSETS 37,639-37,639 CHANGES IN NET ASSETS (916,724) 722,747 (193,977) NET ASSETS, BEGINNING OF YEAR, as restated 4,650,303 1,492,274 6,142,577 TRANSFERS 1,300,999 (1,300,999) - NET ASSETS, END OF YEAR $ 5,034,578 $ 914,022 $ 5,948,600 See Notes to Financial Statements - 3 -
Infrastructure costs 30,778-30,778 - - - - - - 30,778 Construction, building materials and supplies 165,715-165,715 - - - - - - 165,715 Mortgage discounts 95,400-95,400 - - - - - - 95,400 Taxes and insurance 55,215 65,430 120,645-16,358 16,358 - - - 137,003 Property maintenance - 15,534 15,534 - - - - - - 15,534 Vehicle maintenance and fuel 7,442 40,808 48,250 - - - - - - 48,250 Rent 1 168,901 168,902-42,225 42,225 - - - 211,127 Utilities 31,602 75,760 107,362-18,940 18,940 - - - 126,302 Volunteer program 6,285 275 6,560 - - - - - - 6,560 Professional fees 76,099 14,567 90,666 838 3,642 4,480 25-25 95,171 Family selection and support 6,082-6,082 - - - - - - 6,082 Promotion and publicity - 16,895 16,895 - - - 2,804-2,804 19,699 Postage and freight 2,055 11,124 13,179 438 2,781 3,219 375-375 16,773 Printing 1,018 467 1,485 3,390 117 3,507 20,598-20,598 25,590 Telephone 6,789 14,886 21,675 8,011 3,722 11,733 - - - 33,408 Tools and supplies 17,000 8,067 25,067 - - - - - - 25,067 Staff training 11,052 7,304 18,356 7,222 1,826 9,048 421-421 27,825 Office supplies 6,584 3,737 10,321 3,432 934 4,366 330-330 15,017 Computer maintenance 18,150 12,512 30,662 6,895 3,128 10,023 1,500-1,500 42,185 Loan servicing and closing costs 15,706-15,706 - - - - - - 15,706 Bank and credit card fees 2,932 46,524 49,456 - - - - - - 49,456 Other 20,868 11,163 32,031 9,212 2,791 12,003 10,186-10,186 54,220 Depreciation 18,756 28,432 47,188-7,108 7,108 - - - 54,296 Tithe to national affiliate 49,500-49,500 - - - - - - 49,500 Direct cost of home sales, including adjustment of construction in progress and property available for sale to net realizable value 164,173-164,173 - - - - - - 164,173 SUBTOTAL INCLUDING HOME SALES 1,194,799 1,208,852 2,403,651 338,128 270,188 608,316 140,068-140,068 3,152,035 Direct cost of home sales, including adjustment of construction in progress and property available for sale to net realizable value (164,173) - (164,173) - - - - - - (164,173) TOTAL FUNCTIONAL EXPENSES $ 1,030,626 $ 1,208,852 $ 2,239,478 $ 338,128 $ 270,188 $ 608,316 $ 140,068 $ - $ 140,068 $ 2,987,862 PERCENTAGE OF COSTS 75% 20% 5% 100% HABITAT FOR HUMANITY KANSAS CITY, INC. STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2015 Program Services Administration Fundraising Affiliate ReStore Total Affiliate ReStore Total Affiliate ReStore Total Total Wages and salaries $ $ $ $ 331,897 $ 521,556 $ 853,453 $ 257,968 $ 130,389 $ 388,357 $ 88,997-88,997 1,330,807 Payroll taxes and benefits 52,510 106,785 159,295 40,722 26,696 67,418 13,931-13,931 240,644 Contract labor 1,190 38,125 39,315-9,531 9,531 901-901 49,747 See Notes to Financial Statements - 4 -
STATEMENT OF CASH FLOWS For the Year Ended December 31, 2015 CASH FLOWS FROM OPERATING ACTIVITIES Affiliate ReStore Total Changes in net assets $ (916,724) $ 722,747 $ (193,977) Transfers 1,300,999 (1,300,999) - Adjustments to reconcile changes in net assets to net cash flows from operating activities Depreciation 23,600 30,696 54,296 Net contributed inventory activity - 531,052 531,052 Net mortgage loan discount activity (107,211) - (107,211) Cost of homes sold for mortgage loans receivable 251,538-251,538 Issuance of forgivable mortgage loans receivable (191,554) - (191,554) Net (gain) loss on disposal of fixed assets (1,668) 44,369 42,701 Change in operating assets and liabilities Accounts receivable 16,386 (2,500) 13,886 Pledges receivable 32,000-32,000 Merchandise inventory - (38,089) (38,089) Property held for sale and development 80,828-80,828 Construction in progress (375,115) - (375,115) Prepaid expenses (5,881) 23,122 17,241 Other assets (5,961) - (5,961) Accounts payable and refundable advances (16,592) (4,944) (21,536) Accrued liabilities 21,956-21,956 Other liabilities 840-840 NET CASH FLOWS FROM OPERATING ACTIVITIES 107,441 5,454 112,895 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (46,433) (45,990) (92,423) Proceeds from the sale of fixed assets 900-900 Payments received on mortgage loans receivable 300,671-300,671 Change in escrow deposits (24,101) 8,583 (15,518) NET CASH FLOWS FROM INVESTING ACTIVITIES 231,037 (37,407) 193,630 NET CHANGE IN CASH AND CASH EQUIVALENTS 338,478 (31,953) 306,525 CASH, BEGINNING OF YEAR 1,107,125 31,953 1,139,078 CASH, END OF YEAR $ 1,445,603 $ - $ 1,445,603-5 -
(1) Summary of significant accounting policies Nature of operations Habitat for Humanity Kansas City, Inc. (Habitat/Affiliate) is a nonprofit corporation, incorporated in Missouri on May 7, 1979. Habitat is an affiliate of Habitat for Humanity International, Inc., a nondenominational Christian nonprofit that brings people together to build homes, communities, and hope. The mission of Habitat for Humanity Kansas City, Inc. is to build sustainable and affordable homes and communities in Kansas City, Missouri. The term Affiliate encompasses all administrative, housing and program functions of Habitat, and is a standard term set forth by Habitat for Humanity International. ReStore represents the home improvement stores and donation centers. In the fiscal year ended December 31, 2015, through its Construction Program, Habitat built 8 new homes to sell to low and moderate income families. Habitat s Homeownership Program accepts homeowner applications, selects families for program participation, and provides ongoing homeowner education. Habitat homes are built using volunteer labor, donated materials and funding from individuals, churches, corporations and foundations. The homes are sold to qualifying partner families with no profit and affordable 0% interest loans. Mortgage payments are invested back into the program, helping to build new homes across Habitat s target neighborhoods. Homeowners are required to invest 280 hours of sweat equity in the construction of their homes, partnering with other families and completing homeowner education classes. In 36 years, Habitat has enabled more than 315 families to achieve their dream of owning a home and in doing so has revitalized neighborhoods. During 2015, Habitat also has provided minor rehabilitation to 5 homes with their Home Preservation Program. Habitat is a mission-driven and client-focused organization. Habitat s supporters maximize their investments of time, talent, and treasure for the benefit of building homeowners who will participate in building their homes and communities. The homes Habitat builds or rehabs each year impact Kansas City area families and their children. These families housing needs are met. Habitat provides opportunities for sponsors and volunteers to meet and work with families in the homeowner selection and building process. In doing so, a broader understanding of community housing needs is established, and Habitat s supporters fully understand the impact of their gift to the families they are helping. Building and rehabilitating homes for low and moderate income families is a collective community investment. The fiscal, manual and material contributions Habitat receives yearly creates a ripple effect that inspires these families, their neighborhoods, and Kansas City as a whole. The Habitat for Humanity Kansas City, Inc. ReStore is a retail outlet open to the general public. ReStore accepts new and used building materials, fixtures and appliances and resells these items at discounted prices. The purpose of ReStore is to divert materials from the landfill, encourage homeowners (including Habitat homeowners) to improve their properties, and utilize net proceeds from sales as a non-restrictive funding source to build more homes. The revenue generated from ReStore funded 99% of the operating expenses of Habitat during the year ended December 31, 2015. Habitat is responsible for award-winning programs in homeowner education and community development. Habitat has numerous on-going partnerships with faith-based organizations, peer nonprofits, service groups, local governments, and private corporations. Habitat is primarily and directly responsible for its own operations. - 6 -
(1) Summary of significant accounting policies (continued) Basis of presentation Habitat s financial statements are prepared on the accrual basis of accounting. Balances and transactions are presented in accordance with the existence or absence of donor-imposed restrictions. Habitat maintains its financial accounts in accordance with the principles and practices of fund accounting. Fund accounting is the procedure by which resources for various purposes are classified for accounting purposes in accordance with activities or objectives of Habitat. Unrestricted Net Assets are net assets that are not subject to donor-imposed restrictions. Items that affect (i.e., increase or decrease) this category of net assets primarily consist of program revenues and related expenses associated with the core activities of Habitat. In addition to these exchange transactions, changes to this category of net assets include certain types of philanthropic support - namely, unrestricted contributions and grants, including those designated by the Board to function as reserves, as well as restricted contributions and grants whose donor-imposed restrictions were met during the fiscal year, and income from investments. Temporarily Restricted Net Assets are net assets subject to donor-imposed restrictions that may or will be met either by actions of Habitat and/or the passage of time. Items that affect this category of net assets are restricted contributions and grants. Contributions and grants received with donor-imposed restrictions are reported as support in the temporarily restricted net assets class. These amounts are reclassified to unrestricted net assets when such restrictions are met or have expired. Cash For purposes of the statement of cash flows, cash is considered to be cash on hand, bank checking accounts and money market accounts. Habitat maintains cash in certain financial institutions that, at times, may exceed FDIC insurance limits. Management believes that the potential for future loss with respect to these accounts is negligible. Accounts receivable Accounts receivable are recorded at the amount due net of an allowance for estimated uncollectible amounts and are generally due within 30 days. Habitat determines its allowance by considering a number of factors, including the length of time receivables are past due, it s previous loss history, and the general economy as a whole. Habitat writes off receivables when they become uncollectible. No allowance was deemed necessary at December 31, 2015. Property and equipment Land, buildings, equipment, and vehicles are stated on the basis of cost, or if donated, at fair market value on the date of donation. Depreciation is computed by the straight-line method over the following useful lives: Description Building and improvements Leasehold improvements Construction equipment Warehouse equipment Homes used in operations Vehicles Equipment and furniture Computers and office equipment Estimated Useful Lives 5-40 Years 5-40 Years 3-5 Years 3-5 Years 5-40 Years 5 Years 3-5 Years 3-5 Years - 7 -
(1) Summary of significant accounting policies (continued) Merchandise inventory Inventory, which consists of building supplies and donated new and used building materials, fixtures and appliances is stated at the lower of cost or market utilizing the FIFO (first-in, first out) method. Donated inventory is valued based on fair value of the item which should approximate selling cost. Selling cost is determined through the use of Habitat s price book and the experience of the industry professionals. The price book is valued based on market research from the original retailors of the items. Additionally, specialty items are researched prior to pricing. All items factor both age and condition in determining a proper price. Habitat has recorded a reserve for estimated future inventory write-downs of $115,521 as of December 31, 2015. In previously issued financial statements, Habitat did not record the value of donated inventory. The management of Habitat has determined that the donated inventory should have been recorded within assets at the beginning of the year. Accordingly an adjustment of $1,281,554 was made to record inventory at the beginning of the year with a corresponding entry made to increase previously reported net assets. Donated assets Donated assets are reflected as in-kind contributions at their estimated fair value. Donated assets include donations used for the construction of homes and operations of Habitat, and donations made to ReStore. These donations amount totaled $85,492 during the year ended December 31, 2015. Donated services Habitat recognizes donated services that create or enhance non-financial assets and that require specialized skills, if the services are provided by individuals possessing those skills and the services would typically need to be purchased if not provided by donation. During the year ended December 31, 2015, Habitat recorded $4,150 in in-kind contributions for services that met these criteria. A substantial number of additional volunteers have made significant contributions of their time to Habitat s program and supporting services which do not meet the requirements of Not-For-Profit Topic of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) related to revenue recognition of contributions received and, accordingly, are not recorded in these financial statements. The value of this contributed time is not reflected in these financial statements in accordance with U.S. generally accepted accounting principles. Although these services did not meet the criteria for recognition in the financial statements, unpaid volunteers provided over 32,000 volunteer hours in the fiscal year ended December 31, 2015, which were critical to the construction of homes being built. Through the Habitat volunteer coordination effort, volunteers were able to interact with the families selected for program participation, creating a fullcircle of community volunteers, program participants, and agency involvement. Revenues and other support Contributions and grants, including unconditional promises to give, represent amounts raised from the public and are recognized in the period received. Contributions other than cash, including unconditional promises to give and donated materials with clearly measurable bases, are recorded at their estimated fair value at the date of receipt. Revenue from fees and grants from government agencies are recognized as they are earned through expenditure in accordance with the agreement. If any funding is received for exchange transactions in advance of the expenditure, it is recorded as deferred revenue on the statement of financial position. - 8 -
(1) Summary of significant accounting policies (continued) Functional expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities and changes in net assets. Certain costs have been allocated among the programs and supporting services benefited as depicted in the accompanying statements of functional expenses. Expenses that can be identified with a specific program and support are allocated directly according to their natural expenditure classification. Other expenses that are common to several functions are allocated by management s estimate of resources devoted to the programs or support source. Direct benefit to donor costs have been included in fundraising costs on the statements of functional expenses as the associated costs are not material in relation to the financial statements taken as a whole. Program expenses include construction, family support, and ReStore. Transfers Cash generated by ReStore is transferred to the Affiliate as part of its operations. This funding is utilized to underwrite the costs of the Affiliate. Use of estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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 statements, and the reported amounts of revenues and expenses during the reporting period. In these financial statements, construction in progress, property available for sale, ReStore inventory and the valuation of notes receivable involve extensive reliance on management s estimates. Actual results could differ from those estimates. Advertising costs Habitat charges all advertising costs to expense as they are incurred. Total advertising costs were $19,744 for the year ended December 31, 2015. Taxes Habitat is a not-for-profit organization as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal and state income taxes on related income pursuant to Section 501(a) of the Internal Revenue Code. Income tax returns filed by Habitat on Form 990 are subject to examination by the Internal Revenue Services (IRS) for three years after the date filed, with the result that the fiscal years ended 2014, 2013, and 2012 remain open as of December 31, 2015, although no returns have been selected for examination by the IRS. Management has evaluated tax positions taken or expected to be taken in the course of preparing Habitat s tax returns with assistance from its tax preparer to determine whether its tax positions are more likely than not to be sustained by applicable taxing authorities; likely tax positions are reported in these financial statements, and management is not aware of any material uncertain tax positions. Warranties Habitat provides homeowner warranties on the homes it creates and records an accrual for estimated future claims. Such accruals are based upon historical experience and management s estimate of the level of future claims. As of December 31, 2015, Habitat has accrued approximately $6,000 in warranty costs. (2) Construction in progress and property available for sale and development As of December 31, 2015, construction in progress and property available for sale consisted of 7 homes, which were either in the process of being constructed and/or rehabilitated or which were complete and available for sale and 27 plots of land. Construction in progress and property available for sale have been adjusted to management s estimate of the lower of cost or net realizable value of each respective property based on county appraisals and, if available, estimates of future sales price. During the year ended December 31, 2015, 3 houses were sold. - 9 -
(3) Mortgage loans receivable HABITAT FOR HUMANITY KANSAS CITY, INC. Mortgage loans receivable consist of non-interest bearing mortgages, which are secured by real estate and which are payable in monthly installments over the life of the mortgage. These mortgages are discounted based upon the discount rate at the inception of the mortgages. The discount rate is set by Habitat for Humanity International yearly and was 7.51% during the fiscal year ended December 31, 2015. These discounts will be recognized as income over the terms of the mortgages. Habitat had 155 mortgage loans receivable at December 31, 2015. Habitat has not experienced any material losses with respect to uncollectible mortgages in the past and believes that the value of the collateral on the respective loans is sufficient to cover any losses on future foreclosures. Accordingly, no reserve has been established for uncollectible loans. The balances of mortgage loans held at December 31, 2015 are as follows: Mortgage loans receivable, gross $ 6,245,658 Less: Unamortized discount (2,980,420) Mortgage loans receivable, net of unamortized discount 3,265,238 Less: MHDC sale (see Note 10) (281,162) Less: Current portion (328,948) Non-current portion $ 2,655,128 (4) Foreclosed residential real estate properties At December 31, 2015, Habitat had residential real estate properties acquired through foreclosure with a net carrying amount of $54,284. That amount includes all properties for which physical possession had been obtained, either through (a) legal title obtained upon completion of foreclosure proceedings, or (b) conveyance by the borrower in satisfaction of a loan through completion of a deed in lieu of foreclosure or another similar legal agreement. In addition, the Organization had an interest in consumer mortgage loans secured by residential real estate properties for which formal foreclosure proceedings were in process at December 31, 2015. The net carrying amount of those loans, included in Mortgage loans receivable, was $59,665 at December 31, 2015. (5) Property and equipment At December 31, 2015, property and equipment consisted of the following: Affiliate Restore Total Cost Land $ 7,000 $ - $ 7,000 Buildings and building improvements 115,722-115,722 Leasehold improvements 3,454 175,517 178,971 Construction equipment 35,906-35,906 Warehouse equipment - 73,722 73,722 Homes used in operations 14,120-14,120 Vehicles 64,426 98,463 162,889 Equipment and furniture 2,120 21,818 23,938 Computers and office equipment 22,846 11,826 34,672 Total cost 265,594 381,346 646,940 Less: Accumulated depreciation (160,073) (254,052) (414,125) Net property and equipment $ 105,521 $ 127,294 $ 232,815-10 -
(6) Temporarily restricted net assets HABITAT FOR HUMANITY KANSAS CITY, INC. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Support that is restricted by the donor is reported as an increase in temporarily restricted net assets. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Net assets released from donor restrictions by incurring expenses and/or satisfying the time restrictions specified by the donors during the year ended December 31, 2015 were as follows: Construction $ 31,250 Computers 1,366 Total $ 32,616 Temporarily restricted net assets were available for the following purposes at December 31, 2015: (7) Operating leases Prichard Memorial Fund - staff development $ 83,669 Home construction 69,005 Computer equipment 13,049 Total $ 165,723 Habitat has two leases, one for each of its ReStore locations. One lease expires in 2017 but is cancelable with six months notice. The other lease is noncancelable and expires in 2018. Expense related to these leases was $211,127 during the year ended December 31, 2015. Future minimum lease payments required for the noncancelable lease are: Years Ending December 31, 2016 $ 154,500 2017 154,500 2018 128,750 Total $ 437,750 Habitat s office space is donated at a cost of $1, which is included in rent expense. Habitat is responsible for all repairs and maintenance costs associated with this building, which amounted to approximately $45,000 during 2015. (8) Transactions with national affiliate Habitat remits a portion of its contributions to its national office, Habitat for Humanity International, Inc. (HFHI). These funds are used to construct homes in economically depressed areas around the world. Tithe expense for the year ended December 31, 2015 was $49,500. Habitat was awarded a $100,000 Self-Help Homeownership Opportunity Program (SHOP) grant from HFHI to build eight new homes during 2012. Pursuant to the terms of the grant, 25% of the amount received is to be repaid over 48 months beginning January 2012. The grant amount was subsequently increased during 2012. As of December 31, 2015, Habitat owed HFHI $3,215, which is included in other liabilities and is due during 2016 and 2017. - 11 -
(9) Commitments Habitat is a party to certain legal actions that have arisen during the ordinary course of business. Management does not believe that the risk of loss, if any, will have a material impact on the ongoing operations of Habitat. (10) Contingent liability In 1998, Habitat entered into an agreement whereby it sold a package of ten mortgage loans to the Missouri Housing Development Corporation (MHDC). In subsequent years additional loans were sold to MHDC under this agreement, resulting in a total outstanding balance of $281,162 at December 31, 2015. Habitat has guaranteed the performance of these loans to MHDC. Should the borrower default on their payments, Habitat has the option of making these payments for the borrower to MHDC, or to replace the non-performing loan with one that is performing. (11) Subsequent events Habitat has evaluated subsequent events through June 29, 2016, which is the date the financial statements were available to be issued. The following significant matters were identified for disclosure during this evaluation. Subsequent to year end, Habitat sold 5 houses which were included in Construction in Process at December 31, 2015. During June 2016, the Habitat Board of Directors approved a merger with another similar organization. As of July 1, 2016, the combined entities will be known as Habitat for Humanity of Kansas City. - 12 -