Covenant House NOLA: Financial Statements & Uniform Guidance Report (2018), Exams of Accounting

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Consolidated Financial Statements and

Uniform Guidance Financial Report

Together With Independent Auditors’ Reports

June 30, 2018

Consolidated Financial Statements and Uniform Guidance Financial Report Together With Independent Auditors’ Reports

June 30, 2018

TABLE OF CONTENTS

Page

Independent Auditors’ Report

CONSOLIDATED FINANCIAL STATEMENTS

Consolidated Statement of Financial Position 3

Consolidated Statement of Activities 4

Consolidated Statement of Functional Expenses 5

Consolidated Statement of Cash Flows 6

Notes to Consolidated Financial Statements 7-

SUPPLEMENTARY INFORMATION

Schedule of Compensation, Benefits and Other Payments to Agency Head or Chief Executive Officer 21

UNIFORM GUIDANCE SCHEDULES AND REPORTS

Schedule of Expenditures of Federal Awards 22

Notes to Schedule of Expenditures of Federal Awards 23

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

Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance

Schedule of Findings and Questioned Costs 28-

Board of Directors Covenant House New Orleans Page 2

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Covenant House New Orleans as of June 30, 2018, and the consolidated changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Summarized Comparative Information

We have previously audited Covenant House New Orleans’ June 30, 2017 consolidated financial statements, and we expressed an unmodified audit opinion on those audited consolidated financial statements in our report dated November 30, 2017. In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2017 is consistent in all material respects, with the audited consolidated financial statements from which it has been derived.

Report on Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The Schedule of Compensation, Benefits and Other Payments to Agency Head or Chief Executive Director, on page 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, as required by Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards , on page 22 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 November 29, 2018 on our consideration of Covenant House New Orleans’ internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is solely 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 the effectiveness of Covenant House New Orleans’ 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 Covenant House New Orleans’ internal control over financial reporting and compliance.

November 29, 2018

Consolidated Statement of Financial Position June 30, 2018 (with comparative amounts at June 30, 2017)

Cash and cash equivalents $ 958,815 $ 650, Grants receivable 414,928 333, Contributions receivable, net 42,653 253, Other receivables, net 130,358 346, Due from Parent - 34, Other assets 85,154 87, Investments 2,721,112 2,148, Property and equipment, net 2,757,511 2,745, Beneficial interest in assets held by others 382,175 352,

LIABILITIES AND NET ASSETS

Liabilities Accounts payable, accrued expenses, and refundable advances $ 593,878 $ 564, Due to Parent 13,172 - Total Liabilities 607,050 564,

Net Assets Unrestricted Undesignated 721,500 700, Investment in property and equipment 2,757,511 2,745, Designated for endowment purposes 3,070,597 2,494, Total Unrestricted 6,549,608 5,940,

Temporarily restricted 336,048 445, Total Net Assets 6,885,656 6,386,

ASSETS

See notes to consolidated financial statements

Covenant House New Orleans

Consolidated Statement of Functional Expenses

Year Ended June 30, 2018

(with summarized totals for year ended June 30, 2017)

Cost of

Community

Rights of

Total

Total

Direct

Shelter and

Mother/

Service

Public

Passage/

Program

Management

Supporting

Benefits

Crisis Care

Outreach

Child

Medical

Center

Education

In-School

Services

and General

Fundraising

Services

to Donors

2018

2017

Salaries and wages

1,267, $^

104, $^

3, $^

63, $^

140, $^

17, $^

537, $^

2,135,282$

344, $^

149, $^

493, $^

$^

2,629,238$

2,477,405$

Payroll taxes

102,

8,

255

5,

10,

1,

43,

171,

23,

11,

35,

-^

206,

226,

Employee benefits

256,

37,

795

12,

29,

3,

90,

430,

82,

23,

106,

-^

537,

629,

Total Salaries and Related Expenses

1,626,

150,

4,

81,

181,

21,

671,

2,737,

450,

185,

635,

-^

3,373,

3,332,

Accounting fees

-^ -^ -^ -^ -^ -^ -^ -^

40,

-^

40,

-^

40,

40,

Legal fees

38,

-^ -^

5,

5,

10,

24,

85,

15,

15,

31,

-^

117,

3,

Medical fees

-^ -^ -^

24,

4,

-^

12,

41,

-^ -^ -^ -^

41,

30,

Consulting fees

37,

-^ -^

3,

147,

3,

18,

210,

6,

160,

166,

-^

377,

211,

Supplies

47,

1,

426

8,

5,

58

20,

83,

5,

1,

7,

-^

91,

74,

Telephone

18,

1,

41

1,

4,

121

11,

37,

10,

2,

12,

-^

50,

44,

Postage and printing

3,

-^ -^

176

210

2,

734

6,

3,

12,

16,

-^

22,

16,

Occupancy:Fuel and utilities

91,

-^ -^

2,

10,

-^

39,

144,

13,

2,

16,

-^

160,

148,

Repairs and maintenance

48,

-^

3,

18

5,

-^

25,

82,

10,

1,

11,

-^

94,

96,

Rent and other

1,

-^

49

65

176

-^

33,

35,

1,

343

2,

-^

37,

44,

Equipment

42,

320

150

1,

5,

529

16,

67,

34,

7,

41,

-^

109,

81,

Transportation

23,

7,

82

1,

5,

686

16,

54,

2,

3,

6,

-^

61,

58,

Conferences, conventions and meetings

9,

66

-^

769

1,

501

5,

16,

1,

1,

2,

-^

19,

Specific Assistance to Individuals:Food

158,

14,

-^

3

3,

-^

34,

210,

-^ -^ -^ -^

210,

211,

Medical

-^ -^ -^ -^ -^ -^ -^ -^ -^ -^ -^ -^ -^

43,

Contributed medical

-^ -^ -^

2,

8,

-^

1,

11,

-^ -^ -^ -^

11,

12,

Clothing, allowance and other

101,

44,

60

2,

198,

80

219,

566,

-^ -^ -^ -^

566,

539,

Contributed clothing and merchandise

4,

-^ -^ -^

84

-^

280

4,

1,

280

1,

-^

6,

4,

Other purchased services

40,

1,

1,

814

3,

516

14,

63,

33,

3,

36,

-^

99,

75,

Dues, licenses and permits

1,

-^

27

128

220

1

963

3,

474

1,

2,

-^

5,

11,

Subscriptions and publications

907

37

-^

560

105

587

603

2,

216

496

712

-^

3,

2,

Staff recruitment

1,

115

-^

37

337

-^

748

2,

532

332

864

-^

3,

2,

Insurance

34,

5,

137

1,

8,

108

17,

67,

-^

1,

1,

-^

68,

64,

Contributed services

-^ -^ -^

145,

521,

2,

72,

741,

125

375

500

-^

742,

688,

Miscellaneous

7,

830

-^

176

880

28

5,

15,

3,

924

4,

29,

48,

26,

Bank charges and fees

1,

-^ -^

719

-^ -^

1,

3,

8,

10,

19,

-^

22,

15,

Interest

-^ -^ -^ -^ -^ -^ -^ -^

131

-^

131

-^

131

Total Functional Expenses BeforeDepreciation and Amortization

2,341,

229,

9,

285,

1,122,

43,

1,265,

5,297,

644,

413,

1,057,

29,

6,384,

5,881,

Depreciation and amortization

54,

7,

278

659

4,

15

20,

88,

39,

2,

41,

-^

130,

130,

Total Functional Expenses

2,396,

237,

9,

286,

1,127,

43,

1,286,

5,386,

683,

415,

1,099,

6,514,

6,011,

Less cost of direct benefits to donors

-^ -^ -^ -^ -^ -^ -^ -^ -^ -^ -^

(29,375)

(29,375)

(11,378)

Total Expenses Reported by Functionon the Statement of Activities

2,396, $^

237, $^

9, $^

286,574$

1,127, $^

43, $^

1,286, $^

5,386,503$

683, $^

415, $^

1,099,006$

$^

6,485,509$

6,000,489$ Total

Program Services

Supporting Services

See notes to consolidated financial statements

Consolidated Statement of Cash Flows Year Ended June 30, 2018 (with comparative amounts for year ended June 30, 2017 )

CASH FLOWS FROM OPERATING ACTIVITIES

Change in net assets $ 499,303 $ 432, Adjustments to reconcile change in net assets to net cash from operating activities Depreciation and amortization 130,192 130, Net unrealized and realized gain on investments (146,520) (192,290) Bad debt expense 559 559 Loss (gain) on sale of property and equipment 15,240 (2,980) Net change in operating assets and liabilities Grants receivable (81,814) 23, Other receivables 215,169 (173,202) Contributions receivable 211,075 (209,676) Other assets 2,229 (33,939) Accounts payable, accrued expenses 29,395 44, and refundable advances Due from/to Parent 47,562 (67,984) Net Cash from Operating Activities 922,390 (48,834)

CASH FLOWS FROM INVESTING ACTIVITIES

Proceeds from sale of investments 27,539 96, Purchases of investments (477,782) (351,644) Proceeds from sale of beneficial interest 2,984 12, Purchases of beneficial interest (8,810) (4,172) Purchase of property and equipment (157,848) (157,789) Proceeds from sale of property and equipment - 11, Net Cash from Investing Activities (613,917) (392,818) Change in Cash and Cash Equivalents 308,473 (441,652)

CASH AND CASH EQUIVALENTS

Beginning of year 650,342 1,091,

End of year $ 958,815 $ 650,

See notes to consolidated financial statements

Notes to Consolidated Financial Statements June 30, 2018

1. Organization and Nature of Activities (continued)

Components of Program and Supporting Services

Program Services

Shelter and Crisis Care The Shelter and Crisis Care program provides shelter, food, clothing, counseling, cash management, physical and behavioral health, job readiness and placement to runaway homeless and at-risk youth, 22 and under.

Outreach The Outreach program is an effort to reach youths who would otherwise not find their way to the Crisis Center. Outreach teams cruise the city streets, searching for these youths and providing them with food, a trained counselor and a safe ride to shelter.

Mother/Child The Mother/Child program provides emergency shelter, food and counseling to homeless mothers (22 and under) and their children.

Medical Services Medical services include basic medical services, referrals, HIV testing, mental health and counseling.

Community Service Center The Community Service Center provides comprehensive services to former Covenant House youth, and other youths in the community who need support to maintain themselves in stable living situations. Within this program, the Organization also provides counseling and intervention services, and work-related instruction and experience through the White Dove Landscaping program. The Organization’s partners in service include Tulane Medical Center’s Adolescent drop-in clinic, and Catholic Charities Archdiocese of New Orleans Head Start Program.

Public Education The Public Education program informs and educates the public on how to identify potential “runaway” and “throwaway” adolescents, the public and private resources available to help such adolescents before they leave home and the public support services available to these families to improve their home environment.

Rights of Passage/In-School The Rights of Passage program provides transitional living services to youths for up to 24 months, including individual counseling and help with their education and finding jobs and ultimately long term housing.

Notes to Consolidated Financial Statements June 30, 2018

1. Organization and Nature of Activities (continued)

Components of Program and Supporting Services (continued)

Supporting Services

Management and General Management and general services include administration, finance and general support activities. Certain administrative costs that relate to specific programs have been allocated to those programs.

Fundraising Development services relate to the activities of the development program in raising general and specific contributions. Direct Benefit-to-Donor Costs Direct benefit-to-donor are costs incurred in conjunction with items such as meals and entertainment benefiting attendees of special events.

2. Summary of Significant Accounting Policies

Basis of Presentation and Use of Estimates

The accompanying consolidated financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which 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. Accordingly actual results could differ from those estimates.

Principles of Consolidation

The accompanying consolidated financial statements include the accounts of Covenant House New Orleans and Covenant Landscaping, LLC. All significant intercompany transactions and balances have been eliminated in consolidation.

Net Asset Presentation

The Organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statement of activities as net assets released from restrictions. It is the Organization’s policy to record temporarily restricted contributions received and expended in the same accounting period in the unrestricted net asset class activity. Permanently restricted net assets represent those resources that have been designated by the donor to be held and invested in perpetuity. There were no permanently restricted net assets as of June 30, 2018 and 2017.

Notes to Consolidated Financial Statements June 30, 2018

2. Summary of Significant Accounting Policies (continued)

Beneficial Interest in Assets Held by Others (continued)

The agreements also grant variance power, that is, permit each foundation to substitute another beneficiary, if the Organization ceases to exist, or the foundation’s governing board votes that supporting the Organization is no longer necessary or is inconsistent with the needs of the community. The Organization recognized the transfer as reciprocal, and therefore not a contribution, but as a beneficial interest in assets held by others and a component of its board designated endowment.

Property and Equipment

The Organization follows the practice of capitalizing all expenditures for property, building and equipment with a cost in excess of $500. Property and equipment are reported at cost at the date of acquisition or at fair value at the date of donation. Building improvements are capitalized, whereas minor costs of repairs and maintenance are expensed as incurred.

Depreciation is computed on the straight-line basis over the estimated useful lives of the assets, which range from 3 to 33 years. Leasehold improvements are amortized on the straight-line basis over the lesser of the term of the lease or their estimated useful lives.

Contributions and Pledges Receivable

Contributions to the Organization are recorded as revenue upon the receipt of an unconditional pledge or of cash or other assets. Contributions are considered available for unrestricted use, unless the donors restrict their use. Contributions to be received after one year are discounted at an interest rate commensurate with the risk involved. An allowance for uncollectible pledges receivable is provided using management's judgment of potential defaults, which considers factors such as prior collection history, type of contribution and the nature of fundraising activity. Contribution revenue is recognized based on the present value of the estimated future payments to be made to the Organization.

The Organization has been named the beneficiary and owner of a $75,000 life insurance policy which has a cash surrender value. The policy is recognized at net present value and is included in contributions receivable in the accompanying consolidated statement of financial position. The cash surrender value of approximately $24,000 and $22,200 at June 30, 2018 and 2017 is included in other assets.

Allowance for Doubtful Accounts

The Organization maintains an allowance for doubtful accounts for estimated losses that may result from the inability of its customer or donor to make required payments. Such allowances are based upon several factors including, but not limited to, historical experience and the financial condition of the customer or donor. Uncollectible accounts are written off based upon the amount of time they have been outstanding and management’s expected collectability.

Notes to Consolidated Financial Statements June 30, 2018

2. Summary of Significant Accounting Policies (continued)

Donated Goods and Services

Donated goods consist of items received by the Organization and awarded as prizes during the auctions held in relation to special events. These amounts are recorded as both revenue and expense at their estimated fair values at the date of receipt. The Organization recognizes the fair value of donated services which create or enhance nonfinancial assets, or require specialized skills provided by individuals possessing those skills and would typically be purchased if not provided by donation. Contributed services which do not meet these criteria are not recognized as revenue and are not reported in the accompanying consolidated financial statements.

Impairment of Long-Lived Assets

Long-lived assets are reviewed for impairment whenever events or changes in circumstances indicate the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. There were no such impairment for the years ended June 30, 2018 and 2017.

Advertising Costs

Advertising costs are expensed as incurred.

Accounting for Uncertainty in Income Taxes

The Organization recognizes the effect of income tax positions only if those positions are more likely than not to be sustained. Management has determined that the Organization had no uncertain tax positions that would require financial statement recognition and/or disclosure. The Organization is no longer subject to examinations by the applicable taxing jurisdictions for years prior to June 30, 2015.

Subsequent Events Evaluation by Management

Management has evaluated subsequent events for disclosure and recognition in the consolidated financial statements through the date that the consolidated financial statements were available to be issued, which date is November 29, 2018.

Notes to Consolidated Financial Statements June 30, 2018

4. Fair Value of Investments

The following are major categories of investments and beneficial interest in assets held by others measured at fair value as of June 30, categorized by the fair value hierarchy:

Level 1 Level 2 Level 3 Total

Affiliated pooled investments $ - $ 2,688,422 $ - $ 2,688,

Investment cash 32,

Total Investments 2,721,

Beneficial Interest in Assets Held by Others Greater New Orleans Foundation - - 256,092 256, Jewish New Orleans Foundation - - 44,586 44, The Catholic Foundation - - 47,034 47, Baton Rouge Area Foundation - - 34,463 34, Total Beneficial Interest in Assets Held by Others - - 382,175 382,

Total Investments and Beneficial Interest in Assets Held by Others $ - $ 2,688,422 $ 382,175 $ 3,103,

2018

Level 1 Level 2 Level 3 Total

Affiliated pooled investments $ - $ 2,142,955 $ - $ 2,142,

Investment cash 5,

Total Investments 2,148,

Beneficial Interest in Assets Held by Others Greater New Orleans Foundation - - 237,561 237, Jewish New Orleans Foundation - - 41,789 41, The Catholic Foundation - - 39,910 39, Baton Rouge Area Foundation - - 32,753 32, Total Beneficial Interest in Assets Held by Others - - 352,013 352,

Total Investments and Beneficial Interest in Assets Held by Others $ - $ 2,142,955 $ 352,013 $ 2,500,

2017

Notes to Consolidated Financial Statements June 30, 2018

4. Fair Value of Investments (continued)

The following table summarizes the changes in financial assets measured on a recurring basis at fair value using Level 3 inputs for the years ended June 30:

Balance, beginning of year $ 352,013 $ 332,

Purchases 8,810 4,

Sales (2,984) (12,460)

Realized gain 9,783 4,

Unrealized gain 14,553 22,

Balance, end of year $ 382,175 $ 352,

5. Property and Equipment

Property and equipment consists of the following as of June 30:

Land $ 1,543,752 $1,568,

Buildings 992,262 992,

Building improvements 646,067 555,

Equipment 1,826,632 1,750,

Accumulated depreciation and amortization (2,251,202) (2,121,370)

6. Commitments and Contingencies

Leases

The Organization has entered into various noncancelable operating leases used in the daily operations of the business. These leases expire at various dates through October 2028. Rental expenses under all operating leases amounted to $18,523 and $16,290 for the years ended June 30, 2018 and 2017.

Notes to Consolidated Financial Statements June 30, 2018

8. Contributed Services and Merchandise

The Organization recognizes contribution revenue for certain services and merchandise received at fair value. Contributed clinical services by internists, pediatricians, nurse practitioners, registered nurses and intake staff for the years ended June 30 are as follows:

2018 2017

Medical $ 147,381 $ 122, Community Service Center 530,148 501, Rights of Passage 73,942 61, Public Education 2,000 1, Management and General 1,685 125 Fundraising 558 375 Merchandise 4,608 16, $ 760,322 $ 704,

9. Temporarily Restricted Net Assets

Temporarily restricted net assets consist of purpose restricted contributions as follows:

Program core support $ 314,216 $ 425, Other programs 21,832 20, $ 336,048 $ 445,

Net assets released from restrictions by incurring expenses satisfying the restricted purposes during the years ended June 30, are as follows:

2018 2017

Program core support $ 387,177 $ 189,

10. Board Designated Endowment Funds

As required by U.S. GAAP, net assets associated with endowment funds, including funds designated by the Board of Directors to function as endowments, are classified and reported based on the existence or absence or donor-imposed restrictions. The Organization’s endowment funds have not been donor-restricted for specific programs and are expendable for unrestricted purposes following board appropriation subject to a standard of prudence.

Notes to Consolidated Financial Statements June 30, 2018

10. Board Designated Endowment Funds (continued)

During fiscal year 2014, the Organization agreed to pool a significant portion of its board designated reserves with that of Covenant House International and its investment advisor to garner greater returns through economies of scale.

During 2010 the State of Louisiana adopted its version of the Uniform Prudent Management of Institutional Funds Act (“UPMIFA”), which governs endowment spending of charitable institutions. The Organization classifies donor-restricted endowment funds as permanently restricted net assets, unless otherwise stipulated by the donor. Board designated or permanently restricted net assets represent (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts donated to the endowment, and (c) accumulations to the endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the funds. According to UPMIFA, the ordinary income of an endowed fund may be distributed annually. While UPMIFA does not place limitations on what can be distributed when market conditions are favorable, it does limit what can be distributed if the current value is near or below the Historical Dollar Value – defined as the aggregate of original, subsequent and accumulation contributions. In utilizing the appreciation in value of the endowments for distributions, the Organization follows the provisions of the Louisiana Uniform Prudent Management of Institutional Funds Act (“LUPMIFA”) of 2010.

In accordance with LUPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor restricted or board designated endowment funds – the purpose, duration, and preservation of the endowment fund; expected total return on investments; general economic conditions; the possible effects of inflation and deflation; other resources, and the investment policy of the Organization.

The Organization has adopted investment management and spending policies for endowment assets that support the objective of providing a sustainable and increasing level of endowment income distribution to its activities while seeking to maintain the purchasing power of the endowment assets. The Organization’s primary investment objectives are to maximize total return within reasonable and prudent levels of risk while maintaining sufficient liquidity to meet disbursement needs and ensure preservation of capital.

To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy that achieves a return through a combination of current income and capital appreciation, without regard to an emphasis on either, recognizing that changes in market conditions and interest rates will result in varying strategies in an attempt to optimize results. The Organization believes that the decision to pool its investments with the Parent affiliate meets its long-term investment objectives.