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HomeMy WebLinkAboutWARM Financial Audit Dec 2023 Wilmington Area Rebuilding Ministry, Inc. Financial Statements For the Year Ended December 31, 2023 Wilmington Area Rebuilding Ministry, Inc. CONTENTS PAGE INDEPENDENT AUDITOR’S REPORT 1-3 FINANCIAL STATEMENTS Statement of Financial Position 4 Statement of Activities 5 Statement of Functional Expenses 6 Statement of Cash Flows 7 Notes to Financial Statements 8-18 INDEPENDENT AUDITOR’S REPORT On Internal Control over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 19-20 Schedule of Expenditures of Federal and State Awards 21-22 Earney & Company, L.L.P., 710 Military Cutoff Road, Suite 250 Wilmington, NC 28405 T: (910) 256 9995, F: (910) 256 2829, www.earneynet.com INDEPENDENT AUDITOR’S REPORT To the Board of Directors of Wilmington Area Rebuilding Ministry, Inc. Report on the Audit of the Financial Statements Opinion We have audited the accompanying financial statements of Wilmington Area Rebuilding Ministry, Inc. (a nonprofit organization), which comprise the statement of financial position as of December 31, 2023, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. In our opinion, the financial statements present fairly, in all material respects, the financial position of Wilmington Area Rebuilding Ministry, Inc. as of December 31, 2023, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issues by the Comptroller General of the United States. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Wilmington Area Rebuilding Ministry, Inc. and to meet our other ethical responsibilities, in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinions. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Wilmington Area Rebuilding Ministry, Inc.’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued. - 2 - Auditor’s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards and Government Auditing Standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards and Government Auditing Standards, we:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit 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 Wilmington Area Rebuilding Ministry, Inc.’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.  Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Wilmington Area Rebuilding Ministry, Inc.’s ability to continue as a going concern for a reasonable period of time. We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control-related matters that we identified during the audit. - 3 - Supplementary Information Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal and state awards (on pages 21- 22), as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards, is presented for purposes of additional analysis and is not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of expenditures of federal and state awards is fairly stated, in all material respects, in relation to the financial statements as a whole. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 1, 2024, on our consideration of Wilmington Area Rebuilding Ministry, Inc.’s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is 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 Wilmington Area Rebuilding Ministry, Inc.’s 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 Wilmington Area Rebuilding Ministry, Inc.’s internal control over financial reporting and compliance. Wilmington, North Carolina May 1, 2024 Wilmington Area Rebuilding Ministry, Inc. Statement of Financial Position As of December 31, 2023 The Accompanying Notes are an Integral Part of these Financial Statements - 4 - Without Donor With Donor Restrictions Restrictions Total ASSETS Current Assets Cash & cash equivalents 403,012$ 218,000$ 621,012$ Sales tax refund receivable 26,907 - 26,907 Grants & contracts receivable 179,695 663,018 842,713 Due from related party 5,232 - 5,232 Prepaid expenses & other assets 13,312 - 13,312 Total Current Assets 628,158 881,018 1,509,176 Property & equipment, net (Note 2) 2,586,972 - 2,586,972 Property held for sale (Note 2) 627,330 - 627,330 Total Assets 3,842,460$ 881,018$ 4,723,478$ LIABILITIES & NET ASSETS Current Liabilities Accounts payable & accrued liabilities 222,379$ 185,397$ 407,776$ Deferred revenue 15,774 218,000 233,774 Line of credit (Note 5) 100,000 - 100,000 Current maturities of notes payable (Note 5) 6,490 - 6,490 Total Current Liabilities 344,643 403,397 748,040 Long-term notes payable, net (Note 5) 2,023,332 - 2,023,332 Total Liabilities 2,367,975 403,397 2,771,372 Net Assets Without donor restrictions 1,474,485 - 1,474,485 With donor restrictions - 477,621 477,621 Total Net Assets 1,474,485 477,621 1,952,106 Total Liabilities & Net Assets 3,842,460$ 881,018$ 4,723,478$ 2023 Wilmington Area Rebuilding Ministry, Inc. Statement of Activities For the Year Ended December 31, 2023 The Accompanying Notes are an Integral Part of these Financial Statements - 5 - Without Donor With Donor Restrictions Restrictions Total REVENUE Private grants & contracts (Note 4) 302,878$ 472,480$ 775,358$ Government grants & contracts (Note 4) 746,615 1,712,525 2,459,140 Social enterprise income 198,145 - 198,145 Disaster recovery funds (Note 4) - 48,892 48,892 Contract services 243,959 - 243,959 Contributions 257,440 - 257,440 Fundraising activities, net 108,931 - 108,931 Interest & other income 64,703 - 64,703 Gain (loss) on sale of asset 108,215 - 108,215 Employee Retention Tax Credit (Note 8) 147,811 - 147,811 In-kind revenue - services 527,895 - 527,895 In-kind revenue - materials 17,594 - 17,594 Net assets released from restriction 2,539,480 (2,539,480) - Total Revenue 5,263,666 (305,583) 4,958,083 EXPENSES Program 4,254,398 - 4,254,398 Management & general 220,138 - 220,138 Fundraising 311,435 - 311,435 Total Expenses 4,785,971 - 4,785,971 Change in Net Assets 477,695 (305,583) 172,112 Net Assets, Beginning 996,790 783,204 1,779,994 Net Assets, Ending 1,474,485$ 477,621$ 1,952,106$ 2023 Wilmington Area Rebuilding Ministry, Inc. Statement of Functional Expenses For the Year Ended December 31, 2023 The Accompanying Notes are an Integral Part of these Financial Statements - 6 - Management Program & General Fundraising Total Operating Expenses Salaries 1,489,507$ 140,189$ 122,665$ 1,752,361$ Benefits 140,365 13,211 11,559 165,135 Payroll taxes 121,246 11,411 9,985 142,642 Total Salaries & Related 1,751,118 164,811 144,209 2,060,138 Professional services 40,285 3,792 3,318 47,395 Rebuilding contracted services 919,573 - - 919,573 Rebuilding materials & other project costs 532,000 - - 532,000 Travel 8,013 754 660 9,427 Occupancy 152,946 14,395 12,596 179,937 Office & general 114,400 10,767 9,421 134,588 General marketing 42,424 3,993 3,494 49,911 Facilities & equipment 84,033 7,909 6,920 98,862 Insurance 70,411 6,627 5,799 82,837 Interest 35,018 3,296 2,884 41,198 New facilities/capital campaign 30,119 2,835 2,480 35,434 Miscellaneous expense 1,226 - - 1,226 In-kind expense - services 422,316 - 105,579 527,895 In-kind expense - materials 3,519 - 14,075 17,594 Total Operating Expenses 4,207,401 219,179 311,435 4,738,015 Non-Operating Expenses Depreciation 46,997 959 - 47,956 Total Non-Operating Expenses 46,997 959 - 47,956 Total Statement of Activities Expenses 4,254,398$ 220,138$ 311,435$ 4,785,971$ 2023 Wilmington Area Rebuilding Ministry, Inc. Statement of Cash Flows For the Year Ended December 31, 2023 The Accompanying Notes are an Integral Part of these Financial Statements - 7 - Without Donor With Donor Restrictions Restrictions Total Cash Flows From Operating Activities Cash Collections for: Grants, contracts, & contributions 1,207,230$ 2,427,439$ 3,634,669$ Contract services 243,959 - 243,959 Interest & other income 64,703 - 64,703 Employee Retention Tax Credit 147,811 - 147,811 Less: Cash Payments for: Salaries & related (2,060,138) - (2,060,138) Other operating expenses (2,099,065) - (2,099,065) Net assets released from restriction 2,539,480 (2,539,480) - Net Cash Provided (Used) By Operating Activities 43,980 (112,041) (68,061) Cash Flows From Investing Activities (Purchases) proceeds from sale of fixed assets, net (2,136,729) - (2,136,729) Net Cash Provided (Used) By Investing Activities (2,136,729) - (2,136,729) Cash Flows From Financing Activities Proceeds from line of credit 100,000 - 100,000 Proceeds from (payment of) notes payable 1,941,463 - 1,941,463 Interfund transfers (330,041) 330,041 - Net Cash Provided (Used) By Financing Activities 1,711,422 330,041 2,041,463 Net Increase (Decrease) in Cash (381,327) 218,000 (163,327) Cash & Cash Equivalents, Beginning 784,339 - 784,339 Cash & Cash Equivalents, Ending 403,012$ 218,000$ 621,012$ Reconciliation of Change in Net Assets to Cash Provided (Used) By Operating Activities: Change in net assets 477,695$ (305,583)$ 172,112$ Adjustments to Reconcile to Net Cash Provided (Used) By Operating Activities: Depreciation 47,956 - 47,956 (Gain) loss on sale of asset (108,215) - (108,215) (Increase) Decrease in: Sales tax refund receivable (13,013) - (13,013) Grants & contracts receivable (79,695) (209,855) (289,550) Due from related party (770) - (770) Prepaid expenses & other assets 822 - 822 Increase (Decrease) in: Accounts payable & accrued liabilities 32,501 185,397 217,898 Deferred revenue (313,301) 218,000 (95,301) Net Cash Provided (Used) By Operating Activities 43,980$ (112,041)$ (68,061)$ Supplemental Disclosure Interest paid 41,198$ Income taxes paid -$ 2023 Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 8 - 1. ORGANIZATION Wilmington Area Rebuilding Ministry, Inc. (the “Organization”) is a North Carolina nonprofit organization incorporated in March 1998. The Organization is exempt from income taxes under the Internal Revenue Code Section 501(c)(3). As such, contributions to the Organization are tax deductible. The Organization repairs, rebuilds, and makes homes accessible; and inspires service, generosity, and hope. The Organization envisions a community where all homeowners are safe in their homes. The Organization serves Bladen, Brunswick, Columbus, Duplin, New Hanover, Onslow, and Pender counties of North Carolina. To qualify for the Organization’s services, homeowners must be at or below certain income thresholds (usually 50%) based on area median income for their county of residence and must reside in their homes and have owned them for at least three years. In 2023, the Organization served 409 households. 2. SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The Organization prepares its financial statements in accordance with generally accepted accounting principles promulgated in the United States of America (U.S. GAAP) for not-for- profit organizations using the accrual basis of accounting. Accordingly, revenue is recognized when earned and expenses are recorded when incurred. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of revenue and expenses during the reporting period and the reported amounts of assets and liabilities at the date of the financial statements. On an ongoing basis, the Organization’s management evaluates the estimates and assumptions based upon historical experience and various other factors and circumstances. The Organization’s management believes that the estimates and assumptions are reasonable in the circumstances; however, the actual results could differ from those estimates. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 9 - Net Assets The financial statements report net assets and changes in net assets in two classes that are based upon the existence or absence of restrictions on use that are placed by its donors as follows: Net Assets Without Donor Restrictions – Net assets available for use in general operations and not subject to donor-imposed restrictions. Net Assets With Donor Restrictions – Net assets subject to donor-imposed restrictions. Some donor-imposed restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, where the donor stipulates that resources be maintained in perpetuity. Donor-imposed restrictions are released when a restriction expires, which is when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both. During the year, funds totaling $2,539,480 that were initially restricted for a variety of uses were expended for their intended purposes and released from restriction. These appear as the line item “net assets released from restriction” on the statement of activities. Net assets with donor restrictions are available for the following purposes as of December 31: 2023 Urgent repair & rehabilitation programs 359,341$ Building fund 43,760 Other restricted 74,520 Total Net Assets With Donor Restrictions 477,621$ Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 10 - Cash and Cash Equivalents Cash and cash equivalents include certain investments in highly liquid debt instruments with original maturities of three months or less. From time to time during the period presented, the Organization has had cash balances in financial institutions that have exceeded federal depository insurance limits. Cash and cash equivalents are as follows as of December 31: 2023 First Citizens Bank - Checking 400,418$ South State Bank 28,178 Live Oak Bank - CD 130,251 First Internet Bank - Savings 1,087 Self-Help Credit Union 1,137 Petty cash 150 Undeposited funds 59,791 Total Cash & Cash Equivalents 621,012$ Grants and Contracts Receivable Grants and contracts receivable are primarily unsecured, non-interest bearing amounts due from grantors on cost reimbursement or performance grants. The grants and contracts receivable balance of $842,713 consists primarily of grants awarded prior to year-end for which the Organization had yet to receive payment as of December 31, 2023. Management believes that all outstanding grants and contracts receivable are collectible in full; therefore, no allowance for uncollectible receivables has been provided. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 11 - Property and Equipment Expenditures for the acquisition of property and equipment that are greater than $5,000 and have a useful life when acquired of more than one year are recorded at cost if purchased or at fair market value if donated. Depreciation is computed using the straight- line method over the estimated useful lives of the assets as follows: Furniture & equipment 5-10 years Vehicles 5 years Property and equipment are reviewed for impairment when a significant change in the asset’s use or another indicator of possible impairment is present. No impairment losses were recognized in the financial statements in the current period. Property and equipment is stated at cost and consists of the following as of December 31: 2023 Land 249,900$ Furniture & equipment 10,560 Vehicles 330,570 Construction in progress 2,169,079 Less: Accumulated depreciation (173,137) Property & Equipment, Net 2,586,972$ Property Held for Sale In September 2019, the Organization acquired a 3.5-acre property located at 6955 Market Street in Wilmington, North Carolina and over the next three years began the design phase of a project to build a new program facility at that location. In September 2022, the Board of Directors decided not to move forward with the project due to the escalation of projected construction costs. As of December 31, 2023, the property was listed for sale with a local commercial realtor. Following the guidance of Financial Accounting Standards Board Accounting Standards Codification (FASB ASC) 360-10-45-9, Long-Lived Assets Held for Sale, the Organization has segregated the assets held for sale on the statement of financial position. A summary of those assets, which are stated at historical cost less accumulated depreciation, is as follows as of December 31: 2023 Land 501,868$ Land improvements 125,462 Total Property Held for Sale 627,330$ Additionally, in February 2023, the Organization sold its administrative and program offices at 5058 Wrightsville Avenue in Wilmington, North Carolina for $386,500 and recognized a gain on sale of $108,215. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 12 - Deferred Revenue Following the guidance of FASB ASC 958-605, Not-for-Profit Entities Revenue Recognition, the Organization has deferred recognition of $233,774 of revenue received in 2023 that will be earned in 2024. The Organization has determined that the associated grant agreements are conditional and limit the Organization’s discretion on how it may spend the funds. Additionally, any unused funds are to be returned to the grantor. The Organization intends to use the funds for various program purposes in 2024 and will recognize the revenue as the underlying conditions are met. Revenue Recognition Revenue is recognized when earned. Program service fees and payments under cost- reimbursable contracts received in advance are deferred to the applicable period in which the related services are performed or expenditures are incurred, respectively. Contributions are recognized when cash, securities, or other assets; an unconditional promise to give; or a notification of a beneficial interest is received. Conditional promises to give are not recognized until the conditions on which they depend have been substantially met. All contributions are reported as increases in unrestricted net assets unless the use of the contributed assets is specifically restricted by the donor. Grant revenue from federal agencies is subject to an independent audit under Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance) and review by grantor agencies. The review could result in the disallowance of expenditures under the terms of the grant or reductions of future grant funds. Based on prior experience, the Organization’s management believes that costs ultimately disallowed, if any, would not materially affect the financial position of the Organization. In-Kind Contributions The Organization benefits from personal services provided by volunteers. Those volunteers have donated significant amounts of time and services to the Organization’s program operations. However, the contributed services do not meet the criteria for recognition in the financial statements. GAAP allows recognition of contributed services only if (a) the services create or enhance nonfinancial assets or (b) the services would have been purchased if not provided by contribution, require specialized skills, and are provided by individuals possessing those skills. Where contributed payments, materials, and free use of space meet the criteria for recognition, they are recorded at fair market value as in-kind contribution revenues and charged to the appropriate expense or asset category. The Organization recorded $527,895 of donated services and $17,594 of donated materials for the year ended December 31, 2023. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 13 - Expense Recognition and Allocation The cost of providing the Organization’s programs and other activities is summarized on a functional basis in the statement of activities and statement of functional expenses. Expenses that can be identified with a specific program or support service are charged directly to that program or support service. Costs common to multiple functions have been allocated among the various functions benefited using objective bases, such as time spent, salaries, square feet, and other bases. Management and general expenses include those costs that provide for the overall support and direction of the Organization. Management and general activities include those that provide governance (Board of Directors), oversight, business management, financial recordkeeping, budgeting, legal services, human resource management, and similar activities that ensure an adequate working environment and an equitable employment program. Fundraising costs, including advertising, are expensed as incurred even though they may result in contributions received in future years. Fundraising activities include publicizing and conducting fundraising campaigns; maintaining donor lists; conducting special fundraising events; and other activities involved with soliciting contributions from corporations, foundations, individuals, and others. The Organization sponsors occasional special events to raise funds and awareness of its mission. In recognizing special events revenue, the Organization follows the guidance provided by FASB ASC 958-605, Not-for-Profit Entities Revenue Recognition. The Organization considers its events to be ongoing and central to its operations and therefore records revenues at the gross amount. All costs of the events appear within the fundraising category on the statement of functional expenses. Income Taxes The Organization is a not-for-profit organization as described in Section 501(c)(3) of the Internal Revenue Code. Accordingly, it is exempt from income taxes on related income pursuant to Section 501(a) of the Code and contributions may be deductible to donors. The Organization files Form 990 with the Internal Revenue Service (IRS) annually; those forms are generally subject to examination by the IRS for a period of up to three years after they are filed. Subsequent Events Subsequent events have been evaluated through May 1, 2024, which is the date the financial statements were available to be issued. Events occurring after that date have not been evaluated to determine whether a change in the financial statements would be required. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 14 - 3. LIQUIDITY AND AVAILABILITY OF RESOURCES Financial assets available to meet general expenditures over the next 12 months are as follows as of December 31: 2023 Operating Assets at Year End: Cash & cash equivalents 403,012$ Sales tax refund receivable 26,907 Grants & contracts receivable 179,695 Due from related party 5,232 Total Operating Assets at Year End 614,846 Plus: Net assets with purpose or time restrictions to be met in less than a year 881,018 Financial Assets Available to Meet General Expenditures Over the Next 12 Months 1,495,864$ The Organization operates with a balanced budget and anticipates collecting sufficient revenue to cover general expenditures not covered by donor-restricted resources. The accompanying statement of cash flows on page 7 identifies the sources and uses of cash. The Organization regularly monitors liquidity required to meet its operating needs and other contractual commitments, while also striving to maximize the investment of its available funds. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 15 - 4. GRANTS AND CONTRACTS The Organization receives its revenue from a variety of grants and contracts with governmental and private agencies summarized as follows for the year ended December 31: 2023 Government Grants & Contracts NCHFA - Essential Single Family Rehab (20) 136,818$ NCHFA - Essential Single Family Rehab (21) 90,184 NCHFA - Essential Single Family Rehab (22) 317,608 NCHFA - Essential Single Family Rehab Disaster Relief (17) ext. 19 429,374 NCHFA - Urgent Repair Program (23) 120,809 NC General Assembly 500,000 NC Office of State Budget and Management 48,892 Community Care of the Lower Cape Fear 699,115 Other government grants 165,232 Total Government Grants & Contracts 2,508,032 Private Grants & Contracts Duke Endowment 100,000 New Hanover Community Endowment 165,000 The Leon Levine Foundation 40,000 United Way of the Cape Fear Area 75,000 Disabled American Veterans 50,000 Other private foundations 169,160 First Citizens Bank & Trust 50,000 Other corporate contributions 126,198 Total Private Grants & Contracts 775,358 Total Grants & Contracts 3,283,390$ The Organization receives a substantial portion of its resources either directly or indirectly from governmental agencies. A significant reduction in funding from one or more of these agencies could have an adverse impact on the Organization’s programs and activities. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 16 - 5. NOTES PAYABLE The Organization maintains a line of credit with First Citizens Bank of $100,000 to assist with seasonal cash flow needs. The line bears interest at the U.S. prime rate with an interest rate floor of 5.00%. The outstanding balance on the line was $100,000 as of December 31, 2023. The line is reviewed annually and is due on demand. A summary of outstanding notes of the Organization is as follows: Outstanding Balance Dec. 31, 2023 First Citizens Bank Line of Credit Line of credit, $100,000 available at 9.25% interest rate, due June 2024.100,000$ Total Line of Credit 100,000$ First Citizens Bank Notes Payable Original note of $2,000,000 dated September 15, 2023 on Amsterdam Way location. Interest rate is 5.85%. Interest-only payments are due until April 2025. Principal and interest payments of $14,255 are due monthly from April 2025 through March 2029.2,000,000$ Auto loan on 2021 Honda CRV of $32,044 with origination date of August 1, 2023. Interest rate is fixed at 6.5%. Principal and interest payments of $690 are due monthly from September 2023 through February 2028.29,822 Total Notes Payable 2,029,822$ Less: Current maturities (6,490) Long-Term Notes Payable, Net 2,023,332$ Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 17 - Note 5 (continued) Future maturities of notes payable for the Organization (excluding line of credit) are as follows by year as of December 31, 2023: 2024 6,490$ 2025 46,637 2026 63,722 2027 67,657 2028 64,447 Thereafter 1,780,869 Total 2,029,822$ 6. RETIREMENT PLAN The Organization provides a simplified employee retirement plan to its employees. It matches employee contributions to the plan up to 3% of each participant’s qualified wages for the fiscal year. In 2023, the Organization contributed $43,170 and this expense is included in the line item “benefits” on the statement of functional expenses. 7. RELATED PARTY TRANSACTIONS During 2023, the Organization provided contracted services to its sister organization, Hope Comes Home, a nonprofit corporation, in the amount of $243,959. A total of $5,232 of this amount was outstanding at year-end and is reported as the line item “due from related party” on the statement of financial position. The Organization and Hope Comes Home have separate Boards of Directors but share common facilities. However, the financial statements of the two entities are not consolidated based on the guidance provided by FASB ASC 810, Consolidation. Presentation of consolidated financial statements is required when one entity controls and has an economic interest in the other entity. Since Hope Comes Home receives independent funding from the North Carolina Housing Finance Agency (NCHFA), an economic interest does not exist and therefore consolidation is not required. Wilmington Area Rebuilding Ministry, Inc. Notes to Financial Statements December 31, 2023 - 18 - 8. EMPLOYEE RETENTION TAX CREDIT The Organization filed claims for the Employee Retention Tax Credit (“ERTC”), which was established under the CARES Act, totaling $147,811 for the year ended December 31, 2023. The ERTC is designed to help businesses, who either were required to suspend services partially or fully due to COVID or who experienced a significant drop in gross receipts, keep workers on the payroll. 9. CONTINGENCIES From time to time, the Organization may be aware of various asserted and unasserted claims. Management feels that these claims can be successfully defended and intends to resist the allegations of these matters in every way and does not plan to seek out-of-court settlements. In the event that judgments adverse to their interest were to be rendered, management feels any liability will be fully covered by existing insurance or not be material to the financial statements. The Organization is exposed to various risks of loss in the ordinary course of business as a result of torts, theft of, damage to, or destruction of assets, business interruption, allegations of liability, natural disasters, employee and officer errors and omissions, and employee workers’ compensation and medical claims. The Organization purchases commercial insurance coverage against risk of loss due to property damage, theft, and various other insurable risks. The Organization carries employer’s liability insurance in the amount of $500,000 in 2023. The Organization carries wind and hail insurance in the amount of $1,500,000 for personal property with a 1% deductible in 2023. The Organization carries a commercial package policy with a $1,000,000 aggregate. No claim payment has exceeded insurance coverage in the past three fiscal years where insurance coverage applies, subject to the deductibles and retentions noted above. Earney & Company, L.L.P., 710 Military Cutoff Road, Suite 250 Wilmington, NC 28405 T: (910) 256 9995, F: (910) 256 2829, www.earneynet.com INDEPENDENT AUDITOR’S REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Directors of Wilmington Area Rebuilding Ministry, Inc. We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of Wilmington Area Rebuilding Ministry, Inc. (a nonprofit organization), which comprise the statement of financial position as of December 31, 2023, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements, and have issued our report thereon dated May 1, 2024. Report on Internal Control over Financial Reporting In planning and performing our audit of the financial statements, we considered Wilmington Area Rebuilding Ministry, Inc.’s internal control over financial reporting (internal control) as a basis for designing audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of Wilmington Area Rebuilding Ministry, Inc.’s internal control. Accordingly, we do not express an opinion on the effectiveness of Wilmington Area Rebuilding Ministry, Inc.’s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements, on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity’s financial statements will not be prevented, or detected and corrected, on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses or significant deficiencies may exist that were not identified. - 20 - Report on Compliance and Other Matters As part of obtaining reasonable assurance about whether Wilmington Area Rebuilding Ministry, Inc.’s financial statements are free from material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the financial statements. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of This Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the Organization’s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Organization’s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Wilmington, North Carolina May 1, 2024 Wilmington Area Rebuilding Ministry, Inc. Schedule of Expenditures of Federal and State Awards December 31, 2023 - 21 - Federal Grantor/ Federal Pass-Through Grantor/ CFDA Program Title Number Total U.S. Department of Housing & Urban Development (HUD) Older Adults Home Modification Grant Program 14.921 23,026$ Passed through N.C. Housing Finance Agency Single Family Rehab Program (SFR) 14.239 544,610 Total Expenditures of Federal Awards 567,636$ North Carolina State Grantor/ State Pass-Through Grantor/ Ref. Program Title Number Total Housing Trust Fund State Appropriation Single Family Rehab Program (Disaster Relief) CFRLPDR1719 429,374$ Urgent Repair Program (URP) URP 22 18,308 Urgent Repair Program (URP) URP 23 120,809 N.C. Office of State Budget and Management Brunswick County Hurricane Florence Critical Needs 13624-T 16,597 Hurricanes Matthew & Florence Disaster Recovery HMHFP2-032 32,295 N.C. Office of Recovery and Resiliency Homeowner Recovery Program HRP 59,631 N.C. General Assembly State Appropriation Passed through N.C. Office of State Budget and Management Direct Grant 44431 227,372 Total Expenditures of State Awards 904,386$ Total Expenditures of Federal & State Awards 1,472,022$ Wilmington Area Rebuilding Ministry, Inc. Schedule of Expenditures of Federal and State Awards December 31, 2023 - 22 - Notes to Schedule of Expenditures of Federal and State Awards December 31, 2023 1. BASIS OF PRESENTATION The accompanying schedule of expenditures of federal and state awards (the “Schedule”) includes the federal and state award activity of Wilmington Area Rebuilding Ministry, Inc. (the “Organization”) under programs of the federal and state governments for the year ended December 31, 2023. The information in the Schedule is presented in accordance with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Because the Schedule presents only a selected portion of the operations of the Organization, it is not intended to and does not present the financial position, changes in net assets, or changes in cash flows of the Organization. 2. SIGNIFICANT ACCOUNTING POLICIES Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. The Organization has elected not to use the 10 percent de minimis indirect cost rate allowed under the Uniform Guidance. 3. SUBRECIPIENTS The Organization spent the federal and state funds presented in the Schedule directly and did not make awards to subrecipients.