The words you are searching are inside this book. To get more targeted content, please make full-text search by clicking here.

Unity Care's audited financial statement for the 2015-2016 fiscal year.

Discover the best professional documents and content resources in AnyFlip Document Base.
Search
Published by Unity Care, 2018-01-22 18:48:07

2016 Audited Financial Statement

Unity Care's audited financial statement for the 2015-2016 fiscal year.

Financial Statements
and Supplementary Information

June 30, 2016 and 2015

Together with
Independent Auditors’ Report

and Single Audit Reports

THE UNITY CARE GROUP

Table of Contents
June 30, 2016

INDEPENDENT AUDITORS’ REPORT PAGE
1-2
FINANCIAL STATEMENTS
3
Statements of Financial Position 4-5
6-7
Statements of Activities and Changes in Net Assets 8-9
10 - 27
Statements of Functional Expenses 28
29-30
Statements of Cash Flows
31-32
Notes to Financial Statements
33
SUPPLEMENTARY INFORMATION 34
35-36
Independent Auditors' Report on Internal Control over Financial Reporting and
on Compliance and Other Matters based on an Audit of Financial
Statements Performed in Accordance with Government Auditing
Standards

Independent Auditors' Report on Compliance for Each Major Federal Program
and Report on Internal Control over Compliance Required by Uniform
Guidance

Schedule of Expenditures of Federal Awards

Notes to the Schedule of Expenditures of Federal Awards

Schedule of Findings and Questioned Costs

INDEPENDENT AUDITORS’ REPORT

To the Board of Directors of
The Unity Care Group
San Jose, California

Report on the Financial Statements

We have audited the accompanying financial statements of The Unity Care Group (a California
public benefit corporation, the "Organization"), which comprise the statements of financial
position as of June 30, 2016 and 2015, and the related statements of activities and changes in net
assets, functional expenses and cash flows for the years 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 our audits. We
conducted our audits in accordance with auditing standards generally accepted in the United
States of America and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of the United States. Those standards
require that we plan and perform the audits to obtain reasonable assurance about whether the
financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and
disclosures in the financial statements. 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 statements

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a
basis for our audit opinion.

999W.TaylorStreet,SuiteASanJose,CA95126www.rlallp.comOffice:408.855.6770Fax:408.855.6774

INDEPENDENT AUDITORS’ REPORT (CONTINUED)

To the Board of Directors of
The Unity Care Group
San Jose, California

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,
the financial position of the Organization as of June 30, 2016 and 2015, and the changes in its net
assets and its cash flows for the years then ended in accordance with accounting principles
generally accepted in the United States of America.

Other Matters

Other Information

Our audits were conducted for the purpose of forming an opinion on the financial statements as a
whole. The accompanying schedule of expenditures of federal awards, as required by Title 2
U.S. Code of Federal Regulations (CFR) Part 200, Uniform Administration Requirements, Cost
Principles, and Audit Requirements for Federal Awards (“Uniform Guidance”), 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 audits 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 information 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
February 10, 2017, on our consideration of the Organization’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 to describe the
scope of our testing of internal control over financial reporting and compliance and the results of
that testing, and not to provide an opinion on internal control over financial reporting or on
compliance. That report is an integral part of an audit performed in accordance with Government
Auditing Standards in considering the Organization’s internal control over financial reporting
and compliance.



San Jose, California
February 10, 2017

2

THE UNITY CARE GROUP

Statements of Financial Position

June 30,

2016 2015

ASSETS

Current assets: $ 1,380,719 $ 863,218
Cash and cash equivalents
Investments 216,464 211,268
Accounts receivable, net
Prepaid expenses 2,087,297 2,425,374
Contributions receivable - use of facility, net
164,063 136,636

130,875 125,841

Total current assets 3,979,418 3,762,337

Property and equipment, net 5,808,249 6,461,181

Non-current assets: 198,577 321,103
Contributions receivable - use of facility, net 62,644 27,040
Deposits 97,987 30,142
Cash surrender value of life insurance

Total assets $ 10,146,875 $ 10,601,803

LIABILITIES AND NET ASSETS

Current liabilities: $ 66,341 $ 84,889
Accounts payable
Accrued expenses 892,622 858,994
Housing and flexible fund reimbursements
Capital leases payable 312,189 345,022
Notes payable
20,072 19,332

83,328 88,409

Total current liabilities 1,374,552 1,396,646

Non-current liabilities: 25,861 45,932
Capital leases payable 3,210,366 3,620,771
Notes payable
Line of credit 300,000 -
Agency fund liability 9,880 9,880
Deferred compensation 30,142
97,987

Total non-current liabilities 3,644,094 3,706,725

Total liabilities 5,018,646 5,103,371

Commitments and contingencies

Net assets: 2,877,257 3,011,416
Unrestricted 2,250,972 2,487,016
Temporarily restricted

Total net assets 5,128,229 5,498,432

Total liabilities and net assets $ 10,146,875 $ 10,601,803

The accompanying notes are an integral part of these financial statements
3

THE UNITY CARE GROUP

Statements of Activities and Changes in Net Assets
For the Year Ended June 30, 2016

Support and revenues: Unrestricted Temporarily Total
Restricted
Program service fees $ 12,440,229 $ 12,440,229
341,935 -$ 341,935
Gain on disposal of property and equipment 141,912 - 141,912
153,028 - 218,528
In-kind contributions 85,314 65,500 85,314
(503) - (503)
Contributions 26,385 - 26,385
301,544 - -
Rental and other income, net (301,544)
13,489,844 13,253,800
Investment loss (236,044)
11,927,322 11,927,322
Special event, net -
1,329,176 1,329,176
Net assets released from restrictions 367,505 - 367,505
-
Total support and revenues 1,696,681 1,696,681
13,624,003 - 13,624,003
Expenses:
Program expenses (134,159) - (370,203)
3,011,416 5,498,432
Supporting services: 2,877,257 $ (236,044) 5,128,229
General and administrative
Fundraising 2,487,016

Total supporting services 2,250,972 $

Total expenses

Change in net assets

Net assets, beginning of year

Net assets, end of year $

The accompanying notes are an integral part of these financial statements
4

THE UNITY CARE GROUP

Statements of Activities and Changes in Net Assets (continued)
For the Year Ended June 30, 2015

Unrestricted Temporarily Total
Restricted
12,494,805
Support and revenues: $ 12,494,805 $ -$ 313,946
Program service fees 313,946 - 206,288
In-kind contributions 126,288 80,000 (9,300)
Contributions (9,300) - 1,233
Rental and other income, net 1,233 - 27,909
Investment income 27,909 - -
Special event, net 320,877 (320,877)
Net assets released from restrictions

Total support and revenues 13,275,758 (240,877) 13,034,881

Expenses: 10,937,774 - 10,937,774
Program expenses
1,427,285 - 1,427,285
Supporting services: 535,673 - 535,673
General and administrative -
Fundraising 1,962,958 1,962,958

Total supporting services

Total expenses 12,900,732 - 12,900,732

Change in net assets 375,026 (240,877) 134,149

Net assets, beginning of year 2,636,390 2,727,893 5,364,283

Net assets, end of year $ 3,011,416 $ 2,487,016 $ 5,498,432

The accompanying notes are an integral part of these financial statements
5

THE UNITY CARE GROUP

Statements of Functional Expenses
For the Year Ended June 30, 2016

Program Services Supporting Services

Community

M ental and Total
Functional
Residential Health Develop ment General and Exp enses
Services Administrative
Services Services Total Fundraising Total

Salaries and related expenses: $ 2,209,339 $ 3,355,091 $ 1,491,921 $ 7,056,351 $ 704,589 $ 196,885 $ 901,474 $ 7,957,825
Salaries 745,934 822,713 360,545 1,929,192 175,492 46,452 221,944 2,151,136
Payroll taxes and employee benefits
2,955,273 4,177,804 1,852,466 8,985,543 880,081 243,337 1,123,418 10,108,961
Total salaries and related expenses
512,515 81,711 95,869 690,095 - - - 690,095
Direct program expenses: 173,464 500 - 173,964 - - - 173,964
Groceries, household and clothing 116,246 - - - 116,246
Rental assistance 42,460 72,780 1,006
Outings, sports and educational 980,305 - - - 980,305
728,439 154,991 96,875
Total direct program expenses 465,641 81,520 38,075 119,595 585,236
87,667 144,553 233,421 381,209 64,410 47,664 112,074 493,283
Professional and contract fees 149,985 192,480 38,744 331,332 20,092 20,092 351,424
Occup ancy 243,818 74,994 12,520 246,833 6,059 - 256,076
Depreciation and amortization 178,712 45,561 171,409 60,646 3,184 9,243 248,551
Travel, meals and entertainment 22,560 74,066 39,771 134,001 2,272 16,496 77,142 136,874
Office and computer supplies 57,572 43,231 7,952 126,636 6,402 2,873 133,038
Repairs and maintenance 82,818 42,120 11,896 110,987 601 6,402 110,987
Telephone and utilities 72,620 - 13,739 - 110,987
Insurance - - 67,764 4,571 - 13,739 81,503
Interest - 24,178 - 30,725 37,296 - 14,492 45,217
Events and training 43,586 8,176 16,367 26,482 37,296 37,296
Auditing and accounting - - 5,892 9,921 27,782 27,812
Banking and related 6,182 - 30 30 8,727 - 12,819 18,713
Advertising - - 1,179 5,894 8,727 8,727
Bad debt expense - 2,947 - 1,329,176 $ 1,300
- - 6,927 1,696,681 $ 13,624,003
Total expenses 1,768 2,356,782 $
- 5,118,252 $ 11,927,322 $ -

$ 4,452,288 $ 367,505 $

The accompanying notes are an integral part of these financial statements
6

THE UNITY CARE GROUP

Statements of Functional Expenses (continued)
For the Year Ended June 30, 2015

Program Services Supporting Services

Community

M ental and Total
Functional
Residential Health Develop ment General and Exp enses
Services Administrative
Services Services Total Fundraising Total

Salaries and related expenses: $ 2,163,462 $ 3,315,155 $ 960,307 $ 6,438,924 $ 679,352 $ 284,434 $ 963,786 $ 7,402,710
Salaries 731,141 835,863 238,610 1,805,614 168,789 64,979 233,768 2,039,382
Payroll taxes and employee benefits
2,894,603 4,151,018 1,198,917 8,244,538 848,141 349,413 1,197,554 9,442,092
Total salaries and related expenses
459,765 84,331 109,175 653,271 - - - 653,271
Direct program expenses: 32,961 112,864 419 146,244 - - - 146,244
Groceries, household and clothing 132,504 - 132,504 - - - 132,504
Outings, sports and educational -
Rental assistance - - 932,019
625,230 197,195 109,594 932,019 -
Total direct program expenses 88,656 229,563 533,491
60,858 131,390 111,680 303,928 140,907 54,625 120,197 485,301
Professional and contract fees 134,632 195,494 34,978 365,104 65,572 23,098 309,083
Occup ancy 191,482 83,091 11,412 285,985 23,098 - 300,996
Depreciation and amortization 230,518 38,733 291,506 5,859 3,631 9,490 254,773
Travel, meals and entertainment 22,255 78,748 34,401 184,223 54,015 16,535 70,550 153,273
Office and computer supplies 71,074 64,402 11,958 142,169 11,003 11,104 115,088
Telephone and utilities 65,809 36,515 3,458 113,743 - 101 1,345
Repairs and maintenance 73,770 88,553 1,345 88,553 88,553
Bad debt expense - - - 87,277 87,277 87,277
Insurance - - - - 33,810 - 33,810 83,765
Interest - 24,608 - 49,955 5,406 - 20,303 42,194
Events and training 25,347 11,467 5,854 21,891 31,755 - 31,755 31,755
Auditing and accounting 4,570 - - - 29,178 14,897 29,763 29,763
Banking and related - - - - 2,711 - 8,596 11,309
Advertising - 1,492 407 2,713 585
814 5,885 1,962,958 $ 12,900,732
Total expenses
$ 4,170,444 $ 5,205,938 $ 1,561,392 $ 10,937,774 $ 1,427,285 $ 535,673 $

The accompanying notes are an integral part of these financial statements
7

THE UNITY CARE GROUP

Statements of Cash Flows

For the Year Ended

June 30,

2016 2015

Cash flows from operating activities: $ (370,203) $ 134,149
Change in net assets
Adjustments to reconcile change in net assets to net cash 402,031 360,084
provided by (used in) operating activities: (2,000) 28,000
Depreciation and amortization 13,711 12,107
Change in allowance for doubtful accounts -
Realized and unrealized (gains) losses on investments, net (341,935)
Gain on disposal of property and equipment, net - (147,091)
In-kind asset donations 109,679
Contributions receivable - use of facility, net 117,492 (30,142)
Increase in cash surrender value of life insurance (67,845)
Deferred compensation 67,845 30,142
Changes in operating assets and liabilities:
Accounts receivable 340,077 (799,980)
Prepaid expenses (27,427) (92,555)
Deposits (35,604) 4,810
Accounts payable (18,548) (50,621)
Accrued expenses 33,628 124,678
Housing and flexible fund reimbursements (32,833) 218,110
Agency fund liability 9,880
-
Net cash provided (used) by operating activities (88,750)
78,389
Cash flows from investing activities: 1,608
Proceeds from sale of investments 126,919 -
Proceeds from sale of fixed assets 687,938
Acquisition of investments (145,826) (8,317)
Acquisition of property and equipment (95,102) (188,035)

Net cash provied (used) in investing activities 573,929 (194,744)

The accompanying notes are an integral part of these financial statements
8

THE UNITY CARE GROUP

Statements of Cash Flows (continued)

For the Year Ended

June 30,

2016 2015

Cash flows from financing activities: $ 300,000 $ 100,000
Borrowing on line of credit
Repayment of line of credit - (100,000)
Borrowing on capital leases payable
Repayment of capital leases payable - 7,516
Borrowing on notes payable
Repayment of notes payable (19,331) (18,505)

- 21,298

(415,486) (88,851)

Net cash used by financing activities (134,817) (78,542)

Net change in cash and cash equivalents 517,501 (362,036)

Cash and cash equivalents at beginning of year 863,218 1,225,254

Cash and cash equivalents at end of year $ 1,380,719 $ 863,218

Supplemental disclosure of cash flow information

Cash paid during the year for interest $ 91,308 $ 95,184

Supplemental disclosure of non-cash investing and financing information

Acquisition of property and equipment under capital leases $ - $ 7,516
Acquisition of contributed property and equipment $ - $ 147,091

The accompanying notes are an integral part of these financial statements
9

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 1 - Organization and operations:

The Unity Care Group (“Unity Care” or the “Organization”) was incorporated on July 30, 1992
as a community-based nonprofit public benefit corporation. The purpose of Unity Care is to
provide educational and social programs designed to enrich the lives of disadvantaged, at-risk
and gang-affiliated youths through group homes, youth outreach and education, and other
services. Unity Care provides quality youth and family programs for the purpose of creating
healthier communities through life-long partnerships.

Unity Care has been classified as a publicly supported, tax-exempt organization under Section
501(c)(3) of the Internal Revenue Code, and is exempt from California franchise taxes under
Revenue and Taxation Code Section 23701(d).

Note 2 - Summary of significant accounting policies:

Basis of accounting - The financial statements have been prepared on the accrual basis of
accounting which recognizes revenue and support when earned and expenses when incurred and,
accordingly, reflect all significant receivables, payables and other liabilities.

Basis of presentation - The Organization reports information regarding its financial position and
operating activities in three classes of net assets:

x Unrestricted net assets - the portion of net assets that is neither temporarily nor
permanently restricted by donor-imposed stipulations. These net assets are intended for
use of management and the Board of Directors for facility maintenance and general
operations. Unrestricted net assets also include those expendable resources that have
been designated for special use by the Board of Directors.

x Temporarily restricted net assets - the portion of net assets whose use is limited by
donor-imposed stipulations that either expire by passage of time or can be fulfilled and
removed by actions of the Organization.

x Permanently restricted net assets - the portion of net assets whose use is limited by
donor-imposed stipulations that neither expire by passage of time nor can be removed by
actions of the Organization. There were no permanently restricted net assets as of June
30, 2016 and 2015.

10

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 2 - Summary of significant accounting policies (continued):

Use of estimates - The preparation of financial statements requires management to make
estimates and assumptions that affect the reported amounts of assets, 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. Significant estimates used in preparing
these financial statements include the allowance for doubtful accounts, the useful lives of
property and equipment, future payment estimates on loans, the allocation of expenses by
function and in-kind contributions. Accordingly, actual results could differ from these estimates
under different assumptions or conditions.

Revenue recognition - The Organization’s programs are supported by government grants and
contracts and by contributions from individuals, corporations and foundations. Grants and
contracts which are exchange transactions (service contracts) are recognized as program service
fees in the period in which the service is provided. These contracts are reported as an increase in
unrestricted revenue if expenditures are incurred in the current period that effectively fulfilled
the conditions of the contract.

Contributions are recognized when the donor makes a pledge that is, in substance, an
unconditional promise to give. Unconditional promises to give are recorded as unrestricted,
temporarily restricted or permanently restricted depending on the nature of donor restrictions and
depending on whether the restrictions are met in the current period. A conditional promise to
give is a promise that depends on the occurrence of a specified future and uncertain event to bind
the promisor. The Organization had a $10,000 matching conditional promise to give at June 30,
2016.

In-kind contributions - Significant donated equipment, facility and other goods are recorded at
their estimated fair market value as of the date of receipt. Contributed services, which require a
specialized skill and which the Organization would have paid for if not donated, are recorded at
the estimated fair market value at the time the services are rendered. The Organization may also
receive donated services that do not require specific expertise but which are nonetheless central
to the Organization's operations; these amounts are not recorded.

Functional expense allocations - The costs of providing the various programs and supporting
services have been summarized on a functional basis in the Statements of Activities and Changes
in Net Assets. Accordingly, specifically identified expenses are charged to the applicable
program. The remaining costs are allocated among the programs and services benefited based on
management estimates.

Cash and cash equivalents - Cash and cash equivalents include demand deposits in banks, money
market funds and liquid asset accounts held in brokerage accounts with a maturity of three
months or less. The carrying amount in the Statements of Financial Position approximates fair
value.

11

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 2 - Summary of significant accounting policies (continued):

Investments - The Organization’s investments are valued using the Fair Value Measurements.
Investments consist primarily of mutual funds. Contributions of investments are recorded at
estimated fair value at the date of donation. Gains and losses that result from market fluctuations
are recognized in the year such fluctuations occur. Realized gains or losses resulting from sales
or maturities are determined by comparison of specific costs of acquisition to proceeds at the
time of disposal. Dividend and interest income are recognized when earned.

Accounts receivable and allowance for doubtful accounts - Accounts receivable consists
primarily of amounts billed for services provided. The Organization provides for probable
uncollectible amounts through a charge to earnings and a credit to a valuation allowance based
on its assessment of the current status of individual accounts. Balances that are still outstanding
after management has used reasonable collection efforts are written off through a charge to the
valuation allowance and a credit to accounts receivable. The valuation allowances were
approximately $56,000 and $58,000 at June 30, 2016 and 2015, respectively. At June 30, 2016
and 2015, approximately $53,000 and $165,000 of the accounts receivable balance was over 90
days past due, respectively.

Prepaid expenses - Prepaid expenses primarily consists of payments made associated with the
Organization’s rent payments, health insurance benefits, liability insurance and annual software
licensing fees. Such prepayments are amortized over the term of the related insurance coverage.

Contributions receivable - use of facility - This amount includes in-kind contributions which
consist of an unconditional promise to give. Such contributions are recorded as revenue when
promised at their net realizable value. Contributions which are expected to be collected after one
year are discounted to their net present value using a reasonable discount rate.

Property, equipment, depreciation and amortization - Property and equipment are recorded at
cost, or if contributed, at the estimated fair market value when donated. If donors stipulate how
long the assets must be used, the contributions are recorded as restricted support. In the absence
of such stipulations, contributions of property and equipment are recorded as unrestricted
support. There were no restrictions placed on property plant and equipment at June 30, 2016 and
2015.

Depreciation and amortization is computed using the straight-line method over estimated useful
lives of the related assets which range from three to seven years for automobiles, furniture and
equipment and ten to twenty years for buildings and improvements. The Organization
capitalizes all property and equipment in excess of $1,000. Expenditures for maintenance and
repairs that do not improve or extend the lives of the respective assets are expensed as incurred.

12

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 2 - Summary of significant accounting policies (continued):

Deposits - Deposits consist of various operating facility rental security deposits.

Long-lived assets - The Organization reviews long-lived assets for impairment whenever events
or changes in circumstances indicate that the carrying amount of any assets may not be
recoverable. No such impairments have been identified to date.

Housing and flexible fund reimbursements - Housing reimbursements represent overpayments
made by various agencies to the Organization for group homes, and other services. Such
overpayments are subject to various repayment schedules agreed upon by the agencies and the
Organization.

Federal awards - Federal awards consist of funds received from the federal government for
specific research projects. Substantially all of the Organization’s federal award revenue is
derived from cost reimbursement grants, which are billed to the grantor after costs have been
incurred. Federal award revenue and unbilled federal awards are recognized to the extent the
related costs are incurred.

Federal awards are subject to review and audit by the grantor agencies in accordance with the
Single Audit Act and Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (“Uniform
Guidance”). Although such audits could result in expenditure disallowances under terms of the
grants, it is believed that any required reimbursement would not be material to the financial
statements at June 30, 2016 and 2015.

Concentration of credit risk - Financial instruments that potentially subject the Organization to
credit risk consist primarily of cash and cash equivalents, receivables and investments. The
Organization maintains cash and cash equivalents with commercial banks and other major
financial institutions. At times, such amounts might exceed Federal Deposit Insurance
Corporation (“FDIC”) limits. It is the Organization’s opinion that it is not exposed to any
significant credit risks.

Concentration of revenue sources - For the years ending June 30, 2016 and 2015, approximately
94% and 96%, respectively, of the Organization’s revenue is derived from grants from Federal,
State and County government agencies.

There were no major donors for the year ended June 30, 2016. For the year ending June 30,
2015, approximately 22% of the Organization’s contributions were received from a single donor.

13

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 2 - Summary of significant accounting policies (continued):

Fair value of financial instruments - Financial instruments included in the Organization’s
Statements of Financial Position as of June 30, 2016 and 2015 include cash and cash equivalents,
investments, receivables, prepaids, accounts payable, accrued expenses and notes payable.
Investments are reflected in the accompanying Statements of Financial Position at their estimated
fair values using methodologies described above. The remaining accounts of these instruments
represent a reasonable estimate of the corresponding fair values due to their short maturities.

Accounting for uncertainty in income taxes - The Organization evaluates its uncertain tax
positions and will recognize a loss contingency when it is probable that a liability has been
incurred as of the date of the financial statements and the amount of the loss can be reasonably
estimated. The amount recognized is subject to estimate and management judgment with respect
to the likely outcome of each uncertain tax position. The amount that is ultimately sustained for
an individual uncertain tax position or for all uncertain tax positions in the aggregate could differ
from the amount recognized. As of June 30, 2016 management did not identify any uncertain tax
positions.

The Organization is subject to potential examination by taxing authorities for income tax returns
filed in the U.S. federal jurisdiction and the State of California. The tax years that remain subject
to potential examination for the U.S. federal jurisdiction is June 30, 2013 and forward. The State
of California tax jurisdiction is subject to potential examination for fiscal tax years June 30, 2012
and forward.

Recent accounting pronouncements - In May 2014, the Financial Accounting Standards Board
(“FASB”) issued Accounting Standard Update (“ASU”) No. 2014-09 “Revenue from Contracts
with Customers (Topic 606)”. The ASU provides guidance over the core principle of
recognizing revenue to depict the transfer of promised goods or services to customers in an
amount that reflects the consideration to which the entity expects to be entitled in exchange for
those goods. ASU No. 2014-09 will supersede the revenue recognition requirements in FASB
Accounting Standard Codification (ASC) 605, "Revenue Recognition", and most industry-
specific guidance throughout the Industry Topics of the FASB ASC. The purpose of the new
standard is to clarify the principles for recognizing revenue and to develop a common revenue
standard for U.S. GAAP and International Financial Reporting Standards (IFRS). In August
2015, the FASB issued ASU No. 2015-14 “Revenue from Contracts with Customers (Topic
606): Deferral of the Effective Date” which will defer the effective date of ASU No. 2014-09 for
all entities by one year. In March 2016, the FASB issued ASU No. 2016-08 “Revenue from
Contracts with Customers (Topic 606): Principal versus Agent Considerations”. The ASU
improves operability and understandability of Topic 606 in principal versus agent considerations.
In April 2016, the FASB issued ASU No. 2016-10 “Revenue from Contracts with Customers
(Topic 606): Identifying Performance Obligations and Licensing”. The ASU expands on Topic
606 with clarification over identifying performance obligations and licensing.

14

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 2 - Summary of significant accounting policies (continued):

Recent accounting pronouncements (continued) - In May 2016, the FASB issued ASU No. 2016-
12 “Revenue from Contracts with Customers (Topic 606): Narrow-Scope Improvements and
Practical Expedients”. The goal of the update is to reduce diversity in practice and cost of
complexity of applying Topic 606. For non-public entities, the effective date will be effective
for annual reporting periods beginning after December 15, 2018 and interim periods within
annual periods beginning after December 15, 2019. Early adoption is permitted under several
options, the earliest for a year beginning after December 15, 2016 and interim periods within that
year. Various retrospective application methods are available. Management has not determined
the impact on the financial statements.

In February 2016, the FASB issued FASB ASU No. 2016-02 “Leases.” The ASU is intended to
increase transparency and comparability between organizations recognizing lease assets and
liabilities by recognizing lease assets and lease liabilities on the balance sheet and increasing the
related disclosures. For non-public entities, the effective date will be effective for annual
reporting periods beginning after December 15, 2019, and interim periods within annual periods
beginning after December 15, 2020. Early application is permitted. Management has not
determined the impact of this pronouncement.

In August 2016, the FASB issued ASU No. 2016-14 “Not-for-Profit Entities: Presentation of
Financial Statements for Not-for-Profit Entities.” The ASU is intended to improve identified
issues about the current financial reporting for Not-for-Profits. This ASU is effective for annual
financial statements issued for fiscal years beginning after December 15, 2017, and for interim
periods within fiscal years beginning after December 15, 2018. Early application is permitted.
Management has not determined the impact of this pronouncement.

Subsequent events - Subsequent events are evaluated through the date of the independent
auditors' report, which is the date the financial statements were available to be issued. See Note
18 for subsequent event disclosures.

15

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 3 - Investments:

The Organization follows the provisions of the Fair Value Measurements and Disclosure topic of
the Financial Accounting Standard Board Accounting Standards Codification. These standards
establish a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure
fair value. This hierarchy consists of three broad levels: Level 1 inputs consist of unadjusted
quoted prices in active markets for identical assets and have the highest priority; Level 2 inputs
consist of observable inputs other than quoted prices for identical assets; and Level 3 inputs have
the lowest priority. The Organization uses appropriate valuation techniques based on the
available inputs to measure the fair value of its investments. When available, the Organization
measures fair value using Level 1 inputs because they generally provide the most reliable
evidence of fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs are not
available.

An investment’s classification within a level in the fair value hierarchy is based on the lowest
level of any input that is significant to the fair value measurement. The Organization’s
assessment of the significance of a particular input to the fair value measurement in its entirety
requires judgment and considers factors specific to the investment. The categorization of the
investment within the hierarchy is based upon the pricing transparency of the investment and
does not necessarily correspond to the Organization’s perceived risk of that investment.

All investments are at quoted prices in active markets for identical assets (Level 1 inputs) as

follows at June 30:

2016 2015

Mutual funds $ 216,464 $ 211,268

The following schedule summarizes the investment income and losses in the Statements of
Activities and Changes in Net Assets for the years ended June 30:

2016 2015

Interest and dividends $ 13,208 $ 13,340
Realized losses
Unrealized gains (losses) (15,491) -

1,780 (12,107)

$ (503) $ 1,233

16

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 4 - Contributions receivable - use of facility:

The Organization entered into a lease agreement with another charitable organization during the
year ended June 30, 2009 for the lease of its administrative facility for $1 per month. The
receivable for the contributed use of the facility reflects the fair value of the use of the facility for
10 years (through 2019). The Organization has recognized contribution revenue and a receivable
for the present value of the promise for use of the facility with the annual maturity of contributed
support receivable recognized as rent expense. The receivable was recorded after discounting
the future cash flows to present value using a discount rate of 2.6%.

The maturities of this receivable are as follows:

Year Ending Amount
June 30, $ 130,875

2017 136,110
2018 69,392
2019 336,377
(6,925)
Total receivable
Less discount for present value 329,452

Present value of future rent (198,577)
receivable $ 130,875

Less non-current portion of
receivable

Current portion of receivable

17

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 5 - Property and equipment:

Property and equipment consists of the following at June 30:

2016 2015

Depreciable assets: 4,567,541
1,310,712
Buildings $ 4,057,152 $
142,483
Leasehold improvements 1,301,442 397,897
146,819
Furniture and fixtures 149,889
97,626
Computer and equipment 412,075 219,171

Office equipment 146,819 6,882,249
(3,259,018)
Office equipment, under capital lease 97,626
3,623,231
Vehicles 196,236
2,837,950
Total depreciable assets 6,361,239
Less accumulated depreciation (3,236,732) 6,461,181

Total depreciable assets, net 3,124,507

Land 2,683,742

$ 5,808,249 $

Depreciation and amortization expense was approximately $402,000 and $360,000 for the years
ended June 30, 2016 and 2015, respectively.

Note 6 - Accrued expenses:

Accrued expenses consist of the following at June 30:

2016 2015

Wages, salaries and related taxes $ 371,208 $ 390,874
Vacation
Interest 288,758 251,929
Resident Financial Aid Savings program
Other accrued expenses 80,050 71,950
Resident Rent Savings program
Deferred rent 76,692 39,013

52,780 87,170

23,134 15,504

- 2,554

$ 892,622 $ 858,994

18

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 7 - Notes payable:

The Organization’s notes payable consist of the following at June 30: 2015
2016 168,150
419,268
Mortgage loan, due in monthly installments of $2,607 including
275,139
4.375% interest through July 8, 2023, secured by real property. $ 150,469 $
277,719
Mortgage loan, due in monthly installments of $2,588 including 409,298
5% interest through January 10, 2018, secured by real property. 263,548 333,263
458,621
Mortgage loan, due in monthly installments of $1,991 including 168,610
interest of 5.25%. Starting September 1, 2013 installments of
$1,675 including interest at 3.25%. Starting September, 1, 2014
installments of $1,622 including interest at 2.875%. Starting
September 1, 2015, installments of $1,639 including interest of
3% through July 31, 2033 secured by real property.

Mortgage loan, due in monthly installments of $2,041 including 266,757
interest at 5.875%. Starting August 1, 2014, monthly installments
of $1,577 including interest of 2.875%. Starting 1, 2015, -
installments of $1,594 including interest of 3% through July 1, 447,419
2034, secured by real property. 150,892

Mortgage loan, due in monthly installments of $2,449 including
5.875% interest. Starting August 1, 2014, monthly installments of
$1,893 including interest of 2.875%. Starting August 1, 2015,
monthly installments of $1,913 including interest of 3% through
July 1, 2034, secured by real property.

Mortgage loan, due in monthly installments of $3,397 including
5% interest. Starting June 5, 2012 , monthly installments of
$2,855 through October 23, 2017, secured by real property.

Mortgage loan, due in monthly installments of $2,072 including
4.375% interest starting August 31, 2013 through July 10, 2023,
secured by real property.

19

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 7 - Notes payable (continued):

2016 2015

Note payable to the County of Santa Clara, 3% simple interest, $ 250,000 $ 250,000
due in March 2036, secured by real property. If property is
profitable, annual payments will be required prior to maturity.
The Organization estimates no payment will be due until 2036.

Note payable to the City of San Jose, 3% interest, due in March 651,429 651,429
2061, secured by real property. If property is profitable, annual
payments will be required prior to maturity. The Organization
estimates no payment will be due until 2061. See Note 9 for
forgiveness of debt.

Note payable to the City of San Jose, 3% interest, due in 666,429 666,429
September 2066, secured by real property. If property is
profitable, annual payments will be required prior to maturity.
The Organization estimates no payment will be due until 2062.
See Note 9 for forgiveness of debt.

Note payable to the County of Santa Clara, 3% simple interest, 20,000 20,000
due in March 2042, secured by real property. No periodic
payments are required.

Automobile loan, due in monthly installments of $354 including 17,453 20,552
5.99% interest through March 19, 2021, secured by the vehicle.

Total notes payable 3,293,694 3,709,180

Less current maturities (83,328) (88,409)

Non-current portion $ 3,210,366 $ 3,620,771

20

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 7 - Notes payable (continued):

The future scheduled principal payments under these notes are as follows:

Year Ending Amount
June 30,
$ 83,328
2017 90,379
2018 86,251
2019 93,097
2020
Thereafter 2,940,639

Total $ 3,293,694

One of the loans requires the Organization to comply with certain covenants. At June 30, 2015,
management is not aware of any violations of the covenant.

Note 8 - Line of credit:

In January 2015, Unity Care entered into a $500,000 line of credit with a bank which expires
January 2017. Borrowings under the agreement bear interest at the bank’s prime rate plus 1.00%
(4.5% at June 30, 2016). The balance due at June 30, 2016 is $300,000. There were draws of
$300,000 and no payments made on the line of credit for the fiscal year June 30, 2016. At June
30, 2016, management is not aware of any violations of the covenant.

Note 9 - Forgivable loans:

Unity Place I

Unity Care owns and operates an apartment complex (Unity Place I) in San Jose in support of the
Transitional Housing Placement Plus Program (“THP-Plus Program”). The THP-Plus Program
offers affordable and stable housing to young adults ages 18-24, while they focus on attending
school, receiving job training, securing sustainable employment, or learning and practicing skills
for independent living.

The acquisition and renovation of Unity Place I was partially financed with loan proceeds from
the City of San Jose (the “City”), Department of Housing in the amount of $1,520,000 during
fiscal year 2006. The loan is non-interest bearing and is collateralized by a deed of trust on the
real property, and a balloon payment of $1,520,000 due in the year 2061. Of the original loan,
$651,429 was funded from Proposition 46 funds and the remaining $868,571 from Housing
Trust Funds.

21

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 9 - Forgivable loans (continued):

Unity Place I (continued)

During the fiscal year ended June 30, 2011, upon further review of the loan, it was determined by
the City that only the Proposition 46 funds portion of the loan, or $651,429, is deemed to be a
repayable loan, and the remaining loan portion of $868,571 is deemed to be a forgivable loan.

Based upon this review, the repayable loan of $651,429 was modified to a loan with 3% simple
interest charged annually, due from program residual receipts. In the event that the annual
residual receipts are not sufficient to pay the full interest in a given year, the City will write-off /
forgive the balance of the interest owed on the loan. Principal and interest outstanding in the
final year shall be due in their entirety at maturity.

Also based upon this review, as long as the Organization does not use the property for an
unauthorized purpose, the remaining loan of $868,571 will be forgiven in its entirety at Maturity.
As a result of this analysis, the amount of $868,571 was recorded as revenues in fiscal year 2011.

Unity Place II

Unity Care owns and operates an apartment complex (“Unity Place II”) in San Jose to house
special needs households with a priority for youth aging out of foster care whose incomes are to
be at or below 30% Area Median Income (“AMI”) or Extremely Low Income (“ELI”).

The acquisition and renovation of Unity Place II was partially financed with loan proceeds from
the City of San Jose, Department of Housing in the amount of $2,125,000 during fiscal year
2007. The loan is non-interest bearing and is collateralized by a deed of trust on the real
property, and a balloon payment of $2,125,000 due in the year 2062. Of the original loan,
$666,429 was funded from Proposition 46 funds, $570,000 from 20% Tax Increment Funds, and
the remaining $888,571 from Housing Trust Funds.

During the fiscal year ended June 30, 2011, upon further review of the loan, it was determined by
the City that only the Proposition 46 funds portion of the loan, or $666,429, is deemed to be a
repayable loan, and the remaining loan portion of $1,458,571 (comprised of the 20% Tax
Increment Funds and Housing Trust Funds) is deemed to be a forgivable loan.

During the fiscal year ended June 30, 2011, $475,000 of previously undrawn loan value was
exercised. Also during the fiscal year ended June 30, 2011, the forgivable loan value was
increased by an additional $200,000, bringing the total forgivable loan value to $1,658,571, and
total principal value to $2,325,000.

22

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 9 - Forgivable loans (continued):

Unity Place II (continued)

Based upon this review, the repayable loan of $666,429 was modified to a loan with 3% simple
interest charged annually, due from program residual receipts. In the event that the annual
residual receipts is not sufficient to pay the full interest in a given year, the City will write-off /
forgive the balance of the interest owed on the loan. Principal and interest outstanding in the
final year shall be due in their entirety at maturity.

Also based upon this review, as long as Unity Care does not use the property for an unauthorized
purpose, the forgivable loan of $1,658,571 will be forgiven in its entirety at maturity. As a result
of this analysis, the amount of $1,658,571 was recorded as revenues in fiscal year 2011.

The total amount of forgivable loans was $2,527,143. Management of the Organization plans to
meet all restrictions associated with the forgivable loans to be able to take advantage of the
forgiveness clause. As a result, the total amount of $2,527,143 was recorded as revenues in
fiscal year 2011.

Note 10 - Fundraising events:
The Organization had the following fundraising events for the years ended June 30:

2016 2015

Special event income $ 17,966 $ 24,136
Revenues
Contribution 127,874 121,485
Special event income, net
145,840 145,621
Special event direct expenses
Special events, net 119,455 117,712

$ 26,385 $ 27,909

Total fundraising expenses for the years ended June 30, 2016 and 2015 are approximately
$487,000 and $661,000, respectively.

23

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 11 - Temporarily restricted net assets and net assets released from restrictions:

The temporarily restricted net asset activity for the years ended June 30, 2016 and 2015 were as

follows:

July 1, 2015 Additions Releases June 30, 2016

Restricted grants $ 24,958 $ 65,500 $ (24,958) $ 65,500
2,015,113 - (159,094) 1,856,019
Forgivable loans - (117,492)
446,945 329,453
Contributed use-of-facility 65,500 $ (301,544) $
2,487,016 $ 2,250,972
Total $

July 1, 2014 Additions Releases June 30, 2015

Restricted grants $ -$ 80,000 $ (55,042) $ 24,958
2,171,273 - (156,160) 2,015,113
Forgivable loans - (109,675)
556,620 446,945
Contributed use-of-facility 80,000 $

Total $ 2,727,893 $ (320,877) $ 2,487,016

Note 12 - Rental income:

The Organization received rental income from leasing apartment buildings, private homes and a
group home. Rental income for the years ended June 30, 2016 and 2015 were approximately
$179,000 and $80,000, respectively, which have been included in rental and other income.
During the year ended June 30, 2014, the Organization updated two of the former group homes
into residential rental homes. Expenses, which include interest and depreciation, of
approximately $94,000 and $93,000 have been netted against rental and other income in the
Statements of Activities and Changes in Net Assets for the years ended June 30, 2016 and 2015.

24

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 13 - Capital leases:

The Organization maintains two capital leases for equipment expiring June 2019. The asset and
liability under the capital leases are recorded at the present value of the minimum lease payments
at a rate of 3.25-3.80%. The assets are depreciated over 5 years.

The present values of future minimum annual obligations under the agreements are as follows:

Year Ending

June 30, Amount

2017 $ 21,472
2018 21,472
2019 5,098

Total payments 48,042
Less amount representing interest (2,109)

Present value of minimum 45,933
lease payments (20,072)

Less current portion

Total non-current portion $ 25,861

Leased assets included in property and equipment is as follows as of June 30:

2016 2015

Office equipment $ 97,626 $ 97,626
Less accumulated depreciation
(55,865) (35,337)
Property and equipment under
capital leases $ 41,761 $ 62,289

Note 14 - In-kind contributions:

During the year ended June 30, 2016, the Organization received in-kind donations of goods, and
food at an estimated fair value of approximately $95,000, and $36,000, respectively. During the
year ended June 30, 2015, the Organization received in-kind donations of goods, food, and
mattresses at an estimated fair value of approximately $92,000, $47,000 and $11,000,
respectively.

25

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 15 - Retirement plans:

403(b) plan - Effective January 1, 2016, the Organization adopted a 403(b) retirement plan
(“403(b) plan”) which covers substantially all employees over age 21 years old who are eligible
under the plan who have been with the Organization at least 6 months and worked 500 hours or
have completed one year of service. The Organization allows for discretionary employee
deferrals through a salary reduction agreement and discretionary employer matching into the
403(b) plan. Contributions totaling approximately $14,000 for the year ended June 30, 2016
were made by the Organization in addition to the elective deferrals made by employees.

401(k) plan - In 2002, the Organization adopted a 401(k) retirement plan (“401(k) plan”)
covering substantially all employees who are regularly scheduled to work at least 32 hours per
week, as defined in the 401(k) plan document. Under the 401(k) plan, eligible employees may
make contributions through a salary reduction agreement. The 401(k) plan also allows for an
employer matching contribution. During the year ended June 30, 2016, the 401(k) plan was
frozen and management has decided to terminate the 401(k) in the subsequent year. Employer
contributions to the 401(k) plan for the years ended June 30, 2016 and 2015 were approximately
$1,000 and $4,000, respectively.

Deferred compensation plan - In July 2014, the Organization established a nonqualified deferred
compensation plan (the “457 Plan”) under section 457(f) of the Internal Revenue Code to assist
in facilitating a split dollar life insurance policy for key employees. As of June 30, 2016 and
2015 there was only one participant in the 457 Plan.

Note 16 - Commitments:

During the year ended June 30, 2016, the Organization entered into a lease for an administrative
office building which will begin November 2016 and expire March 2026. The Organization will
receive two months of free rent, then three months in which rent expense includes only operating
expenses. Beginning in month six of the lease, the Organization will begin paying monthly rent
payments of approximately $31,500 per month which will increase incrementally each year.

The Organization leases office facilities and other group homes and transitional houses. In
addition, the Organization also leases three of its group home facilities from the executive
director and the executive director’s relatives at market rate. All leases are non-cancellable and
expire at various times through December 2018.

Total rent expense for the years ended June 30, 2016 and 2015 was approximately $480,000 and
$471,000, respectively. Total rent expense paid to related parties for the years ended June 30,
2016 and 2015 was approximately $102,000 and $97,000, respectively.

26

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2016

Note 16 - Commitments (continued):

The future annual minimum lease payments under non-cancellable operating leases are as
follows:

Year Ending Amount
June 30,
$ 563,400
2017 538,140
2018 462,300
2019 462,300
2020 462,300
2021
Thereafter 2,658,230

Total $ 5,146,670

Note 17 - Contingencies:

Due to the nature of the Organization’s operations, claims and litigation may periodically arise.
As of June 30, 2016, management has evaluated the status of any potential legal matters and in
its judgment believes there are no items which will have a material effect on the financial
statements.

Note 18 - Subsequent event:

Refinance of real estate - In September 2016, the Organization refinanced a property resulting in
additional borrowings of approximately $650,000. The term loan matures in September 2023
and bears interest at 4.35%.

Letter of intent - The Organization is currently in negotiations with another Organization to
purchase selected assets. No terms have been formally agreed upon as of the date of the audit
report.

Sale of real estate - In January 2017, the Organization sold a building and the related land for
approximately $575,000.

Debt facility - In September 2016, the Organization entered into a debt facility of $250,000 to
finance tenant improvements under a 5 year term loan bearing interest at 5%.

27

SUPPLEMENTARY INFORMATION

28

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT
OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT

AUDITING STANDARDS

To the Board of Directors of
The Unity Care Group
San Jose, California
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 The Unity Care Group (a nonprofit organization, the “Organization”), which
comprise the statements of financial position as of June 30, 2016 and 2015, and the related
statements of activities and changes in net assets, functional expenses and cash flows for the
years then ended, and the related notes to the financial statements, and have issued our report
thereon dated February 10, 2017.
Internal Control over Financial Reporting
In planning and performing our audits of the financial statements, we considered the
Organization’s internal control over financial reporting (internal control) to determine the audit
procedures that are appropriate in the circumstances for the purpose of expressing our opinion on
the financial statements, but not for the purpose of expressing an opinion on the effectiveness of
the Organization’s internal control. Accordingly, we do not express an opinion on the
effectiveness of the Organization’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 audits we
did not identify any deficiencies in internal control that we consider to be material weaknesses.
However, material weaknesses may exist that have not been identified.

999W.TaylorStreet,SuiteASanJose,CA95126www.rlallp.comOffice:408.855.6770Fax:408.855.6774

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL
REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT
OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT

AUDITING STANDARDS (CONTINUED)

To the Board of Directors of
The Unity Care Group
San Jose, California

Compliance and Other Matters

As part of obtaining reasonable assurance about whether the Organization’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 determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our audits, 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.



San Jose, California
February 10, 2017

30

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED

BY UNIFORM GUIDANCE

To the Board of Directors of
The Unity Care Group
San Jose, California

Report on Compliance for Each Major Federal Program

We have audited The Unity Care Group’s (the “Organization”) compliance with the types of
compliance requirements described in the U.S. Office of Management and Budget (OMB)
Compliance Supplement that could have a direct and material effect on each of the
Organization’s major federal programs for the year ended June 30, 2016. The Organization’s
major federal programs are identified in the summary of auditor’s results section of the
accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statues, regulations, and terms and
conditions of its federal awards applicable to its federal programs.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of the Organization’s major
federal programs based on our audit of the types of compliance requirements referred to above.
We conducted our audit of compliance in accordance with auditing standards generally accepted
in the United States of America; the standards applicable to financial audits contained in
Government Auditing Standards, issued by the Comptroller General of the United States; and the
audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative
Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform
Guidance). Those standards and the Uniform Guidance require that we plan and perform the
audit to obtain reasonable assurance about whether noncompliance with the types of compliance
requirements referred to above that could have a direct and material effect on a major federal
program occurred. An audit includes examining, on a test basis, evidence about the
Organization’s compliance with those requirements and performing such other procedures as we
considered necessary in the circumstances.

We believe that our audit provides a reasonable basis for our opinion on compliance for each
major federal program. However, our audit does not provide a legal determination of the
Organization’s compliance.

Opinion on Each Major Federal Program

In our opinion, the Organization complied, in all material respects, with the types of compliance
requirements referred to above that could have a direct and material effect on each of its major
federal programs for the year ended June 30, 2016.

999W.TaylorStreet,SuiteASanJose,CA95126www.rlallp.comOffice:408.855.6770Fax:408.855.6774

INDEPENDENT AUDITORS’ REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL
PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED

BY UNIFORM GUIDANCE (CONTINUED)

To the Board of Directors of
The Unity Care Group
San Jose, California

Report on Internal Control over Compliance

Management of the Organization is responsible for establishing and maintaining effective
internal control over compliance with the types of compliance requirements referred to above. In
planning and performing our audit of compliance, we considered the Organization’s internal
control over compliance with the types of requirements that could have a direct and material
effect on each major federal program to determine the auditing procedures that are appropriate in
the circumstances for the purpose of expressing an opinion on compliance for each major federal
program and to test and report on internal control over compliance in accordance with Uniform
Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal
control over compliance. Accordingly, we do not express an opinion on the effectiveness of the
Organization’s internal control over compliance.

A deficiency in internal control over compliance exists when the design or operation of a control
over compliance does not allow management or employees, in the normal course of performing
their assigned functions, to prevent, or detect and correct, noncompliance with a type of
compliance requirement of a federal program on a timely basis. A material weakness in internal
control over compliance is a deficiency, or combination of deficiencies, in internal control over
compliance, such that there is a reasonable possibility that material noncompliance with a type of
compliance requirement of a federal program will not be prevented, or detected and corrected, on
a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a
combination of deficiencies, in internal control over compliance with a type of compliance
requirement of a federal program that is less severe than a material weakness in internal control
over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in
the first paragraph of this section and was not designed to identify all deficiencies in internal
control over compliance that might be material weaknesses or significant deficiencies. We did
not identify any deficiencies in internal control over compliance that we consider to be material
weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of
our testing of internal control over compliance and the results of that testing based on the
requirements of Uniform Guidance. Accordingly, this report is not suitable for any other
purpose.



San Jose, California
February 10, 2017

32

THE UNITY CARE GROUP

Single Audit Reports
Schedule of Expenditures of Federal Awards

For the Year Ended June 30, 2016

Federal Grantor/Pass-Through Grantor/ Federal Grant Federal
Program or Cluster Title CFDA identifying Program
number Expenditures
number

EXPENDITURES OF FEDERAL AWARDS:

U.S. Department of Health and Human Services:
Passed through Various Counties

Foster Care - Aid to Families with Dependent 93.658 1496.00.01 $1,132,054
Children * 4300011827
17,594
SAPT Prevention SA 02663-SN-43-R 1,149,648

Passed through Santa Clara County Behavioral Health Services 30,949
30,949
Substance Abuse Prevention (DADS) 93.959 $1,180,597

Total U.S. Department of Health & Human Services

U.S. Department of Agriculture: 10.555
Child Nutrition Programs:
Passed through California Department of Education
National School Lunch Program

Total U.S. Department of Agriculture

Total Expenditures of Federal Awards

* Denotes a major program

33

THE UNITY CARE GROUP

Single Audit Reports
Notes to the Schedule of Expenditures of Federal Awards

Year Ended June 30, 2016

Note 1 - Organization and operations:

The Unity Care Group (“Unity Care” or the “Organization”) was incorporated on July 30, 1992
as a community-based nonprofit public benefit corporation. The purpose of Unity Care is to
provide educational and social programs designed to enrich the lives of disadvantaged, at-risk
and gang-affiliated youths through group homes, youth outreach and education, and other
services. Unity Care provides quality youth and family programs for the purpose of creating
healthier communities through life-long partnerships.

Note 2 - Summary of significant accounting policies:

Basis of accounting - Expenditures in the Schedule are reported on the accrual basis of
accounting. Such expenditures are recognized following, as applicable, OMB Circular A-122,
Cost Principles for Non-Profit Organizations, or the cost principles contained in the Uniform
Guidance, wherein certain types of expenditures are not allowable or are limited as to
reimbursement. Negative amounts shown on the Schedule represent adjustments or credits made
in the normal course of business to amounts reported as expenditures in prior years. The
Organization has elected to use the 10-percent de minimis indirect cost rate allowed under the
Uniform Guidance.

The information in the accompanying Schedule of Expenditures of Federal Awards (“SEFA”)
includes the federal grant activity of the Organization under programs of the federal government
for the year ending June 30, 2016. The information in the SEFA is presented in accordance with
the requirements of Title 2 U.S. Code of Federal Regulations (CFR) Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards
(“Uniform Guidance”). Therefore, some amounts presented in the SEFA may differ from
amounts presented in, or used in the preparation of, the basic financial statements. Although the
Organization is required to match certain grants, as defined by the grants, no such matching has
been included as expenditures in the SEFA.

34

THE UNITY CARE GROUP

Single Audit Reports
Schedule of Findings and Questioned Costs

Year Ended June 30, 2016

A. SUMMARY OF AUDIT RESULTS

1. The auditors' report expresses an unqualified opinion on the financial statements of The
Unity Care Group.

2. No significant deficiencies relating to the audit of the financial statements are reported
in the basic financial statements.

3. No instances of noncompliance material to the financial statements of the Organization
were disclosed during the audit.

4. No significant deficiencies relating to the audit of the major federal award programs are
reported in the financial statements.

5. The auditors' report on compliance for the major federal award programs for the
Organization expresses an unqualified opinion.

6. Audit findings relative to the major federal award programs for the Organization is
reported in Part C of this Schedule below.

7. The programs tested as major programs include:

Major program CDFA Expenditures

Foster Care - Aid to Families with 93.658 1,132,054
Dependent Children

Total major program expenditures 1,132,054

Total federal awards $ 1,180,597

Percent of total Federal awards 96%
expenditures tested

8. The threshold for distinguishing Types A and B programs was $750,000.
9. The Organization was determined to be a low risk auditee.

35

THE UNITY CARE GROUP

Single Audit Reports
Schedule of Findings and Questioned Costs (Continued)

Year Ended June 30, 2016
B. FINDINGS - FINANCIAL STATEMENTS AUDIT

Current Year Findings
No financial statements audit findings noted in the current year.
Prior Year Findings
No financial statements audit findings noted in the prior year.
C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM
AUDIT
Current Year Findings
There are no current year findings that were considered material instances of noncompliance
in accordance with Title 2 U.S. Code of Federal Regulations Part 200, Uniform
Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards.
Prior Year Findings
No findings or questioned costs were noted on the Organization’s major programs in the
prior year.

36


Click to View FlipBook Version
Previous Book
2014 Audited Financial Statement
Next Book
Annual Report 11-12