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Unity Care's audited financial statement for the 2013-2014 fiscal year.

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Published by Unity Care, 2018-01-22 18:41:45

2014 Audited Financial Statement

Unity Care's audited financial statement for the 2013-2014 fiscal year.

Financial Statements
and Supplementary Information

June 30, 2014 and 2013

Together with
Independent Auditors’ Report

and Single Audit Reports

THE UNITY CARE GROUP

Table of Contents
June 30, 2014

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 - 26
Statements of Functional Expenses 27
28 - 29
Statements of Cash Flows
30 - 31
Notes to Financial Statements
32
SUPPLEMENTARY INFORMATION 33
34 - 35
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 Program and on
Internal Control over Compliance Required by OMB Circular A-133

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, 2014 and 2013, 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.

226 Airport Parkway, Suite 350 San Jose, CA 95110                             www.rlallp.com                                 Office: 408.855.6770  Fax: 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, 2014 and 2013, 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 the Office
of Management and Budget Circular A-133, Audits of States, Local Governments, and Non-
Profit Organizations, 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
November 18, 2015, 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
November 18, 2015

2

THE UNITY CARE GROUP

Statements of Financial Position

June 30,

2014 2013

ASSETS $ 1,225,254 $ 2,453,086
Current assets: 216,666 202,885

Cash and cash equivalents 1,653,394 1,104,637
Investments 44,081 34,668
Accounts receivable, net 121,005 116,348
Prepaid expenses
Contributions receivable - use of facility, net

Total current assets 3,260,400 3,911,624

Property and equipment, net 6,494,969 5,611,523

Non-current assets: 435,618 542,514
Contributions receivable - use of facility, net 31,850 46,641
Deposits

Total assets $ 10,222,837 $ 10,112,302

LIABILITIES AND NET ASSETS

Current liabilities: $ 135,510 $ 89,745
Accounts payable
Accrued expenses 734,316 678,516
Housing and flexible fund reimbursements
Capital leases payable 126,912 60,069
Notes payable
Reimbursement payable to HUD 17,308 15,994

83,777 60,634

- 149,919

Total current liabilities 1,097,823 1,054,877

Non-current liabilities: 67,775 16,437
Capital leases payable 3,692,956 3,591,988
Notes payable

Total non-current liabilities 3,760,731 3,608,425

Total liabilities 4,858,554 4,663,302

Commitments

Net assets: 2,636,390 1,663,214
Unrestricted 2,727,893 3,785,786
Temporarily restricted

Total net assets 5,364,283 5,449,000

Total liabilities and net assets $ 10,222,837 $ 10,112,302

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

THE UNITY CARE GROUP

Statement of Activities and Changes in Net Assets
For the Year Ended June 30, 2014

Unrestricted Temporarily Total
Restricted
10,192,342
Support and revenues: $ 10,192,342 $ -$ 218,644
Program service fees 144,941
In-kind contributions 218,644 - 17,118
Contributions 22,724
Rental and other income, net 144,941 - 2,388
Investment income -
Special event, net 17,118 -
Net assets released from restrictions 10,598,157
22,724 -
Total support and revenues 9,257,826
2,388 -
Expenses: 1,036,822
Program expenses 1,057,893 (1,057,893) 388,226

Supporting services: 11,656,050 (1,057,893) 1,425,048
General and administrative 10,682,874
Fundraising 9,257,826 -
(84,717)
Total supporting services 1,036,822 - 5,449,000
388,226 - 5,364,283
Total expenses
1,425,048 -
Change in net assets
10,682,874 -
Net assets, beginning of year
973,176 (1,057,893)
Net assets, end of year
1,663,214 3,785,786

$ 2,636,390 $ 2,727,893 $

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

THE UNITY CARE GROUP

Statements of Activities and Changes in Net Assets
For the Year Ended June 30, 2013

Unrestricted Temporarily Total
Restricted
9,583,503
Support and revenues: $ 9,583,503 $ -$ 933,427
Program service fees 133,427 800,000 258,342
Contributions 258,342 59,725
In-kind contributions 59,725 - 52,020
Special event, net 52,020 - 12,170
Rental and other income, net 12,170 - -
Investment income 171,958 -
Net assets released from restrictions (171,958)

Total support and revenues 10,271,145 628,042 10,899,187

Expenses: 8,524,705 - 8,524,705
Program expenses

Supporting services: 1,066,513 - 1,066,513
General and administrative 378,500 - 378,500
Fundraising

Total supporting services 1,445,013 - 1,445,013

Total expenses 9,969,718 - 9,969,718

Change in net assets 301,427 628,042 929,469

Net assets, beginning of year 1,361,787 3,157,744 4,519,531

Net assets, end of year $ 1,663,214 $ 3,785,786 $ 5,449,000

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

THE UNITY CARE G

Statement of Functional
For the Year Ended June

Program Services

Community

M ental and

Residential Health Develop ment
Services
Services Services
$ 1,618,365 $
Salaries and related expenses: 576,742 2,829,181 $ 764,467 $
Salaries 667,071 171,844
Payroll taxes and employee benefits 2,195,107
3,496,252 936,311
Total salaries and related expenses
409,090 57,853 87,254
Direct program expenses: 43,081 124,701 22,624
Groceries, household and clothing 140,427
Outings, sports and educational 315 19
Rental assistance 592,598
182,869 109,897
Total direct program expenses 51,520
120,348 184,823 75,353
Professional and contract fees 156,131 191,163 9,441
Occup ancy 125,105 1,704
Depreciation and amortization 17,727 190,772
Travel, meals and entertainment 98,374 81,286 46,837
Repairs and maintenance 27,151 81,168 19,271
Office and computer supplies 58,034 63,239 17,419
Telephone and utilities 59,508 39,672
Interest 4,444
Insurance - - -
Auditing and accounting - - -
Events and training 3,901 13,045 -
Banking and related 1,788
Advertising 599 2,246 2,551

Total expenses $ 3,382,786 $ 4,651,640 $ 172

1,223,400 $

The accompanying notes are an integral part
6

CARE GROUP

nctional Expenses
ded June 30, 2014

Supporting Services

unity Total General and Fundraising Total Total
d Administrative Functional
ment Exp enses
ces
5,212,013 $ 577,674 $ 163,914 $ 741,588 $ 5,953,601
4,467 $ 1,415,657 116,011 36,373 152,384 1,568,041
1,844
6,627,670 693,685 200,287 893,972 7,521,642
6,311

7,254 554,197 - - - 554,197
2,624 190,406 - - - 190,406
140,761 - - - 140,761
19
885,364 - - - 885,364
9,897
311,696 73,682 122,442 196,124 507,820
5,353 320,952 59,864 40,428 100,292 421,244
9,441 282,940 - 291,662
1,704 255,336 8,722 1,869 8,722 261,136
6,837 198,931 3,931 1,416 5,800 202,415
9,271 125,738 2,068 7,184 3,484 181,439
7,419 125,717 48,517 - 55,701 131,164
4,444 99,180 5,447 - 5,447 100,255
1,075 - 1,075 74,626
- - 74,626 74,626 42,428
- - 42,428 10,982 42,428 35,336
- 19,497 4,857 416 15,839 17,129
2,551 1,788 14,925 15,341
3,017 2,995 3,202 6,197 9,214
172
9,257,826 $ 1,036,822 $ 388,226 $ 1,425,048 $ 10,682,874
3,400 $

gral part of these financial statements
6

THE UNITY CARE G

Statement of Functional
For the Year Ended June

Program Services

Community

M ental and

Residential Health Develop ment
Services
Services Services

Salaries and related expenses: $ 1,517,614 $ 2,433,468 $ 688,879 $
Salaries 157,332
Payroll taxes and employee benefits 558,069 626,063
846,211
Total salaries and related expenses 2,075,683 3,059,531

Direct program expenses: 397,065 37,703 63,686
Groceries, household and clothing 58,815 115,281 304
Outings, sports and educational 81,758 -
Rental assistance -

Total direct program expenses 537,638 152,984 63,990

Professional and contract fees 79,645 179,306 24,179
Occup ancy 131,039 176,214 2,760
Depreciation and amortization 236,093 72,395 1,824
Travel, meals and entertainment 203,143 57,853
Repairs and maintenance 8,450 72,585 1,469
Office and computer supplies 130,772 90,834 13,467
Telephone and utilities 33,586 54,968 3,234
Interest 71,883
Insurance 116,516 7,311 -
Events and training - -
Auditing and accounting - 419
Advertising 4,040 10,324 -
Banking and related - 173
- -
Total expenses 1,227 2,959
-
-

$ 3,426,572 $ 4,082,554 $ 1,015,579 $

The accompanying notes are an integral part
7

CARE GROUP

nctional Expenses
ded June 30, 2013

Supporting Services

unity Total General and Fundraising Total Total
d Administrative Functional
p ment Exp enses
ices

88,879 $ 4,639,961 $ 530,661 $ 221,613 $ 752,274 $ 5,392,235
57,332 1,341,464 117,425 50,333 167,758 1,509,222

46,211 5,981,425 648,086 271,946 920,032 6,901,457

63,686 498,454 - - - 498,454
304 174,400 - - - 174,400
- - - - 81,758
81,758
63,990 - - - 754,612
754,612
24,179 176,402 51,474 227,876 511,006
2,760 283,130 62,269 35,072 97,341 407,354
1,824 310,013 317,859
57,853 310,312 7,547 - 7,547 276,687
1,469 269,446 5,541 1,700 7,241 207,402
13,467 204,826 1,963 2,576 193,549
3,234 137,887 45,354 613 55,662 136,267
130,085 5,585 10,308 6,182 130,556
- 123,827 6,729 6,729
- 60,671 597 60,671 60,671
419 - 6,105 - 8,388 23,171
- 14,783 19,941 - 19,941 19,941
173 6,917 11,259 15,618
- - 13,403 2,283 13,568 13,568
4,359 -
15,579 $ 1,066,513 $ 1,445,013 $ 9,969,718
- 4,342
165
8,524,705 $
378,500 $

gral part of these financial statements
7

THE UNITY CARE GROUP

Statements of Cash Flows

For the Year Ended

June 30,

2014 2013

Cash flows from operating activities:

Change in net assets $ (84,717) $ 129,469

Adjustments to reconcile change in net assets to net cash

provided by (used in) operating activities:

Depreciation and amortization 325,663 317,859

Change in allowance for doubtful accounts (537,516) 362,516

Unrealized gains on investments (7,224) (1,663)

Loss on disposal of property and equipment (5,042) -

In-kind asset donations 52,338 (62,663)

Contributions receivable - use of facility, net 102,239 95,176

Changes in operating assets and liabilities:

Accounts receivable (11,241) 70,843

Prepaid expenses (9,413) (6,624)

Deposits 14,791 (25,041)

Accounts payable 45,765 38,247

Accrued expenses 55,800 82,634

Housing and flexible fund reimbursements 66,843 26,210

Reimbursement payable to HUD (149,919) (175,000)

Net cash provided (used) by operating activities (141,633) 851,963

Cash flows from investing activities: 81,156 -
Proceeds from sale of investments (87,713) (37,848)
Acquisition of investments (1,187,074) (65,684)
Acquisition of property and equipment

Net cash used in investing activities (1,193,631) (103,532)

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

THE UNITY CARE GROUP

Statements of Cash Flows (continued)
June 30, 2014

For the Year Ended

June 30,

2014 2013

Cash flows from financing activities: $ - $ 800,000
Contribution restricted for purchase of building
Repayment of capital leases payable (16,679) (14,758)
Borrowing on notes payable
Repayment of notes payable 200,000 -

(75,889) (46,300)

Net cash provided by financing activities 107,432 738,942

Net change in cash and cash equivalents (1,227,832) 1,487,373

Cash and cash equivalents at beginning of year 2,453,086 965,713

Cash and cash equivalents at end of year $ 1,225,254 $ 2,453,086

Supplemental disclosure of cash flow information

Cash paid during the year for interest $ 124,660 $ 122,456

Supplemental disclosure of non-cash investing and financing information

Acquisition of property and equipment under capital leases $ 99,082 $ -
52,338 $ 62,663
Acquisition of contributed property and equipment $

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

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

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:

 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.

 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.

 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, 2014 and 2013.

10

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

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. Actual results could differ from these estimates under
different 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. There were no conditional promises to give at June 30, 2014 and 2013.

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, 2014

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 $30,000 and $588,000 at June 30, 2014 and 2013, respectively. At June 30, 2014
and 2013, approximately $97,000 and $82,000 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, 2014 and
2013.

Depreciation and amortization is computed using the straight-line method over estimated useful
lives of the related assets which range from five 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, 2014

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 Office of Management and Budget (“OMB”) Circular A-133, Audits of
States, Local Governments, and Non-Profit Organizations (“A-133 audit”). 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, 2014 and
2013.

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, 2014 and 2013, approximately
95% and 87%, respectively, of the Organization’s revenue is derived from grants from Federal,
State and County government agencies.

For the years ending June 30, 2014 and 2013, approximately 18% and 71%, respectively, of the
Organization’s contributions were received from a single donor.

13

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

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, 2014 and 2013 include cash and cash equivalents,
receivables, investments, prepaids, accounts payable and 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, 2014 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, 2012 and forward. The State
of California tax jurisdiction is subject to potential examination for fiscal tax years June 30, 2011
and forward.

Change of accounting estimate - Management has determined a change in the functional expense
allocation based on their best estimate between Residential Services and Mental Health Services
program expenses. This will have no affect on net assets going forward or retroactively for the
year end June 30, 2013. The Statement of Functional Expenses for the year end June 30, 2013
included in these financial statement have been updated to reflect this new accounting estimate.

Additionally, certain 2013 balances have been reclassified to conform to the 2014 financial
statement presentation. These reclassifications have no effect on previously reported change in
net assets.

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 and
determined that no material subsequent events require an estimate to be recorded or disclosed as
of June 30, 2014.

14

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

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:

2014 2013

Mutual funds $ 216,666 $ 202,885

The following schedule summarizes the investment income and losses in the statement of
activities as of June 30:

Interest and dividends $ 2014 2013
Realized gains $
Unrealized gain on investments 13,311 $ 10,537
2,189 -
7,224
1,633
22,724 $
12,170

15

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

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, $ 121,001
125,841
2015 130,875
2016 136,110
2017 69,392
2018 583,219
Thereafter (26,596)

Total receivable 556,623
Less discount for present value
(435,618)
Present value of future rent
receivable 121,005

Less non-current portion of
receivable

Current portion of receivable

16

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 5 - Property and equipment:

Property and equipment consists of the following at June 30:

2014 2013

Depreciable assets: 4,261,259
1,184,698
Buildings $ 4,544,243 $
128,291
Leasehold improvements 1,310,712 143,104

Furniture and fixtures 128,291 82,731
63,577
Computer and equipment 237,960 70,926
268,756
Computer and equipment, under capital lease -
6,203,342
Office equipment 63,577 (2,759,589)

Office equipment, under capital lease 99,083 3,443,753

Vehicles 172,087 2,167,770

Total depreciable assets 6,555,953 5,611,523
Less accumulated depreciation (2,898,934)

Total depreciable assets, net 3,657,019

Land 2,837,950

Property and equipment, net $ 6,494,969 $

Depreciation and amortization expense was approximately $326,000 and $318,000 for the years
ended June 30, 2014 and 2013, respectively.

Note 6 - Accrued expenses:

Accrued expenses consist of the following at June 30:

2014 2013

Wages, salaries and related taxes $ 264,790 $ 233,560
Vacation
Interest 213,792 178,351
Deferred rent
Other accrued expenses 63,250 55,100

Total accrued expenses 21,598 34,468

170,886 177,037

$ 734,316 $ 678,516

17

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 7 - Notes payable:

The Organization’s notes payable consisted of the following at June 30: 2013
2014 -

Mortgage loan, due in monthly installments of $ 185,084 $ 437,866
$2,607 including 4.375% interest through 428,803
February 8, 2023, secured by real property. 296,687
295,556
Mortgage loan, due in monthly installments of
$2,588 including 5% interest through January 1, 354,667
2018, secured by real property. 479,511
200,477
Mortgage loan, due in monthly installments of 286,439
$1,991 including 5.250% interest through August
1, 2013. Starting September 1, 2013 installments
of $1,675 including interest at 3.250% through
August 1, 2014. Starting September, 1, 2014
installments of $1,622 including interest at 2.875%
through July 31, 2033 secured by real property.

Mortgage loan, due in monthly installments of 288,235
$2,041 including interest at 5.875%. Starting
September 1, 2014, monthly installments of
$1,577 including interest of 2.875% through July
1, 2034, secured by real property.

Mortgage loan, due in monthly installments of 345,882
$2,449 including 5.875%. Starting September 1,
2014 installments of $1,893 including interest of
2.875% through July 1, 2034, secured by real
property.

Mortgage loan, due in monthly installments of 469,330
$3,397 including 5% interest through October 23,
2017, secured by real property.

Mortgage loan, due in monthly installments of $ 185,102 $
$2,072 including 4.375% starting August 31,
2013 through July 10, 2023, secured by real
property.

18

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 7 - Notes payable (continued):

2014 2013

Note payable to the County of Santa Clara, 3% $ 250,000 $ 250,000
interest, 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, 651,429 651,429
due in March 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, 666,429 666,429
due in September 2066, secured by real property.
If property is profitable, annual payments will be 20,000 20,000
required prior to maturity. The Organization
estimates no payment will be due until 2066. See 3,776,733 3,652,622
Note 9 for forgiveness of debt.
(83,777) (60,634)
Note payable to the County of Santa Clara, 3%
simple interest, due in March 2042, secured by $ 3,692,956 $ 3,591,988
real property. No periodic payments are
required.

Total notes payable

Less current maturities

Non-current portion

19

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 7 - Notes payable (continued):

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

Year Ending Amount
June 30,

2015 $ 83,777

2016 88,409

2017 91,952

2018 94,547

2019 91,337

Thereafter 3,326,711

Total $ 3,776,733

One of the loans requires the Organization to comply with certain covenants. At June 30, 2014,
management is not aware of any violations of the covenant.

Note 8 - Line of credit:

In December 2012, Unity Care entered into a $500,000 line of credit with a bank which expires
November 2014. Borrowings under the agreement bear interest at the bank’s prime rate plus
1.00% (4.25% at June 30, 2014). There was no balance due on the line of credit at June 30,
2014 and there were no draws or payments on the line of credit during the June 30, 2014 year
end. The agreement requires the Organization to comply with certain covenants. At June 30,
2014, 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.

20

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

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,
$666,428 was funded from Proposition 46 funds, $570,000 from 20% Tax Increment Funds, and
the remaining $888,572 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 $666,428, is deemed to be a
repayable loan, and the remaining loan portion of $1,458,572 (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 $1,658,572, and
total principal value to $2,325,000.

21

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 9 - Forgivable loans (continued):

Unity Place II (continued)

Based upon this review, the repayable loan of $666,428 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 $1,658,572 will be forgiven in its entirety at maturity. As a result
of this analysis, the amount of $1,658,572 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 - Reimbursement payable to HUD:

The Organization was audited by the U.S. Department of Housing and Urban Development
(HUD) in October 2007 for grants received in the years 2000 through 2007. HUD’s audit
resulted in a repayment demand of approximately $680,000 for disallowed expenses. The
Organization vigorously contested the claim.

During the year ended June 30, 2010, the Organization settled the case and agreed on installment
payments to repay the full obligation over four years. The Organization is required to fund the
obligation from sources that excludes federal and restricted funds. Management believes that by
controlling expenses, fundraising, and selling property, they can satisfy the demand.

During the year ended June 30, 2012, the Organization and HUD amended and revised the
settlement agreement as to payment dates and amounts. (All other provisions of the original
settlement agreement remain in effect). Specifically, Installment Payment 3 due in year ended
2012 was reduced from $300,000 to $150,000; Installment Payment 4, due in year ended 2013,
was increased from $174,919 to $175,000; and Installment Payment 5 was added in the amount
of $149,919 for year ended 2014.

During the year ended June 30, 2014, approximately $28,000 of the balance was waived as the
Organization was able to prove that the amount was earned. The Organization paid the
remaining balance in full.

22

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 11 - Fundraising events:

The Organization had the following fundraising events for the years ended June 30:

2014 2013

Special event income $ 24,652 $ 18,591
Revenues 101,672 114,518
Contribution
126,324 133,109
Special event income, net

Special event direct expenses $ 123,936 73,384
Special events, net 2,388 $ 59,725

Total fundraising expenses for the years ended June 30, 2014 and 2013 are approximately
$512,000 and $451,000, respectively.

Note 12 - Temporarily restricted net assets and net assets released from restrictions:

The temporarily restricted net asset activity for the years ended June 30, 2014 and 2013 were as

follows:

July 1, 2012 Additions Release June 30, 2013

Housing grant $ 800,000 $ - $ (800,000) $ -
2,326,925 - (155,652) 2,171,273
Forgivable loans - (102,241)
658,861 556,620
Contributed use-of-facility - $ (1,057,893) $
3,785,786 $ 2,727,893
Total $

July 1, 2011 Additions Release June 30, 2012

Housing grant $ -$ 800,000 $ -$ 800,000
2,403,707 - (76,782) 2,326,925
Forgivable loans - (95,176)
754,037 658,861
Contributed use-of-facility

Total $ 3,157,744 $ 800,000 $ (171,958) $ 3,785,786

Note 13 - 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, 2014 and 2013 were approximately
$103,000 and $51,000, respectively, which have been included in 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 $93,000 have
been netted against rental income in the Statements of Activities and Changes in Net Assets.

23

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 14 - Capital leases:

The Organization entered into a new lease during the year end June 30, 2014, for equipment
expiring through September 2018. The asset and liability under the capital lease is recorded at
the present value of the minimum lease payments. The asset is depreciated over 5 years at an
interest rate of 3.25%.

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

Year Ending

June 30, Amount

2015 $ 19,817
2016 19,817
2017 19,817
2018 19,817
2019 12,437

Total payments 91,705
Less amount representing interest (6,622)

Present value of minimum 85,083
lease payments (17,308)

Less current portion

Total non-current portion $ 67,775

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

Office equipment $ 2014 2013
Computers and networking $ 99,083 $ 70,926

equipment - 82,731
Less accumulated depreciation (16,514) (126,582)

Property and equipment under 82,569 $ 27,075
capital leases

24

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 15 - In-kind contributions:

During the years ended June 30, 2014 and 2013, the Organization received in-kind donations of
goods, home renovation services, food, mattresses, and other items. The estimated fair value of
these donations totaled approximately $49,000, $52,000, $65,000, $33,000, and $19,000,
respectively, for the year ended June 30, 2014. During the year ended June 30, 2013, the
Organization received in-kind donations estimated at fair value of approximately $80,000,
$66,000, $52,000, $32,000, and $28,000, respectively. These donations were used in providing
program services to youth in the community and expended during the year with the exception of
the value of home renovation services, which the Organization capitalized as building
improvements.

Note 16 - Retirement plans:

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 years ended June 30, 2014 and 2013, the
Organization matched up to $500 to participating employees. Employer contributions to the
401(k) plan for the years ended June 30, 2014 and 2013 were approximately $5,000 and $6,000,
respectively.

Unqualified retirement plan - The Organization has an unqualified retirement plan (“retirement
plan”) covering key employees. During the years ended June 30, 2014 and 2013, no
contributions were made to the retirement plan.

Note 17 - Commitments:

The Organization leases three of its group home facilities from the executive director and the
executive director’s relatives. In addition, the Organization also leases office facilities and other
group homes and transitional houses. All leases are non-cancellable and expire at various times
through December 2018. One of the leases has monthly payments which increase approximately
$300 each year. The Organization has recorded deferred rent which is part of accrued expenses.

25

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2014

Note 17 - Commitments (continued):

The future annual minimum lease payments under noncancellable operating leases are as

follows:

Year Ending

June 30, Amount

2015 $ 340,678
2016 109,378
2017 35,678
2018 17,839

Total $ 503,573

Total rent expense for the years ended June 30, 2014 and 2013 was approximately $405,000 and
$382,000, respectively. Total rent expense paid to related parties for the years ended June 30,
2014 and 2013 was approximately $96,000 and $95,000, respectively.

26

SUPPLEMENTARY INFORMATION

27

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

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 (the “Organization”), a nonprofit organization, which
comprise the statement of financial position as of June 30, 2014, and the related statements of
activities, and cash flows for the year then ended, and the related notes to the financial
statements, and have issued our report thereon dated November 18, 2014.

Internal Control over Financial Reporting

In planning and performing our audit 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 audit 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.

226 Airport Parkway, Suite 350 San Jose, CA 95110                www.rlallp.com                 Office:  408.855.6770   Fax: 408.855.6774 

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 (CONTINUED)
To the Board of Directors of
The Unity Care Group
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 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.

San Jose, California
November 18, 2014

29

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

BY OMB CIRCULAR A-133

To the Board of Directors of
The Unity Care Group

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 OMB Circular A-133 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, 2014. 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 the requirements of laws, regulations, contracts,
and grants applicable to its federal programs.

Auditor’s 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
OMB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations.
Those standards and OMB Circular A-133 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, 2014.

226 Airport Parkway, Suite 350 San Jose, CA 95110                www.rlallp.com                 Office:  408.855.6770   Fax: 408.855.6774 

30

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

CIRCULAR A-133 (CONTINUED)

To the Board of Directors of
The Unity Care Group

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 OMB
Circular A-133, 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 OMB Circular A-133. Accordingly, this report is not suitable for any other
purpose.

San Jose, California
November 18, 2014

31

THE UNITY CARE GROUP

Single Audit Reports
Schedule of Expenditures of Federal Awards

For the Year Ended June 30, 2014

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

EXPENDITURES OF FEDERAL AWARDS:

Pass - Through Programs

U.S. Department of Health and Human Services: 93.658 * N/A $1,084,746
Passed through Various Counties

Foster Care - Aid to Families with Dependent
Children

U.S. Department of Agriculture 10.555 N/A 25,869
Passed through California Department of Education $ 1,110,615
National School Lunch Program

Total Expenditures of Federal Awards

* Denotes a major program
The Organization had no direct programs

32

THE UNITY CARE GROUP

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

Year Ended June 30, 2014
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 - 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.
The information in the accompanying Schedule of Expenditures of Federal Awards (“SEFA”)
include federal grant and loan activities of the Organization and is presented in accordance with
the requirements of OMB Circular A-133, Audits of States, Local Government, and Non-Profit
Organizations. Therefore, some amounts presented in this schedule may differ from amounts
presented in, or used in the preparation of, the financial statements.

33

THE UNITY CARE GROUP

Single Audit Reports
Schedule of Findings and Questioned Costs

Year Ended June 30, 2014

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 Expe nditure s

Foster Care - Aid to Families with 93.658 1,084,746
Dependent Children
$ 1,084,746
Total Major program expenditures
$ 1,110,615
Total Federal awards
98%
Percent of total Federal awards
expenditures tested

8. The threshold for distinguishing Types A and B programs was $300,000.
9. The Organization was determined to be a low risk auditee.

34

THE UNITY CARE GROUP

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

Year Ended June 30, 2014
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 current year.
C. FINDINGS AND QUESTIONED COSTS - MAJOR FEDERAL AWARD PROGRAM
AUDIT
Current Year Findings
No findings or questioned costs were noted on the Organization’s major programs in the
current year.
Prior Year Findings
No findings or questioned costs were noted on the Organization’s major programs in the
prior year.

35


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