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Unity Care's audited financial statement for the 2014-2015 fiscal year.

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Published by Unity Care, 2018-01-22 18:37:50

2015 Audited Financial Statement

Unity Care's audited financial statement for the 2014-2015 fiscal year.

Financial Statements
and Supplementary Information

June 30, 2015 and 2014

Together with
Independent Auditors’ Report

and Single Audit Reports

THE UNITY CARE GROUP

Table of Contents
June 30, 2015

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, 2015 and 2014, 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.

226AirportParkway,Suite350SanJose,CA95110www.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, 2015 and 2014, 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
October 9, 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
October 9, 2015

2

THE UNITY CARE GROUP

Statements of Financial Position

June 30,

2015 2014

ASSETS

Current assets: $ 863,218 $ 1,225,254
Cash and cash equivalents
Investments 211,268 216,666
Accounts receivable, net
Prepaid expenses 2,425,374 1,653,394
Contributions receivable - use of facility, net
136,636 44,081

125,841 121,005

Total current assets 3,762,337 3,260,400

Property and equipment, net 6,461,181 6,494,969

Non-current assets: 321,103 435,618
Contributions receivable - use of facility, net 27,040 31,850
Deposits 30,142
Cash surrender value of life insurance -

Total assets $ 10,601,803 $ 10,222,837

LIABILITIES AND NET ASSETS

Current liabilities: $ 84,889 $ 135,510
Accounts payable
Accrued expenses 858,994 734,316
Housing and flexible fund reimbursements
Capital leases payable 345,022 126,912
Notes payable
19,332 17,308

88,409 83,777

Total current liabilities 1,396,646 1,097,823

Non-current liabilities: 45,932 67,775
Capital leases payable 3,620,771 3,692,956
Notes payable
Agency fund liability 9,880 -
Deferred compensation 30,142 -

Total non-current liabilities 3,706,725 3,760,731

Total liabilities 5,103,371 4,858,554

Commitments and contingencies

Net assets: 3,011,416 2,636,390
Unrestricted 2,487,016 2,727,893
Temporarily restricted

Total net assets 5,498,432 5,364,283

Total liabilities and net assets $ 10,601,803 $ 10,222,837

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, 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 13,034,881
13,275,758 (240,877)
Total support and revenues 10,937,774
10,937,774 -
Expenses: 1,427,285
Program expenses 1,427,285 - 535,673
535,673 -
Supporting services: - 1,962,958
General and administrative 1,962,958 - 12,900,732
Fundraising 12,900,732 (240,877)
2,727,893 134,149
Total supporting services 375,026 2,487,016 $ 5,364,283
2,636,390 5,498,432
Total expenses $ 3,011,416 $

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

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 218,644 - 144,941
In-kind contributions 144,941 - 17,118
Contributions 17,118 - 22,724
Rental and other income, net 22,724 - 2,388
Investment income 2,388 - -
Special event, net (1,057,893)
Net assets released from restrictions 1,057,893 10,598,157

Total support and revenues 11,656,050 (1,057,893) 9,257,826

Expenses: 9,257,826 - 1,036,822
Program expenses 388,226
1,036,822 -
Supporting services: 388,226 - 1,425,048
General and administrative -
Fundraising 1,425,048 10,682,874

Total supporting services (84,717)

Total expenses 10,682,874 - 5,449,000

Change in net assets 973,176 (1,057,893) 5,364,283

Net assets, beginning of year 1,663,214 3,785,786

Net assets, end of year $ 2,636,390 $ 2,727,893 $

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

THE UNITY CARE GROUP

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

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

THE UNITY CARE GROUP

Statement of Functional Expenses
For the Year Ended June 30, 2014

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
$ 1,618,365 $
Salaries and related expenses: 576,742 2,829,181 $ 764,467 $ 5,212,013 $ 577,674 $ 163,914 $ 741,588 $ 5,953,602
Salaries 667,071 171,844 1,415,657 116,011 36,373 152,384 1,568,044
Payroll taxes and employee benefits 2,195,107
3,496,252 936,311 6,627,670 693,685 200,287 893,972 7,521,646
Total salaries and related expenses
409,090 57,853 87,254 554,197 - - - 554,174
Direct program expenses: 43,081 124,701 22,624 190,406 - - - 190,409
Groceries, household and clothing 140,761 - - - 140,761
Outings, sports and educational 140,427 315 19
Rental assistance - - 885,364
592,598 182,869 109,897 885,364 -
Total direct program expenses 122,442 196,124 507,820
51,520 184,823 75,353 311,696 73,682 40,428 100,292 421,244
Professional and contract fees 120,348 191,163 9,441 320,952 59,864 - 291,661
Occup ancy 156,131 125,105 1,704 282,940 8,722 1,869 8,722 261,137
Depreciation and amortization 190,772 46,837 255,336 3,931 7,184 5,800 181,439
Travel, meals and entertainment 17,727 81,168 17,419 125,738 48,517 - 55,701 131,164
Office and computer supplies 27,151 63,239 4,444 125,717 5,447 1,416 5,447 202,415
Telephone and utilities 58,034 81,286 19,271 198,931 2,068 - 3,484 74,626
Repairs and maintenance 98,374 74,626 - 74,626 100,255
Insurance - - - 1,075 10,982 1,075 42,428
Interest - 39,672 - 99,180 4,857 - 15,839 35,359
Events and training 59,508 13,045 2,551 19,497 42,428 416 42,428
Auditing and accounting 3,901 - 14,925 3,202 15,341 9,208
Banking and related - - - 2,995 6,197 17,128
Advertising - - 172 1,788 388,226 $
1,788 2,246 3,017 1,425,048 $ 10,682,894
Total expenses
599

$ 3,382,786 $ 4,651,640 $ 1,223,400 $ 9,257,826 $ 1,036,822 $

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,

2015 2014

Cash flows from operating activities: $ 134,149 $ (84,717)
Change in net assets
Adjustments to reconcile change in net assets to net cash 360,084 325,663
provided by (used in) operating activities: 28,000 (537,516)
Depreciation and amortization 12,107
Change in allowance for doubtful accounts (7,224)
Unrealized (gains) losses on investments - (5,042)
Loss on disposal of property and equipment (147,091) (52,338)
In-kind asset donations 109,679 102,239
Contributions receivable - use of facility, net
Deferred compensation 30,142 -
Changes in operating assets and liabilities:
Accounts receivable (799,980) (11,241)
Prepaid expenses (92,555) (9,413)
Deposits 14,791
Accounts payable 4,810 45,765
Accrued expenses (50,621) 55,800
Housing and flexible fund reimbursements 124,678 66,843
Reimbursement payable to HUD 218,110
Agency fund liability (149,919)
Increase in cash surrender value of life insurance - -
9,880 -
Net cash provided (used) by operating activities (30,142)
(246,309)
Cash flows from investing activities: (88,750)
Proceeds from sale of investments 81,156
Acquisition of investments 1,608 (87,713)
Acquisition of property and equipment (8,317) (1,082,398)
(188,035)
Net cash used in investing activities (1,088,955)
(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,

2015 2014

Cash flows from financing activities: $ 100,000 $ -
Borrowing on line of credit (100,000) -
Repayment of line of credit 7,516 -
Borrowing on capital leases payable (18,505) (16,679)
Repayment of capital leases payable 21,298 200,000
Borrowing on notes payable (88,851) (75,889)
Repayment of notes payable

Net cash provided (used) by financing activities (78,542) 107,432

Net change in cash and cash equivalents (362,036) (1,227,832)

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

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

Supplemental disclosure of cash flow information

Cash paid during the year for interest $ 95,184 $ 124,660

Supplemental disclosure of non-cash investing and financing information

Acquisition of property and equipment under capital leases $ 7,516 $ 99,082
Acquisition of contributed property and equipment $ 147,091 $ 52,338

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

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

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, 2015 and 2014.

10

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

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. There were no conditional promises to give at June 30, 2015 and 2014.

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, 2015

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 $58,000 and $30,000 at June 30, 2015 and 2014, respectively. At June 30, 2015
and 2014, approximately $165,000 and $97,000 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, 2015 and
2014.

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, 2015

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, 2015 and
2014.

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, 2015 and 2014, approximately
96% and 95%, respectively, of the Organization’s revenue is derived from grants from Federal,
State and County government agencies.

For the year ending June 30, 2015, approximately 22% of the Organization’s contributions were
received from a single donor. There were no major donors for the year ended June 30, 2014.

13

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

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, 2015 and 2014 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, 2015 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.
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. See Note 17
for subsequent event disclosure.

14

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

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:

2015 2014

Mutual funds $ 211,268 $ 216,666

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

2015 2014

Interest and dividends $ 13,340 $ 13,311
Realized gain - 2,189
Unrealized gain (loss) on
investments (12,107) 7,224
$ 1,233 $ 22,724

15

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

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, $ 125,841
130,875
2016 136,110
2017 69,392
2018 462,218
2019 (15,274)

Total receivable 446,944
Less discount for present value
(321,103)
Present value of future rent 125,841
receivable
Less non-current portion of
receivable

Current portion of receivable

16

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 5 - Property and equipment:

Property and equipment consists of the following at June 30:

2015 2014

Depreciable assets: 4,544,243
1,310,712
Buildings $ 4,567,541 $
128,291
Leasehold improvements 1,310,712 237,960
63,577
Furniture and fixtures 142,483 99,083
172,087
Computer and equipment 397,897

Office equipment 151,846

Office equipment, under capital lease 92,599

Vehicles 219,171

Total depreciable assets 6,882,249 6,555,953
Less accumulated depreciation (3,259,018) (2,898,934)

Total depreciable assets, net 3,623,231 3,657,019

Land 2,837,950 2,837,950

Property and equipment, net $ 6,461,181 $ 6,494,969

Depreciation and amortization expense was approximately $360,000 and $326,000 for the years
ended June 30, 2015 and 2014, respectively.

Note 6 - Accrued expenses:

Accrued expenses consist of the following at June 30:

2015 2014

Wages, salaries and related taxes $ 390,874 $ 264,790
Vacation
Interest 251,929 213,792
Deferred rent
Other accrued expenses 71,950 63,250

Total accrued expenses 2,554 21,598

141,687 170,886

$ 858,994 $ 734,316

17

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 7 - Notes payable:

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

Mortgage loan, due in monthly installments of $2,607 $ 2015 2014
including 4.375% interest through February 8, 2023, 168,150 $ 185,084
secured by real property. 419,268 428,803

Mortgage loan, due in monthly installments of $2,588 275,139 286,439
including 5% interest through January 1, 2018,
secured by real property. 277,719 288,235
333,263 345,882
Mortgage loan, due in monthly installments of $1,991 458,621 469,330
including 5.250% interest through August 1, 2013. 168,610 185,102
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 $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 $2,449
including 5.875% interest. Starting September 1,
2014, monthly installments of $1,893 including interest
of 2.875% 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 including interest of 2.875%,
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.

18

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 7 - Notes payable (continued):

2015 2014

Note payable to the County of Santa Clara, 3% $ 250,000 $ 250,000
simple 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
required prior to maturity. The Organization estimates
no payment will be due until 2066. See Note 9 for
forgiveness of debt.

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

Automobile loan, due in monthly installments of $354 20,552 -
including 5.990% interest through March 19, 2021,
secured by the vehicle.

Total notes payable 3,709,180 3,776,733

Less current maturities (88,409) (83,777)

Non-current portion $ 3,620,771 $ 3,692,956

19

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 7 - Notes payable (continued):

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

Year Ending Amount
June 30,

2016 $ 88,409

2017 95,241

2018 98,039

2019 95,044

Thereafter 3,332,447

Total $ 3,709,180

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%
(4.25% at June 30, 2015). There was no balance due on the line of credit at June 30, 2015 and
there were draws and payments of $100,000 on the line of credit during the June 30, 2015 year
end. The agreement requires the Organization to comply with certain covenants. At June 30,
2015, 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, 2015

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, 2015

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 was required to fund the
obligation from sources that excludes federal and restricted funds.

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 during the year ended June 30, 2014.

22

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 11 - Fundraising events:

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

2015 2014

Special event income $ 24,136 $ 24,652
Revenues 121,485 101,672
Contribution
145,621 126,324
Special event income, net

Special event direct expenses $ 117,712 123,936
Special events, net 27,909 $ 2,388

Total fundraising expenses for the years ended June 30, 2015 and 2014 are approximately
$661,000 and $512,000, 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, 2015 and 2014 were as

follows:

July 1, 2014 Additions Release 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 $ (320,877) $
2,727,893 $ 2,487,016
Total $

July 1, 2013 Additions Release June 30, 2014

Housing grant $ 800,000 $ - $ (800,000) $ -
2,326,925
Forgivable loans - (155,652) 2,171,273
658,861
Contributed use-of-facility - (102,241) 556,620

Total $ 3,785,786 $ - $ (1,057,893) $ 2,727,893

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, 2015 and 2014 were approximately
$80,000 and $103,000, 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 $107,000 and
$93,000 have been netted against rental income in the Statements of Activities and Changes in
Net Assets for the years ended June 30, 2015 and 2014.

23

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 14 - Capital leases:

The Organization entered into a new lease during the year ended June 30, 2015, for equipment
expiring through June 2020. 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 assets are
depreciated over 5 years at an interest rate of 3.25-3.80%.

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

Year Ending

June 30, Amount

2016 $ 21,472
2017 21,472
2018 21,472
2019 5,096

Total payments 69,512
Less amount representing interest (4,248)

Present value of minimum 65,264
lease payments (19,332)

Less current portion

Total non-current portion $ 45,932

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

Office equipment $ 2015 2014
Less accumulated depreciation $ 92,599 $ 99,083

Property and equipment under (35,337) (16,514)
capital leases
57,262 $ 82,569

24

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 15 - In-kind contributions:

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. During the year ended June 30, 2014, the Organization received in-kind donations
of goods, home renovation services, food, mattresses and other items at an estimated fair value of
approximately $49,000, $52,000, $65,000, $33,000, and $19,000, respectively.

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, 2015 and 2014, the
Organization matched up to $500 to participating employees. Employer contributions to the
401(k) plan for the years ended June 30, 2015 and 2014 were approximately $4,000 and $5,000,
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, 2015 there
was only one participant in the 457 Plan.

Note 17 - Commitments:

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.

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

follows:

Year Ending

June 30, Amount

2016 $ 166,122
2017 35,678
2018 17,839

Total $ 219,639

25

THE UNITY CARE GROUP

Notes to Financial Statements
June 30, 2015

Note 17 - Commitments (continued):
Total rent expense for the years ended June 30, 2015 and 2014 was approximately $471,000 and
$405,000, respectively. Total rent expense paid to related parties for the years ended June 30,
2015 and 2014 was approximately $97,000 and $96,000, respectively.
Subsequent to year end, the Organization entered into a new lease agreement for its
administrative offices. The lease term is for 10 years and commences February 1, 2016 with
scheduled rent payments ranging from $31,350 to $45,600 per month.
Note 18 - Contingencies:
Due to the nature of the Organization’s operations, claims and litigation may periodically arise.
As of June 30, 2015, 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.

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
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 statement of financial position as of June 30, 2015, 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 October 9, 2015.

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.

226AirportParkway,Suite350SanJose,CA95110www.rlallp.comOffice:408.855.6770Fax: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
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 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
October 9, 2015

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
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 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, 2015. 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.

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
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, 2015.

226AirportParkway,Suite350SanJose,CA95110www.rlallp.comOffice:408.855.6770Fax: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
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 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
October 9, 2015

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 $1,255,677
Passed through Various Counties

Foster Care - Aid to Families with Dependent
Children

U.S. Department of Agriculture 10.555 N/A 33,981
Passed through California Department of Education $ 1,289,658
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, 2015
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, 2015

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 1,255,677
Dependent Children

Total Major program expenditures $ 1,255,677

Total Federal awards $ 1,289,658

Percent of total Federal awards 97%
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, 2015
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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