AVIVA CHILDREN'S SERVICES, INC. CHILDREN'S SERVICES, INC. AUDITED FINANCIAL STATEMENTS Yearsended June 30, 2013and 2012

AVIVA CHILDREN'S SERVICES, INC.

AUDITED FINANCIAL STATEMENTSYears ended June 30, 2013 and 2012

AVIVA CHILDREN'S SERVICES, INC. AUDITED FINANCIAL STATEMENTS

Years ended June 30, 2013 and 2012

TABLE OF CONTENTS

Independent auditors’ report..........................................................................................1

Statements of financial position ......................................................................................3

Statements of activities:2013 ................................................................................................................42012 .................................................................................................................5

Statements of functional expenses:2013 ................................................................................................................62012 .................................................................................................................7

Statements of cash flows ..............................................................................................8

Notes to financial statements .........................................................................................9

2013 2012

Current assets:

Cash and cash equivalents $ 636,235 $ 844,055

Contracts receivable 233,654 199,764

Prepaid expenses 6,616 718

Total current assets 876,505 1,044,537

Property and equipment 1,906,836 1,981,363

Oil and gas interests 8,323 7,694

Intangible assets 5,400 7,800

$ 2,797,064 $ 3,041,394

Current liabilities:

Accounts payable $ 1,375 $ 7,160

Accrued payroll and related taxes 77,747 83,558

Mortgage payable, current portion 19,245 17,834

Total current liabilities 98,367 108,552

Mortgage payable 648,705 669,708

Total liabilities 747,072 778,260

Net assets:

Unrestricted:

Available for operations 695,958 875,240

Expended for property and equipment 1,238,886 1,293,821

Board designated for playground project 6,133 6,133

1,940,977 2,175,194

Temporarily restricted 109,015 87,940

2,049,992 2,263,134

$ 2,797,064 $ 3,041,394

June 30, 2013 and 2012

STATEMENTS OF FINANCIAL POSITION


ASSETS

LIABILITIES AND NET ASSETS

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

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Temporarily

Unrestricted restricted

net assets net assets Total

Public support and revenues:

Government vendor contracts $ 1,599,949 $ 1,599,949

Contributions 75,989 $ 61,315 137,304

In-kind contributions 7,201 7,201

Interest income 470 470

Change in fair value of oil and gas interests 629 629

Oil and gas income 2,154 2,154

1,683,609 64,098 1,747,707

Net assets released from restrictions 43,023 (43,023) 0

Total public support and revenues 1,726,632 21,075 1,747,707

Expenses:

Program services 1,575,364 1,575,364

General and administrative 305,980 305,980

Fundraising 79,505 79,505

Total expenses 1,960,849 0 1,960,849

Change in net assets (234,217) 21,075 (213,142)

Net assets, beginning of year 2,175,194 87,940 2,263,134

Net assets, end of year $ 1,940,977 $ 109,015 $ 2,049,992


STATEMENT OF ACTIVITIES

Year ended June 30, 2013


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Temporarily

Unrestricted restricted

net assets net assets Total

Public support and revenues:

Government vendor contracts $ 1,848,592 $ 1,848,592

Contributions 48,406 $ 51,728 100,134

In-kind contributions 150 150

Interest income 708 708

Change in fair value of oil and gas interests 1,925 1,925

Oil and gas income 3,224 3,224

1,897,856 56,877 1,954,733

Net assets released from restrictions 65,909 (65,909) 0

Total public support and revenues 1,963,765 (9,032) 1,954,733

Expenses:

Program services 1,584,149 1,584,149

General and administrative 350,102 350,102

Fundraising 35,788 35,788

Total expenses 1,970,039 0 1,970,039

Change in net assets (6,274) (9,032) (15,306)

Net assets, beginning of year 2,181,468 96,972 2,278,440

Net assets, end of year $ 2,175,194 $ 87,940 $ 2,263,134


STATEMENT OF ACTIVITIES



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Parent Parent Total

Aide support Volunteer program General and

programs programs programs services administrative Fundraising Total

Salaries and wages $ 855,028 $ 31,951 $ 80,499 $ 967,478 $ 179,531 $ 51,429 $ 1,198,438

Employee related expenses 144,537 2,700 13,737 160,974 26,272 6,568 193,814

999,565 34,651 94,236 1,128,452 205,803 57,997 1,392,252

Depreciation and amortization 48,179 13,140 61,319 28,680 89,999

Direct assistance to individuals 634 48,224 48,858 48,858

Furniture and equipment 3,167 400 824 4,391 2,393 6,784

Insurance 7,653 2,087 9,740 4,174 13,914

Marketing and public relations 60 69 129 1,818 1,058 3,005

Miscellaneous 6 138 144 1,056 263 1,463

Mortgage interest 28,387 7,742 36,129 15,483 51,612

Office supplies and expenses 5,864 1,038 603 7,505 1,232 602 9,339

Other operating expenses 8,445 666 597 9,708 3,144 388 13,240

Postage and printing 1,037 66 37 1,140 4,803 7,734 13,677

Professional services 10,538 1,222 458 12,218 20,333 32,551

Program supplies 1,619 4,332 4,524 10,475 801 10,890 22,166

Rent 8,601 2,363 10,964 1,075 12,039

Repairs and maintenance 24,071 1,150 5,720 30,941 7,381 383 38,705

Telephone 12,331 2,104 14,435 1,432 15,867

Training 274 517 89 880 731 190 1,801

Travel 173,807 457 1,240 175,504 608 176,112

Utilities 9,916 2,516 12,432 5,033 17,465Total expenses $ 1,344,148 $ 44,505 $ 186,711 $ 1,575,364 $ 305,980 $ 79,505 $ 1,960,849

STATEMENT OF FUNCTIONAL EXPENSES



Program services


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Parent Parent Total

Aide support Volunteer program General and

programs programs programs services administrative Fundraising Total

Salaries and wages $ 862,752 $ 18,985 $ 98,379 $ 980,116 $ 224,759 $ 23,591 $ 1,228,466

Employee related expenses 137,778 1,351 17,577 156,706 32,998 2,647 192,351

1,000,530 20,336 115,956 1,136,822 257,757 26,238 1,420,817

Depreciation and amortization 45,553 2,577 12,053 60,183 28,212 88,395

Direct assistance to individuals 63,577 63,577 63,577

Furniture and equipment 839 541 1,380 1,496 2,876

Insurance 6,954 394 1,837 9,185 3,937 13,122

Marketing and public relations 48 199 247 1,170 599 2,016

Miscellaneous 326 119 445 404 177 1,026

Mortgage interest 28,184 1,595 7,445 37,224 15,954 53,178

Office supplies and expenses 5,296 368 1,564 7,228 1,341 8,569

Other operating expenses 5,008 234 405 5,647 13,828 205 19,680

Postage and printing 568 747 136 1,451 4,166 8,069 13,686

Professional services 11,467 161 1,292 12,920 3,230 500 16,650

Program supplies 2,592 5,894 5,873 14,359 72 14,431

Rent 7,800 2,177 9,977 1,215 11,192

Repairs and maintenance 23,699 809 4,164 28,672 9,218 37,890

Telephone 3,686 738 900 5,324 1,929 7,253

Training 1,134 46 1,180 526 1,706

Travel 169,682 303 5,201 175,186 475 175,661

Utilities 10,210 480 2,452 13,142 5,172 18,314Total expenses $ 1,322,411 $ 36,000 $ 225,738 $ 1,584,149 $ 350,102 $ 35,788 $ 1,970,039


STATEMENT OF FUNCTIONAL EXPENSES


Program services


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2013 2012

Cash flows from operating activities:

Change in net assets $ (213,142) $ (15,306)

Adjustments to reconcile change in net assets

to net cash from operating activities:

Depreciation and amortization 89,999 88,395

Donated property and equipment (6,500) 0

Change in fair value of oil and gas interests (629) (1,925)

(Increase) decrease in operating assets:

Contracts receivable (33,890) 60,550

Prepaid expenses (5,898) 932

Increase (decrease) in operating liabilities:

Accounts payable (5,785) (5,800)

Accrued payroll and related taxes (5,811) 12,542

Net cash provided by (used in) operating activities (181,656) 139,388

Cash flows (used in) financing activities -

Purchases of property and equipment (6,572) (20,098)

Cash flows (used in) financing activities -

Payments on mortgage payable (19,592) (18,026)

Change in cash and cash equivalents (207,820) 101,264

Cash and cash equivalents, beginning of year 844,055 742,791

Cash and cash equivalents, end of year $ 636,235 $ 844,055

Supplemental cash flow information:Cash paid for interest $ 51,612 $ 53,178

No cash paid for income taxes in 2013 or 2012.

STATEMENTS OF CASH FLOWS

Years ended June 30, 2013 and 2012



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AVIVA CHILDREN'S SERVICES, INC. NOTES TO FINANCIAL STATEMENTS

June 30, 2013 and 2012

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NOTE 1 – Organization Aviva Children's Services, Inc. (AVIVA) is a nonprofit organization incorporated in 1999. AVIVA’s mission is to provide enhanced services to improve the quality of life for children in the care of Arizona’s Child Protective Services (CPS) who are victims of neglect, abuse and poverty. AVIVA’s major sources of revenue are government grants and contracts. AVIVA’s major programs are as follows:

Parent Aide programs – Provides parenting training and individualized case work on issues to alleviate barriers to reunification of the family, as well as facilitating visits between foster children and their birth families.

Parent support programs – Through outreach, resource and peer support, this program provides services to strengthen families who have met court directives and are currently reunited.

Volunteer programs – Provides support services to CPS staff in addition to mentoring, tutoring and life books to children in foster care. The program also provides basic needs for children in crisis through donated goods and the Abused Children’s Fund.

NOTE 2 – Summary of significant accounting policies

Financial statement presentation

AVIVA is required under generally accepted accounting principles to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted.

Use of estimates

The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates.

Cash and cash equivalents

AVIVA considers all cash and highly liquid investments with an original maturity of three months or less to be cash equivalents. AVIVA maintains its cash in bank deposit accounts which may exceed federally insured limits. At June 30, 2013, cash in excess of insured limits totaled $414,997.

Contracts receivable

Contracts and grants receivable are stated at the amount that AVIVA expects to collect from various governmental and foundation entities on outstanding balances. Management believes that all such receivables are fully collectible, and accordingly has recorded no valuation allowance for doubtful receivables.

Property and equipment

AVIVA capitalizes all expenditures for property and equipment in excess of $1,000 with a useful life greater than one year. Purchased property and equipment are carried at cost. Donated property and equipment are carried at the approximate fair value at the date of donation. Depreciation is calculated using the straight-line method over the estimated useful life of the asset.

Oil and gas interests

Oil and gas interests are valued at a multiple of prior year earnings based upon estate valuation guidance issued by the Internal Revenue Service.

AVIVA CHILDREN'S SERVICES, INC. NOTES TO FINANCIAL STATEMENTS - continued

June 30, 2013 and 2012

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NOTE 2 – Summary of significant accounting policies – continued

Intangible assets

Intangible assets are valued at historical cost. The website design, which was purchased in October 2010, is being amortized on a straight-line basis over its estimated useful life of 5 years.

Contributions/restricted revenue

Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the revenue is recognized. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets, depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions.

Donated goods, facilities and services

Donated goods and facilities are valued at their fair market value. Donated services are recognized in the financial statements at their fair market value if the following criteria are met:

The services require specialized skills and the services are provided by individuals possessing those skills. The services would typically need to be purchased if not donated.

Although AVIVA utilizes the services of many outside volunteers, the fair value of these services is not recognized in the accompanying financial statements since they do not meet the criteria for recognition under generally accepted accounting principles.

Income tax status

AVIVA is exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code. However, income from certain activities not directly related to AVIVA’s tax-exempt purpose may be subject to taxation as unrelated business income. In addition, AVIVA qualifies for the charitable contribution deduction under Section 170(b)(1)(A)(vi) and has been classified as an organization other than a private foundation under Section 509(a)(1).

In accordance with generally accepted accounting principles, AVIVA holds no uncertain tax positions and, therefore, has no policy for evaluating them. AVIVA’s Form 990, Return of Organization Exempt from Income Taxes, and Arizona Form 99, Arizona Exempt Organization Annual Information Return, are generally subject to examination by the Internal Revenue Service for three years and the Arizona Department of Revenue for four years, respectively, after the date the returns were filed.

Functional expenses

The costs of providing the various program services and supporting activities of AVIVA have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among program and supporting services benefited.


June 30, 2013 and 2012

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NOTE 3 – Property and equipment

Property and equipment at June 30, 2013 and 2012 consisted of the following:

2013 2012

Land $ 211,000 $ 211,000

Building and improvements 1,782,024 1,782,024

Equipment, furniture and fixtures 150,193 137,121

2,143,217 2,130,145

Construction in progress 24,867 24,867

Less accumulated depreciation (261,248) (173,649)$ 1,906,836 $ 1,981,363

NOTE 4 – Intangible assets

At June 30, 2013 and 2012, intangible assets consisted of the following:

2013 2012

Website design $ 12,000 $ 12,000

Less accumulated amortization (6,600) (4,200)

$ 5,400 $ 7,800

NOTE 5 – Mortgage payable

AVIVA has a mortgage note payable with a financial institution secured by real property. Payments on the mortgage payable are $5,934 per month, including interest, for 119 months with a final payment of $503,442 due at maturity in January 2020. The mortgage payable carries a variable interest rate of index plus 2% with a minimum rate of 7.5% (7.5% at both June 30, 2013 and 2012). Future maturities of the mortgage payable are as follows at June 30, 2013:

Year ending June 30, 2014 $ 19,245

2015 22,646

2016 24,300

2017 26,343

2018 28,418

Thereafter 546,998

$ 667,950

NOTE 6 – Temporarily restricted net assets

Temporarily restricted net asset activity was as follows during the year ended June 30, 2013:

Change in value

Beginning Oil and gas of oil and Ending

balance Contributions income gas interests Releases balanceAbused children's fund $ 87,940 $ 61,315 $ 2,154 $ 629 $ (43,023) $ 109,015


June 30, 2013 and 2012

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NOTE 7 – In-kind contributions

For the years ended June 30, 2013 and 2012, in-kind contributions consisted of the following:

2013 2012

Furniture and equipment (not capitalized) $ 0 $ 150

Program supplies 701 0

Total in-kind expense 701 150

Capitalized property and equipment 6,500 0 Total in-kind revenue $ 7,201 $ 150

NOTE 8 – Operating leases

AVIVA leases office equipment under a non-cancelable operating lease expiring August 2017 and facilities and storage space under month-to-month operating leases. Rental expense for the years ended June 30, 2013 and 2012 was $12,324 and $11,476 respectively. Future minimum payments are as follows:

Year ending June 30, 2014 $ 1,139

2015 1,139

2016 1,139

2017 854

$ 4,271

NOTE 9 – Retirement plans

Through December 2011, AVIVA provided a Simple IRA plan for employees who have one year of service and at least $5,000 in payroll in the preceding year. AVIVA matched up to 3% of gross payroll for eligible employees who have joined and contributed to the plan. The plan was terminated at the end of the calendar year.

Beginning January 2012, AVIVA provides a 403(b) plan for employees who have one year of service and are at least 21 years of age. There is a three month waiting period before new employees can begin participating in the plan. AVIVA matches up to 3% of gross payroll for eligible employees who have joined and contributed to the plan.

Retirement expense totaled $22,321 and $21,835, respectively, for the years ended June 30, 2013 and 2012.

NOTE 10 – Fair value measurements

Fair value measurements are determined based on the assumptions, referred to as inputs, that market participants would use in pricing the asset. The fair value hierarchy distinguishes between market participant assumptions and AVIVA’s own assumptions about market participant assumptions. Observable inputs are assumptions based on market data obtained from independent sources; while unobservable inputs are AVIVA’s own assumptions about what market participants would assume based on the best information available in the circumstances.

Level 1 inputs. A quoted price in an active market for an identical asset or liability is considered to be the most reliable evidence of fair value. AVIVA does not utilize Level 1 inputs.

Level 2 inputs. These are observable inputs, either directly or indirectly, other than quoted prices included within Level 1. AVIVA does not utilize Level 2 inputs.


June 30, 2013 and 2012

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NOTE 10 – Fair value measurements - continued Level 3 inputs. These inputs are unobservable and are used to measure fair value only when observable inputs are not available. See Note 2 for valuation method for oil and gas interests. Fair values of assets measured on a recurring basis using significant unobservable inputs (Level 3) at June 30, 2013 and 2012 consisted of the following:

Level 3 Level 32013 2012

Oil and gas interests $ 8,323 $ 7,694

Activity for these Level 3 assets for the year ended June 30, 2013 was as follows:

Beginning Change in Endingbalance fair value balance

Oil and gas interests $ 7,694 $ 629 $ 8,323

Activity for these Level 3 assets for the year ended June 30, 2012 was as follows:

Beginning Change in Endingbalance fair value balance

Oil and gas interests $ 5,769 $ 1,925 $ 7,694

NOTE 11 – Concentration of risk AVIVA participates in federal and state assisted grant and contract programs. For each of the years ended June 30, 2013 and 2012, 87% of total revenue, was received from the Arizona Department of Economic Security. NOTE 12 – Subsequent events Subsequent events have been evaluated through November 26, 2013, which is the date the financial statements were available to be issued.

Documents

AVIVA CHILDREN'S SERVICES, INC. CHILDREN'S SERVICES, INC. AUDITED FINANCIAL STATEMENTS Yearsended June 30, 2013and 2012