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091665fs123114 Revised: 4/7/2015 8:37 AM mcp
BUILDING CHANGES
FINANCIAL REPORT
DECEMBER 31, 2014
091665fs123114 Revised: 4/7/2015 8:37 AM mcp
C O N T E N T S
Page
INDEPENDENT AUDITORS' REPORT .................................................................................................... 1 and 2
FINANCIAL STATEMENTS
STATEMENTS OF FINANCIAL POSITION ............................................................................................................................... 3
STATEMENTS OF ACTIVITIES ...................................................................................................................................................... 4
STATEMENT OF FUNCTIONAL EXPENSES - 2014 .............................................................................................................. 5
STATEMENT OF FUNCTIONAL EXPENSES - 2013 .............................................................................................................. 6
STATEMENTS OF CASH FLOWS ................................................................................................................................................ 7
NOTES TO FINANCIAL STATEMENTS ........................................................................................................................... 8 - 16
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 ......................................................................................................................................... 17 and 18
INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Building Changes
Seattle, Washington
We have audited the accompanying financial statements of Building Changes, which comprise the
statement of financial position as of December 31, 2014, and the related statements of activities, functional
expenses, and cash flows for the year 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; 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.
Auditor's Responsibility
Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit in accordance with auditing standards generally accepted in the United States.
Those standards require that we plan and perform the audit 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 auditor's 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.
2
Opinion
In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Building Changes as of December 31, 2014, and the changes in its net assets and its
cash flows for the year then ended in accordance with accounting principles generally accepted in the
United States.
Prior Period Financial Statements
The financial statements of Building Changes as of December 31, 2013, were audited by other auditors
whose report dated April 25, 2014, expressed an unmodified opinion.
Other Reporting Required by Government Auditing Standards
In accordance with Government Auditing Standards, we have also issued our report dated
________________________, on our consideration of internal control at Building Changes 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
internal control at Building Changes over financial reporting and compliance.
____________________________
See Notes to Financial Statements
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BUILDING CHANGES
STATEMENTS OF FINANCIAL POSITION
December 31, 2014 and 2013
ASSETS 2014 2013
Current Assets
Cash and cash equivalents 10,914,720$ 10,583,442$
Restricted cash 294,130 70,308
Investments 2,489,604 3,048,207
Current portion of accounts and grants receivable 1,801,945 1,595,117
Current portion of promises to give 2,373,651 2,843,807
Prepaid expenses and deposits 100,387 43,753
Total current assets 17,974,437 18,184,634
Accounts and Grants Receivable, less current portion 1,391,365 1,581,742
Promises to Give, less current portion 1,293,925 9,709
Property and Equipment, net - 6,463
Total assets 20,659,727$ 19,782,548$
LIABILITIES AND NET ASSETS
Current Liabilities
Accounts payable and accrued expenses 219,889$ 188,693$
Current portion of grants payable 5,524,839 6,915,780
Total current liabilities 5,744,728 7,104,473
Grants payable, less current portion 2,937,314 3,575,920
Total liabilities 8,682,042 10,680,393
Net Assets
Unrestricted
Undesignated 1,269,134 1,335,826
Board designated 480,726 622,266
1,749,860 1,958,092
Temporarily restricted 10,227,825 7,144,063
Total net assets 11,977,685 9,102,155
Total liabilities and net assets 20,659,727$ 19,782,548$
See Notes to Financial Statements
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BUILDING CHANGES
STATEMENTS OF ACTIVITIES
For the Years Ended December 31, 2014 and 2013
Unrestricted
Temporarily
Restricted Total Unrestricted
Temporarily
Restricted Total
Support and Revenue
Foundation and corporation contributions 71,316 8,259,863 8,331,179 235,205 7,810,000 8,045,205
Government grants and contracts 2,731,554 2,731,554 576,720 576,720
Technical assitance and other 213,997 213,997 23,293 23,293
Individual contributions 110,434$ 10,000$ 120,434$ 232,915$ -$ 232,915$
Net assets released from restrictions 5,204,428 (5,204,428) 8,372,934 (8,372,934)
Total support and revenue 8,331,729 3,065,435 11,397,164 9,441,067 (562,934) 8,878,133
Expenses
Program services 7,737,845 7,737,845 8,402,141 8,402,141
Management and general 570,634 570,634 595,683 595,683
Fundraising 259,079 259,079 250,923 250,923
Total expenses 8,567,558 - 8,567,558 9,248,747 - 9,248,747
Change in net assets before investment income (235,829) 3,065,435 2,829,606 192,320 (562,934) (370,614)
Investment income 27,597 18,327 45,924 16,147 10,140 26,287
Change in net assets (208,232) 3,083,762 2,875,530 208,467 (552,794) (344,327)
Net Assets, beginning of year 1,958,092 7,144,063 9,102,155 1,749,625 7,696,857 9,446,482
Net Assets, end of year 1,749,860$ 10,227,825$ 11,977,685$ 1,958,092$ 7,144,063$ 9,102,155$
2014 2013
See Notes to Financial Statements
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BUILDING CHANGES
STATEMENT OF FUNCTIONAL EXPENSES
For the Year Ended December 31, 2014
Grantmaking
and
Evaluation
Capacity
Building
Advocacy
and Policy
Total
Program
Services
Management
and General Fundraising Total
Salaries and wages 422,823$ 775,322$ 139,038$ 1,337,183$ 315,567$ 121,897$ 1,774,647$
Payroll taxes and benefits 80,972 175,951 30,678 287,601 64,681 24,324 376,606
Total payroll expenses 503,795 951,273 169,716 1,624,784 380,248 146,221 2,151,253
Grants to others 5,168,204 5,350 5,173,554 5,173,554
Professional fees 283,779 227,438 13,039 524,256 84,143 59,017 667,416
Occupancy 41,918 78,423 14,209 134,550 27,849 12,385 174,784
Conferences and meetings 8,331 56,214 6,812 71,357 7,427 18,149 96,933
Travel 17,733 57,001 9,334 84,068 7,142 520 91,730
Supplies 9,477 22,129 2,770 34,376 20,164 2,176 56,716
Staff recruitment and development 4,660 11,134 885 16,679 18,955 1,546 37,180
Telephone 5,560 12,150 3,334 21,044 4,215 1,424 26,683
Printing and publications 3,230 9,758 1,934 14,922 2,651 5,689 23,262
Dues and licenses 5,188 955 7,786 13,929 6,184 320 20,433
Miscellaneous 242 252 145 639 5,797 7,986 14,422
Insurance 2,422 5,155 1,068 8,645 2,118 884 11,647
Postage and delivery 27 5,924 36 5,987 522 1,939 8,448
Equipment rental and maintenance 1,302 2,417 438 4,157 2,093 384 6,634
Depreciation 1,570 2,822 506 4,898 1,126 439 6,463
Total expenses 6,057,438$ 1,448,395$ 232,012$ 7,737,845$ 570,634$ 259,079$ 8,567,558$
See Notes to Financial Statements
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BUILDING CHANGES
STATEMENT OF FUNCTIONAL EXPENSES
For the Year Ended December 31, 2013
Grantmaking
and
Evaluation
Capacity
Building
Advocacy
and Policy
Total
Program
Services
Management
and General Fundraising Total
Salaries and wages 307,524$ 669,833$ 211,924$ 1,189,281$ 278,528$ 131,634$ 1,599,443$
Payroll taxes and benefits 67,846 145,960 45,686 259,492 55,922 29,332 344,746
Total payroll expenses 375,370 815,793 257,610 1,448,773 334,450 160,966 1,944,189
Grants to others 6,231,457 11,323 6,242,780 6,242,780
Professional fees 231,908 139,397 18,783 390,088 120,977 40,400 551,465
Occupancy 37,215 70,460 19,931 127,606 32,213 13,623 173,442
Conferences and meetings 8,880 13,996 8,107 30,983 2,875 17,463 51,321
Travel 7,521 25,041 9,166 41,728 9,055 250 51,033
Supplies 4,062 11,388 3,219 18,669 39,012 2,266 59,947
Staff recruitment and development 15,038 2,607 840 18,485 15,010 947 34,442
Telephone 4,747 8,354 4,567 17,668 3,831 1,366 22,865
Printing and publications 46 311 357 17,240 2,800 20,397
Dues and licenses 5,365 6,432 7,932 19,729 2,009 646 22,384
Miscellaneous 1,918 3,913 1,114 6,945 1,834 735 9,514
Insurance 136 7,245 14 7,395 909 1,365 9,669
Postage and delivery 2,010 6,853 1,320 10,183 3,129 6,078 19,390
Equipment rental and maintenance 5,764 6,998 1,674 14,436 11,467 1,209 27,112
Depreciation 1,689 3,597 1,030 6,316 1,672 672 8,660
In-kind expense - 137 137
Total expenses 6,933,126$ 1,133,708$ 335,307$ 8,402,141$ 595,683$ 250,923$ 9,248,747$
See Notes to Financial Statements
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BUILDING CHANGES
STATEMENTS OF CASH FLOWS
For the Years Ended December 31, 2014 and 2013
2014 2013
Cash Flows from Operating Activities
Cash received from:
Contributions 7,637,553$ 8,344,215$
Government grants and contracts 2,715,103 1,821,921
Technical assistance and ather 213,997 17,630
Investment income 78,827 84,821
Cash paid for:
Grants to others (7,203,101) (5,980,559)
Personnel (2,124,529) (1,972,822)
Services and supplies (1,288,450) (1,178,546)
Net cash flows from operating activities 29,400 1,136,660
Cash Flows from Investing Activities
Purchases of investments (450,647) (2,311,310)
Proceeds from sales of investments 976,347 3,087,397
Increase in restricted cash (223,822)
Net cash flows from investing activities 301,878 776,087
Change in cash and cash equivalents 331,278 1,912,747
Cash and cash equivalents, beginning of year 10,583,442 8,670,695
Cash and cash equivalents, end of year 10,914,720$ 10,583,442$
Reconciliation of Change in Net Assets
to Net Cash Flows from Operating Activities
Change in net assets 2,875,530$ (344,327)$
Depreciation 6,463 8,660
Realized and unrealized loss on investments 32,903 53,008
Change in operating assets and liabilities
Accounts and grants receivable (16,451) 1,245,201
Promises to give (814,060) 66,095
Prepaid expenses and deposits (56,634) 96,893
Accounts payable and accrued expenses 31,196 (251,091)
Grants payable (2,029,547) 262,221
Net cash flows from operating activities 29,400$ 1,136,660$
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NOTES TO FINANCIAL STATEMENTS
Note 1. Nature of Activities and Organization
Building Changes is a nonprofit organization conducting activities in Washington State to transform the
ways communities work together to end family and youth homelessness. Building Changes believes that
homelessness can be significantly reduced in Washington State when nonprofits, government, and
philanthropy work seamlessly together in a high-performing system that tailors solutions to the needs of
each individual and family.
Mission: Building Changes believes everyone deserves the opportunity for a home, a healthy life, and a
good job. Building Changes unites public and private partners to create innovative solutions through
expert advice, grantmaking, and advocating for lasting change.
Vision: End homelessness together.
Values: Integrity, equity, collaboration, and results.
How Building Changes Works
Building Changes works collaboratively with nonprofits, government, and philanthropy to advance proven
strategies that hold the promise of ending homelessness. Building Changes provides capacity building,
funding, and policy guidance so its partners can do the best work possible. Building Changes' primary
activities are:
Building the capacity of front-line providers and government agencies so they have the knowledge
and skills they need to improve and sustain their programs.
Demonstrating impact through data collection and evaluation.
Providing grants for promising programs and proven solutions to homelessness.
Targeting policy changes that strengthen the approach of collaborative partners to ending
homelessness.
Building Changes' Approach
Building Changes acts as a "compassionate engineer," designing and implementing a better system to end
homelessness. If Building Changes can change the systems that serve the homeless, it can help
communities make more efficient use of their resources - and ultimately, transform lives. Building Changes
applies and tests the following proven and promising strategies:
Economic Opportunities - Promote long-term stability by collaborating with workforce systems and
incorporating educational and employment programs and services into housing.
Rapid Re-Housing - Quickly move people into housing; provide short-term rental assistance, case
management, and employment assistance.
Evaluation - Collect data and evaluate the impact of these approaches to continually improve the
work of communities.
Prevention - Keep families and individuals from falling into homelessness by coordinating efforts
among housing, education, child welfare, health care, social services, and government.
Coordinated Entry - Improve and streamline access to housing and services into one entry point to
quickly meet the specific needs of people experiencing homelessness.
9 091665fs123114 Revised: 4/7/2015 8:37 AM mcp
Tailored Programs and Services - Meet the varying service and housing needs of families and individuals
by delivering a customized level of service at the right time.
Notable Accomplishments for 2014
Coordinated entry is now fully underway in King, Pierce and Snohomish counties. It is helping to
streamline access, assessment, and referral processes for housing and other services across agencies in the
community. All three counties have a better sense of the scope of homelessness and are beginning to
use data to refine their systems and address emerging needs. New data is showing that coordinated
entry has simplified access for families, that many homeless families are ready and able to work and that
the majority of families have many strengths, including recent home ownership or lease, no previous
evictions, recent positive work history, and a high school diploma or higher.
Building Changes played a significant role in implementing Rapid Re-Housing in King County and
throughout Washington State in 2014. This model quickly moves homeless families into permanent
housing using short-term rental assistance, case management, and individualized employment services.
Under a contract with the Washington State Department of Commerce, Building Changes provided
technical assistance to all 39 Washington counties to support effective Rapid Re-housing implementation.
The Washington State Department of Commerce adopted Rapid Re-Housing as an essential tool for
ending family homelessness, making it one of three programs that serves low income families who are
homeless or at risk of homelessness.
Diversion is a new model that engages homeless families as early as possible, moves them from the street
to their own housing, and avoids costly interventions, while freeing up limited shelter beds. The goal is to
serve more families with quick and flexible interventions and the results are encouraging. In 2014,
125 King County families avoided homelessness thanks to a diversion pilot program that provides
recipients the assistance they need. Families received small stipends to rent housing in the private
market, or financial help such as funds for car repair so a parent can keep his or her job. Building
Changes believes this solution can work for many families, while reserving shelter for families who have no
other options.
Building Changes provided training and technical assistance to implement the $6 million Washington State
Department of Labor's Workforce Innovations Fund grant to expand and replicate the Housing and
Employment Navigator model developed in 2010 by Building Changes and its partners. By 2016, this
project will engage 720 homeless families served by housing programs in four Washington counties
(Pierce, Whatcom, Skagit, and Yakima).
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In 2014, Building Changes continued its work to improve the connection between housing and
Healthcare. Building Changes hired a Senior Manager to manage its healthcare initiatives and build
stronger relationships with healthcare organizations. Building Changes' Executive Director Alice Shobe
became the official housing representative on the Washington State-level Behavioral Health Steering
Committee ("the Committee") convened by Washington State's Department of Social & Health Services.
As charged by two recently enacted laws, Senate Bill 5732 and House Bill 1519, the Committee was created
in early 2014 to support the Washington State Health Care Innovation Plan to develop performance
measures in seven areas, including increases in housing stability for people who receive behavioral health
treatments. Building Changes recruited homeless/housing representatives to the Committee's work
groups and convened them to exchange information and ensure broad input in defining housing stability.
During the 2014 legislative session, the work groups participated in weekly phone calls with the
Governor's policy office and other healthcare advocates to ensure housing stability was included in
healthcare bills. Three healthcare bills included significant opportunities for housing and healthcare
cooperation to improve services for people experiencing homelessness, including funding for a pilot
supportive housing program for people exiting behavioral health facilities.
During 2014, Building Changes deepened its racial equity work to address disparities and
disproportionality among families at risk for homelessness. Building Changes' Racial Equity Framework
was finalized in 2014 and articulates the vision of its racial equity work as a primary lens through which it
conducts its work, both internally as part of its organizational culture and externally as reflected
throughout all of its activities, collaborations, and results. Building Changes believes its intentional focus
on building skills among staff on reducing racial disproportionality across its work will lead to
population-level impacts in its work as well. The Racial Equity Framework is now being used to inform
and guide all of Building Changes' work, including grantmaking, capacity building, policy, and evaluation.
Building Changes is leading the Leadership in Action Program, a nine-month Results-Based Leadership
model, in Pierce County. This unique model, developed by the Annie E. Casey Foundation, builds the
capacity of a diverse group of cross-sector community leaders to accelerate measurable improvements in
the well-being of families, children, and communities in the Pierce community. The Pierce County
Leadership in Action Program is the first such offering in Washington State. It launched in
September 2014 with 36 leaders representing more than 30 organizations, and met three times in 2014.
Through the Washington Youth and Families Fund (formerly Washington Families Fund), a successful
public-private partnership, Building Changes made grants in King, Pierce and Snohomish counties to drive
fundamental, systemic changes to the way that homeless families receive support. These private grants
are matched 2.5 to 1 with realigned public funding, to ensure sustainability and increase the impact and
pace of change. Since the fund launched in 2004, Washington State has allocated $17 million to the
Washington Youth and Families Fund, which has leveraged $38.5 million in investments from 25 different
private funders.
In 2014, Building Changes granted $5,173,554 to 37 nonprofits. These grants supported employment,
rapid re-housing, coordinated entry, and other changes to the systems that support homeless families.
Along with funding, Building Changes provides grantees ongoing support in the form of capacity building,
technical assistance, and evaluation.
2014 marked the 10th anniversary of the Washington Youth and Families Fund, which is dedicated to
reducing and ending youth and family homelessness statewide. Building Changes celebrated
Washington Youth and Families Fund's achievements in December, when Governor Inslee and other
Washington State philanthropic and private sector leaders signed a new memorandum of understanding
pledging to make youth, young adult, and family homelessness in Washington a rare, brief, and one-time
occurrence by 2020.
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Note 2. Significant Accounting Policies
Financial Statement Presentation
Building Changes reports information regarding its financial position and activities according to
three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently
restricted net assets. Building Changes has no permanently restricted net assets, so this class of net
assets is not shown on the financial statements.
Temporarily Restricted Net Assets
Temporarily restricted net assets consist of unexpended contributions or grants restricted for particular
purposes or time periods. Temporarily restricted net assets are transferred to unrestricted net assets as
expenditures are incurred for the restricted purpose, or as time restrictions expire. Temporarily restricted
net assets at December 31 consist of:
2014 2013
Washington Families Fund expansion 7,333,538$ 4,295,376$
Washington Families Fund service grantmaking 1,401,433 2,048,510
Contributions restricted for time 327,914 130,000
Youth homelessness 238,990 62,454
WFF high level services evaluation 232,333 267,163
Business planning 225,000
Economic opportunities 206,135 194,258
Healthcare 150,000
Racial disproportionality in homelessness 70,787 146,302
Other 41,695
10,227,825$ 7,144,063$
Unrestricted Net Assets
A portion of unrestricted net assets are designated by the Board for an Innovation Fund, which is intended
to be used to fund new program opportunities.
Use of Estimates
The preparation of financial statements in conformity with accounting principles generally accepted in the
United States requires management to make estimates and assumptions that affect certain reported
amounts and disclosures. Actual results could differ from the estimated amounts.
Cash and Cash Equivalents
Cash and cash equivalents consist of checking, savings, and money market accounts. Cash balances held
in investment accounts are included with investments in the statements of financial position.
Building Changes occasionally has amounts deposited with financial institutions in excess of federally
insured limits.
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Restricted Cash
Restricted cash is not available for general operating purposes and is restricted by donors to be used to
fund grants under the Washington Youth and Family Fund program.
Investments
Investments are reported at their fair values (using Level 1 inputs of the fair value hierarchy, which are
quoted market prices in active markets for identical assets) in the statements of financial position.
Unrealized gains and losses are included in the change in net assets.
Accounts and Grants Receivable
Accounts and grants receivable are due primarily from the Washington State Department of Commerce.
Management provides for probable uncollectible amounts through a charge to expense and a credit to a
valuation allowance based on its assessment of the current status of individual accounts. Balances still
outstanding after management has used reasonable collection efforts are written off through a charge to
the valuation allowance and a credit to the receivable account. Management determined that no
allowance was necessary at December 31, 2014 and 2013. Accounts and grants receivable expected to be
collected after one year from the statement of financial position date are presented as long-term in the
accompanying financial statements.
Promises to Give
Promises to give consist of contributions pledged but not yet received from individuals, foundations, and
corporations. Promises to give that are expected to be collected within one year are recorded at net
realizable value. Promises to give expected to be collected in future years are initially recorded at fair
value, which is measured as the present value of the expected future cash flows. The discount on those
amounts is computed using a risk adjusted interest rate which is applicable to the year in which the award
was received (using Level 3 inputs of the fair value hierarchy, which are unobservable inputs developed by
Building Changes). Of the total promises to give, 74% and 81% were due from one foundation as of
December 31, 2014 and 2013, respectively. Management determined that no allowance was necessary at
December 31, 2014 and 2013.
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Property and Equipment
Property and equipment are recorded at cost or, if donated, at fair value at date of receipt. Building
Changes capitalizes all expenditures for property and equipment with a useful life greater than one year
and a cost in excess of its capitalization threshold of $5,000. Depreciation expense is provided for using
the straight-line method over the assets' estimated useful lives. Depreciation expense for leasehold
improvements is recorded over the shorter of the useful life or the lease term using the straight-line
method. Property and equipment consists of the following at December 31:
2014 2013
Leasehold improvements 143,739$ 143,739$
Furniture and equipment 134,707 353,777
278,446 497,516
Accumulated depreciation (278,446) (491,053)
-$ 6,463$
Grants Payable
Grants payable consist of unconditional promises to pay grants to others. Grants payable are recognized
as expense, and the related liability recognized, at fair value in the period grants are awarded or paid. In
general, grants are payable over three years. In some instances, grants are payable in more than
three years and are recognized in the period it becomes probable that the grants will be paid. Fair value
is measured as the present value of the expected future cash flows. The discount on those amounts is
computed using a risk adjusted interest rate which is applicable to the year in which the award was made
(using Level 3 inputs of the fair value hierarchy, which are unobservable inputs developed by
Building Changes).
Revenue Recognition
Contributions: Unconditional promises to give are recognized as unrestricted, temporarily restricted, or
permanently restricted support depending on the existence and/or nature of any donor restrictions at fair
value during the period a cash gift or non-cash gift is received or pledged.
Government grants: Revenue related to governmental grants and contracts is recognized when grants
payable to others have been awarded or paid.
Technical assistance service fees: Technical assistance service fees represent fees for training and
consulting services, and are recognized as the services are provided.
One foundation and the Washington State Department of Commerce accounted for 60% and 23%,
respectively, of total support and revenue for 2014. One foundation and the Washington State
Department of Commerce accounted for 84% and 9%, respectively, of total support and revenue for 2013.
Functional Allocation of Expenses
The costs of providing the various programs and other activities have been summarized on a functional
basis in the statements of activity and statements of functional expenses. Accordingly, certain costs have
been allocated between the program and supporting services benefited.
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Income Taxes
Building Changes is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue
Code, and its federal returns are open to review by federal taxing authorities for the last three years.
Reclassifications
Certain balances have been reclassified in the 2013 financial statements in order to conform to current
year presentation. These reclassifications had no effect on net assets or the change in net assets as of or
for the year ended December 31, 2013.
Subsequent Events
Building Changes has evaluated subsequent events through the date these financial statements were
available to be issued, which is the same date as the independent auditors' report.
Note 3. Investments
Investments consist of the following at December 31:
2014 2013
Cash and cash equivalents 143,484$ 309,722$
Fixed income securities
Government mortgage backed securities 948,125 1,054,838
Corporate bonds 878,349 1,019,437
Treasury notes 519,646 664,210
2,489,604$ 3,048,207$
Investment income was composed of:
2014 2013
Realized and unrealized losses (32,903)$ (53,008)$
Interest income 78,827 79,295
45,924$ 26,287$
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Note 4. Promises to Give
Promises to give were due as follows as of December 31:
2014 2013
Receivable in less than one year 2,373,651$ 2,843,807$
Receivable in one to five years 1,320,000 10,000
3,693,651 2,853,807
Unamortized discount (2%) (26,075) (291)
3,667,576$ 2,853,516$
Included in the statements of financial position as follows:
2014 2013
Promises to give - current portion 2,373,651$ 2,843,807$
Promises to give - long-term portion 1,293,925 9,709
3,667,576$ 2,853,516$
Note 5. Grants Payable
Grants are payable as follows at December 31:
2014 2013
Payable in less than one year 5,524,839$ 6,915,780$
Payable in one to five years 3,005,388 3,639,526
8,530,227 10,555,306
Unamortized discount (1.5% - 2%) (68,074) (63,606)
8,462,153$ 10,491,700$
Included in the statements of financial position as follows:
2014 2013
Grants payable - current portion 5,524,839$ 6,915,780$
Grants payable - long-term portion 2,937,314 3,575,920
8,462,153$ 10,491,700$
16 091665fs123114 Revised: 4/7/2015 8:37 AM mcp
Note 6. Line of Credit
Building Changes has a $200,000 line of credit agreement with a bank, collateralized by all of its assets,
which is renewable on July 9, 2015. Interest is payable monthly at LIBOR plus 4.095% (resulting in a rate
of 4.18% at December 31, 2014). There was no outstanding balance under this agreement at
December 31, 2014 or 2013.
Note 7. Operating Leases
Building Changes leases office space and certain equipment under operating leases. The term of the
office space lease expires on August 31, 2015. On January 15, 2015, Building Changes executed a lease
for new office space with an initial 60 month term beginning August 2015 and ending August 2020. Rent
expense under these operating leases amounted to $170,147 and $172,707 for the years ended
December 31, 2014 and 2013, respectively. Future minimum payments under the leases are as follows for
the years ending December 31:
2015 107,946$
2016 64,530
2017 57,984
2018 59,712
2019 61,501
Thereafter 41,823
393,496$
Note 8. Retirement Plan
Building Changes participates in a defined-contribution tax-sheltered 403(b) annuity plan covering
substantially all permanent employees upon commencement of employment. Employees are eligible to
receive employer contributions after one year of service. Employer contributions are a minimum of 3% of
eligible employees' annual compensation. Total expense related to contributions to the plan were
$40,924 and $36,428 for the years ended December 31, 2014 and 2013, respectively. Building Changes
also sponsors a tax-deferred annuity plan to which employees may make voluntary contributions.
17
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
Building Changes
Seattle, Washington
We have audited, in accordance with the auditing standards generally accepted in the United States 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 Building Changes, which comprise
the statement of financial position as of December 31, 2014, and the related statements of activities,
functional expenses, and cash flows for the year then ended, and the related notes to the financial
statements, and have issued our report thereon dated __________________.
Internal Control over Financial Reporting
In planning and performing our audit of the financial statements, we considered Building Changes' 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 Building Changes' internal control. Accordingly,
we do not express an opinion on the effectiveness of the Building Changes' 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.
18
Compliance and Other Matters
As part of obtaining reasonable assurance about whether Building Changes' financial statements are free
from material misstatement, we performed tests of its compliance with certain provisions of Jaws,
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
Building Changes' internal control or on compliance. This report is an integral part of an audit performed
in accordance with Government Auditing Standards in considering the Building Changes' internal control
and compliance. Accordingly, this communication is not suitable for any other purpose.
____________________________