S 30, 2019 · 9/30/2019 · FOOD & FRIENDS, INC. STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2019 (WITH SUMMARIZED FINANCIAL INFORMATION FOR THE YEAR ENDED SEPTEMBER

FOOD & FRIENDS, INC.

SINGLE AUDIT FINANCIAL REPORT

UNDER UNIFORM GUIDANCE

SEPTEMBER 30, 2019


TABLE OF CONTENTS

SEPTEMBER 30, 2019

Pages

Independent Auditors’ Report ................................................................................................. 3-4

Financial Statements

Statement of Financial Position ............................................................................................ 5

Statement of Activities ......................................................................................................... 6

Statement of Functional Expenses ........................................................................................ 7

Statement of Cash Flows ...................................................................................................... 8

Notes to Financial Statements .............................................................................................. 9-19

Supplementary Information

Schedule of Expenditures of Federal Awards ........................................................................ 21

Notes to Schedule of Expenditures of Federal Awards .......................................................... 22

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 .............................................................. 23-24

Independent Auditors’ Report on Compliance for Each Major Program and

on Internal Control over Compliance Required by the Uniform Guidance.......................... 25-26

Schedule of Findings and Questioned Costs .......................................................................... 27-28

COUNCILOR, BUCHANAN & MITCHELL, P.C. – CPAs AND BUSINESS ADVISORS www.cbmcpa.com | (F) 301.986.0432

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Independent Auditors’ Report

To the Board of Directors

Food & Friends, Inc.

Washington, D.C.

Report on the Financial Statements

We have audited the accompanying financial statements of Food & Friends, Inc. (the Organization)

a nonprofit organization, which comprise the statement of financial position as of September 30, 2019,

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 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 audit. We

conducted our audit 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 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 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 auditors consider 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.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the

financial position of Food & Friends, Inc. as of September 30, 2019, 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 of America.

To the Board of Directors Food & Friends, Inc.

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Emphasis of Matter

As discussed in Note 2 of the financial statements, Food & Friends, Inc. adopted the Financial

Accounting Standards Board’s (FASB) Accounting Standards Update (ASU) 2016-14, Not-for-Profit

Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. The requirements of the

ASU have been applied retrospectively to all periods presented. Our opinion is not modified with

respect to this matter.

Other Matters

Other Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole.

The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of

Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements

for Federal Awards, 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 audit 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 March 27, 2020,

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 solely 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 the

effectiveness of the Organization’s 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.

Report on Summarized Comparative Information

We have previously audited the Organization’s 2018 financial statements, and we expressed an

unmodified audit opinion on those financial statements in our report dated April 3, 2019. In our

opinion, the summarized comparative information presented herein as of and for the year ended

September 30, 2018, is consistent, in all material respects, with the audited financial statements from

which it has been derived.

Washington, D.C. Certified Public Accountants

March 27, 2020


STATEMENT OF FINANCIAL POSITION

AS OF SEPTEMBER 30, 2019 (WITH SUMMARIZED FINANCIAL INFORMATION AS OF SEPTEMBER 30, 2018)

See accompanying Notes to Financial Statements.

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2019 2018

Assets

Current Assets

Cash and Cash Equivalents 457,591$ 70,910$

Government Grants and Contracts Receivable 601,565 926,091

Partnership Contracts Receivable 181,487 258,390

Contributions Receivable 965,548 1,027,986

Prepaid Expenses 166,483 87,255

Total Current Assets 2,372,674 2,370,632

Investments 3,230,153 3,148,911

Fixed Assets

Kitchen Equipment 1,098,968 1,081,838

Furniture and Office Equipment 1,067,131 1,068,918

Delivery Vehicles 634,192 585,573

Equipment Held under Capital Leases 42,838 21,938

Land and Land Improvements 2,347,662 2,328,161

Building, Including Capitalized Interest of Approximately $48,000 6,000,343 5,891,562

11,191,134 10,977,990

Less Accumulated Depreciation and Amortization (4,692,856) (4,398,593)

Total Fixed Assets 6,498,278 6,579,397

Other Assets

Contributions Receivable, Less Current Portion 320,427 645,427

Cash Surrender Value - Key Man Life Insurance Policy 218,160 195,346

Deposits 106,998 1,770

Total Other Assets 645,585 842,543

Total Assets 12,746,690$ 12,941,483$

Liabilities and Net Assets

Current Liabilities

Accounts Payable and Accrued Expenses 695,410$ 1,115,351$

Capital Lease Obligation 3,670 900

Mortgage Payable 32,955 34,816

Margin Loan - 451,904

Deferred Revenue 1,630 380

Total Current Liabilities 733,665 1,603,351

Capital Lease Obligation, Less Current Portion 14,701 -

Mortgage Payable, Less Current Portion 359,224 389,592

Total Liabilities 1,107,590 1,992,943

Net Assets

Without Donor Restrictions

Undesignated 8,340,830 7,533,009

Board Designated - Greatest Needs 1,028,939 802,872

Total Without Donor Restrictions 9,369,769 8,335,881

With Donor Restrictions

Purpose Restricted 1,253,897 1,622,034

Endowment Funds - Invested in Perpetuity 1,015,434 990,625

Total With Donor Restrictions 2,269,331 2,612,659

Total Net Assets 11,639,100 10,948,540

Total Liabilities and Net Assets 12,746,690$ 12,941,483$


STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED SEPTEMBER 30, 2019 (WITH SUMMARIZED FINANCIAL INFORMATION FOR THE YEAR ENDED SEPTEMBER 30, 2018)


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Without Donor With Donor

Restrictions Restrictions 2019 2018

Revenue

Grants and Contributions

Individuals 1,954,102$ 995,844$ 2,949,946$ 2,631,937$

Corporations and Foundations 441,322 265,463 706,785 988,337

Partnership Contracts 1,300,718 - 1,300,718 416,338

Combined Federal Campaign 148,449 - 148,449 139,193

30th Anniversary Campaign - - - 219,000

In-Kind Contributions 1,034,182 - 1,034,182 1,645,395

Government Grants 3,389,975 1,032,625 4,422,600 3,966,915

Special Events 1,534,544 - 1,534,544 1,593,653

Interest and Dividend Income 70,546 38,020 108,566 126,280

Net Gain (Loss) on Investments 15,556 (12,320) 3,236 63,920

Billboard Revenue 15,000 - 15,000 17,209

Gain on Disposition of Fixed Assets 4,472 - 4,472 4,362

Other Revenue 58,542 - 58,542 -

Net Assets Released

from Restrictions 2,662,960 (2,662,960) - -

Total Revenue 12,630,368 (343,328) 12,287,040 11,812,539

Expenses

Programs 9,023,722 - 9,023,722 8,948,025

Special Events 437,976 - 437,976 493,884

Management and General 415,218 - 415,218 387,438

Fundraising 1,719,564 - 1,719,564 1,636,772

Total Expenses 11,596,480 - 11,596,480 11,466,119

Change in Net Assets 1,033,888 (343,328) 690,560 346,420

Net Assets, Beginning of Year 8,335,881 2,612,659 10,948,540 10,602,120

Net Assets, End of Year 9,369,769$ 2,269,331$ 11,639,100$ 10,948,540$


STATEMENT OF FUNCTIONAL EXPENSES



- 7 -

Programs

Home Groceries Management

Delivered to Total Special and

Meals Go Nutrition Programs Events General Fundraising 2019 2018

Salaries 2,354,864$ 1,547,805$ 426,252$ 4,328,921$ -$ 206,138$ 724,166$ 5,259,225$ $ 5,528,039

Payroll Taxes and Benefits 350,436 230,334 81,348 662,118 - 54,106 132,024 848,248 821,662

Advertising 6,719 4,416 1,948 13,083 - 121 5,848 19,052 17,997

Bank and Payroll Fees 19,695 12,946 3,624 36,265 - 17,326 75,175 128,766 132,430

Combined Federal Campaign 139 91 - 230 - - 5,295 5,525 4,900

Community Relations 12,803 8,415 1,964 23,182 - 8,308 17,084 48,574 30,953

Depreciation and Amortization 161,985 106,469 21,278 289,732 - 24,998 29,295 344,025 336,943

Dues and Subscriptions 1,462 961 2,141 4,564 - 2,987 10,479 18,030 20,400

Education and Development 5,022 3,301 4,709 13,032 - 3,060 10,125 26,217 37,656

Equipment Purchase and Rental 12,041 7,915 337 20,293 - 163 547 21,003 12,151

Events 50,183 32,984 - 83,167 437,976 - - 521,143 579,043

Food and Disposables 1,159,881 762,366 - 1,922,247 - - - 1,922,247 1,561,081

Direct Mail and Major Donor - - - - - - 375,949 375,949 374,367

Insurance 118,695 78,016 11,103 207,814 - 15,431 14,956 238,201 239,718

Interest 19,801 13,015 3,881 36,697 - 3,698 5,409 45,804 48,855

Professional Fees 53,810 35,368 5,203 94,381 - 3,668 9,632 107,681 117,557

Miscellaneous 1,935 1,272 370 3,577 - 13,355 13,523 30,455 33,171

Meetings 2,101 1,381 383 3,865 - 830 2,461 7,156 7,185

Office Expenses 25,902 17,025 3,549 46,476 - 7,618 10,316 64,410 58,580

Postage 7,639 5,021 1,127 13,787 - 4,531 17,621 35,939 34,313

Printing 12,462 8,191 700 21,353 - 338 22,528 44,219 44,295

Consulting Fees and Services 267,820 176,033 18,962 462,815 - 20,568 201,088 684,471 734,247

Promotional Merchandise 1,776 1,167 67 3,010 - 17 385 3,412 5,986

Rent 5,070 3,333 1,177 9,580 - 569 1,910 12,059 10,040

Repairs and Maintenance 237,898 156,366 11,902 406,166 - 12,438 14,228 432,832 287,897

Telephone 38,675 25,420 5,861 69,956 - 6,455 9,954 86,365 76,869

Travel 3,572 2,347 555 6,474 - 2,068 1,668 10,210 6,452

Utilities 94,343 62,010 5,876 162,229 - 6,121 6,786 175,136 196,898

Vehicle Expense 26,063 17,131 835 44,029 - 306 1,112 45,447 40,049

Volunteer Activities 20,859 13,711 109 34,679 - - - 34,679 66,385

Total 5,073,651$ 3,334,810$ 615,261$ 9,023,722$ 437,976$ 415,218$ 1,719,564$ 11,596,480$ 11,466,119$


STATEMENT OF CASH FLOWS



- 8 -

2019 2018

Cash Flows from Operating Activities

Change in Net Assets 690,560$ 346,420$

Adjustments to Reconcile Change in Net Assets to

Net Cash Provided by Operating Activities

Depreciation and Amortization 344,025 336,943

Net Loss on Disposal of Fixed Assets 97 601

Net Gain on Investments (3,236) (63,920)

(Increase) Decrease in Assets

Government Grants Receivable 324,526 (492,465)

Partnership Contracts Receivable 76,903 (258,390)

Contributions Receivable 387,438 420,324

Prepaid Expenses (79,228) 52,723

Deposits (105,228) 3,801

Increase (Decrease) in Liabilities

Accounts Payable and Accrued Expenses (419,941) 302,052

Deferred Revenue 1,250 -

Net Cash Provided by Operating Activities 1,217,166 648,089

Cash Flows from Investing Activities

Purchases and Contributions of Property and Equipment (245,532) (160,031)

Increase in Cash Surrender Value - Key

Man Life Insurance Policy (22,814) (26,144)

Purchases of Investments (1,206,533) (674,695)

Proceeds from Sales of Investments 1,128,527 606,367

Net Cash Used in Investing Activities (346,352) (254,503)

Cash Flows from Financing Activities

Repayments of Mortgage Payable (32,229) (33,249)

Repayments of Capital Lease Obligation - (5,131)

Proceeds from Margin Loan - 250,000

Repayments of Margin Loan (451,904) (639,368)

Net Cash Used in Financing Activities (484,133) (427,748)

Net Increase (Decrease) in Cash and Cash Equivalents 386,681 (34,162)

Cash and Cash Equivalents, Beginning of Year 70,910 105,072

Cash and Cash Equivalents, End of Year 457,591$ 70,910$

Supplementary Disclosure of Cash Flow Information

Interest Paid 45,804$ 48,855$

Noncash Transaction from Investing and Financing Activities

During the year ended September 30, 2019, the Organization entered into a capital lease

agreement for office equipment valued at approximately $21,000.


NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2019

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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Organization

Food & Friends, Inc. (the Organization) is a nonprofit organization located in the District of

Columbia. The mission of Food & Friends, Inc. is to improve the lives and health of people with

HIV/AIDS, cancer and other serious illnesses by preparing and delivering specialized meals and

groceries, providing nutritional counseling, and reducing social isolation. The Organization’s

service area includes the District of Columbia, seven counties in Maryland, and seven counties

and six independent cities in Virginia.

The operations of the Organization are primarily funded by contributions, government grants,

and special events.

Basis of Accounting

The financial statements of Food & Friends, Inc. have been prepared on the accrual basis of

accounting.

Financial Statement Presentation

The Organization has presented its financial statements in accordance with U.S. Generally

Accepted Accounting Principles. Under those principles, the Organization is required to report

information regarding its financial position and activities according to two classes of net assets:

Net Assets Without Donor Restrictions - resources that are available for general operations and

resources designated by the Organization’s Board of Directors for approved expenditures.

Net Assets With Donor Restrictions - net assets with donor restrictions are resources that are subject

to donor-imposed restrictions. Some restrictions are temporary in nature, such as those that are

restricted by a donor for use for a particular purpose or in a particular future period. Other

restrictions may be perpetual in nature; such as those that are restricted by a donor that the

resources be maintained in perpetuity (endowment).

Income Taxes

The Organization is exempt from income taxes under Code Section 501(c)(3) of the Internal

Revenue Code and is not classified as a private foundation.

The Organization requires that a tax position be recognized or derecognized based on a “more-

likely-than-not” threshold. This applies to tax positions taken in a tax return. The Organization

does not believe its financial statements include, or reflect, any uncertain tax positions.

The Organization’s Form 990, Return of Organization Exempt from Income Tax, Form 990-T,

Exempt Organization Business Income Tax Return, and the District of Columbia Form D-20,

Corporation Franchise Tax Return, are subject to examination by the taxing authorities, generally

for three years after they are filed.

Cash and Cash Equivalents

All highly liquid investments, excluding amounts included in investments, with a maturity of

less than 90 days at the date of acquisition are considered cash equivalents.



SEPTEMBER 30, 2019

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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Investments

Investments are recorded at fair market value.

Fixed Assets

The Organization capitalizes all computer equipment of $750 and above and all other fixed

assets acquisitions of $1,000 and above. Fixed assets are recorded at cost, if purchased, or fair

market value at date of donation, if contributed. Depreciation is provided on the straight-line

basis over the estimated useful lives of the assets. Expenditures for maintenance and repairs,

including planned major maintenance activities, are charged to expense as incurred.

Contributions

The Organization reports gifts of cash and other assets as net assets with donor restrictions if they

are received with donor stipulations that limit the use of the donated assets. When a donor

restriction expires, that is, when a stipulated time restriction ends or purpose restriction is

accomplished, net assets with donor restrictions are reclassified to net assets without donor

imposed restrictions and reported in the statement of activities as net assets released from

restrictions.

Government Grants and Contracts

Government grants/contracts derived from federal funding are recognized on a cost

reimbursement basis to the extent of allowable costs/agreed upon price.

Government Grants Receivable

Government grants receivable are stated at the amount management expects to collect on the

outstanding balances. Management provides for probable uncollectible amounts through a

provision for bad debt expense and an adjustment to a valuation allowance based on its

assessment of the current status of accounts. It is the Organization’s policy to charge off

uncollectible government grants receivable when management determines the receivable will

not be collected. As of September 30, 2019, the Organization has not deemed it necessary to

establish an allowance for doubtful accounts for this funding stream.

Partnership Contracts Receivable

The Organization continued with its original July 2018 funding agreement and entered into

additional funding agreements during the fiscal year with two additional managed care

organizations (MCOs). At September 30, 2019, the amount that management recorded as a

receivable from MCO is approximately $181,000.

It is the Organization’s policy to charge off uncollectable receivables when management

determines the receivable will not be collected. As of September 30, 2019, the Organization’s

management has established an allowance for doubtful accounts for approximately $1,800.



SEPTEMBER 30, 2019

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1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Contributions Receivable

Unconditional promises to give that have not been collected as of the statement of financial

position date, are recorded as contributions receivable. An allowance of $5,000 for doubtful

accounts has been established to provide for potentially uncollectible amounts. Management

estimates the allowance for doubtful accounts based on historical experience updated for current

economic conditions. If actual experience changes, revisions to the allowance may be necessary.

Donated Services

Donated services are recognized as contributions if the services (a) create or enhance nonfinancial

assets or (b) require specialized skills, are performed by people with those skills, and would

otherwise be purchased by the Organization.

The Organization receives donated services for professional legal services and from a variety of

unpaid volunteers assisting in preparing and delivering meals. In 2019, volunteers donated

approximately 120,000 hours to the Organization. Volunteers are crucial to the Organization in

fulfilling its tax-exempt purpose.

Functional Expense Allocation

The financial statements report certain categories of expenses that are attributed to more than one

program or supporting function. Therefore, these expenses require allocation on a reasonable basis

that is consistently applied. The expenses that are allocated include most indirect operating costs

that support various programs and functions. The basis of the allocations is direct salary costs

which have been allocated to program and supporting functions based on documentation of

employee time and effort and square footage for occupancy expenses.

Estimates

The preparation of financial statements in conformity with accounting principles generally

accepted in the United States of America 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.

Prior Year Information

The financial statements include certain prior year summarized comparative information. Such

information does not include sufficient detail to constitute a presentation in conformity with

accounting principles generally accepted in the United States of America. Accordingly, such

information should be read in conjunction with the Organization’s financial statements for the

year ended September 30, 2018, from which the summarized information was derived.

Reclassification

Certain 2018 amounts have been reclassified for comparative purposes.



SEPTEMBER 30, 2019

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2. ADOPTION OF ACCOUNTING STANDARDS UPDATE 2016-14

For the year ended September 30, 2019, the Organization adopted Financial Accounting

Standards Board (FASB) Accounting Standards Update (ASU) 2016-14, Not-for-Profit Entities

(Topic 958): Presentation of Financial Statements of Not-for-Profit Entities. This update addresses the

complexity and understandability of net asset classification and provides information about

liquidity and availability of resources. The changes required by the update have been applied

retrospectively to all periods presented. A key change under ASU 2016-14 is the terminology of

net asset classes used in these financial statements. Amounts previously reported as temporarily

and permanently restricted net assets, if applicable, are now reported as net assets with donor

restrictions. Amounts previously reported as unrestricted net assets are now reported as net

assets without donor restrictions.

3. LIQUIDITY AND AVAILABLE RESOURCES

The Organization’s cash flows have seasonal variations due to the timing of grants, contributions,

special events, and vendor payments. The Organization manages its liquidity to meet general

expenditures, liabilities, and other obligations as they become due.

As of September 30, 2019, the following financial assets and liquidity resources were available

for general operating expenditures for the year ending September 30, 2020:

Financial Assets

Cash and Cash Equivalents 457,591$

Government Grants Receivable 601,565

Partnership Contracts Receivable 181,487

Contributions Receivable 965,548

Less With Donor Purpose Restrictions (1,113,796)

Investments, Net of Endowment Funds 1,185,780

Total Financial Assets and Liquidity Resources Available within One Year 2,278,175$

The Organization also has a line of credit available as discussed in Note 10. With resources

available and the line of credit, the Organization is currently adhering to its Reserve Policy -

approved by the Board of Directors - that desires to achieve a reserve for operations equal to

three months operating expense.

4. CONTRIBUTIONS RECEIVABLE

Contributions receivable due in more than one year are discounted at a rate of approximately

5%. Contributions receivable as of September 30, 2019, are as follows:

Description Amount

Contributions Receivable in Less Than One Year 972,365$

Contributions Receivable in One to Five Years 322,500

Contributions Receivable 1,294,865

Less Discount to Net Present Value (2,073)

Less Allowance for Uncollectible Amounts (6,817)

Contributions Receivable, Net of Allowance and Discount 1,285,975$



SEPTEMBER 30, 2019

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5. GOVERNMENT GRANTS AND CONTRACTS

Approximately $4,423,000 of the Organization’s revenue is derived from grants with federal, state,

and local governments, which are subject to audit by various agencies. A contingent liability exists

to refund any amounts received in excess of allowable costs incurred. Management believes that

the adjustments, if any, resulting from such audits will not be material to the financial statements.

6. FAIR VALUE MEASUREMENTS

The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value

into three broad levels as follows:

Level 1 - inputs to the valuation methodology are quoted prices (unadjusted) for identical assets

or liabilities in active markets (examples include equity securities);

Level 2 - inputs to the valuation methodology include quoted prices for similar assets and

liabilities in active markets, and inputs that are observable for the asset or liability other than

quoted prices, either directly or indirectly, including inputs in markets that are not considered

to be active (examples include corporate or municipal bonds);

Level 3 - inputs to the valuation methodology are unobservable and significant to the fair value

measurement. The inputs to the determination of fair value require significant management

judgment (examples include certain private equity securities and split interest agreements).

The following presents the Organization’s assets measured at fair value on a recurring basis as

of September 30, 2019:

Assets Fair Value Level 1 Inputs Level 2 Inputs Level 3 Inputs

Money Market Funds 371,732$ 371,732$ -$ -$

Mutual Funds 1,441,344 1,441,344 - -

Exchange Traded Funds 552,048 552,048 - -

Corporate Bonds 416,136 - 416,136 -

Government Bonds 253,290 - 253,290 -

Certificate of Deposit 166,133 - 166,133 -

Foreign Bonds 29,470 - 29,470 -

Total Investments 3,230,153 2,365,124 865,029 -

Cash Surrender Value - Key Man

Life Insurance Policy 218,160 - 218,160 -

Total 3,448,313$ 2,365,124$ 1,083,189$ -$

Bond values are based on readily available pricing sources for comparable investments. The value

of the cash surrender value - key man life insurance policy was based on information provided by

the investment managers.

The Organization recognizes transfers of assets into and out of levels as of the date an event or change

in circumstances causes the transfer. There were no transfers between levels during the year ended

September 30, 2019.



SEPTEMBER 30, 2019

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7. NET ASSETS WITH DONOR RESTRICTIONS FOR PURPOSE AND TIMING

As of September 30, 2019, net assets with donor restrictions are available as follows:

Description Amount

Purpose Restriction - Programs 865,499$

Purpose Restriction - Delivery Van 50,000

Endowments - Purpose 198,297

Timing 140,101

Total Net Assets With Donor Restrictions for Purpose and Timing 1,253,897$

For the year ended September 30, 2019, net assets were released from donor restrictions by

incurring expenses satisfying the purpose and or timing restrictions specified by donors as follows:

Description Amount

State of Maryland - Home Delivered Meals Program - Timing 840,625$

Purpose Restriction - Programs 878,653

Endowments - Purpose 42,320

Timing 901,362

Total Net Assets Released from Restrictions 2,662,960$

8. NET ASSETS WITH DONOR RESTRICTIONS HELD IN PERPETUITY

Net assets with donor restrictions held in perpetuity consist of endowment funds to be held

indefinitely, the income from which is expendable to support the Organization’s programs.

As of September 30, 2019, the Organization’s net assets held in perpetuity are as follows:

Description Amount

Food and Food Delivery 150,928$

Education and Advocacy 8,199

Volunteer and Community Support 601,008

Greatest Needs 255,299

Total 1,015,434$

9. CAPITAL LEASE OBLIGATION

The Organization is the lessee of office equipment under a capital lease. The asset and the

liability under the lease are recorded at the present value of the minimum lease payments. The

asset is being depreciated over its estimated useful life. Depreciation of the assets under the

capital lease is included in depreciation and amortization expense.



SEPTEMBER 30, 2019

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9. CAPITAL LEASE OBLIGATION (CONTINUED)

The future minimum lease payments under the capital lease as of September 30, 2019, are as

follows:

For the Years Ending September 30,

2020 5,292$

2021 5,292

2022 5,292

2023 5,292

2024 1,323

Total Minimum Lease Payments 22,491 Less Amount Representing Interest (4,120)

Present Value of Total Minimum Lease Payments 18,371$

10. MARGIN ACCOUNT AND LINE OF CREDIT

Margin Account

During 2012, the Organization established a margin account allowing the Organization to borrow

funds up to approximately 65% of its investment portfolio at a rate of 4.25% to fund its cash needs.

The margin account is secured by the investment portfolio. During 2019, the Organization repaid

approximately $452,000 against the margin account. As of September 30, 2019, the margin

account balance was $-0-.

Line of Credit

In August 2017, the Organization entered into a line of credit agreement with a bank in the

amount of $500,000. Under the terms of the agreement, the interest rate on the line of credit is

subject to change from time to time based on changes using a rate of .350 percentage points over

the index rate. Under no circumstances will the interest rate on the line of credit be less than 5%

per annum or more than the maximum rate allowed by applicable law. The line of credit is

secured by a deed of trust and contains restrictive covenants, including the submission of audited

financial statements within 180 days after close of fiscal year. As of September 30, 2019, the

balance on the line of credit was $-0-.

11. CONCENTRATIONS AND FINANCIAL RISK

The Organization maintains cash balances at several financial institutions in the Washington,

D.C., metropolitan area. Accounts at each institution are insured by the Federal Deposit Insurance

Corporation (FDIC). At times during the year, the Organization’s cash balances exceeded the

FDIC insured amount. Management believes the risk in these situations to be minimal.

The Organization invests in professionally managed portfolios that contain cash, bonds,

exchange traded funds, certificates of deposits, and mutual funds. Such investments are exposed

to various risks such as interest rate, market and credit. Due to the level of risk associated with

such investments and the level of uncertainty related to changes in the value of such investments,

it is at least reasonably possible that changes in risks in the near term would materially affect

investment balances and the amount reported in the financial statements.



SEPTEMBER 30, 2019

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11. CONCENTRATIONS AND FINANCIAL RISK (CONTINUED)

For the year ended September 30, 2019, government grants revenue of approximately

$4,423,000 and special events revenue of approximately $1,535,000 make up 36% and 12% of

the Organization’s total revenue, respectively.

For the year ended September 30, 2019, 57% of total contributions receivables came from two

donors. For the year ended September 30, 2019, 15% of total individuals contributions came

from one donor.

12. COMMITMENTS AND CONTINGENCIES

On April 21, 2014, the Organization entered into a mortgage agreement (the Mortgage) with

EagleBank. The Mortgage is secured by the building and property of the Organization. The term

of the Mortgage agreement is ten years ending on April 21, 2024 with an interest rate of 6.5%

and monthly principal and interest payments of $4,472.

Effective August 21, 2019, the terms of the agreement were modified with an interest rate of

4.75%. The term of the Mortgage agreement is 56 months ending on April 21, 2024. The

Organization is required to pay monthly principal and interest payments in the amount of $4,263

resulting in a balloon payment of approximately $231,000 due at the end of the loan. The

Mortgage agreement contains restrictive financial covenant provisions.

Following are maturities of long-term debt for each of the next five years and thereafter.

For the Years Ending September 30,

2020 33,162$

2021 34,621

2022 36,325

2023 38,114

2024 249,957

Total 392,179$

The Organization entered into an employment contract (the Contract) with its Executive

Director that provides for an annual salary and fringe benefits. The term of employment under

the Contract is January 1, 2019 to December 31, 2020. In the event of termination without cause,

the Organization will pay the Executive Director the lesser of (a) six months of current salary,

or (b) the number of months remaining in the term of the Contract.

13. RETIREMENT PLANS

Effective December 15, 2002, the Organization established a defined contribution retirement

plan (the Plan). The Plan allows for contributions of 5% of each eligible employee’s annual

compensation. Employees are eligible to participate in the Plan after completing six months of

service. For the year ended September 30, 2019, the Organization contributed approximately

$175,000 to the Plan.



SEPTEMBER 30, 2019

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14. IN-KIND CONTRIBUTIONS

The value of donated services included as contributions and offsetting expenses in the financial

statements consist of services provided by several law firms for various legal services, consulting

services and volunteers assisting in preparing and delivering meals on behalf of the Organization.

For the year ended September 30, 2019, the total of these services and food and other products

was approximately $1,034,000 and has been allocated among programs and special events.

Special

Description Programs Events Fundraising Total

Salaries 859,011$ -$ -$ 859,011$

Events - 91,269 - 91,269

Professional Fees 47,066 - 18,978 66,044

Food and Other Products 17,858 - - 17,858

Total In-Kind 923,935$ 91,269$ 18,978$ 1,034,182$

15. ENDOWMENT

The Organization’s endowment consists of several individual funds (the Funds) established for a

variety of purposes. The endowment consists of donor-restricted funds and board-designated or

quasi-endowment funds, as required by GAAP, net assets associated with the endowment funds

are classified and reported based on the existence or absence of donor-imposed restrictions.

The Organization classifies as net assets with donor restrictions held in perpetuity (a) the original

value of gifts donated to the permanent endowment funds, (b) the original value of subsequent

gifts to the permanent endowments, and (c) accumulations to the permanent endowments made

in accordance with the direction of the applicable donor gift instrument at the time the

accumulation is added to the fund.

The Organization considers the following factors, as set out in the District of Columbia’s

Uniform Prudent Management of Institutional Funds, DC Code §44-1631 et. seq., in making a

determination to appropriate or accumulate donor-restricted endowment funds: (1) The

duration and preservation of the fund, (2) the purposes of the Organization and the donor-

restricted endowment fund, (3) general economic conditions, (4) the possible effect of inflation

and deflation, (5) the expected total return from income and the appreciation of investments, (6)

other resources of the Organization, and (7) the investment policies of the Organization.



SEPTEMBER 30, 2019

- 18 -

15. ENDOWMENT (CONTINUED)

The Organization had the following changes in the endowment net assets during the year ended

September 30, 2019.

Without Donor

Restrictions

Board Purpose Invested in

Description Designated Restricted Perpetuity Total

Endowment Net Assets, Beginning of Year 802,872$ 214,917$ 990,625$ 2,008,414$

Investment Return

Interest and Dividends 29,111 38,020 - 67,131

Net Gain (Loss) (Realized and Unrealized) (10,021) (12,320) - (22,341)

Total Investment Return 19,090 25,700 - 44,790

Contributions 239,657 - 24,809 264,466

Amounts Appropriated for Expenditure (32,680) (42,320) - (75,000)

Endowment Net Assets, End of Year 1,028,939$ 198,297$ 1,015,434$ 2,242,670$

With Donor Restrictions

As of September 30, 2019, the Organization had the following endowment funds:

Without Donor

Restrictions

Board Purpose Invested in

Description Designated Restricted Perpetuity Total

Donor-Restricted Endowment Funds -$ 198,297$ 1,015,434$ 1,213,731$

Board-Designated Endowment Fund 1,028,939 - - 1,028,939

Total Endowment Funds 1,028,939$ 198,297$ 1,015,434$ 2,242,670$

Return Objectives and Risk Parameters

The Organization has adopted investment and spending policies for endowment assets that attempt

to provide a predictable stream of funding to programs supported by its endowment assets.

Endowment assets include those assets of donor-restricted funds that the Organization must hold in

perpetuity or for donor-specified periods. Under this policy, as approved by the Board of Directors,

the endowment assets are invested in a manner that is intended to produce results that exceed the

price and yield results of the market while assuming a moderate level of investment risk.

Spending Policy

The spending policy is calculated based on a percentage of the average of the fiscal year end

market value of the endowment funds for the previous twelve quarters. Distribution from the

endowment funds may be made on any cycle deemed appropriate to achieve the purpose of the

funds and reduce administrative costs and oversight.

Strategies Employed for Achieving Objectives

To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy in

which investment returns are achieved through both capital appreciation (realized and unrealized)

and current yield (interest and dividends). The Organization targets a diversified asset allocation that

provides reasonable and predictable funds for the Organization’s program purposes and to maintain

a balance between Organization spending and the protection of the principal.



SEPTEMBER 30, 2019

- 19 -

16. SUBSEQUENT EVENTS

The spread of COVID-19 (coronavirus disease) has had a disruptive impact on the daily life and

operations of individuals, businesses, and companies around the world. There is uncertainty

about financial and economic impacts in all sectors of the economy. The financial markets have

experienced significant volatility, and this may continue for an extended period of time. In

light of these circumstances, management continues to assess how best to adapt to changed

circumstances.

The Organization has evaluated subsequent events through March 27, 2020, the date on which

the financial statements were available to be issued.

SUPPLEMENTARY INFORMATION


SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

FOR THE YEAR ENDED SEPTEMBER 30, 2019

See accompanying Notes to Schedule of Expenditures of Federal Awards.

- 21 -

Pass-Through

Federal Grantor/Pass-Through CFDA Entity Disbursements/

Grantor/Program Title Number Identifying Number Expenditures

Department of Health and Human Services

HIV Formula Grants

Pass-Through Programs from

District of Columbia - Department of Health 93.917 CW56028 2,182,700$

District of Columbia - Department of Health 93.917 18B011 25,659

District of Columbia - Department of Health 93.917 19C011 29,369

Total HIV Formula Grants 2,237,728

Department of Homeland Security

Emergency Food and Shelter National Board Program

Pass-Through Programs from

DC Local Board c/o The Salvation Army 97.024 149200-115 22,775

City of Alexandria Local Board 97.024 877400-017 7,222

Total Department of Homeland Security 29,997

The Congress of the United States

Pass-Through from

Government of the District of Columbia Department of Health

District of Columbia Appropriations (HAHSTA) N/A 19C108 150,000

District of Columbia Appropriations (CHA) N/A CHA2017-000010 825,000

Total The Congress of the United States 975,000

Total Federal Expenditures 3,242,725$


NOTES TO SCHEDULE OF EXPENDITURES OF FEDERAL AWARDS

SEPTEMBER 30, 2019

- 22 -

1. BASIS OF PRESENTATION

The accompanying schedule of expenditures of federal awards (the Schedule) includes the

federal grant activity of Food & Friends, Inc. under programs of the federal government for the

year ended September 30, 2019. The information in this Schedule is presented in accordance

with the requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative

Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance).

Because the Schedule presents only a selected portion of the operations of Food & Friends, Inc.

it is not intended to and does not present the financial position, changes in net assets, or cash

flows of Food & Friends, Inc.

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Expenditures reported on the Schedule are reported on the accrual basis of accounting. Such

expenditures are recognized following the cost principles contained in the Uniform Guidance,

wherein certain types of expenditures are not allowable or are limited as to reimbursements.

3. RECONCILIATION OF EXPENDITURES

The 2019 government grants revenue reported on the statement of activities of approximately

$4,423,000 includes approximately $1,180,000 of state and local funds which are not considered

federal assistance.

4. INDIRECT COST RATES

Food & Friends, Inc. has elected to use the 10 percent de minimis indirect cost rate as allowed

under the Uniform Guidance.

5. SUBRECIPIENTS

There were no awards passed through to subrecipients.




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



Washington, D.C.

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 Food & Friends,

Inc. which comprise the statement of financial position as of September 30, 2019, 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 March 27, 2020.

Internal Control Over Financial Reporting

In planning and performing our audit of the financial statements, we considered Food & Friends,

Inc.’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 Food & Friends,

Inc.’s internal control. Accordingly, we do not express an opinion on the effectiveness of Food &

Friends, Inc.’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 Organization’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.

Compliance and Other Matters

As part of obtaining reasonable assurance about whether Food & Friends, Inc.’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.


- 24 -

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.


March 27, 2020




Independent Auditors’ Report on Compliance for Each Major Program and on Internal

Control over Compliance Required by the Uniform Guidance



Washington, D.C.

Report on Compliance for Each Major Federal Program

We have audited Food & Friends, Inc.’s compliance with the types of compliance requirements

described in the OMB Compliance Supplement that could have a direct and material effect on each of

Food & Friends, Inc.’s major federal programs for the year ended September 30, 2019. Food &

Friends, Inc.’s major federal programs are identified in the summary of auditors’ results section of the

accompanying schedule of findings and questioned costs.

Management’s Responsibility

Management is responsible for compliance with federal statutes, regulations, and the terms and

conditions of its federal awards applicable to its federal programs.

Auditors’ Responsibility

Our responsibility is to express an opinion on compliance for each of Food & Friends, Inc.’s major

federal programs based on our audit of the types of compliance requirements referred to above. We

conducted our audit of compliance in accordance with auditing standards generally accepted in the

United States of America; the standards applicable to financial audits contained in Government Auditing

Standards, issued by the Comptroller General of the United States; and the audit requirements of Title 2

U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit

Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require

that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with

the types of compliance requirements referred to above that could have a direct and material effect on a

major federal program occurred. An audit includes examining, on a test basis, evidence about Food &

Friends, Inc.’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 Food & Friends, Inc.’s

compliance.

Opinion on Each Major Federal Program

In our opinion, Food & Friends, Inc. 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 September 30, 2019.

Report on Internal Control over Compliance

Management of Food & Friends, Inc. 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 Food & Friends, Inc.’s internal


- 26 -

Report on Internal Control over Compliance (Continued)

control over compliance with the types of compliance requirements referred to and performing our

audit of compliance, we considered Food & Friends, Inc.’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 the Uniform Guidance, but not for the purpose of

expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do

not express an opinion on the effectiveness of Food & Friend Inc.’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

the Uniform Guidance. Accordingly, this report is not suitable for any other purpose.


March 27, 2020


SCHEDULE OF FINDINGS AND QUESTIONED COSTS


- 27 -

Section I - Summary of Auditors’ Results

Financial Statements

Type of auditors’ report issued: Unmodified

Internal control over financial reporting:

Material weakness(es) identified? No

Significant deficiency(ies) identified that are not

considered to be material weakness(es)? None reported

Noncompliance material to financial statements noted? No

Federal Awards

Internal control over major programs:

Material weakness(es) identified? No

Significant deficiency(ies) identified that are not

considered to be material weakness(es)? None reported

Type of auditors’ report issued on compliance

for major programs:

CFDA Number Name of Federal Program or Cluster

93.917 HIV Formula Grants Unmodified

Any audit findings disclosed that are required

to be reported in accordance 2 CFR Section 200.516(a)? No

Identification of major programs:

CFDA Number Name of Federal Program or Cluster

93.917 HIV Formula Grants

Dollar threshold used to distinguish between

Type A and Type B programs : $750,000

Auditee qualified as low-risk auditee? Yes


SCHEDULE OF FINDINGS AND QUESTIONED COSTS


- 28 -

Section II - Financial Statement Findings

None were reported.

Section III - Federal Award Findings and Questioned Costs

None were reported.

Documents

S 30, 2019 · 9/30/2019 · FOOD & FRIENDS, INC. STATEMENT OF ACTIVITIES FOR THE YEAR ENDED SEPTEMBER 30, 2019 (WITH SUMMARIZED FINANCIAL INFORMATION FOR THE YEAR ENDED SEPTEMBER