1-Aid to Adoption of Special Kids Arizona Audit 2024.pdf

LOHMAN COMPANY, PLLC

Certified Public Accountants & Business Consultants

AID TO ADOPTION OF SPECIAL KIDS/

ARIZONA

CONSOLIDATED

FINANCIAL STATEMENTS

(Audited)

YEAR ENDED

JUNE 30, 2024

CONTENTS

INDEPENDENT AUDITOR’S REPORT

FINANCIAL STATEMENTS

Consolidated statement of financial position ____________________________________________ 1

Consolidated statement of activities ___________________________________________________ 3

Consolidated statement of cash flows __________________________________________________ 4

Consolidated statement of functional expenses ___________________________________________ 5

Notes to consolidated financial statements ______________________________________________ 6

1630 South Stapley Drive, Suite 108, Mesa, Arizona 85204 Phone: 480-355-1100 Fax: 480-355-1130 Toll-Free: 888-793-1375 www.lohmancompany.com

LOHMAN COMPANY, PLLC

Certified Public Accountants & Business Consultants

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors Aid to Adoption of Special Kids/ Arizona Phoenix, AZ

Opinion

We have audited the accompanying consolidated financial statements of Aid to Adoption of Special Kids/ Arizona and its subsidiaries which comprise the consolidated statement of financial position as of June 30, 2024, and the related consolidated statements of activities, cash flows, and functional expenses for the year then ended and the related notes to the consolidated financial statements.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Aid to Adoption of Special Kids/ Arizona and its subsidiaries as of June 30, 2024, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Aid to Adoption of Special Kids/ Arizona and its subsidiaries and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audit. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the consolidated financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Aid to Adoption of Special Kids/ Arizona and its subsidiaries’ ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.

Auditor’s Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control.

Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the consolidated] financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

Exercise professional judgment and maintain professional skepticism throughout the audit.

Identify and assess the risks of material misstatement of the consolidated financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks.

Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the consolidated financial statements.

Obtain an understanding of internal control relevant to the audit 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 Aid to Adoption of Special Kids/ Arizona and its subsidiaries’ internal control. Accordingly, no such opinion is expressed.

Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the consolidated financial statements.

Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Aid to Adoption of Special Kids/ Arizona and its subsidiaries’ ability to continue as a going concern for a reasonable period of time.

We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that we identified during the audit.

Mesa, Arizona January 29, 2025

AID TO ADOPTION OF SPECIAL KIDS/ ARIZONA

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

June 30, 2024

ASSETS

Cash and cash equivalents 2,450,436$

Accounts receivable, net of allowance for 963,263 doubtful accounts of $291,435

Prepaid expenses and other assets 49,665

Investments 29,235,198

Property and equipment, net 2,191,601

Endowment funds 15,139

Total assets 34,905,302$

See accompanying notes to consolidated financial statements

CONSOLIDATED STATEMENT OF FINANCIAL POSITION (Continued)

June 30, 2024

LIABILITIES AND NET ASSETS

Accounts payable 98,506$

Accrued expenses 424,509

Deferred revenue 374,560

Payable to funding source 245,912

Total liabilities 1,143,487

Commitments and contingencies

Net Assets Net assets without donor restrictions 33,746,676 Net assets with donor restrictions 15,139

Total net assets 33,761,815

Total liabilities and net assets 34,905,302$

CONSOLIDATED STATEMENT OF ACTIVITIES

Year Ended June 30, 2024

Net Assets Without Donor

Restrictions

Net Assets Without Donor

Restrictions Total Support and revenue

Contributions revenue 2,019,042$ -$ 2,019,042$ In-kind contributions 44,347 - 44,347 Government contracts 7,107,443 - 7,107,443 Interest and dividend income 1,015,535 46 1,015,581 Realized and unrealized gains 278,137 - 278,137 on investments Other income 24,206 - 24,206

Total support and revenue before reclassifications 10,488,710 46 10,488,756

Net assets released from restrictions - - -

Total support and revenue 10,488,710 46 10,488,756

Functional expenses Program services 7,664,519 - 7,664,519 Support services 958,004 - 958,004

Total functional expenses 8,622,523 - 8,622,523

Change in net assets 1,866,187 46 1,866,233

Net Assets Beginning balance 31,880,489 15,093 31,895,582

Ending balance 33,746,676$ 15,139$ 33,761,815$

CONSOLIDATED STATEMENT OF CASH FLOWS

For the Year Ended June 30, 2024

Cash flows from operating activities Change in net assets 1,866,233$

Adjustments to reconcile change in net assets to net cash provided by operating activities

Depreciation and amortization 165,378 Bad debt expense 102,442 Realized and unrealized gains on investments (278,137) Gain on forgiveness of note payable (12,000)

(Increase) decrease in:

Accounts receivable 30,009 Prepaid expenses and other current assets (10,200)

(Decrease) increase in:

Accounts payable 15,332 Accrued expenses (14,709) Deferred revenue 4,715

Net cash provided by operating activities 1,869,063

Cash flows from investing activities Purchases of property and equipment (57,698) Purchases of investments (2,989,108) Proceeds from sale of investments 1,922,699

Net cash used by investing activities (1,124,107)

Net increase in cash 744,956

Cash and cash equivalents, beginning balance 1,720,619

Cash and cash equivalents, ending balance 2,465,575$

Supplemental disclosure of cash flow information Noncash investing and financing activities:

Debt forgiveness 12,000$

Cash and cash equivalents 2,450,436$ Endowment funds 15,139

2,465,575$

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

Year Ended June 30, 2024

Family Subtotal Support Adoption and Program Management Services Foster Care Expense and General Fundraising Total

Payroll Salaries - full time 468,603$ 2,891,110$ 3,359,713$ 516,687$ 60,980$ 3,937,380$ Salaries - part time 1,719,268 - 1,719,268 - - 1,719,268 Payroll taxes 152,280 191,533 343,813 34,204 4,005 382,022 Benefits 27,911 74,292 102,203 16,478 2,267 120,948 Retirement - 401k match 26,653 77,482 104,135 16,459 2,743 123,337

Total Payroll 2,394,715 3,234,417 5,629,132 583,828 69,995 6,282,955

Family related services 44 1,221,517 1,221,561 - (1,058) 1,220,503 Professional services 16,434 25,115 41,549 76,195 12,875 130,619 Occupancy 21,374 135,098 156,472 28,304 5,017 189,793

Advertising - 13,136 13,136 - 16,371 29,507 Bad debts 52,579 49,863 102,442 - - 102,442 Travel 538 75,411 75,949 509 187 76,645 Communications 8,754 64,327 73,081 14,000 2,238 89,319 Printing - 3,284 3,284 - - 3,284 Office and general supplies 5,381 36,850 42,231 29,555 1,046 72,832 Postage and shipping 14 321 335 781 1,779 2,895 Insurance 10,809 112,266 123,075 18,303 2,738 144,116 Employee recruitment/ 8,624 24,308 32,932 1,840 51 34,823 training/retention Depreciation 17,980 119,000 136,980 24,049 4,349 165,378 and amortization Other 10,025 2,335 12,360 29,395 35,657 77,412

2,547,271$ 5,117,248$ 7,664,519$ 806,759$ 151,245$ 8,622,523$

Program Services Support Services

AID TO ADOPTION OF SPECIAL KIDS/ARIZONA

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Note 1. Nature of Organization and Summary of Significant Accounting Policies

Nature of organization:

Aid to Adoption of Special Kids/Arizona (“AASK”), was incorporated in 1988, as a not-for-profit corporation under the laws of Arizona. AASK is a private, not-for-profit child placement and adoption agency licensed by the Arizona Department of Child Safety, dedicated to the placement of special needs children into permanent, loving homes in Arizona. AASK’s goal of building and preserving families is served through parent training, adoption placement, specialized medical foster care, post-placement support and community education services.

AASK Phoenix Property, LLC (“Phoenix”), AASK Peoria Property, LLC (“Peoria”) and AASK Chandler Property, LLC (“Chandler”) were formed in 2014 under the laws of Arizona, for the purposes of owning and operating real property solely for the AASK’s use. Each entity is a single-member limited liability company with AASK as the sole member.

Principles of consolidation:

The consolidated financial statements include the accounts of Aid to Adoption of Special Kids/Arizona (“AASK”), AASK Phoenix Property, LLC (“Phoenix”), AASK Peoria Property, LLC (“Peoria”) and AASK Chandler Property, LLC (“Chandler”) (collectively, the “Organization”). All material intercompany accounts and transactions are eliminated in consolidation.

Basis of accounting:

The consolidated financial statements are prepared under the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America.

Basis of presentation:

The Organization’s external financial statement presentation is governed by Financial Accounting Standards Board (“FASB”) Accounting Standards Codification (“ASC”) Topic 958, Not-for-Profit Entities (“ASC 958”). Under ASC 958, a not-for-profit organization is required to report information regarding its financial position and activities according to two classes of net assets: net assets without donor restrictions and net assets with donor restrictions, based upon the existence or absence of donor-imposed restrictions as follows:

Net assets without donor restrictions

Net assets that are not subject to donor-imposed restrictions. Certain net assets may be designated for specific purposes by action of the Board of Directors. The Organization currently does not have any Board designated funds.

Net assets with donor

Net assets subject to donor-imposed restrictions. Restrictions may be temporary or permanent subject to time and/or purpose. See Note 4 for net assets with donor restrictions.

Note 1. Nature of Organization and Summary of Significant Accounting Policies (Continued)

Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions.

The Organization’s statement of financial position has been prepared on an unclassified basis as allowed by ASC 958.

Reclassification:

Money market funds have been reclassified from investments to cash and cash equivalents on the consolidated statement of cash flow beginning balance to correspond to the current year’s format.

Cash and cash equivalents:

For the purpose of the consolidated statement of cash flows, the Organization considers all unrestricted highly liquid investments with a maturity of three months or less at the date of acquisition to be cash equivalents.

Concentration of cash:

The Organization maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits.

Liquidity and funds availability:

Financial assets available for general expenditure, that is, without donor or other restrictions or designations limiting their use, within one year of the consolidated statement of financial position date, comprise of the following as of June 30, 2024:

Cash and cash equivalents $ 2,450,436 Accounts receivable, net 963,263 Investments 29,235,198

$ 32,648,897

Receivables:

Accounts receivable – Receivables consist of program service fees and contracts receivable. The Organization provides an allowance for doubtful receivables which are based upon review of outstanding receivables, historical collection information, financial condition, as well as consideration of current economic conditions and changes in collection trends. Management determined allowance for doubtful receivables of $291,435 was necessary at June 30, 2024. Receivables are written off when deemed uncollectible. Recoveries of receivables previously written off are recorded when received.

As of June 30, 2024, approximately 59% of total accounts receivable was due from two state agencies.

Contributions and pledges receivable – Unconditional contributions and pledges receivable that are expected to be collected within one year are recorded at net realizable value. Unconditional contributions and pledges receivable that are expected to be collected in future years are recorded at fair value, which is measured as the present value of their future cash flows. The discounts on those amounts are computed using risk-adjusted interest rates applicable to the years in which the contributions and pledges are received. Conditional contributions and pledges are not included as support until the conditions are substantially met. As of June 30, 2024, there were no pledges receivable outstanding.

Investments:

The Organization invests in a professionally managed portfolio that includes marketable equity securities of publicly traded companies, U.S. treasury securities and certificates of deposit. 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 amounts reported in the consolidated financial statements.

Investments are stated at fair value, and unrealized holding gains and losses are included on the accompanying consolidated statement of activities. Realized gains and losses and declines in fair value judged to be other-than-temporary are included in the consolidated statement of activities.

U.S treasury securities mature between July 2024 and February 2030 with interest rates ranging from 0.625% and 4.50%. Interest income from treasury bills is included in other income on the accompanying consolidated statement of activities for the year ended June 30, 2024.

Certificates of deposit mature between May 2028 and July 2028 with interest rates ranging from 4.40% to 4.50%. Any penalties for early withdrawal would not have a material effect on the consolidated financial statements. Interest income from certificates of deposit is included in other income on the accompanying consolidated statement of activities for the year ended June 30, 2024.

The Organization evaluates investments for other-than-temporary impairment at least on an annual basis, and more frequently when economic or market concerns warrant such evaluation. The Organization employs a systematic methodology that considers available evidence in evaluating potential impairment of its investments. In the event that the cost of an investment exceeds its fair value, the Organization evaluates, among other factors, the magnitude and duration of the decline in fair value; the expected cash flows of the securities; the financial health and business outlook for the issuer; the performance of the underlying assets for interest in securitized assets; and the Organization’s intent and ability to hold the investment. Once a decline in fair value is determined to be other-than-temporary, an impairment charge is recorded in other revenues (expenses) and a new cost basis in the investment is established.

Management determined that no other-than-temporary impairment of investments existed at June 30, 2024.

Property and equipment:

The Organization capitalizes all property and equipment with a cost greater than $1,000. Property and equipment are carried at cost. Depreciation has been provided on the straight-line method over estimated useful lives of 3 to 30 years. Leasehold improvements are stated at cost and amortized over the shorter of the estimated useful life of the improvement or the remaining lease term utilizing the straight-line method.

When items of property and equipment are sold or retired, the related costs and accumulated depreciation and amortization are removed from the accounts and any gain or loss is included in change in net assets.

Repairs that significantly extend the lives of equipment are capitalized, while routine repairs and maintenance are expensed when incurred.

Long-lived assets:

Long-lived assets to be held and used are reviewed for impairment whenever events or changes in circumstances indicate that the related carrying amount may not be recoverable. Impairment is measured by a comparison of the carrying amount of an asset to the future net undiscounted cash flows expected to be generated by the assets. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the asset exceeds its fair value. There were no such impairment losses during the year ended June 30, 2024.

Revenue recognition:

In accordance with ASC 606, the Organization recognizes revenue by applying the following five step model: (1) identify the contract with a customer, (2) identify the performance obligations in the contract,

(3) determine the transaction price, (4) allocate the transaction price to performance obligations in the contract, and (5) recognize revenue as performance obligations are satisfied.

Investment Income – The Organization recognizes investment income when earned.

Government Contract Revenue – The Organization’s government contract revenue is generated from contracts with customers. Revenue is recognized as the promised services are provided to eligible customers. Revenue is recognized at an amount that reflects the consideration the Organization expects to be entitled in exchange for those services. This consideration is based on approved rates per service provided as evidenced in its underlying contracts with Arizona Department of Child Safety (“DCS”), Department of Economic Security Division of Developmental Disabilities (“DDD”), Gila River Indian Community (“GRIC”), Salt River Pima Maricopa Indian Community (“SRPM”), Community Health Nursing Services (“NCIP”) and Arizona Health Care Cost Containment System (“AHCCCS”).

The Organization’s primary services provided to clients include recruiting, training, and assisting families to become licensed to be foster homes with the State of Arizona or certified to become adoptive families.

Additional services include respite, attendant care, and habilitation support. These services are provided through direct agreements with clients, and the Organization provides these services using its employees.

The Organization can bill for services rendered to qualified individuals at underlying fixed rates by each contract.

Revenue is recognized as these services are provided in an amount that reflects the consideration it expects to be entitled to in exchange for its services, which is calculated as hours worked or days in care multiplied by agreed contract rates for each applicable contract. The client simultaneously receives and consumes the benefits of the services as they are provided. The Organization applies the practical expedient to recognize revenue for these services over the term of the agreements commensurate with the amount it has the right to invoice customers.

Amounts are billed as service hours or days in care are provided in accordance with the contract terms, at monthly intervals, in the month following the month of service, generally resulting in receivables.

Payment is typically due within 60-90 days.

The Organization applies the right to invoice practical expedient to its revenue contracts, and recognizes revenue as invoiced, since the Organization’s right to payment is for an amount that corresponds directly with value provided to the clients based on the Organization's performance to date. Performance obligations relate to contracts all with durations of one year. As a result, the Organization is not required to separately disclose aggregate amounts of unsatisfied (or partial satisfied) performance obligations as of the end of the fiscal year.

The government contracts expire annually (June 30 or September 30, generally), and management expects the contracts to be renewed through the respective renewal process. Revenue recognized under two state agencies represented approximately 50% of total support and revenue for the year ended June 30, 2024. If the contracts with these agencies are not renewed or otherwise lost, the Organization’s operations would be significantly impacted.

Contributions, pledges, and grants:

In accordance with FASB ASC 958-605, the Organization evaluates grants and contributions for evidence of the transfer of commensurate value from the Organization to the grantor or resource provider. The transfer of commensurate value from the Organization to the grantor or resource provider may include instances when a) the goods or services provided by the Organization directly benefit the grantor or resource provider or are for the sole use of the grantor or resource provider or b) the grantor or resource provider obtains proprietary rights or other privileges from the goods or services provided by the Organization. When such factors exist, the Organization accounts for the grants or contributions as exchange transactions under ASC 606, or other appropriate guidance. In the absence of these factors, the Organization accounts for the award under the contribution accounting model.

In the absence of the transfer of commensurate value from the Organization’s to the resource provider, the Organization evaluates the contribution for criteria indicating the existence of measurable barriers to the entitlement for the Organization or the right of return to the resource provider. A barrier to entitlement is subject to judgement and generally represents an unambiguous threshold for entitlement that provides clarity to both the Organization and resource provider whether the threshold has been met and when.

These factors may include measurable performance thresholds or limited discretion on the part of the Organization to use the funds. Should the existence of a measurable barrier to entitlement exist and be accompanied by a right of return of the funds to the resource provider or release of the resource provider from the obligation, the contribution is treated as a conditional contribution. If both the barrier to entitlement and right of return do no exist, the contribution is unconditional.

The Organization recognizes amounts received from unconditional contributions at the time the Organization receives notification of the award. Contributions that include conditions imposed by the grantor or resource provider are recognized when those conditions are met by the Organization.

The Organization accounts for contributions in accordance with FASB ASC 958-605, Not-for-Profit Entities – Revenue Recognition. In accordance with FASB ASC 958-605, contributions received are recorded as contributions without donor restrictions or contributions with donor restrictions depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in net assets with donor restrictions depending on the nature of the restriction. When a temporary restriction expires, net assets are reclassified to net assets without donor restrictions and reported in the consolidated statement of activities as net assets released from restrictions. However, if a restriction is fulfilled in the same time period in which the contribution, pledge, or grant is received, the Organization reports the support as net assets without donor restrictions

General contributions - Revenue consists of contributions from individuals and corporations.

Contributions to be received after one year are discounted at an appropriate discount rate commensurate with the risk involved. Amortization of the discount is reported as contribution revenue. Contributions are recognized as revenue when an unconditional promise is received.

Contributions consisted of the following for the year ended June 30, 2024:

Grants and foundations $ 359,836 Individual and civic donors 1,388,530 United Way and donor giving campaigns 258,060 Corporate donors 12,616

$ 2,019,042

Donated non-financial assets (In-kind contributions) – Donated materials and services are recognized as revenue at the estimated fair value of those materials or 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. The Organization recognized in-kind contributions of $44,347 during the year ended June 30, 2024, which is included in the accompanying consolidated statement of activities.

Leases:

The Organization determines if an arrangement contains a lease at the inception of a contract. The lease classification is determined at the commencement date. Right-of-use assets represent the Organization’s right to use an underlying asset for the lease term and lease liabilities represent the Organization’s obligation to make lease payments arising from the lease during the lease term. Right-of-use assets and lease liabilities are recognized at the commencement date based on the present value of the remaining future minimum lease payments during the lease term. Lease commencement is the date the Organization has the right to control the property. When the rate implicit in the lease is not known, the Organization utilizes the risk-free borrowing rate to discount the lease payments. The risk-free rate is based on the United States Treasury rate for treasuries of similar terms to the lease. The operating lease right-of-use assets also include lease payments made before commencement, lease incentives and are recorded net of impairment. Operating leases are expensed on a straight-line basis over the lease term.

Marketing and advertising costs:

The Organization expenses the cost of marketing and advertising as incurred. See accompanying consolidated statement of functional expenses for marketing and advertising expenses incurred during the year ended June 30, 2024.

Functional expenses:

Expenses that can be identified as a program or fundraising activity are charged directly to their natural expenditure classification. Certain costs have been allocated among the programs and support services benefited. Directly identifiable expenses are charged to programs and support services. Expenses related to more than one function are charged to program and supporting services on the basis of personnel activity an other appropriate allocation methods. General and administrative expense include expenses that are not directly identifiable with any other specific function but provide for the overall support and direction of the Organization and are allocated based on personnel activity or other appropriate indicators.

Certain employees are allocated based on time and effort. Occupancy, communications, printing and copying and depreciation expense are allocated based on number of employees.

Income taxes:

The Organization has received from the Internal Revenue Service an exemption from federal income taxes under Section 501(c)(3) of the Internal Revenue Code for exempt function income received.

Accordingly, there is no provision for income taxes. A provision is made in the consolidated financial statements for income taxes on unrelated trade or business income earned, when applicable. AASK- Phoenix, AASK- Chandler, and AASK-Peoria are disregarded entities for tax purposes. Income determined to be unrelated business income would be taxable.

Management evaluated the Organization’s tax positions and concluded that the Organization had taken no uncertain tax positions that require adjustment to the accompanying consolidated financial statements to comply with the provisions of this guidance.

Use of estimates:

The preparation of the consolidated 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 disclosures 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.

Subsequent events:

The Organization has evaluated subsequent events through January 29, 2025, the date on which the consolidated financial statements were available to be issued. See Notes 8 and 9 for subsequent events noted.

Note 2. Recent Authoritative Accounting Guidance

In June 2016, the FASB issued Accounting Standards Update (“ASU”) 2016-13, Financial Instruments— Credit Losses (“Topic 326”), which requires measurement and recognition of expected credit losses at the point a loss is probable to occur, rather than expected to occur, which will generally result in earlier recognition of allowances for credit losses. Within the scope of new standard includes a wide-variety of financial instruments, including trade receivables that result from transaction within the scope of Topic 606 on revenue. This updated standard will be effective for annual reporting periods beginning after December 31, 2022, including interim periods withing those fiscal years. The Organization adopted ASU 2016-13 in the third quarter of 2023, see Note 1 for updated receivables policy.

Note 3. Investments

The following is a summary of the Organization’s investment in marketable and debt securities as of June 30, 2024:

Amortized Cost

Gross Unrealized

Gains (Losses)

Fair Value U.S. Treasury securities $ 27,830,978 $ 55,433 $ 27,886,411 Certificates of deposit 1,353,000 (5,319) 1,347,681 Equity securities 57 1,049 1,106

$ 29,184,035 $ 51,163 $ 29,235,198

The amortized cost and fair value of U.S Treasury securities, by contractual maturity, as of June 30, 2024, are as follows:

Amortized Cost Fair Value

Due within one year $ 5,674,607 $ 5,702,216 Due after one year through six years 22,156,371 22,184,195

$ 27,830,978 $ 27,886,411

During the year ended June 30, 2024, the Organization recognized dividend and interest income of $961,735 on investments on the accompanying consolidated statement of activities.

The following is a reconciliation of beginning and ending balances of investments measured at fair value on a recurring basis during the year ended June 30, 2024:

Investments, beginning balance $ 27,890,652 Realized and unrealized gains 278,137 Purchases of investments 2,989,108 Proceeds from sale of investments (1,922,699)

Investments, ending balance $ 29,235,198

Note 3. Investments (Continued)

FASB ASC Topic 820, Fair Value Measurements and Disclosures (“ASC 820”), establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under ASC 820 are described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access.

Level 2 Inputs to the valuation methodology include:

Quoted prices for similar assets or liabilities in active markets;

Quoted prices for identical or similar assets or liabilities in inactive markets;

Inputs other than quoted prices that are observable for the asset or liability;

Inputs that are derived principally from or corroborated by observable market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset’s or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value:

U.S. Treasury securities: The fair value of US treasury securities is based on quoted market prices based on daily trading volume.

Equity securities: The fair value of equity securities is the quoted closing price of the active market in which the security is traded.

Certificates of deposit: Certificates of deposit are stated at cost plus accrued interest.

The methods described above may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Note 3. Investments (Continued)

The following table sets forth by level, within the fair value hierarchy, the Organization’s investments in marketable and debt securities at fair value as of June 30, 2024:

Note 4. Property and Equipment

Property and equipment consists of the following as of June 30, 2024:

Buildings and building improvements $ 4,585,870 Furniture and equipment 522,578 5,108,448 Less accumulated depreciation and amortization (2,916,847)

$ 2,191,601

Note 5. Net Assets with Donor Restrictions

Net assets with donor restrictions subject to restriction in perpetuity are endowment funds of $15,139 as of June 30, 2024.

Level 1 Level 2 Level 3 Total U.S. Treasury securities $ 27,886,411 $ - $ - $ 27,886,411 Certificates of deposit - 1,347,681 - 1,347,681 Equity securities 1,106 - - 1,106 Total investments at fair value $ 27,887,517 $ 1,347,681 $ - $ 29,235,198

Note 6. Endowment Funds

Endowment funds include investments held by a financial institution. Annually, the Organization may elect to reinvest earnings from the funds in the endowment fund or appropriate the earnings for expenditures. If the election is made to re-invest the earnings, net of investment fees, the earnings are restricted in perpetuity within the endowment fund. The Organization did not release any net assets with donor restrictions during the year ended June 30, 2024.

Endowment net asset composition as of June 30, 2024 is as follows:

Changes in endowment net assets for the year ended June 30, 2024 are as follows:

Note 7. Note Payable

The Organization entered into a Construction Loan Contract (“Loan”), funded by the Community Development Block Grant (“CDBG”) Program in March 2003, with the City of Phoenix. The Certificate of Completion was received from the City of Phoenix in October 2003. The assistance was not to exceed $180,000 and was used by the Organization for the acquisition of property. The CDBG was secured by a 20-year lien on the property. So long as the Organization complied with the grant restrictions, the Loan was forgivable in annual installments of $12,000, beginning in year 6 through 20 based on the effective date of the loan. The final installment of $12,000 was forgiven during the year ended June 30, 2024.

Net assets without donor restrictions

Net assets with donor

Total Endowment funds $ - $ 15,139 $ 15,139 Total endowment funds $ - $ 15,139 $ 15,139

Net assets without donor restrictions

Net assets with donor

Total Endowment funds, beginning balance $ - $ 15,093 $ 15,093

Interest and dividends - 46 46 Endowment funds, ending balance $ - $ 15,139 $ 15,139

Note 8. Commitments and Contingencies

Short-term leases:

The Organization leases office equipment requiring monthly aggregate payments of $607. Total rent expense for the year ended June 30, 2024 was $10,571.

Litigation:

In the ordinary course of business, the Organization may periodically be a defendant in various legal proceedings. If there are estimated losses in excess of amounts covered by liability insurance, such amounts would be included in accrued expenses. In the opinion of management, all such matters are adequately covered by insurance, or if not so covered, are without merit or are of such a kind that any liabilities that may result from these proceedings will not have a material adverse effect on the Organization’s financial condition or results of operations.

Block payments:

Historically, the Organization received funds from a Regional Behavioral Health Authority (“RBHA”) in the form of block payments and the Organization would submit encounter claims for services performed.

Claims submitted under state contracts were recorded in support and revenue from government contracts at the date services were performed, although they were subject to a claims adjudication process by RBHA. The Organization no longer receives block payments, however, has received funding from the RBHA in the past for which the Organization did not have encounters stipulated in their contract with the RBHA to offset the funding received. As of June 30, 2024, the Organization has $245,912 included in payable to funding source on the accompanying consolidated statement of financial position for potential amounts due to the RBHA.

Subsequent to the year ended June 30, 2024, RBHA requested repayment of a portion of the amount due totaling $87,657, which was paid by the Organization in July 2024.

COVID-19:

On March 11, 2020, the World Health Organization declared the outbreak of the novel coronavirus a global pandemic. In response, on March 11, 2021, the President of the United States signed the American Rescue Plan Act which included the Coronavirus State and Local Fiscal Recovery Funds (“SLFRF”).

During the year ended June 30, 2024, the Organization received approximately $312,000 in temporary incentive payments, of which 80% is required to be distributed to its employees by February 28, 2025. As of June 30, 2024, the Organization had incurred approximately $29,000 in qualifying expenses. The remaining amount is included in deferred revenue on the accompanying consolidated statement of financial position.

Note 9. Benefit Plans

Effective January 2003, the Organization established a salary deferral plan under Section 401(k) of the Internal Revenue Code covering substantially all employees meeting certain service and age requirements. The plan allows eligible employees to defer a portion of their compensation ranging from 0% to 90%, subject to IRS limits. Such deferrals accumulate on a tax deferred basis until the employee withdraws the funds. The Plan requires safe harbor employer matching contributions of 100% up to the first 4% of eligible employee contributions. Total expense recorded for the Organization’s matching contribution was $123,337 for the year ended June 30, 2024. Under the plan, the Organization may elect to make profit sharing contributions to the plan at its discretion. The Organization did not make any profit sharing contributions to the plan during the year ended June 30, 2024.

Subsequent to the year ended June 30, 2024, the Organization established a deferred compensation plan under Section 457(b) of the Internal Revenue Code covering certain employees deemed eligible to participate in the plan, as determined by a committee appointed by the Board of Directors of the Organization. Annually, the Organization may make discretionary contributions to the plan as determined by the committee.