FALMOUTH SERVICE CENTER, INC. AUDITED FINANCIAL STATEMENTS FOR THE FISCAL YEAR ENDED MARCH 31, 2013

NEEDHAM OFFICE: 105 Chestnut Street, Suite 10 Needham, MA 02492 (781) 449-3343

Heald Hoffmeister and Company, Inc. Certified Public Accountants

CAPE COD OFFICE: 258 Main Street, Suite A1 Buzzards Bay, MA 02532 (508) 759-6761

FALMOUTH SERVICE CENTER, INC. TABLE OF CONTENTS MARCH 31, 2013

Page INDEPENDENT AUDITORS' REPORT

1

FINANCIAL STATEMENTS: Statement of Financial Position Statement of Activities Statement of Cash Flows Schedule of Functional Expense

2 3 4 5

NOTES TO FINANCIAL STATEMENTS

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Heald Hoffmeister and Company, Inc. Certified Public Accountants Kenneth J. Raffol, CPA, MST • Jill B. Treeful, CPA • Richard A. Petrie • Ryan M. Damaso, CPA, MST INDEPENDENT AUDITORS’ REPORT To the Board of Directors Falmouth Service Center, Inc. Falmouth, Massachusetts We have audited the accompanying statement of financial position of Falmouth Service Center, Inc. (a not-for-profit organization) as of March 31, 2013, and the related statement of activities, cash flows, and functional expenses 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. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the statement of financial position referred to above presents fairly, in all material respects, the financial position of Falmouth Service Center, Inc. as of March 31, 2012, and the changes in its net assets and its cash flows for the year then ended in conformity with generally accepted accounting principles generally accepted in the United States of America.

Heald Hoffmeister and Company, Inc. July 1, 2013

105 Chestnut Street, Suite 10, Needham, MA 02492, P. 781.449.3343, F. 781.444.2119 258 Main Street, Suite A1, Buzzards Bay, MA 02532, P.508.759.6761, F. 508.759.6762 www.hhcocpas.com

FALMOUTH SERVICE CENTER, INC. STATEMENT OF FINANCIAL POSITION MARCH 31, 2013

ASSETS Current Assets: Cash and cash equivalents Gift certificates Inventory Accounts receivable Promises to give Total Current Assets

$ 552,681 4,435 57,336 7,281 65,435 687,168

Property, Plant, and Equipment: Building Land Building improvements Warehouse equipment Vehicles Computers Less: accumulated depreciation Net Property, Plant, and Equipment Other Assets: Food network Total Other Assets Total Assets

1,946,250 147,573 132,316 95,473 59,833 10,905 (421,144) 1,971,206

29,567 29,567 $ 2,687,941

LIABILITIES Current Assets: Accounts payable Salary and benefits payable Deferred revenue Grant payable, food network Total current liabilities NET ASSETS Unrestricted, undesignated Unrestricted, designated Temporarily restricted Total Net Assets Total Liabilities and Net Assets

$

11,031 4,231 391 29,567 45,220

2,423,517 104,000 115,204 2,642,721 $ 2,687,941

The accompanying notes are an integral part of these financial statements. 2

FALMOUTH SERVICE CENTER STATEMENT OF ACTIVITES FOR THE YEAR ENDED MARCH 31, 2013

Unrestricted REVENUES Contributions Food donations Thrift shop sales Grants Interest income Assets released from restrictions Total Revenues

$ 824,033 542,534 74,986 6,000 2,614 1,045,041 2,495,208

Temporarily Restricted $

11,756

(1,045,041) (1,033,285)

Total $ 835,789 542,534 74,986 6,000 2,614 1,461,923

EXPENSES Program services Management and general Fundraising Total Expenses

1,360,047 62,551 37,623 1,460,221

Change in net assets

1,034,987

(1,033,285)

1,702

Net assets - beginning of year

1,492,530

1,148,489

2,641,019

$ 2,527,517

$ 115,204

$ 2,642,721

Net assets - end of year

-

1,360,047 62,551 37,623 1,460,221

The accompanying notes are an integral part of these financial statements. 3

FALMOUTH SERVICE CENTER, INC. STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2013

CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation (Increase) decrease in: Accounts receivable Pledges receivable Inventory Gift certificates Accounts payables and other current liabilities Net Cash Provided by Operating Activities CASH FLOWS FROM INVESTING ACTIVITIES Purchase of short-term investment Purchase of building and equipment Net Cash Used in Investing Activities

$

1,702

54,692 (3,885) 224,840 11,817 2,290 7,218 298,674

480,853 (1,070,695) (589,842)

NET DECREASE IN CASH AND CASH EQUIVALENTS

(291,168)

CASH AND CASH EQUIVALENTS, beginning of year

843,849

CASH AND CASH EQUIVALENTS, end of year

$ 552,681

SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION: Cash paid during the year for interest

$

-

The accompanying notes are an integral part of these financial statements. 4

FALMOUTH SERVICE CENTER, INC. STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED MARCH 31, 2013

Management and General

Program Services Staff salaries Payroll taxes and benefits Telephone Insurance Office supplies Food assistance Medical assistance Rent assistance Utilities assistance Miscellaneous assistance Professional fees Bank/charge fees Rent Repairs and maintenance Utilities Depreciation Vehicle expense Board costs Thrift Shop Cost of Sales Total expenses

$

94,317 16,176 3,808 14,782 2,805 916,119 4,146 100,132 36,072 51,245

14,740 24,285 16,642 54,692 6,315

$ 23,013 5,003 476 1,643 8,417

Fundraising $ 26,616 7,725 476 2,806

13,827 570 1,638 2,698 1,849

3,417 3,771 $ 1,360,047

$ 62,551

$ 37,623

Total $ 143,946 28,904 4,760 16,425 14,028 916,119 4,146 100,132 36,072 51,245 13,827 570 16,378 26,983 18,491 54,692 6,315 3,417 3,771 $ 1,460,221

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

FALMOUTH SERVICE CENTER, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2013 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Activities The Falmouth Service Center, Inc. (the Center) is a not-for-profit organization incorporated in the Commonwealth of Massachusetts on August 1, 1983. The Center is established to provide basic assistance to needy families in the general area of Falmouth, Massachusetts. Major sources of revenue are from contributions and grants from individuals, foundations, and governmental agencies. Basis of Accounting The financial statements of the Center have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. Basis of Presentation The Center is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The Center has no permanently restricted assets. Promises to Give Unconditional promises to give are reported at net realizable value if at the time the promise is made payment is expected to be received in one year or less. Unconditional promises that are expected to be collected in more than one year are reported at fair value initially and in subsequent periods because the Organization elected the fair value option in accordance with generally accepted accounting principles. Management believes that the use of fair value reduces the cost of measuring unconditional promises to give in periods subsequent to their receipt and provides equal or better information to users of its financial statements than if those promises were measured using present value techniques and historical discount rates. The balance of $115,204 in temporarily restricted net assets results from various donations made specifically to support the Center’s space optimization project, to be completed during the 2013 fiscal year. Cash and Cash Equivalents For purposes of the statement of cash flows, cash equivalents include all highly liquid investments with original maturities of three months or less. Inventory Inventory consists of both purchased and donated food items. Purchased items are stated at cost and donated items are stated at the fair market value at date of donation. Cost is determined using the first-in, first-out method by applying the most recent invoice pricing. Fair market value is determined by applying local food prices to donated items. Property and Equipment All acquisitions of property and equipment in excess of $2,500, and all expenditures for repairs, maintenance, improvements, renewals, and betterments that materially prolong the useful lives of assets are capitalized at cost. 6

FALMOUTH SERVICE CENTER, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2013 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Property and equipment are carried at cost or, if donated, at fair value at the date of donation. Such donations are reported as unrestricted support unless the donor has restricted the asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as temporarily restricted support. Absent donor stipulations regarding how long those donated assets must be maintained, the Center reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. Depreciation is computed over the estimated useful lives of the related assets using the straight line method. Designation of Unrestricted Net Assets It is the policy of the Board of Directors of the Center to review its plans for future property improvements and acquisitions from time to time and to designate appropriate sums of unrestricted net assets to assure adequate financing of such improvements and acquisitions. Income Tax Status The Center is exempt from federal income taxes under Internal Revenue Code Section 501(c)(3). The Center is not classified as a private foundation under Internal Revenue Code Section 509(a). Management has considered and concluded that the Center has no uncertain tax positions. The Center’s Forms 990, Return of Organization Exempt from Income Tax, for the years ending 2010, 2011, and 2012 are subject to examination by the IRS, generally for 3 years after they were filed. Concentration of Contributions The Center received approximately 14% of its revenue from the U.S. Department of Agriculture, through the Greater Boston Food Bank. Expense Allocation (Functional expenses) The costs of providing various programs and other activities have been summarized on a functional basis in the Statement of Activities and in the Statement of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Use of Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. NOTE 2 - CASH AND CASH EQUIVALENTS The Center considers all bank accounts established to function as components of regular operations to be cash. The Center maintains cash balances at various financial institutions in Massachusetts. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. At year end, uninsured cash balances were $202,843. 7

FALMOUTH SERVICE CENTER, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2013

NOTE 3 - PREPAID RENT, LEASE COMMITMENTS, OPERATING LEASES The Center has a ten-year lease with the Town of Falmouth for the thrift shop expiring in June 30, 2016, with the option to renew for a ten year period. The current lease requires the Center to pay $4,000 annually to the Town as rent. The Town is to add the payments to a fund restricted for major improvements to the thrift shop. In addition to the annual rental payment of $4,000, the Center is required to contribute 20% of the net profits from the operation of the thrift shop to the Community Health Center of Cape Cod. Payments are to be computed and paid monthly. During the year, the thrift shop paid profits to the Community Health Center of Cape Cod in the amount of $12,378. The thrift shop is operated by volunteer staff and all items sold are donated. Total lease expense for the current period is composed of the following:

Component Annual rent Community Health Center of Cape Cod Total

Amount $ 4,000 12,378 $ 16,378

Minimum future rental payments under all non-cancelable operating leases having remaining terms in excess of one year as of March 31, 2012 are as follows:

Year ending March 31 Amount 2014 $ 4,000 2015 4,000 2016 4,000 Total $ 12,000

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FALMOUTH SERVICE CENTER, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2013

NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment consist of the following:

Land Buildings and improvements Leasehold improvements Warehouse equipment Vehicles Computers Total Less: accumulated depreciation Net Property and Equipment

$

147,573 1,933,678 132,316 108,045 59,833 10,905 2,392,350 (421,144) $ 1,971,206

Depreciation expense of $54,692 is computed on the straight line method using the following estimated useful lives: Years Buildings 15 to 31.5 Improvements 15 Warehouse equipment 5 to 15 Vehicles 5 Computers 5 NOTE 5- SPACE OPTIMIZATION PROJECT In the spring of 2012, the construction phase of the space optimization project at the Center commenced. The project has increased the useable square footage of the building by one third without increasing the building’s footprint. The additional space will be used to enlarge the food pantry to improve the flow of the distribution process, move client intake and application processing to the second floor, and to create a new commercial kitchen. As of the end of the 2013 fiscal year the project was nearly complete. NOTE 6- GRANTS PAYABLE The Center participates in a loose association of local food banks which has applied for and received funding to expand the capacity of the local food banks. The Center is the lead contact for the association and holds funds received for the association. Such funds are reflected in these financial statements as food network and as grants payable, food network.

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FALMOUTH SERVICE CENTER, INC. NOTES TO FINANCIAL STATEMENTS MARCH 31, 2013 NOTE 7- DONATED SERVICES AND FOOD Construction Materials and Related 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 Center recognized donated services and materials related to the space optimization project totaling $90,757 during the year ended March 31, 2013. Volunteer Services There are donated services in both the food pantry and the thrift shop that are not recognized in the financial statements because they did not meet the criteria for recognition. The Center did not track the number of hours for these donated services. Food The Center receives donated food from many sources. The amount donated from the USDA has a value of $203,781, which is included in these financial statements. Food contributions are recorded based on the number of cans donated during the year. During the year, the Center received 157,440 cans with an estimated 1 pound contents each. These contributions were valued at $1.66 per pound as determined by Feeding America which resulted in a contribution valued at $261,350 for the year ended March 31, 2013. The center also received other various food donations valued at $77,403. Food contributions other than cans do not have an easily determined market value and are not recognized in these financial statements. NOTE 8 – EMPLOYEE BENEFIT PLAN The Center offers a SIMPLE IRA plan to eligible employees. The Center will match up to 3% of an individual's income each year if the person chooses to contribute to the plan. Pension expense in the current year was $3,373. NOTE 9 - SUBSEQUENT EVENTS The Center has evaluated all subsequent events through July 1, 2013, the date the financial statements were available to be issued.

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