Title: Note A - Summary of Significant Accounting Policies
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
Organization Purpose
Community AIDS Resource and Education Services of Southwest Michigan (the Organization) was
established to minimize further transmission of the human immunodeficiency virus (HIV) and to
maximize the quality of life for all persons affected by HIV through prevention, education, and support
services.
Basis of Presentation
The financial statements of the Organization have been prepared on the accrual basis of accounting.
Net assets and revenues, expenses, gains, and losses are classified based on the existence or
absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes
therein are classified and reported as follows:
Net Assets Without Donor Restrictions – Net assets available for use in general and not subject
to donor (or certain grantor) restrictions. The governing board has designated, from net assets
without donor restrictions, net assets for an operating reserve, board-designated endowment.
Net Assets with Donor Restrictions – Net assets subject to donor-imposed restrictions. Some
donor-imposed restrictions are temporary in nature, such as those that will be met by the
passage of time or other events specified by the donor. Other donor-imposed restrictions are
perpetual in nature, where the donor stipulates that resources be maintained in perpetuity.
Donor-imposed restrictions are released when a restriction expires, that is when the stipulate
time has elapsed, when the stipulated purpose for which the resource was restricted has been
fulfilled, or both.
Cash Concentrations
Cash held by the Organization in bank accounts may at times exceed the Federal Deposit Insurance
Corporation (FDIC) coverage limit. The amount in excess of FDIC limits totaled approximately
$845,000 at September 30, 2024.
Grants and Accounts Receivable
The Organization utilizes the reserve method to account for bad debts based upon a percentage of
the aged receivables, analysis of specific receivable balances, and prior year collection experience.
The Organization periodically evaluates the financial condition and credit worthiness of entities or
clients from which it has recorded receivables. After all reasonable attempts to collect a receivable
have failed, the amount is written off. Concentrations of credit risk with respect to grants receivable
exist because of the limited diversity of entities from which the Organization has recorded
receivables. Grants receivable consist primarily of amounts due from Michigan Department of Health
and Human Services and are due in less than one year. At, September 30, 2024 and 2023,
management believe all receivables are fully collectible.
Property and Equipment
It is the Organization’s policy to capitalize property and equipment over $5,000. Purchased property
and equipment are capitalized at cost. Donations of property and equipment are recorded as
contributions at their estimated fair value. Property and equipment are depreciated using the straightline
method.
Grants and Contributions
The Organization recognizes contributions when cash, securities or other assets; an unconditional
promise to give; or a notification of a beneficial interest is received. Conditional promises to give that
is, those with a measurable performance or other barrier and a right of return are not recognized until
the conditions on which they depend have been met.
Contributions that are restricted by the donor are reported as increases in net assets without donor
restrictions if the restrictions expire in the fiscal year in which the contributions are recognized. All
other donor-restricted contributions are reported as net assets with donor restrictions. When a
restriction expires, net assets with donor restrictions are reclassified to net assets without donor
restrictions.
Promises to give are stated at the amount management expects to collect from outstanding balances.
Management provides for probable uncollectible amounts through a charge to earnings and a credit
history with donors and the donors’ current financial position. At September 30, 2024 and 2023 there
were no promises to give.
Donated Services
The Organization receives donated services from a variety of unpaid volunteers assisting the
Organization with its programs. No amounts have been recognized in the accompanying financial
statements because the criteria for recognition of such volunteer efforts under accounting principles
have not been satisfied.
Lease Accounting
The Organization recognizes a right-of-use model asset and lease liability on the statement of financial
position for all leases with a term longer than 12 months. Leases are classified as finance or operating,
with classification affecting the pattern and classification of expense recognition in the statement of
activities.
Functional Allocation of Expenses
The costs of providing the various programs and other activities have been summarized on a
functional basis in the statements of activities. Accordingly, certain costs have been allocated among
the programs and supporting services benefited. Such allocations are determined by management
on an equitable basis. Although the methods of allocation used are considered appropriate, other
methods could be used that would produce different amounts.
The expenses that are allocated include the following:
Expense Type Method of Allocation
Compensation and benefits Time and effort
Professional fees Time and effort
Occupancy Time and effort
Supplies Time and effort
Advertising Costs
All advertising costs are expensed in the period in which they are incurred.
Income Taxes
The Internal Revenue Service has determined the Organization to be exempt from federal income
taxes under Section 501(c)(3) of the Internal Revenue Code. Management of the Organization
considers the likelihood of changes by taxing authorities in its exempt organization returns and
discloses potential significant changes that management believes are more likely than not to occur
upon examination by tax authorities. Management has not identified any uncertain tax positions in
filed returns that require disclosure in the accompanying financial statements.
Estimates
The preparation of financial statements in accordance with accounting principles generally accepted
in the United States of America requires the use of management’s estimates. These estimates affect
the amounts reported in the financial statements and the disclosures provided. Actual results may
differ from management’s estimates.
Title: Note B – Liquidity and Availability
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
their use within one year of the balance sheet date, comprise the following:
2024 2023
Cash $ 1,911,655 $ 1,642,409
Grants receivable 129,709 135,981
Other accounts receivable 836,722 635,832
Total assets available 2,878,086 2,414,222
Less: Assets with donor restrictions (86,718) (88,213)
Available for operations $ 2,791,368 $ 2,326,009
The unrestricted cash balance will provide for 30 days or more cash on hand; however, if a risk
assessment indicates the need for additional reserves, the minimum cash balance will be larger to
match the identified higher risk of financial insecurity. Cash is intended to serve a dynamic role and is
available to be utilized as needed rather than being static, devoted only to generating interest income.
The Organization has contractual 340B Program funds carried forward in the amount of
approximately $711,000 which are included in the above cash totals. In addition, the Organization has
a $200,000 line of credit available as of September 30, 2024, which could be used to pay for current
expenses if necessary.
Title: NOTE C – Beneficial Interest Held at Community Foundation
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
In previous years, the Organization transferred funds to the Kalamazoo Community Foundation (KCF)
under an agency endowment fund. It is the hope of the Organization that other individuals will
contribute to the fund. The Organization has granted conditional variance power to KCF, and KCF
has ultimate authority and control over the fund and the income derived there from. The Organization
retains a beneficial interest in the endowment fund held by the KCF. Upon request by the
Organization, income from the fund representing an annual return may be distributed to the
Organization or to another suggested beneficiary subject to the approval of KCF. The fund is charged
an administrative fee annually.
Additionally, the Organization has been named as a beneficiary organization of another endowment
held at KCF. This endowment does not meet the requirements for the Organization to recognize its
rights in a beneficial interest; accordingly, the assets are not recorded in the statements of financial
position. This endowment was established to act as a depository for gifts, conveyances, and other
transfers received directly from donors intended to benefit the Organization. The fair value of these
assets totaled approximately $133,000 and $108,000, at September 30, 2024 and 2023, respectively.
The changes in the Organization’s beneficial interest held at community foundation are as follows:
2024 2023
Beneficial Interest – Beginning of Year $ 12,501 $ 11,054
Unrealized gain 3,007 1,534
Less: Administrative fees (96) (87)
Total Beneficial Interest $ 15,412 $ 12,501
Title: NOTE D – Note Payable – Bank
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
The Organization has a $200,000 line-of-credit with a bank expiring May 1, 2026, bearing interest at
the bank’s prime rate, but not less than 5.00% and is secured by all assets of the Organization. There
were no outstanding balances at September 30, 2024 or 2023.
Title: NOTE E – Net Assets with Donor Restrictions
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
The detail of net assets with donor restrictions at September 30 was as follows:
2024 2023
Restricted for:
United Way allocations $ 13,650 $ 13,500
Specific purpose 73,068 74,713
Total Net Assets With Donor Restrictions $ 86,718 $ 88,213
Title: NOTE F – Operating Lease
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
In accordance with the adoption of ASC 842 (see Note A) the Organization recorded a right-of-use
asset for office space in Benton Harbor, Michigan under a non-cancellable operating lease agreement
through September 30, 2027. Under the terms of the agreement, the Organization pays required
monthly payments. Amounts recognized in the accompanying financial statements as of
September 30 are as follows:
2024 2023
Right-of-use asset $ 7 1,792 $ 39,392
Accumulated amortization - (19,651)
Right-of-use asset, net book value $ 7 1,792 $ 19,741
Remaining lease liability $ 7 1,792 $ 19,741
Future undiscounted minimum lease payments under this operating lease at September 30, 2024, are
as follows:
Payments scheduled for the year ending:
September 30, 2025 $ 2 1,720
September 30, 2026 27,000
September 30, 2027 27,000
Less: amount representing interest (3,928)
Less: current obligations (19,723)
Long-term obligations under operating leases $ 5 2,069
The lease contract for the office space contains an implicit interest rate which is not readily
determinable. As such, the Organization has elected to apply the practical expedient available under
ASU 2016-02 of using a risk-free rate in the determination of the present value of the lease payments.
Accordingly, the Organization has applied an interest rate of 3.52 percent (the five-year risk-free rate
available at the lease’s commencement date) to its calculation of net present value.
Title: NOTE G – Retirement Plan
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
The Organization provides a tax-sheltered annuity plan as defined by section 401(k) of the Internal
Revenue Code. The plan covers substantially all employees of the Organization and allows them to
make pre-tax contributions into the retirement plan. The plan allows for the Organization to make
discretionary contributions. Employer matching contributions were approximately $13,300 and
$11,100 during the years ended September 30, 2024 and 2023, respectively.
Title: NOTE H – Commitments and Contingencies
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
Grants may require the fulfillment of certain conditions set forth in the agreement. Failure to fulfill the
conditions may result in the return of the funds to grantor. Although this is a possibility, the Board of
Directors considers the possibility remote, since by accepting the grants, it has accommodated the
objectives of the Organization to the provisions of the grants.
The Organization has participated in several federally assisted grant programs. These programs are
subject to financial and compliance audits by the grantor or their representatives, the purpose of
which is to ensure compliance with conditions precedent to the granting of funds. Management
believes that any liability for reimbursement that may arise as the result of these audits would not be
material.
Title: NOTE I – Concentrations
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
Grants received through the Michigan Department of Health & Human Services (MDHHS)
represented approximately 14% and 19% of total revenue and support received during the years
ended September 30, 2024 and 2023, respectively. The majority of grants receivable are due from
MDCH as of September 30, 2024 and 2023. The Organization does not require collateral or other
security to support receivables. Whereas the Organization does not expect to lose these grants in the
near future, management believes that other sources of income could be sought out to replace the
grants, if necessary.
Title: NOTE J – 340B Drug Discount Program
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
The Organization was authorized in 2017 as a 340B provider and contracts for discounted drugs with
a local pharmacy. 340B covered entities are eligible under the 340B Drug Pricing Program to
purchase 340B covered drugs at reduced prices for use by 340B program members from drug
manufactures who have signed a Pharmaceutical Pricing Agreement with U.S. Department of Health
and Human Services.
The Organization received 68% and 57% of its revenue (net of drug purchases) from the 340B Drug
Discount Program for the years ended September 30, 2024 and 2023, respectively.
Revenues and contracted drug prices generated from this program for the years ended September 30
are as follows:
2024 2023
340B program revenues $ 10,588,875 $ 7,083,975
340B program related expenses (10,156,942) (6,894,925)
Program income $ 431,933 $ 189,050
Laws and regulations governing the 340B program are complex and subject to interpretation. Use of
program income is limited to core medical and support services, clinical quality management and
administrative expenses as part of a comprehensive system of care for individuals living with HIV and
may have to be expended by the Organization prior to the expenditure of new federal grant awards
during its next grant cycle. Cumulative program income from the inception of the program total
approximately $1,534,000.
Title: NOTE K – Related Party Transactions
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
The Organization has contracted with a pharmacy to operate the Organization’s 340B Drug Discount
Program. A member on the board is a manager at this pharmacy. The Organization received
payments totaling approximately $10,578,000 and $7,067,000, during the years ended September
30, 2024 and 2023, respectively from the 340B program operated by the pharmacy and the
Organization purchased medications with a cost totaling approximately $6,219,000 and $4,363,000,
during the years ended September 30, 2024 and 2023, that this pharmacy distributed.
The organization uses a third-party administrative service for the 340B Drug Discount Program,
payments from the pharmacy were received by the third-party service provider and were then
remitted to the organization.
Title: NOTE L – Subsequent Events
Accounting Policies: 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.
De Minimis Rate Used: N
Rate Explanation: 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 reimbursement. The Organization has elected to not use the 10% de minimis indirect cost rate allowed under the Uniform Guidance.
Management has evaluated subsequent events through February 19, 2025, the date on which the
financial statements were available to be issued.