Title: NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES
Accounting Policies: Nature of Activities: Metro Atlanta Recovery Residences, Inc. ("MARR" or the "Organization"), was incorporated in 1975 as a nonprofit corporation dedicated to bringing total recovery to chemically dependent individuals through high‐quality, cost‐effective, gender‐specific treatment programs. The Organization mentors clients in a disciplined, caring and respectful environment. The total needs of each patient ‐ physical, mental, and spiritual ‐ are addressed to achieve a lasting recovery. Financial Statement Presentation: The Organization prepares its financial statements using the accrual basis of accounting in accordance with accounting standards for financial statements of not‐for‐profit organizations provided by the Financial Accounting Standards Board ("FASB"). The Organization 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. In both restricted net assets classes, the donor stipulates a limitation for the use of the gift. Temporarily restricted net assets represent gifts that the limitation expires with the passage of time or can be fulfilled and removed by actions of the Organization. Permanently restricted net assets are those gifts that the donor has limited in perpetuity, and unrestricted net assets are the remaining net assets of the Organization. Recognition of Donor Restrictions: Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. For temporarily restricted net assets, net assets are released to unrestricted net assets when the donor's restriction expires or when MARR expends the funds in accordance with the donor's request. MARR did not have any net assets classified as permanently restricted as of June 30, 2020 and 2019. Promises to Give: Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts of those amounts are computed using risk‐free interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are not included as support until the conditions are substantially met. MARR did not have any promises to give as June 30, 2020 and 2019. Donated Materials, Securities, and Services: Donated property, marketable securities, and other non‐cash donations are recorded as contributions at their estimated market value at the date of donation. In the absence of donor stipulations, these contributions are recorded as unrestricted support. A number of unpaid volunteers have made contributions of their time to enable the Organization to continue its programs. The value of this contributed time is not reflected in these statements in as much as no objective basis is available to measure the value of such services. METRO ATLANTA RECOVERY RESIDENCES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2020 AND 2019 See independent accountant’s audit report and notes to financial statements 7 NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Client Receivables: Client receivables represent amounts due from patients for program services rendered. The credit worthiness of each patient applying to MARR's programs is assessed prior to admittance and a payment plan established that includes consideration of insurance coverage, family support and other sources of repayment available to the patient. Credit is extended based on initial assessments and generally no collateral is required. Accounts generally do not incur interest charges. An allowance for bad debts is provided based on management's evaluation of the collectability of outstanding client receivables. At June 30, 2020 and 2019, the allowance for doubtful accounts related to client receivables was $40,884 and $40,884, respectively. Client receivables are determined to be uncollectible and are written off as a charge against the allowance account when the Organization determines that further collection attempts are not likely to yield positive results. Tax Status: Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Organization and recognize a tax liability (or asset) if the Organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has analyzed the tax positions taken by the Organization, and has concluded that as of June 30, 2020 there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Cash and Equivalents: Cash and cash equivalents include cash on hand, bank deposit accounts including certificates of deposit, and all highly liquid investments with an original maturity of three months or less at the date of purchase. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from those estimates. Property and Equipment: Property and equipment is stated at cost, if purchased, or at fair value, if donated. The Organization capitalizes property and equipment additions costing in excess of $500. Maintenance and repairs are charged to expense as incurred, and renewals and betterments are capitalized. Gains or losses on disposals are credited or charged to operations. The provision for depreciation is computed using straight‐line and accelerated methods over estimated useful lives of 3 years to 39.5 years. Functional Expenses: The Organization allocates expenses on a functional basis among three categories: program services, general and administrative, and development. Expenses are charged to each category based on direct expenditures incurred. Expenditures not directly chargeable to a specific category are allocated based upon the ratio of program, general and administrative, and fund‐raising salaries to total salaries. METRO ATLANTA RECOVERY RESIDENCES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2020 AND 2019 See independent accountant’s audit report and notes to financial statements 8 NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent Accounting Pronouncement: In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016‐14 "Not‐for‐Profit Entities (Topic 958): Presentation of Financial Statements for Not‐for‐Profit Entities" ("ASU 2016‐14"), which improves the current net asset classification requirements and the information presented in the financial statements and notes about a not‐for‐profit entity's liquidity, financial performance, and cash flows. ASU 2016‐14 is effective for fiscal years beginning after December 15, 2017. Management is in the process of evaluating the impact of ASU 2016‐14 on the Organization's financial statements. On February 25, 2016, the FASB (the “Board”) completed its Leases project by issuing ASU No. 2016‐02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance is effective for private companies for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all organizations. The Company is currently evaluating the impact of its pending adoption of ASU No. 2016‐02 on its financial statements. On January 05, 2016, the FASB completed its Classification and Measurement of Financial Instruments project by issuing ASU No. 2016‐01, Financial Instruments—Overall (Subtopic 825‐10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance improves certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For private companies (including not‐for‐profit organizations and employee benefit plans), the guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early application of the guidance is permitted for all organizations that are not public business entities as of the fiscal year beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of its pending adoption of ASU No. 2016‐01 on its financial statements. In February 2018, the FASB issued guidance on reclassification of certain tax effects from accumulated comprehensive income, which allows for a reclassification of stranded tax effects from the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2019. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In June 2020, the FASB (the “Board”) issued Accounting Standards Update No. 2020‐05,1 which amends the effective dates of the Board’s standards on revenue (ASC 6062) and leasing (ASC 8423) to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the coronavirus disease 2019 (COVID‐19) pandemic. Specifically, the Board deferred the effective dates of ASC 606 and ASC 842 for private companies and private not‐for‐profit entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The deferrals apply only if those entities have not yet issued their financial statements (or made their financial statements available for issuance) as of June 3, 2020. The Company is currently evaluating the impact of its pending adoption of ASU No. 2020‐05.1 on its consolidated financial statements.
De Minimis Rate Used: Y
Rate Explanation: The auditee used the de minimis cost rate
Nature of Activities: Metro Atlanta Recovery Residences, Inc. ("MARR" or the "Organization"), was incorporated in 1975 as a nonprofit corporation dedicated to bringing total recovery to chemically dependent individuals through high‐quality, cost‐effective, gender‐specific treatment programs. The Organization mentors clients in a disciplined, caring and respectful environment. The total needs of each patient ‐ physical, mental, and spiritual ‐ are addressed to achieve a lasting recovery. Financial Statement Presentation: The Organization prepares its financial statements using the accrual basis of accounting in accordance with accounting standards for financial statements of not‐for‐profit organizations provided by the Financial Accounting Standards Board ("FASB"). The Organization 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. In both restricted net assets classes, the donor stipulates a limitation for the use of the gift. Temporarily restricted net assets represent gifts that the limitation expires with the passage of time or can be fulfilled and removed by actions of the Organization. Permanently restricted net assets are those gifts that the donor has limited in perpetuity, and unrestricted net assets are the remaining net assets of the Organization. Recognition of Donor Restrictions: Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. For temporarily restricted net assets, net assets are released to unrestricted net assets when the donor's restriction expires or when MARR expends the funds in accordance with the donor's request. MARR did not have any net assets classified as permanently restricted as of June 30, 2020 and 2019. Promises to Give: Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts of those amounts are computed using risk‐free interest rates applicable to the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are not included as support until the conditions are substantially met. MARR did not have any promises to give as June 30, 2020 and 2019. Donated Materials, Securities, and Services: Donated property, marketable securities, and other non‐cash donations are recorded as contributions at their estimated market value at the date of donation. In the absence of donor stipulations, these contributions are recorded as unrestricted support. A number of unpaid volunteers have made contributions of their time to enable the Organization to continue its programs. The value of this contributed time is not reflected in these statements in as much as no objective basis is available to measure the value of such services. METRO ATLANTA RECOVERY RESIDENCES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2020 AND 2019 See independent accountant’s audit report and notes to financial statements 7 NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Client Receivables: Client receivables represent amounts due from patients for program services rendered. The credit worthiness of each patient applying to MARR's programs is assessed prior to admittance and a payment plan established that includes consideration of insurance coverage, family support and other sources of repayment available to the patient. Credit is extended based on initial assessments and generally no collateral is required. Accounts generally do not incur interest charges. An allowance for bad debts is provided based on management's evaluation of the collectability of outstanding client receivables. At June 30, 2020 and 2019, the allowance for doubtful accounts related to client receivables was $40,884 and $40,884, respectively. Client receivables are determined to be uncollectible and are written off as a charge against the allowance account when the Organization determines that further collection attempts are not likely to yield positive results. Tax Status: Accounting principles generally accepted in the United States of America require management to evaluate tax positions taken by the Organization and recognize a tax liability (or asset) if the Organization has taken an uncertain position that more likely than not would not be sustained upon examination by the Internal Revenue Service. Management has analyzed the tax positions taken by the Organization, and has concluded that as of June 30, 2020 there are no uncertain positions taken or expected to be taken that would require recognition of a liability (or asset) or disclosure in the financial statements. The Organization is subject to routine audits by taxing jurisdictions; however, there are currently no audits for any tax periods in progress. Cash and Equivalents: Cash and cash equivalents include cash on hand, bank deposit accounts including certificates of deposit, and all highly liquid investments with an original maturity of three months or less at the date of purchase. Estimates: The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the amounts reported and disclosed in the financial statements. Actual results could differ from those estimates. Property and Equipment: Property and equipment is stated at cost, if purchased, or at fair value, if donated. The Organization capitalizes property and equipment additions costing in excess of $500. Maintenance and repairs are charged to expense as incurred, and renewals and betterments are capitalized. Gains or losses on disposals are credited or charged to operations. The provision for depreciation is computed using straight‐line and accelerated methods over estimated useful lives of 3 years to 39.5 years. Functional Expenses: The Organization allocates expenses on a functional basis among three categories: program services, general and administrative, and development. Expenses are charged to each category based on direct expenditures incurred. Expenditures not directly chargeable to a specific category are allocated based upon the ratio of program, general and administrative, and fund‐raising salaries to total salaries. METRO ATLANTA RECOVERY RESIDENCES, INC. NOTES TO FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2020 AND 2019 See independent accountant’s audit report and notes to financial statements 8 NOTE 1 – NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Recent Accounting Pronouncement: In August 2016, the Financial Accounting Standards Board ("FASB") issued Accounting Standards Update 2016‐14 "Not‐for‐Profit Entities (Topic 958): Presentation of Financial Statements for Not‐for‐Profit Entities" ("ASU 2016‐14"), which improves the current net asset classification requirements and the information presented in the financial statements and notes about a not‐for‐profit entity's liquidity, financial performance, and cash flows. ASU 2016‐14 is effective for fiscal years beginning after December 15, 2017. Management is in the process of evaluating the impact of ASU 2016‐14 on the Organization's financial statements. On February 25, 2016, the FASB (the “Board”) completed its Leases project by issuing ASU No. 2016‐02, Leases (Topic 842). The new guidance establishes the principles to report transparent and economically neutral information about the assets and liabilities that arise from leases. The new guidance is effective for private companies for fiscal years beginning after December 15, 2019, and interim periods within fiscal years beginning after December 15, 2020. Early application is permitted for all organizations. The Company is currently evaluating the impact of its pending adoption of ASU No. 2016‐02 on its financial statements. On January 05, 2016, the FASB completed its Classification and Measurement of Financial Instruments project by issuing ASU No. 2016‐01, Financial Instruments—Overall (Subtopic 825‐10): Recognition and Measurement of Financial Assets and Financial Liabilities. The new guidance improves certain aspects of recognition, measurement, presentation and disclosure of financial instruments. For private companies (including not‐for‐profit organizations and employee benefit plans), the guidance is effective for fiscal years beginning after December 15, 2018, and interim periods within fiscal years beginning after December 15, 2019. Early application of the guidance is permitted for all organizations that are not public business entities as of the fiscal year beginning after December 15, 2017, including interim periods within those fiscal years. The Company is currently evaluating the impact of its pending adoption of ASU No. 2016‐01 on its financial statements. In February 2018, the FASB issued guidance on reclassification of certain tax effects from accumulated comprehensive income, which allows for a reclassification of stranded tax effects from the Tax Cuts and Jobs Act ("TCJA") from accumulated other comprehensive income to retained earnings. This guidance is effective for fiscal years beginning after December 15, 2019. We are currently evaluating the impact that this guidance will have on our consolidated financial statements. In June 2020, the FASB (the “Board”) issued Accounting Standards Update No. 2020‐05,1 which amends the effective dates of the Board’s standards on revenue (ASC 6062) and leasing (ASC 8423) to give immediate relief to certain entities as a result of the widespread adverse economic effects and business disruptions caused by the coronavirus disease 2019 (COVID‐19) pandemic. Specifically, the Board deferred the effective dates of ASC 606 and ASC 842 for private companies and private not‐for‐profit entities for fiscal years beginning after December 15, 2021, and interim periods within fiscal years beginning after December 15, 2022. The deferrals apply only if those entities have not yet issued their financial statements (or made their financial statements available for issuance) as of June 3, 2020. The Company is currently evaluating the impact of its pending adoption of ASU No. 2020‐05.1 on its consolidated financial statements.