Harvest Point Fellowship Church (A Not-for-Profit Organization) Financial Statements Year Ended December 31, 2020 with Independent Auditor’s Report
Harvest Point Fellowship Church (A Not-for-Profit Organization) Table of Contents Independent Auditor’s Report ……………………………………………...………………………...… 1 Statement of Financial Position ………………………………………………………………………. 3 Statement of Activities and Changes in Net Assets ………………………………………………. ….4 Statement of Functional Expenses ……………………………………………………………….…. ….5 Statement of Cash Flows-Indirect Method…….………………………………………….…….…...….6 Notes to the Financial Statements …………………………………………………………………...….7
14511 Falling Creek Dr., Ste. 307 Houston, Texas 77014 Phone (832) 375-0222 email@example.com Independent Auditor’s Report Board of Directors Harvest Point Fellowship Church Pearland, TX I have audited the accompanying financial statements of Harvest Point Fellowship Church which is comprised of the statement of financial position as of December 31, 2020, and the related statements of activities and changes in net assets, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of the financial statements that are free from material misstatement, whether due to fraud or error. Auditor's Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I 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, I 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. 1
Board of Directors Harvest Point Fellowship Church Opinion In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harvest Point Fellowship Church of December 31, 2020, and the changes in net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Ann E. Williams, PC Pearland, TX October 31, 2021 Ann E Williams Electronic Signature 2
Harvest Point Fellowship Church (A Not-for-Profit Organization) Statement of Financial Position As of December 31, 2020 ASSETS Current assets: Cash $ 321,109 Total current assets 321,109 Property and equipment: Property, plant and equipment 984,936 Accumulated depreciation (35,310) Total property and equipment, net 949,626 Other assets: Building deposits 16,270 Total other assets 16,270 TOTAL ASSETS $ 1,287,005 LIABILITIES AND NET ASSETS Liabilities: Current liabilities: Accounts payable $ 20,272 Short-term portion LT debt 31,156 Total current liabilities 51,428 Long-term liabilities: Notes payable 479,746 Total long-term liabilities 479,746 Net assets: Without donor restrictions Undesignated 624,057 Designated 131,774 Total net assets 755,831 TOTAL LIABILITIES AND NET ASSETS $ 1,287,005 3 The accompanying notes are an integral part of these financial statements.
Harvest Point Fellowship Church (A Nonprofit Organization) Statement of Activities and Changes in Net Assets For the Year Ended December 31, 2020 Without donor restrictions With donor restrictions Memo only OPERATING REVENUES AND SUPPORT General donations $ 1,029,675 $ - $ 1,029,675 Capital campaign 89,091 - 89,091 Interest income 20 - 20 Miscellaneous revenue 3,894 12,478 16,372 Total revenues and support 1,122,680 12,478 1,135,158 NET ASSETS RELEASED FROM RESTRICTIONS Expenditures for program purposes 12,478 (12,478) - EXPENSES Support services 359,595 - 359,595 Program expenses 498,101 - 498,101 Total operating expenses 857,696 - 857,696 Change in net assets from operating activities 277,462 - 277,462 NON-OPERATING INCOME (EXPENSES) Financing expense (24,017) - (24,017) Other income-emergency injury disaster loan 5,000 - 5,000 Change in net assets from non-operating activities (19,017) - (19,017) Change in net assets 258,445 - 258,445 Net assets beginning of year 497,386 - 497,386 Net assets end of year $ 755,831 $ - $ 755,831 4 The accompanying notes are an integral part of these financial statements.
Harvest Point Fellowship Church (A Not-for-Profit Organization) Statement of Functional Expenses For the Year Ended December 31, 2020 Support services Program services Memo only Rent & facilities $ 94,120 $ 148,940 $ 243,060 Payroll expenses 173,150 103,537 276,687 Worship & creative arts ministry - 54,696 54,696 Outreach ministries - 50,171 50,171 Media ministry - 41,815 41,815 Adult ministries - 27,973 27,973 Technology expenses 26,591 - 26,591 Children's ministry - 22,237 22,237 Pastoral care - 17,112 17,112 Insurance expense 18,604 1,016 19,620 Operations expenses 13,717 114 13,831 Utilities 12,771 - 12,771 Professional fees - 12,366 12,366 Depreciation 7,864 - 7,864 Merchant fees 9,963 - 9,963 Student ministry - 7,088 7,088 Equipment rental and storage 1,638 - 1,638 Connect ministry - 5,069 5,069 Pastoral administration - 4,308 4,308 General ministries - 1,659 1,659 Supplies 1,177 - 1,177 Total $ 359,595 $ 498,101 $ 857,696 5 The accompanying notes are an integral part of these financial statements.
Harvest Point Fellowship Church (A Nonprofit Organization) Statement of Cash Flows-Indirect Method For the Year Ended December 31, 2020 Cash flows from operating activities: Increase (decrease) in net assets $ 258,445 OPERATING ACTIVITIES: Items not requiring (providing) operating activity cash flows: Depreciation 7,864 Changes in: Accounts payable (63,280) Other liabilities (1,912) Net cash generated (used) by operating activities 201,117 INVESTMENT ACTIVITIES: Property acquisitions (73,727) Net cash generated (used) by investment activities (73,727) FINANCING ACTIVITIES: Proceeds from issuance of notes payable 173,759 Principal payments on loans (10,873) Net cash generated (used) by financing activities $ 162,886 Net increase (decrease) in cash $ 290,276 Cash at beginning of period 30,833 Cash at end of period $ 321,109 Supplemental information: Interest paid on debt $ 24,017 Supplemental information: Non-cash activity-forgiveness of EIDL $ 5,000 6 The accompanying notes are an integral part of these financial statements.
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Note A – Organization Harvest Point Fellowship Church, (“the Church”) envisions being a church that multiplies by making thousands of disciples through the transforming of lives and communities by the Gospel of Jesus Christ. The Church is located in Pearland, Texas and was established in 2014.The Church offers several ministries including care and support, adult ministry, children’s ministry, college and career ministry, connect team, worship and praise ministry, media team and missions. Note B – Summary of Significant Accounting Policies Basis of Presentation –The financial statements of the Church have been prepared in accordance with U.S. generally accepted accounting principles ("US GAAP"), which require the Church to report information regarding its financial position and activities according to the following net asset classifications: Net assets without donor restrictions: Net assets that are not subject to donor-imposed restrictions and may be expended for any purpose in performing the primary objectives of the organization. These net assets may be used at the discretion of the Church’s management and the trustees. Net assets with donor restrictions: Net assets subject to stipulations imposed by donors and grantors. Some donor restrictions are temporary in nature; those restrictions will be met by actions of the Church or by the passage of time. Other donor restrictions are perpetual in nature, whereby the donor has stipulated the funds be maintained in perpetuity. Donor restricted contributions are reported as increases in net assets with donor restrictions. When a restriction expires, net assets are reclassified from net assets with donor restrictions to net assets without donor restrictions in the statement of activities. 7
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Adoption of Accounting Standards The requirements of the following Financial Accounting Standards Board (FASB) Accounting Standards Update (ASU) were adopted during the year ended December 31, 2020: On August 16, 2016 FASB issued ASU 2016-14, Not-for-Profit Entities (Topic 958) – Presentation of Financial Statements of Not-for-Profit Entities. The update addresses the complexity and understandability of net asset classification, deficiencies in information about liquidity and availability of resources, and the lack of consistency in the type of information provided about expenses and investment return. The Church has adjusted the presentation of these statements accordingly. On August 28, 2018, FASB issued ASU 2018-13, “Changes to the Disclosure Requirements for Fair Value Measurement (Topic 820)”. The amendment removes and modifies certain fair value hierarchy leveling disclosures. The amendments clarify that the measurement uncertainty disclosure is to communicate information about the uncertainty in measurement as of the reporting date. Implementation resulted in financial statement disclosure modifications only. On June 10th, the AICPA issued Technical Question and Answer (TQA) 3200.18, Borrower Accounting for a Forgivable Loan Received Under the Small Business Administration Paycheck Protection Program (“PPP”). This guidance has been published to address accounting matters specific to the PPP loan forgiveness for nongovernmental for-profit and nonprofit entities and to provide each with alternative accounting methods. Provided certain conditions are met, a nongovernmental entity using accounting standards in compliance with generally accepted accounting principles in the United States (US GAAP), whether for-profit or nonprofit, may account for a PPP loan as a financial liability in accordance with FASB ASC Topic 470, Debt. The liability remains until the entity has been legally released as the debtor, as the loan is either partially or fully forgiven, or the loan is fully paid off. A reduction to the liability should be recorded for the amount forgiven once partial or full forgiveness occurs, and a gain on extinguishment should be recorded when the loan has been legally released from the repayment obligation. Interest accrues in accordance with the interest method, as outlined in ASC Subtopic 835-30, and additional interest is not imputed at a market rate. 8
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Pending Standards ASU 2016-02, “Leases (Topic 842),” is effective, as delayed, for the financial statements for the years beginning after December 15, 2021. These amendments and related amendments will require lessees to recognize assets and liabilities on the statement of financial position for the rights and obligations created by all leases with terms of more than twelve months. Disclosures also will be required by lessees to meet the objective of enabling users of financial statements to assess the amount, timing, and uncertainty of cash flows arising from leases. Management has not yet determined the impact of this amendment on the Church’s financial statements. Use of Estimates The preparation of financial statements in conformity with US GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Measure of Operations The statement of activities reports all changes in net assets, including changes in net assets from operating and non-operating activities. Operating activities consist of those items attributable to the Church’s ongoing ministries and interest and dividends earned on investments. Non-operating activities are limited to resources that generate return from investments and other activities considered to be of a more unusual or nonrecurring nature. Concentrations of Credit Risk Financial instruments that potentially subject the Church to concentrations of credit risk consist principally of cash and cash equivalents and investments. The Church maintains its cash and cash equivalents in various bank accounts that, at times, may exceed federally insured limits. The Church’s cash and cash equivalent accounts have been placed with high credit quality financial institutions. The Church has not experienced, nor does it anticipate, any losses with respect to such accounts. 9
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Contributions Contributions are provided to the Church either with or without restrictions placed on the gift by the donor. Revenues and net assets are separately reported to reflect the nature of those gifts – with or without donor restrictions. The value recorded for each contribution is recognized as follows: Nature of the Gift Value Recognized Conditional gifts, with or without restriction Gifts that depend on the Church overcoming a donor-imposed barrier to be entitled to the funds Not recognized until the gift becomes unconditional, i.e., the donor- imposed barrier is met Unconditional gifts, with or without restriction Received at date of gift – cash and other assets Fair value Received at date of gift – property, equipment and long-lived assets Estimated fair value Expected to be collected within one year Net realizable value Collected in future years Initially reported at fair value determined using the discounted present value of estimated future cash flows technique In addition to the amount initially recognized, revenue for unconditional gifts to be collected in future years is also recognized each year as the present-value discount is amortized using the level-yield method. When a donor stipulated time restriction ends or purpose restriction is accomplished, net assets with donor restrictions are reclassified to net assets without donor restrictions and reported in the statements of activities as net assets released from restrictions. Absent explicit donor stipulations for the period of time that long-lived assets must be held, expirations of restrictions for gifts of land, buildings, equipment and other long-lived assets are reported when those assets are placed in service. Gifts and investment income that are originally restricted by the donor and for which the restriction is met in the same time period the gift is received are recorded as revenue with donor restrictions and then released from restriction. 10
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Conditional contributions and investment income having donor stipulations which are satisfied in the period the gift is received and the investment income is earned are recorded as revenue with donor restrictions and then released from restriction. Noncash Contributions Donated materials and use of facilities are recognized at fair value as contributions when an unconditional commitment is received from the donor. The related expense is recognized as the item is used. Contributions of services are recognized as revenue at their estimated fair value only when the services received create or enhance nonfinancial assets or require specialized skills possessed by the individuals providing the service and the service would typically need to be purchased if not donated. Several volunteers have contributed significant amounts of time in connection with the Church’s ministries for which no amount has been recorded in the financial statements because the donated services did not meet the criteria for recognition under GAAP. Advertising Costs Advertising costs are expensed as incurred. Income Taxes The Church is exempt from income tax under IRC section 501(c)(3), though it is subject to tax on income unrelated to its exempt purpose, unless that income is otherwise excluded by the Code. The Church has processes presently in place to ensure the maintenance of its tax-exempt status; to identify and report unrelated income; to determine its filing and tax obligations in jurisdictions for which it has nexus; and to identify and evaluate other matters that may be considered tax positions. The Church has determined that there are no material uncertain tax positions that require recognition or disclosure in the financial statements. Allocation of Functional Expenses Expenses are allocated to various programs and supporting services based on the ultimate use of the product or services and on estimated time and effort invested in the activity. Certain costs may be allocated among the program and supporting services benefited. 11
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Fair Value Measurements Fair value is the price that would be received to sell an asset, or paid to transfer a liability, in an orderly transaction between market participants at the measurement date. Fair value measurements must maximize the use of observable inputs and minimize the use of unobservable inputs. There is a hierarchy of three levels of inputs that may be used to measure fair value: Level 1 Quoted prices in active markets for identical assets or liabilities. Level 2 Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 Unobservable inputs supported by little or no market activity and are significant to the fair value of the assets or liabilities. Statement of Cash Flows The statement of cash flows is presented using the indirect method. The Church considers all highly liquid investments with original maturities of three months or less when purchased to be cash equivalents. Property and Equipment Purchased property and equipment is recorded at cost. Donated property and equipment are recorded at the estimated fair value at the date of the gift. The Church reports gifts of land, buildings, and equipment as without donor restrictions, unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long‑lived assets are reported as with donor restrictions. Absent explicit donor stipulations about how long these long-lived assets must be maintained, the Church reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service; if insignificant, gifts of long-lived assets are expensed when received. Depreciation is computed using the straight-line method over the estimated useful life. Buildings are depreciated over 39 years; building improvements are depreciated over 15-39 years; furniture, fixtures and equipment are depreciated over 5-years; software is depreciated over 5 years; vehicles are depreciated over 5 years; and leasehold improvements are depreciated over the life of the lease or useful life (whichever is shorter). The Church capitalizes purchased property and equipment having a cost greater than $ 750 with estimated useful life greater than one year. Expenditures for repair and maintenance are charged to operating expenses as incurred. 12
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Memorandum Totals Total columns on the financial statements are captioned “memo only” to indicate that they are presented only to facilitate analysis. Amounts in these columns do not present financial position or results of operations in conformity with US GAAP. These amounts are not comparable to a consolidation. Note C- Change in Accounting Principles On January 1, 2020, the Church adopted the Financial Accounting Standards Board Accounting Standards Update 2018-08, Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions Made (Topic 958). The adoption has no impact on the overall change in net assets or net cash provided by operating activities. Note D – Availability and Liquidity The following represents the Church’s financial assets on December 31, 2020: Financial assets at year- end: Cash and cash equivalents $ 321,109 321,109 Less amounts not available to be used within one year: Net assets with donor restrictions - Less: net assets with purpose restrictions to be met in less than a year - Subtotal - Financial assets available to meet general expenditures over the next twelve months $ 321,109 The Church’s goal is generally to maintain financial assets to meet 30 days of operating expenses (approximately $70,000). Note E – Compensable Absences The Church has not accrued for compensable absences because the amount cannot be reasonably estimated at December 31, 2020. However, the Church’s management does not believe the amount to be material. 13
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Note F – Property and Equipment Property and equipment consist of the following on December 31, 2020: Land $ 526,198 Construction in progress 269,497 Leasehold improvements 107,925 Furniture, fixtures and equipment 81,316 Subtotal $ 984,936 Less: Accumulated depreciation (35,310) Property, plant and equipment, net $ 949,626 Depreciation expense totaled $ 7,864 for the year ended December 31, 2020. Note G -Schedule of Functional Expenses The Church reports its operating expenses into primarily two functional classifications: • Program services - activities that provide goods and services to the beneficiaries, customers and members of the Church that fulfill its purpose or mission for which the Church exists. • Support services – activities not directly related to the purpose or mission for which the Church exists, but which are necessary for the Church to operate. Supporting services generally include management and general, fundraising and membership-development activities. 14
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Note H– Notes Payable Notes payable consisted of the following as of December 31, 2020: Lender/terms Outstanding balances 12/31/2020 Vasudev Properties LLC executed on February 3, 2017, in the amount of $375,000 bearing interest of 7% annually and maturing on March 18, 2037. The loan is secured by land located at 2450 Garden Road in Pearland, Texas. Principal and interest payments paid during the current year were $10, 873 and $ 24,017. $ 337,143 Small Business Administration loan dated April 12, 2020, in the amount of $23,759 under the Paycheck Protection Program ("PPP loan") established by the Coronavirus Aid, Relief, and Economic Security (CARES) Act. The loan bears interest at a rate of 1% and is payable in monthly installments of $1,330 principal and interest (if loan is not forgiven) over 24 months beginning 6 months from the date of the note. 23,759 Small Business Administration unsecured loan dated June 2, 2020, in the amount of $150,000 loan in connection with the Economic Injury Disaster Loan program. The loan bears an interest rate of 2.75% annually, with monthly payment amounts of $641 beginning 24 months from the date of the note until paid in full or 30 years from the date of the note. 150,000 Total notes payable $ 510,902 Less: Short-term debt 31,156 Long-term debt $ 479,746 The Church has elected to account for the PPP loan funding as a conditional contribution by applying Accounting Standards Codification Topic 958-605, Revenue Recognition - Contributions. Revenue is recognized when conditions are met, which include meeting FTE and salary reduction requirements and incurring eligible expenditures. PPP loans are subject to audit and acceptance by the U.S. Department of Treasury, Small Business Administration, or lender; as a result of such audit, adjustments could be required to the recognition of revenue. Conditions of the PPP loan have not been met as of the year ended December 31, 2020; therefore, revenue has not been recognized. As of December 31, 2020, the $23,759 loan is reported as long-term debt in the statement of financial position based on the terms of the note. An increase in the amount of $5,000 plus interest was made during 2020 to the Economic Injury Disaster Loan obtained by the Church due to a change in policy by the Small Business Administration. The amount was granted to the Church. It was recorded as other income and included in non-operating income (expenses) in the statement of activities and changes in net assets. 15
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 The future scheduled maturities of debt are as follows: Year Ending December 31, Principal Interest Total 2021 $ 11,590 $ 19,566 $ 31,156 2022 38,282 22,991 61,273 2023 16,997 25,583 42,580 2024 18,063 26,380 44,442 2025 19,201 27,112 46,313 2026 & thereafter 406,770 172,418 579,188 Total $510,902 $294,050 $804,952 Note I –Building Campaign – Project Next The Church has embarked on a building campaign to expand the children and student ministries. The goal is to build a facility that will assist in discipling 500 families, including a worship center that seats approximately 500-550 people, ample space to lead 400 children and students, and intentional space designed to encourage fellowship with opportunities to deepen relationships within the local congregation. Construction is slated to begin the Summer of 2021. Total funds raised and expended from inception to the year ended December 31, 2020, is $401,271 and $269,497, respectively. The Church does not record intentions to give as revenue until funds are received. Accordingly, no pledged receivables have been recorded in the current year. Note J – Lease Commitments Total rental expense incurred under operating leases for office space and a copier totaled $243,060 for the year ended December 31, 2020. For years after 2020, minimum annual future rental commitments under the lease agreements, are as follows: Year Ending December 31, Rental expense 2021 $ 264,056 2022 4,918 2023 4,918 2024 - 2025 - Total $ 273,892 16
Harvest Point Fellowship Church (A Not-for-Profit Organization) Notes to the Financial Statements December 31, 2020 Note K – Contingencies Amounts received may be with or without donor restrictions. Failure by the Church to comply with donor specifications may result in the donor requesting that the contribution be returned. As of December 31, 2020, the Church had no donations or contributions with donor restrictions, and accordingly, no provision has been made for any liabilities that might arise from noncompliance. The coronavirus pandemic remains a rapidly evolving situation. The extent of the impact of the coronavirus on the Church and financial results will depend on future developments, including the duration and spread of the outbreak within communities served by the Church which is highly uncertain. Note L – Subsequent Events FASB 165, which is codified in ASC Topic 855-10, requires the disclosure of the date through which the Church has evaluated subsequent events and the reason for selecting that date. The Church evaluated subsequent events through October 31, 2020, the date the financial statements were available to be issued. No subsequent events occurred except for the forgiveness of the Paycheck Protection Loan dated April 12, 2020, in the amount of $ 23,759 on January 14, 2021. The loan proceeds will be reclassed as gain on extinguishment of debt in 2021. Also, the Church refinanced the Vasudev Properties LLC loan with Liberty Bank and Trust Company on March 15, 2021, in the amount of $342,000, secured by real estate, interest rate 6%, monthly payments $2,907, with a three-year maturity date. 17