Return to flip book view

Harvest Point Fellowship Church Financial Statements For the Year ended December 31, 2022 With Report of Independent Auditor Earl E. Allen, Jr. P.C. Certified Public Accountant

1 Harvest Point Fellowship Church December 31, 2022 Page Independent Auditor’s Report…………………………………………………………. 2 Statement of Financial Position………….……………………………………………. 4 Statement of Activities…………………………………………………………………. 5 Statement of Functional Expenses………………………………………………………. 6 Statement of Cash Flows……………………………….……………….….………….…. 7 Notes to Financial Statements………………………………………………………….… 8

2 EARL E. ALLEN, JR. P. C . CERTIFIED PUBLIC ACCOUNTANT CERTIFIED FINANCIAL PLANNER® 5330 GRIGGS ROAD, SUITE A115, BOX 32 HOUSTON, TEXAS 77021 (713) 721-5365 (713) 721-5060 FAX Independent Auditors’ Report To the Board of Directors Harvest Point Fellowship Church Opinion I have audited the accompanying financial statements of Harvest Point Fellowship Church (a Texas Non-profit Corporation), which comprise the statement of financial position as of December 31, 2022, the related statement of activities, functional expenses and cash flows, for the year then ended, and the related notes to the financial statements. In my opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Harvest Point Fellowship Church, as of December 31, 2022, the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Basis for Opinion I conducted my audit in accordance with auditing standards generally accepted in the United States of America. My responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of my report. I am required to be independent of Harvest Point Fellowship Church and to meet my other ethical responsibilities in accordance with the relevant ethical requirements relating to my audit. I believe that the audit evidence I obtained is sufficient and appropriate to provide a basis for my audit opinion. Responsibilities of Management for the Financial Statements Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in aggregate, that raise substantial doubt about Harvest Point Fellowship Church’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued. Auditor’s Responsibilities for the Audit of the Financial Statements My objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s report that includes my opinion. Reasonable assurance is a high level of assurance but it not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with general accepted auditing standards will always detect a material misstatement when it exists. The risk of

3 not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or thee override of internal control. Misstatements are considered material is there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements. In performing an audit in accordance with generally accepted auditing standards, I:  Exercise professional judgment and maintain professional skepticism throughout the audit.  Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.  Obtain an understanding of internal control relevant to the audit in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of Harvest Point Fellowship Church’s internal control. Accordingly, no such opinion is expressed.  Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements  Conclude whether, in my judgement, there are conditions or events, considered in the aggregate, that raise substantial doubt about Harvest Point Fellowship Church’s ability to continue as a going concern for a reasonable period of time. I am required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit, significant audit findings, and certain internal control related matters that I identified during the audit. Houston, Texas May 15, 2023

4 The accompanying notes are an integral part of these financial statements. Harvest Point Fellowship ChurchStatement of Financial PositionDecember 31, 2022Without restrictionsWith restrictions Memo totalsCash 300,874$ -$ 300,874$ Cash restricted to building project - 3,584,914 3,584,914 Investments 37,328 - 37,328 Total current assets 338,202 3,584,914 3,923,116 Property, plant and equipment 2,304,968 - 2,304,968 Accumulated depreciation (208,201) - (208,201) Total property and equipment, net 2,096,767 - 2,096,767 Other assets:Other assets 16,270 - 16,270 Total other assets 16,270 - 16,270 2,451,239$ 3,584,914$ 6,036,153$ Accounts Payable accrued expenses 11,924$ -$ 11,924$ Total current liabilities 11,924 - 11,924 Long-term liabilities:Loan payable 150,000 - 150,000 Bonds payable, net 4,924,216 - 4,924,216 Total long-term liabilities 5,074,216 - 5,074,216 Net assets (2,634,901) 3,584,914 950,013 Total net assets (2,634,901) 3,584,914 950,013 2,451,239$ 3,584,914$ 6,036,153$ TOTAL LIABILITIES AND NET ASSETSNet assets:Current liabilities:TOTAL ASSETSLIABILITIES AND NET ASSETSLiabilities:ASSET SCurrent assets:Property and equipment:

5 The accompanying notes are an integral part of these financial statements. Harvest Point Fellowship ChurchStatement of Activities and Changes in Net AssetsFor the year ended December 31, 2022Without restrictionsWith restrictionsMemo totalsOPERATING REVENUES AND SUP PORTTithes and offerings 1,727,537$ -$ 1,727,537$ Other income 23 - 23 Total operating revenues and support 1,727,560 - 1,727,560 EXPENSESProgram expenses 1,145,698 - 1,145,698 Support services 429,999 - 429,999 Total operating expenses 1,575,697 - 1,575,697 Change in net assets from operating activities 151,863 - 151,863 NON-OPERATING INCOME (EXPENSES)Interest expense (175,745) - (175,745) Interest income 46,501 46,501 Non-operating income (expenses) (5,826) - (5,826) Change in net assets from non-operating activities (135,070) - (135,070) Change in net assets 16,793 - 16,793 Net assets beginning of year 933,220 - 933,220 Net assets end of year 950,013$ -$ 950,013$

6 The accompanying notes are an integral part of these financial statements. Harvest Point Fellowship Church(a non-profit organization)Statements of Functional ExpensesFor the year ended December 31, 2022 Program Support 2022Expenses Services TotalRent and Facilities 177,146$ 113,258$ 290,404$ Payroll taxes 322,454 206,159 528,613 Professional fees 51,405 - 51,405 Depreciation 64,400 - 64,400 Children's ministry 25,777 - 25,777 Pastoral care 9,742 - 9,742 Insurance 3,889 2,486 6,375 Maintenance expense - 48,951 48,951 Special events 40,669 - 40,669 Connect ministry 23,824 - 23,824 Equipment rental & storage - 8,993 8,993 Pastoral administration 53,697 - 53,697 Media ministry 39,092 - 39,092 Outreach ministries 142,114 - 142,114 Adult ministries 29,672 - 29,672 Worship & creative arts ministry 80,673 - 80,673 Student ministries 19,646 - 19,646 Utilities 16,476 10,533 27,009 Technology 45,022 28,784 73,806 Supplies - 7,341 7,341 Merchant Fees - 3,494 3,494 Total expenses 1,145,698$ 429,999$ 1,575,697$

7 The accompanying notes are an integral part of these financial statements. Harvest Point Fellowship ChurchStatement of Cash FlowsFor the Year Ended December 31, 2022Cash flows from operating activities: Change in net assets 16,793$ OPERATING ACT IVITIES: Adjustments to reconcile net assets to net cash provided by operating activities Depreciation 64,400 Changes in operating assets and liabilitiesDecrease in accounts payable (4,386) Unrealized loss on investments 5,672 Net cash provided by operating activities 82,479 INVESTMENT ACT IVIT IES: Property additions (1,218,329) Purchase of investments (43,000) Net cash used by investment activities (1,261,329) FINANCING ACTIVITIES: Net proceeds of bond issuance 5,074,206 Principal payments on loans (481,050) Net cash provided by financing activities 4,593,156Change in cash 3,414,306Cash at beginning of period 471,482Cash at end of period 3,885,788$ Supplemental information:Interest paid on debt 175,445$

8 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 (1) Description of the Organization Harvest Point Fellowship Church, (a non-profit organization) envisions being a church that multiples 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. (2) Summary of Significant Policies Basis of Presentation- Net assets, revenues, gains, and losses are classified based on the existence or absence of donor-or grantor-imposed restrictions. The financial statements of Harvest Point Fellowship Church have been prepared in accordance with U.S. generally accepted accounting principles (“US GAAP”), which requires Harvest Point Fellowship 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 Harvest Point Fellowship Church’s management and board of directors. 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 Harvest Point Fellowship Church or by the passage of time. Other donor restrictions are perpetual in nature, whereby the donor has stipulated the funds be maintained perpetually. Donor restricted contributions are reported as increases in net assets with donor restrictions. When a restriction expires, net assets are reclassified from the net assets with donor restrictions in the statements of activities. Measure of operations: The statements of activities reports all changes in net assets, including changes in net assets from operating and nonoperating activities. Operating activities consist of those items attributable to Harvest Point Fellowship Church’s ongoing services. Nonoperating activities are limited to resources that generate return from investments and other activities considered to be of a more unusual or nonrecurring nature. Cash and cash equivalents: Harvest Point Fellowship Church’s cash consists of cash on deposit with banks. Cash equivalents represent money market funds or short-term investments with original maturities of three months or less from the date of purchase,

9 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 except for those amounts that are held in the investment portfolio which are invested for long-term purposes. Concentrations of credit risk: Financial instruments that potentially subject Harvest Point Fellowship Church to concentrations of credit risk principally of cash and cash equivalents and investments. Harvest Point Fellowship Church maintains its cash and cash equivalents in various bank accounts that, at times, may exceed federally insured limits. Harvest Point Fellowship Church’s cash and cash equivalent accounts have been placed with high credit quality financial institutions. Harvest Point Fellowship Church has not experienced, nor does it anticipate, any losses with respect to such accounts. Investments and Fair Value measurements: Fair value is defined as the price that would be received to sell an asset in the principal or most advantageous market for the asset in an orderly transaction between market participants on the measurement data. Fair value should be based on the assumptions market participants would use when pricing an asset. US GAAP establishes a fair value hierarchy that prioritizes investments based on those assumptions. The fair value hierarchy gives the highest priority to quoted prices in active markets (observable inputs) and the lowest priority to an entity’s assumptions (unobservable inputs). Harvest Point Fellowship Church groups assets at fair value in three levels, based on the markets in which the assets and liabilities are traded, and the reliability of the assumptions used to determine fair value. These levels are: Contributions: Contributions are recorded as net assets without donor restrictions or net assets with donor restrictions, depending on the existence and/or nature of any donor-imposed restrictions. Contributions that are restricted by the donor are reported as an increase in net assets without donor restrictions if the restriction expires in the reporting period in which the contribution is recognized. All other donor restricted contributions are reported as an increase in net assets with donor restrictions, depending on the nature of the restriction. When a restriction expires (that is, when a 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 same statements of activities as net Level 1 Unadjusted quoted market prices for identical assets or liabilities in active markets of the measurement date. Level 2 Other observable inputs, either directly or indirectly, including:  Quoted prices for similar assets/liabilities in active markets;  Quoted prices for identical or similar assets in non-active markets;  Inputs other than quoted prices that are observable for the asset/liability; and  Inputs that are derived principally from or corroborated by other observable market data Level 3 Unobservable inputs that cannot be corroborated by observable market data

10 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 assets released from restrictions. Contributed property and equipment are recorded at fair value at the date of the donation. Contributions with donor-imposed stipulations regarding how long the contributed assets must be used are recorded as net assets with donor restrictions; otherwise, the contributions are recorded as net assets without donor restrictions. Functional expenses: The costs of providing program and other activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among program services and supporting services benefited. Such allocations are determined by management on estimated time and effort. 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. 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. Statement of Cash Flows: The statement of cash flows is presented using the indirect method. Cash and Cash Equivalents: The Church considers all cash and highly liquid financial instruments with original maturities of three months or less, which are neither held for nor restricted for long-term purposes, to be cash and cash equivalents. Cash and highly liquid instruments restricted to building projects, debt, or other long-term purposes are excluded from this definition.

11 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 Property and Equipment: Purchased property and equipment over $1,600 with estimated useful life greater than one year 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 significant, gifts of long-lived assets are expensed when received. Depreciation is computed using the straight-line method over the estimated useful lives of assets ranging from 3 to 30 years, or in the case of capitalized leased assets or leasehold improvements, the lesser of the useful life of the asset or the lease term. When assets are sold or otherwise disposed of, the cost and related depreciation or amortization are removed from the accounts and any resulting gain or loss is included in the statement of activities. Cost and maintenance repairs that do not improve or extend the useful lives of the respective assets are expensed currently. The Church reviews the carrying values of property and equipment for impairment whenever events or circumstances indicate that the carrying value of an asset may not be recoverable from the estimated future cash flows expected to result from its use and eventual disposition. When considered impaired, an impairment loss is recognized to the extent carrying value exceeds the fair value of the asset. The were no indicators of asset impairment during the year ended December 31, 2022. Investments: The Church records investment purchases at cost, or if donated, at fair value on the date of donation. Thereafter, investments are reported at their fair values in the statement of financial position. Net investment return/(loss) is reported in the statement of activities and consists of interest and dividend income, realized and unrealized capital gains and losses, less external and direct internal investment expenses. Income taxes: Harvest Point Fellowship Church is exempt from income tax under the 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. Harvest Point Fellowship 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. Harvest Point Fellowship Church has determined that there are no material uncertain tax positions that recognition or disclosure in the financial statements.

12 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 (3) Availability and liquidity: The following represents Harvest Point Fellowship Church’s financial assets at December 31, 2022: Harvest Point Fellowship Church’s goal is generally to maintain financial assets to meet 90 days of operating expenses. As part of its liquidity plan, excess cash is invested in short-term investments, including money market accounts and certificates of deposit. (4) Property and Equipment: Property and Equipment consists of the following as of December 31, 2022: Financial assets at year end:Cash and cash equivalents 3,885,788$ 3,885,788 Less amounts restricted to debt service:Net assets with donor restrictions 3,584,914 300,874 Financial assets available to meet general expenditures over the next twelve months300,874$ 12/31/2021 Additions Deletions 12/31/2022CIP-Project Next 354,591$ 1,215,400$ -$ 1,569,991$ Leasehold Improvements 107,955 - 107,955 Furniture & Fixtures 97,895 2,929 - 100,824 Land 526,198 - - 526,198 1,086,639 1,218,329 - 2,304,968 Accumulated depreciation (143,811) (64,390) - (208,201) Property, plant and equipment, net 942,828$ 1,153,939$ -$ 2,096,767$ -

13 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 (5) Bonds and Notes Payable Bonds Payable On May 20, 2022, the TMI Trust Company (the Trustee) issued $5,200,000 of Series 2022 First Mortgage Bonds (the Bonds). The Trustee then loaned the proceeds of the bonds to the Harvest Point Fellowship Church for construction of a new facility including a worship center. The Bonds are special limited obligations of the Trustee and are payable solely out of the amounts received by the Trustee from the Church pursuant to the terms and provisions of the indenture and agreement. The Bonds are 25-year serial bonds maturing in various amounts beginning March 30, 2027, thru March 30, 2047, with rates ranging from 3.25% to 5.40%, provisions for optional and mandatory redemption sinking funds, and provision for early redemption. Payment of principal and interest on the Bonds is guaranteed by a loan agreement, which provides the Trustee with rights and title to revenues and is secured by land, and the new facility including the worship center. Payments on the Bonds are payable semi-annually in May and November beginning in 2024. Bonds Payable consist of the following at December 31, 2022: Notes Payable Notes Payable consist of following at December 31, 2022: 2022Principal amount 5,200,000$ Less uamortized debt issuance costs 275,784 4,924,216$ Lender/TermsBeginning Balances 01/01/2022Additions PaymentsEnding Balances 12/31/2022U. S. SBA EIDL 2.75% note secured by collateral to include: all tangible and intangible personal property including inventory, equipment, and instruments in Houston, Texas, dated June 2, 2020, maturing on May 5, 2051, payments beginning December, 2022, monthly P & I $641.00150,000$ -$ -$ 150,000$ Liberty Bank and Trust 6.00% note secured by land located at 2450 Garden Road in Pearland Texas, dated March 15, 2021, maturing on March 15, 2024 , monthly P & I $2,902.56331,050 - 331,050 - 481,050$ -$ 331,050$ 150,000$

14 Harvest Point Fellowship Church (a Texas Nonprofit Corporation) Notes to Financial Statements December 31, 2022 (6) 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. 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. (7) Compensable Absences: The Church. has not accrued for compensable absences because the amount cannot be reasonably estimated at December 31, 2022. However, the Church’s management does not believe the amount to be material. (8) Lease Commitments: Total rental expense incurred under operating leases for office space and a copier totaled $290,404 for the year ended December 31, 2022. (9) 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, 2022, 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. (10) Subsequent Events: Harvest Point Fellowship Church. has evaluated subsequent events through May 15, 2023, which is the date the financial statements were available to be issued. Harvest Point Fellowship Church is not aware of any material subsequent events.