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FRANKIE LEMMON FOUNDATION, INC. AND

FRANKIE LEMMON SCHOOL ANDDEVELOPMENTAL CENTER, INC.

Raleigh, North Carolina

CONSOLIDATEDAUDITED FINANCIAL STATEMENTSAND ADDITIONAL INFORMATION

FOR THE YEAR ENDED JUNE 30, 2019

CONTENTS

PAGES

Independent Auditor’s Report 2-3

Financial Statements - Exhibits:

“A” Consolidated Statement of Financial Position 4

“B” Consolidated Statement of Activities and Changes in Net Assets 5

“C” Consolidated Statement of Cash Flows 6

“D” Consolidated Statement of Functional Expenses 7

Notes to Consolidated Financial Statements 8-16

Additional Information 17

Supplemental Consolidating Financial Statements – Statements:

“1” Consolidating Statement of Financial Position 18

“2” Consolidating Statement of Activities and Changes in Net Assets 19

“3” Consolidating Statement of Cash Flows 20

“4” Consolidating Statement of Functional Expenses 21

INDEPENDENT AUDITOR’S REPORT

Page 1 of 2

To the Board of Directors ofFrankie Lemmon Foundation, Inc. and Frankie Lemmon School and Developmental Center, Inc.Raleigh, North Carolina

We have audited the accompanying consolidated financial statements of Frankie Lemmon Foundation, Inc., (a nonprofit organization) and Frankie Lemmon School and Developmental Center, Inc., (a nonprofit organization), which comprise the consolidated statement of financial position as of June 30, 2019, and the related consolidated statements of activities and changes in net assets, cash flows, and functional expenses for the year then ended, and the related notes to the consolidated financial statements.

Management’s Responsibility for the Financial Statements

Management is responsible for the preparation and fair presentation of these consolidatedfinancial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility

Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

3

Page 2 of 2

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Frankie Lemmon Foundation, Inc., and Frankie Lemmon School and Developmental Center, Inc., as of June 30, 2019, and the changes in their net assets and their cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Report on Consolidating Information

Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating information on pages 17 through 21 is presented for purposes of additional analysis of the consolidated financial statements rather than to present the financial position, results of operations, cash flows, and functional expenses of the individual organizations, and it is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole.

Chapel Hill, North CarolinaFebruary 10, 2020

4

EXHIBIT A

CURRENT ASSETS:Cash and cash equivalents 1,173,355$ Investments 3,725,415 Accounts receivable 210,633 Promises to give, net 91,697 Inventory 14,455 Prepaid expenses 15,766

TOTAL CURRENT ASSETS 5,231,321

PROPERTY AND EQUIPMENT:Building 4,513,276 Land and building impovements 211,328 Furniture and fixtures 176,360 Office equipment 104,200 Less: accumulated depreciation (348,150)

NET PROPERTY AND EQUIPMENT 4,657,014

OTHER ASSETS:Restricted cash and cash equivalents 13,824Security deposits 5,594

TOTAL OTHER ASSETS 19,418

TOTAL ASSETS 9,907,753$

CURRENT LIABILITIES:Accounts payable and accrued expenses 50,874$ Deferred rent, current portion 1,539 Deferred revenue 8,505 Long-term debt, current maturities 123,662

TOTAL CURRENT LIABILITIES 184,580

LONG-TERM LIABILITIES:Deferred rent 8,304 Long-term debt, net of current maturities 3,586,796

TOTAL LONG-TERM LIABILITIES 3,595,100

TOTAL LIABILITIES 3,779,680

NET ASSETS:Without donor restrictions 6,052,651 With donor restrictions 75,422

TOTAL NET ASSETS 6,128,073

TOTAL LIABILITIES AND NET ASSETS 9,907,753$

For the Year Ended June 30, 2019

ASSETS

LIABILITIES AND NET ASSETS

CONSOLIDATED STATEMENT OF FINANCIAL POSITION

FRANKIE LEMMON FOUNDATION, INC. ANDFRANKIE LEMMON SCHOOL AND DEVELOPMENTAL CENTER, INC.

The accompanying Notes to Consolidated Financial Statements are an integral part of these statements.

5

EXHIBIT B

Without With

Donor Donor

Restrictions Restrictions Total

SUPPORT AND REVENUE:

Contributions 386,168$ 25,103$ 411,271$

Grant revenue 4,567 10,054 14,621

Special events, net 1,763,848 - 1,763,848

Tuition income 327,702 - 327,702

Wake County Public Schools 601,420 - 601,420

Net investment return 367,959 - 367,959

Other income 72,933 - 72,933

3,524,597 35,157 3,559,754

Net assets released from restrictions 171,379 (171,379) -

TOTAL SUPPORT AND REVENUE 3,695,976 (136,222) 3,559,754

EXPENSES:

Program 2,143,684 - 2,143,684

Management and general 405,117 - 405,117

Fundraising 400,829 - 400,829

TOTAL FUNCTIONAL EXPENSES 2,949,630 - 2,949,630

Bad debt expense 97,688 - 97,688

TOTAL EXPENSES 3,047,318 - 3,047,318

CHANGES IN NET ASSETS 648,658 (136,222) 512,436

NET ASSETS - BEGINNING OF PERIOD 5,403,993 211,644 5,615,637

NET ASSETS - END OF PERIOD 6,052,651$ 75,422$ 6,128,073$



FRANKIE LEMMON SCHOOL AND DEVELOPMENTAL CENTER, INC.

CONSOLIDATED STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS


6

EXHIBIT C

CASH FLOWS FROM OPERATING ACTIVITIES:

Changes in net assets 512,436$

Adjustments to reconcile changes in net assets to net cash

provided by operating activities:

Depreciation 186,140

Realized and unrealized gain on investments (326,334)

Changes in assets and liabilities:

Accounts receivable (84,282)

Promises to give, net 66,954

Inventory (13,987)

Prepaid expenses (8,608)

Accounts payable and accrued expenses (146,274)

Deferred rent (3,430)

NET CASH PROVIDED BY OPERATING ACTIVITIES 182,615

CASH FLOWS FROM INVESTING ACTIVITIES:

Sale of property and equipment 5,800

Purchase of property and equipment (30,366)

Sale of investments 3,477,629

Purchases of investments (3,406,362)

NET CASH PROVIDED BY INVESTING ACTIVITIES 46,701

CASH FLOWS FROM FINANCING ACTIVITIES:

Repayments of long-term debt (114,542)

NET INCREASE IN CASH AND CASH EQUIVALENTS 114,774

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 1,072,405

CASH AND CASH EQUIVALENTS - END OF YEAR 1,187,179$

RECONCILIATION OF CASH AND CASH EQUIVALENTS:

Cash and cash equivalents 1,173,355$

Restricted cash and cash equivalents 13,824

TOTAL CASH AND CASH EQUIVALENTS 1,187,179$

Supplemental Disclosures:

Interest paid 165,225$



CONSOLIDATED STATEMENT OF CASH FLOWS



7

EXHIBIT D


Program Management

Services and General Fundraising Total

Salaries 1,142,482$ 221,845$ 197,792$ 1,562,119$

Special event expenses - - 522,166 522,166

Subcontractors 176,650 16,456 16,628 209,734

Depreciation 161,603 21,091 3,446 186,140

Interest expense 150,124 19,433 2,819 172,376

Insurance 132,663 20,224 3,318 156,205

Payroll taxes 85,090 16,792 15,374 117,256

Bad debt expense - 97,688 - 97,688

Rent 24,231 14,704 28,037 66,972

Employee benefits 27,488 10,540 16,452 54,480

School lunches 51,004 - - 51,004

Bank fees 100 768 49,769 50,637

Office expenses 16,120 9,010 24,097 49,227

Materials and supplies 28,179 7,207 10,382 45,768

Travel 7,454 4,935 25,510 37,899

Repairs and maintenance 30,145 3,902 - 34,047

Miscellaneous 22,701 2,675 3,393 28,769

Utilities 24,141 3,125 453 27,719

Educational supplies 24,266 - - 24,266

Professional fees 2,328 21,851 44 24,223

Telephone 11,744 1,520 221 13,485

Grants 10,904 - - 10,904

Advertising 2,650 6,872 - 9,522

Training 4,419 1,813 3,042 9,274

School events 4,463 - - 4,463

Dues and subscriptions 1,415 183 27 1,625

Technology 1,320 171 25 1,516

Total expenses 2,143,684 502,805 922,995 3,569,484

Less expense included with revenues

on the statement of activities - - (522,166) (522,166)

Less bad debt expense - (97,688) - (97,688)

Total functional expenses 2,143,684$ 405,117$ 400,829$ 2,949,630$



CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES


8FRANKIE LEMMON FOUNDATION, INC. AND


NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

Page 1 of 9

ORGANIZATION

Frankie Lemmon School and Developmental Center, Inc. (the “School”) is a nonprofit corporation that trains and educates children with and without developmental disabilities. The School provides inclusive classrooms, life-changing education, and support that leads to successful participation in family and community life and an opportunity for each child to reach their full potential. Frankie Lemmon Foundation, Inc. (the “Foundation”) is a nonprofit corporation organized to provide support to the School.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES

A. Basis of Accounting.

The consolidated financial statements include the accounts of the School and Foundation(hereafter, the “Organization”), after elimination of all intercompany accounts and transactions.The consolidated financial statements are presented on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America (“U.S. GAAP”), which require the use of certain estimates made by the Organization’s management. Accordingly, revenues are recognized when earned, and expenses are recognized when the obligation is incurred.

The Organization reports gifts of cash and other assets as support with donor restrictions if they are received with donor stipulations that limit the use of the donated assets. When a donor 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 statement of activities and changes in net assets as net assets released from restrictions. Some contributions are restricted in perpetuity, which represent only those contributions restricted by the donor to be invested for the purpose of providing a permanent source of income. The accumulated earnings are reflected in net assets with donorrestrictions until appropriated.

B. Cash and Cash Equivalents.

Cash and cash equivalents consist of monies on deposit at financial institutions, and other highly liquid investments with maturities of three months or less, which are neither held for nor restricted by donors for long-term purposes. Cash and cash equivalents that are perpetual in nature are excluded from this definition. At times, the Organization places deposits with high-quality financial institutions that may be in excess of federally insured amounts. The Organization has not experienced any financial loss related to such deposits.

C. Investments.

Investments are stated at fair value and include marketable securities, mutual funds, bonds, and pooled investment funds. Donated securities are initially recorded at their fair value at the date of the gift. Net investment return (loss) is reported in the statements of activities and changes in net assets and consists of interest and dividend income, realized and unrealized capital gains and losses, less external investment expenses.




Page 2 of 9

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

D. Accounts Receivable.

Accounts receivable are recorded at net realizable value. The Organization provides an allowance for doubtful accounts equal to the estimated losses that are expected to be incurred in collection. The allowance is based on historical collection experience and a review bymanagement of the current status of the existing receivables. As of June 30, 2019, all receivables were deemed collectible by management.

E. Promises to Give.

Unconditional promises to give are recognized as support and assets in the period received. Conditional promises to give are recognized when the conditions on which they depend are substantially met. 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 Organization provides an allowance for uncollectible accounts equal to the estimated losses that are expected to be incurred in collection. The allowance is based on historical collection experience and a review by management of the current status of the existing promises to give. The allowance totaled $7,200 at June 30, 2019.

F. Inventory.

Inventory is stated at the lower of cost or market, determined by the first-in, first-out method. Inventory consists of various items such as wine and glassware.

G. Property and Equipment.

Property and equipment are stated at cost for purchased assets and at fair value on the date of the gift for donated assets. Property and equipment are capitalized if the life is expected to be greater than one year and if the cost exceeds $1,000. Depreciation is calculated using the straight-line method over estimated lives of 5 to 40 years.

The Organization reports gifts of land, buildings, and equipment as support 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 assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as support with donor restrictions.




Page 3 of 9

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED)

H. Revenue Recognition.

Revenue from grants which are deemed to be unconditional contributions is recognized when the grantor makes a promise to give to the Organization. Contributions that are restricted by the grantor are reported as increases in net assets with donor restrictions. Conditional grant revenues are recognized when the conditions upon which they depend are substantially met.

I. Advertising.

Advertising costs totaling $9,522 for the year ended June 30, 2019, are expensed as incurred.

J. Net Assets.

Net assets and support and revenue are classified based on the existence or absence of donor or grantor-imposed restrictions. Accordingly, net assets and changes therein are classified and reported as follows:

Net Assets Without Donor Restrictions - Net assets available for use in general operations and not subject to donor (or certain grantor) restrictions. These resources include amounts generated from operations, undesignated gifts, and investments in property and equipment.

Net Assets With Donor Restrictions - Net assets subject to donor (or certain grantor) 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 stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both.

K. Income Taxes.

The Foundation and School are exempt organizations under Section 501(c)(3) of the Internal Revenue Code and have been classified as other than private foundations. If applicable, the Organization reports any interest and penalties for uncertain tax positions as miscellaneous expense.

L. Estimates.

The preparation of financial statements in conformity with U.S. GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates.

11 FRANKIE LEMMON FOUNDATION, INC. AND



Page 4 of 9 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND PRACTICES (CONTINUED) M. New Accounting Pronouncement.

In August 2016, The Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update (“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 Organization has implemented ASU 2016-14 and adjusted the presentation of the accompanying financial statements accordingly.

LIQUIDITY AND AVAILABILITY Financial assets available for general expenditure, that is without donor or other restrictions limiting their use, within one year of the statement of financial position date, comprise the following:

Cash and cash equivalents 1,173,355$ Investments 3,725,415 Accounts receivable 210,633 Promises to give, net 91,697 Inventory 14,455

5,215,555 Less amounts unavailable for general expenditures within one year, due to: Restrictions by donors (61,598) Board designations (1,500,000)

Financial assets available to meet cash needs for general expenditures within one year 3,653,957$

As part of the Organization’s liquidity management, it structures its financial assets to be available as its general expenditures, liabilities, and other obligations come due. Management believes financial assets available to meet cash needs for general expenditures within one year to be sufficient. However, the board designation of $1,500,000 noted above would be released if considered necessary. Additionally, the Organization holds a $1,000,000 line of credit which could be drawn upon if needed.




Page 5 of 9

FAIR VALUE OF ASSETS

U.S. GAAP defines fair value as 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. It also establishes a fair value hierarchy for inputs used in measuring fair value that maximizes the use of observable inputs and minimizes the use of unobservable inputs by requiring that the most observable inputs be used when available. Observable inputs are those that market participants would use in pricing the asset or liability based on market data obtained from sources independent of the Organization. Unobservable inputs reflect the Organization’s assumptions about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances.

The fair value hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Quoted prices are available in active markets for identical assets as of the reporting date.

Level 2 - Valuations based on inputs other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, are valued at prices for similar assets or liabilities in markets that are not active, or determined through the use of models or other valuation methodologies.

Level 3 - Pricing inputs are unobservable and include situations where there is little, if any, market activity for the asset. Fair value for these assets is determined using valuation methodologies that consider a range of factors, including but not limited to the price at which the asset was acquired, the nature of the asset, local market conditions, trading values on public exchanges for comparable securities, current and projected operating performance and financing transactions subsequent to the acquisition of the asset. The inputs into the determination of fairvalue require significant management judgment. Due to the inherent uncertainty of these estimates, these values may differ materially from the values that would have been used had a ready market for these assets existed.

There were no changes during the year ending June 30, 2019, to the Organization’s valuation techniques used to measure asset values on a recurring basis.

The Organization’s investments are classified as Level 1 or Level 2. No assets or liabilities were classified as Level 3.

The following table summarizes the assets of the Organization for which fair value is determined on a recurring basis as of June 30, 2019. As required by U.S. GAAP, the assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement.




Page 6 of 9

FAIR VALUE OF ASSETS (CONTINUED)

Level 1 Level 2 Level 3 Total

Mutual Funds 43,112$ -$ -$ 43,112$

Exchange Traded Funds 2,638,201 - - 2,638,201

Bonds 902,372 - - 902,372

Alternative - 141,730 - 141,730

3,583,685$ 141,730$ -$ 3,725,415$

RETIREMENT PLAN

The Organization has a SIMPLE IRA retirement plan which allows employees to defer a portion of their gross income annually. Employees must have worked 60 days prior to enrollment on either January 1 or July 1 to be eligible to participate in the plan. The Organization makes a non-elective contribution of 2% of the employees’ salary. The Organization contributed $28,319 to employee accounts for the year ended June 30, 2019.

OPERATING LEASE COMMITMENTS

The Foundation entered into a 62-month lease for office space beginning June 2017. Monthly payments total $4,172, with 3% increases effective annually. Rent expense under the office space lease agreement for the year ended June 30, 2019, totaled $52,981.

The Foundation leases office equipment and a postage meter under non-cancelable operating leases with monthly payments of $283 expiring May 2020 and quarterly payments of $115 expiring August 2018, respectively. The postage meter lease was not renewed. In November 2017, the School entered into a new operating lease agreement for office equipment with monthly payments of $496 and expiring October 2021. Rent expense under these lease agreements totaled $9,651 for the yearended June 30, 2019.

Minimum lease payments under the lease agreements are as follows:

Year Ending June 30

2020 63,626$

2021 58,189

2022 4,695

Total minimum lease payments 126,510$




Page 7 of 9

LINE OF CREDIT

In June 2017, the Organization obtained a $1,000,000 line of credit collateralized by investments without donor restrictions maintained with a financial institution. Interest accrues daily on the outstanding balance at a rate equal to LIBOR plus 1.65%. There was no outstanding balance on the line of credit for the year ended June 30, 2019.

LONG-TERM DEBT

Long-term debt at June 30, 2019, consists of the following:

3,710,458$

Less: current maturities 123,662

Total long-term debt 3,586,796$

During 2018, the Organization entered into a mortgage note

payable to a bank for the purchase of a building totaling

$3,825,000. The note is payable in monthly installments of

$24,624, including interest at 4.625%. The note is secured

by the building, guaranteed by the Foundation, and is due

June 2028.

Principal maturities of long-term debt are as follows:

Year Ending June 302020 123,662$ 2021 130,059 2022 136,291 2023 142,821 2024 149,263

Thereafter 3,028,362

Total minimum long-term debt payments 3,710,458$




Page 8 of 9

BOARD DESIGNATED NET ASSETS

The Organization has designated net assets for future operating expenses in the amount of $1,500,000 as of June 30, 2019.

NET ASSETS WITH DONOR RESTRICTIONS

Net assets with donor restrictions for the year ended June 30, 2019, consists of:

Purpose restricted:

Playground 42,738$

Sensory garden 15,960

Other 2,900

61,598

Restricted in perpetuity 13,824

75,422$

Net assets maintained for perpetuity consist of cash endowments maintained in investments for the purposes of student activities.

SPECIAL EVENTS

Special events consists of the following at June 30, 2019:

Contributions 1,989,750$

Event income 296,265

Less: direct expenses (522,167)

Special events, net 1,763,848$

DONATED SERVICES

The Organization recognizes donated goods and services that create or enhance nonfinancial assets or that require specialized skills, and would typically need to be purchased if not provided by donation. No services meeting these requirements for recognition in the financial statements were received during the year ended June 30, 2019. However, numerous volunteers have donated significant amounts of their time and services to the Organization for program and supporting activities that have not been recognized in the accompanying financial statements. The Organization did not receivedonated property and equipment during the year ended June 30, 2019.




Page 9 of 9

FUNCTIONAL ALLOCATION OF EXPENSES

The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities and changes in net assets, and functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited based on management’s estimates.

The expenses that are allocated include the following:

Expense Method of Allocation

Depreciation Square footage

Dues and subscriptions Time and effort

Employee benefits Time and effort

Insurance Time and effort

Interest expense Square footage

Materials and supplies Usage

Miscellaneous Time and effort

Office expenses Time and effort

Payroll taxes Time and effort

Professional fees Time and effort

Rent Square footage

Repairs and maintenance Usage

Salaries Time and effort

Subcontractors Time and effort

Technology Time and effort

Telephone Usage

Training Time and effort

Travel Time and effort

Utilities Usage

CONCENTRATIONS

Fifty three percent of outstanding accounts receivable and promises to give at June 30, 2019, is from two supporters of the Organization. One special event provided 98% of net proceeds of the Organization’s total special events income, net of expenses for the year ended June 30, 2019.

SUBSEQUENT EVENTS

Management has evaluated subsequent events for recognition or disclosure through February 10, 2020, the date the financial statements were available to be issued. Management did not identify any events that occurred subsequent to year-end that require disclosure in the financial statements.

17

ADDITIONAL INFORMATION


18

STATEMENT 1

Foundation School Eliminations Total

CURRENT ASSETS:

Cash and cash equivalents 1,044,713$ 128,642$ -$ 1,173,355$

Investments 3,725,415 - - 3,725,415

Accounts receivable 81,243 129,390 - 210,633

Promises to give, net 91,697 - - 91,697

Inventory 14,455 - - 14,455

Prepaid expenses 3,374 12,392 - 15,766

TOTAL CURRENT ASSETS 4,960,897 270,424 - 5,231,321

PROPERTY AND EQUIPMENT:

Building - 4,513,276 - 4,513,276

Land and building improvements - 211,328 - 211,328

Furniture and fixtures 5,885 170,475 - 176,360

Office equipment 5,577 98,623 - 104,200

Less: accumulated depreciation (11,419) (336,731) - (348,150)

NET PROPERTY AND EQUIPMENT 43 4,656,971 - 4,657,014

OTHER ASSETS:

Restricted cash and cash equivalents 13,824 - - 13,824

Security deposit 4,172 1,422 - 5,594

TOTAL OTHER ASSETS 17,996 1,422 - 19,418

TOTAL ASSETS 4,978,936$ 4,928,817$ -$ 9,907,753$

CURRENT LIABILITIES:

Accounts payable and accrued expenses 21,706$ 29,168$ -$ 50,874$

Deferred rent, current portion 1,539 - - 1,539

Deferred revenue - 8,505 - 8,505

Long-term debt, current maturities - 123,662 - 123,662

TOTAL CURRENT LIABILITIES 23,245 161,335 - 184,580

LONG-TERM LIABILITIES:

Deferred rent 8,304 - - 8,304

Long-term debt, net of current maturities - 3,586,796 - 3,586,796

TOTAL LONG-TERM LIABILITIES 8,304 3,586,796 - 3,595,100

TOTAL LIABILITIES 31,549 3,748,131 - 3,779,680

NET ASSETS:

Without donor restrictions 4,887,925 1,164,726 - 6,052,651

With donor restrictions 59,462 15,960 - 75,422

TOTAL NET ASSETS 4,947,387 1,180,686 - 6,128,073

TOTAL LIABILITIES AND NET ASSETS 4,978,936$ 4,928,817$ -$ 9,907,753$



CONSOLIDATING STATEMENT OF FINANCIAL POSITION


ASSETS

LIABILITIES AND NET ASSETS

See Independent Auditor's Report.

19

STATEMENT 2

Without With Without With

Donor Donor Donor Donor Elimination

Restrictions Restrictions Subtotal Restrictions Restrictions Subtotal Entries Total

SUPPORT AND REVENUE:

Contributions 386,168$ 25,103$ 411,271$ -$ -$ -$ -$ 411,271$

Grant revenue - - - 4,567 10,054 14,621 - 14,621

Income from Foundation - - - 1,240,000 - 1,240,000 (1,240,000) -

Special events, net 1,763,848 - 1,763,848 - - - - 1,763,848

Tuition income - - - 327,702 - 327,702 - 327,702

Wake County Public Schools - - - 601,420 - 601,420 - 601,420

Net investment return 367,959 - 367,959 - - - - 367,959

Other income 386 - 386 72,547 - 72,547 - 72,933

2,518,361 25,103 2,543,464 2,246,236 10,054 2,256,290 (1,240,000) 3,559,754

Net assets released from restrictions 155,549 (155,549) - 15,830 (15,830) - - -

TOTAL SUPPORT AND REVENUE 2,673,910 (130,446) 2,543,464 2,262,066 (5,776) 2,256,290 (1,240,000) 3,559,754

EXPENSES:

Program 1,472,842 - 1,472,842 1,910,842 - 1,910,842 (1,240,000) 2,143,684

Management and general 165,574 - 165,574 239,543 - 239,543 - 405,117

Fundraising 369,633 - 369,633 31,196 - 31,196 - 400,829

TOTAL FUNCTIONAL EXPENSES 2,008,049 - 2,008,049 2,181,581 - 2,181,581 (1,240,000) 2,949,630

Bad debt expense 97,688 - 97,688 - - - - 97,688

TOTAL EXPENSES 2,105,737 - 2,105,737 2,181,581 - 2,181,581 (1,240,000) 3,047,318

CHANGES IN NET ASSETS 568,173 (130,446) 437,727 80,485 (5,776) 74,709 - 512,436

NET ASSETS - BEGINNING OF PERIOD 4,319,752 189,908 4,509,660 1,084,241 21,736 1,105,977 - 5,615,637

NET ASSETS - END OF PERIOD 4,887,925$ 59,462$ 4,947,387$ 1,164,726$ 15,960$ 1,180,686$ -$ 6,128,073$

Foundation School



CONSOLIDATING STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS



20

STATEMENT 3

Foundation School Eliminations Total

CASH FLOWS FROM OPERATING ACTIVITIES

Changes in net assets 437,727$ 74,709$ -$ 512,436$

Adjustments to reconcile changes in net assets to net cash

provided by operating activities:

Depreciation 855 185,285 - 186,140

Realized and unrealized gain on investments (326,334) - - (326,334)

Changes in assets and liabilities:

Accounts receivable 37,911 (122,193) - (84,282)

Due from School 487 - (487) -

Promises to give, net 66,954 - - 66,954

Inventory (13,987) - - (13,987)

Prepaid expenses 389 (8,997) - (8,608)

Accounts payable and accrued expenses (123,129) (23,145) - (146,274)

Deferred rent (1,535) (1,895) - (3,430)

Due to Foundation - (487) 487 -

NET CASH PROVIDED BY OPERATING ACTIVITIES 79,338 103,277 - 182,615

CASH FLOWS FROM INVESTING ACTIVITIES

Sale of property and equipment 5,800 - - 5,800

Purchase of property and equipment - (30,366) - (30,366)

Sale of investments 3,477,629 - - 3,477,629

Purchases of investments (3,406,362) - - (3,406,362)

NET CASH PROVIDED BY

(USED IN) INVESTING ACTIVITIES 77,067 (30,366) - 46,701

CASH FLOWS FROM FINANCING ACTIVITIES

Repayments of long-term debt - (114,542) - (114,542)

NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 156,405 (41,631) - 114,774

CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 902,132 170,273 - 1,072,405

CASH AND CASH EQUIVALENTS - END OF YEAR 1,058,537$ 128,642$ -$ 1,187,179$

RECONCILIATION OF CASH AND CASH EQUIVALENTS:

Cash and cash equivalents 1,044,713$ 128,642$ -$ 1,173,355$

Restricted cash and cash equivalents 13,824 - - 13,824

TOTAL CASH AND CASH EQUIVALENTS 1,058,537$ 128,642$ -$ 1,187,179$

Supplemental Disclosures:

Interest paid -$ 165,225$ -$ 165,225$



CONSOLIDATING STATEMENT OF CASH FLOWS



21

STATEMENT 4

Program Management Program ManagementServices and General Fundraising Subtotal Services and General Fundraising Subtotal Eliminations Total

Salaries 101,177$ 87,053$ 178,240$ 366,470$ 1,041,305$ 134,792$ 19,552$ 1,195,649$ -$ 1,562,119$ Special event expenses - - 522,166 522,166 - - - - - 522,166 Subcontractors 49,195 16,456 16,628 82,279 127,455 - - 127,455 - 209,734 Depreciation 236 203 416 855 161,367 20,888 3,030 185,285 - 186,140 Interest expense - - - - 150,124 19,433 2,819 172,376 - 172,376 Insurance 601 2,472 1,060 4,133 132,062 17,752 2,258 152,072 - 156,205 Payroll taxes 7,903 6,801 13,925 28,629 77,187 9,991 1,449 88,627 - 117,256 Bad debt expense - 97,688 - 97,688 - - - - - 97,688 Rent 15,826 13,616 27,879 57,321 8,405 1,088 158 9,651 - 66,972 Employee benefits 9,117 7,844 16,061 33,022 18,371 2,696 391 21,458 - 54,480 School lunches - - - - 51,004 - - 51,004 - 51,004 Bank fees - 768 49,769 50,537 100 - - 100 - 50,637 Office expenses 9,471 8,149 23,972 41,592 6,649 861 125 7,635 - 49,227 Materials and supplies - 3,559 9,853 13,412 28,179 3,648 529 32,356 - 45,768 Travel 5,431 4,673 25,472 35,576 2,023 262 38 2,323 - 37,899 Repairs and maintenance - - - - 30,145 3,902 - 34,047 - 34,047 Miscellaneous 21,284 1,644 3,367 26,295 1,417 1,031 26 2,474 - 28,769 Utilities - - - - 24,141 3,125 453 27,719 - 27,719 Educational supplies - - - - 24,266 - - 24,266 - 24,266 Professional fees - 10,875 - 10,875 2,328 10,976 44 13,348 - 24,223 Telephone - - - - 11,744 1,520 221 13,485 - 13,485 Grants 10,904 - - 10,904 - - - - - 10,904 Advertising - - - - 2,650 6,872 - 9,522 - 9,522 Training 1,697 1,461 2,991 6,149 2,722 352 51 3,125 - 9,274 School events - - - - 4,463 - - 4,463 - 4,463 Dues and subscriptions - - - - 1,415 183 27 1,625 - 1,625 Technology - - - - 1,320 171 25 1,516 - 1,516 Transfers to School 1,240,000 - - 1,240,000 - - - - (1,240,000) -

Total expenses 1,472,842 263,262 891,799 2,627,903 1,910,842 239,543 31,196 2,181,581 (1,240,000) 3,569,484

Less expense included with revenueson the statement of activities - - (522,166) (522,166) - - - - - (522,166)

Less bad debt expense - (97,688) - (97,688) - - - - - (97,688)

Total functional expenses 1,472,842$ 165,574$ 369,633$ 2,008,049$ 1,910,842$ 239,543$ 31,196$ 2,181,581$ (1,240,000)$ 2,949,630$

Foundation School

FRANKIE LEMMON FOUNDATION, INC. ANDFRANKIE LEMMON SCHOOL AND DEVELOPMENTAL CENTER, INC.

CONSOLIDATING STATEMENT OF FUNCTIONAL EXPENSES



- fl consolidated issued financial statements (frankie ......frankie lemmon foundation, inc.and...

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