SBH COMMUNITY SERVICE NETWORK, INC.

AND AFFILIATE

CONSOLIDATED FINANCIAL STATEMENTS

YEAR ENDED DECEMBER 31, 2019

AND

INDEPENDENT AUDITORS’ REPORT

 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

TABLE OF CONTENTS

Page

Independent Auditors’ Report 1

Consolidated Financial Statements

Statement of Financial Position with Consolidating Information 3

Statement of Activities with Consolidating Information 4

Statement of Functional Expenses 5

Statement of Cash Flows 6

Notes to Consolidated Financial Statements 7

 INDEPENDENT AUDITORS’ REPORT

To the Board of Directors

SBH Community Service Network, Inc. and Affiliate

We have audited the accompanying consolidated financial statements of SBH Community Service
Network, Inc. and Affiliate (the “Organization”), which comprise the consolidated statement of
financial position as of December 31, 2019, and the related consolidated statements of activities,
functional expenses and cash flows for the year then ended, and the related notes to the consolidated
financial statements.

Management’s Responsibility for the Consolidated Financial Statements

Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material
misstatement, whether due to fraud or error.

Auditors’ 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 Organization’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 Organization’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.

(Continued)
1
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 SBH Community Service Network, Inc. and Affiliate as of
December 31, 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.

November 2, 2020

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

CONSOLIDATED STATEMENT OF FINANCIAL POSITION WITH CONSOLIDATING INFORMATION

DECEMBER 31, 2019

SBHC SBHJB Total

ASSETS
Cash and cash equivalents $ 1,684,202 $ - $ 1,684,202
Investments 1,873,779 4,920,435 6,794,214
Accounts receivable 260,417 - 260,417
Contributions receivable - net 2,160,998 46,000 2,206,998
Grants receivable 731,104 - 731,104
Prepaid expenses 54,861 - 54,861
Other assets 12,895 - 12,895
Property and equipment - at cost, less accumulated
depreciation and amortization 6,658,480 - 6,658,480
Total assets $ 13,436,736 $ 4,966,435 $ 18,403,171

LIABILITIES AND NET ASSETS

Liabilities
Accounts payable and accrued expenses $ 152,947 $ - $ 152,947
Accrued payroll and related liabilities 426,548 - 426,548
Deferred income 269,690 - 269,690
Total liabilities 849,185 - 849,185

Commitments and contingencies

Net assets
Without donor restrictions 11,916,752 1,598,860 13,515,612
With donor restrictions 670,799 3,367,575 4,038,374
Total net assets 12,587,551 4,966,435 17,553,986
Total liabilities and net assets $ 13,436,736 $ 4,966,435 $ 18,403,171

See notes to consolidated financial statements.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

CONSOLIDATED STATEMENT OF ACTIVITIES WITH CONSOLIDATING INFORMATION

YEAR ENDED DECEMBER 31, 2019

Without Donor Restrictions With Donor Restrictions

SBHC SBHJB Total SBHC SBHJB Total Total
Support and revenues
Contributions $ 4,918,850 $ - $ 4,918,850 $ 39,300 $ 86,045 $ 125,345 $ 5,044,195
Program income - mental health clinic 1,988,482 - 1,988,482 - - - 1,988,482
Special events, net of direct expenses of $1,696,729 2,151,031 - 2,151,031 - - - 2,151,031
Grant revenue 1,466,640 - 1,466,640 - - - 1,466,640
Rental income 129,100 - 129,100 - - - 129,100
In-kind contributions - food and clothing 181,162 - 181,162 - - - 181,162
Other income 55,774 - 55,774 - - - 55,774
Net assets released from restrictions 214,200 191,059 405,259 (214,200) (191,059) (405,259) -
11,105,239 191,059 11,296,298 - (174,900) (105,014) (279,914) - 11,016,384

Grant from SBHJB to SBHC 198,500 (198,500) - - - - -

Total support and revenues 11,303,739 (7,441) 11,296,298 - (174,900) (105,014) (279,914) - 11,016,384

Expenses
Program services
Client services 4,844,795 - 4,844,795 - - - 4,844,795
Career services network 759,764 - 759,764 - - - 759,764
Thrift store clothing and food 263,650 - 263,650 - - - 263,650
Family services 178,842 - 178,842 - - - 178,842
Senior services 462,012 - 462,012 - - - 462,012
Medical 336,295 - 336,295 - - - 336,295
Volunteer 369,607 - 369,607 - - - 369,607
Mental health services 2,184,327 - 2,184,327 - - - 2,184,327
Total program services 9,399,292 - 9,399,292 - - - - 9,399,292

Supporting services
Management and general 1,530,590 - 1,530,590 - - - 1,530,590
Fundraising 733,265 - 733,265 - - - 733,265
Total supporting services 2,263,855 - 2,263,855 - - - 2,263,855

Total expenses 11,663,147 - 11,663,147 - - - 11,663,147

Change in net assets before nonoperating changes (359,408) (7,441) (366,849) - (174,900) (105,014) (279,914) (646,763)

Nonoperating revenues and expenses

Net realized/unrealized gain on investments 200,985 228,960 429,945 - 428,403 428,403 858,348
Interest and dividends 41,701 53,646 95,347 - 71,456 71,456 166,803
Total nonoperating revenues and expenses 242,686 282,606 525,292 - 499,859 499,859 1,025,151

Change in net assets (116,722) 275,165 158,443 (174,900) 394,845 219,945 378,388

Net assets, beginning of year 12,033,474 1,323,695 13,357,169 845,699 2,972,730 3,818,429 17,175,598
Net assets, end of year $ 11,916,752 $ 1,598,860 $ 13,515,612 $ 670,799 $ 3,367,575 $ 4,038,374 $ 17,553,986

See notes to consolidated financial statements.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES

YEAR ENDED DECEMBER 31, 2019

Program Services Supporting Services

Client Services Career Thrift Store Mental Management
Brooklyn Jersey Shore Services Clothing and Family Senior Health and Fund Special Total
Branch Branch Total Network Food Services Services Medical Volunteer Services Total General Raising Events Total Expenses
Personnel expenses
Salaries $ 1,149,633 $ 451,616 $ 1,601,249 $ 515,173 $ 89,458 $ 117,836 $ 314,302 $ 172,718 $ 168,276 $ 969,262 $ 3,948,274 $ 713,350 $ 381,169 $ - $ 1,094,519 $ 5,042,793
Payroll taxes and benefits 186,750 67,206 253,956 95,231 15,989 16,378 50,937 34,135 32,801 175,948 675,375 124,341 55,618 - 179,959 855,334
Total personnel expenses 1,336,383 518,822 1,855,205 610,404 105,447 134,214 365,239 206,853 201,077 1,145,210 4,623,649 837,691 436,787 - 1,274,478 5,898,127

Other expenses
Financial assistance 113,342 45,481 158,823 - - - 2,262 650 - - 161,735 - - - - 161,735
Clients' rent 649,654 204,400 854,054 - - - - - - - 854,054 - - - - 854,054
Food (including in-kind food of $19,162) 369,775 157,194 526,969 - 18,462 - 20,763 1,319 27,021 - 594,534 - - - - 594,534
Medical and homecare services 116,371 7,866 124,237 - - - 1,642 1,750 - - 127,629 - - - - 127,629
Camp scholarships 106,014 21,463 127,477 - - - - - - - 127,477 - - - - 127,477
Tutoring and educational aid 13,720 - 13,720 - - - - - - - 13,720 - - - - 13,720
Holiday programs 120,116 43,408 163,524 - - - - - - - 163,524 - - - - 163,524
Child care 22,224 - 22,224 - - - - - - - 22,224 - - - - 22,224
Clients' utilities 120,381 33,588 153,969 - - - - - - - 153,969 - - - - 153,969
Flowers and gifts 10,216 3,432 13,648 - - - - - - - 13,648 - - - - 13,648
Clothing (including in-kind clothing of $162,000) 205,232 15,355 220,587 - 23,343 - 525 - - - 244,455 - - - - 244,455
Grant expense - 2,000 2,000 - - - - 80,000 - - 82,000 - - - - 82,000
Professional fees 275 22,248 22,523 38,038 1,300 12,374 7,485 5,643 - 753,408 840,771 176,750 88,417 - 265,167 1,105,938
Occupancy 180,359 48,214 228,573 14,712 60,626 3,123 8,700 4,814 5,186 69,884 395,618 148,411 8,074 - 156,485 552,103
Printing and postage 2,554 3,911 6,465 - 63 - - 395 - 870 7,793 2,051 6,082 - 8,133 15,926
Repairs and maintenance - 50,318 50,318 24,873 3,241 700 3,312 1,680 12,427 66,918 163,469 16,760 - - 16,760 180,229
Bank and credit card charges - - - - 20 - - - - - 20 3,269 81,671 - 84,940 84,960
Telephone 24,774 10,554 35,328 3,051 1,283 2,404 2,139 3,909 3,992 25,766 77,872 18,721 9,056 - 27,777 105,649
Travel and meetings 12,747 4,228 16,975 395 115 8,300 8,417 505 3,606 6,055 44,368 8,053 2,122 389,359 399,534 443,902
Advertising - 1,525 1,525 1,356 2,976 1,711 1,255 6,293 4,728 4,727 24,571 6,890 56,928 - 63,818 88,389
Security 500 3,495 3,995 - - - 400 - 675 1,744 6,814 19,725 - 15,808 35,533 42,347
Supplies 14,764 32,175 46,939 11,011 36,822 637 5,779 1,293 33,905 13,580 149,966 52,836 5,803 173,326 231,965 381,931
Insurance 24,651 9,244 33,895 11,269 1,880 2,392 6,511 3,687 3,973 20,414 84,021 14,932 10,285 - 25,217 109,238
Depreciation and amortization 95,186 44,960 140,146 43,513 7,258 9,238 25,139 14,237 15,340 63,919 318,790 63,294 23,878 - 87,172 405,962
Hall, catering and entertainment - - - - - - - - 52,750 - 52,750 - - 967,945 967,945 1,020,695
Gifts and prizes - - - - - - - - - - - - - 150,291 150,291 150,291
Bad debts - - - - - - - - - - - 88,661 - - 88,661 88,661
Miscellaneous expenses 6,138 15,538 21,676 1,142 814 3,749 2,444 3,267 4,927 11,832 49,851 72,546 4,162 - 76,708 126,559
Total other expenses 2,208,993 780,597 2,989,590 149,360 158,203 44,628 96,773 129,442 168,530 1,039,117 4,775,643 692,899 296,478 1,696,729 2,686,106 7,461,749

Total expenses by function 3,545,376 1,299,419 4,844,795 759,764 263,650 178,842 462,012 336,295 369,607 2,184,327 9,399,292 1,530,590 733,265 1,696,729 3,960,584 13,359,876

Less direct cost of special events - - - - - - - - - - - - - (1,696,729) (1,696,729) (1,696,729)

Total expenses $ 3,545,376 $ 1,299,419 $ 4,844,795 $ 759,764 $ 263,650 $ 178,842 $ 462,012 $ 336,295 $ 369,607 $ 2,184,327 $ 9,399,292 $ 1,530,590 $ 733,265 $ -0- $ 2,263,855 $ 11,663,147

See notes to consolidated financial statements.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

CONSOLIDATED STATEMENT OF CASH FLOWS

YEAR ENDED DECEMBER 31, 2019

Cash flows from operating activities

Change in net assets $ 378,388
Adjustments to reconcile change in net assets to
net cash provided by operating activities
Depreciation and amortization 405,962
Provision for doubtful accounts 88,661
Realized/unrealized gain on investments (858,348)
Changes in assets and liabilities
Accounts receivable 38,888
Contributions receivable 135,210
Grants receivable 531,748
Prepaid expenses 133,317
Other assets 359,300
Accounts payable and accrued expenses (189,410)
Accrued payroll and related liabilities (61,043)
Deferred income (146,955)
Net cash provided by operating activities 815,718

Cash flows from investing activities

Acquisition of property and equipment (101,939)
Purchases of investments (1,605,789)
Proceeds from sales of investments 951,284
Net cash used in investing activities (756,444)

Net increase in cash and cash equivalents 59,274

Cash and cash equivalents, beginning of year 1,624,928

Cash and cash equivalents, end of year $ 1,684,202

Noncash investing activities

Disposal of fully depreciated equipment $ 424,000

See notes to consolidated financial statements.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

1 - ORGANIZATION

SBH Community Service Network, Inc. (“SBHC”) is a not-for-profit organization with offices
located in Brooklyn, New York and Deal, New Jersey. SBHC is exempt from federal income tax
under section 501(c)(3) of the Internal Revenue Code and is a publicly supported organization
under Section 509(a).

In 2014, The Sephardic Bikur Holim Fund in Memory of Joseph D. Beyda, Inc. (“SBHJB”) was
organized to engage in fund-raising activities, manage investments, maintain an endowment fund,
and provide grants and scholarships to support not-for-profit organizations, including SBHC.
SBHC is the sole member of SBHJB. SBHJB’s activity is consolidated in this report. SBHJB
qualifies as a tax-exempt organization under existing provisions of Internal Revenue Code Section
501(c)(3).

SBH Community Service Network, Inc. and Affiliate (collectively, the “Organization” or “SBH”)
provides various forms of assistance to individuals, whose needs are assessed on a case-by-case
basis. SBH also operates a mental health clinic to provide counseling. SBH is supported primarily
by contributions, special events and income from their clinic.

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting and Presentation

The Organization’s consolidated financial statements have been prepared on the accrual basis of
accounting in accordance with accounting principles generally accepted in the United States of
America (“GAAP”), and include the accounts of SBHC and SBHJB. All significant intercompany
accounts and transactions have been eliminated in consolidation.

The financial statement presentation is in accordance with Financial Accounting Standards Board
Accounting Standards Codification (“FASB ASC”) 958, Not-for-Profit Entities. Under FASB
ASC 958, the Organization is required to report information regarding its financial position and
activities according to two classes of net assets: those without donor restrictions and those with
donor restrictions. Net assets without donor restrictions are those net assets that are not subject to
donor-imposed restrictions. Net assets with donor restrictions are subject to donor stipulations that
limit the use of their contributions, which either expire by the passage of time or when used for
specified purposes.

Changes in Accounting Principles

The Organization adopted ASU No. 2014-09, “Revenue from Contracts with Customers” (Topic
606), effective January 1, 2019 using the modified retrospective transition method, which was
applied to agreements that were either entered into after the effective date or were not completed as
of the effective date. Under Topic 606, revenue from contracts with customers is recognized when
control of the promised goods or services is transferred in an amount that reflects the consideration

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Changes in Accounting Principles (Continued)

to which the Organization expects to be entitled in exchange for those goods or services (i.e.,
transaction price). Adoption of this standard did not have a material impact on the Organization’s
consolidated financial statements.

The Organization also adopted ASU No. 2018-08, “Clarifying the Scope and the Accounting
Guidance for Contributions Received and Contributions Made”, effective January 1, 2019 using the
modified prospective approach. The ASU amends the new revenue recognition standard and long-
standing contribution accounting guidance.

This ASU provides a more robust framework to determine when a transaction should be accounted
for as a grant or as an exchange transaction and provides additional guidance about how to
determine whether a grant is conditional. Grants are considered conditional when the underlying
agreement includes a performance barrier and a right of return or a right to release promised assets
exists. Conditional promises to give are not recognized until the performance barrier and the right
of return or release have been overcome. There was no restatement or cumulative effect to the
consolidated financial statements as a result of adoption.

Use of Estimates
The preparation of consolidated financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect certain reported amounts and
disclosures. Accordingly, actual results could differ from those estimates.

Cash and Cash Equivalents

Cash balances in banks are insured by the Federal Deposit Insurance Corporation subject to certain
limitations. For purposes of the statement of cash flows, the Organization considers all highly liquid
investments with a maturity of three months or less when purchased to be cash equivalents, except
for cash and cash equivalents held within SBH’s investment portfolio which are deemed to be held
for long-term purposes.

Investments
Investments in equity securities having a readily determinable fair value are carried at fair value.
Investment return includes dividend, interest and other investment income; realized and unrealized
gains and losses on investments carried at fair value, less external investment expenses.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Investments (Continued)
Investment securities in general are exposed to various risks such as interest rate, credit and overall
market volatility. Due to the level of risk associated with certain investment securities, it is
reasonably possible that changes in the value of investment securities will occur in the near term,
based on the markets’ fluctuations and that such changes could materially affect the amounts
reported in the financial statements.

Fair Value
GAAP establishes a framework for measuring fair value. That framework provides a fair value
hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The
hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets
or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3
measurements). Under GAAP, the three levels of the fair value hierarchy are described as follows:

Level 1: Inputs to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the Organization has the ability to
access.

Level 2: Inputs to the valuation methodology include:

• Quoted prices for similar assets or liabilities in active markets;

• Quoted prices for identical or similar assets or liabilities in inactive markets;
• Inputs other than quoted prices that are observable for the asset or liability;
• Inputs that are derived principally from or corroborated by observable
market data by correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must
be observable for substantially the full term of the asset or liability.

Level 3: Unobservable inputs that reflect management’s own assumptions.

Investments in mutual funds, common and preferred stocks, and corporate bonds are stated at fair
value based on quoted prices on a recognized securities exchange and are classified as Level 1
investments.

Accounts Receivable
SBH records receivables based on established rates or contracts for services provided. Interest is
not charged on overdue receivables. Management has determined that an allowance was not
necessary at December 31, 2019.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Contributions Receivable
Unconditional gifts expected to be collected within one year are reported at their net realizable
value. Unconditional gifts expected to be collected in future years are initially reported at fair value
determined using the discounted present value of estimated future cash flows technique. The
resulting discount is amortized and reported as contribution revenue. The carrying amount of
contributions receivable is shown net of an allowance for doubtful accounts of $1,467,560 as of
December 31, 2019.

Grants Receivable and Grant Revenue

SBH records revenue and receivables for grants from contracting agencies when reimbursable
expenses are incurred under the terms of the contract. Such revenues are subject to audit by the
agencies. No provision for any disallowances is reflected in the consolidated financial statements,
since management does not anticipate any material adjustments.

Allowance for Doubtful Accounts

SBH determines whether an allowance should be provided for uncollectible receivables. Such
estimates are based on management’s assessment of the aged basis of its receivables, current
economic conditions, subsequent receipts and historical information. Receivables are written off
against the allowance for doubtful accounts when all reasonable collection efforts have been
exhausted.

Property and Equipment

Property and equipment are stated at cost less accumulated depreciation and amortization. Items
with a cost in excess of $600 and an estimated useful life greater than one year are capitalized.
Depreciation is provided on the straight-line method over the estimated useful lives of the assets.
Leasehold improvements are amortized over the lesser of their useful lives or the term of the lease.

Long-Lived Assets
The Organization periodically evaluates the recoverability of the carrying value of long-lived assets
whenever events or circumstances indicate the carrying amount may not be recoverable. If a long-
lived asset is tested for recoverability and the undiscounted estimated future cash flows expected
to result from the use and eventual disposition of the asset is less than the carrying amount of the
asset, the asset cost is adjusted to fair value, and an impairment loss is recognized as the amount by
which the carrying amount of a long-lived asset exceeds its fair value. Based on management’s
evaluations, there were no impairments of long-lived assets as of December 31, 2019.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Contributions
Gifts of cash and other assets received without donor stipulations are reported as revenue without
donor restrictions. Gifts received with a donor stipulation that limits their use are reported as
revenue with donor restrictions. 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 statement of activities as net assets released from restrictions. Gifts
having donor stipulations, which are satisfied in the period the gift is received, are reported as
revenue without donor restrictions.

Program Income - Mental Health Clinic

Revenues are reported at the estimated net realizable amounts from patients, third-party payors
(including Medicaid and Medicare), and others for services rendered, based upon agreements with
third-party payors. Laws and regulations governing Medicaid and Medicare programs are
extremely complex and subject to interpretation. As a result, there is at least a reasonable possibility
that recorded estimates will change by a material amount in the near term. Additionally,
noncompliance with such laws and regulations could result in fines, penalties and exclusion from
the Medicaid and/or Medicare programs.

Special Events
Special event income is recognized at the net realizable amount when the event is held. A portion
of the special event gross proceeds paid by the participant represents payment for the direct cost of
the benefits received by the participant at the event. The portion of special event income collected
in advance but not yet earned is reflected as deferred income.

Rental Income
Rental income is recognized on the straight-line basis based on signed rental agreements. Accrued
rental income is recorded when material. Rental payments received in advance are deferred until
earned.

In-Kind Contributions
In addition to receiving cash contributions, SBH receives in-kind contributions of food and clothing
from various donors. It is the policy of SBH to record the estimated fair value of certain in-kind
donations as an expense in its financial statements, and similarly increase contribution revenue by
a like amount. For the year ended December 31, 2019, in-kind contributions of $181,162 were
received by the Organization.

Grant Expense
Grants are made to various health related organizations pursuant to authorization by the Board of
Directors of SBH and are recorded when awarded.

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)

Advertising
Advertising costs are expensed as incurred.

Functional Allocation of Expenses

Certain costs have been allocated among the programs and supporting services they benefit, in
accordance with bases that best reflect, in management’s judgment, the proportionate benefits derived
by the program or administrative unit. Salaries, payroll taxes and employee benefits are allocated based
on employees’ hours worked. Insurance, depreciation and amortization, and certain office expenses
(including utilities and telephone expense) are allocated based on the salary allocation method.
Occupancy charges are allocated based on square footage utilized and location. Specific expenses
related to clients’ rent, food, advertising and other classifications are directly charged to the function
for which they are related.

Measure of Operations
SBH’s operating loss includes revenues and expenses directly related to services provided and
excludes net realized and unrealized gain on investments, interest and dividend income.

Subsequent Events
These consolidated financial statements were approved by management and available for issuance
on November 2, 2020. Management has evaluated subsequent events through this date.

3 - LIQUIDITY AND AVAILABILITY OF RESOURCES

Financial assets consist of the Organization’s cash and cash equivalents, investments, accounts
receivable, contributions receivable and grants receivable. The following represents the
Organization’s financial assets reduced by an amount not available for general use within one year
of the year ended because of contractual or donor-imposed restrictions at December 31, 2019:

Cash and cash equivalents $ 1,684,202

Investments 6,794,214
Accounts receivable 260,417
Contributions receivable, net 2,206,998
Grants receivable 731,104
Total financial assets as of December 31, 2019 11,676,935
Less: Donor-restricted endowment (Note 6) (3,367,575)
Total financial assets available for general
expenditure within one year $ 8,309,360

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

3 - LIQUIDITY AND AVAILABILITY OF RESOURCES (Continued)

As part of the Organization’s liquidity management, it has a policy to structure its financial assets
to be available as its general expenditures, liabilities, and other obligations become due. The
Organization invests excess funds, along with its endowment fund, in various securities in
accordance with the Organization’s investment policy, the objective of which, is to preserve the
long-term purchasing power of its financial assets while also realizing appropriate investment
income (refer to Note 5 and Note 7).

4 - PROPERTY AND EQUIPMENT

Property and equipment consisted of the following at December 31, 2019:

Land $ 356,534
Building and improvements 11,406,400 31.5 years
Leasehold improvements 170,658 10 years
Furniture and equipment 471,339 5 - 10 years
Vehicles 37,723 5 year
Construction in progress 68,335
12,510,989
Less - Accumulated depreciation and amortization 5,852,509
$ 6,658,480

Depreciation and amortization expense was $405,962 for the year ended December 31, 2019.

5 - INVESTMENTS

The following table represents the Organization’s investments measured at fair value on a recurring
basis at December 31, 2019.

Level 1 Level 2 Level 3 Total

Mutual funds $ 5,017,712 $ - $ - $ 5,017,712

Common stocks 1,283,046 - - 1,283,046
Preferred stocks 51,980 - - 51,980
Fixed income 244,093 - - 244,093
Cash and cash equivalents 197,383 - - 197,383
$ 6,794,214 $ -0- $ -0- $ 6,794,214

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 SBH COMMUNITY SERVICE NETWORK, INC. AND AFFILIATE

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

6 - NET ASSETS WITH DONOR RESTRICTIONS

The following summarizes the changes in net assets with donor restrictions:

Contributions/ Released Balance

Balance, Investment from December 31,
Program January 1, 2019 Income Restrictions 2019
Sephardic hospital fund $ 711,499 $ - $ (80,000) $ 631,499

Time restrictions 134,200 39,300 (134,200) 39,300

Endowment 2,972,730 585,904 (191,059) 3,367,575

Total $ 3,818,429 $ 625,204 $ (405,259) $ 4,038,374

7 - ENDOWMENT

SBH’s endowment consists of a single donor-restricted endowment fund established to support

general operations. As required by GAAP, net assets associated with endowment funds are
classified and reported based on the existence or absence of donor-imposed restrictions.

Interpretation of Relevant Law

The Board of Directors of SBH adopted the New York Prudent Management of Institutional Funds
Act (NYPMIFA). NYPMIFA moves away from the “historic dollar value” standard and permits
charities to apply a spending policy to endowments based on certain specified standards of
prudence. SBH is governed by the NYPMIFA spending policy, which establishes a standard
maximum prudent spending limit of 7%. As a result of this interpretation, SBH classifies as
perpetually restricted net assets (a) the original value of gifts donated to the perpetual endowment,
(b) the original value of subsequent gifts to the perpetual endowment, and (c) accumulations to the
perpetual endowment made in accordance with the direction of the applicable donor gift instrument
at the time the accumulation is added to the fund. The remaining portion of the donor-restricted
endowment fund that is not classified in perpetually restricted net assets is classified as donor-
restricted net assets until those amounts are appropriated for expenditure by the organization in a
manner consistent with the standards of prudence prescribed by NYPMIFA.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

7 - ENDOWMENT (Continued)

Return Objectives, Strategies Employed and Spending Policy

The objective of SBH is to generate investment income while maintaining the principal endowment
funds at the original amount designated by the donor. The investment policy to achieve this
objective is to invest in income-generating investments.

Net Asset Composition by Fund Type

The endowment net asset composition for December 31, 2019 of $3,367,575 consists of one donor-
restricted fund and the investment return in excess of the Organization’s spending policy.

Changes in Endowment Net Assets for the Year Ended December 31, 2019

Endowment net assets, beginning of year $ 2,972,730

Contributions 86,045
Net realized/unrealized gain on investments 428,403
Interest and dividends 71,456
Appropriated for expenditures (191,059)
Endowment net assets, end of year $ 3,367,575

8 - CONTRIBUTIONS RECEIVABLE

Contributions receivable are those amounts pledged but not yet paid to SBH. At December 31,
2019, contributions receivable are due as follows:

Without Donor With Donor

Restrictions Restrictions Total
Past Due $ 3,237,258 $ 338,000 $ 3,575,258
2020 - 99,300 99,300
3,237,258 437,300 3,674,558
Less: Allowance for uncollectible
contributions (1,115,560) (352,000) (1,467,560)
$ 2,121,698 $ 85,300 $ 2,206,998

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

9 - COMMITMENTS AND CONTINGENCIES

Lease Arrangements
The Organization has operating leases for office and program space expiring through fiscal-year
2034. Future rental and related charges as of December 31, 2019 are approximately as follows:

2020 $ 226,000
2021 219,000
2022 221,000
2023 227,000
2024 233,000
Thereafter 2,435,000
$ 3,561,000

The above lease arrangements include future rental payments of approximately $3,490,000 for
space located at 1963 McDonald Avenue in Brooklyn, New York. The terms of the lease agreement
include an option to purchase the property for the price of $3,425,000, plus certain additional costs
as defined in the lease agreement. The Organization intends to exercise this purchase option prior
to the expiration of the option period in March 2024.

Contingencies
SBH is responsible to report to and is regulated by various governmental third parties, among which
are the Centers for Medicare and Medicaid Services (CMS) and the New York State Office of
Mental Health (OMH). These agencies, as well as the New York State Office of the Attorney
General’s Medicaid Fraud Control Unit (MFCU), the Internal Revenue Service, the New York
State Office of the Attorney General’s Charities Bureau, the New York State Department of
Health’s Independent Office of Medicaid Inspector General (OMIG), and other agencies have the
right to audit fiscal as well as programmatic compliance, i.e., clinical documentation, among other
compliance requirements. The current third-party payor programs, including Medicaid, are based
upon extremely complex laws and regulations. Noncompliance with such laws and regulations
could result in fines, penalties and exclusion from such programs. SBH is not aware of any
allegations of noncompliance that could have a material adverse effect on SBH’s change in net
assets or financial position and believes that it is substantially in compliance with all applicable
laws and regulations.

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NOTES TO CONSOLIDATED FINANCIAL STATEMENTS

10 – EMPLOYEE BENEFIT PLAN

Effective March 1, 2019, SBH began sponsoring a 403(b) retirement plan, under which eligible
employees may contribute a percentage of their compensation as defined in the plan agreement in
accordance with Internal Revenue Service regulations. According to the provisions of the plan,
SBH may contribute matching contributions at its discretion. There were no matching contributions
for the year ended December 31, 2019.

11 - SUBSEQUENT EVENTS

SBH’s operations may be affected by the recent and ongoing outbreak of the coronavirus disease
2019 (“COVID-19”), which in March 2020, was declared a pandemic by the World Health
Organization. The ultimate disruption that may be caused by the outbreak is uncertain; however, it
may result in a material adverse impact on SBH’s financial position, operations, cash flows and the
value of assets, including investments and receivables.

On April 30, 2020, the Organization qualified for and received a loan pursuant to the Paycheck
Protection Program, a program implemented by the U.S. Small Business Administration (the
“SBA”) under the Coronavirus Aid, Relief, and Economic Security Act (the “CARES Act”), from
a qualified lender, for an aggregate principal amount of $1,113,845 (the “PPP Loan”). The PPP
Loan bears interest at a fixed rate of 1.0% per annum, with the first six months of interest deferred,
has a term of two years, and is unsecured and guaranteed by the SBA. The principal amount of the
PPP Loan is subject to forgiveness under the Paycheck Protection Program upon the Organization’s
request to the extent that the PPP Loan proceeds are used to pay expenses permitted by the Paycheck
Protection Program, including payroll costs, covered rent and covered utility payments incurred by
the Organization. The Organization intends to apply for forgiveness of the PPP Loan with respect
to these covered expenses.

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