Review the financial statements for Propel Nonprofit

Identify evidence where you believe they have implemented ASC 958 by discussing one specific example.

Comment on if you believe this financial reporting change was beneficial for the reader of the financial statement. If you want to include a contrasting set of financial statements from another organization, please feel free to do so but include the link (i.e. document your source).

In summary, please discuss one specific implementation of ASC 958, your comments.

LOANS RECEIVABLE (CONTINUED) NOTE 4 Anticipated principal payments on loans receivable as of March 31, 2018 are as follows: Year Ending March 31 2019, Net of Allowance of $433,745 2020 through 2023, Net of Allowance of $880,941 Thereafter, Net of Allowance of $166,316 Amount 6,505,029 11,931,851 3,439,372 $ 21,876,252 S Total as of March 31, 2018: Propel Nonprofits has the following commitments Available Nonrevolving Lines of Credit, with Maturities to FY2019 48,463 Available Lines of Credit, with Maturities through FY2020 Term Loans Originated but Not Flly Disbursed 2,863,465 as of Year-End Total Commitments 400,000 $ 3,311,928 Loans receivable at March 31 were comprised of the following 2018 2017 Working CapitaVBusiness Working Capital/Equity Builder Community Facilities Affordable Housing S 5,945,832 1,464,388 14,091,045 1,855,989 23,357,254 (1,481,002) $ 21,876,252 $ 5,270,845 443,937 12,233,289 835,164 18,783,235 (939,162 17,844,073 Subtotal Allowance for Loan Losses Loans Receivable, Net Working capital/business loan credit is extended to nonprofit organizations for program expansion, short-term bridge loans, cash flow stabilization, and funding growth. These loans are often secured with business assets such as receivables, sometimes with other business assets such as liens on facilities, but may in some short-term situations be made on an unsecured basis. grants receivable or program revenue Equity Builder loan credit is a new product first piloted in FY2017. The pil ot brings capital to arts organizations and other nonprofits anchored in and transformational in their communities, especially communities of color and emerging immigrant communities. The program includes a new loan product that provides a 3-year term loan to be used for working capital or facility purposes. The loans, which range from $50,000 $200,000, invest immediate capital for stability and growth. A portion of the loan (between 20% - 40%) is converted to a grant (forgivable) over the 3-year term LOANS RECEIVABLE (CONTINUED) NOTE 4 Community facilities loan credit is generally extended to nonprofit organizations for building purchase, building repair, or renovation. Most of these loans are secured with first or second position mortgage liens. Affordable housing loan credit is extended to nonprofit organizations specifically for the acquisition, construction, and/or renovation of single family or multi-family residences. Most of these loans are secured with mortgage liens or other business assets. C Aging of Past Due Loans: The following table presents the aging of past due loans by loan segment as of March 31: 31-80 Days 61-00 Days 90+ Days Nonaccruing Current Past Due Past Due Past Due Total Loans As of March 31, 2018 S S 5,505,832 350,000 5,945,832 Working Capital/Business Working Capital/Equity Builder Community Facilities Affordable Housing 1464.388 1,464,388 13.299.041 792,004 14,091,045 1,855,989 1,855,989 23,357,254 Total S 22.215.250 $ 1,142,004 S As of March 31, 2017 Working Capital/Business Working Capital/Equity Builder Community Facilities Affordable Housing S 179.500 S 5.270.845 S 5,001,345 443.937 12233 289 443,937 12.233.289 835.164 835,164 S 18,603,735 S 179,500 Total $ 18,783,235 Propel Nonprofits uses portfolio. At the time of loan approval, each loan is assigned an initial risk classification. Classifications are reviewed at least quarterly during the term of the loan and at any time there is a significant change, positive or negative, in the borrower's operations an intemal risk rating system to monitor the credit quality of its loan Loan credit quality is rated using letter designations from A to G, with A being the highest quality rating andG being the lowest. Each category is differentiated based on evaluation of financial measures, management and govemance, collateral, payment history, and likelihood of full repayment. For reporting purposes in the following tables, ratings A, B, and C are grouped as Pass. Loans rated D are considered Watch. Loans with quality ratings of E and F are considered Substandard. Loans rated G are listed as Doubtful. LOANS RECEIVABLE (CONTINUED) NOTE 4 As of March 31, 2018 Pass Watch Substandard Doubtful Total Working Capital/Business Working Capital/Equity Builder 247,787 5548,045 150,000 S 5,945,832 1,464,388 1,484,388 Community Facilties 12,972,854 1,855,989 $ 21,841,276 792004 328,187 14,091,045 1,855,989 S 23,357,254 Affordable Housing Total S 1.039.791 476.187 S 22.215.250 $ 21,841,276 Current 47.787 328,187 Past Due 31-80 Days Past Due 01-90 Days Past Due 90+ Days 982 004 150.000 1,142004 S 23,357,254 S 1,039,79 Total $ 21,841,276 476,187 As of March 31, 2017 Pass Watch Substandard Doubtful Total Working Capital/Business Working Capital/Equity Builder Community Facilties Affordable Housing 4.888.604 S 443,937 572741 20,500 S 5.270.845 443,037 12,233 289 11,767,119 835,164 17,714,824 488.170 835,164 S 18.783235 S 1,038,911 Total 29.500 $ 17,584,824 S 1,038,011 S 18,603,735 179.500 Current Past Due 31-80 Days Past Due 61-00 Days 150,000 29,500 Past Due 90 Days $17,714,824 $ 1,038,011 22,500 $ 18,783.235 Total Allowance for Loan Losses: The allowance for loan losses (loan loss reserve) is established as losses are estimated to have occurred through a provision for loan losses charged to earmings. Loans are charged against the loan loss reserve when management confirms that the principal will not be collected. Subsequent recoveries, if any, are credited to the allowance. Activity in the loan loss reserve for the years ended March 31 was as follows: Working Capital Working Capital Equity Builder Community Affordable March 31, 2018 Business Facilities Housing Total Allowance for Loan Losses Beginning Balance Charge Offs S S 340,671 23,162 538,012 37,317 939.162 (304,126) (304,126) Recoveries 500 500 Provisions Ending Balance 269,081 42,783 85,045 495.271 1,033,283 S 38.351 75,888 845,468 1,481,002 306.108 S Allowance for Loan Losses Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impairment Total 24,779 487,503 492,282 281,330 65,945 585,779 75,888 988,720 1,033,282 65,945 1,481,002 308,109 75,888 S Financing Receivables Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impaiment Total S 1,515,078 307.787 1,118,191 5,548,045 1,464,388 12,972,854 1,855,989 21,841,276 1,855,989 $ 23,357 254 S 5,045,832 $ 1,484,388 14.091.045 (16) LOANS RECEIVABLE (CONTINUED) NOTE 4 Working Capital Business Working Capital Equity Builder Community Faclities Affordable Total Housing March 31, 2017 Allowance for Loan Losses Beginning Balance Charge Offs 1,051,269 (388,013) 5,010 S 317,657 708,405 27,207 (223.117) (142,896) Recoveries 5,010 Provisions 241.121 23.162 (25,497) 538,012 10,110 37,317 248.898 Ending Balanoe S 340,671 23,162 939,162 Allowance for Loan Losses Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impaiment 30,500 39.500 301,172 23.162 538,011 37,317 89e,882 Total 340,672 23,162 538,011 37,317 939.182 Financing Receivables Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impairment S 602 241 486,170 1,088.411 4,668,604 443,937 11,787,119 835,164 17,714,824 835,164 S 5,270,845 $ 18,783,235 Total 12,233,280 443,937 Loan Charge Offs and Recoveries: On April 30, 2014, Propel Nonprofits received a deed for property in lieu of foreclosure from a borrower in Princeton, MN. The property received in lieu of foreclosure was collateral for two loans to a single nonprofit organization that ceased operations. As of the acquisition date, Propel Nonprofits recorded the property as Other Real Estate Owned. The property was held for sale. At the time of acquisition, the value of the property the property served as collateral. The property was recorded at carrying amount. On December 9, 2016, the property sold for $493,507. At the time of sale, a gain of $31,901 was recognized on the statement of activities for the year ended March 31, 2017 was determined to be in excess of the carrying amount of the loans on which On November 21, 2016, Propel Nonprofits received a deed for property in lieu of foreclosure from a borrower in West Concord, MN. As of the acquisition date, Propel Nonprofits recorded the property as Other Real Estate Owned. The property is held for sale. At the time of acquisition, the value of the property was determined to be in excess of the carrying amount of the loans on which the property served as collateral. The property was recorded at carrying amount. As of March 31, 2018, the recorded carrying amount is $60,811. During fiscal year 2018, Propel Nonprofits charged off three loans in the amount of $304,126. Per its policy and practice, Propel Nonprofits had been evaluating the status of these loans periodically and had assigned reserves accordingly. At the time of the charge off, Propel Nonprofits had fully reserved against the potential loss. The balance of the loan loss reserve was reduced by the charge off. NOTE 5 LIQUIDITY, AVAILABILITY, AND RESERVES MANAGEMENT Propel Nonprofits maintains and manages adequate operating and loan fund reserves per policies set by its board of directors. In the case of the operating reserve, the Finance Committee of the board regularly reviews and recommends reserve policies to the full board for approval. In the case of loan fund reserves, including loan loss reserves, the Loan Committee regularly reviews and recommends reserve policies to the full board for approval. Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of the balance sheet date, are made up of the following: Assets Without Donor Restrictions Available Within 12 Months: Cash and Cash Equivalents (Program and Operations) Cash and Cash Equivalents (Loan Fund) Accounts Receivable (Net of Allowance) Loan Interest Receivable 981,910 4,206,439 244,244 79,504 Total S 5,512,097 Per its financial policies, Propel Nonprofits maintains an less than one-fourth of budgeted operating expenses, calculated less noncash items such as loan loss reserves and depreciation, and less grants to other entities that have a specific, corresponding revenue source. The reserve itself consists of cash, cash equivalents, CDs, assets with donor restrictions that will likely be released within 90 days, and other receivables likely to mature within 90 days. operating reserve with a value of no Operating Reserve Available Within 90 days: Cash and Cash Equivalents (Program and Operations Only) Accounts Receivable (Net of Allowance) Loan Interest Receivable (Available for Program and Operations) 981,910 244,244 79,504 Donor-Restricted Assets Estimated to be Released Within 90 Days 185,164 Total 1,490,822 Operating Reserve Requirement Per Policy Budgeted Operating Expenses FY2019 Less Depreciation Expense 5,347,946 (161,700) (104,195) Less Provision for Loan Loss Reserves Less Grants to Other Entities with a Corresponding (995,833) 4,086,218 $ Source of Revenue Subtotal Total Operating Reserve Requirement 1,021,555 LOANS RECEIVABLE (CONTINUED) NOTE 4 Anticipated principal payments on loans receivable as of March 31, 2018 are as follows: Year Ending March 31 2019, Net of Allowance of $433,745 2020 through 2023, Net of Allowance of $880,941 Thereafter, Net of Allowance of $166,316 Amount 6,505,029 11,931,851 3,439,372 $ 21,876,252 S Total as of March 31, 2018: Propel Nonprofits has the following commitments Available Nonrevolving Lines of Credit, with Maturities to FY2019 48,463 Available Lines of Credit, with Maturities through FY2020 Term Loans Originated but Not Flly Disbursed 2,863,465 as of Year-End Total Commitments 400,000 $ 3,311,928 Loans receivable at March 31 were comprised of the following 2018 2017 Working CapitaVBusiness Working Capital/Equity Builder Community Facilities Affordable Housing S 5,945,832 1,464,388 14,091,045 1,855,989 23,357,254 (1,481,002) $ 21,876,252 $ 5,270,845 443,937 12,233,289 835,164 18,783,235 (939,162 17,844,073 Subtotal Allowance for Loan Losses Loans Receivable, Net Working capital/business loan credit is extended to nonprofit organizations for program expansion, short-term bridge loans, cash flow stabilization, and funding growth. These loans are often secured with business assets such as receivables, sometimes with other business assets such as liens on facilities, but may in some short-term situations be made on an unsecured basis. grants receivable or program revenue Equity Builder loan credit is a new product first piloted in FY2017. The pil ot brings capital to arts organizations and other nonprofits anchored in and transformational in their communities, especially communities of color and emerging immigrant communities. The program includes a new loan product that provides a 3-year term loan to be used for working capital or facility purposes. The loans, which range from $50,000 $200,000, invest immediate capital for stability and growth. A portion of the loan (between 20% - 40%) is converted to a grant (forgivable) over the 3-year term LOANS RECEIVABLE (CONTINUED) NOTE 4 Community facilities loan credit is generally extended to nonprofit organizations for building purchase, building repair, or renovation. Most of these loans are secured with first or second position mortgage liens. Affordable housing loan credit is extended to nonprofit organizations specifically for the acquisition, construction, and/or renovation of single family or multi-family residences. Most of these loans are secured with mortgage liens or other business assets. C Aging of Past Due Loans: The following table presents the aging of past due loans by loan segment as of March 31: 31-80 Days 61-00 Days 90+ Days Nonaccruing Current Past Due Past Due Past Due Total Loans As of March 31, 2018 S S 5,505,832 350,000 5,945,832 Working Capital/Business Working Capital/Equity Builder Community Facilities Affordable Housing 1464.388 1,464,388 13.299.041 792,004 14,091,045 1,855,989 1,855,989 23,357,254 Total S 22.215.250 $ 1,142,004 S As of March 31, 2017 Working Capital/Business Working Capital/Equity Builder Community Facilities Affordable Housing S 179.500 S 5.270.845 S 5,001,345 443.937 12233 289 443,937 12.233.289 835.164 835,164 S 18,603,735 S 179,500 Total $ 18,783,235 Propel Nonprofits uses portfolio. At the time of loan approval, each loan is assigned an initial risk classification. Classifications are reviewed at least quarterly during the term of the loan and at any time there is a significant change, positive or negative, in the borrower's operations an intemal risk rating system to monitor the credit quality of its loan Loan credit quality is rated using letter designations from A to G, with A being the highest quality rating andG being the lowest. Each category is differentiated based on evaluation of financial measures, management and govemance, collateral, payment history, and likelihood of full repayment. For reporting purposes in the following tables, ratings A, B, and C are grouped as Pass. Loans rated D are considered Watch. Loans with quality ratings of E and F are considered Substandard. Loans rated G are listed as Doubtful. LOANS RECEIVABLE (CONTINUED) NOTE 4 As of March 31, 2018 Pass Watch Substandard Doubtful Total Working Capital/Business Working Capital/Equity Builder 247,787 5548,045 150,000 S 5,945,832 1,464,388 1,484,388 Community Facilties 12,972,854 1,855,989 $ 21,841,276 792004 328,187 14,091,045 1,855,989 S 23,357,254 Affordable Housing Total S 1.039.791 476.187 S 22.215.250 $ 21,841,276 Current 47.787 328,187 Past Due 31-80 Days Past Due 01-90 Days Past Due 90+ Days 982 004 150.000 1,142004 S 23,357,254 S 1,039,79 Total $ 21,841,276 476,187 As of March 31, 2017 Pass Watch Substandard Doubtful Total Working Capital/Business Working Capital/Equity Builder Community Facilties Affordable Housing 4.888.604 S 443,937 572741 20,500 S 5.270.845 443,037 12,233 289 11,767,119 835,164 17,714,824 488.170 835,164 S 18.783235 S 1,038,911 Total 29.500 $ 17,584,824 S 1,038,011 S 18,603,735 179.500 Current Past Due 31-80 Days Past Due 61-00 Days 150,000 29,500 Past Due 90 Days $17,714,824 $ 1,038,011 22,500 $ 18,783.235 Total Allowance for Loan Losses: The allowance for loan losses (loan loss reserve) is established as losses are estimated to have occurred through a provision for loan losses charged to earmings. Loans are charged against the loan loss reserve when management confirms that the principal will not be collected. Subsequent recoveries, if any, are credited to the allowance. Activity in the loan loss reserve for the years ended March 31 was as follows: Working Capital Working Capital Equity Builder Community Affordable March 31, 2018 Business Facilities Housing Total Allowance for Loan Losses Beginning Balance Charge Offs S S 340,671 23,162 538,012 37,317 939.162 (304,126) (304,126) Recoveries 500 500 Provisions Ending Balance 269,081 42,783 85,045 495.271 1,033,283 S 38.351 75,888 845,468 1,481,002 306.108 S Allowance for Loan Losses Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impairment Total 24,779 487,503 492,282 281,330 65,945 585,779 75,888 988,720 1,033,282 65,945 1,481,002 308,109 75,888 S Financing Receivables Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impaiment Total S 1,515,078 307.787 1,118,191 5,548,045 1,464,388 12,972,854 1,855,989 21,841,276 1,855,989 $ 23,357 254 S 5,045,832 $ 1,484,388 14.091.045 (16) LOANS RECEIVABLE (CONTINUED) NOTE 4 Working Capital Business Working Capital Equity Builder Community Faclities Affordable Total Housing March 31, 2017 Allowance for Loan Losses Beginning Balance Charge Offs 1,051,269 (388,013) 5,010 S 317,657 708,405 27,207 (223.117) (142,896) Recoveries 5,010 Provisions 241.121 23.162 (25,497) 538,012 10,110 37,317 248.898 Ending Balanoe S 340,671 23,162 939,162 Allowance for Loan Losses Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impaiment 30,500 39.500 301,172 23.162 538,011 37,317 89e,882 Total 340,672 23,162 538,011 37,317 939.182 Financing Receivables Ending Balance: Individually Evaluated for Impairment Ending Balance: Collectively Evaluated for Impairment S 602 241 486,170 1,088.411 4,668,604 443,937 11,787,119 835,164 17,714,824 835,164 S 5,270,845 $ 18,783,235 Total 12,233,280 443,937 Loan Charge Offs and Recoveries: On April 30, 2014, Propel Nonprofits received a deed for property in lieu of foreclosure from a borrower in Princeton, MN. The property received in lieu of foreclosure was collateral for two loans to a single nonprofit organization that ceased operations. As of the acquisition date, Propel Nonprofits recorded the property as Other Real Estate Owned. The property was held for sale. At the time of acquisition, the value of the property the property served as collateral. The property was recorded at carrying amount. On December 9, 2016, the property sold for $493,507. At the time of sale, a gain of $31,901 was recognized on the statement of activities for the year ended March 31, 2017 was determined to be in excess of the carrying amount of the loans on which On November 21, 2016, Propel Nonprofits received a deed for property in lieu of foreclosure from a borrower in West Concord, MN. As of the acquisition date, Propel Nonprofits recorded the property as Other Real Estate Owned. The property is held for sale. At the time of acquisition, the value of the property was determined to be in excess of the carrying amount of the loans on which the property served as collateral. The property was recorded at carrying amount. As of March 31, 2018, the recorded carrying amount is $60,811. During fiscal year 2018, Propel Nonprofits charged off three loans in the amount of $304,126. Per its policy and practice, Propel Nonprofits had been evaluating the status of these loans periodically and had assigned reserves accordingly. At the time of the charge off, Propel Nonprofits had fully reserved against the potential loss. The balance of the loan loss reserve was reduced by the charge off. NOTE 5 LIQUIDITY, AVAILABILITY, AND RESERVES MANAGEMENT Propel Nonprofits maintains and manages adequate operating and loan fund reserves per policies set by its board of directors. In the case of the operating reserve, the Finance Committee of the board regularly reviews and recommends reserve policies to the full board for approval. In the case of loan fund reserves, including loan loss reserves, the Loan Committee regularly reviews and recommends reserve policies to the full board for approval. Financial assets available for general expenditure, that is, without donor or other restrictions limiting their use, within one year of the balance sheet date, are made up of the following: Assets Without Donor Restrictions Available Within 12 Months: Cash and Cash Equivalents (Program and Operations) Cash and Cash Equivalents (Loan Fund) Accounts Receivable (Net of Allowance) Loan Interest Receivable 981,910 4,206,439 244,244 79,504 Total S 5,512,097 Per its financial policies, Propel Nonprofits maintains an less than one-fourth of budgeted operating expenses, calculated less noncash items such as loan loss reserves and depreciation, and less grants to other entities that have a specific, corresponding revenue source. The reserve itself consists of cash, cash equivalents, CDs, assets with donor restrictions that will likely be released within 90 days, and other receivables likely to mature within 90 days. operating reserve with a value of no Operating Reserve Available Within 90 days: Cash and Cash Equivalents (Program and Operations Only) Accounts Receivable (Net of Allowance) Loan Interest Receivable (Available for Program and Operations) 981,910 244,244 79,504 Donor-Restricted Assets Estimated to be Released Within 90 Days 185,164 Total 1,490,822 Operating Reserve Requirement Per Policy Budgeted Operating Expenses FY2019 Less Depreciation Expense 5,347,946 (161,700) (104,195) Less Provision for Loan Loss Reserves Less Grants to Other Entities with a Corresponding (995,833) 4,086,218 $ Source of Revenue Subtotal Total Operating Reserve Requirement 1,021,555