california-nevada methodist homes · 2018. 1. 10. · see notes to financial statements. 4...

CALIFORNIA-NEVADA METHODIST HOMES

ANNUAL REPORT

FISCAL YEAR ENDED

JUNE 30, 2017

ANNUAL REPORT CHECKLIST

for FISCAL YEAR ENDED:

6/30/2017

PROVIDER: California-Nevada Methodist Homes, Inc. FACILITIES: Forest Hill, Lake Park CONTACT PERSON: Robert Leeper TELEPHONE NO.: (510) 893-8989

Your complete annual report must consist of 2 copies of all of the following: This cover sheet. Annual Provider Fee in the amount of: $ 16,251.00 If applicable, late fee in the amount of: $__________. Certification by the provider’s chief executive officer that:

The reports are correct to the best of his/her knowledge. Each continuing care contract form in use or offered to new residents

has been approved by the Department. The provider is maintaining the required liquid reserve and refund reserve, if applicable.

Evidence of the provider’s fidelity bond. The provider’s audited financial statements, with an accompanying certified public accountant’s opinion thereon. The provider’s audited reserve reports (prepared on Department forms), with an accompanying certified public accountant’s opinion thereon. The provider’s “Continuing Care Retirement Community Disclosure Statement” for each community. A copy of the Key Indicators Report.

Disclosure details of reserves, specific funds, and per capita costs.


(A California Not-For-Profit Corporation)

FINANCIAL STATEMENTS

JUNE 30, 2017 AND JUNE 30, 2016

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TABLE OF CONTENTS JUNE 30, 2017 AND JUNE 30, 2016

Page(s) Independent auditors’ report 2 - 3 Statements of financial position 4 - 5 Statements of activities 6 Statements of functional expenses 7 - 8

Statements of cash flows 9 Notes to financial statements 10 - 21 Supplemental Information:

Statement of unrestricted revenue and expenses by division 23 - 26

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RINA accountancy corporation 625 Market Street, 15th Floor San Francisco, CA 94105 phone: 415.777.4488 fax: 415.837.1260 1.800.RINA.CPA web: www.rina.com

Independent Auditors’ Report Board of Trustees California-Nevada Methodist Homes We have audited the accompanying financial statements of California-Nevada Methodist Homes (a California not-for-profit corporation), which comprise the statements of financial position as of June 30, 2017 and June 30, 2016, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of 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 financial statements based on our audits. We conducted our audits 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 financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers the internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, 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 financial statements. 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 financial statements referred to above present fairly, in all material respects, the financial position of California-Nevada Methodist Homes as of June 30, 2017 and June 30, 2016, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.

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Report on Supplementary Information

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying supplemental information, Statement of Unrestricted Revenue and Expenses by Division, is presented for purposes of additional analysis and is not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements. In our opinion, the information is fairly stated in all material respects in relation to the financial statements taken as a whole.

Certified Public Accountants San Francisco, California October 30, 2017

See notes to financial statements. 4


STATEMENTS OF FINANCIAL POSITION - JUNE 30, 2017

TemporarilyASSETS Unrestricted Restricted Total

CURRENT:

Cash and cash equivalents 375,422$ 42,226$ 417,648$ Investments, at fair value 4,627,758 - 4,627,758 Accounts and notes receivable (pledged):

Trade, net of $45,000 allowance for uncollectible accounts 523,368 - 523,368 Other 64,764 - 64,764

Accrued interest 6,620 - 6,620 Prepaid expenses 306,920 - 306,920 Bond reserve funds 4,353,781 - 4,353,781

TOTAL CURRENT ASSETS 10,258,633 42,226 10,300,859

PROPERTY AND EQUIPMENT, at cost, net encumbered 50,836,428 - 50,836,428 OTHER:

Charitable remainder trust, at present value 14,360 - 14,360

61,109,421$ 42,226$ 61,151,647$

LIABILITIES AND NET ASSETS CURRENT:

Accounts payable - trade 856,559$ -$ 856,559$ Bond payable 550,000 - 550,000 Note payable 166,667 - 166,667 Accrued liabilities:

Salaries and wages 150,552 - 150,552 Compensated absences 1,051,759 - 1,051,759 Accrued interest 796,325 - 796,325 Other 8,986 - 8,986

TOTAL CURRENT LIABILITIES 3,580,848 - 3,580,848

LONG-TERM:

Accrued severance pay 155,815 - 155,815 Entrance deposits 854,255 - 854,255 Repayable entrance fees 21,525,528 - 21,525,528 Deferred revenue from entrance fees 12,077,058 - 12,077,058 Deferred compensation 110,129 - 110,129 Note payable 152,777 - 152,777 Bonds payable net of debt financing fees of $3,144,826 32,723,118 - 32,723,118 Other 152,079 - 152,079

TOTAL LIABILITIES 71,331,607 - 71,331,607

NET ASSETS (DEFICIT) (10,222,186) 42,226 (10,179,960) 61,109,421$ 42,226$ 61,151,647$



STATEMENTS OF FINANCIAL POSITION - JUNE 30, 2016

TemporarilyASSETS Unrestricted Restricted Total

CURRENT:Cash and cash equivalents 620,560$ 25,573$ 646,133$ Investments, at fair value 5,534,201 - 5,534,201 Accounts and notes receivable (pledged):

Trade, net of $21,360 allowance for uncollectible accounts 641,159 - 641,159 Other 18,207 - 18,207

Accrued interest 4,592 - 4,592 Prepaid expenses 274,452 - 274,452 Bond reserve funds 7,503,754 - 7,503,754

TOTAL CURRENT ASSETS 14,596,925 25,573 14,622,498

PROPERTY AND EQUIPMENT, at cost, net (encumbered) 50,149,297 - 50,149,297 OTHER:

Charitable remainder trust, at present value 14,000 - 14,000

64,760,222$ 25,573$ 64,785,795$

LIABILITIES AND NET ASSETS

CURRENT:Accounts payable - trade 1,357,227$ -$ 1,357,227$ Payroll payable 27,612 - 27,612 Bond payable 380,020 - 380,020 Line of credit 486,111 - 486,111 Accrued liabilities:

Salaries and wages 129,851 - 129,851 Compensated absences 938,030 - 938,030 Accrued interest 800,125 - 800,125 Other 6,967 - 6,967

TOTAL CURRENT LIABILITIES 4,125,943 - 4,125,943

LONG-TERM:

Accrued severance pay 152,316 - 152,316 Entrance deposits 126,010 - 126,010 Repayable entrance fees 22,503,604 22,503,604 Deferred revenue from entrance fees 12,595,208 - 12,595,208 Deferred compensation 110,129 - 110,129 Bonds payable net of debt financing fees of $3,295,770 33,456,646 - 33,456,646 Other 55,015 - 55,015

TOTAL LIABILITIES 73,124,871 - 73,124,871

NET ASSETS (DEFICIT) (8,364,649) 25,573 (8,339,076) 64,760,222$ 25,573$ 64,785,795$



STATEMENTS OF ACTIVITIES

Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total

REVENUE:Resident fees 11,561,697$ -$ 11,561,697$ 12,097,810$ -$ 12,097,810$ Patient fees 4,506,217 - 4,506,217 3,599,616 - 3,599,616 Amortization of entrance fees 2,952,276 - 2,952,276 2,982,813 - 2,982,813 Interest and dividend income 89,273 - 89,273 125,753 - 125,753 Rental income 105,491 - 105,491 102,531 - 102,531 Gifts, bequests and grants - 27,129 27,129 - 23,866 23,866 Change in present value of charitable

remainder trust 360 - 360 2,500 - 2,500 Unrealized gains (losses) on investments 319,405 - 319,405 68,003 - 68,003 Realized gains on sale of investments 12,484 - 12,484 12,759 - 12,759 Realized losses on bond retirement - - - (1,060,125) - (1,060,125) Miscellaneous 114,384 - 114,384 94,848 - 94,848

Net assets released from restrictions:

Satisfaction of program restrictions 10,476 (10,476) - 30,288 (30,288) -

TOTAL REVENUE 19,672,063 16,653 19,688,716 18,056,796 (6,422) 18,050,374 EXPENSES:

Program services:Forest Hill Manor 8,952,189 - 8,952,189 8,719,422 - 8,719,422 Lake Park Retirement Residence 11,548,266 - 11,548,266 10,608,436 - 10,608,436 Rental properties 34,555 - 34,555 37,999 - 37,999

Total program services 20,535,010 - 20,535,010 19,365,857 - 19,365,857

Supporting services:

Management and general 984,090 - 984,090 1,023,648 - 1,023,648 Fundraising 10,500 - 10,500 17,700 - 17,700

TOTAL EXPENSES 21,529,600 - 21,529,600 20,407,205 - 20,407,205

INCREASE (DECREASE) IN

NET ASSETS (1,857,537) 16,653 (1,840,884) (2,350,409) (6,422) (2,356,831) NET ASSETS, beginning of year (8,364,649) 25,573 (8,339,076) (6,014,240) 31,995 (5,982,245) NET ASSETS, end of year (10,222,186)$ 42,226$ (10,179,960)$ (8,364,649)$ 25,573$ (8,339,076)$

June 30, 2017Year Ended

June 30, 2016Year Ended



STATEMENTS OF FUNCTIONAL EXPENSES - JUNE 30, 2017 Management Forest Rental and Total Hill Lake Park Properties Total General Fundraising Expenses Program expenses:

Medical services 1,158,801$ 1,655,693$ -$ 2,814,494$ -$ -$ 2,814,494$ Food and food services 1,369,525 3,089,577 - 4,459,102 - - 4,459,102 Administration 906,654 1,049,441 3,592 1,959,687 924,507 - 2,884,194 Marketing 559,999 685,595 - 1,245,594 130 - 1,245,724 Housekeeping 397,870 679,190 - 1,077,060 - - 1,077,060 Utilities 355,330 662,264 10,402 1,027,996 16,506 - 1,044,502 Assisted living 353,728 1,068,437 - 1,422,165 - - 1,422,165 Maintenance and operations 306,055 703,959 7,290 1,017,304 12,306 - 1,029,610 Medical care 491,257 274,901 - 766,158 - - 766,158 Laundry 44,313 2,148 - 46,461 - - 46,461 Activities 193,496 332,879 - 526,375 - - 526,375 Social services - 35,010 - 35,010 - - 35,010 Fundraising - - - - - 10,500 10,500 Property taxes and

insurance 117,773 200,583 7,734 326,090 - - 326,090

Total program expenses 6,254,801 10,439,677 29,018 16,723,496 953,449 10,500 17,687,445 Other expenses:

Depreciation 1,446,414 873,205 5,511 2,325,130 30,641 - 2,355,771 Amortization of bond issuance costs 134,460 16,484 - 150,944 - - 150,944 Investment expenses 3,858 6,084 19 9,961 - - 9,961 Interest 1,072,795 207,350 7 1,280,152 - - 1,280,152 Bad debt 39,861 5,466 - 45,327 - - 45,327

Total other expenses 2,697,388 1,108,589 5,537 3,811,514 30,641 - 3,842,155

TOTAL EXPENSES 8,952,189$ 11,548,266$ 34,555$ 20,535,010$ 984,090$ 10,500$ 21,529,600$

Supporting ServicesProgram Services



STATEMENTS OF FUNCTIONAL EXPENSES - JUNE 30, 2016

Management Forest Rental and Total Hill Lake Park Properties Total General Fundraising Expenses Program expenses:

Medical services 1,080,177$ 1,471,215$ -$ 2,551,392$ -$ -$ 2,551,392$ Food and food services 1,393,410 2,964,531 - 4,357,941 - - 4,357,941 Administration 841,826 944,716 2,930 1,789,472 950,106 - 2,739,578 Marketing 548,578 556,374 - 1,104,952 216 - 1,105,168 Housekeeping 377,483 626,506 - 1,003,989 - - 1,003,989 Utilities 321,935 621,368 9,362 952,665 14,829 - 967,494 Assisted living 354,106 989,570 - 1,343,676 - - 1,343,676 Maintenance and operations 297,382 689,227 9,599 996,208 9,504 - 1,005,712 Medical care 502,668 330,920 - 833,588 - - 833,588 Laundry 36,689 1,223 - 37,912 - - 37,912 Activities 179,452 296,223 - 475,675 - - 475,675 Social services - 35,175 - 35,175 - - 35,175 Fundraising - - - - - 17,700 17,700 Property taxes and

insurance 106,662 199,717 7,612 313,991 - - 313,991

Total program expenses 6,040,368 9,726,765 29,503 15,796,636 974,655 17,700 16,788,991 Other expenses:

Depreciation 1,385,943 728,665 8,472 2,123,080 30,566 - 2,153,646 Amortization of bond issuance costs 122,921 14,283 - 137,204 - - 137,204 Investment expenses 3,756 5,923 18 9,697 - - 9,697 Interest 1,117,721 88,587 6 1,206,314 18,427 - 1,224,741 Bad debt 48,713 44,213 - 92,926 - - 92,926

Total other expenses 2,679,054 881,671 8,496 3,569,221 48,993 - 3,618,214

TOTAL EXPENSES 8,719,422$ 10,608,436$ 37,999$ 19,365,857$ 1,023,648$ 17,700$ 20,407,205$

Supporting ServicesProgram Services



STATEMENTS OF CASH FLOWS

CASH FLOWS FROM OPERATING ACTIVITIES: Decrease in net assets (1,840,884)$ (2,356,831)$ Adjustments to reconcile decrease in net assets to net

cash used by operating activities:Depreciation 2,355,771$ 2,153,646$ Amortization of bond issuance costs 150,944 137,204 Amortization of bond premium (334,472) (262,106) Amortization of entrance fees (2,952,276) (2,982,813) Entrance fees received, net 1,456,050 1,561,205

Realized losses on bond retirement - 1,060,125 Realized (gain) loss on sale of investments (12,484) (12,759) Unrealized (gain) loss on investments (319,405) (68,003) Change in present value of charitable remainder trust (360) (2,500) Decrease (increase) in:

Accounts and notes receivable - trade 117,791 (153,594) Other receivables (46,557) 26,817 Accrued interest receivable (2,028) 2,017 Prepaid expenses (32,468) 36,001

Increase (decrease) in:Accounts payable (500,668) 151,094 Payroll payable (27,612) (118,162) Accrued liabilities 233,212 26,834 Entrance deposits 728,245 813,683 (71,914) 1,483,092

NET CASH USED BY OPERATING ACTIVITIES (1,027,201) (873,739)

CASH FLOWS FROM INVESTING ACTIVITIES:

Purchases of property and equipment (3,042,902) (2,314,886) Proceeds from sale of investments 1,402,103 1,600,845 Decrease (increase) in bond reserve funds 3,149,973 (4,838,386) Purchase of investments (163,771) (187,856)

NET CASH PROVIDED (USED) BY INVESTING

ACTIVITIES 1,345,403 (5,740,283) CASH FLOWS FROM FINANCING ACTIVITIES:

Net proceeds from line of credit - (500,000) Proceeds from long term debt - 500,000 Proceeds from bond issuance - 32,920,000 Bond issuance costs - (2,167,855) Bond premium - 4,238,125 Payments on long term debt (546,687) (29,038,889)

NET CASH (USED) PROVIDED BY FINANCINGACTIVITIES (546,687) 5,951,381

NET DECREASE IN CASH AND CASH EQUIVALENTS (228,485) (662,641)

CASH AND CASH EQUIVALENTS, beginning of year 646,133 1,308,774

CASH AND CASH EQUIVALENTS, end of year 417,648$ 646,133$

SUPPLEMENTAL DISCLOSURE OF CASH FLOWINFORMATION:Cash paid during the year for interest 1,620,329$ 1,486,847$

Year EndedJune 30, 2017

Year EndedJune 30, 2016


NOTES TO FINANCIAL STATEMENTS - JUNE 30, 2017 AND JUNE 30, 2016

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Note 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Nature of activities:

California-Nevada Methodist Homes (the Corporation) is a non-profit charitable corporation with a primary mission of enhancing the well-being of seniors for the remaining years of their lives through the creation and ethical administration of residential and health care facilities in which the independence, dignity, traditional values and individual rights of each person are held in high regard.

Financial statement format:

The Corporation classifies its net assets and activities into one of three categories: unrestricted, temporarily restricted and permanently restricted. Descriptions of these categories are as follows:

Unrestricted: Those net assets and activities which represent the portion of expendable funds that are available to support operations. A portion of these net assets may be designated by the Board of Trustees for specific purposes.

Temporarily Restricted: Those net assets and activities which are donor-restricted for (a) support of specific operating activities; (b) investment for a specified term; (c) use in a specified future period; or (d) acquisition of long-lived assets.

Permanently Restricted: Those net assets and activities which are permanently donor-restricted for holdings of (a) assets donated with stipulations that they be used for a specified purpose, be preserved, and not sold; or (b) assets donated with stipulations that they be invested to provide a permanent source of income.

Cash and cash equivalents:

Cash and cash equivalents are considered to be short-term, highly liquid investments with original maturities of three months or less.

Accounts receivable:

Accounts receivable represent amounts billed but not yet collected. The Corporation provides an allowance for doubtful accounts based on management’s evaluation of a current aging of the accounts. It is the corporation’s policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected.

Investments:

The Corporation reports investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets.

The Corporation invests in various investments. Investments are exposed to various risks, such as interest rate, market and credit risk. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the value of investments will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position.



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Note 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Investments (continued):

Professional accounting standards established 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). The three levels of the fair value hierarchy under professional accounting standards 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 Corporation 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 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Equity securities, debt securities, and U.S. government securities: Valued at the closing price reported on the active market on which the individual securities are traded.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Corporation believes its valuation methods are appropriate and consistent with other participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

Depreciation:

The Corporation computes depreciation on its property and equipment using the straight-line method of accounting over useful lives ranging from 5 to 50 years. Depreciation is a non-cash adjustment to assets on the "Statement of Financial Position". As of June 30, 2017, cumulative depreciation is $36,778,687 (see Note 8).



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Note 1. NATURE OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued): Amortization of deferred income - entrance fees:

The Entrance Fee and Continuing Care Agreements between the Corporation and the residents provide for the payment of an entrance fee. Entrance fees are used for general purposes, including support of operations, debt retirement and capital acquisitions. Repayable entrance fees are held on the balance sheet and not amortized. The amortizable fees are recognized as revenue on a straight-line method of accounting over the expected remaining life of the residents as recomputed actuarially at the end of each year. In the case of repayable entrance fee contracts, and upon the death of the resident, the unamortized amount of the entrance fee taken into income is reduced by the amount of the repayment embodied in the contract.

Deferred revenue from entrance fees is treated as a long-term liability on the "Statement of Financial Position". Only a portion of this deferred revenue, however, is subject to repayment provisions. As of June 30, 2017, the amount of deferred revenue not subject to repayment provisions is $9,448,470 (see Note 13).

Amortization of bond issuance cost:

Certain costs related to the bond issue have been capitalized and are being amortized using the straight-line method over the life of the bond.

Amortization of bond premium:

The premium on issuance of the bonds is being amortized to offset interest expense over the life of the bonds.

Income taxes:

The Corporation has received tax-exempt status under the Internal Revenue Code Section 501(c) (3) and under the California Revenue Code Section 23701(d).

Recent accounting pronouncements: In August 2015 the Financial Accounting Standards Board (“FASB”) issued Accounting Standards Update No. 2015-15, Interest – Imputation of Interest, which requires entities to present debt issuance costs related to recognized debt liability as a direct deduction from the carrying amount of that debt liability. Debt issuance costs represent financing fees and expenses that have been capitalized in conjunction with financing arrangements. These costs are amortized to interest expense over the term of the respective loans. Debt issuance costs are reported on the balance sheet as a direct deduction from the carrying amount of the debt. The pronouncement is effective for fiscal years beginning after December 15, 2015.

Reclassifications:

Certain comparative figures have been reclassified to conform to the financial statement presentation adopted for the current year.

Subsequent events: Management has evaluated subsequent events through October 30, 2017, the date which the financial statements were available for issue. No significant events were identified that require any additional disclosure.



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Note 2. NATURE OF ESTIMATES: The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

Note 3. CONCENTRATIONS OF CREDIT RISK: Financial instruments that potentially subject the Corporation to concentrations of credit risk consist principally of cash and cash equivalents, investments and trade accounts receivable. Cash and cash equivalents were held in financial institutions in amounts exceeding the guaranteed amounts of the Federal Deposit Insurance Corporation. Trade accounts receivable are due from Medicare and private sources. Investments are held at brokerage firms in amounts which may exceed the guaranteed amount of the Securities Investor Protection Corporation.

Note 4. STATUTORY LIQUID ASSET RESERVE: Effective January 1, 2005 the State of California Health and Safety Code Section 1792 requires the Corporation to hold reserves to cover its annual long-term debt service and seventy-five days of net operating expenses. The Corporation is not required to segregate these reserves, and the reserves may be held as cash, investments or letters of credit. The Corporation's assets held by the Tax Exempt Bond Trustee, Union Bank, can be used to satisfy this requirement. At June 30, 2017 and June 30, 2016, the Corporation had a required reserve of $4,801,271 and $5,177,771, respectively, which were held as cash, cash equivalents and investments.

Note 5. INVESTMENTS: Investments are stated at fair value. Fair value and cost as of June 30, 2017 and June 30, 2016 are summarized as follows:

Fair FairInvestment Type Value Cost Value Cost

Corporate equities 1,179,067$ 754,166$ 1,043,119$ 1,029,677$ Debt securities 2,796,498 2,381,100 2,520,388 2,458,565 Certificate of deposits 652,193 669,152 1,970,694 1,957,729

4,627,758$ 3,804,418$ 5,534,201$ 5,445,971$

June 30, 2017 June 30, 2016



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Note 6. FAIR VALUE MEASUREMENTS: The following tables sets forth by level, the fair value hierarchy, the Corporation’s assets at fair value as of June 30, 2017 and June 30, 2016:

Assets at Fair Value as of June 30, 2017

SignificantQuoted Prices Other Significant

In Active Observable UnobservableMarkets Inputs Inputs(Level 1) (Level 2) (Level 3) Total

Corporate equities 1,179,067$ -$ -$ 1,179,067$ Debt securities 2,796,498 - - 2,796,498 Charitable remainder trust - - 14,360 14,360

3,975,565$ -$ 14,360$ 3,989,925$

Assets at Fair Value as of June 30, 2016

SignificantQuoted Prices Other Significant

In Active Observable UnobservableMarkets Inputs Inputs(Level 1) (Level 2) (Level 3) Total

Corporate equities 1,043,119$ -$ -$ 1,043,119$ Debt securities 2,520,388 - - 2,520,388 Charitable remainder trust - - 14,000 14,000

3,563,507$ -$ 14,000$ 3,577,507$

Level 3 Gains and Losses: The following table sets forth a summary of changes in the fair value of the Corporation’s level 3 assets for the years ended June 30, 2017 and June 30, 2016:

June 30, 2017 June 30, 2016Charitable Charitable

Remainder Trust Remainder Trust

Balance, beginning of year 14,000$ 11,500$ Unrealized gains/losses relating to

instruments held at reporting date 360 2,500

Balance, end of year 14,360$ 14,000$



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Note 7. BOND RESERVE FUNDS: The bond reserve funds are held by a trustee in the following accounts:

2017 2016

Interest fund 796,943$ 800,164$ Bond reserve 2,148,634 2,161,839 Project 857,641 4,161,731 Principal 550,563 380,020

4,353,781$ 7,503,754$

June 30,

The trustee has invested the funds in marketable certificates of deposit. These earnings will be accumulated and used to fund bond bi-annual interest payments. During the years ended June 30, 2017 and June 30, 2016, bond payments in the amount of $380,000 and $755,000, respectively, were made from the principal fund. The project fund in the amount of $6,001,500 was established with the 2015 bonds. During the years ended June 30, 2017 and June 30, 2016, $3,307,887 and $1,839,769 was expended on ongoing projects, respectively.

Note 8. PROPERTY AND EQUIPMENT:

Property and equipment consists of the following at June 30:

2017 2016

Land 834,624$ 834,624$ Land improvements 337,637 268,306 Buildings and improvements 80,503,159 77,841,692 Furniture and equipment 5,617,455 4,366,768 Construction in progress 322,240 1,260,823

Totals 87,615,115 84,572,213 Less accumulated depreciation (36,778,687) (34,422,916)

Property and equipment, net 50,836,428$ 50,149,297$

June 30,



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Note 8. PROPERTY AND EQUIPMENT (Continued): The balances of accumulated depreciation by category are as follows:

2017 2016

Land improvements 200,106$ 190,246$ Buildings and improvements 32,827,097 30,721,005 Furniture and equipment 3,751,484 3,511,665

Totals 36,778,687$ 34,422,916$

June 30,

Note 9. CHARITABLE TRUSTS:

The Corporation has been named as a beneficiary of a Charitable Remainder Trust. The income beneficiaries of the Trust are entitled to a payment each year calculated at 6% of the fair market value of the trust assets as of the first day of each taxable year of the trust.

The Trusts are stated at the present value of the projected balance of the Trusts at termination, net of the amounts due to the income beneficiaries over the term of the Trusts. Changes in the calculated net present value are reported in the statement of activities annually. The key assumptions used in net present value calculations for the Trusts are as follows:

June 30, 2017 June 30, 2016 Present value $ 14,360 $ 14,000 Trust assets at fair value $ 20,215 $ 20,000 Projected term of the trusts based on actuarial tables 10.30 years 10.80 years Projected growth rate net of payments to income beneficiaries 0.00 % 0.00 % Risk-free discount rate 3.40 % 3.40 %

Note 10. LINE OF CREDIT:

The Corporation had available a $500,000 line of credit with a bank that matured January 31, 2016. The interest rate on the line was the prime rate plus .5% (currently 3.30%). During the year ended June 30, 2016 the line of credit was converted to a note.

Note 11. NOTE PAYABLE: The Corporation has a note payable to a financial institution, payable in monthly installments of $13,889 principle plus interest at 1% plus prime, currently 4.75%. The note payable balance was $319,444 as of June 30, 2017 and matures in May 2019.



17

Note 11. NOTE PAYABLE (Continued): Maturities of long-term debt for the five years subsequent to June 30, 2017, are as follows:

Year EndingJune 30, Amount

2018 166,667$ 2019 152,777 2020 - 2021 - 2022 -

Total 319,444$

Note 12. TAX EXEMPT BOND PAYABLE:

The construction of the new buildings at Forest Hill and a portion of the costs incurred in the expansion of the Lake Park skilled nursing unit were financed by the Corporation through the issuance of tax-exempt California Health Facilities Financing Authority Insured Revenue Bonds (California-Nevada Methodist Homes), Series 2006 (the “ 2006 Bonds”), in the aggregate principal amount of $42,280,000. The Office of Statewide Health Planning and Development of the State of California insures the principal and interest payments on the Bonds. Union Bank of California serves as the trustee. October 1, 2015 the 2006 Bonds were refinanced by the Corporation through the issuance of tax-exempt California Health Facilities Financing Authority Insured Revenue Bonds (California-Nevada Methodist Homes), Series 2015 (the “Bonds”), in the aggregate principal amount of $32,920,000. The Office of Statewide Health Planning and Development of the State of California insures the principal and interest payments on the Bonds. Wilmington Trust serves as the trustee. The Bonds are secured by the property, accounts receivable and equipment of the Corporation. The Bonds have a final maturity date of 2045, but were subject to mandatory redemptions beginning in 2016. For the year ended June 30, 2016, the Corporation made eleven payments. Three payments were made on the 2006 Bonds and following the refinance eight payments were made on the 2015 Bonds. The Serial Bonds for the years 2016 - 2026 will be repaid by the Corporation making twelve monthly payments each year to the Trustee. The payments will be equal to the sum of two future interest payments (January 1 and July 1) and the one annual redemption payment (July 1). The Term Bonds due in 2030, 2035 and 2045 have sinking fund requirements that start in 2027. The payments each year will begin with $850,000 in 2027 to $2 million in 2045.

For all bonds, according to the indenture requirements, the monthly payments made by the Corporation, as calculated and administered by the trustee, include both interest and principal amounts. Thus, at the time of each bond redemption, all principal due will have been accumulated and no additional principal payment will be required.



18

Note 12. TAX EXEMPT BOND PAYABLE (Continued): The Corporation is required to maintain a debt service fund equal to approximately one year’s debt service with the trustee, which was met at June 30, 2017 and June 30, 2016. The Corporation is required to meet certain covenants. The Corporation anticipates receiving a waiver for these covenants as measured on June 30, 2017. The stated fixed interest rate of the Bonds varies from 2.0% to 5.0%. The bonds were issued at a premium of $4,238,125 which is being amortized over the life of the bonds.

Bond maturity dates are as follows:

Type ofMaturity Date Amount Bonds

2017 550,000$ Serial2018 570,000 Serial2019 585,000 Serial2020 610,000 Serial2021 630,000 Serial2022 665,000 Serial2023 700,000 Serial2024 735,000 Serial2025 770,000 Serial2026 810,000 Serial2030 3,655,000 Term2035 5,700,000 Term2045 16,560,000 Term

Subtotal 32,540,000 Less unamortized debt

issuance costs (3,144,826)

Bond payable less debtissuance costs 29,395,174

Premium on bond payable 3,877,944

Total 33,273,118$

Note 13. DEFERRED REVENUE FROM ENTRANCE FEES:

The Corporation has several different types of contracts. Type A entrance fee agreements provides for the right of each resident to terminate the agreement and be entitled to a refund of the original fee less 1.5% of the original fee for each month of residency. A Type B entrance fee agreement provides for the right of each resident to terminate the agreement and be entitled to a refund of the original fee less 2.08% of the original fee for each month of residency. For guaranteed repayment contracts the repayment is 90%, 80% or 50% of the original fee. At June 30, 2017 and June 30, 2016, unamortized entrance fees (deferred revenue) were $12,077,058 and $12,595,208, respectively. At June 30, 2017 and June 30, 2016, repayable entrance fees were $21,525,528 and $22,503,604, respectively.



19

Note 14. SELECTIVE MANAGEMENT COMPENSATION PLAN: The Corporation has agreements with certain of its key employees. The agreements are designed to provide benefits to be paid to these employees in installments upon retirement or in the event of their death, to a designated beneficiary. Accordingly, the Corporation has accrued deferred compensation of $110,129 at June 30, 2017 and June 30, 2016.

Note 15. FUTURE SERVICE OBLIGATION:

Professional accounting standards require the Corporation to record a liability recognizing an obligation to provide future services and the use of the facilities to all current residents if the net present value of future net cash out-flows, adjusted for certain noncash items, exceeds the present value of future net cash in-flows. At June 30, 2017 and June 30, 2016 the estimated future service obligation was $0. The interest rate used to discount the liability was 5.5% in both 2017 and 2016.

Note 16. TEMPORARILY RESTRICTED NET ASSETS: Temporarily restricted net assets consisted of the following for the year ended June 30, 2017:

Beginning Released from EndingBalance Contributions Restriction Balance

Forest Hill:Service enhancement 1,046$ -$ -$ 1,046$ Resident support 5,000 8,000 6,500 6,500 Facility undesignated 344 18,864 163 19,045 Capital improvement 9,075 - 813 8,262

Total Forest Hill 15,465 26,864 7,476 34,853

Lake Park:Service enhancement 10,068 - 3,000 7,068 Capital improvement 40 - - 40 Facility undesignated - 265 - 265

Total Lake Park 10,108 265 3,000 7,373

Total temporarilyrestricted net assets 25,573$ 27,129$ 10,476$ 42,226$



20

Note 16. TEMPORARILY RESTRICTED NET ASSETS (Continued): Temporarily restricted net assets consisted of the following for the year ended June 30, 2016:

Beginning Released from EndingBalance Contributions Restriction Balance

Forest Hill:Service enhancement 1,046$ -$ -$ 1,046$ Resident support 5,250 6,000 6,250 5,000 Facility undesignated 811 17,826 18,293 344 Capital improvement 10,035 - 960 9,075

Total Forest Hill 17,142 23,826 25,503 15,465

Lake Park:Service enhancement 11,568 - 1,500 10,068 Capital improvement 3,285 40 3,285 40 Facility undesignated - - - -

Total Lake Park 14,853 40 4,785 10,108

Total temporarilyrestricted net assets 31,995$ 23,866$ 30,288$ 25,573$

Note 17. MULTI-EMPLOYER RETIREMENT PLAN: The Corporation contributes to a multi-employer defined benefit union pension plan that covers all Lake Park employees under collective bargaining agreements. In accordance with the plans, the Corporation makes monthly contributions based on employee hours worked. For the years ended June 30, 2017 and June 30, 2016, the Corporation contributed to the union pensions in the amount of $217,268 and $47,742, respectively. Management is not able to determine whether or not there is any unfunded union pension liability at June 30, 2017 as information relating to the plan’s funded status each year is not available at the date the financial statements are available to be issued. Balances will vary depending on market conditions. The Corporation has made all required payments during the year. The risks of participating in this multi-employer plan are different from single-employer plans in the following aspects:

Assets contributed to a multi-employer plan by one employer may be used to provide benefits to

employees of other participating employers. If a participating employer stops contributing to the plan, the unfunded obligations of the plan

may be borne by the remaining participating employers. If the Corporation chooses to stop participating in its multi-employer plan, the Corporation may

be required to pay the plan an amount based on the underfunded status of the plan, referred to as a withdrawal liability.



21

Note 17. MULTI-EMPLOYER RETIREMENT PLAN (Continued): The Corporation’s participation in this plan for the annual period ended June 30, 2017, is outlined in the table below. The “EIN/Pension Plan Number” column provides the Employee Identification Number (EIN) and three digit plan number. Unless otherwise noted, the most recent Pension Protection Act (PPA) zone status available to 2013 is for the plan’s year end at December 31, 2013. The zone status is based on information that the Corporation received from the plan and is certified by the plan’s actuary. Among other factors, plans in the red zone are generally less than 65 percent funded, plans in the yellow zone are less than 80 percent funded, and plans in the green zone are at least 80 percent funded. The “FIP/RP Status Pending/Implemented” column indicates plans for which a financial improvement plan (FIP) or a rehabilitation plan (RP) is either pending or has been implemented. The last column lists the expiration date(s) of the collective-bargaining agreements to which the plan is subject. The Corporation’s contributions do not represent more than 5 percent of total contributions to the plan.

Pension Fund

EIN/Pension Plan Number

Pension

Protection Act Zone Status

2012

FIP/RP Status

Implemented

Surcharge Imposed

Expiration Date of

Collective-Bargaining Agreement

SEIU National Industry Pension Fund

52-6148540

Red/Critical

Yes

Yes

9/30/2017

Note 18. INTEREST EXPENSE: Interest expense consists of the following at June 30:

2017 2016

Bond interest 1,592,650$ 1,464,660$ Amortized bond premium (334,493) (262,106) Credit line interest 19,513 20,041 Short term note 2,481 2,146

1,280,151$ 1,224,741$

Note 19. PRO FORMA INFORMATION:

Pro forma of the Statement of Financial Position without deferred income and depreciation: In the absence of depreciation, total assets on the "Statement of Financial Position" as of June 30, 2017 would change from $61,151,647 to $97,930,334. If deferred income from entrance subscriptions was reduced by the amount not subject to refund provisions, total liabilities on the "Statement of Financial Position" as of June 30, 2017 would change from $71,331,607 to $61,883,137. Thus, Total Net Assets would change from ($10,179,960) to $36,047,197.

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SUPPLEMENTAL INFORMATION



STATEMENT OF UNRESTRICTED REVENUE AND EXPENSES BY DIVISION

YEAR ENDED JUNE 30, 2017

Interest and Forest Rental Hill Lake Park Properties Total REVENUE:

Resident fees 3,643,647$ 7,918,050$ -$ 11,561,697$ Patient fees:

Medicare 1,710,980 494,481 - 2,205,461 Private 800,799 1,499,957 - 2,300,756

Amortization of entrance fees 1,144,384 1,807,892 - 2,952,276 Interest and dividend income 42,043 47,087 143 89,273 Rental income 37,679 - 67,812 105,491 Gifts, bequests and grants, net - 360 - 360 Unrealized gains (losses) on investments - - 319,405 319,405 Realized gains on investments - - 12,484 12,484 Realized gains (losses) on bond retirement - - - - Miscellaneous 24,716 89,635 33 114,384 Net assets released from restrictions 7,476 3,000 - 10,476

TOTAL REVENUE 7,411,724 11,860,462 399,877 19,672,063

EXPENSES:

Facility operations:Medical services 1,158,801 1,655,693 - 2,814,494 Food and food services 1,369,525 3,089,577 - 4,459,102 Administration 906,654 1,049,441 3,592 1,959,687 Marketing 559,999 685,595 - 1,245,594 Housekeeping 397,870 679,190 - 1,077,060 Utilities 355,330 662,264 10,402 1,027,996 Assisted living 353,728 1,068,437 - 1,422,165 Maintenance and operations 306,055 703,959 7,290 1,017,304 Medical care 491,257 274,901 - 766,158 Laundry 44,313 2,148 - 46,461 Activities 193,496 332,879 - 526,375 Social services - 35,010 - 35,010 Property taxes and insurance 117,773 200,583 7,734 326,090

Total operating expenses before

management and general allocation 6,254,801 10,439,677 29,018 16,723,496

Management and general allocation 381,138 601,082 1,870 984,090 Fundraising allocation 4,074 6,426 - 10,500

Total operating expenses 6,640,013$ 11,047,185$ 30,888$ 17,718,086$




YEAR ENDED JUNE 30, 2017

Interest and Forest Rental Hill Lake Park Properties Total

Other expenses:Depreciation 1,446,414$ 873,205$ 5,511$ 2,325,130$ Amortization of bond issuance costs 134,460 16,484 - 150,944 Interest 1,072,795 207,350 7 1,280,152 Investment costs 3,858 6,084 19 9,961 Bad debts 39,861 5,466 - 45,327

Total other expenses 2,697,388 1,108,589 5,537 3,811,514

TOTAL EXPENSES 9,337,401 12,155,774 36,425 21,529,600

INCREASE (DECREASE) IN UNRESTRICTED

NET ASSETS (1,925,677)$ (295,312)$ 363,452$ (1,857,537)$




YEAR ENDED JUNE 30, 2016 Interest and Forest Rental Hill Lake Park Properties Total REVENUE:

Resident fees 3,929,818$ 8,167,992$ -$ 12,097,810$ Patient fees:

Medicare 1,770,472 714,071 - 2,484,543 Private 319,382 795,691 - 1,115,073

Amortization of entrance fees 1,543,690 1,439,123 - 2,982,813 Interest and dividend income 68,376 57,208 169 125,753 Rental income 37,532 - 64,999 102,531 Gifts, bequests and grants, net - 2,500 - 2,500 Unrealized gains (losses) on investments - - 68,003 68,003 Realized gains on investments - - 12,759 12,759 Realized gains (losses) on bond retirement - - (1,060,125) (1,060,125) Miscellaneous 26,613 68,154 81 94,848 Net assets released from restrictions 25,503 4,785 - 30,288

TOTAL REVENUE 7,721,386 11,249,524 (914,114) 18,056,796

EXPENSES:

Facility operations:Medical services 1,080,177 1,471,215 - 2,551,392 Food and food services 1,393,410 2,964,531 - 4,357,941 Administration 841,826 944,716 2,930 1,789,472 Marketing 548,578 556,374 - 1,104,952 Housekeeping 377,483 626,506 - 1,003,989 Utilities 321,935 621,368 9,362 952,665 Assisted living 354,106 989,570 - 1,343,676 Maintenance and operations 297,382 689,227 9,599 996,208 Medical care 502,668 330,920 - 833,588 Laundry 36,689 1,223 - 37,912 Activities 179,452 296,223 - 475,675 Social services - 35,175 - 35,175 Property taxes and insurance 106,662 199,717 7,612 313,991

Total operating expenses before

management and general allocation 6,040,368 9,726,765 29,503 15,796,636

Management and general allocation 396,459 625,244 1,945 1,023,648 Fundraising allocation 6,868 10,832 - 17,700

Total operating expenses 6,443,695$ 10,362,841$ 31,448$ 16,837,984$




YEAR ENDED JUNE 30, 2016 Interest and Forest Rental Hill Lake Park Properties Total

Other expenses:Depreciation 1,385,943$ 728,665$ 8,472$ 2,123,080$ Amortization of bond issuance costs 122,921 14,283 - 137,204 Interest 1,117,721 88,587 6 1,206,314 Investment costs 3,756 5,923 18 9,697 Bad debts 48,713 44,213 - 92,926

Total other expenses 2,679,054 881,671 8,496 3,569,221

TOTAL EXPENSES 9,122,749 11,244,512 39,944 20,407,205

INCREASE (DECREASE) IN UNRESTRICTED

NET ASSETS (1,401,363)$ 5,012$ (954,058)$ (2,350,409)$

RINA accountancy corporation 625 Market Street, 15th Floor San Francisco, CA 94105 phone: 415.777.4488 fax: 415.837.1260 1.800.RINA.CPA web: www.rina.com

Independent Auditors’ Report Board of Trustees California-Nevada Methodist Homes We have audited the accompanying continuing care contract report of California-Nevada Methodist Homes as of June 30, 2017 and the supplemental statement of cash flow - direct method for the year then ended. The continuing care contract report and supplemental statement are the responsibility of California-Nevada Methodist Homes’ management. Our responsibility is to express an opinion on the continuing care contract report and supplemental statement 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 continuing care contract report and supplemental statement are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the continuing care contract report and supplemental statement. An audit of a continuing care contract report and supplemental statement also includes assessing conformity with the provisions of California Health and Safety Code Section 1792 in so far as it relates to accounting and reporting matters. We believe that our audit provides a reasonable basis for our opinion. The continuing care contract report was prepared in conformity with the accounting practices prescribed by the California Department of Social Services pursuant to provisions of the California Health and Safety Code. This report is not intended to be a complete presentation of California-Nevada Methodist Homes’ assets and liabilities on the basis of accounting described above. In our opinion, such continuing care contract report and supplemental statement of cash flows present fairly, in all material respects, the continuing care contract requirements and cash flows of California-Nevada Methodist Homes as of and for the year ended June 30, 2017, in conformity with the report preparation provisions of California Health and Safety Code Section 1792. This report is intended solely for the information and use of the board of directors and management of California-Nevada Methodist Homes and for filing with the California Department of Social Services and is not intended to be and should not be used by anyone other than these specified parties.

Certified Public Accountants San Francisco, California October 30, 2017

Line Continuing Care Residents TOTAL

[1] Number at beginning of fiscal year 77

[2] Number at end of fiscal year 68

[3] Total Lines 1 and 2 145

[4] Multiply Line 3 by ".50" and enter result on Line 5.

[5] Mean number of continuing care residents 72.5

All Residents





[10] Mean number of all residents 81

[11]Divide the mean number of continuing care residents (Line 5) by the mean number of all residents (Line 10) and enter the result (round to two decimal places).

0.90

FORM 1-2ANNUAL PROVIDER FEE

Line TOTAL

[1] Total Operating Expenses (including depreciation and debt service - interest only) $9,456,106

[a] Depreciation $1,446,414

[b] Debt Service (Interest Only) $1,369,679

[2] Subtotal (add Line 1a and 1b) $2,816,093

[3] Subtract Line 2 from Line 1 and enter result. $6,640,013

[4] Percentage allocated to continuing care residents (Form 1-1, Line 11) 90%

[5] Total Operating Expense for Continuing Care Residents(multiply Line 3 by Line 4) $5,943,222

x .001[6] Total Amount Due (multiply Line 5 by .001) $5,943

PROVIDERCOMMUNIT

California-Nevada Methodist Homes, Inc.Forest Hill

x .50

x .50

Line Continuing Care Residents TOTAL





[5] Mean number of continuing care residents 153.5

All Residents





[10] Mean number of all residents 164.5

[11]Divide the mean number of continuing care residents (Line 5) by the mean number of all residents (Line 10) and enter the result (round to two decimal places).

0.93

FORM 1-2ANNUAL PROVIDER FEE

Line TOTAL

[1] Total Operating Expenses (including depreciation and debt service - interest only) $12,143,361

[a] Depreciation $873,205

[b] Debt Service (Interest Only) $222,971

[2] Subtotal (add Line 1a and 1b) $1,096,176

[3] Subtract Line 2 from Line 1 and enter result. $11,047,185

[4] Percentage allocated to continuing care residents (Form 1-1, Line 11) 93%

[5] Total Operating Expense for Continuing Care Residents(multiply Line 3 by Line 4) $10,308,467

x .001[6] Total Amount Due (multiply Line 5 by .001) $10,308

PROVIDERCOMMUNIT

California-Nevada Methodist Homes, Inc.Lake Park

FORM 1-1RESIDENT POPULATION

x .50

x .50

Long-TermDebt Obligation

(a)

Date Incurred

(b)

Principal PaidDuring Fiscal Year

(c)

Interest PaidDuring Fiscal Year

(d)Credit Enhancement

Premiums Paidin Fiscal Year

(e)

Total Paid(columns (b) + (c) + (d))

$0$0$0$0$0

TOTAL: $0 $0 $0(Transfer this amount to

Form 5-3, Line 1)

PROVIDER:

The Corporation refinanced the Series 2006 bonds in October of 2015. The interest shown is for 3 months.

California-Nevada Methodist Homes, Inc.

FORM 5-1LONG-TERM DEBT INCURRED

IN A PRIOR FISCAL YEAR(Including Balloon Debt)

NOTE: For column (b), do not include voluntary payments made to pay down principal.

Long-TermDebt Obligation

(a)

Date Incurred

(b)

Total Interest PaidDuring Fiscal Year

(c)

Amount of Most RecentPayment on the Debt

(d)

Number ofPayments overnext 12 months

(e)

Reserve Requirement(see instruction 5)(columns (c) x (d))

1 10/01/16 $1,592,650 $176,989 12 $2,123,8662 $03 $04 $05 $06 $07 $08 $09 $0

TOTAL: $1,592,650 $176,989 12 $2,123,866(Transfer this amount to

Form 5-3, Line 2)

PROVIDER:

FORM 5-2LONG-TERM DEBT INCURRED

DURING FISCAL YEAR(Including Balloon Debt)

NOTE: For column (b), do not include voluntary payments made to pay down principal.


Line TOTAL

1 Total from Form 5-1 bottom of Column (e) $0

2 Total from Form 5-2 bottom of Column (e) $2,123,866

3 Facility leasehold or rental payment paid by provider during fiscal year (including related payments such as lease insurance)

4 TOTAL AMOUNT REQUIRED FOR LONG-TERM DEBT RESERVE: $2,123,866

PROVIDER: California-Nevada Methodist Homes, Inc.

FORM 5-3CALCULATION OF LONG-TERM DEBT RESERVE AMOUNT

Line Amounts TOTAL

1 $9,456,106

2

a. Interest paid on long-term debt (see instructions) $1,369,679

b. Credit enhancement premiums paid for long-term debt (see instructions)

c. Depreciation $1,446,414

d. Amortization $134,460

e. Revenues received during the fiscal year for services to persons who did not have a continuing care contract $2,511,779

f. Extraordinary expenses approved by the Department

3 $5,462,332

4 $3,993,774

5 $10,942

6 $820,638

PROVIDER:COMMUNITY:

Deductions:

FORM 5-4CALCULATION OF NET OPERATING EXPENSES

Total operating expenses from financial statements

Total Deductions

Net Operating Expenses

California-Nevada Methodist Homes, Inc.Forest Hill

Divide Line 4 by 365 and enter the result.

Multiply Line 5 by 75 and enter the result. This is the provider's operating expense reserve amount.

Line Amounts TOTAL

1 $12,143,361

2

a. Interest paid on long-term debt (see instructions) $222,971

b. Credit enhancement premiums paid for long-term debt (see instructions)

c. Depreciation $873,205

d. Amortization $16,484

e. Revenues received during the fiscal year for services to persons who did not have a continuing care contract $1,994,438

f. Extraordinary expenses approved by the Department

3 $3,107,098

4 $9,036,263

5 $24,757

6 $1,856,766

PROVIDER:COMMUNITY:

Deductions:

FORM 5-4CALCULATION OF NET OPERATING EXPENSES

Total operating expenses from financial statements

Total Deductions

Net Operating Expenses

California-Nevada Methodist Homes, Inc.Lake Park

Divide Line 4 by 365 and enter the result.

Multiply Line 5 by 75 and enter the result. This is the provider's operating expense reserve amount.

Provider Name:Fiscal Year Ended: 6/30/2017

Unrestricted Cash & Cash Equivalents (Page 4) $417,648

The Unrestricted funds are held in a bank account to fund operations.The first $150,000 is held in a non-interest bearing checking account with the balance held in an investment sweep account.

Investments, at fair value (Page 4) $4,627,758

As found in the Note 5 to the Financial Statements, 6/30/2017,California-Nevada Methodist Homes holds part of its reserves ininvestments as follows:

Corporate equities $1,179,067Debt securities $2,796,498Certificates of deposit $652,193

$4,627,758

Bond reserve funds (Page 4) $4,353,781

Reconciles to Note 7, 2017 column.

Interest Fund $796,943Bond reserve $2,148,634Project Fund $857,641Principal Fund $550,563

$4,353,781

ANNUAL RESERVE & FUNDS DISCLOSURE H&SC SECTION 1790 A (2) & (3


Provider Name:Fiscal Year Ended: 6/30/2017

Forest Hill Manor

Total Operating Expenses, Form 5-4 (1), Line 1 $9,456,106Mean number of all residents, Form 1-1 (1), Line 10 81

Per Capita costs $116,742

Lake Park Retirement

Total Operating Expenses, Form 5-4 (2), Line 1 $12,143,361Mean number of all residents, Form 1-1 (2), Line 10 164.5

Per Capita costs $73,820

ANNUAL PER CAPITA COSTS DISCLOSURE SECTION 1790 A (2)


Explanation to reconcile Forms to Financial Statements..

Form 1-2 (1)Forest Hill:

Total Operating Expense: Page 23, Forest Hill column, Total Operating Expenses, plus: Page 24, Forest Hill column, Depreciation, plus: Debt service Interest Expense (see Form 5-2 reconciliation below).Depreciation: Page 24, Forest Hill column, Depreciation.Debt service: Interest expense, (see Form 5-2 reconciliation below).

Form 1-2 (2)Lake Park:

Total Operating Expense: Page 23, Lake Park column, Total Operating Expenses, plus: Page 24, Lake Park column, Depreciation, plus: Debt service Interest Expense (see Form 5-2 recon below)Depreciation: Page 24, Lake Park column, Depreciation.Debt service: Interest expense, (see Form 5-2 reconciliation below).

Depreciation expense on Page 7, June 30, 2017 financial statements, Total Expenses column, $2,355,771 ties to Statement of Cash Flows - Direct Method (SCF-DM), Page 2, Depreciation.

Form 5-2See Note 12. The bonds below were issued October 1, 2016. The total interestpaid in 2017 for these bonds was $1,592,650 and is allocated according tothe bonds listed below:Maturity Date Interest Rate Face Amount Interest Paid (FH) Interest Paid (LP)

7/1/2017 3.00% $550,000 $14,190 $2,3107/1/2018 3.00% $570,000 $14,706 $2,3947/1/2019 4.00% $585,000 $20,124 $3,2767/1/2020 4.00% $610,000 $20,984 $3,4167/1/2021 5.00% $630,000 $27,090 $4,4107/1/2022 5.00% $665,000 $28,595 $4,6557/1/2023 5.00% $700,000 $30,100 $4,9007/1/2024 5.00% $735,000 $31,605 $5,1457/1/2025 5.00% $770,000 $33,110 $5,3907/1/2026 5.00% $810,000 $34,830 $5,6707/1/1930 5.00% $3,655,000 $157,165 $25,5857/1/1935 5.00% $5,700,000 $245,100 $39,9007/1/1945 5.00% $16,560,000 $712,080 $115,920

Total Interest Paid: $1,369,679 $222,971

The sum of interest expense shown on Forms 5-2 is $1,592,650 which ties to the Total BondInterest for 2017 in Note 18. The Total Net Interest Expense in Note 18 ties to Interest Expenseon Page 7, Total Expenses column. Total Interest Expense, $1,280,151 ties to SCF-DM Page 1,Payments of interest, $1,614,624, if you add back the amortization of bond premium in the amountof $334,493 disclosed in Note 18.

The schedule below is derived from Note 18, which provides a breakdown of Interest Expensein support of the $1,592,650 in Bond Interest Expense. ($1,369,679 + $222,971 = $1,592,650).

Forest Hill Bond Interest expense (Series 2015) $1,369,679Lake Park Bond Interest expense (Series 2015) $222,971Total amortized Bond Premium -$334,493Total allocated Credit Line Interest $19,514Total allocated short term note Interest $2,481Interest Expense line on Page 7, Total Expenses column. $1,280,152

Form 5-4 (1)Forest Hill:

Total Operating Expense: Page 23 Forest Hill column, Total Operating Expenses,

plus: Page 24, Forest Hill column, Depreciation, plus: Debt service Interest Expense (see Form 5-2 reconciliation above).Interest: See schedule 5-2, and explanations of Schedule 5-2 above; ties to Interest Paid (FH).

Depreciation: Page 24, Forest Hill column, Depreciation = $1,446,414Amortization: Page 24, Forest Hill column, Amortization of Bond Issuance Costs = $134,460Revenues from non contract residents: See Page 23 of the June 30, 2017 financial statements Forest Hill column, Patient fees, Medicare and Private revenue totaling $2,511,779. ($1,710,980 + $800,799)

Form 5-4 (2)Lake Park: See Page 23 of the June 30, 2017 financial statements.

Total Operating Expense: Page 23, Lake Park column, Total Operating Expenses, plus: Page 24, Lake Park column, Depreciation, plus: Debt service Interest Expense (see Form 5-2 reconciliation above).Interest: See schedule 5-2 & explanation of Schedule 5-2 above. Ties to Interest Paid (LP).Depreciation: Page 24, Lake Park column, Depreciation = $873,205.Amortization: Page 24, Lake Park column, Amortization of Bond Issuance Costs = $16,484.Revenues from non contract residents: See Page 23 of the June 30, 2017 financial statements, Lake Park column, Patient fees, Medicare and Private revenue totaling $1,994,438. ($494,481 + $1,499,957).

Total depreciation expense on Page 7, $2,355,771 ties to Statement ofCash Flows - Direct Method (SCF-DM), Page 2, Depreciation.

Total Amortization of Bond Issuance costs on Page 7, $150,944 ties to Statement ofCash Flows - Direct Method (SCF-DM), Page 2, Amortization of Bond Issuance Costs.

Total Non contract resident revenue (Forest Hill $2,511,779 + Lake Park $1,994,438) = $4,506,217, tieto Statement of Cash Flows - Direct Method (SCF-DM) Page 1, Patient fees = $4,624,008, less: Statement of Cash Flows - Direct Method (SCF-DM), Page 2, Decrease in A/R = $117,791, ($4,624,008 - $117,791) = $4,506,217 which ties to Page 6, Year Ended June 30, 2017, Total column, Patient fees.

Continuing Care Retirement Community Date Prepared: _____ Disclosure Statement General Information

FACILITY NAME: ADDRESS: ZIP CODE: PHONE: PROVIDER NAME: FACILITY OPERATOR: RELATED FACILITIES: RELIGIOUS AFFILIATION:

YEAR OPENED: ___ # OF ACRES: __ SINGLE STORY MULTI-STORY OTHER: _________ MILES TO SHOPPING CTR: MILES TO HOSPITAL: ______

NUMBER OF UNITS: RESIDENTIAL LIVING HEALTH CARE APARTMENTS – STUDIO: ASSISTED LIVING: APARTMENTS – 1 BDRM: SKILLED NURSING: APARTMENTS – 2 BDRM: SPECIAL CARE:

COTTAGES/HOUSES: DESCRIBE SPECIAL CARE: RLU OCCUPANCY (%) AT YEAR END:

TYPE OF OWNERSHIP: NOT-FOR-PROFIT FOR- PROFIT ACCREDITED?: YES NO BY: _________________

FORM OF CONTRACT: CONTINUING CARE LIFE CARE ENTRANCE FEE FEE FOR SERVICE(Check all that apply) ASSIGNMENT OF ASSETS EQUIT MEMBERSHIP RENTAL

REFUND PROVISIONS: (Check all that apply) 90% 75% 50% PRORATED TO 0% OTHER: ____________________

RANGE OF ENTRANCE FEES: $___________ TO $____________ LONG-TERM CARE INSURANCE REQUIRED? YES NO

HEALTH CARE BENEFITS INCLUDED IN CONTRACT:

ENTRY REQUIREMENTS: MIN. AGE: ____ PRIOR PROFESSION: OTHER:

RESIDENT REPRESENTATIVE ON THE BOARD (briefly describe their involvement):

FACILITY SERVICES AND AMENITIES COMMON AREA AMENITIES AVAILABLE FEE FOR SERVICE SERVICES AVAILABLE INCLUDED IN FEE FOR EXTRA CHARGE

BEAUTY/BARBER SHOP HOUSEKEEPING (___ TIMES/MONTH) BILLIARD ROOM MEALS (___/DAY) BOWLING GREEN SPECIAL DIETS AVAILABLE CARD ROOMS CHAPEL 24-HOUR EMERGENCY RESPONSE COFFEE SHOP ACTIVITIES PROGRAM CRAFT ROOMS ALL UTILITIES EXCEPT PHONE EXERCISE ROOM APARTMENT MAINTENANCE GOLF COURSE ACCESS CABLE TV LIBRARY LINENS FURNISHED PUTTING GREEN LINENS LAUNDERED SHUFFLEBOARD MEDICATION MANAGEMENT SPA NURSING/WELLNESS CLINIC SWIMMING POOL-INDOOR PERSONAL HOME CARE SWIMMING POOL-OUTDOOR TRANSPORTATION-PERSONAL TENNIS COURT TRANSPORTATION-PREARRANGED WORKSHOP OTHER _________________ OTHER ________________

All providers are required by Health and Safety Code section 1789.1 to provide this report to prospective residents before executing a deposit agreement or continuing care contract, or receiving any payment. Many communities are part of multi-facility operations which may influence financial reporting. Consumers are encouraged to ask questions of the continuing care retirement community that they are considering and to seek advice from professional advisors

10/31/17

Forest Hill551 Gibson Avenue 93950 831-657-5200

California Nevada Methodist Homes, Inc California Nevada Methodist Homes, IncLake Park United Methodist Conference

1954 2.4 ■1/4

6

17 1839 (4 Junior) 26278

53%

■ ■ CCAC

■ ■

■■ ■ Variable repayable

39,000 374,737 ✔

30 days lifetime Assisted Living, 30 days of Skilled Nursing

62 N/A N/A

See page 5 that follows

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Continuing Care Retirement Community Date Prepared: ______ Disclosure Statement General Information

FACILITY NAME: ADDRESS: ZIP CODE: PHONE: PROVIDER NAME: FACILITY OPERATOR: RELATED FACILITIES: RELIGIOUS AFFILIATION:

YEAR OPENED: ___ # OF ACRES: __ SINGLE STORY MULTI-STORY OTHER: _________ MILES TO SHOPPING CTR: MILES TO HOSPITAL: ______

NUMBER OF UNITS: RESIDENTIAL LIVING HEALTH CARE APARTMENTS – STUDIO: ASSISTED LIVING: APARTMENTS – ALCOVE: SKILLED NURSING: APARTMENTS – 1 BDRM: SPECIAL CARE: APARTMENTS – 2 BDRM: DESCRIBE SPECIAL CARE:

RLU OCCUPANCY (%) AT YEAR END:

TYPE OF OWNERSHIP: NOT-FOR-PROFIT FOR- PROFIT ACCREDITED?: YES NO BY: _________________

FORM OF CONTRACT: CONTINUING CARE LIFE CARE ENTRANCE FEE FEE FOR SERVICE(Check all that apply) ASSIGNMENT OF ASSETS EQUIT MEMBERSHIP RENTAL

REFUND PROVISIONS: (Check all that apply) 90% 75% 50% PRORATED TO 0% OTHER: ____________________

RANGE OF ENTRANCE FEES: $___________ TO $____________ LONG-TERM CARE INSURANCE REQUIRED? YES NO

HEALTH CARE BENEFITS INCLUDED IN CONTRACT:

ENTRY REQUIREMENTS: MIN. AGE: ____ PRIOR PROFESSION: OTHER:

RESIDENT REPRESENTATIVE ON THE BOARD (briefly describe their involvement):

FACILITY SERVICES AND AMENITIES COMMON AREA AMENITIES AVAILABLE FEE FOR SERVICE SERVICES AVAILABLE INCLUDED IN FEE FOR EXTRA CHARGE

BEAUTY/BARBER SHOP HOUSEKEEPING (___ TIMES/MONTH) BILLIARD ROOM MEALS (___/DAY) BOWLING GREEN SPECIAL DIETS AVAILABLE CARD ROOMS CHAPEL 24-HOUR EMERGENCY RESPONSE COFFEE SHOP ACTIVITIES PROGRAM CRAFT ROOMS ALL UTILITIES EXCEPT PHONE EXERCISE ROOM APARTMENT MAINTENANCE GOLF COURSE ACCESS CABLE TV LIBRARY LINENS FURNISHED PUTTING GREEN LINENS LAUNDERED SHUFFLEBOARD MEDICATION MANAGEMENT SPA NURSING/WELLNESS CLINIC SWIMMING POOL-INDOOR PERSONAL HOME CARE SWIMMING POOL-OUTDOOR TRANSPORTATION-PERSONAL TENNIS COURT TRANSPORTATION-PREARRANGED WORKSHOP OTHER _________________ OTHER ________________

All providers are required by Health and Safety Code section 1789.1 to provide this report to prospective residents before executing a deposit agreement or continuing care contract, or receiving any payment. Many communities are part of multi-facility operations which may influence financial reporting. Consumers are encouraged to ask questions of the continuing care retirement community that they are considering and to seek advice from professional advisors.

10/31/16

Lake Park1850 Alice Street 94612 510-835-5511

California Nevada Methodist Homes, Inc California Nevada Methodist Homes, IncForest Hill United Methodist Conference

1965 2.4 ✔1/4

3

15 3722 3580 (2 Junior)30

71%

■ ■ CCAC

■ ■

✔ ■ ■ Variable repayable

43,743 343,002 ■

30 days lifetime Assisted Living, 30 days of Skilled Nursing

62 N/A

See page 5 that follows

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PROVIDER NAME: _____________________________________________________________________________ CCRCs LOCATION (City, State) PHONE (with area code)

MULTI-LEVEL RETIREMENT COMMUNITIES

FREE-STANDING SKILLED NURSING

SUBSIDIZED SENIOR HOUSING

NOTE: PLEASE INDICATE IF THE FACILITY IS A LIFE CARE FACIL

California Nevada Methodist Homes, Inc

Forest HillLake Park

Pacific Grove, CAOakland, CA

831-657-5200510-835-5511

PROVIDER NAME: _____________________________________________________________________________

201 01 01 201 INCOME FROM ONGOING OPERATIONS OPERATING INCOME (excluding amortization of entrance fee income)

LESS OPERATING EXPENSES (excluding depreciation, amortization, and interest)

NET INCOME FROM OPERATIONS

LESS INTEREST EXPENSE

PLUS CONTRIBUTIONS

PLUS NON-OPERATING INCOME (EXPENSES) (excluding extraordinary items)

NET INCOME (LOSS) BEFORE ENTRANCE FEES, DEPRECIATION AND AMORTIZATION

NET CASH FLOW FROM ENTRANCE FEES (Total Deposits Less Refunds)

DESCRIPTION OF SECURED DEBT (AS OF MOST RECENT FISCAL YEAR END)

LENDER OUTSTANDING

BALANCE INTEREST

RATE DATE OF

ORIGINATION DATE OF

MATURITY AMORTIZATION

PERIOD

FINANCIAL RATIOS (see next page for ratio formulas) 201 CCAC Medians

50th Percentile (optional)

201 01 201 DEBT TO ASSET RATIO OPERATING RATIO DEBT SERVICE COVERAGE RATIO DAYS CASH-ON-HAND RATIO HISTORICAL MONTHLY SERVICE FEES (AVERAGE FEE AND PERCENT CHANGE) 201 01 01 1

STUDIO ONE BEDROOM TWO BEDROOM

COTTAGE/HOUSE ASSISTED LIVING

SKILLED NURSING SPECIAL CARE

COMMENTS FROM PROVIDER:

California Nevada Methodist Homes Inc. / Forest Hill

$ 16,282,961

$ 16,640,672

-$ 357,711

$ 1,483,046

$ 83,518

-$ 1,757,239

$ 6,812,656

$ 16,628,416

$ 17,091,557

-$ 463,141

$ 1,434,566

$ 315,850

-$ 1,581,857

$ 1,087,136

$ 16,134,108

$ 16,731,317

-$ 597,209

$ 1,224,741

$ 0

-$ 1,821,950

$ 1,553,040

$ 16,719,787

$ 16,617,088

-$ 102,699

$ 1,280,152

$ 0

-$ 1,382,851

$ 1,456,405

CHFFA $33,273,118 5.00% 10/22/2015 7/1/2045 340

38.81%

97.78%

315.0

44.55%111.25%

2.46 0.32160.6

54.00%112.29%0.97124.6

55.82%117.72%0.0894.7

$ 2,402 4.20% $ 2,503 3.00% $ 2,578 3.50% $ 2,668

$ 3,427 4.20% $ 3,571 3.00% $ 3,678 3.50% $ 3,806$ 3,947 4.20% $ 4,113 3.00% $ 4,236 3.50% $ 4,385$ 3,915 4.20% $ 4,080 3.00% $ 4,203 3.50% $ 4,349$ 6,243 5.00% $ 6,555 3.75% $ 6,800 4.25% $ 7,087$ 10,836 5.00% $ 11,376 3.75% $ 11,802 4.25% $ 12,303

0.00% 0.00% 0.00%

PROVIDER NAME: _________________________________

california-nevada methodist homes · 2018. 1. 10. · see notes to financial statements. 4...

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