Page 16 - 2019 - 2020 Child Care Resource Center Audited Financial Statements

Child Care Resource Center, Inc. Notes to Financial Statements
Note 2 – Summary of Significant Accounting Policies (continued)
Recent accounting pronouncements – In February 2016, the FASB issued ASU 2016-02, Leases (Topic 842), which increases transparency and comparability among entities by recognizing lease assets and lease liabilities on the consolidated statements of financial position and disclosing key information about leasing arrangements in the financial statements of lessees. The effective date of ASU 2014-09 was deferred by ASU 2020-05, Revenue from Contracts with Customers (Topic 606) and Leases
(Topic 842): Effective Dates for Certain Entities. For non-profit organizations like CCRC that are considered public business entities, the amendments in this update are effective for fiscal years beginning after December 15, 2020, if adopted. Management has elected to adopt ASU 2020-05 for the year end June 30, 2020, and is currently evaluating the impact of the provisions of ASU 2016-02 on the financial statements.
Reclassifications – Certain amounts presented in the prior year financial statements have been reclassified to conform to the current year presentation. Reclassifications of prior year amounts have no impact on net assets.
Note 3 – Concentration of Credit Risk
Financial instruments which potentially subject CCRC to concentrations of credit risk consist of cash and cash equivalents, cash held in reserve, government contracts receivable, other receivables, and investments. Although cash and cash equivalent balances may from time to time exceed federally insured limits, management believes CCRC is not exposed to any significant credit risk with respect to those deposits. Management believes that CCRC is not exposed to any significant credit risk on government contract and other receivables based on the creditworthiness of the counterparties. Investments are exposed to various risk factors such as market and credit risks. Although the investment value may from time to time change based on the performance of the investments, management believes CCRC is not exposed to any significant credit risk with respect to these investments.
Both governmental and private pay sources have instituted cost-containment measures designed to limit payments made to providers of child care services, and there can be no assurance that future measures designed to limit payments made to providers will not adversely affect reimbursement to CCRC. Furthermore, government reimbursement programs are subject to statutory and regulatory changes, retroactive rate adjustments, administrative rulings, and government funding restrictions, all of which could materially decrease the services covered or the rates paid to CCRC for its services.
A majority of CCRC’s annual funding, $334,309,541 or 99.8% and $288,576,559 or 99.9% in 2020 and 2019, respectively, of total revenue and support is derived from grant agreements and contracts for fees for services collected from federal and nonfederal agencies and family fees associated with those contracts. CCRC has no reason to believe that relationships with these agencies will be discontinued in the foreseeable future. However, any interruption of these relationships (e.g., the failure to renew grant agreements, withholding of funds, or significant decreases to funding) would adversely affect CCRC’s ability to finance its ongoing operations.
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