SW VA 2nd Harvest Food Bank - Annual Report 2008

THE SOUTHWESTERN VIRGINIA
SECOND HARVEST FOOD BANK, INC.

and SUBSIDIARY
Salem, Virginia
FINANCIAL STATEMENTS
For the Years Ended June 30, 2008 and 2007
ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

THE SOUTHWESTERN VIRGINIA SECOND HARVEST FOOD BANK, INC.
and SUBSIDIARY
SUBSIDIARY
Salem, Virginia
- INDEX -
Independent Auditors' Report Page 1
Statements of Financial Position as of

June 30, 2008 and 2007 Exhibit A
Statements of Activities, For the Years

Ended June 30, 2008 and 2007 Exhibit B
Statements of Cash Flows, For the Years

Ended June 30, 2008 and 2007 Exhibit C
Statements of Functional Expenses, For the Years

Ended June 30, 2008 and 2007 Exhibit D
Notes to Financial Statements,

June 30, 2008 and 2007 Exhibit E
Schedule of Expenditures of Federal Awards,

For the Year Ended June 30, 2008 Schedule 1
Schedule of Findings and Questioned Costs,

For the Year Ended June 30, 2008 Schedule 2
Report on Internal Control Over Financial Reporting

and on Compliance and Other Matters Based on an Audit
of Financial Statements Performed in Accordance
with Government Auditing Standards Exhibit F
Report on Compliance with Requirements Applicable

to Each Major Program and on Internal Control
Over Compliance in Accordance with OMB
Circular A-133 Exhibit F-1

Independent Auditors' Report
To the Board of Directors

The Southwestern Virginia Second Harvest
Food Bank, Inc. and Subsidiary
Salem, Virginia
We have audited the accompanying statements of financial position of The

Southwestern Virginia Second Harvest Food Bank, Inc. (a nonprofit organization) and its
wholly-owned subsidiary, SWVAFB Property Corporation, as of June 30, 2008 and 2007
and the related statements of activities, cash flows and functional expenses for the years
then ended. These financial statements are the responsibility of the Organization's
management. 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 and the standards applicable to financial audits contained
in Government Auditing Standards, issued by the Comptroller General of the United
States. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the financial statements are free of material misstatement. An
audit includes examining, on a test basis, evidence supporting the amounts and
disclosures in the financial statements. An audit also includes assessing the accounting
principles used and the significant estimates made by management as well as evaluating
the overall financial statement presentation. We believe that our audits provide a
reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all
material respects, the financial position of The Southwestern Virginia Second Harvest
Food Bank, Inc. and Subsidiary as of June 30, 2008 and 2007 and the changes in its net
assets and its cash flows for the years then ended in conformity with accounting
principles generally accepted in the United States of America.
-2-
In accordance with Government Auditing Standards, we have also issued our

report dated August 27, 2008 on our consideration of The Southwestern Virginia Second
Harvest Food Bank, Inc. and Subsidiary's internal control over financial reporting and on
our tests of its compliance with certain provisions of laws, regulations, contracts, and
grant agreements and other matters. The purpose of that report is to describe the scope of
our testing of internal control over financial reporting and compliance and the results of
that testing, and not to provide an opinion on the internal control over financial reporting
or on compliance. That report is an integral part of an audit performed in accordance
with Government Auditing Standards and should be considered in assessing the results of
our audit.
Our audits were conducted for the purpose of forming an opinion on the basic
financial statements of The Southwestern Virginia Second Harvest Food Bank, Inc. and
Subsidiary taken as a whole. The accompanying schedule of expenditures of federal
awards is presented for purposes of additional analysis as required by U. S. Office of
Management and Budget Circular A-133, "Audits of States, Local Governments and
Non-Profit Organizations," and is not a required part of the basic financial statements.
Such information has been subjected to the auditing procedures applied in the audit of the
basic financial statements and, in our opinion, is fairly stated, in all material respects, in
relation to the basic financial statements taken as a whole.
Roanoke, Virginia
August 27, 2008

and SUBSIDIARY
Statements of Financial Position
As of June 30, 2008 and 2007
ASSETS 2008 2007
Current Assets:
Cash and cash equivalents $ 238,800 $ 240,027
Accounts receivable (net of allowance of $4,369
and $5,216 as of June 30, 2008
and 2007, respectively) 59,021 49,977
Employee receivable 450 -
Unconditional promises to give 73,302 72,094
Deposits and prepaid expenses 11,727 2,027
Food inventory 1,062,923 1,522,980
Total current assets $ 1,446,223 $ 1,887,105
Long-Term Unconditional Promises to Give $ 58,426 $ 37,504
Fixed Assets:
Land $ 975,000 $ 975,000
Vehicles 330,307 330,307
Buildings and other equipment 1,636,089 1,619,371
Total $ 2,941,396 $ 2,924,678
Less accumulated depreciation 580,283 436,507
Total fixed assets $ 2,361,113 $ 2,488,171
Intangible Assets $ 28,978 $ 28,978

Loan Costs Less Accumulated Amortization 5,175 1,035
Total intangible assets $ 23,803 $ 27,943
Total assets $ 3,889,565 $ 4,440,723

Exhibit A
LIABILITIES and NET ASSETS 2008 2007
Current Liabilities:
Accounts payable $ 55,935 $ 182,397
Accounts receivable credit balances 4,565 35,401
Grant funds due agencies 37,586 21,261
Note payable - line of credit 43,594 171,150
Bridge loan 171,274 420,000
Current portion of long-term note payable 36,000 36,000
Accrued payroll and related taxes 48,474 -
Accrued annual leave 8,292 8,292
Unearned rent 10,750 40,750
Accrued interest 5,709 4,410
Total current liabilities $ 422,179 $ 919,661
Long-Term Liabilities:
Note payable - building $ 1,728,000 $ 1,764,000
Note payable - other 75,000 -
Total long-term liabilities $ 1,803,000 $ 1,764,000
Total liabilities $ 2,225,179 $ 2,683,661
Net Assets:
Unrestricted $ 1,246,670 $ 1,362,444
Temporarily restricted 417,716 394,618
Total net assets $ 1,664,386 $ 1,757,062
Total liabilities and net assets $ 3,889,565 $ 4,440,723
The accompanying notes are an integral part of these financial

statements and should be read in connection therewith.
Exhibit B
Sheet 1

and SUBSIDIARY
Statements of Activities
2008 2007
Unrestricted Net Assets:

Support:
Grants $ 160,812 $ 270,617
Local municipal government grants 103,517 29,415
Contributions 1,154,605 775,870
In-kind contributions 287,448 291,997
Donated food 14,564,915 14,634,556
Total support $ 16,271,297 $ 16,002,455
Revenue:
USDA shared maintenance fees $ 390,355 $ 141,566
Other shared maintenance fees 740,580 889,968
Sale of purchased food 186,408 120,071
Miscellaneous 12,518 1,722
Total revenue $ 1,329,861 $ 1,153,327
Net assets released from restrictions $ 278,636 $ 257,105
Total support and revenue $ 17,879,794 $ 17,412,887
Expenses:
Program expenses $ 1,678,804 $ 1,493,122
Management and general 670,161 546,707
Fundraising 434,642 415,071
Food distributions 15,211,961 15,713,764

Total expenses $ 17,995,568 $ 18,168,664
Increase (Decrease) in Unrestricted Net Assets $ (115,774) $ (755,777)

Exhibit B
Sheet 2

and SUBSIDIARY
Statements of Activities
2008 2007
Temporarily Restricted Net Assets:

Support:
Contributions $ 86,044 $ 92,400
Grants 215,690 242,000
Net assets released from restrictions (278,636) (257,105)
Increase (Decrease) in Temporarily Restricted Net Assets $ 23,098 $ 77,295
Increase (Decrease) in Net Assets $ (92,676) $ (678,482)
Net Assets, Beginning of Year 1,757,062 2,435,544
Net Assets, End of Year $ 1,664,386 $ 1,757,062


Exhibit C
Sheet 1

and SUBSIDIARY
Statements of Cash Flows
2008 2007
Cash Flows from Operating Activities:

Increase (decrease) in net assets $ (92,676) $ (678,482)
Adjustments to reconcile increase (decrease) in net assets

to net cash provided by operating activities:
Contributions received in kind (other than donated food) $ (3,624) $ (12,095)
Depreciation 147,916 71,263
Changes in assets and liabilities:

(Increase) decrease in accounts receivable (9,044) (28,714)
(Increase) decrease in unconditional promises to give (22,130) 46,541
(Increase) decrease in grants receivable - 75,000

(Increase) decrease in employee receivable (450) -
(Increase) decrease in prepaid expenses (9,700) -
(Increase) decrease in food inventory 460,057 967,849
Increase (decrease) in accounts payable (126,462) 87,110
Increase (decrease) in accounts receivable credit balance (30,836) (46,522)
Increase (decrease) in grants due agencies 16,325 (3,567)
Increase (decrease) in accrued payroll and related taxes 48,474 (33,295)
Increase (decrease) in accrued annual leave - (11,826)

Increase (decrease) in unearned rent (30,000) (30,000)
Increase (decrease) in accrued interest 1,299 4,410
Total adjustments $ 441,825 $ 1,086,154
Net cash provided by operating activities $ 349,149 $ 407,672

Cash Flows from Investing Activities:
Capital expenditures $ (13,094) $ (2,440,295)
Cash Flows from Financing Activities:

Proceeds from note payable $ 75,000 $ 2,220,000
Net borrowing (payments) on line of credit (127,556) 105,963
Principal payments on notes payable (284,726) (141,834)
Net cash provided by (used in) financing activities $ (337,282) $ 2,184,129
Net Increase (Decrease) in Cash and Cash Equivalents $ (1,227) $ 151,506
Cash and Cash Equivalents, Beginning of Year 240,027 88,521
Cash and Cash Equivalents, End of Year $ 238,800 $ 240,027

Exhibit C
Sheet 2

and SUBSIDIARY
Statements of Cash Flows
2008 2007
Supplemental Disclosures of Cash Flow Information:

Cash paid during the year for:
Interest $ 117,029 $
50,663
Supplemental Schedule of Noncash Investing and Financing Activities:

In-kind contributions received were comprised of the
following assets:
Vehicles $ - $ 6,200
Office furniture 3,624 5,895
$ 3,624 $ 12,095


Exhibit D
Sheet 1

and SUBSIDIARY
Statement of Functional Expenses
For the Year Ended June 30, 2008
Program Management
Services and General Fundraising Total
Personnel Expenses:
Salaries $ 613,422 $ 267,675 $ 234,216 $1,115,313
Payroll taxes 52,148 22,756 19,911 94,815

Fringe benefits 63,628 27,765 24,294 115,687
Total personnel expenses $ 729,198 $ 318,196 $ 278,421 $

1,325,815
Other Expenses:
Consultants and contract services 44,373 77,405 58,946 180,724
Travel 6,833 6,561 1,034 14,428
Space costs 496,598 20,355 10,179 527,132
Materials and supplies 14,979 9,949 4,386 29,314
Postage 6,360 9,011 72,141 87,512
Equipment expense 51,495 8,810 2,832 63,137
Depreciation 137,562 8,875 1,479 147,916
Telephone 24,922 1,608 268 26,798
General insurance 29,328 38,405 2,095 69,828
Dues and subscriptions 932 25,985 2,038 28,955
Trucking expenses 132,720 - - 132,720
Interest expense - 118,328 - 118,328

Other costs 3,504 26,673 823 31,000
Total expenses $1,678,804 $ 670,161 $ 434,642 $

2,783,607


Exhibit D
Sheet 2

and SUBSIDIARY
Statement of Functional Expenses
Program Management
Services and General Fundraising Total
Personnel Expenses:
Salaries $ 493,519 $ 212,723 $ 144,652 $ 850,894
Payroll taxes 46,212 19,919 13,545 79,676
Fringe benefits 49,749 21,444 14,581 85,774
Total personnel expenses $ 589,480 $ 254,086 $ 172,778 $

1,016,344
Other Expenses:
Consultants and contract services 42,771 102,352 102,959 248,082
Travel 6,631 3,823 972 11,426
Space costs 506,937 20,696 10,348 537,981
Materials and supplies 13,077 9,598 2,633 25,308
Postage 10,390 14,052 116,967 141,409
Equipment expense 92,818 10,276 3,303 106,397
Depreciation 66,274 4,276 713 71,263
Telephone 25,063 1,617 269 26,949
General insurance 28,488 37,306 2,035 67,829
Dues and subscriptions 751 19,883 1,575 22,209

Trucking expenses 105,494 - - 105,494
Interest expense - 50,663 - 50,663
Other costs 4,948 18,079 519 23,546
Total expenses $1,493,122 $ 546,707 $ 415,071 $

2,454,900


Exhibit E
Sheet 1

and SUBSIDIARY
Notes to Financial Statements
June 30, 2008 and 2007
Notes:
1. Nature of Activities:
The Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary (the Food
Bank) is a non-profit organization incorporated under the laws of the Commonwealth of Virginia
on December 29, 1998. The Food Bank has applied for and received tax exempt status from the
Internal Revenue Service as an organization described in Section 501(c)(3) of the Internal Revenue
Code. The Corporation was created to take over and operate the food bank program previously run
by Total Action Against Poverty in the Roanoke Valley, Inc. The mission of the Food Bank is to
feed the hungry by soliciting food and judiciously distributing that food through a network of non-
profit member agencies. On November 1, 2004, the Food Bank moved to a new office and
warehouse facility in Salem, Virginia. The Food Bank has, in addition to its headquarters in
Salem, branches in Abingdon and Covington. Funding comes from area United Way agencies,
local governments, contributions from the general public and businesses in the area and through an
agreement with the Virginia Department of Agriculture and Consumer Services. This agreement
provides for donated foods as they are made available by the United States Department of
Agriculture. Numerous other commercial organizations donate food through the Second Harvest
National Food Bank network of which the Food Bank is an affiliate. On February 5, 2007, the
Food Bank formed SWVAFB Property Corporation, a Virginia corporation, for the purpose of
acquiring land and building occupied by the Food Bank in Salem and to provide warehouse
services to the Food Bank. The Food Bank is the sole stockholder of the corporation. Purchase of
an 80% undivided interest in the land and building was completed on March 30, 2007 by the new
corporation under the terms of an option agreement between the Food Bank and New Century
Development Company LLC. SWVAFB Property Corporation leases the facility to the Food Bank
and provides warehouse services under various leasing agreements.
2. Corporate Structure:
The affairs of the Organization are managed by a Board of Directors. Day-to-day

operations are managed by a chief executive officer hired by the Board of Directors.

Exhibit E
Sheet 2

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
3. Summary of Significant Accounting Policies:
(a) Principles of Consolidation:
The consolidated financial statements include the accounts of the Food Bank
and its wholly-owned subsidiary, SWVAFB Property Corporation. All material
intercompany transactions have been eliminated in consolidation.
(b) Basis of Accounting:
The financial statements have been prepared on the accrual basis of accounting in
accordance with generally accepted accounting principles. They are presented in
accordance with Statement of Financial Accounting Standards (SFAS) No. 117,
"Financial Statements of Not-for-Profit Organizations". Under SFAS No. 117, the
Organization is required to report information regarding its financial position and
activities according to three classes of net assets: unrestricted, temporarily restricted and
permanently restricted. Currently, the Organization has no assets that are permanently
restricted.
(c) Support and Revenue:
The Food Bank receives grants from area United Way Agencies and from local
governments which are recognized as support in the period(s) for which the grant was
made. One-time grants from charitable foundations and contributions from businesses or
individuals are recorded, in most cases, when received. Significant amounts pledged but
not received by year-end are recorded as receivable. Contributions received with donor-
imposed restrictions are recorded as temporarily or permanently restricted depending on
the nature of the restrictions. Support that is restricted by the donor is reported as an
increase in unrestricted net assets if the restriction expires in the reporting period in
which the support is recognized.
(d) Unconditional Promises to Give:
The Food Bank recognizes promises to give as income in the period when the promise is
received. Oral promises are not recorded until a signed commitment is received.
Promises to give are recorded at net receivable value. Management bases collectibility
on past experience and uses a discount rate commensurate with the risk involved.

Exhibit E
Sheet 3

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
3. (Continued)
(e) Food Valuation:
Foods for distribution in the Organization's program are obtained from three
types of sources and are valued as follows:
Purchased food Valued at cost

USDA commodities Value assigned by USDA
Donated foods Valued at $1.49 and $1.69 per pound,
as of June 30, 2008 and 2007,
respectively*
*The average value per pound is based on an independent study done for
America's Second Harvest. These values are used in measuring the amount of donated
food received and food distributions shown on Exhibit B and the food inventory on
Exhibit A.
Food distributions for the years ended June 30, 2008 and 2007 were
approximately 11.3 million and 11.1 million pounds, respectively, with an approximate
value of 14.6 million and 15 million dollars, respectively. The difference in the average
value per pound is largely accounted for by the decline in value of donated food from
2007 to 2008.
(f) Fixed Assets:
The Food Bank follows the practice of capitalizing all expenditures for property, furniture
and equipment in excess of $500. Acquisitions are recorded at cost if purchased and at
fair market value if donated to the Organization in-kind. Depreciation of all such items is
computed on a straight-line basis over the estimated useful lives of the assets generally as
follows:
Buildings 39 years
Refrigerated trucks 5 years
Cooler, freezers, forklift 7 years
Other equipment, including computers 5 years
Computer software 3 years
Office furniture 7 years

Exhibit E Exhibit E
Sheet 4

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
3. (Continued)
(g) Income Taxes:
The Food Bank is exempt from Federal income taxes under Section 501(c)(3) of the
Internal Revenue Code and did not conduct unrelated business activities. The subsidiary,
a Virginia corporation, is subject to income taxes. However, as the subsidiary has no
taxable income for the period ended June 30, 2008, the Food Bank has made no provision
for income taxes in the accompanying financial statements. In addition, the Food Bank
has been determined by the Internal Revenue Service not to be a "private foundation"
within the meaning of Section 509(a) of the Internal Revenue Code.
(h) Estimates:
The preparation of financial statements in conformity with generally accepted accounting

principles requires management to make estimates and assumptions that affect the
reported amounts of assets and liabilities and disclosure of contingent assets and
liabilities at the date of the financial statements and the reported amounts of revenues and
expenses during the reporting period. Actual results could vary from the estimates that
were used.
(i) Functional Allocation of Expenses:
The costs of providing the various programs and other activities have been summarized
on a functional basis in the statement of activities. Accordingly, certain costs have been
allocated among the programs and supporting services benefited.
(j) Cash and Cash Equivalents:
Cash equivalents consist of highly liquid investments with an initial maturity of three
months or less. Fair value approximates carrying amounts.

Exhibit E
Sheet 5

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
3. (Continued)
(k) Allowance for Doubtful Accounts:
The Food Bank provides for estimated losses on accounts receivable based on
prior bad debt experience and a review of existing receivables. Based on these factors,
there is a provision for doubtful accounts of $4,369 and $5,216 for the years ended June
30, 2008 and 2007, respectively.
(l) In-Kind Contributions:
In-kind contributions are recorded at fair market value and recognized as support in the
year they are received.
(m) Accrued Annual Leave:
Vacation pay is recognized as expense in the period when it is earned.
4. Notes Payable:
The Organization has a line of credit in the amount of $225,000 with SunTrust Bank. Interest
is payable at the bank's prime rate and is due and payable on demand. The line is secured by a first
credit line deed of trust and a blanket lien on all assets of the Organization. The balances
outstanding at June 30, 2008 and 2007 were $43,594 and $171,150, respectively.
During the year ended June 30, 2007, the Organization obtained a bridge loan in the amount of
$595,000 from SunTrust Bank to pay off a $120,000 bridge loan from Valley Bank and to
complete the purchase of the Salem facility. Interest is payable monthly at the bank's prime
floating rate and principal balance is due January 1, 2009. The outstanding balance at June 30,
2008 was $171,274. The loan is secured by a first credit line deed of trust on the facility and a
blanket lien on all assets of the Organization.

Exhibit E
Sheet 6

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
4. (Continued)
During the year ended June 30, 2007, the Organization obtained a seven-year commercial
mortgage loan in the amount of $1,800,000 from SunTrust Bank to purchase an 80% undivided
interest in a 98,090 square foot facility occupied by the Organization located at 1025 Electric Road
in Salem, Virginia. The Organization has entered into an interest rate swap agreement to
effectively change the interest rate to a fixed rate of 4.43%. At June 30, 2008, the Organization
had outstanding interest rate swap agreements having a total notional principal amount of
$1,764,000. The interest rate swap agreement matures at the time the note matures. The
Organization is exposed to credit loss in the event of nonperformance by the counter parties to the
interest rate swap agreements. However, the Organization does not anticipate nonperformance by
the counter parties. Annual principal payments of $36,000 are due beginning December 1, 2007.
The Organization is required to make sinking fund deposits of $400,000 by December 31, 2008
and $100,000 in 2009. The loan is secured by a first credit line deed of trust on the facility and a
blanket lien on all assets of the Organization.
During the year ended June 30, 2008, the Organization obtained a five-year balloon loan
from SunTrust Bank, Trustee of the Gerald W. Roller IRA, in the amount of $75,000 with an
interest rate of 4.13% payable annually with the principal amount of the loan due December 20,
2012. The loan is secured by a 2007 Chevrolet truck.
The combined principal maturities for long-term notes payable are as follows:
Fiscal year 2009 $ 36,000

2010 36,000
2011 36,000
2012 111,000
2013 36,000
5. Pension Plan:
The Food Bank participates in a retirement and 401(k) plan for the benefit of its employees.
The plan is administered by SunTrust Bank and Transamerica Retirement Services. Employees
become eligible to participate in the plan and make elective deferrals after 30 days of employment.
After two years of service, participants are eligible to have employer contributions credited to their
account. The plan provides for benefits at the employee’s normal retirement age of 65. Benefits
may be paid in a lump sum or in installments over a fixed period of time. The amount of benefits
is based on the participant’s account balance at time of retirement.

Exhibit E
Sheet 7

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
5. (Continued)
Participants may defer from 1% to 100% of their salary and up to 100% of any cash paid
employer bonus subject to the annual dollar limit and overall plan limit on elective deferrals. The
Food Bank may make matching, non-elective, and discretionary contributions to the plan. During
the years ended June 30, 2008 and 2007, the Food Bank contributed $39,519 and $29,591,
respectively, to the plan which is included in fringe benefits in the financial statements.
6. Leases:
The Food Bank leases a 20% undivided interest in its Salem facility of approximately
98,090 square feet for an annual rental of $172,966. Under the terms of the lease, the Food Bank
is to pay rent monthly in the amount of $14,414. However, the Food Bank is not required to pay
the rent as the landlord treats the amount of foregone rent as a donation to the Food Bank. The
Food Bank recognizes the amount of rental payments as an in-kind contribution.
The Food Bank subleases unused warehouse and parking space on a short-term basis.
Rental expense for the years ended June 30, 2008 and 2007, not including contributed rent, was
$174,378 and $123,738 net of sublease rental income of $104,816 and $45,726, respectively.
The branch facility in Abingdon is leased under an agreement which provides

approximately 1,200 square feet of office space for $1,200 per month. Approximately 9,500
square feet of additional warehouse and office space is leased at zero monthly rent. The fair
market rental value of $86,500 is recognized as an in-kind contribution. The lease expired March
31, 2006, and the Food Bank is renting the facility on a month-to-month basis.
The branch facility in Covington is leased under an agreement that requires the Food Bank
to pay 63% of all utilities for the facility. There is no monthly rental. The amount paid for utilities
under this agreement was $5,328 for the year ended June 30, 2008 and $6,104 for 2007.

Exhibit E
Sheet 8

and SUBSIDIARY
June 30, 2008 and 2007
Notes: (Continued)
7. Temporarily Restricted Net Assets:
Temporarily restricted net assets consisted of the following at June 30, 2008 and
2007, respectively:
2008 2007
Kids Café $ 74,344 $ 38,240
Grants and donations for specific

agencies or purposes 211,543 246,780
Unconditional promises to give 131,728 109,598
Sinking Fund 101 -
$ 417,716 $ 394,618
8. Related Party Transactions:
The Food Bank exercised an option, granted in 2004, to purchase an 80% undivided
interest in the Salem facility from New Century Development Company, LLC. The Food Bank
leases the remaining 20% undivided interest from New Century. John F. Shoulders, Jr., managing
member of New Century, was elected to the board of the Food Bank in 2006. The total amount of
rent paid to New Century during the period ended June 30, 2008 was $172,966 all of which was
recognized as an in-kind contribution. The total amount of rent paid to New Century during the
period ended June 30, 2007 was $343,562 including $193,402 recognized as an in-kind
contribution.
During the years ended June 30, 2008 and 2007, the Food Bank paid legal fees to the firm
of Woods, Rogers, Hazelgrove in the amount of $3,866 and $11,721, respectively. Neil Birkhoff, a
partner in Woods, Rogers, Hazelgrove, is a director of the Food Bank.

Schedule 1

and SUBSIDIARY
Schedule of Expenditures of Federal Awards
Federal
CFDA # Revenue Expenditures
Pass Through Virginia Department of Agriculture

and Consumer Services (VDACS Agency
Number 67-500):
USDA - Emergency Food Assistance
Program (food commodities) 10.569 $1,264,685 $ 1,132,578
USDA - Emergency Food Assistance

Program (administrative costs) 10.568 390,355 390,355
Virginia Child and Adult Care Food Program
(operating costs) 10.558 116,026 116,026
Summer Feeding Program Foods 10.559 435 435
Total Federal assistance $1,771,501 $ 1,639,394
NOTES TO SCHEDULE OF FEDERAL FINANCIAL ASSISTANCE

FOR THE YEAR ENDED JUNE 30, 2008
Note A Basis of Presentation
The accompanying schedule of revenue and expenditures of Federal awards includes the Federal
grant activity of The Southwestern Virginia Second Harvest Food Bank, Inc. and is presented on
the accrual basis of accounting. The information in this schedule is presented in accordance with
the requirements of OMB Circular A-133, "Audits of States, Local Governments, and Non-Profit
Organizations."
Note B Food Distribution
Non-monetary assistance is reported in the schedule at the fair market value of the commodities
received and distributed. At June 30, 2008 and 2007, the Food Bank had food commodities
totaling $157,196 and $25,089, respectively in inventory.

Schedule 2

and SUBSIDIARY
Schedule of Findings and Questioned Costs
Part A: Summary of Audit Results:
1. The auditors' report expresses an unqualified opinion on the financial statements of

the
Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary.
2. No significant deficiencies in internal control were disclosed by the audit of the

financial statements.
3. The audit disclosed no instances of noncompliance which are material to the

financial statements of The Southwestern Virginia Second Harvest Food Bank, Inc. and
Subsidiary.
4. No significant deficiencies in internal controls over major programs were disclosed

by the audit of major Federal programs.
5. The auditors' report expresses an unqualified opinion on compliance for major

programs of The Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary.
6. The audit disclosed no audit findings relative to the major programs for The
Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary which are required to
be reported under OMB Circular A-133.
7. The programs tested as major programs included:
CFDA #
USDA - Emergency Food Assistance Program (food commodities)

10.569
USDA - Emergency Food Assistance Program (administrative costs)
10.568
ISDA - Child and Adult Care Food Program (operating costs) 10.558

Exhibit F
Sheet 1
Report on Internal Control Over Financial

Reporting and on Compliance and Other Matters Based on
An Audit of Financial Statements Performed
In Accordance with Government Auditing Standards
Board of Directors
Salem, Virginia
We have audited the financial statements of The Southwestern Virginia Second

Harvest Food Bank, Inc. and its wholly-owned subsidiary SWVAFB Property Corporation
as of and for the year ended June 30, 2008, and have issued our report thereon dated
August 27, 2008. We conducted our audit in accordance with auditing standards generally
accepted in the United States of America and the standards applicable to financial audits
contained in Government Auditing Standards, issued by the Comptroller General of the
United States.
Internal Control over Financial Reporting
In planning and performing our audit, we considered The Southwestern Virginia

Second Harvest Food Bank, Inc. and Subsidiary's internal control over financial reporting
as a basis for designing our auditing procedures for the purpose of expressing our opinion
on the financial statements, but not for the purpose of expressing an opinion on the
effectiveness of The Southwestern Virginia Second Harvest Food Bank, Inc. and
Subsidiary's internal control over financial reporting. Accordingly, we do not express an
opinion on the effectiveness of the Organization's internal control over financial reporting.
A control deficiency exists when the design or operation of a control does not allow
management or employees, in the normal course of performing their assigned functions, to
prevent or detect misstatements on a timely basis. A significant deficiency is a control
deficiency, or combination of control deficiencies, that adversely affects the Organization's
ability to initiate, authorize, record, process, or report financial data reliably in accordance
Exhibit F
Sheet 2
with generally accepted accounting principles, such that there is more than a remote
likelihood that a misstatement of the Organization's financial statements that is more than
inconsequential will not be prevented or detected by the Organization's internal control.
A material weakness is a significant deficiency, or combination of significant

deficiencies, that results in more than a remote likelihood that a material misstatement of
the financial statements will not be prevented or detected by the Organization's internal
control.
Our consideration of internal control over financial reporting was for the limited
purpose described in the first paragraph of this section and would not necessarily identify
all deficiencies in internal control that might be significant deficiencies or material
weaknesses. We did not identify any deficiencies in internal control over financial
reporting that we consider to be material weaknesses, as defined above.
Compliance and Other Matters
As part of obtaining reasonable assurance about whether The Southwestern Virginia

Second Harvest Food Bank, Inc. and Subsidiary's financial statements are free of material
misstatement, we performed tests of its compliance with certain provisions of laws,
regulations, contracts, and grant agreements, noncompliance with which could have a
direct and material effect on the determination of financial statement amounts. However,
providing an opinion on compliance with those provisions was not an objective of our
audit, and accordingly, we do not express such an opinion. The results of our tests
disclosed no instances of noncompliance or other matters that are required to be reported
under Government Auditing Standards.
We noted certain matters that we reported to management of The Southwestern

Virginia Second Harvest Food Bank, Inc. and Subsidiary in a separate letter dated August
27, 2008.
This report is intended solely for the information and use of management, the audit
committee, Board of Directors and Federal awarding agencies and pass-through entities
and is not intended to be and should not be used by anyone other than these specified
parties.
Roanoke, Virginia
August 27, 2008

Exhibit F-1
Sheet 1
Report on Compliance with Requirements

Applicable to Each Major Program and on Internal Control
Over Compliance in Accordance with OMB Circular A-133
Board of Directors
Salem, Virginia
We have audited the compliance of The Southwestern Virginia Second Harvest

Food Bank, Inc. and Subsidiary with the types of compliance requirements described in the
U. S. Office of Management and Budget (OMB) Circular A-133 Compliance Supplement
that are applicable to each of its major Federal programs for the year ended June 30, 2008.
The Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary's major
Federal programs are identified in the summary of auditor's results section of the
accompanying schedule of findings and questioned costs. Compliance with the
requirements of laws, regulations, contracts, and grants applicable to each of its major
Federal programs is the responsibility of The Southwestern Virginia Second Harvest Food
Bank, Inc. and Subsidiary's management. Our responsibility is to express an opinion on
The Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary's compliance
based on our audit.
We conducted our audit of compliance in accordance with auditing standards

generally accepted in the United States of America; the standards applicable to financial
audits contained in Government Auditing Standards, issued by the Comptroller General of
the United States; and OMB Circular A-133, Audits of States, Local Governments, and
Non-Profit Organizations. Those standards and OMB Circular A-133 require that we plan
and perform the audit to obtain reasonable assurance about whether noncompliance with
the types of compliance requirements referred to above that could have a direct and
material effect on a major Federal program occurred. An audit includes examining, on a
test basis, evidence about The Southwestern Virginia Second Harvest Food Bank, Inc. and
Exhibit F-1
Sheet 2
Subsidiary's compliance with those requirements and performing such other procedures as
we considered necessary in the circumstances. We believe that our audit provides a
reasonable basis for our opinion. Our audit does not provide a legal determination of The
Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary's compliance with
those requirements.
In our opinion, The Southwestern Virginia Second Harvest Food Bank, Inc. and
Subsidiary complied, in all material respects, with the requirements referred to above that
are applicable to each of its major Federal programs for the year ended June 30, 2008.
Internal Control Over Compliance
The management of The Southwestern Virginia Second Harvest Food Bank, Inc.
and Subsidiary is responsible for establishing and maintaining effective internal control
over compliance with the requirements of laws, regulations, contracts, and grants
applicable to Federal programs. In planning and performing our audit, we considered The
Southwestern Virginia Second Harvest Food Bank, Inc. and Subsidiary's internal control
over compliance with requirements that could have a direct and material effect on a major
Federal program in order to determine our auditing procedures for the purpose of
expressing our opinion on compliance, but not for the purpose of expressing an opinion on
the effectiveness of internal control over compliance. Accordingly, we do not express an
opinion on the effectiveness of The Southwestern Virginia Second Harvest Food Bank, Inc.
and Subsidiary's internal control over compliance.
A control deficiency in an entity's internal control over compliance exists when the
design or operation of a control does not allow management or employees, in the normal
course of performing their assigned functions, to prevent or detect noncompliance with a
type of compliance requirement of a Federal program on a timely basis. A significant
deficiency is a control deficiency, or combination of control deficiencies, that adversely
affects the entity's ability to administer a Federal program such that there is more than a
remote likelihood that noncompliance with a type of compliance requirement of a Federal
program that is more than inconsequential will not be prevented or detected by the entity's
internal control.
A material weakness is a significant deficiency, or combination of significant

deficiencies, that results in more than a remote likelihood that material noncompliance with
a type of compliance requirement of a Federal program will not be prevented or detected
by the entity's internal control.

Exhibit F-1
Sheet 3
Our consideration of internal control over compliance was for the limited purpose
described in the first paragraph of this section and would not necessarily identify all
deficiencies in internal control that might be significant deficiencies or material
weaknesses. We did not identify any deficiencies in internal control over compliance that
we consider to be material weaknesses as defined above.
This report is intended solely for the information and use of the audit committee,
management, Board of Directors, and Federal awarding agencies and pass-through entities
and is not intended to be and should not be used by anyone other than these specified
parties.
Roanoke, Virginia
August 27, 2008

SW VA 2nd Harvest Food Bank - Annual Report 2008

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SW VA 2nd Harvest Food Bank - Annual Report 2008

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THE SOUTHWESTERN VIRGINIA

SECOND HARVEST FOOD BANK, INC.

For the Years Ended June 30, 2008 and 2007

ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

Independent Auditors' Report Page 1

Statements of Financial Position as of

Statements of Activities, For the Years

Statements of Cash Flows, For the Years

Statements of Functional Expenses, For the Years

Notes to Financial Statements,

Schedule of Expenditures of Federal Awards,

Schedule of Findings and Questioned Costs,

Report on Internal Control Over Financial Reporting

Report on Compliance with Requirements Applicable

ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

To the Board of Directors

We have audited the accompanying statements of financial position of The

We conducted our audits in accordance with auditing standards generally accepted

In accordance with Government Auditing Standards, we have also issued our

ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

Statements of Financial Position

As of June 30, 2008 and 2007

ASSETS 2008 2007

Total current assets $ 1,446,223 $ 1,887,105

Long-Term Unconditional Promises to Give $ 58,426 $ 37,504

Total fixed assets $ 2,361,113 $ 2,488,171

Intangible Assets $ 28,978 $ 28,978

Total intangible assets $ 23,803 $ 27,943

Total assets $ 3,889,565 $ 4,440,723

ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

LIABILITIES and NET ASSETS 2008 2007

Total current liabilities $ 422,179 $ 919,661

Total long-term liabilities $ 1,803,000 $ 1,764,000

Total liabilities $ 2,225,179 $ 2,683,661

Total net assets $ 1,664,386 $ 1,757,062

Total liabilities and net assets $ 3,889,565 $ 4,440,723

The accompanying notes are an integral part of these financial

THE SOUTHWESTERN VIRGINIA SECOND HARVEST FOOD BANK, INC.

For the Years Ended June 30, 2008 and 2007

Unrestricted Net Assets:

Local municipal government grants 103,517 29,415

Contributions 1,154,605 775,870

In-kind contributions 287,448 291,997

Donated food 14,564,915 14,634,556

Total support $ 16,271,297 $ 16,002,455

Other shared maintenance fees 740,580 889,968

Sale of purchased food 186,408 120,071

Miscellaneous 12,518 1,722

Total revenue $ 1,329,861 $ 1,153,327

Net assets released from restrictions $ 278,636 $ 257,105

Total support and revenue $ 17,879,794 $ 17,412,887

Management and general 670,161 546,707

Fundraising 434,642 415,071

Food distributions 15,211,961 15,713,764

ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

Increase (Decrease) in Unrestricted Net Assets $ (115,774) $ (755,777)

ANDERSON & REED, CERTIFIED PUBLIC ACCOUNTANTS

THE SOUTHWESTERN VIRGINIA SECOND HARVEST FOOD BANK, INC.

Temporarily Restricted Net Assets:

Grants 215,690 242,000

Net assets released from restrictions (278,636) (257,105)

Increase (Decrease) in Temporarily Restricted Net Assets $ 23,098 $ 77,295

Increase (Decrease) in Net Assets $ (92,676) $ (678,482)

Net Assets, Beginning of Year 1,757,062 2,435,544