CharityWatch's rating of Covenant House & Affiliates includes the financial activities of the entities consolidated in the Covenant House audited financial statements for the fiscal year ended June 30, 2020.
According to the Covenant House & Affiliates consolidated audit of June 30, 2020 (Note 1, Organization and Tax Status), the entities below consist of the Covenant House U.S. and International Affiliates:
(1) Covenant House Alaska; (2) Covenant House California; (3) Covenant House Chicago; (4) Covenant House Connecticut; (5) Covenant House Florida; (6) Covenant House Georgia; (7) Covenant House Illinois; (8) Covenant House Michigan; (9) Covenant House Missouri; (10) Covenant House New Jersey; (11) Covenant House New Orleans; (12) Covenant House New York/Under 21; (13) Covenant House Pennsylvania/Under 21; (14) Covenant House Texas; (15) Covenant House Washington D.C.; (16) Covenant House Western Avenue; (17) Covenant House Testamentum; (18) Covenant House Holdings, LLC; (19) Covenant International Foundation; (20) CH Housing Development Fund Corporation; (21) Rights of Passage, Inc.; (22) Under 21 Boston, Inc.; (23) 268 West 44th Corporation; (24) 460 West 44th St, LLC; (25) Asociacion La Alianza (Guatemala); (26) Casa Alianza de Honduras; (27) Casa Alianza Internacional; (28) Casa Alianza Nicaragua; (29) Covenant House Toronto; (30) Covenant House Vancouver; (31) Fundacion Casa Alianza Mexico, I.A.P.
All significant intercompany transactions and balance have been eliminated in the audit consolidation.
Also according to the Covenant House & Affiliates consolidated audit of June 30, 2020 (Note 1, Organization and Tax Status):
"In 2019, Covenant House California (the 'California affiliate') acquired the DreamCatcher Youth Services ('DreamCatcher') program which included a property acquisition, from its' parent agency, Alameda Family Services (AFS). DreamCatcher's mission is consistent with that of the California affiliate; providing support and housing for homeless and trafficked youth in Oakland, CA..."
Whenever practicable, CharityWatch obtains consolidated audited financial statements that include all of the entities of a charitable organization. Such an audit eliminates transactions among interorganizational entities and allows us to determine how efficiently an organization is operating as a whole. For more information on this topic, please see Treatment of Related Organizations on the Our Process page.
According to the Covenant House & Affiliates audited Consolidated Statement of Activities for the year ended June 30, 2020, Covenant House received in-kind contributed goods and services on which it placed a value of $5,392,750.
[Note: CharityWatch generally excludes the value of in-kind (non-cash) donations of goods and services from its calculations of Program % and Cost to Raise $100. More information on how grades are calculated and the treatment of in-kind donations can be found on the Our Process page.]
According to the Covenant House & Affiliates consolidated audit of June 30, 2020 (Note 13, Paycheck Protection Program):
"During fiscal 2020, Covenant House and its U.S. Affiliates received loan proceeds in the amount of $16,014,545 under the Paycheck Protection Program (the 'PPP'). The PPP, established as part of the Coronavirus Aid, Relief and Economic Security Act (the 'CARES Act'), provides for loans to qualifying entities for amounts up to 2.5 times the 2019 average monthly payroll expenses of the qualifying entity. The PPP loan bears an interest rate of 1% per annum. All or a portion of the PPP loan principal and accrued interest is forgivable as long as the borrower uses the loan proceeds for eligible purposes, as described in the CARES Act, over a period of either eight or twenty-four weeks (the 'Covered Period'). The amount of loan forgiveness could be reduced if the borrower terminates employees or reduces salaries below a certain threshold during the Covered Period and does not qualify for certain safe harbors. The unforgiven portion of the PPP loan, if any, is payable within two years from the date of the loan. Loan payments of principal and interest are deferred until the amount of loan forgiveness is determined by the United States Small Business Administration ('SBA'). If Covenant House and its US Affiliates do not apply for forgiveness, payments begin approximately 16 months after the loan date.
"Covenant House and its U.S. Affiliates intend to use all proceeds received in accordance with regulations established by the PPP. Management believes its use of the proceeds, including amounts expended through June 30, 2020, will be forgiven. ... In fiscal 2020, Covenant House and its U.S. Affiliates recognized $2,865,507 of income, included in government grants and contracts in the [audited] consolidated statement of activities. The remaining PPP loan funds of $4,081,316 from these U.S. Affiliates are reported as PPP refundable advances in the [audited] consolidated statement of financial position at June 30, 2020.
"Covenant House (Parent) and other U.S. Affiliates who received the PPP loan recognized the funds as debt on the [audited] consolidated statement of financial position. Covenant House (Parent) and these U.S. Affiliates will recognize the income from the forgiveness of the PPP loan when it receives notification of forgiveness from the SBA... Covenant House (Parent) and the U.S. Affiliates who received the loans reported these funds in full as PPP loans in the consolidated statement of financial position at June 30, 2020 for $9,067,722. Although Covenant House (Parent) and these U.S. Affiliates believe the loans will be substantially forgiven, there can be no guarantee that the SBA will approve the loan forgiveness.
"The SBA has stated it will review the needs certification on all loans over $2,000,000. After the review, the SBA may determine that Covenant House and its U.S. Affiliates did not meet the need criteria to apply for the PPP loan. In such a circumstance, Covenant House and its U.S. Affiliates may be forced to return all or part of the PPP loan proceeds plus pay the accrued and unpaid interest. Covenant House and its U.S. Affiliates believe they were eligible to receive the PPP loan proceeds."
According to the Covenant House & Affiliates consolidated audit of June 30, 2020 (Note 22, Risks and Uncertainties):
"The ongoing Coronavirus pandemic has resulted in substantial volatility in the global economy. The pandemic may potentially have an adverse effect on the results of the operations. While management has implemented measures to mitigate the impact of the pandemic, including obtaining PPP loans under the CARES Act as detailed in Note 13 [cited separately, above], the extent to which the Covenant House's operations are impacted will depend on future developments, which are highly uncertain and cannot be predicted. As a result, management cannot reasonably estimate the overall impact of the Coronavirus pandemic to Covenant House's future results of operations, cash flows, or financial condition."