Financial Statements. March 31, Table of Contents

Transcription

1 Financial Statements March 31, 2015 Table of Contents Page Independent Auditor's Report 1 Statement of Operations 2 Statement of Net Assets 3 Statement of Financial Position 4 Statement of Cash Flow 5 Schedule of Thrift Shops 6 Schedule of Relief Sales & Festivals 7 8

2 INDEPENDENT AUDITOR'S REPORT To the members of: MENNONITE CENTRAL COMMITTEE (MCC) BC We were engaged to audit the accompanying financial statements of Mennonite Central Committee (MCC) BC which are comprised of the statement of changes in financial position as at March 31, 2015, and the statements of operations, net assets and cash flow for the year then ended, along with a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation 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 audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and 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 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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. Basis for Qualified Opinion In common with many charitable organizations, the society derives part of its revenue from the general public in the form of donations; the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of these revenues was limited to the amounts recorded in the records of the society and we were not able to determine whether any adjustment might be necessary to contributions, excess of revenue over expenses, current assets, and net assets. Qualified Opinion In our opinion, except for the failure to satisfy ourselves as to the completeness of donations, these financial statements present fairly, in all material respects, the financial position of Mennonite Central Committee (MCC) BC as at March 31, 2015 and its financial performance and its cash flows for the year then ended, in accordance with Canadian accounting standards for not-for-profit organizations. CERTIFIED GENERAL ACCOUNTANTS Abbotsford, B.C. June 17,

3 Statement of Operations 2015 Restated Actual Budget 2014 REVENUE Contributions $ 2,497,527 $ 2,439,050 $ 2,408,313 Contributions - Special - - 1,002,397 Contributions - Major Disasters 197, ,056 Thrift Shops (Page 6) 5,342,175 5,718,440 5,623,056 Relief Sales & Festivals (Page 7) 751, , ,726 Material Resources 389, , ,197 ECD 36,465 30,000 60,799 Grants & Other Programs 318, , ,062 Legacy 79,440 84,000 79,441 Ten Thousand Villages 363, , ,002 Common Place Cafe 171, Rent, Interest & Miscellaneous 114,379 97, ,880 10,262,822 10,280,847 11,688,929 EXPENDITURES Remittance to MCC Canada 2,384,192 2,465,000 2,892,696 Material Resources (Note 24) 440, , ,280 Programs: Common Place Cafe 280, Constituency Engagement (Peace Education) 65,475 74,320 66,222 End Abuse 106,287 83,050 87,500 Guest House 42,429 44,020 42,495 Homelessness Prevention & Outreach 70,667 50,965 46,007 Indigenous Relations 47,643 42,600 52,699 New Foundations (Child Poverty) 132, , ,564 Program Development & Coordination 195, , ,318 Refugee Assistance & Food Bank 102, , ,085 Service Worker & IVEP 243, , ,991 Ten Thousand Villages 399, , ,004 Volunteer Development & HIV/AIDS 83,044 64,545 77,989 4,594,699 4,663,588 4,688,850 Resource Development: Fundraising 207, , ,435 Thrift Shops (Page 6) 4,146,012 4,218,440 4,109,347 Relief Sales & Festivals (Page 7) 213, , ,851 4,566,868 4,695,080 4,677,633 General Administration: Carrying Costs - Gladys (Note 2(k)) ,285 Legacy 71,869 94,600 49,347 Finance & Property Administration 1,070, , ,935 Human Resources 117, , ,483 1,259,495 1,064, ,050 TOTAL EXPENDITURES 10,421,062 10,423,653 10,337,533 EXCESS OF (EXPENSES) REVENUE BEFORE OTHER ITEMS (158,240) (142,806) 1,351,396 Gain (loss) from Disposal of Assets 1,359,268-1,161,549 Income from Subsidiaries (Note 17) 530,818 - (64,388) Building Project Transitional Revenue 217, Building Project Transitional Expenses (217,950) - - EXCESS OF REVENUE (EXPENSES) $ 1,731,846 $ (142,806)$ 2,448,557 See accompanying and Auditor's Report 2

4 Statement of Net Assets Restricted Internally Restricted Unrestricted 2015 Restated 2014 NET ASSETS - Open $ 7,625,536 $ 1,106,763 $ 43,934,279 $52,666,579 $ 24,259,653 Excess of Revenue 913, ,709 1,731,846 2,448,557 Contributions (Note 2(c),(e),(l)) 762,921 70,529 (70,529) 762,921 25,958,369 Internally Restricted Transfer (Note 2(j)) - (80,446) 80, Changes in Capital Assets (1,680,498) - 1,680, NET ASSETS - Close $ 7,621,096 $ 1,096,846 $ 46,443,403 $55,161,346 $ 52,666,579 See accompanying and Auditor's Report 3

5 Statement of Financial Position As at March 31, 2015 ASSETS 2015 Restated 2014 CURRENT ASSETS Cash & Bank $ 3,786,416 $ 859,639 Investments (Note 4) 833,457 3,029,003 Contributions Receivable 149, ,823 Receivable from MCC Canada 22,169 - Inventory (Note 5) 208, ,959 Deposits & Outlays Paid 57, ,175 Prepaid Expenses 59,728 78,456 Interfund Loans - 400,000 Current Portion due from Related Parties (Note 6) 492, ,858 Sales Taxes Refundable 292,857 22,919 5,903,200 5,244,832 LONG TERM INVESTMENTS Investment in Subsidiaries (Note 7) 39,823,883 39,293,064 Due from Related Parties (Note 6) 3,111,540 3,095,777 42,935,423 42,388,841 CAPITAL ASSETS (Note 13) 24,879,238 15,494,209 TOTAL ASSETS $ 73,717,861 $ 63,127,882 LIABILITIES & NET ASSETS CURRENT LIABILITIES Notes Payable (Note 14) $ 260,000 $ 660,000 Accounts Payable & Accruals 522, ,046 Payable to MCC Canada 17, ,006 Payroll & Deductions Payable 143, ,441 Deferred Operating Contributions (Note 18) 246,277 52,700 Current Portion of Deferred Capital Contributions (Note 19) 82,689 - Current Portion of Long-term Debt (Note 21) 11,174,789 4,495,637 Interfund Loans - 400,000 Due to Related Parties (Note 15) 2,606,877 2,621,436 15,054,352 9,588,266 LONG TERM LIABILITIES Deferred Capital Contributions (Note 19) 3,135, ,943 Rental Deposits 1,500 - Long-term Debt (Note 21) 364, ,094 3,502, ,037 NET ASSETS 55,161,346 52,666,579 TOTAL LIABILITIES & NET ASSETS $ 73,717,861 $ 63,127,882 Mark Sawatzky Terry Christie See accompanying and Auditor's Report 4

6 Statement of Cash Flow 2015 Restated 2014 OPERATING ACTIVITIES Excess of revenue (expenses) from operations $ (158,240) $ 1,351,396 Add: non-cash items affecting operations Amortization 446, ,371 Accounts Receivable (14,287) 58,645 Inventory (62,594) (101,229) Deposits & Outlays Paid 175,206 (185,941) Prepaid Expenses 18,728 9,517 Accounts Payable & Accruals (659,766) 442,725 Sales Taxes Payable (269,938) 10,663 Wages Payable (15,006) 50,159 Deferred Operating Contributions 193,578 (15,345) Deferred Capital Contributions 2,475, ,220 Rental Deposits 1,500 - Capital Donations Received 762,921 4,278,237 2,893,953 6,538,418 FINANCING ACTIVITIES Loan Proceeds from Related Rarty (14,559) 2,621,436 Notes Payable (400,000) 600,000 Proceeds of Long-term debt 10,964,554 - Repayment of Long-term Debt (4,049,712) (3,539,617) 6,500,283 (318,181) INVESTING ACTIVITIES Acquisition of Capital Assets (10,146,892) (5,322,096) Proceeds from Disposal of Capital Assets 1,673,903 5,844,019 Investment in Ecoworks Landscape Services Inc. - (5,810,000) Due from Related Parties (190,016) (1,249,121) (8,663,005) (6,537,198) INCREASE (DECREASE) IN CASH OR EQUIVALENTS 731,231 (316,961) CASH - OPEN 3,888,642 4,205,603 CASH - CLOSE $ 4,619,873 $ 3,888,642 CASH REPRESENTED BY: Cash & Bank $ 3,786,416 $ 859,639 Investments 833,457 3,029,003 $ 4,619,873 $ 3,888,642 See accompanying and Auditor's Report 5

7 Schedule of Thrift Shops REVENUE Abby East Store $ 253,576 $ 560,711 Chilliwack Store 315, ,014 Clearbrook Clothing Store 1,005,532 1,238,346 Clearbrook Furniture Store 537,850 1,207,275 Kelowna Store 479, ,285 MCC Centre 752,933 - Mission Store 569, ,317 Powell River Store 339, ,497 Surrey Store 497, ,337 Vancouver Store 543, ,670 Yarrow Store 41,902 34,854 Other Sales & Donations 4,576 9,750 5,342,175 5,623,056 EXPENDITURES Advertising 29,334 13,181 Amortization 163, ,700 Human Resources 5, Insurance 27,314 31,053 Interest on Long-term Debt 46,938 21,628 Office Expenses 46,493 29,495 Products for Resale 34,287 36,196 Property Tax 149, ,018 Rent 1,019, ,169 Repair & Building Costs 194, ,453 Store Operating Expenses 299, ,009 Travel & Delivery 91,093 73,081 Wages & Benefits 2,038,194 2,146,556 4,146,012 4,109,347 EXCESS OF REVENUE $ 1,196,163 $ 1,513,709 See accompanying and Auditor's Report 6

8 Schedule of Relief Sales & Festivals REVENUE Fraser Valley $ 722,084 $ 699,095 Prince George (net) 24,000 23,770 Black Creek (net) 5,317 17, , ,726 EXPENDITURES Advertising & Promotion 9,090 8,157 Amortization 1, Banquets 14,850 16,412 Facilities & Equipment 70,635 71,616 Food & Supplies 66,049 94,671 Insurance 3,079 2,631 Office Expenses 8,462 7,360 Setup & Maintenance 5,350 3,927 Travel & Meetings 1,827 2,603 Wages & Benefits 32,572 30, , ,851 EXCESS OF REVENUE $ 538,251 $ 501,875 See accompanying and Auditor's Report 7

9 1. PURPOSE OF THE ORGANIZATION Mennonite Central Committee started in 1920 in response to hunger in Ukraine, and is the co-operative relief, service and development agency of the Mennonite and Brethren in Christ Churches in North America. Mennonite Central Committee (MCC) is a worldwide ministry of Anabaptist churches whose priorities are disaster relief, sustainable community development and justice and peace-building. MCC endeavours to share God's love and compassion for all "In the name of Christ" by responding to basic human needs and working for peace and justice. MCC envisions communities worldwide in right relationship with God, one another and creation. The Mennonite Central Committee British Columbia was established as a not-for-profit society in It is registered as a charity for purposes of the Income Tax Act (Canada), and as such is not subject to income tax on its excess of revenues over expenditures. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Accounting framework These statements have been prepared in accordance with Canadian Accounting Standards for Not-for-Profit Organizations. (b) Accounting method The Society uses the deferral method of accounting for contributions. Restricted contributions related to expenses of future periods are deferred and recognized as revenue in the period when the related expenses are incurred. Contributions are recognized as revenue when received or receivable, if the amount to be received can be reasonably estimated and collection is reasonably assured. (c) Estate donations The Society's policy, which coincides with MCC Canada policy, is to recognize estate donations as revenue in the year of receipt as restricted net assets. These funds are transferred to unrestricted net assets over five years. If an estate donation is specifically designated toward an MCC International project, the amounts are transferred to unrestricted net assets and forwarded to MCC Canada in the year of receipt. (d) Amortization Capital assets are recorded at cost, or, in the case of donated assets, at their fair market value at the time of contribution, and are being amortized on the straight-line basis at the following rates. Full year amortization is claimed in the year of purchase except for buildings for which amortization is recorded for the fraction of the year of purchase or construction, based on the date the building is available for use as determined by management. Buildings Furniture and fixtures Equipment Motor vehicles Computer hardware Computer software 40 years 10 years 5 years 3 years 3 years 2 years See accompanying Auditor's Report 8

10 SIGNIFICANT ACCOUNTING POLICIES (Continued) Leasehold improvements are being amortized on the straight-line basis over their estimated useful life. Vancouver Thrift Shop building leaseholds are being amortized over the life of the underlying land lease. (e) Donations and gifts in kind Donations of materials and services are recognized in the accounts of the Society at estimated fair market value when the materials and services are used in the normal course of the Society's operations and would otherwise have been acquired for distribution in accordance with the Society's purpose and objectives. The total donations in kind recorded as contributions during the year was $93,432 ( $118,615). (f) Contributed services Thousands of volunteers contribute a significant amount of their time each year. Because of the difficulty of determining the fair value, contributed services are not recognized in the financial statements. (g) Foreign currency Foreign-currency-denominated monetary assets and liabilities are translated to Canadian dollars at the exchange rate in effect at the balance sheet date. Foreign-currency-denominated non-monetary assets and liabilities are translated to Canadian dollars at the exchange rate in effect on the transaction date. Revenue and expense items are translated at the exchange rate in effect at the time of the transaction. Amortization and property write-downs are translated at the same exchange rate as the assets to which they relate. Foreign exchange gains or losses are included in the determination of net earnings for the year. (h) Measurement uncertainty These financial statements have been prepared in accordance with Canadian generally accepted accounting principles which require 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 differ from those estimates. (i) Investment in subsidiaries The Society accounts for its investments in wholly owned, for profit subsidiary corporations, on the equity method. (j) Internally restricted funds The Society has internally restricted net assets for two purposes. First, the fund records the transactions for estate contributions as described in Note 2(c). Second, as per MCC BC Board resolutions amounts have been internally restricted toward a capital fund for anticipated building projects related to Thrift Shop expansion. (k) Capitalization of constructed assets The Society has a policy to capitalize all costs associated with the acquisition, construction and development of capital assets. This includes carrying costs related to property held for construction and development, such as interest and property taxes. Interest and property taxes related to land that not held for construction or development, are recorded as an expense in the period in which they are incurred. (l) Restricted funds The restricted net assets of the Society are comprised of net assets invested in capital assets and contributions designated for the repayment of debt on the Gladys Avenue property. See accompanying Auditor's Report 9

11 3. FINANCIAL INSTRUMENTS Financial instruments are defined as a contractual right to either receive or deliver cash or another financial instrument to or from another party. Fair Value The carrying amount of cash, investments, contributions, loans and proceeds receivable, and notes payable, and accounts payable approximates their fair value because of the short-term nature of these items. The carrying amount of long-term debt approximates fair market value because the interest rates and terms are not significantly different from those presently available to the Society. Credit Risk The Society's financial assets that are exposed to credit risk are cash, investments, contributions, loans and proceeds receivable. Credit risk associated with cash and investments is minimized substantially by ensuring these assets are invested in accounts at a Schedule I bank with investment grade ratings. Credit risk associated with contributions, loans and proceeds receivable is minimized by restricting the granting of credit and by application of internal collection policies and procedures. Foreign Currency Risk The Society is not exposed to foreign exchange risk as it has no significant financial assets or liabilities denominated in foreign currencies. Interest Rate Risk The Society is exposed to interest rate risk on its banker's acceptances, construction loan, and commercial promissory note because they are subject to fluctuation in the prime lending rate of the Society's financial institution. The Society is not exposed to interest rate risk on other long-term debt because these financial instruments are subject to fixed rates of interest. 4. INVESTMENTS Investments are grouped by financial institution. The maturity dates commence October 2015 and the investments bear interest at rates ranging from.85% to 3.45%. Envision Financial $ 815,917 $ 2,068,013 Mennonite Foundation of Canada 9, ,824 Canadian Conference of MB Churches 8, ,166 $ 833,457 $ 3,029,003 See accompanying Auditor's Report 10

12 5. INVENTORY Inventory is recorded at the lower of cost and net market value. Items donated for Material Resource shipments overseas are recorded at standard cost stipulated by MCC Canada when shipped. 6. DUE FROM RELATED PARTIES The Society has notes receivable from Ecoworks Landscaping Services Inc., a wholly owned for profit subsidiary. The first loan is repayable in annual payments of $60,000 bearing interest at Envision Financial prime minus 1¼%. The second loan is repayable in annual payments of $75,600 bearing interest at Envision Financial prime plus ½%. The Society has a note receivable from Agora Employment Essentials Inc., a wholly owned for profit subsidiary, repayable in monthly payments of $5,000 including interest at prime plus ½%. The loan is to be paid in full by September 1, 2018 and is also payable upon demand. All amounts due from 4171 Investments Ltd. are subject to interest at 3% and due upon demand. All amounts due from Cedar Ridge Estates Inc. are subject to interest at 3%, and due August 1, All amounts due from Promontory Ridge Estates Inc are subject to interest at 3%, and due April 1, Ecoworks Landscape Services Inc. $ 305,324 $ 355,317 Agora Employment Essentials Inc. 206, , Investments Ltd. 92,211 90,467 Cedar Ridge Estates Inc. 2,796,949 2,717,851 Promontory Ridge Estates Inc. 202,301-3,603,651 3,413,635 Less: principal due within one year (492,111) (317,858) $ 3,111,540 $ 3,095, INVESTMENT IN SUBSIDIARIES Ecoworks Landscape Services Inc. (Note 8) $ 6,591,790 $ 6,278,552 Agora Employment Essentials Inc. (Note 9) 755, , Investments Ltd. (Note 10) 4,831,724 5,462,487 Cedar Ridge Estates Inc. (Note 11) 5,570,903 5,034,634 Promontory Ridge Estates Inc. (Note 12) 22,074,460 22,011,846 $39,823,883 $ 39,293,064 See accompanying Auditor's Report 11

13 8. ECOWORKS LANDSCAPE SERVICES INC. The investment in Ecoworks Landscape Services Inc., a wholly owned for profit subsidiary, is accounted for using the equity method. The subsidiary is subject to income tax and uses the taxes payable method. The following represents summary information from the subsidiary's unaudited financial statements for the year ended March 31, 2015 and comparisons for the year ended March 31, Total assets $15,446,878 $ 11,039,657 Total liabilities 10,026,483 5,932,500 Share capital and retained earnings 5,420,395 5,107,157 Revenue 2,023,944 1,789,116 Expenses 1,710,706 1,665,248 Net income 313, ,968 Cash flow from operating 337, ,705 Cash flow from financing 3,950,884 10,859,116 Cash flow from investing $(4,225,188) $ (11,460,522) 9. AGORA EMPLOYMENT ESSENTIALS INC. The investment in Agora Employment Essentials Inc., a wholly owned for profit subsidiary, is accounted for using the equity method. The subsidiary is subject to income tax and uses the taxes payable method. The following represents summary information from the subsidiary's unaudited financial statements for the year ended March 31, 2015 and comparisons for the year ended March 31, Total assets $ 1,160,128 $ 1,091,769 Total liabilities 405, ,222 Share capital and retained earnings 755, ,547 Revenue 2,319,123 2,546,466 Expenses 2,069,661 2,266,238 Net Income 249, ,318 Cash flow from operating (102,632) 174,573 Cash flow from financing (52,097) - Cash flow from investing $ 86,796 $ (502,093) See accompanying Auditor's Report 12

14 INVESTMENTS LTD. The investment in 4171 Investments Ltd., a wholly owned for profit subsidiary, is accounted for using the equity method. The subsidiary is subject to income tax and uses the taxes payable method. The following represents summary information from the subsidiary's unaudited financial statements for the year ended March 31, 2015 and comparisons for the year ended March 31, Total assets $ 8,962,559 $ 9,489,327 Total liabilities 10,340,057 10,319,064 Share capital and retained earnings (1,460,498) (829,737) Revenue 1,310,996 1,413,375 Expenses 1,941,757 2,076,139 Net income (loss) (630,761) (662,764) Cash flow from operating (689,066) (420,389) Cash flow from financing (351,469) 655,536 Cash flow from investing $ - $ (2,761) 11. CEDAR RIDGE ESTATES INC. The investment in Cedar Ridge Estates Inc., a wholly owned for profit subsidiary, is accounted for using the equity method. The subsidiary is subject to income tax and uses the taxes payable method. The following represents summary information from the subsidiary's unaudited financial statements for the year ended March 31, 2015 and comparisons for the year ended March 31, There is a permanent difference of $5,044,751 between the carrying cost of the assets on the financial statements of the subsidiary and the fair market value of the company at the time it was donated to MCC BC on August 1, Total assets $ 5,765,801 $ 7,133,531 Total liabilities 5,262,805 7,166,804 Share capital and retained earnings (deficit) 502,996 (33,273) Revenue 4,297,769 11,826 Expenses 3,761,500 25,545 Net income (loss) 536,269 (13,719) Cash flow from operating 2,583,138 (2,528,517) Cash flow from financing (1,937,756) 4,090,021 Cash flow from investing $ 1,096,132 $ (1,561,966) See accompanying Auditor's Report 13

15 12. PROMONTORY RIDGE ESTATES INC. The investment in Promontory Ridge Estates Inc., a wholly owned for profit subsidiary, is accounted for using the equity method. The subsidiary is subject to income tax and uses the taxes payable method. The following represents summary information from the subsidiary's unaudited financial statements for the year ended March 31, 2015 and comparisons for the six months ended March 31, There is a permanent difference of $2,620,244 between the carrying cost of the assets on the financial statements of the subsidiary and the fair market value of the company at the time it was donated to MCC BC on October 1, Total assets $20,576,367 $ 20,115,433 Total liabilites 19,899,968 19,504,649 Share capital and retained earnings 676, ,784 Revenue 357, ,395 Expenses 332, ,244 Income from joint ventures 37, ,659 Net income 62, ,810 Cash flow from operating 753, ,401 Cash flow from financing 213,560 (530,936) Cash flow from investing $ (829,370) $ (737,404) 13. CAPITAL ASSETS Original Accumulated Net Net Cost Amortization Land $ 8,614,852 - $ 8,614,852 $ 7,571,150 Buildings 17,158,455 (1,439,419) 15,719,036 7,599,061 Computer hardware 158,537 (123,896) 34,641 17,512 Computer software 44,253 (40,015) 4,238 5,771 Equipment 768,909 (427,690) 341, ,061 Furniture and fixtures 148,298 (75,345) 72,953 9,582 Leasehold improvements 189,121 (158,515) 30,606 24,200 Motor vehicles 351,580 (351,580) - 18,787 27,434,005 (2,616,460) 24,817,545 15,409,124 Buildings under capital lease 598,430 (536,735) 61,695 85,085 $28,032,435 $(3,153,195) $ 24,879,240 $15,494, NOTES PAYABLE The Society has received private demand loans payable without interest. See accompanying Auditor's Report 14

16 15. DUE TO RELATED PARTIES The Society has an amount owing to Promontory Ridge Estates Inc., a wholly owned for profit subsidiary of $106,877 ( $121,436), is non-interest bearing and has no schedule terms of repayments. The Society has a demand loan payable to Ecoworks Landscape Services Inc. of $2,500,000. The Society is required to make monthly interest only installments of 5%. Promontory Ridge Estates Inc. $ 106,877 $ 121,436 Ecoworks Landscape Services Inc. 2,500,000 2,500,000 $ 2,606,877 $ 2,621, RELATED PARTY TRANSACTIONS During the year the Society entered into various transactions with its wholly owned for profit subsidiaries. All transactions have been measured at exchange amount by the parties. With the exception of long-term debt between the parties, all amounts owing from, or due to, the subsidiaries are without interest and are payable in 30 days. Interest on Related Party Debt The Society has received interest on related party debt in the current fiscal year from Ecoworks Landscape Services Inc. of $7,490 (Operations) + $3,950 (Building) ( $7,567 from Operations); from Agora Employment Essentials Ltd. of $7,902 ( $8,750); from 4171 Investments Ltd. of $2,578 ( $2,397); from Cedar Ridge Estates Inc. of $79,439 ( $79,286); and from Promontory Ridge Estates of $2,301 (2014 Nil). The Society has repaid principal on related party debt to Ecoworks Landscape Services Inc. of $2,500,000 ( $Nil) and interest on related party debt to Ecoworks Landscape Services Inc. of $61,328 ( $21,233), which has been capitalized with the building development. Administrative Services The Society has received payments for rent, compensation and benefits, administration and office services in the current fiscal year from Ecoworks Landscape Services Inc. of $101,421 ( $11,960); from Agora Employment Essentials Ltd. of $2,873 ( $83,830); from 4171 Investment Ltd. of $1,743 ( $35,815); from Cedar Ridge Estates Inc. of $Nil ( $334); and from Promontory Ridge Estates of $14,558 ( $Nil). The Society has made payment for landscaping supplies in the current fiscal year to Ecoworks Landscape Services Inc. of $183 ( $4,170). Fees Service The Society has made payment for landscaping and maintenance services for various Thrift Shops and the Deer Trail Guest House to Ecoworks Landscape Services Inc. of $5,814 ( $735). Donation The Society has received a donation in the current fiscal year from Ecoworks Landscape Services Inc. of $2,386 ( $2,400) and from Agora Employment Essentials Ltd. of $Nil ( $100,000). See accompanying Auditor's Report 15

17 17. INCOME FROM SUBSIDIARIES Ecoworks Landscape Services Inc. $ 313,237 $ 123,968 Agora Employment Essentials Inc. 249, ,317 Cedar Ridge Estates Inc. 536,269 (13,719) 4171 Investments Ltd. (630,763) (662,764) Promontory Ridge Estates Inc. 62, ,810 $ 530,818 $ (64,388) 18. DEFERRED OPERATING CONTRIBUTIONS Deferred contributions represent unspent resources externally restricted for operating funding received in the current period that is related to the subsequent period. Changes in the deferred contributions balance are as follows: Opening balance $ 52,700 $ 68,045 Less amount recognized as revenue in the year (229,435) (138,128) Add amount received related to next year 423, ,783 Closing balance $ 246,277 $ 52, DEFERRED CAPITAL CONTRIBUTIONS Deferred contributions related to capital assets represent contributed capital assets and restricted contributions for the purchase of capital assets. The changes in the deferred contributions balance for the period are as follows: Opening balance $ 743,943 $ 284,453 Less amount recognized as revenue in the year (572,502) (31,314) Add amount received related to asset purchases 3,047, ,804 Closing balance $ 3,218,569 $ 743, LEASE OBLIGATIONS The Society has entered into various leases for premises, equipment and automobiles. Under the terms of the leases the minimum annual lease payments required are as follows: 2016 $ 641, $ 411, $ 171, $ 85, $ - See accompanying Auditor's Report 16

18 21. LONG-TERM DEBT MCC Centre - HSBC Banker's Acceptance maturing April 27,2015; secured by first charge over Gladys Road and South Fraser Way Plaza properties and assignment of rents to a maximum of $15,000,000; bearing interest of prime plus 0.75% plus stamping fees of 1.9% per annum. MCC Centre - Construction loan payable due on demand with a maximum available amount of $9,500,000. Interest only payments at prime plus 0.75% per annum until October Monthly payments of principal and interest commence after that with full repayment due in January Secured by a mortgage over real property and a general security agreement. MCC Centre - HSBC construction line of credit payable on demand in monthly interest only installments of prime plus 0.75% plus issuance fees of 2.25% per annum; secured using terms of HSBC Banker's Acceptance. Constituent Loan - Promissory note payable on demand with interest of 1% per annum. Matures June Unsecured. Kelowna Thrift Store - Commercial promissory note payable on demand with interest only payments at prime plus 0.50% per annum payable monthly. Note is secured by a mortgage over real property included in capital assets of the Society. Surrey Thrift Store - Mortgage payable to Mennonite Foundation of Canada, due March 2016; secured by real property; repayable in equal monthly installments of $2,270, including interest at 3.15%. Mission Thrift Store - Mortgage payable to Mennonite Foundation of Canada, due July 2017, secured by real property; repayable in equal monthly installments of $3,117, including interest at 3.75%. Powell River Thrift Store - Commercial promissory note due on demand with monthly payments of $973 plus interest at prime plus 0.90% per annum. Secured by a mortgage over real property and a general security agreement. Powell River Thrift Store - Commercial promissory note payable with monthly payments of $2,977 including interest at 3.77% per annum. Loan is due in Secured by a mortgage over real property and a general security agreement. $ 3,263,382 $ 3,264,701 5,128, , ,567-1,700, , , , , , ,580-11,539,572 4,624,731 Less: principal amounts due within one year (11,174,789) (4,495,637) $ 364,783 $ 129,094 See accompanying Auditor's Report 17

19 LONG-TERM DEBT (Continued) Under the present terms and conditions of the loans payable, the minimum annual principal payments that will be required to retire the debt will be as follows: Year Total 2016 $11,174, $ 23, $ 340, RESTATEMENT During the year it was determined that the carrying cost of the property located at Gladys Avenue, which was transferred to Ecoworks Landscape Services Inc. (a wholly owned subsidiary) on July 2, 2013, was incorrect. Legal documents disclosing the original purchase of two properties on Gladys Avenue on January 9, 2012, incorrectly assigned values to the respective properties. Consequently, the carrying cost assigned to the property transferred in 2013 required adjustment. As a result, the cost of land shown on the balance sheet of the society has increased by $989,991 and there was a corresponding increase in the 2014 gain realized on the transfer and the opening balance of Net Assets for 2015; carrying costs previously recorded as an expense of the society in 2012 and 2013 were decreased by $63,229; deferred capital contributions of $462,627 shown on the balance sheet in 2014 are now recorded as a direct increase to Net Assets. Also, during the year it was determined that donations made by the Ecoworks Landscape Services Inc. and Agora Employement Essentials Inc., both wholly owned subsidiaries in 2011, 2013 and 2014, were not eligible to be deducted by the subsidiaries for tax purposes. The subsidiaries tax liability and tax expense for the years in questions have increased for the applicable years. This has resulted in a change to the equity earnings recorded by MCC of those subsidiaries for the years in question. For Ecoworks Landscape Services Inc. the equity earnings have decreased by $21,500 in 2011, $25,000 in 2013 and $624 in For Agora Employment Essentials Inc. the equity earnings have decreased by $22,500 in 2013 and $26,000 in Also, during the year it was discovered that the amount recorded as payable to MCC Canada regarding the 2013 forwarding was overstated. As a result, the accounts payable to MCC Canada on the Statement of Financial Position and the Remittance to MCC Canada on the Statement of Operations have been reduced for the 2014 comparative figures by $215,908. Also, during the year it was discovered that the revenue in 4171 Investments Ltd. was overstated in the prior year. As a result, the equity in 4171 Investments Ltd. on the Statement of Financial Position and the income from subsidiaries on the Statement of Operations have been reduced for the 2014 comparative figures by $54,037. See accompanying Auditor's Report 18

20 23. SUBSEQUENT EVENTS Subsequent to the year end the Society and Ecoworks Landscape Services Inc. (a wholly owned subsidiary) are in discussions regarding the fair market value used for the transfer of the property between them on July 2, 2013, which is located at Gladys Avenue. The fair value of the property at the time of transfer was based on an independent appraisal. The two organizations are considering if the fair value needs to take into account some additional site preparation costs not evident at the time of the transfer. The financial effect of this possible adjustment cannot, at the time these financial statements were prepared, be reasonably estimated. 24. MATERIAL RESOURCES Material resources expense is made up of the following : Material aid shipped $ 276,652 $ 392,753 Warehouse program activity 163, ,527 $ 440,530 $ 554, CONTINGENT LIABILITIES The Society is contingently liable to the City of Abbotsford through Letters of Guarantee issued through HSBC totalling $989,4525 in regards to the MCC Centre building project. Of this amount $232,188 is included in Accounts Payable & Accruals as it is due in the coming year. 26. COMPARATIVE FIGURES Comparative figures have been reclassified where necessary to conform to current presentation. See accompanying Auditor's Report 19