Officers and professional advisers 2. Report of the Elders Court 3. Statement of the Elders Court responsibilities 4. Independent auditors report 5-6

Transcription

1 FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER 2012 CONTENTS PAGES Officers and professional advisers 2 Report of the Elders Court 3 Statement of the Elders Court responsibilities 4 Independent auditors report 5-6 Financial Statements Statement of comprehensive income 7 Statement of financial position 8 Statement of changes in funds 9 Statement of cash flows 10 Notes to the financial statements Detailed statement of comprehensive income Appendix I 1

2 OFFICERS AND PROFESSIONAL ADVISERS ELDERS COURT MEMBERS Gerald Macharia - Chairman Anthony Okoth - Secretary James Kaniaru - Treasurer Oscar Muriu Godwin Wangongu Mureithi Wanjau Walter Jaoko CONTACT ADDRESS AUDITORS BANKERS Nairobi Chapel Ngong Road Ngong Road P O Box Nairobi Deloitte & Touche Certified Public Accountants (Kenya) Deloitte Place Waiyaki Way, Muthangari P O Box Nairobi, Kenya Chase Bank Limited City centre branch P O Box Nairobi, Kenya NIC Bank Limited City centre branch P O Box Nairobi, Kenya Housing Finance Bank Limited Rehani House branch P O Box Nairobi, Kenya CfC Stanbic Bank Limited Karen branch P O Box Nairobi, Kenya Consolidated Bank Limited Meru branch P O Box Meru, Kenya LEGAL ADVISORS Mboya & Wangong u Advocates Lex Chambers Maji Mazuri Road, off James Gichuru Road, Lavington, P O Box Nairobi, Kenya 2

3 REPORT OF THE ELDERS COURT The Elders Court submits their report and the audited financial statements for the year ended 31 December 2012 which disclose the state of the affairs of the Chapel. PRINCIPAL ACTIVITY The principal activity of the Chapel is equipping God s people to disciple the nations for Christ. NAIROBI CHAPEL NGONG ROAD FINANCIAL STATEMENTS Nairobi Chapel Ngong Road financial statements incorporates the financial statements of Trinity Chapel (a branch of Nairobi Chapel based in Meru) and Rongai Chapel which are made up to 31 December The interchurch transactions and balances are eliminated upon amalgamation of the results. RESULTS Income 193,995,166 Expenditure (188,935,561) Surplus for the year 5,059,605 ========= ELDERS COURT MEMBERS The Elders court members who served the Chapel during the year are listed on page 2. AUDITORS Deloitte & Touche were appointed to carry out the audit for the year ended 31 December 2012 and have expressed their willingness to continue in office. BY ORDER OF THE ELDERS COURT SECRETARY Nairobi

4 STATEMENT OF THE ELDERS COURT RESPONSIBILITIES The Elders Court is responsible for keeping proper accounting records which disclose with reasonable accuracy at any time the financial position of Nairobi Chapel Ngong Road as at the end of financial year and of the operating results of the chapel for that year. They are also responsible for safeguarding the assets of the Chapel and hence for taking reasonable steps for the prevention and detection of fraud and other irregularities. The Elders Court is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and for such internal controls as the Elders Court determines are necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. The Elders Court accepts responsibility for the annual financial statements, which have been prepared using appropriate accounting policies supported by reasonable and prudent judgements and estimates, in conformity with International Financial Reporting Standards. The Elders Court is of the opinion that the financial statements give a true and fair view of the state of the Chapel s financial affairs and of the results of its operations. The Elders Court further accepts responsibility for the maintenance of accounting records that may be relied upon in the preparation of the financial statements, as well as adequate systems of internal financial controls. Nothing has come to the attention of the Elders Court to indicate that the Chapel will not be able to continue with its activities for at least twelve months from the date of this statement. Chairman Treasurer

5 INDEPENDENT AUDITORS REPORT TO THE MEMBERS OF NAIROBI CHAPEL NGONG ROAD We have audited the accompanying financial statements of Nairobi Chapel Ngong road, set out on pages 7 to 24, which comprise the statement of financial position as at 31 December 2012, the statement of comprehensive income, statement of changes in funds and statement of cash flows for the year then ended, and a summary of significant accounting policies and other explanatory notes. Elders Court Responsibility for the Financial Statements The Elders Court is responsible for the preparation of financial statements that give a true and fair view in accordance with International Financial Reporting Standards and for such internal controls as the Elders Court determines are 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 International Standards on Auditing. 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 our judgement, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, we considered the internal controls relevant to the Chapel s preparation of the financial statements that give a true and fair view in order to design audit procedures that were appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Chapel s internal controls. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by the Elders Court, 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 give a true and fair view of the state of the financial position of Nairobi Chapel Ngong road as at 31 December 2012 and of its financial performance and cash flows for the year then ended in accordance with International Financial Reporting Standards. 5

6 INDEPENDENT AUDITORS REPORT (CONTINUED) Emphasis of matter In common with similar entities, Nairobi Chapel Ngong Road derives a substantial proportion of its income from voluntary contributions which are not susceptible to independent audit verification until they have been captured in the accounting records. However, we have reviewed the controls relating to the receipt and the recording of voluntary contributions to ensure that they have been adequately recorded. We draw this matter to the reader s attention but our opinion is not qualified in this respect. Certified Public Accountants (Kenya) Nairobi

7 STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER Notes Income 3 193,995, ,125,164 Expenditure Staff costs 4 76,288,293 60,120,069 Ministry expenses 5 61,123,527 44,497,300 Administration costs 6 51,523,741 35,780,251 Total expenditure 188,935, ,397,620 Surplus for the year 5,059,605 14,727,544 ======== ======== 7

8 STATEMENT OF FINANCIAL POSITION AS AT 31 DECEMBER Notes ASSETS Non current assets Property and equipment 7 81,897,574 27,066,781 Intangible assets 8 150,374 15,341 82,047,948 27,082,122 Current assets Deposits and prepayments 9 1,981,558 12,214,812 Cash and bank 10 23,121,672 24,039,225 Grants receivable ,687 25,103,230 36,523,724 Total assets 107,151,178 63,605,846 ========= ========= FUND BALANCES AND LIABILITIES Fund balances Accumulated fund 55,689,797 50,630,192 Non current liabilities Borrowings 11 30,843,963 - Current liabilities Borrowings ,968 - Payables and accruals 12 9,028,097 4,300,528 Unexpended funds 13 10,870,353 8,675,126 20,617,418 12,975,654 Total fund balances and liabilities 107,151,178 63,605,846 ========= ========= The financial statements on pages 7 to 24 were approved and authorised for issue by the Elders Court on 2013 and were signed on their behalf by: Chairman Treasurer 8

9 STATEMENT OF CHANGES IN FUNDS FOR THE YEAR ENDED 31 DECEMBER 2012 Accumulated fund At 1 January ,902,648 Surplus for the year 14,727,544 At 31 December ,630,192 ========= At 1 January ,630,192 Surplus for the year 5,059,605 At 31 December ,689,797 ========= 9

10 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED 31 DECEMBER 2012 Notes Cash flows from operating activities Surplus for the year 5,059,605 14,727,544 Adjustments for: Depreciation of property and equipment 7 9,383,196 6,968,187 Amortisation on intangible assets 8 27,003 7,659 Loss on disposal of motor vehicle 118,750 - Cash flows before working capital changes 14,588,554 21,703,390 Working capital changes Decrease/(increase) in deposits and prepayments 10,233,254 (3,897,397) Increase /(decrease) in payables and accruals 4,727,569 (689,161) Net movement in designated funds 2,464,914 (1,018,938) Net cash flows generated from operating activities 32,014,291 16,097,894 Cash flows from investing activities Purchase of property and equipment 7 (64,932,739) (8,434,613) Purchase of intangible assets 8 (162,036) (23,000) Proceeds on disposal of motor vehicle 600,000 - Net cash flows used in investing activities (64,494,775) (8,457,613) Cash flows from financing activities Proceeds from borrowings 11 32,000,000 - Repayments on borrowings 11 (437,069) - Net cash flows generated from financing activities 31,562,931 - (Decrease)/increase in cash and cash equivalents (917,553) 7,640,281 Cash and cash equivalents at 1 January 24,039,225 16,398,944 Cash and cash equivalents at 31 December 10 23,121,672 24,039,225 ========= ========= 10

11 NOTES TO THE FINANCIAL STATEMENTS FOR THE YEAR ENDED 31 DECEMBER ACCOUNTING POLICIES Statement of compliance The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS). Adoption of new and revised International Financial Reporting Standards (IFRSs) and Interpretations (IFRIC) (i) New standards and amendments to published standards effective for the year ended 31 December 2012 The following new and revised IFRSs were effective in the current year and had no material impact on the amounts reported in these financial statements. Amendments to IAS 1 Presentation of Financial Statements (as part of Improvements to IFRSs issued in 2011). The amendments to IAS 1 clarify that an entity may choose to disclose an analysis of other comprehensive income item by item in the statement of changes in funds or in the notes to the financial statements. The Chapel will continue disclosing an analysis of other comprehensive income item by item in the statement of changes in funds. Improvements to IFRSs issued in The application of Improvements to IFRSs issued in 2011 has not had any material effect on amounts reported in the Chapel s financial statements. (ii) New and amended standards and interpretations in issue but not yet effective in the year ended 31 December 2012 New and Amendments to standards Effective for annual periods beginning on or after IFRS 7, Financial Instruments: Disclosures Amendments enhancing disclosures about offsetting financial assets and financial liabilities IFRS 7, Financial Instruments: Disclosure Amendments requiring disclosures about initial application of IFRS 9 IFRS 9, Financial Instruments Accounting for financial liabilities and derecognition IAS 1, Presentation of Financial Statements presentation of items of other comprehensive income IAS 19, Employee Benefits (2012) IFRS 13, Fair Value Measurement Amendment to interpretations IFRIC 14, IAS 19 The Limit on a Defined Benefit Asset, Minimum Funding Requirements and their interaction; prepayments of a minimum funding requirement. 1 January January 2013 or otherwise when IFRS 9 is first applied 1 January July January January January

12 1 ACCOUNTING POLICIES (Continued) (ii) Impact of new and amended standards and interpretations on the financial statements for the year ended 31 December 2012 and future annual periods IAS 19 (as revised in 2012)- Employee Benefits The amendments to IAS 19 change the accounting for defined benefit plans and termination benefits. The most significant change relates to the accounting for changes in defined benefit obligations and plan assets. The amendments require the recognition of changes in defined benefit obligations and in fair value of plan assets when they occur, and hence eliminate the 'corridor approach' permitted under the previous version of IAS 19 and accelerate the recognition of past service costs. The amendments require all actuarial gains and losses to be recognised immediately through other comprehensive income in order for the net pension asset or liability recognised in the statement of financial position to reflect the full value of the plan deficit or surplus. The amendments to IAS 19 are effective for annual periods beginning on or after 1 January 2013 and require retrospective application with certain exceptions. The Elders anticipate that this standard will not have a material impact on the Chapel s financial statements. (iii) Early adoption of standards The Chapel did not early-adopt any new or amended standards in the period. Significant accounting policies The principal accounting policies adopted are set out below: Basis of preparation The financial statements have been prepared under the historical cost basis of accounting. Income and expenditure Offerings and donations are recognised when received and recorded in the Chapel s books of account. Investment income and expenditure is accounted for on an accruals basis. Gifts of investments are brought in at valuation. Interest income from bank deposits is accrued on a time basis, by reference to the principal outstanding and at the interest rate applicable. Designated funds Funds received for specific purposes are treated as unexpended grants and credited to the income and expenditure statement when the activities for which they were provided for have been undertaken. Specific grant pledges that have not been received but for which expenditure has been incurred, as well as the excess of expenditure over receipts for specific grants are recognised as revenue and included in the financial statements as accounts receivable from donors. Property and equipment Property and equipment is stated at cost less accumulated depreciation and any accumulated impairment losses. 12

13 1 ACCOUNTING POLICIES (Continued) Property and equipment (Continued) Depreciation is calculated on property and equipment on a straight line basis to write down the cost of each asset to its residual value over its estimated useful life, on the following bases: Property 2.5% Furniture, fittings & equipment 12.5% Computers 33.3% Music equipment 33.3% Motor vehicles 25% Generator 12.5% Tents 12.5% Intangible assets Intangible assets comprise the cost of acquired accounting software. Expenditure on acquired accounting software is capitalised and amortised using straight line method over the estimated useful life, generally not exceeding three years. Impairment of tangible and intangible assets The carrying amounts of the Chapel s tangible and intangible assets are reviewed annually at the end of the reporting period to determine if there is any indication of impairment. If such condition is identified, the asset s net recoverable amount is estimated. Where the asset s carrying amount exceeds its net recoverable amount, it is written down immediately to the recoverable amount and the resulting impairment loss is treated as an expense in the surplus or deficit. Foreign currencies Assets and liabilities that are denominated in foreign currencies are translated into Kenya Shillings at the rates of exchange ruling at the end of reporting period. Transactions during the year, which are expressed in foreign currency, are translated at the rates ruling on the transaction dates. Gains or losses on translation are dealt with in the surplus or deficit. Retirement benefit obligations The Chapel contributes to a statutory defined contribution scheme, The National Social Security Fund. The Chapel s obligations under the scheme are limited to regulated contributions which are currently Sh 200 per month per employee. The Chapel also contributes to a registered provident fund, the contribution to which is at a rate of 10% of the basic pay per month per employee. Its obligations to staff retirement benefit schemes are charged to the surplus or deficit as they fall due. Employee benefits Employees entitlements to annual leave are recognised when they accrue to employees. A provision is made for the liability for such entitlements as a result of services rendered by employees upto the end of reporting period. Taxation No provision for taxation has been made in these accounts. Nairobi Chapel qualifies for exemption from Kenyan Corporation tax under Paragraph 10 of the 1st Schedule to the Income Tax Act, Cap 470 (Laws of Kenya). On this basis, the Kenya Revenue Authority granted the Chapel an Income Tax Exemption certificate valid between 26 October 2009 to 26 October The organization made an application for renewal of the Income Tax Exemption Certificate but as at the date of signing the report, the organization was awaiting feedback from the Kenya Revenue Authority. 13

14 1 ACCOUNTING POLICIES (Continued) Contingent liabilities Contingent liabilities arise if there is a possible obligation; or a present obligation that may, but probably will not, require an outflow of economic resources; or there is a present obligation, but there is no reliable method to estimate the monetary value of the obligation. Leases Leases are classified as finance leases whenever the terms of the lease transfer substantially all risks and rewards of ownership to the lessee. All other leases are classified as operating leases. Rentals payable under operating leases are charged to the surplus or deficit on a straight-line basis over the period of the lease. Financial instruments Financial assets and financial liabilities are recognised in the Chapel s statement of financial position when the Chapel becomes a party to the contractual provisions of the instruments. Receivables Receivables are carried at anticipated realisable value. An estimate is made for doubtful receivables based on a review of all outstanding amounts at the end of reporting period. Bad debts are written off when all reasonable steps to recover them have failed. Payables Payables are not interest bearing and are stated at their nominal value. Borrowings Borrowings are recognised initially at fair value, net of transaction costs incurred. Borrowings are subsequently carried at amortised cost; any difference between the proceeds (net of transaction costs) and the redemption value is recognised in the statement of comprehensive income over the period of the borrowings using the effective interest method. Fees paid on the establishment of loan facilities are recognised as transaction costs of the loan to the extent that it is probable that some or all of the facility will be drawn down. In this case, the fee is deferred until the draw-down occurs. To the extent there is no evidence that it is probable that some or all of the facility will be drawn down, the fee is capitalised as a pre-payment for liquidity services and amortised over the period of the facility to which it relates. De-recognition of financial liabilities The Chapel derecognises financial liabilities when, and only when, the Chapel s obligations are discharged, cancelled or they expire. The difference between the carrying amount of the financial liability derecognised and the consideration paid and payable is recognised in surplus of deficit. De-recognition of financial assets Financial assets are derecognised when the rights to receive cash flows from the financial assets have expired or where the Chapel has transferred substantially all risks and rewards of ownership. 14

15 1 ACCOUNTING POLICIES (Continued) Impairment of financial assets At the end of each reporting period, the Chapel assesses whether there is objective evidence that a financial asset (or group of financial assets) is impaired. Impairment losses are recognised if there is objective evidence of impairment as a result of one or more events that have occurred after the initial recognition of the asset, and that those events have an impact on the estimated future cash flows of the financial asset that can be reliably estimated. The impairment loss so recognised is measured as the difference between the asset s carrying amount and the present value of estimated future cash flows, discounted at the financial asset s original effective interest rate. Cash and cash equivalents For the purposes of the cash flow statement, cash equivalents include short term liquid investments which are readily convertible into known amounts of cash and which were within three months of maturity when required, less advances from the banks repayable within three months from the dates of advance. Comparatives Where necessary, comparative figures have been adjusted to conform with changes in presentation in the current year. 2 CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY In the application of the Chapel s accounting policies, which are described in note 1, the Elders Court is required to make judgements, estimates and assumptions about the carrying amounts of assets and liabilities that are not readily apparent from other sources. The estimates and associated assumptions are based on historical experience and other factors that are considered to be relevant. Actual results may differ from these estimates. The estimates and underlying assumptions are reviewed on an ongoing basis. Revisions to accounting estimates are recognised in the period in which the estimate is revised if the revision affects only that period or in the period of the revision and future periods if the revision affects both current and future periods. The key areas of judgment in applying the Chapel s accounting policies are dealt with below: (a) Critical judgments in applying accounting policies There are no critical judgments, apart from those involving estimations (see b below), that the Elders Court has made in the process of applying the Chapel s accounting policies and that have the most significant effect on the amounts recognised in the financial statements. (b) Key sources of estimation uncertainty Impairment losses At the end of each reporting period, the Chapel reviews the carrying amounts of its tangible and intangible assets to determine whether there is any indication that those assets have suffered an impairment loss. If any such indication exists, the recoverable amount of the asset is estimated in order to determine the extent of the impairment loss. Where it is not possible to estimate the recoverable amount of an individual asset, the Chapel estimates the recoverable amount of the cash generating unit to which the asset belongs. 15

16 2 CRITICAL ACCOUNTING JUDGMENTS AND KEY SOURCES OF ESTIMATION UNCERTAINTY (Continued) (b) Key sources of estimation uncertainty (Continued) Intangible assets, property and equipment 3 INCOME Critical estimates are made by the Elders Court in determining depreciation rates for property, plant and equipment. Contingent liabilities The Elders Court evaluates the status of any exposures to contingent liabilities on a regular basis to assess the probability of the Chapel incurring related liabilities. However, provisions are only made in the financial statements where, based on the Elders Court s evaluation, a present obligation has not been established Tithes and offerings 142,984, ,072,677 Designated income (Note 13) 32,984,371 24,383,465 Other incomes 17,591,379 13,015,277 Interest received 347, ,297 Sale of books 73,115 - Sale of sermon CDs 14,679 79,448 Donations in kind - 1,231,000 _ 193,995, ,125,164 ========== ========= 4 STAFF COSTS Salaries and wages 70,818,643 55,206,306 Staff medical insurance 3,059,035 2,606,760 Pension 1,533,472 1,181,345 Staff retreat 472,724 1,017,658 Staff gifts and severance 404, ,000 5 MINISTRY EXPENSES 76,288,293 60,120,069 ========= ========= Ministry running expenses 36,200,924 26,164,839 Leadership development 14,771,175 7,184,105 Ministry partnership support 5,583,714 7,435,504 Outreach missions/negst 1,729,847 1,605,591 Honorarium and gift 1,249, ,978 Plug in oversight, retreats and scholarships 1,089,334 1,076,375 Benevolence gifts 498, ,908 61,123,527 44,497,300 ========= ========= 16

17 6 ADMINISTRATION COSTS Rentals 10,261,205 5,944,512 Depreciation on property and equipment 9,383,196 6,968,187 Site development and management 6,626,183 6,097,633 Printing and stationery 4,753,380 3,192,015 Interest on mortgage facility 3,138,967 - Travel and conferencing 2,959,842 1,116,391 Security 2,277,094 1,743,752 Refreshments and hospitality expenses 1,710,630 1,348,708 Electricity and water charges 1,608, ,177 Cleaning 1,298, ,997 Hire of equipment 1,241,000 - Communication and telephone charges 1,063,596 1,664,986 Decoration 922, ,118 Books 723,801 32,500 Bank charges 638, ,791 Audit fees 596, ,252 Equipment repair and ministry microphones 498, ,491 Repairs and renewals 493, ,869 Car running expenses 399, ,844 Insurance for property and equipment 373, ,462 Office operating licence 330, ,615 Consultancy 160,861 1,467,000 Amortisation on intangible assets 27,003 7,659 Children's learning materials 31,346 25,002 Software license 4,000 - Other costs 1,940 9,170 Legal fees - 331,604 Withholding tax - 166,516 51,523,741 35,780,251 ========= ========= 17

18 7 PROPERTY AND EQUIPMENT Cost Work in Motor Music Furniture & Property Progress Vehicle Computer Generator Equipment Fittings Tents Total At 1 January ,556,880-1,678,770 2,157,891 1,048,140 7,782,688 2,663,090 15,743,749 37,631,208 Additions - - 1,150, ,749 2,780,010 3,374, ,789-8,434,613 At 31 December ,556,880-2,828,770 2,758,640 3,828,150 11,156,753 3,192,879 15,743,749 46,065,821 At 1 January ,556,880-2,828,770 2,758,640 3,828,150 11,156,753 3,192,879 15,743,749 46,065,821 Additions - 45,389,267-1,923,910-12,374, ,400 5,000,000 64,932,739 Disposals - - (1,150,000) (1,150,000) At 31 December ,556,880 45,389,267 1,678,770 4,682,550 3,828,150 23,530,915 3,438,279 20,743, ,848,560 ======= ======= ======== ======== ======== ========= ======== ======== ======== Depreciation At 1 January ,527-1,259, , ,588 2,845, ,979 5,903,906 12,030,853 Charge for the year 163, , , ,935 2,774, ,419 1,967,968 6,968,187 At 31 December ,449-1,966,271 1,043, ,523 5,619,856 1,210,398 7,871,874 18,999,040 At 1 January ,449-1,966,271 1,043, ,523 5,619,856 1,210,398 7,871,874 18,999,040 Charge for the year 163, ,749 1,252, ,519 4,959, ,439 1,967,968 9,383,196 Eliminated on disposal - - (431,250) (431,250) At 31 December ,371-1,678,770 2,296,357 1,156,042 10,579,767 1,626,837 9,839,842 27,950,986 ======= ======= ======== ======== ======== ========= ======== ======== ======== Net book value At 31 December ,783,509 45,389,267-2,386,193 2,672,108 12,951,148 1,811,442 10,903,907 81,897,574 ======= ======= ======= ======== ======= ======== ======== ======== ======== At 31 December ,947, ,499 1,714,971 3,150,627 5,536,897 1,982,481 7,871,875 27,066,781 ======= ======= ======= ======== ======= ======== ======== ======== ======== Work in progress relates to purchase of office space at The Green House Office Park. The acquired office space was still under construction as at 31 December The office space has been used to secure a mortgage facility from Housing Finance Bank Limited (see note 11). 18

19 8 INTANGIBLE ASSETS Cost At 1 January 23,000 - Additions 162,036 23,000 At 31 December 185,036 23,000 Amortisation At 1 January 7,659 - Charge for the year 27,003 7,659 At 31 December 34,662 7,659 Net book value At 31 December 150,374 15,341 ====== ========= Intangible assets represent accounting software. 9 DEPOSITS AND PREPAYMENTS Rent deposit 1,306,000 1,426,000 Other receivables 361, ,702 Land rates and licence prepayments 314, ,215 Deposit for office space - 9,905, CASH AND BANK 1,981,558 12,214,812 ======== ======== Cash at bank 22,330,009 23,866,278 M-Pesa balance 789, ,730 Cash in hand 2,380 50, BORROWINGS 23,121,672 24,039,225 ========= ========= At 1 January - - Received during the year 32,000,000 - Paid in the year (437,069) - At 31 December 31,562,931 - ========= ========= 19

20 11 BORROWINGS (Continued) Analysis of borrowings by maturity: Due within one year 718,968 - Due after one year 30,843,963-31,562,931 - ========= ========= The borrowing relates to a mortgage facility with Housing Finance Bank Limited. The facility is secured by office space on LR Number 209/406/1 at The Green House Office Park. As per the loan agreement, interest rate on the loan is fixed at 14.5% for the first 5 years and on a floating basis for the subsequent periods. The loan is repayable in a period of 15 years. 12 PAYABLES AND ACCRUALS Sundry creditors 5,824,966 1,545,635 Accruals 3,203,131 2,754,893 9,028,097 4,300,528 ========= ======== 20

21 13 DESIGNATED FUNDS - GRANTS RECEIVABLE/ (UNEXPENDED FUNDS) 1 January December 2012 Unexpended funds Grants receivable Receipts Payments Unexpended funds Grants receivable 3201 ROPES (2) - (698,658) 495,322 (203,338) PMCC (162,196) - (532,300) 405,770 (288,726) Jubilee Scholarship donations (4,153,138) - (8,369,609) 9,246,864 (3,275,883) Children outreach (S.F Activities) (64,961) - (639,665) 383,811 (320,815) Social justice - 98,967 (531,796) 332,869 (99,960) KQ- Investments (22,427) - (8,722) - (31,149) K-Krew designate gifts (683,045) - (4,412,500) 3,106,734 (1,988,811) Cheryls children home - - (346,000) 305,000 (41,000) Teacher training retreat (12,905) (12,905) Interns support kitty (203,322) - (1,892,646) 1,754,501 (341,467) School prayer (15,972) , Tree of Joy (5,900) - (5,900) Elders' contribution (2,665,581) - - 1,409,974 (1,255,607) HARC /UZIMA (261,699) - (4,147,200) 3,576,223 (832,676) ADIYA - womens' ministry (172,576) , Singles ministry (23,295) - (25,100) 48, Book fund (229,788) (229,788) - Youth S.F 3265 Activities/Missions/Benevolence (4,219) - (539,874) 353,484 (190,609) Rongai Church - 170,720 (3,712,904) 3,403,123 (139,061) Ecclesia study materials - - (354,500) 315,300 (39,200) Marriage Ministry - - (1,434,480) 1,352,840 (81,640) Parenting - - (229,300) 191,750 (37,550) Church plants - - (5,892,859) 5,080,572 (812,287) Viral conference - - (1,084,750) 996,112 (88,638) One lamb - - (570,522) 32,179 (538,343) Wedding officiating fee - - (20,000) 5,000 (15,000) - Total (Unexpended funds)/grants receivable (8,675,126) 269,687 (35,449,285) 32,984,371 (10,870,353) - ========= ======== ========== ========= ========= ======== (Note 3) 21

22 14 KEY MANAGEMENT COMPENSATION Elders of the Nairobi Chapel offer their services on a voluntary basis and are not remunerated. In 2011, key management comprised of the Senior Pastor and Associate Pastor. In 2012,an Executive Board was formed which comprised of the Senior Pastor, Associate Pastor, Finance and Administration Manager, Discipleship Pastor, Expansion Pastor, Oversight Pastor and Operations Pastor. The remuneration of key management during the year was as follows: Salaries and other benefits 29,575,947 15,240,589 ======== ======== 15 FINANCIAL RISK MANAGEMENT POLICIES The Chapel s financial risk management objectives and policies are detailed below: Significant accounting policies Details of the significant accounting policies and methods adopted, including the criteria for recognition, the basis of measurement and the basis on which income and expenses are recognised, in respect of each class of financial asset and financial liability are disclosed in note 1 to the financial statements. Financial risk management objectives The Chapel activities expose it to a variety of financial risks including credit risk, liquidity risks and the effects of changes in foreign currency rates. The Chapel s overall risk management programme focuses on unpredictability of changes in the operating environment and seeks to minimise the potential adverse effect of such risks on its performance by setting acceptable levels of risk. Credit risk management The Chapel s credit risk is primarily attributable to its grants receivables and bank balances. The amount of grants receivable presented in the statement of financial position relates to expenditure incurred in excess of designated funds received. The credit risk on grants receivable is limited because designated funds are sourced from credible sponsors and ministries within the Chapel The credit risk on liquid funds with financial institutions is also low, because the counter parties are banks with high credit-ratings. The amount that best represents the Chapel s maximum exposure to credit risk as at 31 December 2012 is made up as follows: Fully performing Past due Impaired Total Bank balances 22,330, ,330,009 ========== ========== ========== ========== 22

23 15 FINANCIAL RISK MANAGEMENT POLICIES (Continued) Credit risk management (Continued) The amount that best represents the Chapel s maximum exposure to credit risk as at 31 December 2011 is made up as follows: Interest rate risk management The Chapel is exposed to interest rate risk. The Chapel borrowed funds at a fixed rate for the first five years and a floating interest rate for subsequent periods. The risk is managed by the Chapel through close monitoring control by the Elders. Liquidity risk management Ultimate responsibility for liquidity risk management rests with the Elders Court, who have built an appropriate liquidity risk management framework for the management of the Chapel s short, medium and long-term funding and liquidity management requirements. The Chapel manages liquidity risk by maintaining enough required funds for its operations through continuous monitoring of forecast and actual cash flows. The table below shows the maturity analysis of the financial liabilities that affect liquidity. As at 31 December 2012 Less than Between Over 1 month 1-3 months 3 months Total Borrowings 59, ,742 31,323,275 31,562,931 Payables 1,695,654 7,332,443-9,028,097 As at 31 December ,755,568 7,512,185 31,323,275 40,591,028 ======== ========= ========= ========= Payables 2,608,017 1,692,511-4,300,528 ========= ========== ========= ========= Exchange risk Fully Performing Past due Impaired Total Bank balances 23,866, ,866,278 Grants receivable 269, ,687 24,135, ,135,965 ========== ========= ========= ========== The Chapel holds some of its bank balances in foreign currency. The fluctuations in currency exchange rates result in changes in the value of the monetary assets denominated in foreign currency hence expose the Chapel to the risk of incurring exchange losses. The monetary assets held in foreign currency are closely monitored to ensure that they are not materially affected by adverse foreign currency fluctuations. There are no other foreign currencies denominated financial assets or liabilities. 23

24 15 FINANCIAL RISK MANAGEMENT POLICIES (Continued) Exchange risk (continued) At year end, the foreign currency bank accounts had the following balance: At 31 December 2012 Amount In foreign currency Amount US dollar bank account 95,758 7,939,246 ====== ======== At 31 December 2011 US dollar bank account 65,655 5,585,364 ====== ======== As at 31 December 2012, an increase/decrease of 10% in the Dollar exchange rates to the Kenya Shilling would have resulted in an increase/decrease in the surplus for the year of 793,925 ( ,536). Capital risk management The Chapel manages its capital to ensure that it will be able to continue as a going concern while maximising the return to stakeholders through the optimisation of the unexpended grants and fund balance. The Chapel s overall strategy remains unchanged from The capital structure of the Chapel consists of unexpended grants and borrowings. The gearing ratio at the end of the reporting period was as follows: Unexpended grants (note 13) 10,870,353 8,675,126 Borrowings (note 11) 31,562,931 - Cash and cash equivalent (note 10) (23,121,672) (24,039,225) Amount 19,311,612 (15,364,099) ========= ========= Accumulated fund* 55,689,797 50,630,192 ========= ========= Gearing ratio 35% Nil * Accumulated fund comprises cumulated surplus. 16 LEGAL STATUS The Nairobi Chapel Ngong Road is a branch of Nairobi Chapel. The Nairobi Chapel was registered on 6 th December 1961 under the Societies Act as per certificate of exception number CURRENCY These financial statements are presented in Kenya Shillings (). 24

25 DETAILED STATEMENT OF COMPREHENSIVE INCOME FOR THE YEAR ENDED 31 DECEMBER 2012 Appendix I Ngong Road Rongai Trinity INCOME Tithes and offerings 134,047,700 7,062,171 1,874, ,984, ,072,677 Designated income 32,979,371 5,000-32,984,371 24,383,465 Other income 17,331, ,000-17,591,379 13,015,277 Donations in kind ,231,000 Interest received 347, , ,297 Sale of sermon CDs 12,179 2,500-14,679 79,448 Sale of books 73, ,115 - Total income 184,791,348 7,329,671 1,874, ,995, ,125,164 EXPENDITURE Staff costs Salaries and wages 68,963, , ,000 70,818,643 55,206,306 Staff medical insurance 3,034,117 24,918-3,059,035 2,606,760 Pension contribution 1,533, ,533,472 1,181,345 Staff retreat 471,524 1, ,724 1,017,658 Staff gifts and severance 404, , ,000 Total staff costs 74,406,675 1,017, ,000 76,288,293 60,120,069 Ministry expenses 59,996, , ,429 61,123,527 44,497,300 Administration costs 46,429,216 4,176, ,397 51,523,741 35,780, Total expenditure 180,832,084 6,135,651 1,967, ,935, ,397,620 TOTAL COMPREHENSIVE INCOME/(LOSS) FOR THE YEAR 3,959,264 1,194,020 (93,679) 5,059,605 14,727,544 ========= ========= ======== ========= =========