Drug Policy Alliance. Financial Statements. May 31, 2012

Transcription

1 Financial Statements

2 Independent Auditors Report Board of Directors Drug Policy Alliance We have audited the statement of financial position of Drug Policy Alliance ( DPA ) as of May 31, 2012 and the related statements of activities, functional expenses and cash flows for the year then ended. These financial statements are the responsibility of DPA's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year s summarized comparative information has been derived from DPA s May 31, 2011 financial statements and in our report dated September 23, 2011, we expressed an unqualified opinion on these financial statements. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of DPA s internal control over financial reporting. Accordingly, we express no such opinion. 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 significant estimates made by management, as well as evaluating the overall financial presentation. We believe that our audit provides 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 Drug Policy Alliance as of and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. New York, New York October 11, 2012

3 Statement of Financial Position (with comparative amounts at May 31, 2011) ASSETS Cash and cash equivalents $ 2,480,645 $ 6,136,126 Cash restricted for mortgage escrow 591,338 - Certificates of deposit 445,000 - Grants receivable 39,425,255 2,003,998 Accounts receivable 125,569 37,895 Prepaid expenses and other assets 68, ,603 Deposits 90,048 81,264 Property, equipment and leasehold improvements, net 5,503, ,251 $ 48,729,843 $ 8,505,137 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 545,730 $ 703,577 Compensated absences 278, ,775 Mortgage payable 3,082,145 - Total Liabilities 3,906, ,352 Net Assets Unrestricted 6,033,363 4,578,392 Temporarily restricted 38,790,128 2,993,393 Total Net Assets 44,823,491 7,571,785 $ 48,729,843 $ 8,505,137 See notes to financial statements 2

4 Statement of Activities Year Ended (with summarized totals for the year ended May 31, 2011) 2012 Temporarily 2011 Unrestricted Restricted Total Total SUPPORT AND REVENUE Grants and contributions $ 8,209,707 $ 37,348,818 $ 45,558,525 $ 8,145,824 Registrations and conference income 333, ,417 51,425 Membership 738, , ,402 Acquisition 331, , ,879 Drug Policy Action administration 142, , ,515 Publications and videos 10,664-10,664 13,991 Interest income 7,828-7,828 12,255 Loss on disposal of property, equipment and leasehold improvements (7,948) - (7,948) - Other income 20,181-20, ,982 Net assets released from restrictions 1,552,083 (1,552,083) - - Total Support and Revenue 11,338,617 35,796,735 47,135,352 9,729,273 EXPENSES Program services 7,053,842-7,053,842 6,217,545 Management and general 1,495,743-1,495,743 1,616,596 Fundraising 1,334,061-1,334,061 1,204,645 Total Expenses 9,883,646-9,883,646 9,038,786 Change in Net Assets 1,454,971 35,796,735 37,251, ,487 NET ASSETS Beginning of year 4,578,392 2,993,393 7,571,785 6,881,298 End of year $ 6,033,363 $ 38,790,128 $ 44,823,491 $ 7,571,785 See notes to financial statements 3

5 Statement of Functional Expenses Year Ended (with summarized totals for the year ended May 31, 2011) Program Management Services and General Fundraising Total Total Grants $ 1,096,970 $ - $ - $ 1,096,970 $ 1,008,802 Salaries 2,640, , ,979 3,668,905 3,353,484 Payroll taxes and employee benefits 715, ,367 84, , ,961 Management fees 4,829 40,820-45,649 20,344 Legal fees - 11, ,525 10,515 Auditing fees - 30,408-30,408 33,165 Lobbying fees 233, , ,457 Fundraising fees 22, , , ,356 Program fees 447,514 70,513 38, , ,697 Advertising and marketing fees 88, ,951 68,394 Office expenses 120,102 91, , , ,953 Printing expenses 158,749 1, , , ,204 Postage and bulk mail 79,587 3, , , ,737 Information technology 69,319 14,450 3,538 87, ,054 Occupancy and related expenses 380, ,390 54, , ,001 Staff and other travel 201,046 63,524 9, , ,406 Conference, meetings and seminars 650,788 14,673 11, , ,438 Depreciation and amortization 18,942 16,549 2,498 37,989 32,429 Relocation expense 7,958 6,953 1,050 15,961 - Insurance 4,735 51,939-56,674 44,052 Lists ,924 48,924 19,975 Books, subscriptions and memberships 38,454 1,773 4,967 45,194 46,171 Bank and merchance service charges 3,527 32,105-35,632 29,101 Interest expense 66,464 55,551 24, ,006 - Sundry 2,778 7,595 1,416 11,789 6,748 Board expenses - 10,554-10,554 6,342 Total Expenses $ 7,053,842 $ 1,495,743 $ 1,334,061 $ 9,883,646 $ 9,038,786 See notes to financial statements 4

6 Statements of Cash Flows Year Ended (with comparative amounts for the year ended May 31, 2011) CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 37,251,706 $ 690,487 Adjustments to reconcile change in net assets to net cash from operating activities Depreciation and amortization 37,989 32,429 Loss on disposal of property, equipment and leasehold improvements 7,948 - Net changes in operating assets and liabilities Grants receivable (37,421,257) 8,182 Accounts receivable (87,674) (8,874) Prepaid expenses and other assets 57,321 (20,088) Deposits (8,784) 3,316 Accounts payable and accrued expenses (157,847) 553,420 Compensated absences 48,702 23,800 Net Cash from Operating Activities (271,896) 1,282,672 CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, equipment and leasehold improvements (5,429,392) (42,536) Purchase of certificates of deposit (707,073) 073) (4,320,000) 000) Proceeds from sale of certificates of deposit 262,073 4,936,000 Net Cash from Investing Activities (5,874,392) 573,464 CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from mortgage 3,140,092 - Payments of mortgage (57,947) - Net Cash from Financing Activities 3,082,145 - Net Change in Cash and Cash Equivalents (3,064,143) 1,856,136 CASH AND CASH EQUIVALENTS Beginning of year 6,136,126 4,279,990 End of year $ 3,071,983 $ 6,136,126 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest $ 147,006 $ - See notes to financial statements 5

7 1. Nature of Organization Drug Policy Alliance ( DPA ) is a nonprofit organization created on July 1, 2000, as a merger of The Lindesmith Center and the Drug Policy Foundation. DPA is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. DPA s mission is to promote alternatives to the war on drugs based on science, compassion, health and human rights. DPA s major program service activities consist of: Grants DPA has initiated a grants program for various projects. Communication DPA promotes a broader understanding of drug policy reform values through various forms of public education: Public speaking and community outreach. The executive director and other staff regularly address diverse audiences around the country, expanding public awareness and building coalitions for reform. Media relations. DPA s communications team works with journalists to develop positive media coverage of drug policy reform and to bring greater public attention to the harms of the war on drugs. Internet. DPA s web site ( provides in-depth information about drugs and drug-related issues, updates about breaking events in drug policy reform, and opportunities for viewers to participate in online activism campaigns. Publications. DPA publishes a range of materials to educate readers about drug policy reform issues and DPA s programs. Publications include reports and brochures and books, including Marijuana Myths Marijuana Facts; guides on addiction care issues and drug education; the newsletter; and the annual report. Conferences DPA hosts an international conference every second year, bringing together policymakers, public health workers, medical and legal professionals and hundreds of other people affected by the war on drugs. DPA also hosts regional and topical conferences. 6

8 1. Nature of Organization (continued) Health and Harm Reduction DPA educates the public, the media and lawmakers about alternatives to punitive drug policies, notably harm reduction approaches including syringe deregulation and overdose prevention. Public Policy and Legal Affairs To promote alternative drug laws and policies at the local and national level, DPA educates lawmakers through: State-based Reform Effort: DPA works to reform state and local drug policies by working with state legislators; building new coalitions for drug policy reform; and drafting model legislation based on organizational priorities. DPA is most actively engaged in those states in which it has offices (California, New Jersey, New Mexico and New York) though DPA is also active in many other states as opportunities arise. Federal Reform Effort: The Washington, D.C. based office monitors federal drug policy legislation; educates lawmakers, constituents and other interest groups about drug policy reform; and builds coalitions to promote reform legislation and block drug war initiatives. DPA s Office of Legal Affairs establishes, promotes and carries out a legal agenda to advance drug policy reform and promote alternative policies through: Legal Analysis and Litigation: DPA plays a direct role in many drug policyrelated court cases which have the potential either to set legal precedent or to affect large numbers of people. Policy Formulation and Legislative Drafting: DPA s legal team supports statebased and federal policy advocacy by drafting proposals for specific laws and initiatives. DPA also develops model legislation to promote among legislatures in many states. Legal Recruiting and Training: DPA seeks out and trains legal talent for drug policy reform movement. 7

9 1. Nature of Organization (continued) Treatment and Prevention DPA s Safety First project, created in 2002, is dedicated to providing parents of adolescents with honest, science-based information about drugs and drug education. DPA s strategy centers on public education, and has included organizing conferences, forums, and workshops; publication of booklets, brochures, opinion pieces and videos; and outreach across the country to middle and high school parent-teacher associations. DPA also publishes and distributes About Methadone, an accessible handbook designed to educate methadone maintenance providers, patients and their loved ones about the use, benefits and current regulation of methadone. Special Projects DPA addresses issues critical to its mission that fall outside of its major program areas. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements 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. Accordingly actual results could differ from those estimates. Net Asset Presentation The financial statements report net assets separately by class of net assets. Unrestricted net assets are those that are not subject to donor imposed restrictions. Temporarily restricted net assets represent contributions with donor imposed restrictions that have not yet been satisfied, and earnings on the endowment which has not been appropriated. When a stipulated time restriction ends, a purpose restriction is accomplished or earnings on endowment are designated for appropriation, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restriction and/or spend rate allocation. Permanently restricted net assets are those which are established by donor gifts to provide a permanent endowment. 8

10 2. Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents For financial statement purposes, DPA considers all highly liquid debt instruments with maturities of three months or less at the time of purchase to be cash equivalents. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets or with respect to leasehold improvements, the remaining lease term, whichever is shorter. Property and equipment with a cost of $3,000 or higher is capitalized. The cost of property and equipment retired or disposed of is removed from the accounts along with the related accumulated depreciation, and any gain or loss is reflected in the statement of activities. Revenue Recognition Grants and contributions that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the fiscal year in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily restricted net assets depending on the nature of the restriction. Sales of publications and videos are reported as earned revenue when DPA has fulfilled its obligation under the terms of the sale. Functional Allocations of Expenses The costs of providing for 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 program and supporting services benefited. Joint Cost Allocation During fiscal year 2012, DPA incurred joint costs of $462,406 for informational materials and activities that included fund-raising appeals. DPA allocated $371,562 of these costs to fundraising expense in fiscal year 2012 and $90,844 of these costs to program services in fiscal year Compensated Absences Employees of DPA are entitled to compensated absences, depending on length of service and other factors. DPA's policy is to recognize the costs of compensated absences when earned. 9

11 2. Summary of Significant Accounting Policies (continued) Accounting for Uncertainty in Income Taxes DPA recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Management has determined that DPA had no uncertain tax positions that would require financial statement recognition. DPA is no longer subject to audits by the applicable taxing jurisdictions for the periods prior to Subsequent Events Evaluation by Management Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, which date is October 11, Prior Year Summarized Comparative Information Information as of and for the year ended May 31, 2011 is presented for comparative purposes only. The notes to the financial statements and certain activity by net asset classification are not included in this report. Accordingly, such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with DPA s financial statements as of and for the year ended May 31, 2011, from which the summarized comparative information was derived. 4. Concentrations of Credit Risk DPA's financial instruments that are potentially exposed to concentrations of credit risk consist primarily of cash and cash equivalents, certificates of deposit, grants and contributions. DPA places its cash with financial institution which at times, may be in excess of the Federal Deposit Insurance Corporation s insurance limit. During fiscal 2012, DPA received contributions from one organization that amounted to approximately 89%, respectively of total support and revenue. 5. Certificates of Deposit Certificates of deposit are stated at cost. All Certificates of deposits were sold during the year ending May 31, The certificates at bear interest ranging from.30% to.35% and have maturities ending February

12 6. Grants and Contributions Receivable Grants and contributions receivable from various foundations and individuals are due within two to ten years. Payments to be received after May 31, 2013 are discounted to their present value using an interest rate of 4.38%. The discount rate is based on the Federal Reserve s statistical release survey of terms of business lending in effect at December 31, Grants and contributions receivable at are summarized as follows: Receivable within one year $ 7,621,437 Receivable within two to ten years 40,060,000 Discount to present value (8,256,182) Total $ 39,425,255 Management does not believe an allowance is necessary for accounts receivable. 7. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements as of and 2011 consisted of the following: Office condominium $ 4,340,092 $ - Leasehold improvements 848, ,725 Furniture and equipment 596, ,157 Books and periodicals 49,910 49,910 5,834,790 1,019,792 Less accumulated depreciation. and amortization 331, ,541 $ 5,503,706 $ 120,251 Depreciation and amortization expense for the years ended and 2011 was $37,989 and $32,

13 8. Mortgage Payable Drug Policy Alliance entered into a mortgage loan agreement on June 28, 2011 in connection with the purchase of their new office space. The loan matures on June 28, Payments of principal and interest are due monthly and bear interest at 5.15%. Future principal payments are as follows: 9. Temporarily Restricted Net Assets 2013 $ 66, , , , ,563 Thereafter 2,716,876 $ 3,082,145 Temporarily restricted net assets at and 2011 are restricted for the following purposes: Purpose New Jersey Office $ 125,000 $ 20,000 Los Angeles Office 122,083 98,125 San Francisco Office 19,750 - New York Project 28,333 50,000 New Mexico 6,250 - Office of National Affairs 15,000 - Grants 1,577,111 1,690,345 New Jersey Syringe Access Initiative 45,800 45,800 Hep. C. - Task Force 1,983 5,790 1,941,310 1,910,060 Time restriction 36,848,818 1,083,333 $ 38,790,128 $ 2,993,393 12

14 9. Temporarily Restricted Net Assets (continued) Net assets released from restrictions in fiscal 2012 and 2011 are as follows: Grants program $ 113,234 $ 1,079,827 DPA conference ,000 - New Mexico 31,250 4,167 New York Project 71,667 4,167 San Francisco Office 36,500 9,375 Hep. C. - Task Force 3,807 11,709 New Jersey Office 101,250 98,958 Los Angeles Office 101,042 - Time restriction 1,083,333 1,083, Other Income $ 1,552,083 $ 2,291,536 During 2011, DPA received two non-recurring items that were extraordinary to its operations. These included the reimbursement of legal fees associated with a case in California that amounted to $263,338 and the reimbursement of services and overhead costs associated with the California ballot initiative, Proposition 19 that amounted to $172, Retirement Plans DPA provides retirement benefits through a 403(b) defined contribution plan (the plan ) for its employees. DPA made contributions at 10% of annual employee compensation for employees under the age of 45 and 15% of annual employee compensation for employees 45 and over. Effective June 1, 2010, DPA amended the plan and now uses a new formula (a tiered match based on annual salaries). DPA's contributions to the plan were $259,615 and $252,006 for the years ended and DPA also provides a non-qualified retirement plan, (The Executive 457(b) Retirement Plan of Drug Policy Alliance), for highly compensated employees who do not receive full 403(b) employer match from DPA. DPA s contribution to the 457(b) plan was $8,051 and $8,605 years ended and Related Party Transactions As per an administrative service agreement between Drug Policy Alliance (DPA) and Drug Policy Action, Drug Policy Action reimburses DPA for all administrative, personnel and related expenses, and use of facilities. During the year ended and 2011, Drug Policy Alliance (DPA) received from Drug Policy Action approximately $143,000 and $124,000 for expenses paid by DPA. 13

15 13. Lease Commitments Rent expense for various offices was $414,573 and $504,291 for the years ended May 31, 2012 and Future minimum lease obligations are payable as follows at May 31, 2012: 2013 $ 208, , , , ,047 Total $ 613,105 * * * * * 14

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