CHARLIE S HOUSE, INC. FINANCIAL STATEMENTS. YEARS ENDED DECEMBER 31, 2012 and 2011

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1 FINANCIAL STATEMENTS YEARS ENDED DECEMBER 31, 2012 and 2011

2 December 31, 2012 and 2011 CONTENTS Independent Auditors Report 1 Financial Statements Statements of Financial Position 2 Statements of Activities and Changes in Net Assets 3 Statements of Cash Flows 4 Statements of Functional Expenses 5 Notes to Financial Statements 6-8

3 MICHAEL J. McINERNEY, LLC A Certified Public Accounting Firm 9250 Glenwood mailing address: Overland Park, Kansas P.O. Box 6034 (913) Leawood, Kansas (913) Fax mike@mcinerneycpa.com To the Board of Directors of Charlie s House, Inc. INDEPENDENT AUDITORS REPORT We have audited the accompanying financial statements of Charlie s House, Inc., (a nonprofit organization) which comprise the statement of financial position as of December 31, 2012 and 2011, and the related statements of activities and changes in net assets, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. 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 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluation of 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 referred to above present fairly, in all material respects, the financial position of Charlie s House, Inc. as of December 31, 2012 and 2011 and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Michael J. McInerney, LLC Overland Park, Kansas August 20,

4 STATEMENTS OF FINANCIAL POSITION As of December 31, 2012 and 2011 ASSETS CURRENT ASSETS Cash $ 72,977 $ 224,714 Contributions receivable 263, ,500 Prepaid insurance 2, Total current assets 338, ,214 NONCURRENT ASSETS Cash set aside for property acquisition 338,841 5,000 FIXED ASSETS Office equipment 7,310 7,310 Accumulated depreciation ( 4,165) ( 2,702) 3,145 4,608 TOTAL ASSETS $ 680,327 $ 717,822 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 2,225 $ 3,902 Total current liabilities 2,225 3,902 NET ASSETS Unrestricted 48,618 40,656 Temporarily restricted 629, ,264 Total net assets 678, ,920 TOTAL LIABILITIES AND NET ASSETS $ 680,327 $ 717,822 The accompanying notes are an integral part of these statements. 2

5 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS For The Years Ended December 31, 2012 and 2011 UNRESTRICTED NET ASSETS SUPPORT AND REVENUE Foundations and corporate contributions $ 41,995 $ 15,000 Individual contributions 20,347 47,248 Special events 4,425 17,467 In-kind contributions -- 50,598 Interest income Net assets released from restrictions 58,547 41,272 Total support and revenue 126, ,585 EXPENSES Program services 81, ,816 Supporting services Administrative 15,313 16,266 Fundraising 21,380 56,181 Total supporting services 36,693 72,447 Total expenses 118, ,263 Change in unrestricted net assets 7,962 ( 19,678) TEMPORARILY RESTRICTED NET ASSETS Foundations and corporate contributions 14, ,550 Net assets released from restrictions ( 58,547) ( 41,272) Change in temporarily restricted net assets ( 43,780) 629,278 Change in net assets ( 35,818) 609,600 NET ASSETS, beginning of year 713, ,320 NET ASSETS, end of period $ 678,102 $ 713,920 The accompanying notes are an integral part of these statements. 3

6 STATEMENTS OF CASH FLOWS For The Years Ended December 31, 2012 and 2011 Cash flows from operating activities Change in net assets $ ( 35,818) $ 609,600 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 1,462 1,038 (Increase) decrease in: Contributions receivable 220,250 (474,940) Increase (decrease) in: Prepaid insurance ( 2,114) -- Accounts payable ( 1,676) 1,058 Net cash provided by operating activities 182, ,756 Cash flows from investing activities Additions to office equipment -- ( 2,315) Net cash (used in) investing activities -- ( 2,315) Net increase in cash 182, ,441 Cash at beginning of year 229,714 95,273 Cash at end of period $ 411,818 $ 229,714 The accompanying notes are an integral part of these statements. 4

7 STATEMENTS OF FUNCTIONAL EXPENSES For The Years Ended December 31, 2012 and Program Supporting Services Services Administrative Fundraising Total Total Contract labor $ 42,179 $ 8,436 $ 5,624 $ 14,060 $ 56,239 Depreciation ,462 Fundraising ,285 3,285 3,285 Insurance 1, ,082 Meeting expense Miscellaneous expense ,006 Office supplies 1, ,716 Postage & delivery Printing 1, ,219 Professional fees 10,789 4,149 11,410 15,559 26,348 Program expenses 20, ,392 Telephone 1, ,572 Travel Total Functional Expenses $ 81,476 $ 15,313 $ 21,380 $ 36,693 $ 118, Program Supporting Services Services Administrative Fundraising Total Total Contract labor $ 41,850 $ 10,825 $ 5,580 $ 16,405 $ 58,255 Depreciation ,038 Fundraising ,818 48,818 48,818 Insurance 4,111 1, ,213 6,324 Meeting expense Miscellaneous expense 1, ,055 3,014 Office supplies 1, ,777 Postage & delivery ,003 Printing 1, ,686 Professional fees 1, ,815 Program expenses 61, ,923 Telephone 2, ,168 3,339 Travel Total Functional Expenses $ 118,816 $ 16,266 $ 56,181 $ 72,447 $ 191,263 The accompanying notes are an integral part of these statements. 5

8 NOTES TO FINANCIAL STATEMENTS Years Ended December 31, 2012 and 2011 NOTE A ORGANIZATION, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Charlie s House, Inc. was organized as The Safety Spot, Inc. in November 2007, to prevent injuries to children in and around the home. Charlie's House is a 501(c)3 not for profit organization. Revenues are derived from contributions and grants. Basis of Presentation The Organization s accounts are maintained on the accrual method of accounting. Accordingly, revenues and expenses are recorded as they are incurred. The organization reports information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets, which are based upon the existence and nature of donor-imposed restrictions. Cash - The Organization maintains cash balances at a financial institution in the metropolitan Kansas City area. Accounts are insured by the Federal Deposit Insurance Corporation up to $250,000. There were $164,654 and -0- of uninsured cash balances at December 31, 2012 and 2011, respectively. Cash Flows - For purposes of the statement of cash flows, the organization considers highly liquid investments purchased with an initial maturity of three months or less to be cash equivalents. The carrying value of cash and cash equivalents approximates fair value because of the short maturities of those financial instruments. Use of Estimates - The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. Income taxes - The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. Consequently, no income taxes have been provided in the accompanying financial statements. Depreciation Property and equipment are carried at cost. Purchases are depreciated over their estimated useful lives by use of the straight-line method. The useful lives for purpose of computing depreciation are: Office equipment 5 Years Depreciation expense for years ended December 31, 2012 and 2011 was $1,462 and $1,038, respectively. Contributions All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporary restricted or permanently restricted support that increases those net asset classes. When a temporary restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. The organization had no permanently restricted net assets in 2012 or

9 NOTES TO FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2012 and 2011 Contributions Receivable The Organization uses the allowance method to determine uncollectible contributions receivable. The Organization considers all contributions receivable at December 31, 2012 and 2011 to be fully collectible and, therefore, did not provide for an allowance for uncollectible contributions. Functional expenses - The Organization allocates its expenses on a functional basis among its program and support services. Expenses that can be identified with a specific program and support service are allocated directly according to their natural expenditure classification. Most of the expenses are common to several functions and are allocated by management s estimate of resources devoted to the program or support service. These expenses include contract labor, administrative support, depreciation, and telephone. Donated services The Organization recognizes donated services that create or enhance non-financial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. NOTE B RESTRICTED ASSETS The organization plans to build a safe home in Kansas City, Missouri. Cash in the amount of $338,841, which has been set aside for that purpose, has been invested in a money market account. The temporarily restricted net assets of Charlie s House, Inc. are contributions with donor-imposed stipulations. These stipulations are removed when Charlie s House, Inc. expends the donated funds for the purposes specified. The following represents assets restricted as to use at December 31, 2012, Assets restricted as to use: Building Blocks Fund $ 609,944 Educational outreach 9,946 Website development 1,607 Program expenses 7,987 Total restricted assets $ 629,484 NOTE C LEASE In April, 2011 the organization entered into an agreement to lease land for the construction of a safe house. The initial lease term is for 40 years with two additional ten year options and provides for annual rental of $1 plus the cost of any taxes and fees. 7

10 NOTES TO FINANCIAL STATEMENTS (Continued) Years Ended December 31, 2012 and 2011 NOTE D SUBSEQUENT EVENTS Subsequent events have been evaluated through August 20, 2013, which is the date the financial statements were issued, and there were no subsequent events to disclose. 8