NORTHWESTERN MINNESOTA SYNOD OF THE EVANGELICAL LUTHERAN CHURCH IN AMERICA

Transcription

1 FINANCIAL STATEMENTS JANUARY 31, 2015 WITH INDEPENDENT AUDITOR S REPORT

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4 STATEMENT OF FINANCIAL POSITION JANUARY 31, 2015 ASSETS CURRENT ASSETS Cash and cash equivalents $ 440,570 $ 434,563 Accounts receivable 1,715 1,715 Prepaid expenses Total current assets 442, ,298 INVESTMENTS 243, ,604 PROPERTY AND EQUIPMENT, net 10,206 14,064 Total assets $ 695,555 $ 691,966 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable $ 241,867 $ 250,180 Accrued expenses 7,761 3,244 Donor pass through payables 39,775 31,614 Bequest payable - 40,889 Total current liabilities 289, ,927 NET ASSETS Unrestricted General (32,921) 2,389 Synod designated 289, ,771 Temporarily restricted 149, ,879 Total net assets 406, ,039 Total liabilities and net assets $ 695,555 $ 691,966 See Notes to Financial Statements 3

5 STATEMENT OF ACTIVITIES Unrestricted Synod Total General Designated Unrestricted Revenue and support Congregational support Mission support $ 1,387,390 $ - $ 1,387,390 Synod support 26,906-26,906 Grants and designated support 52,292 92, ,426 Investment income 2,900-2,900 Synod assembly 57,864-57,864 Lutheran Youth Organization 95,308-95,308 Other revenues and reimbursements 52,629-52,629 Net assets released from restrictions 100, ,777 Net assets released from designation 42,690 (62,690) (20,000) Operating fund transfers to designated funds (2,279) 2,279 - Total revenue and support 1,816,462 31,738 1,848,200 Expenses Boards and committees 16,541-16,541 Compensation and benefits 515, ,365 Depreciation 3,554-3,554 Donor restricted programs and services 85,262-85,262 ELCA 677, ,784 Equipment maintenance and upgrades 24,644-24,644 Insurance 4,829-4,829 Legal and audit 32,596-32,596 Lutheran Youth Organization 98,133-98,133 North central career development 6,010-6,010 Occupancy 17,706-17,706 Other administrative expenses 10,266-10,266 Other services, ministries, and missions 40,112-40,112 Partners in Ministry 203, ,231 Postage and freight 2,296-2,296 Staff travel 37,204-37,204 Supplies and materials 10,192-10,192 Synod assembly 41,628-41,628 Synod designated programs and services 17,690-17,690 Telephone 6,729-6,729 Total expenses 1,851,772-1,851,772 CHANGE IN NET ASSETS (35,310) 31,738 (3,572) NET ASSETS, Beginning of year 2, , ,160 NET ASSETS, End of year $ (32,921) $ 289,509 $ 256,588

6 Temporarily Total Restricted $ - $ 1,387,390 $ 1,415,569-26,906 23, , , ,477-2,900 4,410-57, ,622-95,308 88,311-52,629 31,778 (100,777) , ,685 1,891,885 1,834,138-16,541 17, , ,953-3,554 4,199-85, , , ,567-24,644 18,486-4,829 6,998-32,596 30,811-98,133 96,039-6,010 13,959-17,706 17,706-10,266 13,007-40,112 36, , ,900-2, ,204 34,269-10,192 12,127-41,628 72,594-17,690 30,427-6,729 8,957-1,851,772 2,102,861 43,685 40,113 (268,723) 105, , ,762 $ 149,564 $ 406,152 $ 366,039 See Notes to Financial Statements 4

7 STATEMENT OF CASH FLOWS CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 40,113 $ (268,723) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Loss on disposal of asset Depreciation 3,554 4,199 Changes in assets and liabilities Accounts receivable - (1,715) Prepaid expenses Bequest receivable - 74,805 Accounts payable (8,313) (11,271) Accrued expenses 4,517 (1,865) Donor pass through payables 8,161 17,630 Bequest payable (40,889) - Net cash provided by (used in) operating activities 7,447 (186,694) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of investments (1,440) (130) NET CHANGE IN CASH AND CASH EQUIVALENTS 6,007 (186,824) CASH AND CASH EQUIVALENTS, Beginning of year 434, ,387 CASH AND CASH EQUIVALENTS, End of year $ 440,570 $ 434,563 See Notes to Financial Statements 5

8 NOTES TO THE FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Northwestern Minnesota Synod of the Evangelical Lutheran Church in America ( Synod ), in partnership with the church-wide organization, bears responsibility for the oversight of the life and mission of this church in the territory of this Synod, which is the northwest section of the state of Minnesota. The Synod operates under the bylaws, policies and regulations of the Evangelical Lutheran Church in America ( ELCA ). Basis of Accounting The financial statements of the Synod have been prepared on the accrual basis. The significant accounting policies followed by the Synod are described below to enhance the usefulness of the financial statements to the reader. The Synod is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. The Synod reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. A summary of the activity in temporarily restricted net assets is included in the supplemental information. Cash and Cash Equivalents For the purposes of the statement of cash flows, the Synod considers all highly liquid investment accounts with a maturity of three months or less to be cash equivalents. Concentration of Credit Risk The Synod maintains cash balances at certain financial institutions. The accounts at each institution are insured by the Federal Deposit Insurance Corporation ( FDIC ). At times during the year, the Synod s bank balances exceeded the insured limit. Balances exceeding insured balances totaled $169,816 on January 31, 2015 and $173,427 on January 31, Investments It is the practice of the Synod to invest funds with the Mission Investment Fund of the ELCA ( MIF ). These funds are used by MIF to provide financing or refinancing for buildings and site acquisitions to congregations, organizations, and institutions that are related to the ELCA. Payments of principal and interest depend largely on the payments MIF receives from its borrowing congregations. Investments held by the Synod consist of term investments with original maturities of five to seven years. The investments are valued at the present value of future payments to be received by MIF and subsequently reimbursed to the Synod. The investments are not insured by the FDIC, Securities Investor Protection Corporation ( SIPC ) or any other federal or state regulatory agency. (Continued) 6

9 NOTES TO THE FINANCIAL STATEMENTS Property and Equipment Property and equipment are stated at cost. Donated equipment is valued at estimated cost at the time of the donation. It is the policy of the Synod to provide depreciation based on the useful life of the assets, using the straight-line method. The estimated useful life of the assets ranges from 5 to 40 years. The Synod s policy is to capitalize any purchase determined to be property or equipment over $2,000 and with useful lives greater than three years. Sweep Agreement The Synod has entered into a checking account sweep agreement with a financial institution. The agreement provides for the financial institution to make daily automatic fund transfers between the checking account and savings account. Donor Pass Through Payables The donor pass through payables account represents contributions collected and held at the end of the year for other organizations and missions. The Synod s policy is to recognize the contributions received and deposited as a liability until paid to the beneficiaries. Contributions and Assessments Contributions are considered available for unrestricted use unless specifically restricted by the donor. For financial statement purposes, contributions and assessments are recognized as revenue in the year an unconditional promise to give is received. Reserve Excess The Synod has a policy which states that undesignated net assets should not exceed sixteen percent of the following year s budgeted expenditures. If the Synod exceeds this amount, it must designate the excess to be used for a specific purpose approved by the Synod Council in the following year. Income Taxes The latest determination letter issued by the Internal Revenue Service indicates the Northwestern Minnesota Synod of the Evangelical Lutheran Church in America is exempt from federal income tax under provisions of Section 501 (c)(3) of the Internal Revenue Code, as a religious organization, and therefore no provision is made for federal and state income taxes. With few exceptions, the Synod is no longer subject to U.S. federal, state and local, or non-u.s. income tax examinations by tax authorities for years before (Continued) 7

10 NOTES TO THE FINANCIAL STATEMENTS Sabbatical Leave The sabbatical leave policy states, for those employees for whom it can be demonstrated that the leave will increase their value to the Synod, sabbatical leave may be requested. Approval is required by the Bishop and Executive Committee. For non-rostered employees, leave can range from one to three months and may be requested after six years of service. Upon completion of leave the employee shall be committed to a minimum of one year of full-time employment. Rostered employees are encouraged to take a minimum of one to three months every five to seven years. Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liability 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. NOTE 2 PROPERTY AND EQUIPMENT Property and equipment consisted of the following at January 31: Computers and equipment $ 49,261 $ 70,703 Accumulated depreciation (39,055) (56,639) $ 10,206 $ 14,064 Depreciation expense for the years ended January 31, 2015 and 2014 was $3,554 and $4,199, respectively. NOTE 3 FAIR VALUE MEASUREMENTS Professional standards clarify the principle that fair value should be based on the assumptions that market participants would use when pricing an asset or liability. Additionally, it establishes a fair value hierarchy that prioritizes the information used to develop those assumptions. Level 1: Quoted prices in active markets for identical securities. Level 2: Other significant observable inputs (including quoted prices for similar securities, interest rates, prepayment spreads, credit risk, ect). Level 3: Significant unobservable inputs, including the Synod s own assumptions. MIF term investments The fair value is based on the present value of anticipated future cash flows. (Continued) 8

11 NOTES TO THE FINANCIAL STATEMENTS The asset s or liability s fair value measurement level with the fair value hierarchy is based on the lowest level of an input that is significant to the fair value measurement. The Synod s fair value measurement policies and procedures are reviewed annually to determine if the valuation techniques are still appropriate The following table set forth by level, within the fair value hierarchy, the Synod s investments at fair value reported on a recurring basis as of January 31: Level 3 Level 3 MIF term investments $ 243,044 $ 241,604 Changes in Level 3 investments are as follows for the years ended January 31, 2015 and 2014: Balance, January 31, 2013 $ 241,474 Total income 130 Balance, January 31, ,604 Total income 1,440 Balance, January 31, 2015 $ 243,044 Valuation Techniques The following table describes the valuation techniques used for the other recurring fair value measurements for assets in Level 3 of the fair value hierarchy: Quantitative Information about Level 3 Fair Value Measurements Fair Value Fair Value as of as of Valuation Unobservable 1/31/15 1/31/14 Techniques Inputs MIF term investments $ 243,044 $ 241,604 Present Value Illiquidity and credit spreads 9

12 NOTES TO THE FINANCIAL STATEMENTS NOTE 4 TEMPORARILY RESTRICTED NET ASSETS The following net assets are recorded as temporarily restricted as of January 31: Book of Faith $ 2,401 $ 2,401 Bridgebuilders/Church Council Canidacy grants and retreats 2,500 - Companion Synod 11,499 11,570 Congregation renewal Evangelism and outreach 6,743 5,854 Fostering Vibrant Faith 44,434 - GIFTS Grant Good Will Offer Hunger grants 6,015 7,152 Hurricane relief Lilly III grant funds 30,522 - LYO scholarships Macedonia Project 2,431 2,431 Men in Missions 2,412 2,849 Multi synod youth gathering 1,079 1,579 NW MN flood support 3,527 9,127 Planned giving partnership 7,632 11,086 Power and boundary training 1, Red Lake School Fund 1,169 1,169 Rural internships Seminary graduate grants - 11,645 Seminary student scholarships 1,953 7,264 Spouse of clergy conference 3,674 2,946 Sustaining rural ministry 80 2,593 Synod program opportunities fund Synod special continuing education fund - 15 Thrivent Development Grant 17,138 22,138 $ 149,564 $ 105,879 10

13 NOTES TO THE FINANCIAL STATEMENTS NOTE 5 SYNOD DESIGNATED NET ASSETS The following net assets are Synod designated as of January 31: Continuing education staff $ 5,256 $ 4,903 Forward Together Health and wellness 44,756 41,729 Insurance proceeds - church mutual 22,703 42,255 Minerva Olson estate - special projects 11,355 14,855 Next generation fund 96,584 55,695 Pastor to Pastor 15,309 - Staff transition designated fund 58,001 58,001 Synod assembly reserve 10,055 10,218 Synod designated program reserve 14,792 18,292 Synod ministries 3,078 2,811 Synod staff consultants 3,613 3,613 Synod strategic plan 2,007 2,899 Youth and family events 2,000 2,000 NOTE 6 PENSION AND BENEFIT PLAN $ 289,509 $ 257,771 The Synod participates in a pension and benefit plan through the Board of Pensions of the Evangelical Lutheran Church in America. This is a defined contribution plan which covers all employees who work a minimum of 20 hours a week for six months or more per year. Contributions are the following percentages of the total salary and housing allowance: 10% for support staff and 12% for pastoral staff. Contributions totaled $40,113 and $37,154 for the years ended January 31, 2015 and 2014, respectively. NOTE 7 RELATED PARTY The Synod is related to the ELCA through common management and religious affiliation. The Synod s policy is to give the ELCA a percentage of its mission support revenue each year. Contributions to the ELCA related to mission support for the years ended January 31, 2015 and 2014 totaled $677,781 and $704,541, respectively. Additionally, the Synod made pass-through payments to the ELCA for the years ended January 31, 2015 and 2014 and those payments totaled $298,743 and $252,439, respectively. As of year end, the amount payable to ELCA totaled $178,728 and $195,576, respectively. The Synod is one of the nine ELCA Synods that comprise Region 3 ELCA. Contributions to Region 3 ELCA totaled $14,400 with a balance due of $1,548 in 2015 and $15,141 with a balance due of $1,205 in

14 NOTES TO THE FINANCIAL STATEMENTS NOTE 8 COMMITMENTS The Synod has an operating lease for a postage machine that expires January Monthly payments are $156 per month. The Synod has a rental agreement for office space with Concordia College in which the Synod is paying $1,422 per month. The rental agreement is evaluated annually. Minimum rental payments due in future years are as follows: 2016 $ 1, , ,717 $ 5,463 Lease expense for the years ended January 31, 2015 and 2014 was $30,678 and $28,475. NOTE 9 FUNCTIONAL EXPENSE ALLOCATION Expenses by function are as follows for the years ended January 31, 2015 and 2014: Program services $ 1,439,963 $ 1,743,680 Management and general 318, ,917 Fundraising 93,508 77,264 NOTE 10 SUBSEQUENT EVENTS $ 1,851,772 $ 2,102,861 The Synod has evaluated subsequent events through May 1, 2015, the date which the financial statements were available to be issued. 12

15 SUPPLEMENTARY INFORMATION

16 SCHEDULE OF SYNOD DESIGNATED FUNDS ACTIVITY Revenue, Net Assets Grants, Released Balance Support Transfers from from Balance 1/31/14 and Transfers Restricted Funds Designation 1/31/15 Continuing education staff $ 4,903 $ 2,279 $ 15 $ 1,941 $ 5,256 Forward Together Health and wellness 41,729 23,495-20,468 44,756 Insurance proceeds - church mutual 42,255 11,249-30,801 22,703 LAMP Minerva Olson estate - special projects 14, ,500 11,355 Next generation fund 55,695 40, ,584 Pastor to Pastor - 15, ,309 Staff transition designated fund 58, ,001 Synod assembly reserve 10, ,055 Synod designated program reserve 18, ,500 14,792 Synod ministries 2, ,078 Synod staff consultants 3, ,613 Synod strategic plan 2, ,007 Youth and family events 2, ,000 $ 257,771 $ 94,413 $ 15 $ 62,690 $ 289,509 13

17 SCHEDULE OF TEMPORARILY RESTRICTED FUNDS ACTIVITY Net Assets Revenue, Restricted and Released Balance Grants, and Designated fund from Balance 1/31/14 Support Transfers Restrictions 1/31/15 Book of Faith $ 2,401 $ - $ - $ - $ 2,401 Bridgebuilders/Church Council Canidacy grants and retreats - 2, ,500 Companion Synod 11,570 3,915-3,986 11,499 Congregation renewal Evangelism and outreach 5, ,743 Fostering Vibrant Faith - 43,502 20,000 19,068 44,434 GIFTS Grant Good Will Offer Hunger grants 7,152 3,250-4,387 6,015 Hurricane relief Lilly III grant funds - 40,522-10,000 30,522 LYO scholarships Macedonia Project 2, ,431 Men in Missions 2, ,412 Multi synod youth gathering 1, ,079 NW MN flood support 9, ,700 3,527 Planned giving partnership 11,086 2,796-6,250 7,632 Power and boundary training 50 4,040-2,475 1,615 Red Lake School Fund 1, ,169 Rural internships Seminary graduate grants 11, (11,670) - - Seminary student scholarships 7,264 7,389-12,700 1,953 Spouse of clergy conference 2,946 1,950-1,222 3,674 Stand with Africa - 2,809-2,809 - Sustaining rural ministry 2,593 11,422 11,670 25, Synod program opportunities fund (889) - - Synod special continuing education fund Thrivent Development Grant 22, ,000 17,138 $ 105,879 $ 124,462 $ 20,000 $ 100,777 $ 149,564 14

18 SCHEDULE OF PARTNERS IN MINISTRY SUPPORT FOR THE YEARS ENDED JANUARY 31, Coalition for Public Policy in Minnesota $ 3,603 $ 4,000 Companion Synod Relationship 1,500 1,500 ELCA Colleges - Division for Education 4,052 4,500 Luther Seminary 83,745 93,000 Lutheran Campus Ministry of Minnesota 56,730 63,000 Minnesota Council of Churches 13,507 15,000 Native American Ministries 8,144 9,000 Oak Grove Lutheran School 1,530 1,500 Parish Nurse Program 1,020 1,000 Region 3 14,400 14,400 Synod Outreach Ministries 15,000 10,000 Total support to Partners in Ministry $ 203,231 $ 216,900 15