CHARLIE S HOUSE, INC. FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED DECEMBER 31, 2017

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1 FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR S REPORT FOR THE YEAR ENDED DECEMBER 31, 2017

2 TABLE OF CONTENTS Page INDEPENDENT AUDITOR S REPORT 1-2 FINANCIAL STATEMENTS Statement of Financial Position 3 Statement of Activities 4 Statement of Functional Expenses 5 Statement of Cash Flows 6 Notes to Basic Financial Statements 7-12

3 2 Victory Drive, Suite 230 D, Liberty, MO P: (816) F: (816) INDEPENDENT AUDITOR S REPORT To the Board of Directors Charlie s House, Inc. Kansas City, Missouri Report on the Financial Statements I have audited the accompanying financial statements of Charlie s House, Inc., a non-profit organization, which comprise the statement of financial position as of December 31, 2017, and the related statements of activities, functional expenses, and cash flows for the year 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that I plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. 1

4 An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated 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, I 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 evaluating the overall presentation of the financial statements. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my 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, 2017, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Kenney D. Hales, CPA, PC Liberty, Missouri September 27,

5 STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2017 ASSETS 2017 Current assets: Cash and cash equivalents $ 1,002,820 Contributions receivable 80,225 Prepaid expenses 3,400 Prepaid insurance 2,440 Total current assets 1,088,885 Capital assets: Office furniture and equipment 7,310 Less accumulated depreciation (7,310) Net capital assets - Total assets $ 1,088,885 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ 4,403 Credit cards payable 2,058 Payroll liabilities 2,288 Total current liabilities 8,749 Net assets: With donor restrictions 992,420 Without donor restrictions 87,716 Total net assets 1,080,136 Total liabilities and net assets $ 1,088,885 The accompanying notes are an integral part of these financial statements. 3

6 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, Revenues, gains and losses: Corporate contributions $ 85,120 Grants 69,536 Special events 56,235 Contributions supplies 48,000 Individual contributions 9,715 Interest income 3,557 Online supplies contributions 2,317 Total revenues, gains and losses 274,480 Expenses: Programs 99,788 Management and general 43,735 Fundraising 49,431 Total expenses 192,954 Change in net assets 81,526 Net assets at beginning of year 998,610 Net assets at end of year $ 1,080,136 The accompanying notes are an integral part of these financial statements. 4

7 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2017 Management Expenses: Programs and General Fundraising Total Compensation, benefits and taxes $ 21,862 $ 24,729 $ 34,148 $ 80,739 In-kind contributions 48, ,000 Supplies 15,497-3,112 18,609 Audit, accounting, and legal - 8,625-8,625 Rental facilities and equipment - - 7,180 7,180 Postage 6, ,063 Insurance - 4,428-4,428 Travel 1,615 1, ,886 Printing and copying 2, ,277 3,825 Advertising 1,100-1,314 2,414 Technology 1, ,244 Order fulfillment 1, ,841 Telephone - 1,564-1,564 Meetings ,313 1,476 Office supplies Bank service charges Storage Dues and subscriptions Miscellaneous Total expenses $ 99,788 $ 43,735 $ 49,431 $ 192,954 The accompanying notes are an integral part of these financial statements. 5

8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, Cash flows from operating activities: Change in net assets $ 81,526 Adjustment to reconcile increase in net assets to cash provided by operating activities: Change in current assets and liabilities Contributions receivable 45,000 Prepaid expenses (1,563) Prepaid insurance (404) Accounts payable (21,218) Credit card payable 1,842 Accrued wages (1,837) Payroll liabilities 2,288 Net cash provided by operating activities 105,634 Net change in cash and cash equivalents 105,634 Beginning cash and cash equivalents 897,186 Ending cash and cash equivalents $ 1,002,820 The accompanying notes are an integral part of these financial statements. 6

9 NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Nature of Activities Charlie s House, Inc. was incorporated in 2007 as a Kansas general not-for-profit corporation. Since Charlie s House, Inc. s inception, the goal has been to build a demonstration home in the Kansas City metropolitan area that parents and caregivers can come and walk through to see all the hazards in and around the home for children and to learn how to protect their kids from accidents. The Organization hosts classes and resource events in collaboration with other non-profit resources in the city. The ground breaking for the demonstration house occurred in September The three programs of Charlies House are as follows: 1. Local Distribution: Information is provided to parents, grandparents and caregivers at over 60 events annually in the Kansas City metropolitan area. Education centers around the importance of safety for children in and around the home. 2. National Distribution: The website provides the general public the ability to order information and safety materials to be shipped anywhere nationally. Videos on the website demonstrate how to use the safety materials distributed. 3. Physician s Alliance: Through a partnership with pediatricians in the Kansas City metropolitan area, checklists and free supplies are provided for the patient s parents at well-check visits. The Organization is supported primarily by corporate and individual contributions, grants, and various fundraising events throughout the year. B. Basis of Accounting The Organization s policy is to prepare its financial statements on the accrual basis of accounting. Revenues are recorded as increases in unrestricted net assets unless there are donor-imposed restrictions. Expenses are recorded as decreases in unrestricted net assets. 7

10 NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) C. Basis of Presentation The Organization presents its net assets and its revenues based upon the existence of donor-imposed restrictions into these classes: without donor restrictions and with donor restrictions. Without donor restricted net assets Net assets that are not subject to donor imposed stipulations. With donor restricted net assets Net assets that are available for use, but expendable only for those purposes specified by the grantor. All contributions are considered to be available for without donor restricted 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 with donor restricted net assets that increases those net asset classes. However, if a restriction is fulfilled in the same time period in which the contribution is received, the Organization reports that support as unrestricted. Restrictions on gifts of fixed assets or cash for the purchase of fixed assets expire when the asset is placed in service. At December 31, 2017, the Organization had $992,420 in donor restricted net assets. D. Cash and Cash Equivalents For the purposes of the statement of financial position and the statement of cash flows, cash and cash equivalents consist of cash and other highly liquid resources, such as certificates of deposits, money market funds and other investments, with an original maturity of three months or less when purchased. The following is the composition of the combined amounts appearing in the financial statements Cash $ 834,143 Money market funds 168,677 Totals $1,002,820 8

11 NOTES TO BASIC FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) E. Capital Assets Property and equipment are capitalized when the value is greater than $500. Purchased assets are recorded at cost; donated assets are recorded at estimated fair value. Expenditures for additions and major improvements that significantly extend the useful life of an asset are capitalized. Maintenance and repairs which are not considered to extend the useful life are charged to expense when incurred. When an asset is retired or disposed of, the cost and related accumulated depreciation are removed from the accounts, and any resulting gain or loss is recognized in the statement of activities. Depreciation is provided on the straight-line basis over estimated useful lives ranging from five to forty years. Depreciation expense for the years ended December 31, 2017 was zero as the capital assets were fully depreciated prior to F. Management estimates The preparation of financial statements in conformity with generally accepted accounting principles require management to make estimates and assumptions that affect the certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. G. Income Tax Status The Organization is a not-for profit organization that is exempt from income taxes under Internal Revenue Code Section 501 (c)(3). The Organization has also been classified as an entity that is not a private foundation within the meaning of 509 (a) and qualifies for deductible contributions as provided by Section 170 (b)(1)(a)(vi). H. Functional Allocation of Expenses The costs of providing the Organization s various programs and other activities have been summarized on a functional basis in the statement of activities and statement of functional expenses. Accordingly, certain costs have been allocated among the programs and support services benefitted. 9

12 NOTES TO BASIC FINANCIAL STATEMENTS NOTE 2 INVESTMENTS AND FAIR VALUE MEASUREMENTS The Organization applies the provisions of ASC 820, Fair Value Measurements and Disclosures, for investments that are recognized and disclosed at fair value in the financial statements on a recurring basis. ASC 820 defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (and exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. ASC 820 also establishes a fair value hierarchy that requires the Organization to maximize the use of observable inputs when measuring fair value. Observable inputs reflect market data obtained from independent sources, while unobservable inputs reflect the Organization s market assumptions. The three levels of the fair value hierarchy are as follows: Level 1 Quoted prices for identical assets or liabilities in active markets. Level 2 Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities that are not active; inputs other than quoted prices that are observable for the asset or liability; or market corroborated inputs. Level 3 Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. In certain cases, the inputs to measure fair value may result in an asset or liability falling into more than one level of the fair value hierarchy. In such cases, the determination of the classification of an asset or liability with the fair value hierarchy is based on the least determinate input that is significant to the fair value measurement. For 2017, there were no transfers between levels. The Organization s assessment of the significance of a particular input to the fair value measurement in its entirety requires judgment and considers factors specific to the asset or liability. The following table represents investment that are measured at fair value on a recurring basis at December 31, 2017: Level 1 Level 2 Level 3 Total Money market funds $168, $168,677 10

13 NOTES TO BASIC FINANCIAL STATEMENTS NOTE 3 CONTRIBUTIONS RECEIVABLE Charlie s House, Inc. anticipates the collection of outstanding contributions within the subsequent accounting period. There is no allowance made for uncollectible amounts as of December 31, NOTE 4 INVENTORY The Organization provides safety supplies to the general public upon request. The supplies are donated from various sources and recorded as in in-kind contribution and sale of merchandise on each transaction. Because the Organization does not physically handle the items, no inventory has been recorded during the year. NOTE 5 NET ASSETS WITH DONOR RESTRICTIONS The Organization plans to build a model home to demonstrate various safety supplies and techniques for viewing to parents and caregivers. Contributions made specifically for the purpose of this construction project have been segregated at the direction of the donors and are maintained in separate bank accounts. NOTE 6 CONCENTRATION OF REVENUES The Organization receives the majority of its revenues from contributions, grants and fundraising events. Should any of these three sources be dramatically reduced in the future, it would greatly impact the operations of the organization. NOTE 7 CONCENTRATION OF RISK The Organization maintains its cash balances at four separate banks across the Kansas City metropolitan area. The balances are insured by the Federal Deposit Insurance Corporation to a limit of $250,000 at December 31, The Organization had no uninsured cash balances as of this date. NOTE 8 SUBSEQUENT EVENTS The Organization has evaluated subsequent events through September 27, 2018, the date which the financial statements were available to be issued. 11