THE NATIONAL CENTER ON ADDICTION AND SUBSTANCE ABUSE AT COLUMBIA UNIVERSITY. Financial Statements. December 31, 2010

Transcription

1 Financial Statements (With Independent Auditors Report Thereon)

2 KPMG LLP 345 Park Avenue New York, NY Independent Auditors Report The Board of Directors The National Center on Addiction and Substance Abuse at Columbia University: We have audited the accompanying balance sheet of The National Center on Addiction and Substance Abuse at Columbia University (CASA) as of, and the related statements of activities, functional expenses, and cash flows for the year then ended. These financial statements are the responsibility of CASA s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative financial information has been derived from CASA s 2009 financial statements, and in our report dated May 14, 2010, we expressed an unqualified opinion on those 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 CASA s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement 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 National Center on Addiction and Substance Abuse at Columbia University as of, and the changes in its net assets and its cash flows for the year then ended, in conformity with U.S. generally accepted accounting principles. April 29, 2011 KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

3 Balance Sheet (with comparative financial information as of December 31, 2009) Assets Cash and cash equivalents $ 548,903 1,099,690 Grants and contributions receivable, net (note 7) 7,341,378 8,001,934 Prepaid expenses and other assets 319, ,756 Investments (note 3) 51,813,766 47,642,928 Property and equipment, net (notes 4 and 8) 10,593,541 10,943,285 Total assets $ 70,616,924 67,867,593 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses $ 1,770,993 2,317,083 Deferred revenue 844, ,568 Bonds payable (note 8) 14,000,000 14,000,000 Total liabilities 16,615,258 16,813,651 Net assets: Unrestricted: Available for operations 6,334,400 6,261,411 Amounts designated (note 11): For Califano Institute 2,189,767 For Program Concentration Fund 37,653,057 36,099,873 Total unrestricted 46,177,224 42,361,284 Temporarily restricted (note 9) 7,824,442 8,692,658 Total net assets 54,001,666 51,053,942 Total liabilities and net assets $ 70,616,924 67,867,593 See accompanying notes to financial statements. 2

4 Statement of Activities Year ended (with summarized financial information for the year ended December 31, 2009) 2010 Temporarily 2009 Unrestricted restricted Total Total Revenues: Grants $ 942,785 2,634,718 3,577,503 4,470,061 Contributions 415,746 1,701,176 2,116,922 1,068,412 Net investment income (note 3) 6,011,745 6,011,745 7,763,431 Donated services 295, , ,667 Special events (note 10) 1,253,608 1,253,608 1,293,216 Less direct benefits to donors (note 10) (92,734) (92,734) (108,901) Net special events revenues 1,160,874 1,160,874 1,184,315 Rental income (note 5) 384, , ,888 Miscellaneous revenue 6,254 6,254 9,629 Net assets released from restrictions: Satisfaction of purpose restrictions 3,778,852 (3,778,852) Expiration of time restrictions 1,056,000 (1,056,000) Total revenues 14,052,186 (498,958) 13,553,228 15,225,403 Expenses and losses: Program operations: Youth programs 582, , ,536 Public policy 1,041,758 1,041, ,824 Health and treatment research 2,648,519 2,648,519 2,502,344 Research and program development 1,859,127 1,859,127 1,206,768 Communications 589, , ,218 Special projects 970, ,478 1,108,854 Marketing 3,793 3,793 56,867 Online services 92,208 92, ,375 Total program operations 7,787,979 7,787,979 7,821,786 Supporting services: Administration 1,809,594 1,809,594 1,982,273 Fund-raising (note 10) 638, , ,569 Total supporting services 2,448,267 2,448,267 2,681,842 Total expenses 10,236,246 10,236,246 10,503,628 Losses on uncollectible grants receivable 369, ,258 Total expenses and losses 10,236, ,258 10,605,504 10,503,628 Increase (decrease) in net assets 3,815,940 (868,216) 2,947,724 4,721,775 Net assets at beginning of year 42,361,284 8,692,658 51,053,942 46,332,167 Net assets at end of year $ 46,177,224 7,824,442 54,001,666 51,053,942 See accompanying notes to financial statements. 3

5 Statement of Functional Expenses Year ended (with summarized financial information for the year ended December 31, 2009) Program operations Health and Research and Youth Public treatment program Special programs policy research development Communications projects Salaries and wages $ 278, ,718 1,025,291 1,145, , ,282 Fringe benefits 80, , , ,052 89, ,492 Total salaries and wages and employee benefits 358, ,636 1,322,625 1,477, , ,774 Professional services 39, , , ,809 66, ,633 Communications/marketing/promotional 5, ,617 76,154 Pass-through grants and contracts 95, ,692 Office expenses and supplies ,188 1, Postage and delivery 1, , ,769 Telephone and facsimile ,712 6, Occupancy and related costs 24,844 45,855 91, ,268 27,527 38,342 Equipment maintenance , ,314 Printing and duplicating 359 1, ,344 1,078 Travel, meetings, and conferences 24,756 15,239 84,713 31,191 1,210 8,968 Dues, subscriptions, and publications ,458 7,753 17,711 24,937 Insurance 4,146 7,449 15,283 17,068 4,594 6,399 Interest/financing 8,843 15,887 32,596 36,402 9,798 13,648 Recruitment 595 Depreciation and amortization 18,528 33,286 68,294 76,269 20,529 28,594 Miscellaneous Direct benefit to donors Total expenses $ 582,943 1,041,758 2,648,519 1,859, , ,478 See accompanying notes to financial statements. 4

6 Supporting services Total Total Online program supporting Total expenses Marketing Services operations Administration Fund-raising services ,213 3,689, , , ,332 4,658,199 4,881,111 1,222 1,070, ,866 73, ,026 1,356,087 1,370,328 5,435 4,759, , ,395 1,254,358 6,014,286 6,251,439 24, , , , ,789 1,300,960 1,225, ,532 15,220 15, , ,594 61,800 1,032,326 1,032,326 1,130,061 22,504 54, ,203 77,707 99, ,453 2,046 2,818 4,864 10,317 17, ,629 18, ,332 33,961 35, , ,006 22, , , ,087 15,100 71,687 6,252 77,939 93,039 90,747 4,451 2, ,186 6,637 26,450 3, ,870 24,249 2,716 26, , ,667 53,084 15,821 1,730 17,551 70,635 54, ,002 20,827 3,772 24,599 79,601 78, ,308 68,962 8,044 77, , , , ,533 16, , , , ,314 4,949 87,263 87,720 48,172 3,793 92,208 7,787,979 1,809, ,673 2,448,267 10,236,246 10,503,628 92, ,901 $ 10,328,980 10,612,529 5

7 Statement of Cash Flows Year ended (with summarized financial information for the year ended December 31, 2009) Cash flows from operating activities: Increase in net assets $ 2,947,724 4,721,775 Adjustments to reconcile increase in net assets to net cash (used in) provided by operating activities: Depreciation and amortization 395, ,213 Net unrealized appreciation in fair value of investments (4,172,573) (5,348,636) Net realized gain on investments (358,671) (732,265) Losses on uncollectible grants receivable 369,258 Decrease in grants and contributions receivable 291, ,478 (Increase) decrease in prepaid expenses and other assets (139,580) 53,232 (Decrease) increase in accounts payable and accrued expenses (546,090) 384,047 Increase in deferred revenue 347, ,296 Net cash (used in) provided by operating activities (865,769) 137,140 Cash flows from investing activities: Proceeds from sales of investments 5,111,661 19,621,941 Purchases of investments (4,751,255) (19,325,323) Acquisitions of property and equipment (45,424) (32,855) Net cash provided by investing activities 314, ,763 Net (decrease) increase in cash and cash equivalents (550,787) 400,903 Cash and cash equivalents at beginning of year 1,099, ,787 Cash and cash equivalents at end of year $ 548,903 1,099,690 Supplemental disclosures of cash flow information: Interest paid $ 33,493 42,046 Donated services 295, ,667 See accompanying notes to financial statements. 6

8 (1) Organization and Tax-Exempt Status Incorporated in April 1991, The National Center on Addiction and Substance Abuse at Columbia University (CASA) is a not-for-profit organization that has been organized to: Inform Americans of the economic and social costs of substance abuse and its impact on their lives; Assess what works in prevention, treatment, and law enforcement; Encourage every individual and institution to take responsibility to combat substance abuse and addiction; Provide those on the front lines with the tools they need to succeed; and Remove the stigma of substance abuse and replace shame and despair with hope. CASA has been classified as exempt from federal income taxes under Section 501(a) of the Internal Revenue Code (the Code) as an organization described in Section 501(c)(3). It has been classified as an organization that is not a private foundation under Section 509(a) and has been designated as a publicly supported organization under Sections 509(a)(1) and 170(b)(1)(A)(vi) of the Code. (2) Summary of Significant Accounting Policies (a) Basis of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting. (b) Basis of Presentation Net assets and revenues, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of CASA and changes therein are classified and reported as follows: Unrestricted net assets Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets Net assets subject to donor-imposed stipulations that will be met by either actions of CASA and/or the passage of time. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as net assets released from restrictions. 7 (Continued)

9 (c) (d) (e) (f) (g) (h) (i) Cash and Cash Equivalents Cash and cash equivalents include all short-term liquid investments with original maturities of three months or less, except for those short-term investments held by CASA s investment managers as part of a long-term investment strategy. Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are measured at fair value in the accompanying balance sheet, as determined by quoted market prices. Realized and unrealized gains and losses are recognized as changes in net assets in the period in which they occur, and interest and dividends are recognized as revenue in the period earned. Property and Equipment Property and equipment are recorded at cost. Furniture and equipment are depreciated on a straight-line basis over their estimated useful lives of 3 to 10 years. The condominium interest and improvements are depreciated on a straight-line basis over their estimated useful lives of 40 years. Donated Services The value of donated services (principally legal and promotional services) is based on information obtained from the providers and is reported as both revenues and expenses in the accompanying statement of activities. Grants and Contributions Grants and contributions, including unconditional promises to give, are reported as revenues in the period received except those grants that are deemed to be exchange transactions, which are reported as revenue in the period earned. Grants and contributions receivable are reported at their discounted net present value (using a discount rate of 0.29% to 2.42%). An allowance for amounts estimated to be uncollectible is provided based upon management judgment, including such factors as prior collection history and type of grants and contributions. Expenses The costs of providing programs and other activities have been summarized on a functional basis in the statements of activities and functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Use of Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts 8 (Continued)

10 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. Actual results could differ from those estimates. (j) Fair Value Measurements Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an 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. The fair value hierarchy maximizes the use of observable inputs and minimizes the use of unobservable inputs when measuring fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to measurements involving significant unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are as follows: Level 1 inputs are quoted prices (unadjusted) in active markets for identical assets or liabilities that CASA has the ability to access at the measurement date. Level 2 inputs are inputs other than quoted prices included within Level 1 that are observable for the asset or liability, either directly or indirectly. Level 3 inputs are unobservable inputs for the asset or liability. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest level input that is significant to the fair value measurement in its entirety. (k) (l) Fair Value Disclosures of Financial Instruments Management estimates that the carrying value of CASA s bonds payable is not materially different from its fair value at and 2009 because the bonds bear interest rates that are not significantly different from current market rates for loans with similar maturity and credit quality. The fair value of investments is discussed in note 3. The carrying amount of CASA s other financial instruments approximates fair value due to their short-term maturity. Prior Year Summarized Financial Information The financial statements include certain prior year summarized comparative information in total but not by net asset class or function in the accompanying statement of activities and the statement of functional expenses, respectively. Such information does not include sufficient detail to constitute a presentation in conformity with U.S. generally accepted accounting principles. Accordingly, such information should be read in conjunction with CASA s financial statements as of and for the year ended December 31, 2009, from which the summarized information was derived. 9 (Continued)

11 (m) Subsequent Events In connection with the preparation of the financial statements, CASA evaluated subsequent events after the balance sheet date of through April 29, 2011, which was the date the financial statements were issued and determined that there were no additional matters that are required to be disclosed. (3) Investments CASA invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the balance sheet. The following tables present the fair value hierarchy for investments, the only financial instruments measured at fair value as of and 2009: 2010 Cost Fair value Level 1 Level 2 Level 3 Cash and cash equivalents $ 2,108,045 2,108,045 2,108,045 Fixed-income mutual funds 15,874,287 16,239,575 16,239,575 Equities: Domestic equity mutual fund 16,595,798 22,411,168 22,411,168 International equity mutual funds 9,793,263 11,054,978 11,054,978 Total investments $ 44,371,393 51,813,766 51,813, Cost Fair value Level 1 Level 2 Level 3 Cash and cash equivalents $ 3,020,721 3,020,721 3,020,721 Fixed-income mutual funds 10,592,809 10,666,118 10,666,118 Equities: Domestic equity mutual fund 16,406,798 19,328,290 19,328,290 International equity mutual funds 14,352,800 14,627,799 14,627,799 Total investments $ 44,373,128 47,642,928 47,642, (Continued)

12 Net investment income for the years ended and 2009 consists of the following: Interest and dividends $ 1,480,501 1,682,530 Net unrealized appreciation in fair value of investments 4,172,573 5,348,636 Net realized gain on investments 358, ,265 $ 6,011,745 7,763,431 (4) Property and Equipment Property and equipment at and 2009 consist of the following: Condominium interest and improvements $ 14,269,155 14,279,305 Furniture and equipment 1,553,703 1,498,129 15,822,858 15,777,434 Accumulated depreciation and amortization (5,229,317) (4,834,149) Property and equipment, net $ 10,593,541 10,943,285 (5) Leases CASA leases a portion of its condominium under an operating lease that expires in September Total lease income in 2010 and 2009 was $384,879 and $384,888, respectively. Future minimum lease payments are as follows: Year ending December 31: 2011 $ 392, , , , ,652 $ 1,866, (Continued)

13 (6) Pension Plan CASA has a noncontributory defined contribution pension plan covering substantially all employees. Contributions are based on the following formula: 8.0% of the first $106,800 of annual salary and 13.7% of annual salary in excess of $106,800 to a maximum of $245,000. Total pension expense for the years ended and 2009 was $358,351 and $383,413, respectively. (7) Grants and Contributions Receivable Grants and contributions receivable are scheduled to be collected as follows at and 2009: Less than one year $ 4,955,253 5,684,766 One to five years 2,330,368 2,076,146 Greater than five years 200, ,000 7,485,621 8,160,912 Discount to present value of future cash flows (129,600) (144,335) Allowance for doubtful accounts (14,643) (14,643) Grants and contributions receivable, net $ 7,341,378 8,001,934 During 2010 and 2009, approximately 79% and 75%, respectively, of grants and contributions revenues were from six funding sources. At and 2009, 74% and 68%, respectively, of grants and contributions receivable, net, were from three funding sources. (8) Bonds Payable In 2000, the New York City Industrial Development Agency (the Agency) issued $14 million in Adjustable Rate Demand Civic Facility Revenue Bonds, Series 2000 (2000 CASA Project) to refinance a note that was used to finance the purchase of condominium units (the Facility). The bonds consist of term bonds with a maturity of March 1, 2020, at an initial interest rate of 3.85%. During 2010, the interest rates ranged from 0.12% to 0.33% per annum. During 2009, the interest rates ranged from 0.15% to 0.65% per annum. The bonds are supported by an irrevocable direct-pay letter of credit from JP Morgan Chase Bank in the amount of $14,230,137. The letter of credit was initially renewed on March 9, 2003 through March 2010 and has subsequently been renewed until March Under the terms of the letter of credit reimbursement agreement, CASA is required to comply with certain financial covenants. CASA complied with those covenants for the years ended and The trustee of the bonds holds a mortgage note on the Facility secured by the property on which the Facility was built, as well as the condominium and improvements, furniture, and fixtures thereon. 12 (Continued)

14 In conjunction with the financing, the parties thereto agreed that the Agency would take title to all assets constructed from the proceeds of the financing. Concurrently, CASA entered into a lease agreement with the Agency to lease those assets. Title to these assets transfers to CASA when the bonds are extinguished. Accordingly, the proceeds of the bonds and the property, which are the subject of the lease agreement, and the outstanding bonds are included in the accompanying balance sheet. (9) Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes or periods at and 2009: Communications $ 207,386 Youth programs 38,935 8,340 Public policy 569, ,483 Health and treatment research 3,605,815 3,266,053 Special projects 374, ,782 Online services 15, ,218 Future periods 3,220,423 3,181,396 $ 7,824,442 8,692,658 (10) Special Events During 2010 and 2009, CASA held its annual Anniversary Celebration and Awards Benefit Dinner. Revenues totaled $1,253,608 and $1,293,216 in 2010 and 2009, respectively. Total costs for these events, totaling $417,901 and $390,449 in 2010 and 2009, respectively, are included in direct benefits to donors and fund-raising expense in the accompanying statement of activities. (11) Designated Net Assets The net assets of the Program Concentration Fund (the PCF) are designated by CASA to be used for the research and understanding of substance abuse, often before projects are ready for specific program funding. The PCF underwrites the research and program development capacity to accomplish this. The asset allocation target objectives for the investment portfolio are achieved by using diversified and low cost mutual funds. 13 (Continued)

15 In 2010, the CASA Board of Directors authorized a fund raising campaign and agreed that the funds raised would be used to establish the Joseph A. Califano, Jr. Institute for Applied Policy. This fund will support research to enhance awareness, among the general public and policymakers, of the facts and costs of substance abuse and addiction, and catalyze the design and implementation of policies and programs for prevention and treatment of substance abuse and addiction as a medical condition. Its efforts will aim to embed a fuller understanding into policy systems and practical programs at the national, state, and local levels. 14