Avon Products Foundation, Inc. Financial Statements. December 31, 2007 and 2006

Transcription

1 Financial Statements December 31, 2007 and 2006

2 Financial Statements December 31, 2007 Table of Contents Independent Auditors' Report 1 Page Financial Statements Statements of Financial Position 2 Statements of Activities 3 Statements of Functional Expenses 4 Statements of Cash Flows 5 Notes to Financial Statements 6-11

3 Independent Auditors' Report The Board of Directors Avon Products Foundation, Inc. We have audited the accompanying statement of financial position of Avon Products Foundation, Inc. (the Foundation ) as of December 31, 2007, and the related statements of activities, functional expenses and cash flows for the year then ended. These financial statements are the responsibility of the Foundation's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Foundation s 2006 financial statements and, in our report dated February 16, 2007 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 the Foundation'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 Avon Products Foundation, Inc. as of December 31, 2007, 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 March 28, 2008 The Lincoln Building, 60 East 42 nd Street, New York, New York tel fax

4 Statements of Financial Position December 31, 2007 (with comparative amounts as of December 31, 2006) ASSETS Cash and cash equivalents $ 47,187,745 $ 41,764,344 Equipment, net of depreciation of $50, ,000 - Pledges receivable, net of allowance for uncollectible pledges of $48,410 and $69, , ,306 Other receivables 247, ,978 Prepaid expenses 125,000 50,000 Due from Avon Products, Inc. 348, ,912 Deferred program costs 2,734,173 7,102,105 $ 50,980,211 $ 50,197,645 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 1,197,950 $ 359,901 Due to Avon Products, Inc. 194, ,347 Grants payable, net 21,005,941 14,049,555 Total Liabilities 22,398,725 14,626,803 Net Assets Unrestricted 19,371,768 11,458,313 Temporarily restricted 9,209,718 24,112,529 Total Net Assets 28,581,486 35,570,842 $ 50,980,211 $ 50,197,645 See notes to financial statements 2

5 Statements of Activities Year Ended December 31, 2007 (with summarized totals for the year ended December 31, 2006) Temporarily Unrestricted Restricted Total Total PUBLIC SUPPORT AND REVENUE Special events income $ 1,620,700 $ 49,775,706 $ 51,396,406 $ 46,055,560 Special event in-kind donations 560, ,722 - Contributions from Avon: Special Events 3,877, ,000 4,352,777 4,007,777 Breast Cancer Crusade 250,000 5,929,772 6,179,772 7,211,959 Scholarship/Women's Empowerment - 1,340,000 1,340,000 1,660,000 Domestic Violence - 1,229,060 1,229, ,059 Emergency Relief Fund ,796 General Support - Special Donation ,000,000 General Support - In-Kind 1,704,097-1,704,097 1,754,626 Pledges - 1,079,020 1,079, ,754 Interest income 2,575,916-2,575,916 2,259,688 Other income 192, , , ,194 Net assets released from restrictions: Satisfaction of purpose restriction 74,551,657 (74,551,657) - - Satisfaction of time restriction 911,754 (911,754) - - Total Public Support and Revenue 85,684,043 (14,902,811) 70,781,232 69,946,413 EXPENSES Program Services Breast Cancer Crusade 56,355,722-56,355,722 53,864,112 Scholarship/Women's Empowerment 1,422,394-1,422,394 1,904,500 Domestic Violence 2,787,826-2,787,826 2,036,692 Emergency Relief Fund 358, , ,229 Total Program Expenses 60,924,157-60,924,157 58,549,533 Supporting Services Management and general 2,019,418-2,019,418 2,236,530 Fundraising 14,827,013-14,827,013 12,865,638 Total Supporting Services 16,846,431-16,846,431 15,102,168 Total Expenses 77,770,588-77,770,588 73,651,701 Change in Net Assets 7,913,455 (14,902,811) (6,989,356) (3,705,288) NET ASSETS Beginning of year 11,458,313 24,112,529 35,570,842 39,276,130 End of year $ 19,371,768 $ 9,209,718 $ 28,581,486 $ 35,570,842 See notes to financial statements 3

6 Statements of Functional Expensese Year Ended December 31, 2007 (with summarized totals for the year ended December 31, 2006) Program Services Supporting Services Breast Scholarship/ Domestic Emergency Management Cancer Women's Violence Relief and Total Crusade Empowerment Fund Fund Total General Fundraising Total EXPENSES Staffing $ - $ - $ - $ - $ - $ 754,376 $ - $ 754,376 $ 754,376 $ 635,971 Grants 43,821,673 1,226,195 2,274, ,149 47,653, ,653,775 44,248,455 Equipment 389, ,033-1,048,111 1,048,111 1,437,144 1,360,545 Communications , , , , ,307 Travel and meals 354, ,362 18, , , , ,335 Supplies 318, ,003 21, , , , ,436 Facilities , , , ,628 Public awareness 5,514, ,514,520-2,581,743 2,581,743 8,096,263 7,403,341 Public relations 272, ,993 1, , , , ,860 Printing 2,570, ,570, , ,047 3,439,170 2,783,498 Professional services 1,397,144-14,525-1,411,669 86,724 4,980,230 5,066,954 6,478,623 6,884,496 Other Services 698, ,791-2,734,109 2,734,109 3,432,900 4,177,283 Insurance ,168 47,677 80,845 80, ,681 Taxes and licenses 79, ,159 57, , , , ,125 Bank fees ,711 6, , , ,659 Agency Labor ,714-29,714 29,714 77,507 Bad Debt Expense ,256-12,256 12, ,205 Depreciation Expense ,000 50,000 50,000 - Other ,735 8,735 8,735 47,743 Total Direct Expenses 55,415,801 1,226,195 2,289, ,149 59,262,428 1,909,153 14,334,188 16,243,341 75,505,769 71,897,075 Staffing 369, , ,099 17, ,997 78, , ,586 1,160,583 1,154,588 Communications , ,927 1,317 Travel and meals 62,752 6,414 17,470 1,038 87,674 3,543 11,667 15, ,884 83,542 Supplies 241,614 5,086 13, ,377 2,809 9,251 12, ,437 19,765 Facilities 28,363 8,682 23,649 1,405 62,099 4,797 15,794 20,591 82,690 82,690 Public awareness 116, ,752-66,236 66, ,988 - Public relations 81,017 24,801 67,553 4, ,386 13,700 45,114 58, ,200 66,365 Professional services 29,808 9,125 24,854 1,478 65,265 5,040 16,599 21,639 86, ,650 Other services , , ,934 - Agency Labor 9,011 2,759 7, ,731 1,523 5,018 6,541 26,272 66,709 Total In-Kind Expenses 939, , ,543 27,066 1,661, , , ,090 2,264,819 1,754,626 Total Expenses $ 56,355,722 $ 1,422,394 $ 2,787,826 $ 358,215 $ 60,924,157 $ 2,019,418 $ 14,827,013 $ 16,846,431 $ 77,770,588 $ 73,651,701 See notes to financial statements 4

7 Statements of Cash Flows Year Ended December 31, 2007 (with comparative amounts for the year ended December 31, 2006) CASH FLOW FROM OPERATING ACTIVITIES Change in net assets $ (6,989,356) $ (3,705,288) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation expense 50,000 - Net changes in operating assets and liabilities Pledges receivable, net (20,260) 417,535 Other receivable (25,249) (86,226) Prepaid expense (75,000) - Due from Avon Products, Inc. 493,412 (513,031) Deferred costs 4,367,932 1,938,406 Accounts payable and accrued expenses 838,049 32,113 Due to Avon Products, Inc. (22,513) 155,543 Grants payable, net 6,956,386 1,342,026 Net Cash Provided by (Used in) Operating Activities 5,573,401 (418,922) CASH FLOW FROM INVESTING ACTIVITIES Purchase of equipment (150,000) - Net Change in Cash and Cash Equivalents 5,423,401 (418,922) CASH AND CASH EQUIVALENTS Beginning of year 41,764,344 42,183,266 End of year $ 47,187,745 $ 41,764,344 See notes to financial statements 5

8 Notes to Financial Statements 1. Organization Avon Products Foundation, Inc. (the "Foundation") was incorporated in the State of New York in 1955 by Avon Products, Inc. ( Avon ). The mission of the Foundation is to improve the lives of women and to bring this mission to life through two key philanthropic pillars: breast cancer and domestic violence. The Foundation also manages scholarships and women s empowerment programs and special emergency relief funds for Avon Products, Inc. The Foundation is a public charity and is exempt from Federal income taxes pursuant to Section 501(c) (3) of the Internal Revenue Code. Programs The major program activities of the Foundation are as follows: a. Breast Cancer The Avon Breast Cancer Crusade funds breast cancer awareness, education, outreach programs, medical research and programs that assist people diagnosed with breast cancer, particularly the underserved, with services to improve their access to clinical care. The Foundation receives its financial support from Avon and the general public through the Avon Walk for Breast Cancer ( AWBC ), other special events and donations. b. Domestic Violence In its commitment to ending domestic violence, the Foundation supports awareness, education, direct services and prevention programs. In July 2004, the Foundation announced the Speak Out Against Domestic Violence program, which expanded the domestic violence program and developed new community outreach and support for victims. c. Scholarships/Women s Empowerment Scholarships The Foundation has U.S. college scholarship programs for children of Avon associates, Avon independent sales representatives, children and grandchildren of Avon independent sales representatives and for children residing in and around the Suffern New York school district. Economic Advancement The Foundation periodically supports other women s empowerment causes, including programs that advance women s issues, including career development mentoring, educational support, counseling and life-skills training. 6

9 1. Organization (Continued) d. Emergency Relief Funds Avon Products Foundation, Inc. Notes To Financial Statements Through donations from Avon and the sale of selected Avon Products from time to time, the Foundation provides support in emergency and crisis situations, such as the following: Heart of Asia Relief Fund In response to the tsunami tragedy in Asia, the Foundation created the Heart of Asia Relief Fund in late 2004 to assist in the relief and rebuilding efforts. Support was directed to longterm aid organizations that provide medical care, shelter, food distribution, education for children and help to reunite families and create stronger communities. Yellow Ribbon Fund In response to the military action in Iraq and Afghanistan, the Foundation established the Yellow Ribbon Fund in 2003 to provide direct financial assistance and emotional support to the families who have lost loved ones in the line of duty and to armed services members who suffered injuries in the line of duty. Funds were directed to various institutions and programs that provide support, including counseling, rehabilitation, housing for families while recuperating service people undergo treatment, and education for those wounded and their families. Heart of America In an effort to assist the victims of the September 11th tragedies, the Foundation established the Avon Foundation Heart of America Charity in 2001 for the benefit of the children affected by the events of September 11th. These funds were directed to educational institutions, after-school programs and children's programs that provide counseling, safety education, and childcare. In 2005 in response to the devastation of Hurricanes Katrina and Rita, the Heart of America campaign was renewed with the sale of a special keychain. Support was directed to recovery and rebuilding efforts, as well as to domestic violence and breast cancer victims and programs that experienced relocation or damages as a result of the unprecedented storms. 2. Summary of Significant Accounting Policies Basis of Presentation The financial statement presentation is in conformity with accounting principles generally accepted in the United States of America for nonprofit organizations, which requires the Foundation to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted net assets. There are no permanently restricted net assets as of December 31,

10 Notes To Financial Statements 2. Summary of Significant Accounting Policies (Continued) Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services in reasonable ratios determined by management. Cash and Cash Equivalents The Foundation considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. Use of 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 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. Comparative Data The financial statements include prior-year summarized comparative information in total but not by net asset class. 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 the Foundation s financial statements for the year ended December 31, 2006 from which the summarized information was derived. Grants Grants are recorded when a commitment is made and approved by the Board of Directors. Multi-year grants are recorded at present value using a risk-free interest rate, which generally approximates the rate of the two year treasury bill. Public Awareness Public awareness and education costs consisted primarily of television, radio, direct-mail campaigns, local and national print and point-of-sale materials. The Foundation expensed public awareness costs as incurred. At December 31, 2007, public awareness expense was $8,279,251. 8

11 Notes To Financial Statements 3. Concentration Risk Financial instruments that potentially subject the Foundation to concentration of credit risk consist principally of cash and cash equivalents. The Foundation places its cash with high quality financial institutions. Cash accounts at banks are insured by the Federal Deposit Insurance Corporation ( FDIC ) up to $100,000. Amounts in excess of the insured limits were approximately $4,064,000 at December 31, Cash equivalents consist of investments in money market funds with two money managers the balances of which totaled approximately $42,705,000 at December 31, The Foundation monitors this risk on a regular basis. 4. Related Party Transactions Contributions Avon made a pledge of $14,805,706 to the Foundation in The Foundation received $14,457,206 of this amount during the year. The balance of $348,500 is reflected as a receivable at December 31, This receivable was subsequently collected in The Foundation under an administrative services arrangement has outstanding obligations to Avon for reimbursement of the salaries, accrued compensated absences and other expenses of the finance and operations department amounting to $194,834 as of December 31, In-Kind Contributions Avon provides the Foundation with a substantial amount of support including the following: Staffing $ 1,160,583 Communications 1,927 Travel & Meals 61,084 Supplies 48,437 Facilities 82,690 Public Relations 236,200 Professional Service 86,904 Agency Labor 26,272 $ 1,704,097 The support of $1,704,097 is reflected in the financial statements as contributions and expenses for the year ended December 31, The Foundation also received valuable management support from the Board of Directors and Associates of Avon Products, Inc. which do not meet the requirements for measurement and recognition in the financial statements. 9

12 Notes To Financial Statements 5. Special Events One awareness and fundraising program in 2007 was the Avon Walk for Breast Cancer ( AWBC ) comprised of eight weekend awareness and fundraising walks in the United States. Other fundraising programs in 2007 were the Foundation gala and the Need for Speed Relay against Domestic Violence. In 2007, all special events provided the Foundation with total income of $57,221,659, $52,308,160 from the public (including $911,754 of 2007 special events income pledged in 2006), $560,722 of in-kind donations from sponsors and $4,352,777 from Avon. 6. Joint Costs The Foundation conducted activities that included direct-mail campaigns and special events. The costs of conducting those activities included a total of $16,199,122 of joint costs. These joint costs were allocated as follows: 7. Equipment Breast Cancer Crusade $ 10,214,075 Scholarships/Women s Empowerment 196,199 Domestic Violence 498,454 Emergency Relief Fund 26,885 Management and General 110,447 Fundraising 5,153,062 Total $ 16,199,122 Equipment consists of tents purchased for AWBC. Depreciation is provided by the straight-line method over an estimated life of three years. 8. Grants Payable The Foundation has entered into longer-term commitments with certain research/care organizations. Payments to these organizations at December 31, 2007 are due to be made as follows: Less than one year $ 19,292,210 One to three years 1,766,000 21,058,210 Less: Present value discount 52,269 Grants payable, net $ 21,005,941 10

13 9. Temporarily Restricted Net Assets Avon Products Foundation, Inc. Notes To Financial Statements Temporarily restricted net assets are available as follows at December 31, 2007: Time restriction Breast Cancer Crusade $ 1,079,020 Purpose restriction Breast Cancer Crusade 7,264,838 Scholarships/Women s Empowerment 717,639 Emergency Relief Fund 148,221 $ 9,209,718 The time restriction relates to contributions received and pledges made towards the 2008 events received in Deferred Program Costs Expenses related to the 2008 events have been reflected as deferred program costs at December 31, Tuition Commitments The Foundation sponsors multiyear scholarship programs for children of Avon associates and for children residing in and around the Suffern New York school district. The Foundation intends to provide continuing support for selected participating students until completion of their college education, contingent upon fulfilling certain requirements of the award. The anticipated future tuition cost for those students to complete their studies over a four-year period is approximately $240,000. The Foundation intends to obtain the necessary funds to support the participating students through future grants from Avon Products, Inc. The Scholarship program is administered by the Educational Testing Service and Scholarship America. 11