Christian Care Ministry, Inc. Financial Statements

Transcription

1 Christian Care Ministry, Inc. Financial Statements For The Year Ended

2 REPORT OF INDEPENDENT AUDITORS The Board of Directors Christian Care Ministry, Inc. Melbourne, Florida We have audited the accompanying financial statements of Christian Care Ministry, Inc. ( the Ministry ), which comprise the statement of financial position as of, and the related statements of activities 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 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 audit. 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 from 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 Ministry'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 Ministry'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 evaluating 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 Christian Care Ministry, Inc. as of, the changes in its net assets, and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. B ATTS M ORRISON W ALES & L EE, P.A. Orlando, Florida October 27, 2015

3 STATEMENT OF FINANCIAL POSITION ASSETS ASSETS Cash and cash equivalents $ 9,188,479 Other assets 478,314 Property and equipment, net 6,543,648 Total assets $ 16,210,441 LIABILITIES AND UNRESTRICTED NET ASSETS LIABILITIES Accounts payable and accrued expenses $ 2,858,808 Note payable 3,475,736 Interest rate swap contract, at estimated fair value 310,645 Other liabilities 882,686 Total liabilities 7,527,875 UNRESTRICTED NET ASSETS 8,682,566 Total liabilities and unrestricted net assets $ 16,210,441 The Accompanying Notes are an Integral Part of These Financial Statements 1

4 STATEMENT OF ACTIVITIES For The Year Ended PUBLIC SUPPORT AND REVENUE Program fees $ 42,183,725 Extra Blessings 1,175,491 Total public support and revenue 43,359,216 EXPENSES Program activities 34,061,185 General and administrative 3,333,049 Total expenses 37,394,234 CHANGE IN UNRESTRICTED NET ASSETS BEFORE EFFECT OF INTEREST RATE SWAP CONTRACT 5,964,982 Effect of interest rate swap contract (445,645) CHANGE IN UNRESTRICTED NET ASSETS 5,519,337 UNRESTRICTED NET ASSETS - Beginning of year 3,163,229 UNRESTRICTED NET ASSETS - End of year $ 8,682,566 The Accompanying Notes are an Integral Part of These Financial Statements 2

5 STATEMENT OF CASH FLOWS For The Year Ended OPERATING CASH FLOWS Cash received from program fees $ 42,183,725 Cash received from other sources 1,175,491 Cash paid for operating activities and costs (36,501,952) Net operating cash flows 6,857,264 INVESTING CASH FLOWS Purchases of and improvements to property and equipment (2,588,162) Net investing cash flows (2,588,162) FINANCING CASH FLOWS Borrowings 1,717,408 Principal repayments (64,000) Net financing cash flows 1,653,408 NET CHANGE IN CASH AND CASH EQUIVALENTS 5,922,510 CASH AND CASH EQUIVALENTS - Beginning of year 3,265,969 CASH AND CASH EQUIVALENTS - End of year $ 9,188,479 RECONCILIATION OF CHANGE IN UNRESTRICTED NET ASSETS TO NET OPERATING CASH FLOWS Change in unrestricted net assets $ 5,519,337 Adjustments to reconcile change in unrestricted net assets to net operating cash flows Depreciation 776,778 Change in other assets (213,897) Change in accounts payable and accrued expenses 505,995 Change in estimated fair value of interest rate swap contract 310,645 Change in other liabilities (41,594) Net operating cash flows $ 6,857,264 The Accompanying Notes are an Integral Part of These Financial Statements 3

6 NOTES TO FINANCIAL STATEMENTS NOTE A NATURE OF ACTIVITIES Christian Care Ministry, Inc. ( the Ministry ) is a Florida not-for-profit corporation. The Ministry was established to offer a formalized approach to sharing medical burdens among members. The Ministry currently offers the following programs to serve the Christian community: Medi-Share - is a biblically based, non-insurance healthcare solution that brings Christians together to share the cost of their medical care needs. Under the Medi-Share program, the Ministry began direct member-to-member sharing of medical care needs through individual member-owned bank accounts in December These individual member-owned bank accounts are held by America s Christian Credit Union (ACCU). The Ministry has limited power of attorney access to these ACCU Bank accounts in order to facilitate sharing of medical care needs among Medi-Share members. The Ministry sends members a monthly notice advising them of their share and administrative fee which includes program fees for services such as: medical bill review, bill adjudication, member assistance programs, and rate negotiation for medical services. Manna - facilitates Christians supporting one another during times of lost income due to disability from sickness or injury. Restore - helps Christians reverse disease through a structured program which includes personalized telephone-based health coaching, educational materials, interactive websites, and web-based seminars. NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Member medical payments All funds used to pay medical care needs comes from the voluntary giving of Medi-Share members, not from the Ministry, and the Ministry does not pay nor is it liable for the payment of any medical care expenses. Program fees The Ministry s primary source of revenue is from administrative fees which are assessed to member accounts based on a portion of the member s monthly share payment. Revenue is recognized when earned. Extra Blessings Extra Blessings revenue includes late fees assessed to member accounts and contributions received by the Ministry which are used to provide assistance to members with medical needs which are not covered under the Medi-Share program. Restricted and unrestricted revenue and support Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished) in the reporting period in which the support is recognized. Cash and cash equivalents The Ministry considers investment instruments purchased or donated with original maturities of three months or less to be cash equivalents. Property and equipment Property and equipment are stated at cost, if purchased, or estimated fair value on the date of donation, if donated. The Ministry uses the straight-line method of depreciating property and equipment over the estimated useful lives of the related assets. 4

7 NOTES TO FINANCIAL STATEMENTS NOTE B SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Other liabilities Other liabilities consist of the net present value of payment obligations associated with salary continuation agreements between the Ministry and previous members of management. Income taxes The Ministry is exempt from federal income tax as an organization described in Section 501(c)(3) of the Internal Revenue Code and from state income tax pursuant to Florida law. The Ministry is further classified as a public charity and not a private foundation for federal tax purposes. The Ministry has not incurred unrelated business income taxes. As a result, no income tax provision or liability has been provided for in the accompanying financial statements. The Ministry has not taken any material uncertain tax positions for which the associated tax benefits may not be recognized under accounting principles generally accepted in the United States of America. Federal and state tax authorities may generally examine the Ministry s income tax positions or (if applicable) returns for periods of approximately three to six years. Use of estimates Management uses estimates and assumptions in preparing the financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and reported revenues and expenses. Significant estimates used in preparing these financial statements include those related to the useful lives of property and equipment. Actual results could differ from the estimates. Subsequent events The Ministry has evaluated for possible financial statement reporting and disclosure subsequent events through October 27, 2015, the date as of which the financial statements were available to be issued. NOTE C CONCENTRATIONS The Ministry maintains its cash and cash equivalents in deposit accounts which may not be federally insured, may exceed federally insured limits, or may be insured by an entity other than an agency of the federal government. The Ministry has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk related to cash and cash equivalents. As of, the Ministry had approximately $10,238,000 in bank deposit accounts, not reflective of outstanding deposits or disbursements. As of, accounts are federally insured up to $250,000 per financial institution. 5

8 NOTES TO FINANCIAL STATEMENTS NOTE D PROPERTY AND EQUIPMENT Property and equipment consisted of the following: Category Land $ 735,438 Buildings 5,283,545 Furniture and fixtures 706,791 Computer equipment 2,605,997 Construction in progress 46,300 Total 9,378,071 Less: Accumulated depreciation (2,834,423) Net property and equipment $ 6,543,648 Depreciation expense was $776,778 for the year ended. NOTE E NOTE PAYABLE During January 2015, the Ministry entered into an amended and restated promissory note with a bank with an original outstanding balance of $3,539,736 to fund the construction of the Ministry s headquarters location in Melbourne, Florida. The promissory note contains certain covenants, the most restrictive of which requires that the Ministry maintain a certain fixed charge coverage ratio (calculated on June 30th of each year). Interest on the promissory note is payable monthly at the one-month LIBOR plus 2.30% per annum (2.49% per annum as of ), with payments of principal due monthly according to a certain fifteen-year amortization schedule. The promissory note is secured by a mortgage on the Ministry s headquarters location, and the Ministry s obligation to repay the promissory note is guaranteed by a certain third party in an amount up to the lesser of 47.87% of the unpaid principal balance or $2,250,000. The guaranty will expire upon the earlier of payment by the guarantor of any amount of the guaranty, payment in full by the Ministry or guarantor of all obligations due on the note, or January In addition, the Ministry entered into an interest rate swap agreement with a certain institution which fixes the interest rate on the loan balance at 5.70% per annum (see Note F). Final payment is due during January Approximate future maturities of the Ministry s note payable are as follows: Year Ending June 30, 2016 $ 157, , , , ,000 Thereafter 2,591,000 Total $ 3,476,000 Interest expense was approximately $135,000 for the year ended. 6

9 NOTES TO FINANCIAL STATEMENTS NOTE F INTEREST RATE SWAP CONTRACT The Ministry entered into an interest rate swap contract with a financial institution to reduce the impact of changes in the variable rate of its long-term debt. The interest rate swap contract matures in January The contract effectively fixes the Ministry s annual interest rate exposure on a notional amount totaling $3,475,736 as of to 5.70% per annum. The estimated fair value of the interest rate swap contract was a liability of $310,645 as of. The liability is reported as Interest rate swap contract, at estimated fair value in the accompanying statement of financial position. The change in the estimated fair value of the interest rate swap contract is included in the accompanying statement of activities with Effect of interest rate swap contract. Value has been estimated based on the amount needed to settle the agreement as calculated by the counterparty to the swap agreement. Such calculations were based on market conditions, including prevailing interest rates, and take into consideration expectations regarding interest rate movements, the remaining terms of the agreements, and other factors. The caption Effect of interest rate swap contract in the accompanying statement of activities consists of the following: Recognition of initial liability at $ 310,645 Bank fee for partial termination of swap agreement 135,000 Total $ 445,645 NOTE G RETIREMENT PLAN The Ministry contributes to a 401(k) profit-sharing plan ( the Plan ) for its employees. All employees who are at least eighteen years of age and have six months of service are eligible to participate in the Plan. Participating employees may elect to make salary deferral contributions to the Plan. The Plan requires the Ministry to make matching contributions of up to 3% of an employee s annual compensation up to a maximum of 5% (increasing by 50% of salary deferrals between 3% and 5% of an employee s annual compensation). The Ministry s contributions to the Plan were approximately $446,000 for the year ended. NOTE H ADVERTISING COSTS The Ministry uses advertising to promote its programs. Advertising costs are expensed as incurred. During the year ended, the Ministry incurred total advertising costs of approximately $4,300,000. Such amounts are included in program activities expenses in the accompanying statement of activities. NOTE I RELATED PARTY TRANSACTIONS During the year ended, the Ministry made payments totaling approximately $206,000 to members of the board of directors for board meeting stipends, travel-related expenditures, and consulting services. 7

10 NOTES TO FINANCIAL STATEMENTS NOTE J ALLIANCE FOR HEALTH CARE SHARING MINISTRIES In July 2007, the Ministry and Samaritan Ministries International, of Peoria, Illinois, formed the Alliance of Health Care Sharing Ministries, Inc. ( the Alliance ). The Alliance is a Florida not-for-profit corporation and is classified as a 501(c)(6) organization under the Internal Revenue Code. The Alliance s management and board are composed of employees of both member ministries in equal representation. The purpose of the Alliance is to serve the common interests of faith-based ministries which facilitate the sharing of health care needs (financial, emotional, and spiritual) by individuals and families. The Alliance is committed to advocacy in the public policy arena on issues of importance to health care sharing ministries. During the year ended, the Ministry contributed approximately $178,000 to the Alliance. NOTE K COMMITMENT At, the Ministry was party to a contract related to the expansion of its headquarters location. Approximately $1,328,000 remained unpaid related to this contract as of and will be paid as construction is completed. 8