STARLIGHT CHILDREN S FOUNDATION GLOBAL OFFICE. Financial Statements. December 31, (With Independent Auditors Report Thereon)

Transcription

1 Financial Statements (With Independent Auditors Report Thereon)

2 Table of Contents Page Independent Auditors Report 1 Statement of Financial Position 2 Statement of Activities 3 Statement of Functional Expenses 4 Statement of Cash Flows 5 Notes to Financial Statements 6

3 KPMG LLP Suite Pacifica Irvine, CA Independent Auditors Report The Board of Directors Starlight Children s Foundation: We have audited the accompanying financial statements of Starlight Children s Foundation (Global Office), which comprise the statement of financial position as of, 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 U.S. generally accepted accounting principles; 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. Auditors 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 auditors 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, 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 Starlight Children s Foundation (Global Office) as of, and the changes in its net assets and its cash flows for the year then ended, in accordance with U.S. generally accepted accounting principles. Irvine, California August 1, 2016 KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 Statement of Financial Position Assets Cash and cash equivalents $ 5,158,660 Pledges 65,972 Inventory 63,569 Prepaid expenses 610,807 Other assets 102,249 Property and equipment (net) 204,037 Total assets $ 6,205,294 Liabilities and Net Assets Liabilities: Accounts payable and accrued liabilities $ 580,151 Total liabilities 580,151 Net assets: Unrestricted 4,763,664 Temporarily restricted 861,479 Total net assets 5,625,143 Total liabilities and net assets $ 6,205,294 See accompanying notes to financial statements. 2

5 Statement of Activities Year ended Temporarily Unrestricted restricted Total Revenue and support: Contributed goods, services, and use of facilities $ 1,827,836 1,827,836 Contributions 3,989,577 1,807,038 5,796,615 Revenue from related parties 252, ,910 Miscellaneous 8,729 8,729 Net assets released from restrictions 1,396,172 (1,396,172) Total revenue and support 7,475, ,866 7,886,090 Expenses: Program services 6,458,667 6,458,667 Management and general 634, ,889 Fundraising 479, ,781 Total expenses 7,573,337 7,573,337 Change in net assets (98,113) 410, ,753 Net assets beginning of year 4,861, ,613 5,312,390 Net assets end of year $ 4,763, ,479 5,625,143 See accompanying notes to financial statements. 3

6 Statement of Functional Expenses Year ended Program services Supporting Services Starlight Starlight Total program Management Wish Lists World services and general Fundraising Total Advertising $ 3, ,176 1, ,025 Bank charges Depreciation 109,478 6, ,474 27,900 23, ,071 Donated professional services 617,456 5, ,969 22,094 18, ,830 Donated materials and supplies 1,043, ,043, ,044,918 Donated use of facilities 304,062 19, ,492 77,489 67, ,725 Equipment for program use 662, , ,437 Equipment rental and repair 94, ,823 1,428 1,213 97,464 Facilities rent and parking 33,843 2,162 36,005 8,624 7,326 51,955 Fees 1, ,912 30, ,602 Grants to affiliates 193, , ,200 Insurance 23,010 1,470 24,480 5,864 4,981 35,325 Membership dues 5, ,139 1,470 1,249 8,858 Miscellaneous 12,229 4,175 16,404 3,040 2,583 22,027 Outside IT Services 147,897 49, ,117 17,378 14, ,256 Postage, shipping, and delivery 132, , ,759 Printing and publications 5, ,692 1, ,582 Professional services 180,247 12, ,540 80,423 32, ,414 Regulatory and other renewal fees 42,274 4,310 46,584 1,517 1,288 49,389 Renovation expense Starlight Sites 754, , ,627 Salaries and employee benefits 1,646, ,584 1,923, , ,090 2,553,009 Supplies 5, ,927 1,420 1,206 8,553 Telephone 21,194 1,354 22,548 5,401 4,588 32,537 Travel and automobile 28,557 2,326 30,883 6,618 5,808 43,309 Total functional expenses $ 6,070, ,931 6,458, , ,781 7,573,337 See accompanying notes to financial statements. 4

7 Statement of Cash Flows Year ended Cash flows from operating activities: Change in net assets $ 312,753 Adjustment to reconcile change in net assets to net cash provided by operating activities: Donated property (405,561) Depreciation 168,071 (Increase) decrease in: Contributions and pledges receivable (26,722) Accounts receivable (1,210) Inventory 768,928 Prepaid expenses and other assets (68,831) Decrease in: Accounts payable and accrued liabilities (311,940) Deferred revenue (64,400) Net cash provided by operating activities 371,088 Cash flows from investing activity: Purchases of property and equipment (36,205) Net cash used in investing activity (36,205) Net increase in cash and cash equivalents 334,883 Cash and cash equivalents beginning of year 4,823,777 Cash and cash equivalents end of year $ 5,158,660 See accompanying notes to financial statements. 5

8 Notes to Financial Statements (1) Organization Founded in 1982, Starlight Children s Foundation harnesses the power of giving to advance children s health through its global network of community partners. Starlight raises funds and awareness and invests in programs that improve the quality of life for children and families. In 2015, the board of directors of Starlight Children s Foundation (Global Office) and the remaining domestic chapter (NY*NJ*CT) officially voted to separate effective October 30, Any transactions between the NY*NJ*CT chapter and Starlight Children s Foundation recorded prior to that date are included in these financial statements. Starlight Children s Foundation also maintains affiliates in the United Kingdom, Canada, and Australia (International Affiliates). Affiliate Agreements entered into between each International Affiliate and Starlight provide for common purposes and policy direction. The accompanying financial statements were prepared for the purpose of presenting the separate financial information of Starlight Children s Foundation (Global Office) (referred to herein as the Foundation). The Foundation has elected not to consolidate the International Affiliates or its U.S. Chapter s financial results into the accompanying financial statements, based on Accounting Standards Codification (ASC) , Consolidation. (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. (b) Accounting The Foundation s net assets and changes therein are classified and reported as follows: Unrestricted. Net assets that are not subject to donor-imposed restrictions or law. The Foundation has $4,763,664 of unrestricted net assets at. Temporarily Restricted. Net assets subject to restrictions imposed by donor or law that may be met either by actions of the Foundation or the passage of time. When a donor restriction expires, that is, when a stipulated time restriction ends or the purpose of the 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. The Foundation reports restricted contributions whose restrictions are met in the same reporting period as unrestricted contributions. The Foundation has $861,479 in temporarily restricted net assets at, (note 2(d) and note 6). 6 (Continued)

9 Notes to Financial Statements Permanently Restricted. Net assets subject to donor-imposed restrictions that the principal be maintained in perpetuity. Generally, the donors of these assets permit the Foundation to expend all of the income (or other economic benefits) derived from the donated assets. The Foundation has no permanently restricted net assets at. (c) Cash and Cash Equivalents The Foundation considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. The carrying value of cash and cash equivalents at approximates its fair value. The Foundation maintains its cash and cash equivalents in bank deposit accounts, which, at times, may exceed federally insured limits. The Foundation has not experienced any losses in such accounts. As of, the Foundation has $5,158,660 in cash and cash equivalents. (d) (e) (f) Contributions and Pledges Receivable Contributions, including pledges, representing unconditional promises to give are recorded at estimated fair value, and recognized as revenue in the period received. The Foundation reports unconditional contributions as restricted support if they are received with donor stipulations that limit the use of the donated assets. At, $5,364 of the pledges receivable includes restricted support. Total pledges receivable are expected to be collected in their entirety within one year subsequent to the year-end. Inventory Inventory includes Starlight tablets and videogame players, monitors, and other electronics that make up the Starlight Fun Center units. Other inventory includes Starlight Comfort Kit backpacks and other materials collected for distribution through the Foundation s programs. Purchased inventory is stated at cost. Donated inventory is recorded at estimated fair value at the time of donation. The Foundation reviews the carrying value of its inventory for possible impairment whenever events or changes in circumstances indicate that the fair value may have declined since it was originally acquired. An impairment loss is recognized when the fair value of the inventory is lower than the carrying amount, in which case a write-down is recorded to reduce the related asset to its estimated fair value. No impairment losses were recognized during the year ended for donated materials and supplies. Prepaid Expenses and Other Assets Prepaid expenses primarily include a prepayment to Nintendo of America (Nintendo) of $522,445 for Starlight Fun Center units and prepaid operating expenses and insurance of $88,362 as of. 7 (Continued)

10 Notes to Financial Statements (g) Property and Equipment Property and equipment having a useful life of more than one year are recorded at cost if purchased. Donated assets are capitalized at the estimated fair value at the date of receipt and restrictions are released once the asset has been placed into service. Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. Maintenance and repair costs are charged to expenses as incurred. Property and equipment are capitalized if the cost of an asset is greater than or equal to $5,000. The estimated useful lives of property and equipment are as follows: Software and computers Furniture and fixtures Office equipment 3 Years 7 Years 5 Years Leasehold improvements are amortized on the straight-line basis over the term of the lease or the estimated useful life, whichever is shorter. (h) (i) Long-Lived Assets The Foundation reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the book value of the assets may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the asset, in which case a write-down is recorded to reduce the related assets to its estimated fair value. No impairment losses were recognized during the year ended. Contributed Goods, Services, and Use of Facilities Contributions of donated noncash assets are recorded at fair value in the period received. Contributions of donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at fair value in the period received. Contributed goods generally consist of materials for distribution to partner facilities. For the year ended, the Foundation received $1,827,836 of contributed goods, services, and use of facilities (note 5). 8 (Continued)

11 Notes to Financial Statements (j) Fair Value of Financial Instruments Fair Value Determination The fair value of the Foundation s financial instruments as of represents management s best estimates of the amounts that would be received to sell those assets in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there are little, if any, observable inputs, management s own judgments about the assumptions of market participants were used in pricing the asset. Although the Foundation uses its best judgment in determining the fair value of financial instruments, there are inherent limitations in any methodology. Therefore, the values presented herein are not necessarily indicative of the amount the Foundation could realize in a current transaction. Future confirming events could affect the estimates of fair value and could be material to the financial statements. These events could also affect the amount realized upon liquidation of the financial instruments. Fair Value Hierarchy The Foundation s fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level I measurements) and the lowest priority measurements involving significant unobservable inputs (Level III measurements). The three levels of the fair value hierarchy are as follows: Level I inputs are quoted prices (unadjusted) in active markets for identical assets that the Foundation has the ability to access at the measurement date. Level II inputs are inputs other than quoted prices included within Level I that are observable for the asset, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs that can be corroborated by observable market data. Level III are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset. 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. Due to the short-term nature of cash equivalents, receivables, other assets, accounts payable, and accrued liabilities, fair value approximates carrying value. 9 (Continued)

12 Notes to Financial Statements (k) Income Taxes The Foundation is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Service Code and corresponding California provisions. However, the Foundation remains subject to income taxes on any net income that is derived from a trade or business, regularly carried on and not in furtherance of the purpose for which it was granted exemption. No income tax provision has been recorded as the net income, if any, from any unrelated trade or business, in the opinion of management, is not material to the financial statements taken as a whole. ASC Topic 740, Topic Income Taxes (ASC 740), prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure, and transition. Management believes that there are no such uncertain tax positions for the Foundation at. (l) (m) 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, revenues and expenses as of the date and for the period presented. Actual results could differ from those estimates. Functional Allocation of Expenses The costs of providing the Foundation s programs and other activities have been presented in the statement of functional expenses. Indirect or shared costs are allocated among program and support services by a method that best measures the relative degree of benefit. (3) Property and Equipment Property and equipment at consist of the following: Software and computers $ 633,233 Furniture and fixtures 42,675 Leasehold improvements 89,769 Total 765,677 Less accumulated depreciation (561,640) Property and equipment (net) $ 204,037 Depreciation expense was $168,071 for the year ended. 10 (Continued)

13 Notes to Financial Statements (4) Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities at consist of the following: Accounts payable $ 80,771 Accrued payroll 35,536 Accrued paid time off 91,979 Accrued warranty reserve Starlight Fun Center units 225,000 Deferred compensation 100,782 Other accrued liabilities 46,083 Total accounts payable and accrued liabilities $ 580,151 The $225,000 warranty reserve relates to Starlight Fun Center units purchased from Nintendo of America. The Foundation is required to repair Starlight Fun Center units donated to healthcare facilities for 3 years after the units are distributed to the respective facilities. (5) Contributed Goods, Services, and Use of Facilities Contributed goods, services, and use of facilities during the year ended are as follows: Donated professional services $ 663,830 Donated materials and supplies 695,281 Donated use of facilities 468,725 Total $ 1,827,836 (6) Temporarily Restricted Net Assets Temporarily restricted net assets comprise the following as of : Purpose restrictions $ 806,479 Time restrictions 55,000 $ 861,479 (7) Defined Contribution Pension Plan The Foundation maintains a 403(b) defined contribution pension plan to which the Foundation made $24,784 in matching contributions for the year ended. 11 (Continued)

14 Notes to Financial Statements (8) Related Party Transactions As of, there were no U.S. Chapters, and therefore, there are no financial results reported for them. The NY*NJ*CT chapter (the U.S. NY chapter) separated from the Foundation on October 30, During the year, the Foundation provided Starlight Fun Centers to its U.S. NY chapter in existence at the time. During the fiscal year 2015, the Foundation received revenue from its U.S. NY chapter totaling $145,729. Of that amount, $80,000 were for Starlight Fun Center units. There were no receivables from or payables to its U.S. NY chapter at. (9) Commitments The Foundation leases certain facilities and equipment under long-term operating lease agreements that expire through March Future minimum lease payments for leases that have a remaining noncancelable term in excess of one year at are as follows: 2016 $ 7, ,070 Total noncancelable lease commitments $ 8,205 Rent expenses were $7,135 during the year ended. (10) Subsequent Events The Foundation has evaluated events and transactions occurring subsequent to the statement of financial position date of for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through August 1, 2016, the date these financial statements were available to be issued. 12