CHILDREN, INCORPORATED FINANCIAL STATEMENTS. Years Ended June 30, 2014 and 2013

Transcription

1 CHILDREN, INCORPORATED FINANCIAL STATEMENTS Years Ended June 30, 2014 and 2013

2 Table of Contents Page No. Independent Auditor s Report 1 Financial Statements Statements of Financial Position 3 Statements of Activities 4 Statements of Functional Expenses Year Ended June 30, Year Ended June 30, Statements of Cash Flows 7 Notes to the Financial Statements 8

3 INDEPENDENT AUDITOR'S REPORT To the Board of Directors Children, Incorporated Richmond, Virginia We have audited the accompanying financial statements of Children, Incorporated which comprise the statements of financial position as of June 30, 2014 and 2013, and the related statements of activities, functional expenses and cash flows for the years 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 audits. We conducted our audits 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 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.

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Children, Incorporated as of June 30, 2014 and 2013, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Winchester, Virginia February 5, 2015

5 Statements of Financial Position June 30, 2014 and Assets Cash $ 1,461,305 $ 2,012,646 Marketable securities 3,140,581 3,018,109 Furniture and equipment 446,487 56,245 Total assets $ 5,048,373 $ 5,087,000 Liabilities Obligation for database development costs incurred $ 10,747 $ 18,306 Other 25,553 13,460 Total liabilities 36,300 31,766 Net assets Unrestricted 4,439,726 4,482,887 Permanently restricted 572, ,347 Total net assets 5,012,073 5,055,234 Total liabilities and net assets $ 5,048,373 $ 5,087,000 See the accompanying notes. 3

6 Statements of Activities Years Ended June 30, 2014 and Changes in unrestricted net assets Revenues Contributions $ 4,029,371 $ 4,525,034 Earnings on marketable securities 124,015 67,032 Total revenues 4,153,386 4,592,066 Expenses Program services 3,630,082 3,425,148 Administration 328, ,193 Fund raising 238, ,490 Total expenses 4,196,547 3,975,831 Increase (decrease) in unrestricted net assets (43,161) 616,235 Change in permanently restricted net assets - - Increase (decrease) in total net assets (43,161) 616,235 Total net assets at the beginning of the year 5,055,234 4,438,999 Total net assets at the end of the year $ 5,012,073 $ 5,055,234 See the accompanying notes. 4

7 Statement of Functional Expenses Year Ended June 30, 2014 Program Services Administration Fund Raising Total Compensation $ 496,608 $ 248,304 $ 56,069 $ 800,981 Employee benefits 36,819 18,409 4,157 59,385 Payroll taxes 40,862 20,431 4,613 65, , ,144 64, ,272 Advertising and promotion , ,536 Bank and credit card fees 63, ,011 Depreciation 3, ,703 General insurance 12,878 3, ,170 Office expenses 26,940 7,184 1,796 35,920 Professional fees 33,812 9,016 2,254 45,082 Rent 46,779 12,474 3,119 62,372 Supplies and services for impoverished children 2,826, ,826,846 Travel 21,446 2,523 1,261 25,230 Other 20,554 5,481 1,370 27,405 Total expenses $ 3,630,082 $ 328,197 $ 238,268 $ 4,196,547 See the accompanying notes. 5

8 Statement of Functional Expenses Year Ended June 30, 2013 Program Services Administration Fund Raising Total Compensation $ 509,325 $ 250,090 $ 59,327 $ 818,742 Employee benefits 48,190 23,662 5,613 77,465 Payroll taxes 40,882 20,074 4,762 65, , ,826 69, ,925 Advertising and promotion , ,415 Bank and credit card fees 60, ,713 Database provider fees 19,717 5,258 1,314 26,289 Depreciation 3,875 1, ,166 General insurance 14,504 3, ,338 Loss on write-off of furniture and equipment no longer in use 35,530 9,475 2,368 47,373 Office expenses 18,496 4,932 1,233 24,661 Professional fees 1, ,232 Rent 46,181 12,315 3,079 61,575 Supplies and services for impoverished children 2,593, ,593,262 Travel 18,164 2,137 1,068 21,369 Other 14,635 3, ,513 Total expenses $ 3,425,148 $ 337,193 $ 213,490 $ 3,975,831 See the accompanying notes. 6

9 Statements of Cash Flows Years Ended June 30, 2014 and Cash flows from operating activities Increase (decrease) in total net assets $ (43,161) $ 616,235 Adjustment to derive cash flows Depreciation 4,703 5,166 Loss on write-off of furniture and equipment no longer in use - 47,373 Increase in the fair value of marketable securities (106,194) (44,955) Increase in other liabilities 12,093 13,460 Cash flows from operating activities (132,559) 637,279 Cash flows from investing activities Database development (402,504) (28,998) Purchase of marketable securities (16,278) (21,918) Cash flows from investing activities (418,782) (50,916) Increase (decrease) in cash (551,341) 586,363 Cash at the beginning of the year 2,012,646 1,426,283 Cash at the end of the year $ 1,461,305 $ 2,012,646 See the accompanying notes. 7

10 Notes to the Financial Statements Note A Nature of Activities Children, Incorporated is a not-for-profit entity that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. Its program services consist of arranging and providing funding for supplies and services to meet the basic and educational needs of approximately 20,000 impoverished children in 300 locations, half in the United States and half in other countries. There are no donor-imposed restrictions on the types of supplies and services provided or the children for whom they are provided. Children, Incorporated does not provide grants and other assistance, as that term is defined in the Glossary to Form 990, Return of Organization Exempt from Income Tax. Contributions to Children, Incorporated are received at its office in Richmond, Virginia, which is where its paid staff members are located. Program services are provided entirely by volunteers at each location. Funding for supplies and services for impoverished children is transferred from the Richmond office to the volunteer staff members. They decide on the supplies and services needed, arrange for them to be provided, and administer disbursement of the funds. The volunteer staff members are required to retain documentation of the disbursements and provide periodic reports to the paid staff members. Volunteer staff members are periodically visited at their locations by paid staff members. A summary of program services by location for the years ended June 30, 2014 and 2013, follows Program services provided outside the United States of America Central America and the Caribbean $ 374,867 $ 309,461 East Asia and the Pacific 143, ,587 Middle East and North Africa 46,752 36,800 North America 79,991 85,606 South America 520, ,799 South Asia 195, ,644 Sub-Saharan Africa 157, ,157 1,518,480 1,455,054 Program services provided in the United States of America 1,308,366 1,138,208 $ 2,826,846 $ 2,593,262 For the three years ended June 30, 2013, Children, Incorporated received a significant amount of unrestricted contributions from one entity. Those contributions totaled approximately $500,000 for the year ended June 30, 2013; $402,500 for the year ended June 30, 2012; and $593,600 for 8

11 Notes to the Financial Statements the year ended June 30, Effective for the year ended June 30, 2014, the entity changed its charitable giving strategy and is no longer contributing to Children, Incorporated. Note B Use of Estimates and Consideration of Subsequent Events Preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires estimating some of the amounts reported; actual results could differ from the estimates. Those accounting principles also require evaluating subsequent events to determine whether they should be considered in the measurements and disclosures in the financial statements. Management s evaluation of subsequent events was through February 5, 2015, which is the date the financial statements were available to be issued. Note C Credit Risk for Cash There was credit risk for cash because balances under deposit arrangements with Wells Fargo exceeded the maximum amount insured by the Federal Deposit Insurance Corporation by $1,186,319 at June 30, 2014, and $1,688,901 at June 30, Note D Marketable Securities Children, Incorporated has three portfolios of marketable securities, all of which are maintained by Wells Fargo. The carrying amount of the portfolios is their fair value at June 30, 2014 and Their fair value was determined using quoted prices in active markets for identical instruments, sometimes referred to as a Level 1 measurement. The components of the portfolios at June 30, 2014 and 2013, follow Money market account $ 1,683,667 $ 1,667,388 Mutual funds 1,456,914 1,350,721 Note E Furniture and Equipment Fair value of the portfolios $ 3,140,581 $ 3,018,109 The components of the carrying amount of furniture and equipment at June 30, 2014 and 2013, follow Cost $ 551,077 $ 156,132 Accumulated depreciation (104,590) (99,887) Carrying amount of furniture and equipment $ 446,487 $ 56,245 9

12 Notes to the Financial Statements During the year ended June 30, 2013, Children, Incorporated began developing a database, primarily using a consulting firm under an hourly-rate contract. Costs of $442,249 were incurred under the contract through June 30, Additional costs of approximately $50,000 were incurred by the time the database was completed near the end of October Note F Permanently Restricted Net Assets Three contributions made in prior years established permanent endowments: $100,000 in December 1999; $119,788 in July 2010; and $352,559 in January Correspondence from the donors required Children, Incorporated to establish permanent endowments in the amount of the December 1999 and July 2010 contributions and use the investment earnings to arrange and provide funding for supplies and services to meet the basic and educational needs of impoverished children. That is also the donor s intent for the January 2012 contribution based on discussions legal counsel for Children, Incorporated had with the Executor of the estate that made the contribution. Note G Description of Leasing Arrangements Children, Incorporated leases its office in Richmond under a year-to-year arrangement that was renewed in August 2014 for monthly rentals of $4,450 through December Rent expense under the agreement was $53,400 for the years ended June 30, 2014 and Children, Incorporated also leases office equipment under cancelable arrangements. 10