Financial Statements of. GRAND CANYON SYNOD OF THE EVANGELICAL LUTHERAN CHURCH IN AMERICA (a non-profit religious corporation)

Transcription

1 Financial Statements of GRAND CANYON SYNOD OF January 31, 2018

2 FINANCIAL STATEMENTS Year Ended January 31, 2018 TABLE OF CONTENTS Independent Auditors Report 1 Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6 Supplemental Information: Schedule of Financial Support 12 Schedule of Activities and Changes in Net Assets by Area of Ministry 13 PAGE

3 950 W Indian School Rd Phoenix AZ INDEPENDENT AUDITORS REPORT To the Council of Grand Canyon Synod of the Evangelical Lutheran Church in America We have audited the accompanying financial statements of Grand Canyon Synod of the Evangelical Lutheran Church in America, which comprises the statement of financial position as of January 31, 2018, 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 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 Grand Canyon Synod of the Evangelical Lutheran Church in America as of January 31, 2018, and 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. METZ & ASSOCIATES, PLLC CERTIFIED PUBLIC ACCOUNTANTS

4 Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of financial support on page 12 and the schedule of activities and changes in net assets by area of ministry on page 13 are presented for purposes of additional analysis and are not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. Phoenix, Arizona May 7, 2018 METZ & ASSOCIATES, PLLC CERTIFIED PUBLIC ACCOUNTANTS

5 Statement of Financial Position January 31, 2018 Assets Current Assets Cash and cash equivalents $ 869,272 Restricted cash 40,981 Investments, at fair value 1,334,830 Accounts receivable 76,713 Prepaid expenses 6,640 Total Current Assets 2,328,436 Property and equipment 23,857 Less: Accumulated depreciation (3,956) Net Property and Equipment 19,901 Other Assets Investments with permanent restrictions 625,346 Deposits 2,809 Total Other Assets 628,155 Total Assets $ 2,976,492 Liabilities and Net Assets Current Liabilities Payable to ELCA $ 87,867 Accounts payable and accrued expenses 35,340 Funds held for others 40,981 Total Current Liabilities 164,188 Net Assets Unrestricted 538,918 Designated unrestricted general mission support 563,356 Temporarily restricted 1,096,108 Permanently restricted 613,922 Total Net Assets 2,812,304 Total Liabilities and Net Assets $ 2,976,492 The accompanying Independent Auditors Report and notes are an integral part of these financial statements. 3

6 Statement of Activities Year Ended January 31, 2018 Changes in unrestricted net assets: Support and revenue Congregational and designated giving $ 1,863,716 Grants 43,038 Other income 94,231 Investment income 27,267 Total unrestricted support and revenue 2,028,252 Net assets released from restrictions 76,417 Total unrestricted support and revenue and net assets released from restrictions 2,104,669 Expenses: Mission support 1,246,510 Personnel 289,135 Program services 240,226 Professional services 151,430 Travel expenses 59,679 Occupancy 34,330 Administration 15,171 Equipment and software 4,997 Other expenses 6,538 Postage and supplies 4,736 Communication 2,728 Total expenses 2,055,480 Increase in unrestricted net assets 49,189 Changes in temporarily restricted net assets: Investment income 181,647 Net assets released from restrictions (56,017) Increase in temporarily restricted net assets 125,630 Changes in permanently restricted net assets: Investment income 94,302 Net assets released from restrictions (20,400) Increase in permanently restricted net assets 73,902 Increase in net assets 248,721 Net assets at January 31, ,563,583 Net assets at January 31, 2018 $ 2,812,304 The accompanying Independent Auditors Report and notes are an integral part of these financial statements. 4

7 Statement of Cash Flows Year Ended January 31, 2018 Cash flows from operating activities: Change in net assets $ 248,721 Adjustments to reconcile change in net assets to net cash used in operating activities Depreciation 5,654 Gain on disposal of property and equipment (5,258) Noncash compensation 10,634 Gain in fair market value of investments (297,396) (Increase)/decrease in: Accounts receivable 14,844 Prepaid expense (129) Increase/(decrease) in: Payable to ELCA (19,411) Accounts payable and accrued expenses (8,599) Funds held for others (11,380) Net cash used in operating activities (62,320) Cash flows from investing activities: Redemption of investments 70,400 Purchase of automobile (22,112) Net cash provided by investing activities 48,288 Net decrease in cash, cash equivalents and restricted cash (14,032) Cash, cash equivalents and restricted cash at beginning of year 924,285 Cash, cash equivalents and restricted cash at end of year $ 910,253 Noncash disclosure of cash flow information: Noncash compensation $ 10,634 Cash and cash equivalents $ 869,272 Restricted cash 40,981 Cash, cash equivalents and restricted cash at end of year $ 910,253 The accompanying Independent Auditors Report and notes are an integral part of these financial statements. 5

8 Notes to Financial Statements January 31, 2018 NOTE A NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES Nature of Activities The Grand Canyon Synod of the Evangelical Lutheran Church in America (the Synod) was incorporated in 1986 as a non-profit religious corporation. Its purpose is to promote the Christian religion according to the tenants of faith set forth in the Constitution of the Evangelical Lutheran Church in America. The Synod is comprised of approximately 100 congregations in Arizona and southern Nevada. The officers and members of the Synod Council are elected by the Synod Assembly. The Synod Assembly is comprised of ordained ministers, associates in ministry, diaconal ministers and congregational lay members. Basis of Accounting The accounts of the Synod are maintained, and the financial statements have been prepared on the accrual basis of accounting. Accordingly, revenues are recognized when earned and expenses are recognized when incurred. Basis of Presentation Information regarding financial position and activities is reported according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Support received is recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the nature of donor restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restrictions expire in the reporting period in which the support is recognized. All other donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, either when stipulated time restriction expires or purpose 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. Contributions of unrestricted net assets with an economic life in excess of one year are recorded as increases in support and unrestricted net assets. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles (GAAP) accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements, and revenue and expenses during the period reported. Actual results could differ from those estimates. Concentrations of Credit Risk Financial instruments which potentially subject the Synod to concentrations of credit risk include cash deposits maintained in excess of Federal Deposit Insurance Corporation ( FDIC ) and Securities Investor Protection Corporation ( SIPC ) limits throughout the year. The Company maintains mutual fund balances included in cash and cash equivalents. These funds are not insured by the Federal Deposit Insurance Corporation. At January 31, 2018, the Synod s uninsured cash balances totaled $453,359. Property and Equipment Property and equipment is recorded at cost, or if donated, at estimated fair value at donation date. Repairs, maintenance, and minor replacements are expensed as incurred. For financial reporting purposes, depreciation is computed using the straight line method over the estimated useful lives of the assets, which range from five to ten years. The Synod capitalizes its property and equipment in excess of $3,000. Revenue Recognition The Synod recognizes contributions and revenue when received. Contributions are recorded as unrestricted, temporarily restricted, or permanently restricted based on the existence and nature of any donor-imposed restrictions. 6

9 Notes to Financial Statements January 31, 2018 NOTE A NATURE OF ACTIVITIES AND SIGNIFICANT ACCOUNTING POLICIES (continued) Compensated Absences The Synod allows full-time employees to receive compensation for vacation and sick leave. Employees are allowed to carry forward five days of vacation into the following calendar year. Upon termination, earned but unpaid vacation time shall be paid as of the last full pay period before the termination. The accrued vacation liability at January 31, 2018 is $14,829 and is included in accrued expenses. Donated Services No amounts have been reflected in the financial statements for donated services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist the Synod with specific programs, fund solicitations, and various committee assignments. Income Tax Status The Synod is an exempt religious organization under the Internal Revenue Code Section 501(c)(3) and is covered by a group exemption letter issued to the Evangelical Lutheran Church in America and, accordingly, there is no provision for income taxes included in the financial statements. Cash and Cash Equivalents For purposes of the statement of cash flows, the Synod considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. Investments Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met in the reporting period in which the income and gains are recognized. Investments 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 least reasonably possible that changes in risks in the near term could materially affect account balances and the amounts reported in the accompanying financial statements. Estimates The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. NOTE B FAIR VALUE ESTIMATES The Synod s investments are reported at fair value in the accompanying statement of financial position. The methods used to measure fair value may produce an amount that may not be indicative of future fair values. Furthermore, although the Synod believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. GAAP provides a fair value hierarchy that 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 or liabilities (level 1) and the lowest priority to unobservable inputs (level 3). The three levels of the fair value hierarchy under GAAP are described as follows: Level 1 Fair Value Measurements Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Synod has the ability to access. 7

10 Notes to Financial Statements January 31, 2018 NOTE B FAIR VALUE ESTIMATES (continued) Level 2 Fair Value Measurements Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets quoted prices for identical or similar assets or liabilities in inactive markets inputs other than quoted prices that are observable for the asset or liability inputs that are derived principally from, or corroborated by, observable market data by correlation or other means If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Fair Value Measurements Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques maximize the use of relevant observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at January 31, Mutual Funds - Valued at the daily closing price as reported by the fund. Mutual funds held by the Synod are open-end mutual funds that are registered with the Securities and Exchange Commission. These funds are required to publish their daily Net Asset Value (NAV) and to transact at that price. The mutual funds held by the Synod are deemed to be actively traded. The following table sets forth by level, within the fair value hierarchy, the Synod's assets at fair value as of January 31, Assets at Fair Value Total Level 1 Level 3 Mutual funds $ 1,960,176 $ 1,960,176 $ 0 Total assets at fair value $ 1,960,176 $ 1,960,176 $ 0 NOTE C PROPERTY AND EQUIPMENT Property and equipment consist of the following as of January 31, 2018: Estimated Useful Lives Automobiles $ 22,112 5 years Furniture 1, years 23,857 Accumulated depreciation (3,956) Property and equipment, net $ 19,901 Depreciation expense for the year ended January 31, 2018 was $5,654 and is included in Other Expense. 8

11 Notes to Financial Statements January 31, 2018 NOTE D FUNDS HELD FOR OTHERS Funds held for others consist of the following at January 31, 2018: Retired pastors retreat $ 16,681 Gifts to other congregation 10,000 Lutheran Social Services of the Southwest 7,031 Gifts to Universities Campus Ministries 4,939 Navajo Lutheran Mission 400 Lutheran Social Services of Nevada 750 Other gifts 1,180 $ 40,981 NOTE E TEMPORARILY RESTRICTED NET ASSET Temporarily restricted net assets at January 31, 2018 represent amounts restricted for various purposes as listed below: Latino mission support $ 335,275 Scholarships for potential and current seminarians 298,580 Faith formation 219,341 Outreach for new and redeveloping congregations 183,309 Haiti educational programs 59,603 $ 1,096,108 NOTE F PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets at January 31, 2018 consist of endowment funds established to support congregational assistance. Contributions to the endowment fund are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested by the Synod indefinitely. Income from the fund is to be expended for congregational assistance program services. As required by GAAP, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. NOTE G INVESTMENT INCOME AND EXPENSES Investment income and expenses were as follows for the year ended January 31, 2018: Change in fair market value of investment $ 297,396 Interest 5,820 $ 303,216 9

12 Notes to Financial Statements January 31, 2018 NOTE H RETIREMENT PLAN The Synod contributes to a pension plan, which is maintained by the Board of Pensions of the Evangelical Lutheran Church in America, for the benefit of all Synod employees. All employees are eligible to participate immediately upon employment. The pension cost is 10% of defined compensation. The pension plan expense that was included in personnel expenses was $17,139 for the year ended January 31, NOTE I OPERATING LEASE The Synod entered into an office lease, categorized as an operating lease for accounting purposes, on September 1, The lease has minimum monthly payments ranging from $2,488 to $2,809 and the rent is adjusted annually. The operating lease agreement expires August 31, Future minimum payments under the amended lease agreement are as follows: Year ending January 31, 2019 $ 19,661 Occupancy expense under the lease for the year ended January 31, 2018 was $34,330. NOTE J UNCERTAIN TAX POSITIONS The Synod has implemented GAAP for uncertainty in income taxes. The Synod evaluates its uncertain tax positions, if any, on a continual basis through review of its policies and procedures and review of its regular tax filings. As of January 31, 2018, the Synod had made no changes in the purpose, character or method of operations, and therefore management believes the Synod did not have any uncertain tax positions that qualify for either recognition or disclosure in the financial statements. NOTE K SUBSEQUENT EVENTS The Synod evaluates events occurring subsequent to the date of the financial statements in determining the accounting for and disclosure of transactions and events that affect the financial statements. Management has determined that there were no events that occurred that require additional disclosure. Subsequent events have been evaluated through May 7, 2018, which is the date the financial statements were available to be issued. 10

13 SUPPLEMENTAL INFORMATION

14 Schedule of Financial Support For the Year Ended January 31, 2018 Pacific Lutheran Theological Seminary $ 102,000 Lutheran Social Services of the Southwest 80,000 Campus Ministry, Arizona State University 36,672 Campus Ministry, Northern Arizona University 36,672 Campus Ministry, University of Arizona 36,672 Lutheran Social Services of Nevada 20,000 Spirit in the Desert 13,500 Region 2 9,100 Arizona Faith Network 4,000 California Lutheran University 2,000 $ 340,616 12

15 Schedule of Activities and Changes in Net Assets by Area of Ministry For the Year Ended January 31, 2018 Mission Congregational Office of Missional Support Ministry The Bishop Network Administration Totals Support and Revenue Congregation Gifts $ 1,811,337 $ 0 $ 998 $ 51,381 $ 0 $ 1,863,716 Grants , ,038 Other Income 16,237 6,498 53,065 18, ,231 Interest and Investment Earnings , , , ,216 Net Assets Released 0 3,517 (7,500) 79,909 (75,926) 0 Total Support and Revenue 1,827,574 10,015 81, ,221 83,761 2,304,201 Expenses Mission Support 1,246, ,246,510 Personnel 0 5, ,807 12, , ,135 Program 0 3,600 35, ,849 1, ,226 Professional Fees and Services ,200 51,035 35, ,430 Travel ,238 29, ,679 Building 0 0 3, ,499 34,330 Administrative ,031 2,811 1,329 15,171 Equipment and Software ,997 4,997 Other 0 0 5, ,538 Postage and Supplies ,270 4,736 Communication ,594 2,728 Total Expenses 1,246,510 9, , , ,518 2,055,480 Increase (Decrease) in Net Assets $ 581,064 $ 996 $ (212,877) $ 4,295 $ (124,757) $ 248,721 13

16 METZ & ASSOCIATES PLLC CERTIFIED PUBLIC ACCOUNTANTS 950 W INDIAN SCHOOL RD, PHOENIX AZ PHONE: FAX TJACK@METZCPA.COM WEB: METZCPA.COM