OVERSEAS MISSIONARY FELLOWSHIP, INC. d/b/a OMF INTERNATIONAL (U.S.)

Transcription

1 FINANCIAL STATEMENTS With Independent Auditors' Report

2 Table of Contents Independent Auditors' Report 1 Financial Statements Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 6 Page

3 INDEPENDENT AUDITORS REPORT Board of Directors Overseas Missionary Fellowship, Inc. d/b/a OMF International (U.S.) Littleton, Colorado We have audited the accompanying financial statements of Overseas Missionary Fellowship, Inc. d/b/a OMF International (U.S.), which comprise the statements of financial position as of, and the related statements of activities 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. Auditors' 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 audits 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 Board of Directors Overseas Missionary Fellowship, Inc. d/b/a OMF International (U.S.) Littleton, Colorado Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Overseas Missionary Fellowship, Inc. d/b/a OMF International (U.S.), as of December 31, 2013 and 2012, and the changes in its net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Littleton, Colorado March 7,

5 Statements of Financial Position December 31, ASSETS: Cash and cash equivalents $ 4,442,829 $ 4,528,447 Prepaid expenses, receivables, and other assets 222, ,158 Investments 4,894,935 4,307,602 Property and equipment net 760, ,342 Prepaid entrance fees net 454, ,684 Assets held in trust 298, ,022 Endowment assets 255, ,635 Total Assets $ 11,331,045 $ 10,824,890 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 126,090 $ 164,566 Accounts payable to Fellowship and affiliates 666, ,545 Charitable gift annuities payable 17,568 17, , ,647 Net assets: Unrestricted: Undesignated 2,175,955 1,719,318 Board designated Lammermuir fund 2,309,213 2,725,601 Equity in property and equipment net 760, ,342 5,246,060 5,269,261 Temporarily restricted 5,087,087 4,919,884 Permanently restricted Dreyer endowment 188, ,098 10,521,245 10,377,243 Total Liabilities and Net Assets $ 11,331,045 $ 10,824,890 See notes to financial statements -3-

6 Statements of Activities Year Ended December 31, Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total SUPPORT AND REVENUE: Contributions $ 2,492,326 $ 13,197,257 $ - $ 15,689,583 $ 2,894,435 $ 12,669,045 $ - $ 15,563,480 Investment income 583,188 47, , ,770 37, ,668 Contributed services 140, , , ,650 Change in value of charitable gift annuities and trusts 32 29,572-29,604 (949) 17,158-16,209 Other revenue 229, , , ,337 Total Support and Revenue 3,445,512 13,274,435-16,719,947 3,533,243 12,724,101-16,257,344 NET ASSETS RELEASED: Purpose and time restrictions 12,518,558 (12,518,558) ,544,789 (13,544,789) - - Administrative assessments 588,674 (588,674) ,953 (613,953) - - Total Net Assets Released 13,107,232 (13,107,232) ,158,742 (14,158,742) - - EXPENSES: Program services 13,848, ,848,738 14,239, ,239,107 Supporting activities: General and administrative 2,276, ,276,631 2,193, ,193,064 Fund-raising 450, , , ,479 2,727, ,727,207 2,690, ,690,543 Total Expenses 16,575, ,575,945 16,929, ,929,650 Change in Net Assets (23,201) 167, , ,335 (1,434,641) - (672,306) Net Assets, Beginning of Year 5,269,261 4,919, ,098 10,377,243 4,506,926 6,354, ,098 11,049,549 Net Assets, End of Year $ 5,246,060 $ 5,087,087 $ 188,098 $ 10,521,245 $ 5,269,261 $ 4,919,884 $ 188,098 $ 10,377,243 See notes to financial statements -4-

7 Statements of Cash Flows Year Ended December 31, CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 144,002 $ (672,306) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation expense 117,829 82,788 Amortization of prepaid entrance fees 148,940 94,463 Change in value of charitable gift annuities and trusts (29,604) (16,209) Net realized and unrealized gain on investments (509,168) (272,809) Net change in operating assets and liabilities: Prepaid expenses, receivables, and other assets (114,815) 1,084 Bequests receivable - 595,968 Accounts payable and accrued expenses (38,476) (248,713) Accounts payable to Fellowship and affiliates 400,597 (312,514) Net Cash Provided (Used) by Operating Activities 119,305 (748,248) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (54,379) (44,182) Purchases of investments and reinvested income (201,766) (631,717) Proceeds from sale of investments 55,503 1,044,672 Net Cash Provided (Used) by Investing Activities (200,642) 368,773 CASH FLOWS FROM FINANCING ACTIVITIES: Payments on charitable gift annuities (4,281) (4,281) Net Cash Used by Financing Activities (4,281) (4,281) Net Change in Cash and Cash Equivalents (85,618) (383,756) Cash and Cash Equivalents, Beginning of Year 4,528,447 4,912,203 Cash and Cash Equivalents, End of Year $ 4,442,829 $ 4,528,447 See notes to financial statements -5-

8 1. NATURE OF ORGANIZATION: Overseas Missionary Fellowship, Inc. d/b/a OMF International (U.S.) (OMF International) is organized as a notfor-profit corporation under the laws of Pennsylvania and is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. In 2008, the Internal Revenue Service changed the status of OMF International from a religious order to a church. As an interdenominational, Protestant missionary church, its mission is to glorify God by the mobilization of resources for the evangelization of East Asia's peoples. Activities include extensive and culturally-sensitive evangelism, teaching and nurturing of believers, planting of new churches, facilitating growth and effective witness in already established churches, translation, medical care, literature production, and leadership training. The work of OMF International is being carried out among East Asia's peoples, both in Asia and among the Asian international community world-wide. OMF International is led by a General Director responsible for the overall leadership of Overseas Missionary Fellowship International (the Fellowship) and the determination of major policies. The International Headquarters is in Singapore, where decisions relating to the national churches overseas are made in consultation with area directors and national leaders from the countries concerned and in the context of Asian cultures. The financial statements included herein reflect the operations of the U.S. Headquarters only. The U.S. Headquarters represents the Fellowship to home churches, assesses the suitability of candidates for membership, and seeks to encourage prayer for members overseas and their financial and material support. A significant portion of the contributions received by OMF International represents donations from U.S. donors who are supporting missionaries and projects of the Fellowship. Each month, the U.S. office transmits funds internationally, representing these donations. In the accompanying financial statements, funds which have been remitted to the International Headquarters are considered to have been expended for the program activity for which they were designated. 2. SIGNIFICANT ACCOUNTING POLICIES: OMF International maintains its accounts and prepares its financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. 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, disclosures of any contingent assets and liabilities at the date of the financial statements, and the reported revenues and expenses during the reporting period. Actual results could differ from the estimates. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader. -6-

9 2. SIGNIFICANT ACCOUNTING POLICIES, continued: CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash held in checking, savings, and money market accounts and petty cash on hand. These accounts may, at times, exceed federally insured limits. OMF International has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash. PREPAID ENTRANCE FEES In 2008, OMF International sold a facility that was used to accommodate retired missionaries. OMF International received a commitment from the buyer to care for the residents living in the facility at the time of the sale. The sale price was based on the fair market value of what residents would have to pay for similar accommodations. The value of the services provided was $1,048,000. The amount represents prepaid entrance fees for the residents and is being amortized over the estimated life expectancies of the residents. Accumulated amortization as of, was $593,256 and $444,316, respectively. INVESTMENTS Investments consist of mutual funds, certificates of deposit, money markets, unit trusts, and equity. Realized and unrealized gains and losses are included as unrestricted revenue in the statements of activities. Donated investments are recorded at the fair value on the date of donation and thereafter carried in accordance with the above provisions. PROPERTY AND EQUIPMENT Expenditures for property and equipment are capitalized at cost. Donated assets to be used by OMF International are capitalized at their fair value on the date of the gift. Depreciation of property and equipment is computed on the straight-line method over the estimated useful lives of the assets (thirty years for buildings, five to seven years for furniture and equipment, seven years for vehicles, and three to seven years for software). OMF International capitalizes fixed asset purchases exceeding $3,000, with lesser amounts expensed in the year purchased. -7-

10 2. SIGNIFICANT ACCOUNTING POLICIES, continued: CLASSES OF NET ASSETS The financial statements report amounts separately by class of net assets. Unrestricted net assets are those resources currently available, at the discretion of the board, and invested in property and equipment. Temporarily restricted net assets are those resources which are stipulated by donors for specific operating purposes and those currently not available for use until lifetime beneficiary interests have ceased. Permanently restricted net assets are those resources contributed with donor restrictions requiring they be held in perpetuity. Income received on endowment funds has been designated by agreement for specific ministry purposes. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by management to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The board of directors of OMF International has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, OMF International classifies as permanent restricted net assets (a) the original value of the gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donorrestricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, OMF International considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund 2. The purposes of the organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the organization 7. The investment policies of the organization -8-

11 2. SIGNIFICANT ACCOUNTING POLICIES, continued: CLASSES OF NET ASSETS, continued Changes in endowment net assets are: Year Ended December 31, 2013 Temporarily Permanently Restricted Restricted Total Endowment Net Assets, Beginning of Year $ 30,537 $ 188,098 $ 218,635 Investment income: Interest and dividends 7,280-7,280 Net realized and unrealized gains 29,819-29,819 Endowment Net Assets, End of Year $ 67,636 $ 188,098 $ 255,734 Changes in endowment net assets are: Year Ended December 31, 2012 Temporarily Permanently Restricted Restricted Total Endowment Net Assets, Beginning of Year $ 3,464 $ 188,098 $ 191,562 Investment income: Interest and dividends 6,789-6,789 Net realized and unrealized gains 20,284-20,284 Endowment Net Assets, End of Year $ 30,537 $ 188,098 $ 218,635-9-

12 2. SIGNIFICANT ACCOUNTING POLICIES, continued: SUPPORT, REVENUE, AND EXPENSES Contributions are recorded when made, which may be when cash or other assets are received or unconditionally promised. All contributions are considered available for unrestricted use, unless stipulations are made by the donor for a specified time or purpose. Donor-preferenced contributions for missionary support and projects are reported as temporarily restricted contributions and are reclassified as unrestricted when the funds have been expended for the purposes specified. Donated goods (including securities and property) are recorded at fair value at the date of the gift. Those contributions postmarked by December 31, 2013, are recorded as contributions and cash and cash equivalents rather than promises to give. OMF International reports gifts of property and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire longlived assets are reported as restricted support. Absent explicit donor stipulations about how long those longlived assets must be maintained, OMF International reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Other support and revenue is recognized when earned and expenses are recorded when incurred in accordance with the accrual basis of accounting. OMF International recognizes contributed services that create or enhance non-financial 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. These services primarily consist of medical professionals' donated time for ministry purposes. The value of these services received by OMF International and recognized as contributed services revenue and expense in the statements of activities was $140,085 and $109,650 for the years ended, respectively. -10-

13 2. SIGNIFICANT ACCOUNTING POLICIES, continued: ALLOCATION OF EXPENSES The costs of providing various program services and supporting activities have been summarized on a functional basis in the statements of activities. Costs have been allocated to program services and supporting activities based on the functions benefited. OMF International incurs joint costs for missionaries that include activities when on furlough. These costs have been allocated as follows: Year Ended December 31, Program services $ 503,942 $ 610,450 Supporting activities: General and administrative 105, ,998 Fund-raising 203, ,149 $ 812,809 $ 984,597 FUND-RAISING The functional expense category of fund-raising is included in these financial statements based on certain definitions and criteria put forth by the Not-For-Profit Topic of the Financial Accounting Standards Board Accounting Standards Codification (FASB ASC). Activities such as conducting seminars on estate planning and deferred giving, preparing and submitting grant proposals upon request, and the maintenance and operation of OMF International s donor database are reported as fund-raising per the Not-For-Profit Topic of the FASB ASC. UNCERTAIN TAX POSITIONS The financial statement effects of a tax position taken or expected to be taken are recognized in the financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Interest and penalties, if any, are included in expenses in the statements of activities. As of December 31, 2013, OMF International had no uncertain tax positions that qualify for recognition or disclosure in the financial statements. -11-

14 3. INVESTMENTS: Investments consist of: December 31, Mutual funds $ 4,241,891 $ 3,490,237 Certificates of deposit 391, ,046 Money market funds 181, ,778 Unit trusts 71,864 54,323 Common stock 8,448 1,180 Corporate bonds - 21,038 Investment income, related to investments and endowment assets, consists of: $ 4,894,935 $ 4,307,602 Year Ended December 31, Interest and dividends $ 121,626 $ 135,859 Net realized and unrealized gains 509, ,809 $ 630,794 $ 408,

15 4. PROPERTY AND EQUIPMENT NET: Property and equipment net consist of: December 31, Land $ 238,353 $ 238,353 Buildings 1,505,271 1,500,206 Furniture and equipment 614, ,824 Vehicles 88, ,110 2,446,146 2,406,493 Less accumulated depreciation (1,685,254) (1,679,631) 760, ,862 Assets not placed in service - 97,480 Property and equipment net $ 760,892 $ 824, ASSETS HELD IN TRUST: Assets held in trust consist of: December 31, Mutual funds $ 228,335 $ 198,514 Money market funds 70,603 35,508 Temporarily restricted change in value: $ 298,938 $ 234,022 Year Ended December 31, Interest and dividends $ 6,397 $ 5,001 Net realized and unrealized gains (losses) 23,175 12,157 $ 29,572 $ 17,

16 6. ENDOWMENT ASSETS: Endowment assets consist of: December 31, Mutual funds $ 231,982 $ 197,523 Certificates of deposit 20,555 20,921 Money market funds 3, Investment income related to endowment assets is included in Footnote 3. $ 255,734 $ 218, ANNUITIES PAYABLE: OMF International has established a gift annuity plan whereby donors have contributed assets to OMF International in exchange for the right to receive a fixed-dollar annual return during their lifetimes. A portion of the transfer is considered to be a charitable contribution for income tax purposes. The annuity liability is revalued annually based upon actuarially-computed present values using federal mortality tables and a discount rate of 5% as of. Unrestricted change in value consists of: Year Ended December 31, Payments on charitable gift annuities $ (4,281) $ (4,281) Charitable gift annuity actuarial change 4,313 3,332 $ 32 $ (949) -14-

17 8. TEMPORARILY RESTRICTED NET ASSETS: Temporarily restricted net assets consist of: December 31, Project and support balances held locally $ 4,673,721 $ 4,620,781 Adeney charitable trust 304, ,022 Dreyer missionary kids fund 67,636 30,537 Other projects 41,292 34, OTHER REVENUE: Other revenue consists of: $ 5,087,087 $ 4,919,884 Year Ended December 31, Publication sales $ 63,272 $ 64,313 Tenant rents 14,519 15,747 Miscellaneous fees and conference revenue 152,090 79,277 $ 229,881 $ 159, RELATED PARTY TRANSACTIONS: Throughout the year, various transactions occur on behalf of and between the affiliated organizations described in Note 1. These transactions are summarized below: Year Ended December 31, Funds received by OMF International from the Fellowship and affiliates: Contributions $ 603,313 $ 657,394 Various reimbursements 1,615, ,896 $ 2,218,465 $ 1,161,

18 10. RELATED PARTY TRANSACTIONS, continued: Year Ended December 31, Funds sent from OMF International to the Fellowship and affiliates: Contributions - missionary support (salaries and benefits) $ 7,036,420 $ 6,462,340 Various reimbursements 959,090 2,782,369 $ 7,995,510 $ 9,244,709 December 31, Amounts payable to the Fellowship and affiliates by OMF International $ 666,142 $ 265, OMF INTERNATIONAL PHILIPPINES FIELD: During 1993, legal research disclosed the fact that the Philippines field operation was organized under the control of OMF International. Since its organization in the 1950s, the Philippines field has always operated as and reported to International Headquarters in Singapore as an independent field. Although a controlled subsidiary in form, the Philippines field is not consolidated in these financial statements as it is not controlled in substance. The necessary legal steps have been taken in the Philippines in order to transfer all assets, liabilities, and net assets from OMF International to the Philippines field. This transfer will be completed during the year ended December 31, LONG-TERM EMPLOYMENT: OMF International has no formal retirement plan for members who retired prior to January 1, The supplemental support OMF International provides currently retired missionaries is contingent upon need and God's provision of funds and is paid as wages and housing allowance. No formal commitment to continue this support has been, nor can be, made. However, OMF International's goal, with God's provision, is to ensure that all currently retired members receive a reasonable, minimal standard of living. During the years ended, OMF International paid $898,655 and $980,096, respectively, to retired members. -16-

19 13. RETIREMENT PLAN: During the year ending December 31, 2007, OMF International adopted a 403(b) defined contribution pension plan (the Plan). The Plan covers all employees and members who have completed three months of service and obtained the age of eighteen. Part-time employees must work 1,000 hours or more during a plan year to be eligible. OMF International has the ability to make a discretionary contribution as well as match employee elective deferrals 100% of the first 2% of salary withheld. Total contributions by OMF International was $24,110 and $22,715 for the years ended, respectively. 14. FAIR VALUE MEASUREMENTS: OMF International uses appropriate valuation techniques to determine fair value based on inputs available. When available, OMF International measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Fair values of investments, endowment assets, and assets held in trust measured on a recurring basis consist of: Fair Value Measurements Using: Quoted Prices Significant in Active Other Markets for Observable Identical Assets Inputs Total (Level 1) (Level 2) December 31, 2013: Mutual funds: Large value bond and equity mutual funds $ 2,470,183 $ 2,470,183 $ - Equity mutual funds: Large blend 927, ,115 - Large value 321, ,086 - Bond mutual funds: Intermediate 459, ,228 - World 303, ,094 - Corporate 221, ,503 - Certificates of deposit 412, ,061 Unit trusts 71,864-71,864 Common stock: technology 8,448 8,

20 14. FAIR VALUE MEASUREMENTS, continued: Fair Value Measurements Using: Quoted Prices Significant in Active Other Markets for Observable Identical Assets Inputs Total (Level 1) (Level 2) December 31, 2012: Mutual funds: Large value bond and equity mutual funds $ 1,938,157 $ 1,938,157 $ - Equity mutual funds: Large growth 360, ,984 - Large value 344, ,800 - Large blend 258, ,876 - Bond mutual funds: Intermediate 862, ,919 - World 120, ,538 - Long-term corporate bonds 21,038 21,038 - Certificates of deposit 462, ,967 Unit trusts 54,323-54,323 Common stock: consumer goods 1,180 1,180 - Level 1 Fair values for money market funds, mutual funds, bonds, and common stocks are determined by reference to quoted market prices and other relevant information generated by market transactions for identical assets. Level 2 The fair values of certificates of deposit are based on yields currently available on comparable securities of issuers with similar credit ratings. The fair values of the unit trusts are based on the value of underlying securities included in the trust. 15. SUBSEQUENT EVENTS: Subsequent events have been evaluated through the report date, which represents the date the financial statements were available to be issued. No subsequent events of disclosures were identified. Subsequent events after that date have not been evaluated. -18-