Avon Products Foundation, Inc.

Transcription

1 Financial Statements December 31, 2017 and 2016

2 December 31, 2017 and 2016 Table of Contents Page Independent Auditors' Report FINANCIAL STATEMENTS Statements of Financial Position 2 Statements of Activities 3-4 Statements of Functional Expenses 5-6 Statements of Cash Flows 7 Notes to Financial Statements 8-12

3 The Board of Directors Avon Products Foundation, Inc. Independent Auditors' Report We have audited the accompanying financial statements of Avon Products Foundation, Inc. (the Foundation ) which comprise the statements of financial position as of December 31, 2017 and 2016 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. 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 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 Avon Products Foundation, Inc. as of December 31, 2017 and 2016 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. Harrison, New York April 25, 2018 PKF O CONNOR DAVIES, LLP 500 Mamaroneck Avenue, Harrison, NY I Tel: I Fax: I PKF O Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.

4 Statements of Financial Position December 31, ASSETS Cash and cash equivalents $ 6,320,805 $ 8,291,143 Investments 1,475,000 1,720,000 Other receivables - 3,000 Due from related parties 29,801 2,744,785 $ 7,825,606 $ 12,758,928 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 40,174 $ 19,359 Due to related parties 106,635 3,212,647 Grants payable, net 388,014 1,669,634 Total Liabilities 534,823 4,901,640 Net Assets Unrestricted 5,620,589 6,125,665 Temporarily restricted 1,670,194 1,731,623 Total Net Assets 7,290,783 7,857,288 $ 7,825,606 $ 12,758,928 See notes to financial statements 2

5 Statement of Activities Year Ended December 31, 2017 Temporarily Unrestricted Restricted Total PUBLIC SUPPORT AND REVENUE Contributions from related parties Scholarship / Other Programs $ - $ 1,152,791 $ 1,152,791 Domestic Violence - 1,255,000 1,255,000 Global Philanthropy 223, ,015 General Support - In-Kind 508, ,199 Royalty fees - 1,120,564 1,120,564 Contributions from others 7,294 58,315 65,609 Investment income 63,181-63,181 Net Assets Released from Restrictions: Satisfaction of purpose restriction 3,871,114 (3,871,114) - Total Public Support and Revenue 4,449,788 (61,429) 4,388,359 EXPENSES Program Services Breast Cancer 936, ,893 Scholarship / Other Programs 1,476,074-1,476,074 Domestic Violence 1,835,154-1,835,154 Reforestation 150, ,839 Total Program Expenses 4,398,960-4,398,960 Supporting Services Management and general 555, ,904 Fundraising Total Supporting Services 555, ,904 Total Expenses 4,954,864-4,954,864 Change in Net Assets (505,076) (61,429) (566,505) NET ASSETS Beginning of year 6,125,665 1,731,623 7,857,288 End of year $ 5,620,589 $ 1,670,194 $ 7,290,783 See notes to financial statements 3

6 Statement of Activities Year Ended December 31, 2016 Temporarily Unrestricted Restricted Total PUBLIC SUPPORT AND REVENUE Contributions from related parties Scholarship / Other Programs $ - $ 1,241,000 $ 1,241,000 Domestic Violence - 1,650,000 1,650,000 General Support - In-Kind 637, ,509 Royalty fees 1,990,880 1,990,880 Contributions from others 169,179 69, ,818 Investment income 79,988-79,988 Net Assets Released from Restrictions: Satisfaction of purpose restriction 4,654,001 (4,654,001) - Total Public Support and Revenue 5,540, ,518 5,838,195 EXPENSES Program Services Breast Cancer 5,074,351-5,074,351 Scholarship / Other Programs 1,324,365-1,324,365 Domestic Violence 2,144,384-2,144,384 Reforestation 100, ,000 Emergency Relief Fund 77,000-77,000 Total Program Expenses 8,720,100-8,720,100 Supporting Services Management and general 538, ,508 Fundraising 67,377-67,377 Total Supporting Services 605, ,885 Total Expenses 9,325,985-9,325,985 Change in Net Assets (3,785,308) 297,518 (3,487,790) NET ASSETS Beginning of year 9,910,973 1,434,105 11,345,078 End of year $ 6,125,665 $ 1,731,623 $ 7,857,288 See notes to financial statements 4

7 Statement of Functional Expense Year Ended December 31, 2017 Program Services Supporting Services Scholarship/ Management Breast Other Domestic and Cancer Programs Violence Reforestation Total General Fundraising Total Total EXPENSES Grants $ 721,972 $ 1,292,891 $ 1,705,413 $ 150,839 $ 3,871,115 $ - $ - $ - $ 3,871,115 Equipment Communications ,100-2,100 2,100 Travel and meals 96,018-2,529-98, ,547 Supplies Printing 15, , ,590 Professional services , , ,268 Other services 23, , ,550 Insurance ,203-12,203 12,203 Taxes and licenses ,093-21,093 21,093 Bank fees ,479-46,479 46,479 Bad debt expense Total Direct Expenses 857,199 1,292,891 1,707, ,839 4,008, , ,794 4,446,665 Staffing 70, , , , , , ,882 Facilities 9,263 17,909 10,190-37,362 8,955-8,955 46,317 Total In-Kind Expenses 79, , , , , , ,199 Total Expenses $ 936,893 $ 1,476,074 $ 1,835,154 $ 150,839 $ 4,398,960 $ 555,904 $ - $ 555,904 $ 4,954,864 See notes to financial statements 5

8 Statement of Functional Expense Year Ended December 31, 2016 Program Services Supporting Services Scholarship/ Emergency Management Breast Other Domestic Relief and Cancer Programs Violence Reforestation Fund Total General Fundraising Total Total EXPENSES Grants $ 4,985,047 $ 1,066,985 $ 1,885,826 $ 100,000 $ 77,000 $ 8,114,858 $ - $ - $ - $ 8,114,858 Equipment 11, , ,855 Communications Travel and meals Supplies ,935 3,814 6,749 6,749 Facilities ,106 52,024 76,130 76,130 Printing 23, ,562-8,539 8,539 32,101 Professional services 30,652-1, , , , ,511 Insurance ,805-12,805 12,805 Taxes and licenses ,000 3,000 18,000 18,000 Bank fees ,013-87,013 87,013 Bad debt expense ,797-38,797 38,797 Total Direct Expenses 5,051,116 1,066,985 1,887, ,000 77,000 8,182, ,995 67, ,372 8,688,476 Staffing 20, , , ,136 87,057-87, ,193 Facilities 2,966 21,947 21, ,860 12,456-12,456 59,316 Total In-Kind Expenses 23, , , ,996 99,513-99, ,509 Total Expenses $ 5,074,351 $ 1,324,365 $ 2,144,384 $ 100,000 $ 77,000 $ 8,720,100 $ 538,508 $ 67,377 $ 605,885 $ 9,325,985 See notes to financial statements 6

9 Statements of Cash Flows Year Ended December 31, CASH FLOW FROM OPERATING ACTIVITIES Change in net assets $ (566,505) $ (3,487,790) Adjustments to reconcile change in net assets to net cash from operating activities Bad debt expense - 38,797 Net changes in operating assets and liabilities Pledges receivable, net - 22,418 Other receivable 3,000 1,176,128 Due from related parties 2,714, ,252 Deferred program costs - - Accounts payable and accrued expenses 20,815 (258,492) Due to related parties (3,106,012) 968,696 Grants payable, net (1,281,620) (1,055,366) Net Cash from Operating Activities (2,215,338) (2,361,357) CASH FLOW FROM INVESTING ACTIVITIES Proceeds from sale of investments 245,000 1,486,000 Net Change in Cash and Cash Equivalents (1,970,338) (875,357) CASH AND CASH EQUIVALENTS Beginning of year 8,291,143 9,166,500 End of year $ 6,320,805 $ 8,291,143 See notes to financial statements 7

10 Notes to Financial Statements December 31, 2017 and Organization The Avon Products Foundation, Inc. (the Foundation ) was incorporated in the State of New York in 1955 by Avon Products, Inc. ( Avon ). The fundamental mission of the Foundation since its inception is to promote or aid charitable, scientific, educational, and humanitarian activities, with a special emphasis on those activities that improve the lives of women and their families. In its work to realize those aspirations, its current mission focus is on two causes of great importance to women: eradicating breast cancer and ending domestic and gender violence. It works toward achieving this goal through three complementary strategies: funding, convening, and educating. The Foundation receives financial support to fund its mission initiatives from Avon and it s recently separated North American business, now known as New Avon, LLC through special product sales and direct donations. It also receives general support for its work through direct donations from the public through individuals. The Foundation also operates small additional programs that advance the Foundation s fundamental mission to improve the lives of women. Those programs include Avon and New Avon independent sale representative and employee-eligible scholarships and Avon and New Avon employee matching gifts, which are all funded by Avon and New Avon. In 2013 the Foundation began to operate the Avon global reforestation grant program, Healthy Forests, Beautiful World, which is focused on mobilizing women to nurture nature and help reverse deforestation. In 2015, the Foundation s Board of Directors concluded that it would result in efficiency and further the educational and charitable mission of the Avon Breast Cancer Crusade Program to transfer the Program to New Venture Fund ( NVF ), a 501 (c) (3) public charity with extensive experience in fiscal sponsorships and in managing complex programs. On September 2, 2015, NVF formed Avon Breast Cancer Crusade, LLC ( ABCC ) to support breast cancer research education, outreach, awareness and access to care. ABCC managed breast cancer grants and funding in the United States. In December 2017, ABCC discontinued its annual U.S. Avon 39 Walks and announced plans to wind-down its grantmaking programs. As a result, the foundation will no longer be partnering with ABCC in 2018, however, the Foundation will continue its work to support breast cancer initiatives globally through partnerships with other organizations. In 2017, the Foundation launched the Avon Breast Cancer Promise, its renewed commitment to the breast cancer cause in more than 50 markets worldwide. As part of this new promise, the Foundation, in partnership with Avon has set an annual goal to reach 50 million women to help them know the risks of breast cancer, know the signs of breast cancer, and know how to take action. The Foundation will work closely with its newly established advisory board of global experts to provide direction within the various markets in which the Foundation interacts. As a result of launching the new promise, the Foundation has ended its Avon Breast Cancer Crusade branding going forward. 8

11 Notes to Financial Statements December 31, 2017 and Summary of Significant Accounting Policies Basis of Presentation The financial statements are prepared in conformity with accounting principles generally accepted in the United States of America ( U.S. GAAP ) for nonprofit organizations, which requires the Foundation to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted net assets. There are no permanently restricted net assets. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents The Foundation considers all highly liquid debt instruments with a maturity of three months or less at the time of purchase, including certificates of deposit, to be cash equivalents. Allowance for Uncollectable Receivables An allowance for uncollectable receivables is estimated based on a combination of write-off history, aging analysis and any specific known troubled accounts. There was no allowance for uncollectable receivables at December 31, 2017 and Fair Value of Financial Instruments The Foundation follows U.S. GAAP on Fair Value Measurements and Disclosures which defines fair value and establishes a fair value hierarchy organized into three levels based upon the input assumptions used in pricing assets. Level 1 inputs have the highest reliability and are related to assets with unadjusted quoted prices in active markets. Level 2 inputs relate to assets with other than quoted prices in active markets which may include quoted prices for similar assets or liabilities or other inputs which can be corroborated by observable market data. Level 3 inputs are unobservable inputs and are used to the extent that observable inputs do not exist. Money market mutual funds included in cash equivalents are valued using level 1 inputs. Investments and Investment Income Investments consist of certificates of deposit valued at cost plus accrued interest which approximates fair value and have maturity dates ranging from greater than three months to seven years from the statement of financial position date. Income or losses from investments, including both realized and unrealized gains and losses, are treated as an increase or decrease in unrestricted net assets unless otherwise specified by the donor. 9

12 Notes to Financial Statements December 31, 2017 and Summary of Significant Accounting Policies (continued) Public Support and Revenue Unconditional promises to give are recorded as received. Unconditional promises to give due in the next year are reflected as current promises to give and are recorded at their net realizable value. Grants and other contributions of cash and other assets are reported as temporarily restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or a purpose 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 restriction. Royalty Fees The Foundation earns royalty fees from certain campaigns in which intellectual property of the Foundation is licensed. Royalty fees are recognized when earned. In-Kind Contributions Contributions of donated noncash assets are recorded at their fair values 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 purchases if not provided by donation, are recorded at the fair value in the period received. Avon provided the Foundation with in-kind support of $508,199 and $637,509 for the years ending December 31, 2017 and These amounts are reflected in the financial statements as contributions and expenses. Grants Grants are recorded when a commitment is made and approved by the Board of Directors. Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services in reasonable ratios determined by management. 10

13 Notes to Financial Statements December 31, 2017 and Summary of Significant Accounting Policies (continued) Tax Status The Foundation is a public charity and is exempt from Federal income taxes pursuant to Section 501 (c) (3) of the Internal Revenue Code. The Foundation recognizes the effects of income tax positions only when they are more likely than not to be sustained. Management has determined that the Foundation has no uncertain tax positions that would require financial statement recognition or disclosure. The Foundation is no longer subject to examinations by the applicable taxing jurisdictions for periods prior to Subsequent Events Evaluation by Management Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, which date is April 25, Concentration Risk Financial instruments that potentially subject the Foundation to concentration of credit risk consist principally of cash and cash equivalents and investments. The Foundation maintains its cash in bank deposit accounts which, at times, may exceed Federally insured limits. Cash equivalents consist of investments in money market mutual funds held with two money managers the balance of which was $5,918,910 and $7,964,989 at December 31, 2017 and The Foundation monitors this risk on a regular basis. Investments consist of brokered certificates of deposit, all of which were less than federally insured limits. The Foundation has not experienced any losses in such accounts. 4. Related Party Transactions (Not Disclosed Elsewhere) The following amounts were due from and to related parties as of December 31, Due From Related Parties New Avon, LLC $ 29,801 $ 1,990,880 Avon Products, Inc ,438 Avon Breast Cancer Crusade, LLC - 154,467 Total $ 29,801 $ 2,744,785 Due To Related Parties Avon Breast Cancer Crusade, LLC $ 105,816 $ 3,211,828 Avon Products, Inc Total $ 106,635 $ 3,212,647 11

14 Notes to Financial Statements December 31, 2017 and Related Party Transactions (Not Disclosed Elsewhere) (continued) Avon Products, Inc. In 2017, Avon made a pledge of $2,630,806 to the Foundation (exclusive of in-kind donations). In 2016, Avon made a pledge of $2,891,000 to the Foundation (exclusive of in-kind donations). New Avon, LLC During 2016, the Foundation entered into a charitable sales promotion and licensing agreement with New Avon which granted New Avon limited non-exclusive license to use the Foundation s name, trademark and logo in conjunction with charitable sales promotions. The royalty fee received by the Foundation is a portion of the purchase price on selected merchandise sold by New Avon. During 2017 and 2016 the total amount of royalty fees earned were $1,120,565 and $1,990,880. Avon Breast Cancer Crusade, LLC On September 11, 2015, the Foundation entered into a Transfer and Grant Agreement with the Crusade to support the latter s mission. The Foundation gave a one-time grant of $16,100,000 in 2015 that was added to the Crusade s working capital. Pursuant to the grant agreement, the Foundation gave the Crusade $1,700,000 in In addition, a contribution of $502,000 was given by the Foundation to the Crusade to help defray the transition expenses and a grant of $2,071,247 was given in support of the Avon 39 Walks. In 2017, the Foundation gave the Crusade $733,051 in support of the Avon 39 Walks. On March 7, 2016, the Foundation entered into an Administrative Services Agreement with the Crusade whereby the Crusade would provide managerial and administrative services. The agreement expired on December 31, For the year ended December 31, 2017 and 2016, the Foundation incurred $225,409 and $169,155 of expense. 5. Temporarily Restricted Net Assets Temporarily restricted net assets are available as follows at December 31: Purpose Restriction Scholarships/Other Programs $ 1,397,974 $ 1,479,759 Domestic Violence 188, ,864 Reforestation 72,176 - Breast Cancer 11,080 - $ 1,670,194 $ 1,731,623 * * * * * 12