WILLOW CREEK COMMUNITY CHURCH, INC.

Transcription

1 WILLOW CREEK COMMUNITY CHURCH, INC. Financial Statements With Independent Auditors Report And Federal Awards In Accordance with the Uniform Guidance Year Ended December 31, 2016

2 Table of Contents Independent Auditors Report 1 Financial Statements Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Notes to Financial Statements 6 Federal Awards Schedule of Expenditures of Federal Awards 19 Notes to Schedule of Expenditures of Federal Awards 20 Independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards 21 Independent Auditors Report on Compliance for Each Major Federal Program and Report on Internal Control Over Compliance Required by the Uniform Guidance 23 Schedule of Findings and Questioned Costs 25 Summary Schedule of Prior Audit Findings 27 Corrective Action Plan 28 Page

3 INDEPENDENT AUDITORS REPORT Board of Elders Willow Creek Community Church, Inc. South Barrington, Illinois Report on the Financial Statements We have audited the accompanying financial statements of Willow Creek Community Church, Inc. (WCCC), which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Managementʼs 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. Auditorsʼ 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 and standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States. 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. 120 East Liberty Drive, Suite 270 Wheaton, IL capincrouse.com

4 Board of Elders Willow Creek Community Church, Inc. South Barrington, Illinois Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Willow Creek Community Church, Inc.as of December 31, 2016 and 2015, 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. Report on Supplementary Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The accompanying schedule of expenditures of federal awards, as required by Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles and Audit Requirements for Federal Awards (Uniform Guidance), is presented for purposes of additional analysis and is 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. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated May 23, 2017, on our consideration of WCCC s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering WCCC s internal control over financial reporting and compliance. Wheaton, Illinois May 23,

5 Statements of Financial Position December 31, ASSETS: Current assets: Cash and cash equivalents $ 6,259,727 $ 9,314,259 Short-term investments 19,991,920 18,608,467 Accounts and other receivables, net 843, ,479 Current portion of contributions receivable 3,987,080 7,292,667 Inventory 826, ,736 Prepaid expenses and other assets 449, ,631 32,358,516 36,884,239 Contributions receivable, net of current portion 1,934,027 4,343,106 Long-term investments 597, ,317 Assets held for investment in property and equipment: Cash and cash equivalents 3,908,476 4,532,029 Investments 13,144,416 9,517,175 Property and equipment, net 173,543, ,738,458 Assets held for endowment 461, ,984 Total Assets $ 225,948,604 $ 204,966,308 LIABILITIES AND NET ASSETS: Current liabilities: Accounts payable and accrued expenses $ 2,853,067 $ 2,156,452 Construction costs payable 3,763,846 1,548,832 Unearned fees 242, ,254 Current portion of notes payable 1,816,450-8,676,196 3,957,538 Notes payable, net of current portion 13,187,900-21,864,096 3,957,538 Net assets: Unrestricted 188,208, ,647,180 Temporarily restricted 15,414,059 20,899,606 Permanently restricted 461, , ,084, ,008,770 Total Liabilities and Net Assets $ 225,948,604 $ 204,966,308 See notes to financial statements 3

6 Statements of Activities Year Ended December 31, CHANGES IN UNRESTRICTED NET ASSETS: Support and revenue: Contributions $ 53,266,369 $ 53,326,270 Donated food, vehicles, clothing and services 7,286,461 8,078,251 Sales 1,506,220 1,955,906 Fees 2,225,766 2,517,790 Interest and dividend income 232, ,177 Net realized and unrealized loss on investments (35,197) (4,435) Other income 661, ,760 65,144,050 66,797,719 Reclassifications - net assets released from restrictions: Satisfaction of purpose restrictions 6,533,958 4,644,033 Satisfaction of property restrictions 9,816,261 8,681,331 Satisfaction of timing restrictions 20,000 68,091 16,370,219 13,393,455 81,514,269 80,191,174 Expenses: Program services: Worship and programming 25,668,972 24,286,824 Ministries 12,263,233 11,815,694 Harvest and Seeds 2,357,873 2,574,003 Outreach 22,127,188 20,497,328 Camp Paradise 847, ,381 63,264,719 59,910,230 Supporting activities: Management and general 9,522,168 8,724,033 Fundraising 166, ,880 9,688,265 9,012,913 72,952,984 68,923,143 Change in unrestricted net assets 8,561,285 11,268,031 CHANGES IN TEMPORARILY RESTRICTED NET ASSETS: Contributions 11,763,294 17,487,106 Interest and dividend income on endowment 1,989 1,001 Bad debt losses due to change in allowance on contributions receivable (880,611) (507,444) Reclassifications - net assets released from restrictions (16,370,219) (13,393,455) Change in temporarily restricted net assets (5,485,547) 3,587,208 Change in Net Assets 3,075,738 14,855,239 Net Assets, Beginning of Year 201,008, ,153,531 Net Assets, End of Year $ 204,084,508 $ 201,008,770 See notes to financial statements 4

7 Statements of Cash Flows Year Ended December 31, CASH FLOWS FROM OPERATING ACTIVITIES: Reconciliation of change in net assets to net cash provided by operating activities: Change in net assets $ 3,075,738 $ 14,855,239 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation expense 7,052,914 5,645,641 Net realized and unrealized loss on investments 35,197 4,435 Net (gain) loss on disposal of property and equipment 113,924 (11,699) Contributions restricted for property and equipment (861,048) (5,759,604) Recognition of new contributions receivable restricted for capital campaign (1,428,720) (8,002,291) Change in allowance on contributions receivable 880, ,444 Change in discount on contributions receivable (97,982) 36,348 Changes in: Operating assets (450,943) (159,220) Operating liabilities (861,638) (1,202,573) Net Cash Provided by Operating Activities 7,458,053 5,913,720 CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of property and equipment (28,207,826) (13,243,320) Proceeds from sales of investments 36,750,693 28,484,647 Purchases of investments (41,905,160) (32,098,358) Proceeds from sales of property and equipment - 38,509 Change in cash restricted for investment in property and equipment 623,553 (1,305,088) Net Cash Used by Investing Activities (32,738,740) (18,123,610) CASH FLOWS FROM FINANCING ACTIVITIES: Proceeds from notes payable 15,004,350 - Contributions restricted for property and equipment 861,048 5,759,604 Proceeds from contributions receivable 6,360,757 5,604,813 Net Cash Provided by Financing Activities 22,226,155 11,364,417 Net Change in Cash and Cash Equivalents (3,054,532) (845,473) Cash and Cash Equivalents, Beginning of Year 9,314,259 10,159,732 Cash and Cash Equivalents, End of Year $ 6,259,727 $ 9,314,259 SUPPLEMENTAL DATA: Cash paid for interest and loan fees, $66,776 capitalized $ 84,026 $ - Noncash investing activities: Disposals of fully depreciated property and equipment $ 2,254,661 $ 2,373,584 Property and equipment purchased but not yet paid for $ 3,763,846 $ 1,548,832 See notes to financial statements 5

8 Notes to Financial Statements December 31, 2016 and NATURE OF ORGANIZATION: Willow Creek Community Church, Inc. of South Barrington, Illinois (WCCC) was incorporated in July Since its inception, WCCC has focused its resources on achieving its mission: to turn irreligious people into fully devoted followers of Christ. WCCC s main method of introducing people to Christ is through three weekend church services (worshipping and programming), aimed at ministering to people no matter where they are on their spiritual journey. WCCC also conducts midweek classes aimed at helping Christians grow in their faith. In addition, WCCC has six regional centers that conduct worship services and act as an extension of the main campus. Ministries and outreach are activities focused on specific areas of need or interest. Ministries for high school, junior high, grade school and pre-school children provide a friendly environment to learn about Christ in an increasingly unfriendly world. Casa de Luz, the Spanish speaking ministry of the church, was launched to reach out to the Latino community within the church's geographic footprint. The church sponsors a wide range of ministry options, helping people connect with others and discover deep, biblical community. The various outreach ministries are designed to meet the needs of people on a local, regional and global scale. The Care Center assists those in need locally by providing food, children s clothing, automobiles, legal services, employment counseling and dental and optometry services. Assistance is provided for the homeless, families going through marital distress or divorce, families of the incarcerated and dozens of other situations of need. The majorityof global outreach is done through ministry partners and local churches, primarily in Latin America and Africa. Seeds Ministry supports spiritual growth and the spreading of the Gospel through the sale of books and videos. Harvest Ministry provides food service before and after services, helping facilitate a sense of community among the attendees. The financial statements of WCCC include the ministries of WCCC and its subsidiary, Paradise Christian Youth Camp, Inc. (Camp), after elimination of all significant intra-organization transactions and balances. The Camp, located on 1,000 wooded acres in Michigan's Upper Peninsula, was incorporated in September 1977 and is a fully integrated ministry within the operating structure of WCCC, including a common governing board. WCCC operates Crystal Lake Main Street, LLC, a wholly owned subsidiary formed in May, 2016, which was created to hold the property and related mortgage located at 100 S Main Street, Crystal Lake, Illinois. All intercompany activity has been eliminated for financial statement purposes. In January 2017, WCCC formed Huntley Road, LLC, a wholly owned subsidiary. Huntley Road, LLC was created to hold the property and related mortgage from future development at WCCC's Huntley regional campus. WCCC s primary revenue source is contributions from donors. WCCC is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code (the Code) and comparable state law, and has been classified as a publicly supported organization, which is not a private foundation, under Section 509(a) of the Code. Contributions to WCCC are tax deductible within the limitations prescribed by the Code. 6

9 Notes to Financial Statements December 31, 2016 and SIGNIFICANT ACCOUNTING POLICIES: The financial statements of WCCC have been prepared on the accrual basis of accounting. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. The significant accounting policies followed are described below. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of checking, savings and money market accounts. Certain items that meet the definition of cash equivalents, but are part of a larger pool of investments, are included in investments. INVESTMENTS AND ASSETS HELD FOR ENDOWMENT Investments and assets held for endowment consist of certificates of deposit, money market funds, mutual funds and government securities. Certificates of deposit are stated at cost plus accrued interest. Money market funds and marketable debt securities are stated at fair market value. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Investments with a maturity of less than one year are reported as short-term investments, unless part of a larger pool of longterm investments. Investments with a maturity greater than one year are reported as long-term investments. Donated securities are recorded at market value on the date of the gift. Interest and dividend income and the realized and unrealized gain or loss on investments is reported as unrestricted investment income unless a donor or law temporarily or permanently restricts its use. ACCOUNTS AND OTHER RECEIVABLES Accounts and other receivables consist of the following: Trade $ 233,100 $ 23,672 Accrued interest 30,604 17,506 Deposits 31,723 30,771 Bequest receivable 72,000 20,000 Grant receivable - 60,000 Net accounts receivable from affiliated organization 102,181 47,477 Other 265,049 76,284 $ 734,657 $ 275,710 No allowance for doubtful accounts has been recorded as all receivables are considered fully collectible as of December 31, 2016 and CONTRIBUTIONS RECEIVABLE Unconditional promises to give are recognized as income when made and recorded at fair value based upon estimated future cash flows. Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. The discounts on those amounts are computed using interest rates applicable to the years in which the promises are expected to be received. Amortization of the discount is included in contributions in the statements of activities. 7

10 Notes to Financial Statements December 31, 2016 and SIGNIFICANT ACCOUNTING POLICIES, continued: INVENTORY Inventory is valued at the lower of cost or market and consists of food supplies, DVDs, CDs, books and curriculum. Also included in inventory are vehicles, clothing and food donated to WCCC for use in benevolent ministries or for resale. These items are recorded at fair value. There is no reserve for obsolescence recorded at December 31, 2016 and 2015, as all inventory is considered sellable at lower of cost or market value. Shipping and handling costs are included in cost of goods sold, which is a component of Harvest and Seeds expense. Inventory consists of the following: Food and clothing $ 558,920 $ 604,983 CARS vehicles 159, ,500 Seeds 84,788 91,420 Harvest 23,753 12,833 $ 826,661 $ 832,736 ASSETS HELD FOR INVESTMENT IN PROPERTY AND EQUIPMENT Contributions received that are restricted by donors or designated by the Board of Elders for expenditures related to the current building facility or its expansion have been segregated from cash and investments, and shown in this category. The amounts for this purpose have also been recorded in temporarily restricted or designated, unrestricted net assets. PROPERTY AND EQUIPMENT Purchased property and equipment in excess of $5,000 are recorded at cost or, if donated, at fair market value on the date of the donation. Buildings and equipment are depreciated on a straight-line basis over their estimated useful lives, ranging from 3 to 50 years. Property donated with restrictions regarding their use and contributions of cash to acquire property are reported as restricted support. Absent any donor stipulations, these restrictions expire when the asset is acquired or placed in service, and a reclassification is made from temporarily restricted net assets to unrestricted net assets at that time. ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consist of the following: Trade $ 2,148,961 $ 1,336,719 Medical claims reserve 543, ,877 Accrued wages 160, ,856 $ 2,853,067 $ 2,156,452 UNEARNED FEES Unearned fees represent fees received in advance for future services, related to camp fees and shared construction costs. 8

11 Notes to Financial Statements December 31, 2016 and SIGNIFICANT ACCOUNTING POLICIES, continued: CLASSES OF NET ASSETS The financial statements report amounts separately by classes of net assets as follows: Unrestricted net assets are those currently available at the discretion of the Board of Elders for use in the organization s operations, those designated by the Board for specific purposes and those resources invested in property and equipment. Temporarily restricted net assets are those contributed with donors restrictions for specific operating purposes or programs, or those with timing restrictions. They are not currently available for use in WCCC s ministries until commitments regarding their use have been fulfilled. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Permanently restricted net assets are those restricted by donors in perpetuity as endowments. These assets are included with assets held for endowment. The endowment consists of one fund, the corpus of which must be held in perpetuity, and its earnings used for benevolent purposes. The disclosures required by the Reporting Endowment Funds topic of the FASB ASC have not been included in these financial statements due to immateriality. SUPPORT AND REVENUE Contributions are reported as income when made, which may be when cash is received, unconditional promises are made or ownership of donated assets is transferred. Bequests are recorded as income at the time when WCCC has an established right to the bequest and the proceeds are measurable. Contributions restricted by the donor for a specific purpose are recorded as revenue in the temporarily restricted class of net assets until funds have been expended by WCCC for the purposes specified. Noncash gifts are recorded at their estimated fair market value at the date of donation. As of December 31, 2016 and 2015, WCCC received $7,086,563 and $7,885,559, respectively, in food, vehicles and clothing donations. Donated food items are valued based on a price per pound of $1.67 and $1.70 in 2016 and 2015, respectively, as determined by a study performed by a major food distribution organization. DONATED SERVICES Contributed services are recognized as contributions if the services, (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills and would otherwise be purchased by WCCC. WCCC recognized $199,898 and $192,692 of donated services for dental, optometry and legal services provided through the Care Center during the years ended December 31, 2016 and 2015, respectively. In addition to contributed services recorded in the financial statements, many other individuals routinely provide voluntary services to the overall ministries of WCCC. These services have a significant impact on making the ministry effective. However, the value of these services is not reflected in the financial statements because they do not meet the criteria described above. 9

12 Notes to Financial Statements December 31, 2016 and SIGNIFICANT ACCOUNTING POLICIES, continued: FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing the various program and supporting activities have been summarized on a functional basis. These allocations are based on management's estimate of program usage. During 2016 and 2015, WCCC's advertising costs were expensed as incurred and totaled $176,840 and $95,307, respectively. CONCENTRATION OF CREDIT RISK WCCC places its cash and investments with high quality institutions. From time to time, deposits may exceed federally insured limits. WCCC has not experienced any loss on its cash and cash equivalents and management routinely assesses the financial strength of the institutions and, as a consequence, believes its credit risk exposure is limited related to these accounts. 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, 2016 and 2015, WCCC had no uncertain tax positions that qualify for recognition or disclosure in the financial statements. RECLASSIFICATIONS Certain 2015 balances have been reclassified to conform with the 2016 presentation. 3. CONTRIBUTIONS RECEIVABLE: In 2015, WCCC's Crystal Lake regional campus began a three-year campaign (Move) to purchase a new church home in Crystal Lake, Illinois. The move in date is expected to be late In 2014, WCCC's North Shore regional campus began a three-year campaign (The Next Chapter) to construct a new church home in Glenview, Illinois. The building was completed in Contributions receivable consist of the following: Contributions receivable before unamortized discount $ 7,342,180 $ 12,274,217 Unamortized present value discount (33,018) (131,000) 7,309,162 12,143,217 Net allowance for uncollectible amounts (1,388,055) (507,444) Net contributions receivable $ 5,921,107 $ 11,635,773 Contributions receivable are expected to mature as follows: Amounts due in: Less than one year $ 5,215,472 $ 7,800,111 One year to two years 2,126,708 4,474,106 $ 7,342,180 $ 12,274,217 Due to the unknown factors which may affect individual donor's future cash flows, it is reasonably possible that the estimated future cash flows of contributions receivable could increase or decrease by a material amount in the near term. 10

13 Notes to Financial Statements December 31, 2016 and INVESTMENTS AND ASSETS HELD FOR ENDOWMENT: Investments consist of the following: At fair value: Money market funds $ 3,546,660 $ 3,722,166 Government securities 5,215,076 6,858,680 Fixed income mutual funds 3,028,840 - At cost plus accrued interest: Certificates of deposit 22,405,637 18,496,097 $ 34,196,213 $ 29,076,943 Investment income consists of the following: Interest and dividend income $ 234,757 $ 105,178 Net realized and unrealized loss on investments (35,197) (4,435) $ 199,560 $ 100,743 Investments are classified as follows: Short-term investments $ 19,991,920 $ 18,608,467 Long-term investments 597, ,317 Assets held for investment in property and equipment 13,144,416 9,517,175 Assets held for endowment 461, ,984 $ 34,196,213 $ 29,076, PROPERTY AND EQUIPMENT: Property and equipment consist of the following: Land and improvements: South Barrington, Illinois $ 17,065,858 $ 16,618,366 Glenview, Illinois 9,978,735 8,231,325 Crystal Lake, Illinois 4,366,847 - Hulbert, Michigan 590, ,013 South Haven, Michigan 141, ,951 Building and improvements: South Barrington, Illinois 136,408, ,881,193 Glenview, Illinois 21,077,076 - Crystal Lake, Illinois 2,060,117 - Hulbert, Michigan 2,640,577 1,926,327 South Haven, Michigan 329, ,000 Leasehold improvements 5,450,866 3,971,884 Equipment 33,305,468 30,053, ,415, ,703,863 Land held for future development 18,090,019 18,090,019 Construction in process 2,714,224 9,197, ,219, ,991,378 Less accumulated depreciation (80,676,336) (76,252,920) $ 173,543,292 $ 148,738,458 11

14 Notes to Financial Statements December 31, 2016 and NOTES PAYABLE: Notes payable consists of the following: Construction loan of $9,555,000 (maximum available $14,000,000), payable to a bank, with monthly interest only payments at LIBOR % (2.6% at December, 31, 2016). The note is payable in multiple principal installments, with the initial installment payable on April 13, 2018, in an amount sufficient to cause the outstanding principal balance of the loans to be equal to or less than $9,000,000 as of such date and quarterly principal installments, payable on the last day of each March, June, September and December of each year (commencing upon conversion to a term loan), with each principal installment to equal 1/240th of the principal balance (without regard to any payments or prepayments thereof), except that the final payment on the note shall be in the amount of all principal not previously paid and shall be due and payable on April 14, This note is secured by the buildings and property at 2200 Shermer Road, Glenview, IL $ 9,555,000 $ - Mortgage payable of $5,449,350, payable to a bank, with a fixed interest rate of 4.00%. Beginning in June 2017, the loan requires principal payments of $1,816,450, plus accrued interest, on June 6th of each year until maturity on June 8, This note is secured by the buildings and property at 100 S. Main Street Crystal Lake, IL. 5,449,350-15,004,350 - Less current portion of notes payable (1,816,450) - Notes payable, net of current portion $ 13,187,900 $ - Long-term debt matures as follows for the year ending December 31: Thereafter $ $ 1,816,450 2,521,450 1,966, , ,000 8,400,000 15,004,350 Subsequent to the year-end, WCCC borrowed an additional $2,820,000 on the construction loan. These subsequent borrowings brought the total balance of the construction loan to $12,375,000. Notes payable agreements contain certain administrative covenants, WCCC was in compliance with all covenants as of December 31,

15 Notes to Financial Statements December 31, 2016 and NET ASSETS: Net assets consist of the following: Unrestricted: Undesignated $ 6,471,277 $ 4,632,309 Designated for property and equipment 5,641,272 7,113,247 Designated for capital contingencies 3,339,919 3,081,479 Designated for other ministry purposes 18,047,317 17,690,762 Equity in property and equipment 154,708, ,129, ,208, ,647,180 Temporarily restricted for: Property and equipment 13,568,881 17,022,897 Global & Local Compassion ministries 1,154,978 3,232,001 Special services 146, ,065 Benevolence programs 161,358 31,987 Regional ministry 310, ,656 Other 72,000 20,000 15,414,059 20,899,606 Permanently restricted as endowment 461, ,984 $ 204,084,508 $ 201,008, LEASE AGREEMENTS: WCCC has several lease agreements, primarily for various properties used in conjunction with weekend services at its regional locations. These leases have various expiration dates through Rental expense was $2,403,391 and $2,066,695 for the years ended December 31, 2016 and 2015, respectively. Future minimum lease payments under operating leases that have remaining lease terms in excess of one year as of December 31, 2016, are: 2017 $ 1,447, , , , $ 48,373 3,048,041 13

16 Notes to Financial Statements December 31, 2016 and RELATED PARTY TRANSACTIONS: WCCC provides interest-free secured loans to certain employees as part of employment agreements. Imputed interest and any forgiveness of loans are appropriately included as taxable income to the employee. The total amount of notes receivable from employees at December 31, 2016 and 2015, was $109,103 and $64,769, respectively. WCCC made contributions to a 501(c)(3) organization where a WCCC board member sits on the Board of Directors. The amount of the contributions totaled $225,000 and $265,000 for the years ended December 31, 2016 and 2015, respectively. As a part of the North Shore and Crystal Lake building campaigns, WCCC had contributions receivable from officers and Board members totaling $707,565 and $725,419, at December 31, 2016 and 2015, respectively. WCCC had activity related to facilities usage, health insurance and office expenses between an organization that is a related party because two of WCCC's Board members are also Board members of the other not-forprofit organization. The transactions between these two entities as of and for the years ended December 31, 2016 and 2015, were as follows: Payments from related party $ 1,205,746 $ 1,217,333 Payments to related party $ 24,206 $ 356,928 Net amount due from related party at December 31 $ 102,181 $ 47, TAX DEFERRED ANNUITY PLAN: WCCC maintains a tax deferred annuity (403(b)) plan for the benefit of its employees. WCCC makes contributions equal to the employee contributions on a matching scale, with a maximum contribution by WCCC of 5.5% of an employee's earnings. WCCC contributed $785,923 and $777,360 to the plan during 2016 and 2015, respectively. 14

17 Notes to Financial Statements December 31, 2016 and COMMITMENTS AND CONTINGENCIES: WCCC entered into an agreement during 2016 for building renovations for the Crystal Lake regional campus totaling $5,342,264. As of December 31, 2016, $4,202,354 remained outstanding. As a condition of building the North Shore regional campus, WCCC entered into an 20-year service fee agreement with the Village of Glenview. WCCC began paying the service fee during 2016 and incurred $180,000 of service fee expenses for the year ended December 31, The total amount of the agreement is $1,780,000, of which $1,600,000 remained outstanding as of December 31, In February 2017, WCCC entered into an agreement to purchase a building at a cost of $8,550,000. The purchase of the building is expected to close in August WCCC anticipates acquiring a loan for a portion of the purchase price. 12. MEDICAL INSURANCE: WCCC operates a self-funded health insurance plan for qualified employees. As of December 31, 2016 and 2015, the self-funded plan has an annual stop-loss limit of $100,000 for each insured individual per year. The plan has a cumulative stop-loss limit of $3,578,975 and $3,505,214 for the entire group as of December 31, 2016 and 2015, respectively. Once either limit has been reached, the reinsurance coverage will directly pay all claims with no cap or limit. The plan has no lifetime maximum coverage limits per individual or cause. The plan uses proprietary claim services direct from the carrier to pay, process and adjudicate all claims. As of December 31, 2016 and 2015, the reserve for unpaid claims, including those incurred but not reported, totaled $543,294 and $497,877, respectively, and is included in accrued expenses. This reserve is based on an estimate of outstanding claims at December 31; however, the actual liability is unknown and exposure to losses in excess of the accrued reserve may exist. Management believes that the liability reflected in the statements of financial position is adequate to cover future losses. WCCC and a related party share this self-funded health insurance plan. As a result, WCCC could be held liable for any unpaid health insurance claims incurred by the related party. Total reserve for incurred but not reported claims of the related party totaled $95,771 and $88,449 as of December 31, 2016 and 2015, respectively. 15

18 Notes to Financial Statements December 31, 2016 and DISCLOSURE OF FAIR VALUE and FAIR VALUE MEASUREMENTS: The following disclosures of estimated fair value of financial instruments as of December 31, 2016 and 2015, is made in accordance with the requirements of the Disclosures about Fair Value of Financial Instruments topic of the FASB Accounting Standards Codification (ASC). The estimated fair value amounts have been determined by WCCC using available market information and appropriate valuation methodologies. December 31, 2016 December 31, 2015 Carrying Amount Fair Value Carrying Amount Fair Value Assets: Cash and cash equivalents and short term investments $ 26,251,647 $ 26,251,647 $ 27,505,539 $ 27,505,539 Long term investments and assets restricted to investment in property and equipment 18,112,769 18,112,769 15,000,505 15,000,505 Refundable deposits , ,187 Accounts and other receivables 843, , , ,479 Contributions receivable 5,921,107 5,921,107 11,635,773 11,635,773 Liabilities: Accounts payable and accrued liabilities 2,853,067 2,853,067 2,156,452 2,156,452 Construction costs payable 3,763,846 3,763,846 1,548,832 1,548,832 Notes payable 15,004,350 15,004, Methods and assumptions used by WCCC in estimating fair values are as follows: Cash and cash equivalents, short-term investments and accounts and other receivables: The carrying amounts approximate fair value due to the short-term maturity of these instruments. Long term-investments and assets restricted to investment in property and equipment: See Note 2 for the fair values of all investments and assets restricted to investment in property and equipment. Contribution receivable: The carrying amounts approximate fair value based upon estimated future cash flows. 16

19 Notes to Financial Statements December 31, 2016 and DISCLOSURE OF FAIR VALUE and FAIR VALUE MEASUREMENTS, continued: Methods and assumptions used by WCCC in estimating fair values are as follows, continued: Accounts payable and accrued liabilities: The carrying amounts approximate fair value due to the shortterm maturity of these instruments. Construction costs payable: The carrying amounts approximate fair value due to the short-term maturity of these instruments. Notes payable : The carrying amount approximates fair value due to the fact that the debt is subject to a floating interest rate that adjusts to market balance. WCCC adopted the provisions of the Fair Value Measurements and Disclosure topic of the FASB ASC. These standards define fair value, establish a framework for measuring fair value and enhance disclosures about fair value measurements. Fair value is defined under the standards as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market between market participants on the measurement date. FASB ASC also establishes a fair value hierarchy, which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. The standard describes three levels of inputs that may be used to measure fair value: Level 1 - Quoted market prices in active markets for identical assets or liabilities. Level 2 - Observable inputs other than Level 1 prices, such as quoted prices for similar assets or liabilities; quoted prices in active markets that are not active; or other inputs that are observable or can be corroborated by observable market data for substantially the full term of the assets or liabilities. Level 3 - Unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the assets or liabilities. WCCC uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, WCCC measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are used only when Level 1 or Level 2 inputs are not available. WCCC does not have any investments that are classified as Level 3. Changes in methods and valuation techniques: none 17

20 Notes to Financial Statements December 31, 2016 and DISCLOSURE OF FAIR VALUE and FAIR VALUE MEASUREMENTS, continued: The following table presents the fair value measurements of assets and liabilities recognized in the accompanying statements of financial position measured at fair value on a recurring basis and the level within the ASC fair value hierarchy in which the fair value measurements fall: December 31, 2016 Quoted Prices Significant in Active Other Markets for Observable Identical Assets Inputs Fair Value (Level 1) (Level 2) Investments: Money market funds $ 3,546,660 $ 3,546,660 $ - Government securities 5,215,076 5,215,076 - Fixed income mutual funds 3,028,840 3,028,840 - December 31, 2015 Quoted Prices Significant in Active Other Markets for Observable Identical Assets Inputs Fair Value (Level 1) (Level 2) Investments: Money market funds $ 3,722,166 $ 3,722,166 $ - Government securities 6,858,680 6,858, LEGAL MATTERS: WCCC is subject to claims, legal proceedings, and investigation of matters that arise in the ordinary course of operations. In the opinion of management, all such matters are adequately covered by insurance and, if not so covered, are without merit and will be vigorously contested or involve amounts which would not have a significant effect on WCCC s financial position or results of operations if disposed of unfavorably. 15. SUBSEQUENT EVENTS: Subsequent events have been evaluated through the report date, which represents the date the financial statements were available to be issued. Subsequent events after that date have not been evaluated. 18

21 FEDERAL AWARDS

22 Schedule of Expenditures of Federal Awards Year Ended December 31, 2016 Federal Grantor/Pass Through Grantor/Program or Cluster Title Federal Pass Through CFDA Agreement Entity Federal Number Number Identifying Number Expenditures U.S. DEPARTMENT OF AGRICULTURE Food Distribution Cluster: Emergency Food Assistance Program (Food Commodities) passed through from Greater Chicago Food Depository A00992 $ 1,076,979 U.S. DEPARTMENT OF HUMAN SERVICES Community Services Block Grant (Note E) passed through from Greater Chicago Food Depository A ,661 Total Expenditures of Federal Awards $ 1,148,640 See notes to schedule of expenditures of federal awards 19

23 Notes to Schedule of Expenditures of Federal Awards December 31, 2016 A. BASIS OF PRESENTATION: The accompanying schedule of expenditures of federal awards (the schedule) includes the federal grant activity of Willow Creek Community Church, Inc. (WCCC) under programs of the federal government for the year ending December 31, The information in the schedule is presented in accordance with the requirements of the Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Therefore, some amounts presented in the schedule may differ from amounts presented in, or used in the preparation of, the basic financial statements. B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Expenditures in the schedule are reported on the accrual basis of accounting. Such expenditures are recognized following the cost principles contained in the Uniform Guidance, wherein certain types of expenditures are not allowable or are limited as to reimbursement. Negative amounts shown on the schedule represent adjustments or credits made in the normal course of business to amounts reported as expenditures in prior years. Donated food commodities are valued based on a price per pound as determined by a study performed by a major food distribution organization. WCCC has elected not to use the 10-percent de minimis indirect cost rate allowed under the Uniform Guidance. C. RELATIONSHIP TO FINANCIAL STATEMENTS: The amount of total expenditures of federal awards reconciles to the revenue in the statement of activities as follows: Total expenditures of federal awards $ 1,148,640 Plus: Non federal donated commodities 6,137,821 Donated food, clothing and services per statement of activities $ 7,286,461 D. NON-CASH ASSISTANCE, SUBRECIPIENTS, FEDERAL INSURANCE, LOANS, AND LOAN GUARANTEES: WCCC only receives federal non cash assistance in the form of donated food commodities. WCCC did not receive any other direct or indirect federal financial assistance. WCCC did not provide any federal awards to subrecipients nor did they receive any federal insurance, loans, or loan guarantees. E. COMMUNITY SERVICES BLOCK GRANT Community and Economic Development Association of Cook County, Inc. (CEDA) is the recipient of a Community Services Block Grant (CSBG). CEDA provides CSBG funding to Greater Chicago Food Depository to purchase fresh produce which is then donated to WCCC to distribute to income eligible recipients through their food pantry. 20

24 INDEPENDENT AUDITORS REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS Board of Elders Willow Creek Community Church, Inc. South Barrington, Illinois We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States, the financial statements of Willow Creek Community Church, Inc. (WCCC), which comprise the statements of financial position as of December 31, 2016 and 2015, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements, and have issued our report thereon dated May 23, Internal Control Over Financial Reporting In planning and performing our audits of the financial statements, we considered WCCC s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of WCCC s internal control. Accordingly, we do not express an opinion on the effectiveness of WCCC s internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, misstatements on a timely basis. A material weakness is a deficiency, or a combination of deficiencies, in internal control such that there is a reasonable possibility that a material misstatement of the entity s financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. We did identify certain deficiencies in internal control, described in the accompanying schedule of findings and questioned costs as item that we consider to be a significant deficiency. 120 East Liberty Drive, Suite 270 Wheaton, IL capincrouse.com

25 Board of Elders Willow Creek Community Church, Inc. South Barrington, Illinois Compliance and Other Matters As part of obtaining reasonable assurance about whether WCCC s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Organization s Response to Findings WCCC s response to the findings identified in our audit is described in the accompanying schedule of findings and questioned costs. WCCC s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. Purpose of Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of WCCC s internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering WCCC s internal control and compliance. Accordingly, this communication is not suitable for any other purpose. Wheaton, Illinois May 23,

26 INDEPENDENT AUDITORS REPORT ON COMPLIANCE FOR EACH MAJOR FEDERAL PROGRAM AND REPORT ON INTERNAL CONTROL OVER COMPLIANCE REQUIRED BY THE UNIFORM GUIDANCE Board of Elders Willow Creek Community Church, Inc. South Barrington, Illinois Report on Compliance for Each Major Federal Program We have audited Willow Creek Community Church, Inc. s (WCCC) compliance with the types of compliance requirements described in the U.S. Office of Management and Budget (OMB) Compliance Supplement that could have a direct and material effect on each of WCCC s major federal programs for the year ended December 31, WCCC s major federal programs are identified in the summary of auditors results section of the accompanying schedule of findings and questioned costs. Management s Responsibility Management is responsible for compliance with federal statues, regulations, and the terms and conditions of its federal awards applicable to its federal programs. Auditors Responsibility Our responsibility is to express an opinion on compliance for each of WCCC s major federal programs based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States of America; and the audit requirements of Title 2 U.S. Code of Federal Regulations Part 200, Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards (Uniform Guidance). Those standards and the Uniform Guidance require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major federal program occurred. An audit includes examining, on a test basis, evidence about WCCC s compliance with those requirements and performing such other procedures as we considered necessary in the circumstances. We believe that our audit provides a reasonable basis for our opinion on compliance for each major federal program. However, our audit does not provide a legal determination of WCCC s compliance. Opinion on Each Major Federal Program In our opinion, Willow Creek Community Church, Inc. complied, in all material respects, with the types of compliance requirements referred to above that could have a direct and material effect on each of its major federal programs for the year ended December 31, East Liberty Drive, Suite 270 Wheaton, IL capincrouse.com

27 Board of Elders Willow Creek Community Church, Inc. South Barrington, Illinois Report on Internal Control Over Compliance Management of WCCC is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered WCCC s internal control over compliance with the types of requirements that could have a direct and material effect on each major federal program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for each major federal program and to test and report on internal control over compliance in accordance with the Uniform Guidance, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of WCCC s internal control over compliance. A deficiency in internal control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a federal program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a federal program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies, in internal control over compliance with a type of compliance requirement of a federal program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance. Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses, as defined above. However, material weaknesses may exist that have not been identified. Purpose of This Report The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of the Uniform Guidance. Accordingly, this report is not suitable for any other purpose. Wheaton, Illinois May 23,

28 Schedule of Findings and Questioned Costs December 31, 2016 Section I - Summary of Audit Results Financial Statements: Type of auditors report issued: unmodified Internal control over financial reporting: Material weakness(es) identified? yes no Significant deficiency(ies) identified that are not considered a material weakness? yes none reported Noncompliance material to financial statements noted? yes no Federal Awards: Internal control over major programs: Material weakness(es) identified? yes no Significant deficiency(ies) identified that are not considered a material weakness? yes none reported Type of auditors report issued on compliance for major programs: unmodified Any audit findings that are required to be reported in accordance with 2 CFR Part (a)? yes no Identification of major program(s): CFDA Numbers Name of Federal Program or Cluster Food Distribution Cluster Dollar threshold used to distinguish between type A and type B programs: $750,000 Auditee qualified as low-risk auditee? yes no 25

29 Schedule of Findings and Questioned Costs December 31, Bank Reconciliations Significant Deficiency Section II - Financial Statement Findings Condition: During our review of the various transaction processes, we noted that while bank reconciliations are being performed, they had not been reviewed timely by management during the course of the year. Criteria: Review of account reconciliations is necessary for strong internal controls. Effect: Increased risk for errors not being identified and resolved on a timely basis. Cause: Oversight by management. Recommendation: We recommend bank reconciliations be reviewed within 30 days upon completion of the reconciliations. Views of Responsible Officials: Management agrees with the finding and has addressed the issue. See corrective action plan. Section III - Federal Award Findings and Questioned Costs There are no current year findings that were considered material instances of noncompliance in accordance with Title 2 U.S. Code of Federal Regulations Part 200 Uniform Administrative Requirements, Cost Principles, and Audit Requirements for Federal Awards. 26

30 Auditee Summary Schedule of Prior Audit Findings December 31, 2016 Financial Statement Findings There were no prior year findings in internal control over financial reporting. There were no prior year findings or questioned costs Federal Award Findings 27

31 Willow Creek Community Church, Inc. Auditee Corrective Action Plan December 31, 2016 Finding Number: Bank Reconciliations Planned Corrective Action: The Controller will review and approve bank account reconciliations within 30 days after the end of the month. Person Responsible for Corrective Action Plan: Controller Anticipated Date of Completion: Corrective action was implemented 2/28/17.