YOUTH FOR CHRIST/USA, INC. AND AFFILIATE. Consolidated Financial Statements With Independent Auditors' Report. June 30, 2018 and 2017

Transcription

1 YOUTH FOR CHRIST/USA, INC. AND AFFILIATE Consolidated Financial Statements With Independent Auditors' Report

2 Table of Contents Independent Auditors' Report 1 Consolidated Financial Statements Consolidated Statements of Financial Position 3 Consolidated Statements of Activities 4 Consolidated Statements of Cash Flows 6 7 Page

3 INDEPENDENT AUDITORS' REPORT Board of Directors Youth for Christ/USA, Inc. and Affiliate Englewood, Colorado We have audited the accompanying consolidated financial statements of Youth for Christ/USA, Inc. and Affiliate, which comprise the consolidated statements of financial position as of, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the consolidated 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 consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion E. Mineral Circle, Suite 305 Centennial, CO capincrouse.com

4 Board of Directors Youth for Christ/USA, Inc. and Affiliate Englewood, Colorado Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Youth for Christ/USA, Inc. and Affiliate, as of, and the changes in their net assets and cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Centennial, Colorado October 19,

5 Consolidated Statements of Financial Position June 30, ASSETS: Cash and cash equivalents $ 6,407,440 $ 4,485,600 Investments 800, ,010 Accounts and other receivables net 288, ,587 Prepaid expenses and other assets 239, ,176 Promises to give net 1,597,283 2,130,765 Investment in captive insurance company 2,743,425 3,025,295 Land, buildings, and equipment net 1,239,480 1,368,856 Total Assets $ 13,315,517 $ 12,397,289 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable $ 269,350 $ 213,035 Accrued expenses and other liabilities 215, ,977 Deferred income 1,541,074 1,392,840 2,025,656 1,753,852 Net assets 11,289,861 10,643,437 Total Liabilities and Net Assets $ 13,315,517 $ 12,397,289 See notes to consolidated financial statements -3-

6 Consolidated Statements of Activities Year Ended June 30, Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total SUPPORT AND REVENUE: Contributions $ 5,186,374 $ 8,457,029 $ - $ 13,643,403 $ 3,183,982 $ 10,185,665 $ - $ 13,369,647 Insurance premiums from affiliates 1,745, ,745,324 1,693, ,693,707 Dues from affiliates 1,552, ,552,491 1,515, ,515,673 Event income 1,626, ,626,656 1,411, ,411,759 Gain (loss) on investment in captive insurance company (281,870) - - (281,870) 890, ,495 Program and other revenue 308, , , ,553 Total Support and Revenue 10,137,286 8,457,029-18,594,315 9,341,169 10,185,665-19,526,834 NET ASSETS RELEASED: Purpose restrictions 6,526,112 (6,526,112) - - 8,818,296 (8,818,296) - - Time restrictions 2,407,209 (2,407,209) ,939 (38,939) - - 8,933,321 (8,933,321) - - 8,857,235 (8,857,235) - - (continued) See notes to consolidated financial statements -4-

7 Consolidated Statements of Activities (continued) Year Ended June 30, Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total EXPENSES: Program services: Missionaries 5,279, ,279,253 5,729, ,729,835 Chapter services 4,437, ,437,173 4,219, ,219,921 Field leadership 2,754, ,754,675 2,147, ,147,081 Risk management 1,374, ,374,686 1,568, ,568,046 13,845, ,845,787 13,664, ,664,883 Supporting activities: General and administrative 2,567, ,567,043 2,649, ,649,462 Fund-raising 1,535, ,535,061 1,703, ,703,597 4,102, ,102,104 4,353, ,353,059 Total Expenses 17,947, ,947,891 18,017, ,017,942 Change in Net Assets 1,122,716 (476,292) - 646, ,462 1,328,430-1,508,892 Net Assets, Beginning of Year 5,769,305 4,855,542 18,590 10,643,437 5,588,843 3,527,112 18,590 9,134,545 Net Assets, End of Year $ 6,892,021 $ 4,379,250 $ 18,590 $ 11,289,861 $ 5,769,305 $ 4,855,542 $ 18,590 $ 10,643,437 See notes to consolidated financial statements -5-

8 Consolidated Statements of Cash Flows Year Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 646,424 $ 1,508,892 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation and amortization 124, ,195 (Gain) loss on investment in captive insurance company 281,870 (890,495) Net realized and unrealized losses 11,875 2,552 Proceeds from collection of promises to give 2,407,209 1,085,328 Recognition of promises to give (1,873,727) (2,106,506) Change in operating assets and liabilities: Accounts and other receivables net 17,064 95,962 Prepaid expenses and other assets 51, ,724 Accounts payable 56,315 (49,576) Accrued expenses and other liabilities 67,255 (8,701) Deferred income 148,234 46,809 Net Cash Provided (Used) by Operating Activities 1,938,782 (73,816) CASH FLOWS FROM INVESTING ACTIVITIES: Purchases of land, buildings, and equipment - (57,424) Purchases of investments (60,426) (26,377) Proceeds from sale of investments 43,484 10,944 Net Cash Used by Investing Activities (16,942) (72,857) Change in Cash and Cash Equivalents 1,921,840 (146,673) Cash and Cash Equivalents, Beginning of Year 4,485,600 4,632,273 Cash and Cash Equivalents, End of Year $ 6,407,440 $ 4,485,600 See notes to consolidated financial statements -6-

9 1. NATURE OF ORGANIZATION: Youth for Christ/USA, Inc. (YFC) is a not-for-profit corporation striving to reach young people everywhere, working together with the local church and other like-minded partners to raise up lifelong followers of Jesus who lead by their godliness in lifestyle, devotion to the Word of God and prayer, passion for sharing the love of Christ, and commitment to social involvement. YFC aims to both demonstrate and communicate messages of hope, grace and love in a variety of different cultural settings, pursuing teens in personal, authentic, Christ-sharing relationships. The organization works through affiliates and chapters nationwide to support work in communities, engaging in relationship with year-olds in rural and urban settings alike, spreading the redemption message of Jesus Christ. At a national level, YFC delivers resources and training to empower these local leaders and overseas missionaries in reaching out to teens everywhere who need to hear about the love of Jesus. YFC is exempt from income tax under section 501(c)(3) of the United States Internal Revenue Code (the Code) and comparable state law, and contributions to YFC are tax deductible within the limitations prescribed by the Code. In 2015, the Internal Revenue Service amended YFC s status from a Religious Non-profit Public Charity [501(c)(3) subsection 509(a)(2)] to an Association of Churches [501(c)(3) subsection 170(b)(1)(A)(i) and 509(a)(1)]. YFC has been classified as a publically supported organization which is not a private foundation under section 509(a) of the Code. YFC Resources Inc. (YFCR) is a wholly owned subsidiary of YFC which was created to sell YFC's branded merchandise. YFCR's activity is consolidated within the financial statements of YFC. YFC and YFCR are collectively referred to as YFC/USA in these consolidated financial statements. The primary source of support and revenue for YFC/USA is contributions, which are tax-deductible for income tax purposes. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: YFC/USA maintains its accounts and prepares its consolidated financial statements on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. The preparation of consolidated 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 consolidated 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 consolidated financial statements to the reader. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash held in checking accounts, money market accounts, and petty cash on hand. YFC/USA maintains their cash in accounts at high quality financial institutions. The balances, at times, may exceed federally insured limits. At, the cash accounts that exceeded federally insured limits was approximately $5,900,000 and $3,625,000, respectively. YFC/USA has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. -7-

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: INVESTMENTS Investments consist of certificates of deposit, mutual funds, exchange-traded funds, and pooled investments. Certificates of deposit are reported at cost and have original maturities of greater than ninety days. Mutual funds and pooled investments are reported at fair market value and have readily determinable fair value. Donated securities are recorded at fair value on the date of the gift and are carried in accordance with the above policy. ACCOUNTS AND OTHER RECEIVABLES Accounts and other receivables consist primarily of amounts due from affiliates for risk management services and administrative fees. Management's estimate of uncollectible accounts is based upon an analysis of past due accounts, which takes into consideration historical collections. For significant past due accounts, YFC/USA works with the chapters to create financial arrangements to pay the balance. Accounts are written off when all methods to collect have been exhausted. PREPAID EXPENSES AND OTHER ASSETS Prepaid expenses and other assets mainly consist of prepayments of insurance premiums for the upcoming fiscal year. They will be recognized as expense as they incur. PROMISES TO GIVE Unconditional promises to give are recognized as assets and support in the period made. Management's estimate of uncollectible promises to give is based on consideration of historical giving trends. LAND, BUILDINGS, AND EQUIPMENT Land, buildings, and equipment are stated at cost, or if donated, at the estimated fair market value at the date of donation. Property donated with restrictions regarding its 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. Depreciation and amortization is recorded using the straight-line method over estimated useful lives of 3 to 75 years. During the year ended June 30, 2018, YFC/USA changed their capitalization policy to $4,000. Therefore, fixed asset purchases exceeding that amount are capitalized. Previously, YFC/USA capitalized fixed assets exceeding $2,000. There are no fixed assets that are capitalized below the new policy of $4,

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: DEFERRED INCOME Deferred income consists primarily of risk management services charged to affiliates for general liability insurance coverage. Income is recognized over the insurance policy year. Deferred income also includes registration fees for camps that are scheduled to occur after fiscal year end. Deferred income consists of: June 30, Risk management $ 1,002,268 $ 915,851 Camp registration 527, ,731 Other deferred income 11,241 18,258 NET ASSETS The net assets of YFC/USA consist of the following categories: $ 1,541,074 $ 1,392,840 Unrestricted net assets are those resources that are available for current operations, which includes those resources invested in property and equipment net, resources board designated for liability insurance coverage and projects, and resources invested in the captive insurance company. Temporarily restricted net assets are comprised of donor-restricted contributions for the support of projects and promises to give. Permanently restricted net assets include endowment funds held in perpetuity by third party trustees for the benefit of YFC/USA. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds are classified and reported based on the existence of donorimposed restrictions. The disclosures required by the Reporting Endowment Funds topic of the Financial Accounting Standards Board Accounting Standards Codification have not been included in these consolidated financial statements due to immateriality. -9-

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: SUPPORT AND REVENUE Contributions are recorded when made, which may be when cash and other assets are received or unconditionally promised. Gifts of cash and other assets are reported as restricted support if they are received with donor stipulations that limit the use of the donated amounts. When a donor restriction expires, that is, when a stipulated time restriction ends or purpose restriction is satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the consolidated statements of activities as net assets released from restrictions. All contributions are considered available for unrestricted use unless specifically restricted by the donor. YFC/USA receives fees for camps and risk management services from its affiliates. This income is recognized in the month in which it is earned. YFC/USA has excluded fees that cover months subsequent to June 30, 2018 and The amount of insurance premiums excluded from accounts receivable and deferred revenue as of, is $162,959 and $133,111, respectively. Amounts that have been billed to its affiliates for services subsequent to June 30, 2018, and paid by its affiliates as of June 30, 2018, have been recorded as deferred revenue in the consolidated statements of financial position. Dues from affiliates and administrative fees are received from affiliates and recognized when earned. Camp registration fees and event income are recognized when earned, which is when the camp or event occurs. Program and other income is recorded when earned. ALLOCATION OF EXPENSES Expenses are recorded when incurred, in accordance with U.S. GAAP. The costs of providing the various program services and supporting activities of YFC/USA have been summarized on a functional basis in the consolidated statements of activities. Accordingly, certain costs have been allocated among the program services and supporting activities benefited. 3. INVESTMENTS: Investments consist of: June 30, Cash and cash equivalents held for investment purposes $ 31,517 $ 51,668 Certificates of deposit 514, ,363 Mutual funds 203, ,379 Pooled investments 25,735 24,600 Exchange-traded funds 24, $ 800,005 $ 790,010

13 4. ACCOUNTS AND OTHER RECEIVABLES NET: Accounts and other receivables net consist of: June 30, Due from affiliates (located nationwide): Charter covenant fees $ 222,002 $ 244,678 Risk management 154, ,004 Other 73,142 81, , ,311 Less allowance for doubtful accounts (160,826) (227,724) $ 288,523 $ 305, PROMISES TO GIVE NET: Promises to give due in one to five years have not been discounted due to immateriality. Promises to give net consist of: June 30, Due in less than one year $ 1,479,390 $ 1,817,526 Between one year and five years 117, ,000 Less allowance for doubtful promises to give - (6,761) $ 1,597,283 $ 2,130, INVESTMENT IN CAPTIVE INSURANCE COMPANY: There are currently nine unrelated not-for-profit organizations that have invested in the captive insurance holding company, entitled Stewardship Insurance, Ltd (SIL). As of, YFC/USA owns 7.90% and 9.90 %, respectively, of SIL. YFC/USA uses the equity method because it has been determined that YFC/USA has significant influence. The captive insurance holding company reinsures claims relating to workers' compensation, general liability, auto liability, and sexual misconduct liability. SIL pays the first $1,000,000 of any claim and reinsures the next $1,000,000 with a primary carrier, ACE American Insurance Company (ACE). ACE also provides aggregate stop loss coverage for the aggregate of all claims insured by SIL. Claim experience is identified to each participating entity, and subsequent premiums are modified based on an entity's experience and other factors. -11-

14 6. INVESTMENT IN CAPTIVE INSURANCE COMPANY, continued: The investment in SIL was $2,743,425 and $3,025,295 as of, respectively. During the year ended June 30, 2018, YFC/USA reported its investment in SIL based upon the audited financial statements of SIL for SIL's year ended April 30, However, subsequent to the year ended June 30, 2017, YFC/USA noted that the July 31, 2017, SIL financial statements reported a lower valuation on their investments. Therefore, management has recorded their investment in SIL as of June, 30, 2017, based upon the July 31, 2017, internal financial statements of SIL. Summary financial information of SIL is: April 30, 2018* 2017* Total assets $ 49,725,937 $ 48,087,257 Total liabilities $ 18,483,714 $ 17,873,655 Comprehensive income net of dividends $ 3,491,632 $ 7,258,312 *SIL's fiscal year end is April 30, therefore amounts represent balances and activities through and for the years ending April LAND, BUILDINGS, AND EQUIPMENT NET: Land, buildings, and equipment net consist of: June 30, Land $ 199,950 $ 199,950 Buildings and improvements 1,312,089 1,341,708 Software 704, ,676 Furniture, fixtures, and equipment 171, ,877 2,388,179 2,463,211 Less accumulated depreciation and amortization (1,148,699) (1,094,355) $ 1,239,480 $ 1,368,

15 8. NET ASSETS: Net assets consist of: June 30, Unrestricted: Operating $ 698,010 $ (554,082) Equity in land, buildings, and equipment net 1,239,480 1,368,856 Designated for risk management 2,211,106 1,929,236 Investment in captive insurance company 2,743,425 3,025,295 6,892,021 5,769,305 Temporarily restricted: Projects: Missionaries and missionary projects 1,260,793 1,265,182 Affiliates and affiliate projects 965, ,996 Camp and other projects 555, ,599 Time restricted promises to give net 1,597,283 2,130,765 4,379,250 4,855,542 Permanently restricted 18,590 18,590 $ 11,289,861 $ 10,643, FAIR VALUE MEASUREMENTS: YFC/USA uses appropriate valuation techniques to determine fair value based on inputs available. When available, YFC/USA measures fair value using Level 1 inputs because they generally provide the most reliable evidence for fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs are not available. The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated statements of financial position, which are measured at fair value on a recurring basis, and the level within the fair value measurement hierarchy in which the fair value measurements fall: -13-

16 9. FAIR VALUE MEASUREMENTS, continued: Fair Value Measurements Using: Quoted Prices Significant in Active Other Observable Markets for Observable Identical Assets Inputs Fair Value (Level 1) (Level 2) June 30, 2018: Mutual funds: Fixed income: Intermediate-term $ 117,196 $ 117,196 $ - Multi-sector 34,174 34,174 - Equity: Large-cap 26,727 26,727 - International 11,742 11,742 - Small-cap 7,655 7,655 - Real estate 5,601 5, , ,095 - Exchange-traded 24,681 24,681 - Pooled investments 25,735-25, ,511 $ 227,776 $ 25,735 Reconciling items at cost: Cash and cash equivalents and certificate of deposits 546,494 Total Investments $ 800,

17 9. FAIR VALUE MEASUREMENTS, continued: Fair Value Measurements Using: Quoted Prices Significant in Active Other Observable Markets for Observable Identical Assets Inputs Fair Value (Level 1) (Level 2) June 30, 2017: Mutual funds: Fixed income: Intermediate-term $ 120,026 $ 120,026 $ - Multi-sector 35,105 35,105 - Equity: Large-cap 23,708 23,708 - International 12,920 12,920 - Small-cap 6,471 6,471 - Real estate 5,149 5,149 - Pooled investments 24,600-24, ,979 $ 203,379 $ 24,600 Reconciling items at cost: Cash and cash equivalents and certificate of deposits 562,031 Total Investments $ 790,010 Valuation techniques: Level 1 measures the fair value for mutual funds. They are determined by reference to quoted market prices and other relevant information generated by market transactions, Level 2 measures the fair value of pooled investments. They are determined based on quoted market prices, however, YFC/USA's interest represents an interest in pooled funds held by another organization and as such the funds are classified as Level RETIREMENT PLAN: YFC/USA participates in a Tax Sheltered Annuity Plan (the Plan) in compliance with Section 403(b) of the Internal Revenue Code. Employees who have completed two years of service and make a voluntary 1% to 3% salary reduction contribution, are entitled to a 1% to 3% employer contribution. Employer contributions to the Plan for the years ended, were $179,490 and $190,827, respectively. -15-

18 11. LINE OF CREDIT: During the years ended, YFC/USA held a line of credit with a financial institution secured by investments. $500,000 is available to draw and the line of credit bears an interest rate of 3.0% as of June 30, 2018, which is subject to change based upon the dividend rate of the highest paying certificate of deposit plus 2%. There were no draws made during the years ended. The line of credit was scheduled to mature June However, subsequent to the year ending June 30, 2018, YFC/USA closed the line of credit. 12. RELATED PARTY TRANSACTIONS: During the years ended, five and four, respectively, of the one hundred forty executive directors of YFC/USA affiliates were also board members of YFC/USA. These members are selected by YFC regions to represent the interests of all affiliates. During the years ended, $485,930 and $454,156, respectively, was billed to those affiliates for dues and risk management services. As of June 30, 2018 and 2017, $86,348 and $55,504 and, respectively, was due to YFC/USA from these affiliates. A member of management of YFC/USA was on the board of Military Community Youth Ministries (MCYM). YFC/USA received income from MCYM of $29,408 for services provided by YFC/USA missionaries to MCYM during the year ended June 30, YFC/USA did not have a receivable from MCYM recorded as of June 30, There was no activity between YFC/USA and MCYM for the year ending June 30, A member of YFC/USA's board is also on the board of a financial institution where YFC/USA holds cash and cash equivalents and investments. As of, YFC/USA held $416,601 and $415,061 of cash and cash equivalents at this financial institution, respectively. Additionally, as of, YFC/USA held $514,977 and $510,363 of investments at this financial instutition, respectively. 13. SUBSEQUENT EVENTS: During the year ending June 30, 2018, YFC/USA agreed to transition their Global Engagement Division, starting January 1, 2019, to Youth For Christ International (YFCI). All of the related assets will be donated to YFCI at that time, along with YFCI assuming any related liabilities. Activity of that division will no longer be recorded by YFC/USA after that time. Total assets of the Global Engagement Division was $1,213,027 and $1,510,340 as of, respectively. Total revenue of the Global Engagement Division was $3,819,952 and $4,682,444 for the years ending, respectively. Subsequent events have been evaluated through October 19, 2018, which is the date the financial statements were available to be issued. -16-