FINANCIAL STATEMENTS With Independent Auditors' Report. June 30, 2011 and 2010

Transcription

1 FINANCIAL STATEMENTS With Independent Auditors' Report

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

3 INDEPENDENT AUDITORS' REPORT Board of Directors Youth for Christ/USA, Inc. Englewood, Colorado We have audited the accompanying statements of financial position of Youth for Christ/USA, Inc. as of June 30, 2011 and 2010, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the organization's management. 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 of material misstatement. An audit includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the organization s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Youth for Christ/USA, Inc. as of, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. As discussed in Note 2 to the financial statements, Youth for Christ/USA adopted ASU No Improving Disclosures about Fair Value Measurements, effective for the year ended June 30, Littleton, Colorado November 3, 2011

4 Statements of Financial Position June 30, ASSETS: Cash and cash equivalents $ 3,438,933 $ 3,248,578 Restricted certificate of deposit 202,941 - Accounts and other receivables net 592, ,632 Inventory 114,626 85,021 Promises to give net 184,576 53,189 Prepaid expenses 319, ,921 Investment in captive insurance company 797, ,329 Assets under trust and gift annuity agreements 289, ,047 Land, buildings, and equipment net 1,498,917 1,241,201 Total Assets $ 7,440,070 $ 6,564,918 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable $ 140,266 $ 265,149 Accrued expenses 142, ,377 Deferred income 1,143,232 1,072,430 Line of credit 199,926 - Note payable - 115,685 Liabilities under trust and gift annuity agreements 169, ,418 1,795,751 1,886,059 Net assets 5,644,319 4,678,859 Total Liabilities and Net Assets $ 7,440,070 $ 6,564,918 See notes to financial statements -2-

5 Statements of Activities Year Ended June 30, Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total SUPPORT AND REVENUE: Contributions $ 2,552,199 $ 6,059,887 $ - $ 8,612,086 $ 2,310,676 $ 5,668,105 $ - $ 7,978,781 Insurance premiums from affiliates 1,734, ,734,648 1,910, ,910,211 Dues from affiliates 1,484, ,484,962 1,486, ,486,148 Program income 1,012, ,012, , ,988 Camp registration fees 468, , , ,482 Service fee income 216, , , ,853 Event income 80, , , ,989 Interest and dividend income 18, ,236 18, ,739 Change in value of trusts and gift annuities - 9,568-9,568 - (17,196) - (17,196) Gain (loss) from captive insurance company 17, ,367 30, ,683 Other revenue 248, , , ,847 Total Support and Revenue 7,833,709 6,069,455-13,903,164 7,674,616 5,650,909-13,325,525 NET ASSETS RELEASED: Purpose restrictions 5,846,755 (5,846,755) - - 5,874,133 (5,874,133) - - Time restrictions 158,472 (158,472) ,838 (74,838) - - 6,005,227 (6,005,227) - - 5,948,971 (5,948,971) - - EXPENSES: Program services: Missionaries and overseas development 5,046, ,046,255 5,258, ,258,255 Field service and development 2,984, ,984,201 2,805, ,805,782 Insurance claims and premiums 1,214, ,214,390 1,379, ,379,032 Field and staff internships 629, , , ,612 Regions 355, , , ,393 10,229, ,229,852 10,337, ,337,074 (continued) See notes to financial statements -3-

6 Statements of Activities (continued) Year Ended June 30, Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total EXPENSES, continued: Supporting activities: General and administrative 2,006, ,006,942 2,429, ,429,592 Fund-raising 700, , , ,083 2,707, ,707,852 3,177, ,177,675 Total Expenses 12,937, ,937,704 13,514, ,514,749 Change in Net Assets 901,232 64, , ,838 (298,062) - (189,224) Net Assets, Beginning of Year 2,555,732 2,104,537 18,590 4,678,859 2,446,894 2,402,599 18,590 4,868,083 Net Assets, End of Year $ 3,456,964 $ 2,168,765 $ 18,590 $ 5,644,319 $ 2,555,732 $ 2,104,537 $ 18,590 $ 4,678,859 See notes to financial statements -4-

7 Statements of Cash Flows Year Ended June 30, CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 965,460 $ (189,224) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 53,207 32,895 Change in value of annuities and trusts (9,568) 17,196 (Gain) loss on investment in captive insurance company (17,367) (30,683) Change in operating assets and liabilities: Accounts and other receivables (197,976) 218,600 Inventory (29,605) 9,999 Promises to give (131,387) 14,696 Prepaid expenses 254,092 77,590 Accounts payable (124,883) 2,898 Accrued expenses (113,408) 20,109 Deferred income 70,802 (21,366) Health claims payable - (164,000) Net Cash Provided (Used) by Operating Activities 719,367 (11,290) CASH FLOWS FROM INVESTING ACTIVITIES: Change in cash and cash equivalents held for self-insured medical plan - 17,723 Purchases of land, buildings, and equipment (310,923) (70,816) Purchases of investments (427,050) (24,718) Investment in captive insurance company (100,000) - Proceeds from property held for sale - 330,000 Proceeds from sale of investments 255,210 77,864 Net Cash Provided (Used) by Investing Activities (582,763) 330,053 CASH FLOWS FROM FINANCING ACTIVITIES: Investment income on trust and annuity assets (12,430) (27,020) Trustor and annuity payments (18,060) (16,088) Proceeds from notes payable - 200,000 Payments on note payable (115,685) (233,993) Borrowings on line of credit 199,926 - Payments on line of credit - (149,533) Net Cash Provided (Used) by Financing Activities 53,751 (226,634) Change in Cash and Cash Equivalents 190,355 92,129 Cash and Cash Equivalents, Beginning of Year 3,248,578 3,156,449 Cash and Cash Equivalents, End of Year $ 3,438,933 $ 3,248,578 SUPPLEMENTAL DISCLOSURE: Cash paid for interest (none capitalized) $ 7,052 $ 21,011 See notes to financial statements -5-

8 1. NATURE OF ORGANIZATION: Youth for Christ/USA, Inc. (YFC/USA) is a not-for-profit corporation whose mission is to participate in the body of Christ in responsible evangelism of youth, presenting them with the person, work, and teachings of Christ and disciple them into the church. The objectives of the organization are religious, philanthropic, and educational. YFC/USA also provides support to its individual chapters nationwide. The primary source of revenue for YFC/USA is contributions. YFC/USA 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 it are tax deductible within the limitations prescribed by the Code. YFC/USA has been classified as a publicly supported organization which is not a private foundation under Section 509(a) of the code. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: YFC/USA uses estimates and assumptions in preparing financial statements in accordance with accounting principles generally accepted in the United States of America. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of any contingent assets and liabilities, and the reported revenues and expenses. Actual results could vary from the estimates that were assumed in preparing the financial statements. The significant accounting policies followed are described below to enhance the usefulness of the financial statements to the reader. CASH AND CASH EQUIVALENTS Cash and cash equivalents consist of cash held in checking accounts, interest-bearing money market accounts, and petty cash on hand. YFC/USA maintains their cash in accounts at high credit quality financial institutions. The balances, at times, may exceed federally insured limits. YFC/USA has not experienced any losses in such accounts, and it believes it is not exposed to any significant credit risk on cash and cash equivalents. RESTRICTED CERTIFICATE OF DEPOSIT The certificate of deposit is held as collateral for the line of credit and is reported at cost. RECEIVABLES Accounts and other receivables consist primarily of amounts due from affiliates for insurance premiums and administrative fees. Management's estimate of uncollectible accounts is based upon an analysis of past due accounts, which takes into consideration historical collections. Accounts are written off when all methods to collect have been exhausted. INVENTORY Inventory consists of Bibles held for sale. Inventory is valued at the lower of cost or market on the first-in, firstout (FIFO) method. -6-

9 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: 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. GIFT ANNUITY AND TRUST AGREEMENTS Investments YFC/USA uses appropriate valuation techniques to determine fair value based on inputs available. Marketable securities, which include equity and fixed income mutual funds, are recorded using Level 1 inputs, which are based on quoted market prices in active markets for identical assets. Unrealized gains or losses in fair value are recognized in the year in which they are reported. Gift annuity liability YFC/USA has established a gift annuity plan whereby donors may contribute assets to YFC/USA in exchange for the right to receive a fixed dollar annual return during their lifetimes. The difference between the original annuity amount invested and the discounted liability for future payments, determined on an actuarial basis, is recognized as contribution income at the date of the gift. The annuity liability is revalued annually based upon actuarially computed present values. The resulting actuarial gain or loss is recorded as change in value in the statements of activities. Trust liability As trustee, YFC/USA administers an irrevocable trust. This trust provides for the payment of lifetime distributions to the grantor or other designated beneficiaries. The trust liability is the actuarially determined present value of future payments to beneficiaries. At the death of the lifetime beneficiaries, the trust contains a provision to distribute assets to a remaindermen in addition to YFC/USA. The trust liability includes the remainder interest due to other remaindermen (charitable organizations). Perpetual agreement A perpetual trust held by a third party is an arrangement in which a donor establishes and funds a long-term or perpetual trust administered by an entity other than YFC/USA, with YFC/USA as the beneficiary. Under the terms of the trust, YFC/USA has the irrevocable right to receive a portion of the income earned on the trust assets in perpetuity, but may never receive the assets held in trust. Distributions received by YFC/USA have not been restricted by the donor. -7-

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: 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 is recorded using the straight-line method over estimated useful lives of 3 to 75 years. Fixed asset purchases exceeding $2,000 are capitalized. Depreciation expense for the year ended, was $53,207 and $32,895, respectively. DEFERRED INCOME Deferred income consists primarily of insurance premiums charged to affiliates for general liability insurance coverage. Income is recognized over the insurance policy year. NET ASSETS The net assets of YFC/USA consist of the following categories: Unrestricted net assets are those resources that are used for current operations, which includes those resources invested in property and equipment, resources designated for liability insurance coverage, and those resources invested in the captive insurance company. Temporarily restricted net assets are comprised of donor-restricted contributions for the support of projects, promises to give, and an irrevocable trust. Permanently restricted net assets include endowment funds held in perpetuity by a 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. 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 statements of activities as net assets released from restrictions. All contributions are considered available for unrestricted use unless specifically restricted by the donor. -8-

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: SUPPORT AND REVENUE, continued YFC/USA receives insurance premiums from its affiliates. Insurance premium income is recognized in the month in which it is earned. YFC/USA has excluded insurance premiums that cover months subsequent to June 30, The amount of insurance premiums excluded from accounts receivable and deferred revenue as of June 30, 2011, is $201,000. Amounts that have been billed to its affiliates for coverage subsequent to June 30, 2011, and paid by its affiliates as of June 30, 2011, have been recorded as deferred revenue in the statements of financial position. During the year ending June 30, 2012, YFC/USA expects to pay $687,000 for the cost of insurance coverage related to this coverage period. 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. All other income is recorded when earned. ALLOCATION OF EXPENSES The costs of providing the various program services and supporting activities of YFC/USA have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the program services and supporting activities benefited. RECLASSIFICATION Certain prior period amounts have been reclassified to conform with current year presentation. RECENTLY ISSUED ACCOUNTING STANDARDS In January 2010, The FASB issued ASU No , Improving Disclosures about Fair Value Measurements. This amends the Fair Value Measurement and Disclosures topic of the ASC to require additional disclosures. Effective for years beginning after December 15, 2009, the guidance requires entities to disclose transfers of assets in and out of Levels 1 and 2 of the fair value hierarchy, and the reasons for those transfers, and to report fair values based on class rather than category. Effective for years beginning after December 15, 2010, the guidance requires separate presentation of purchases and sales in the Level 3 asset reconciliation. YFC/USA adopted ASU effective for the year ended June 30, 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 June 30, 2011, YFC/USA had no uncertain tax positions that qualify for recognition or disclosure in the financial statements. -9-

12 3. ACCOUNTS AND OTHER RECEIVABLES NET: Accounts and other receivables net consist of: June 30, Due from affiliates (located nationwide): Charter covenant fees $ 350,752 $ 401,294 Insurance 318, ,856 Other 129,782 96,553 Other receivables 76, , ,703 Allowance for doubtful accounts (283,220) (391,071) $ 592,608 $ 394, 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 $ 137,036 $ 80,877 Due in one to five years 59,500 1, ,536 81,877 Allowance for doubtful promises to give (11,960) (28,688) $ 184,576 $ 53, INVESTMENT IN CAPTIVE INSURANCE COMPANY: There are currently nine unrelated non-for-profit organizations that have invested in the captive insurance holding company, entitled Stewardship Insurance, Ltd (SIL). As of, YFC/USA owns 3.5% and 3.0%, respectively, of SIL. -10-

13 5. INVESTMENT IN CAPTIVE INSURANCE COMPANY, continued: YFC/USA uses the equity method as 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. The captive also reinsures claims relating to property through ACE. SIL pays the first $250,000 of any property claim up to a $750,000 annual aggregate. Claim experience is identified to each participating entity, and subsequent premiums are modified based on an entity's experience. The investment in SIL was $797,696 and $680,329 as of, respectively. Summary financial information of SIL is: April 30, April 30, 2011* 2010* Total assets $ 46,200,000 $ 43,235,000 Total liabilities $ 24,092,000 $ 21,290,000 Comprehensive income (loss) net of dividends $ 2,016,000 $ 3,994,000 *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 1,284,167 1,205,833 Furniture, fixtures, and equipment 742, ,948 2,226,654 1,915,731 Accumulated depreciation (727,737) (674,530) $ 1,498,917 $ 1,241,

14 6. LAND, BUILDINGS, AND EQUIPMENT NET, continued: Equity in land, buildings, and equipment consist of: June 30, Land, buildings, and equipment net $ 1,498,917 $ 1,241,201 Note payable - (115,685) 7. GIFT ANNUITY AND TRUST AGREEMENTS: Assets of gift annuities and trust agreements at fair value as of June 30, 2011: $ 1,498,917 $ 1,125,516 Equity mutual funds consist of: Large-cap balanced fund $ 109,388 Large-cap growth fund 39,333 Mid-cap growth fund 15,559 Large-cap value fund 13,601 Small-cap balanced fund 10, ,916 Fixed income mutual funds consist of: Intermediate-term bond fund 42,579 Short-term bond fund 26,332 International bond fund 14,527 83,438 Beneficial interest in perpetual trust 18,590 $ 289,944 Assets of gift annuities and trust agreements at fair value as of June 30, 2010: Fixed income mutual funds $ 151,309 Cash and cash equivalents 82,505 Equity mutual funds 35,677 Beneficial interest in perpetual trust 18,556 $ 288,

15 7. GIFT ANNUITY AND TRUST AGREEMENTS, continued: Liabilities of gift annuities and trust agreements consist of: June 30, Irrevocable trusts $ 90,075 $ 95,990 Amounts held for others 63,782 64,828 Gift annuities 15,501 15,600 Change in value of gift annuities and trust agreements consists of: $ 169,358 $ 176,418 Year Ended June 30, Actuarial change $ 7,060 $ (25,505) Interest income 12,473 15,394 Trustor and annuity payments (18,060) (16,088) Unrealized gains (losses) 8,095 9,003 $ 9,568 $ (17,196) 8. LINE OF CREDIT: YFC/USA has access to an unsecured revolving line of credit with a financial institution. As of June 30, 2011 and 2010, $199,926 and $0, respectively, was outstanding on the line of credit. The line of credit bears interest at a variable rate, which is the greater of the Prime Index as published in the Wall Street Journal or 4.5%. The total amount available to YFC/USA is $200,000. The line of credit matures in August NOTE PAYABLE: Note payable consists of a mortgage payable to a financial institution, secured by a deed of trust. The note payable was paid in full during the year ended June 30,

16 10. NET ASSETS: Net assets consist of: June 30, Unrestricted: Operating $ (977,394) $ (1,332,050) Equity in land, buildings, and equipment 1,498,917 1,125,516 Designated for liability insurance coverage 2,137,745 2,081,937 Investment in captive insurance company 797, ,329 3,456,964 2,555,732 Temporarily restricted: Projects: Missionaries and missionary projects 1,576,236 1,498,301 Staff support and projects 290, ,309 Project Serve - 6,148 Promises to give 184,576 53,189 Irrevocable trust 117, ,590 2,168,765 2,104,537 Permanently restricted 18,590 18,590 $ 5,644,319 $ 4,678, RETIREMENT PLAN: YFC/USA participates in a Tax Sheltered Annuity 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 $99,694 and $94,976, respectively. -14-

17 12. OPERATING LEASES: YFC/USA leases several office machines, computer software, and office space under operating leases. Lease expense under these leases for the years ended, was $84,156 and $175,052, respectively. Future minimum lease payments are: Year Ending June 30, Thereafter $ $ 98,184 45,771 8,472 4,785 3,240 1, ,072 YFC/USA leases a portion of its office space and has several cell tower leases. Lease income under these leases for the years ended, was $57,127 and $35,037, respectively. Future minimum lease income is: Year Ending June 30, Thereafter $ $ 35,018 31,368 28,618 23,981 15, , , RELATED PARTY TRANSACTIONS: Eight of the one hundred seventy-five executive directors of YFC/USA affiliates are also board members of YFC/USA and are selected by YFC regions to represent the interests of all affiliates. During the years ended, $226,483 and $419,965, respectively, was received from the eight affiliates for dues and insurance fees. As of, $20,844 and $26,589, respectively, was due to YFC/USA from these eight affiliates. A member of management of YFC/USA is on the board of Military Community Youth Ministries (MCYM). YFC/USA received payments from MCYM of $971,818 and $923,988 for services provided by YFC/USA missionaries to MCYM during the years ended, respectively, and YFC/USA made payments to MCYM of $1,305 and $3,203 during the years ended, respectively. YFC/USA has recorded a receivable from MCYM in the amount of $76,940 as of June 30,

18 14. OPERATING DEFICIT: Since the inception of YFC/USA during 1944, YFC/USA has a cumulative operating deficit of $977,394, as of June 30, Management has developed a plan to reduce this operating deficit and continues to evaluate and implement further changes for all programs, including expanding their fund raising efforts. 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. -16-