SAMARITAN S PURSE. Consolidated Financial Statements. and Supplemental Schedules. December 31, (with Independent Auditors Report thereon)

Transcription

1 SAMARITAN S PURSE Consolidated Financial Statements and Supplemental Schedules December 31, 2012 (with Independent Auditors Report thereon)

2 SAMARITAN S PURSE Mission Statement Samaritan s Purse is a nondenominational evangelical Christian organization providing spiritual and physical aid to hurting people around the world. Since 1970, Samaritan s Purse has helped meet needs of people who are victims of war, poverty, natural disasters, disease, and famine with the purpose of sharing God s love through His Son, Jesus Christ. The organization serves the church worldwide to promote the Gospel of the Lord Jesus Christ.

3 SAMARITAN S PURSE Table of Contents December 31, 2012 Page(s) Independent Auditors Report Consolidated Statement of Financial Position...3 Consolidated Statement of Activities...4 Consolidated Statement of Cash Flows...5 Notes to Consolidated Financial Statements Supplemental Schedules: Schedule of Functional Expenses Information...17 Schedule of Ministry Expenses Information...18

4 - Independent Auditors Report - To the Board of Directors Samaritan s Purse Report on Consolidated Financial Statements We have audited the accompanying consolidated financial statements of Samaritan s Purse (the Ministry ), which comprise the consolidated statement of financial position as of December 31, 2012, and the related consolidated statements of activities and cash flows for the year then ended. The prior year summarized comparative information has been derived from the Ministry s 2011 consolidated financial statements and, in our report dated April 17, 2012, we expressed an unqualified opinion on those consolidated financial statements. Management s Responsibility for the 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. Auditor s 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 auditors 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. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the Ministry as of December 31, 2012, and the results of its 1

5 Independent Auditors Report Page Two operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Report on Supplementary Information Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements taken as a whole. The supplemental information is presented for purposes of additional analysis and is not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates to the underlying accounts and other records used to prepare the consolidated financial statements. The supplemental information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the supplemental information is fairly stated in all material respects in relation to the consolidated financial statements taken as a whole. March 21,

6 SAMARITAN S PURSE Consolidated Statement of Financial Position December 31, 2012 (With Comparative Totals for 2011) Assets Current assets: Cash and cash equivalents: Available for ministries $ 5,449,598 $ 4,531,482 Held for donor-restricted ministry purposes 73,543,186 54,031,118 Investments: Available for ministries 52,738,472 50,077,495 Held for donor-restricted ministry purposes - 30,834,740 Planned giving program 6,418,191 6,344,033 Grants receivable 957, ,998 Assets held by field operations 5,191,041 7,459,527 Other current assets 4,573,356 5,378,458 Inventories 12,761,939 41,159,680 Total current assets 161,632, ,465,531 Noncurrent assets: Planned giving program investments 19,021,768 17,640,957 Other noncurrent assets 615, ,273 Property and equipment, net of accumulated depreciation 65,148,054 62,035,991 Total noncurrent assets 84,785,126 80,316,221 Total assets $ 246,417,996 $ 280,781,752 Liabilities and Net Assets Current liabilities: Accounts payable - suppliers $ 11,933,016 $ 10,600,129 Accrued expenses 1,169,533 1,109,584 Funds held on behalf of affiliates 624, ,999 Current portion of planned giving program obligations 6,418,191 6,344,033 Total current liabilities 20,145,514 18,765,745 Noncurrent liabilities: Planned giving program obligations 12,058,856 11,944,181 Total noncurrent liabilities 12,058,856 11,944,181 Total liabilities 32,204,370 30,709,926 Net assets: Unrestricted: Designated by governing board 4,864,192 4,531,482 Represented by property and equipment 65,148,054 62,035,991 General 60,842,648 58,004,435 Total unrestricted 130,854, ,571,908 Temporarily restricted 83,358, ,499,918 Total net assets 214,213, ,071,826 Total liabilities and net assets $ 246,417,996 $ 280,781,752 See accompanying notes. 3

7 SAMARITAN S PURSE Consolidated Statement of Activities For the Year Ended December 31, 2012 (With Comparative Totals for 2011) Temporarily Unrestricted Restricted Total Total Support and revenue: Contributions $ 77,729,206 $ 127,315,542 $ 205,044,748 $ 207,148,912 Contributed goods and services 13,782, ,325, ,107, ,693,315 Investment income (loss) 1,658,471-1,658,471 (60,320) Change in value of annuities and trusts 40,918 20,053 60,971 (323,034) Other income 1,989,450 39,035 2,028,485 2,257,762 Total support and revenue 95,200, ,700, ,900, ,716,635 Reclassifications: Assessment against restricted contributions 7,802,529 (7,802,529) - - Satisfaction of program and property restrictions 329,038,838 (329,038,838) - - Total reclassifications 336,841,367 (336,841,367) - - Expenses: Ministry expenses: Emergency relief 36,594,887-36,594,887 26,861,769 Community development ministry 42,038,841-42,038,841 31,751,853 Medical ministry 30,711,063-30,711,063 29,624,891 Children's ministry-operation Christmas Child 231,142, ,142, ,686,718 Children's ministry-other 9,056,329-9,056,329 4,535,817 Christian education 29,093,024-29,093,024 21,200,018 Miscellaneous ministry 1,397,384-1,397,384 1,897,502 Other ministry services 1,756,363-1,756,363 11,227,134 Total ministry expenses 381,790, ,790, ,785,702 Supporting activities: Fund raising 26,300,692-26,300,692 24,767,123 General and administrative 17,667,206-17,667,206 17,988,135 Total expenses 425,758, ,758, ,540,960 Increase (decrease) in net assets 6,282,986 (42,141,186) (35,858,200) 35,175,675 Net assets at beginning of year 124,571, ,499, ,071, ,896,151 Net assets at end of year $ 130,854,894 $ 83,358,732 $ 214,213,626 $ 250,071,826 See accompanying notes. 4

8 SAMARITAN S PURSE Consolidated Statement of Cash Flows For the Year Ended December 31, 2012 (With Comparative Totals for 2011) Cash flows from operating activities: Increase (decrease) in net assets $ (35,858,200) $ 35,175,675 Adjustments to reconcile increase (decrease) in net assets to net cash provided by operating activities: Depreciation 7,743,025 7,237,862 (Gain) loss on disposition of property (195,040) 181,578 Loss on sale of investments 958, ,855 Property and equipment contributions received (83,948) (306,575) Contributions of other assets received and held for sale (66,527) (881,652) Adjustment of planned giving obligations 1,300,409 1,200,451 Unrealized (gain) loss on investments (2,021,013) 1,181,578 (Increase) decrease in value of other assets 23,969 (2,252) Net change in: Grants receivable (308,089) 206,220 Assets held by field operations 2,268,486 (2,884,952) Other assets 871,629 (478,139) Inventories 28,397,741 (8,575,272) Accounts payable-suppliers 1,332, ,242 Accrued expenses 59,949 (102,178) Net cash provided by operating activities 4,424,215 32,898,441 Cash flows from investing activities: Proceeds from sale of property and equipment 270,952 6,811,833 Proceeds from sale of investments 91,050,514 51,840,367 Purchase of investments (62,475,526) (102,213,325) (Increase) decrease in planned giving program assets (794,118) 290,562 Collections on note receivable - 100,000 Capital expenditures (10,847,052) (11,726,703) Net cash provided (used) by investing activities 17,204,770 (54,897,266) Cash flows from financing activities: Increase (decrease) in funds held on behalf of affiliates (87,225) 158,867 Proceeds from planned giving program contracts 620,546 1,277,029 Payments of planned giving program contracts (1,732,122) (1,644,420) Net cash used by financing activities (1,198,801) (208,524) Net increase (decrease) in cash and cash equivalents 20,430,184 (22,207,349) Cash and cash equivalents - beginning of year 58,562,600 80,769,949 Cash and cash equivalents - end of year $ 78,992,784 $ 58,562,600 See accompanying notes. 5

9 SAMARITAN S PURSE Notes to Consolidated Financial Statements December 31, 2012 (With Comparative Totals for 2011) 1. Description of Ministry and Summary of Significant Accounting Policies Ministry Samaritan s Purse (the Ministry ) is incorporated as a nonprofit organization under the laws of North Carolina. The Ministry is a nondenominational evangelical Christian organization providing spiritual and physical aid to hurting people around the world. Since 1970, the Ministry has helped meet needs of people who are victims of war, poverty, natural disasters, disease, and famine with the purpose of sharing God s love through His Son, Jesus Christ. The organization serves the church worldwide to promote the Gospel of the Lord Jesus Christ. Basis of Presentation Financial statement presentation follows accounting principles generally accepted in the United States of America ( GAAP ) pertaining to Financial Statements of Nonprofit Organizations. Under Financial Statements of Nonprofit Organizations, the Ministry is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Principles of Consolidation The consolidated financial statements include the accounts of the Ministry and its interrelated organizations, Samaritan s Purse (Kenya), Samaritan's Purse (Sri Lanka), and Ippan Shadan Houjin Samaritan s Purse (Japan). The accounts of Emmanuel Group, a wholly owned title holding corporation formed in 2004 under Section 501(c)(2) of the Internal Revenue Code, are also included in the consolidated financial statements. Emmanuel Group has no operations or activities other than holding title. All interorganization transactions and account balances are eliminated upon consolidation. Use of Estimates The preparation of the consolidated financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Cash and Cash Equivalents Cash and cash equivalents include investments in highly liquid debt instruments with an original maturity of three months or less when purchased. The Board approved an investment policy for the operating fund that maintains adequate cash flow with preservation of principal and liquidity as the primary investment objective with maximization of earnings as a secondary objective. Investments Investments in equity securities with readily determinable fair values and all debt securities are measured at fair value. Investment income or loss (including gains and losses on investments, interest, and dividends) is included in the increase in net assets. Investment income is recorded net of investment expenses. For the years ended December 31, 2012 and 2011, investment expenses were $156,796 and $94,972, respectively. Realized gains or losses on investments are determined by comparison of specific cost of acquisition to proceeds at the time of disposal. Unrealized gains or losses are calculated by comparing cost to market values at the consolidated statement of financial position date. 6

10 Samaritan s Purse Notes to Consolidated Financial Statements, Continued Planned Giving Program The Ministry has a fully-funded program whereby donors may contribute through gift annuities and charitable remainder trusts. Assets equal to the present value of payment liabilities, plus an additional reserve, are held in segregated trust accounts by a bank or brokerage firm and are managed by professional investment advisors. The Ministry complies with state laws regulating gift annuities and trusts. The Ministry records planned gift assets at their fair value. Liabilities are recorded at the present value of projected payments, usually for beneficiaries lives using a 6% discount rate, the Annuity 2000 mortality table and other actuarial assumptions. Changes in value of annuities and trusts are recorded in the statement of activities. The charitable present value of annuities and trusts is recorded as contribution revenue at the time the agreement is executed. Values of trust agreements in which the Ministry s remainder interest is revocable are recorded as a liability until that interest becomes irrevocable, at which time the contribution revenue is recorded. The Ministry is also named as a beneficiary in trusts and wills not managed by the Ministry, the values of which are unknown and are not included in the consolidated statement of financial position. Fair Value Measurements Fair value is defined under GAAP as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Ministry utilizes market data or assumptions that market participants would use in pricing the asset or liability. GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. Assets Held by Field Operations Assets held by field operations represent cash forwarded to project field sites for use in carrying out ministry activities. Other Assets Other assets consists primarily of receivables, prepaid expenses, and deposits which are carried at cost at the date of acquisition as well as gifts of property held for liquidation and cash surrender value of life insurance which are carried at fair value. Changes in fair value are reported in other income in the consolidated statement of activities. The Ministry has contracted with a captive insurance company to obtain coverage for workers compensation, general liability, property, and automobile liability insurance. The Ministry owns a non-controlling share of the common stock of the captive insurance company and is accounting for this asset under the cost method of investment accounting. The cost of this asset in the amount of $285,000 as of December 31, 2012 and 2011 is included as other noncurrent assets in the consolidated statement of financial position. Inventories Inventory consisting of Operation Christmas Child gift boxes, medical equipment and supplies, and other equipment and supplies is stated at the lower of fair value as of the date of the donation or at market value as of the date of the consolidated statement of financial position. 7

11 Samaritan s Purse Notes to Consolidated Financial Statements, Continued Property and Equipment Land is stated at cost. All other property and equipment are stated at cost less accumulated depreciation. Depreciation over the following estimated useful lives of property and equipment is computed using the straight-line method: Buildings Furniture, fixtures, land improvements and equipment Ministry and missionary aircraft 30 years 3-10 years 10 years Ministry and missionary aircraft represents aircraft stationed throughout the world that are used by the Ministry and other organizations in their ministries. Donated Property Donated property is recorded at fair value at the date of donation. Net Assets Designated by Governing Board The Board of Directors designates an amount equivalent to 10 percent of the cost basis of the Ministry s buildings to replace and repair buildings owned by the Ministry. The amounts designated as of December 31, 2012 and 2011 were $4,864,192 and $4,531,482, respectively. Contributed Services The Ministry received contributed services from approximately 138,000 individual volunteers in 2012 and approximately 124,000 individuals in The Ministry recorded the value of approximately 69,000 and 61,000 of those volunteers for the years ended December 31, 2012 and 2011, respectively. The value of contributed services recorded by the Ministry amounted to approximately $13,700,000 in 2012 and $12,700,000 in The recorded value is determined based on hours of service donated at average fair value of comparable services and is reported both as revenue and expense in the period the service is performed. The remaining 69,000 volunteers in 2012 and 63,000 in 2011 performed services which are not reflected in the consolidated financial statements as the services did not require specialized skills as specified by GAAP pertaining to Accounting for Contributions Received and Contributions Made. These services are estimated to be valued at $5,400,000 in 2012 and $4,000,000 in Approximately $2,500,000 of the 2012 amount and $2,100,000 of the 2011 amount not reflected in the consolidated financial statements were related to the collection of gift boxes for Operation Christmas Child. Contributed Goods The Ministry receives donations of medical equipment, supplies and other materials for use in its programs. Such gifts are recorded at their estimated fair value at the date of donation. Based upon the quantities donated, some gifts were valued using the estimated wholesale value of gifts received considering their condition and utility for use. Gifts of approximately $167,400,000 and $177,000,000 were received for the years ended December 31, 2012 and 2011, respectively. These donations include the receipt of individual gift boxes through the Operation Christmas Child project. This project collected approximately 6,500,000 and 6,000,000 gift boxes from individuals for the years ended December 31, 2012 and 2011, respectively. The estimated value per gift box was $23.83 for 2012 and $27.25 for Contributed goods are held in inventory and expensed as used by the Ministry. Gifts-in-kind distributed through the Ministry amounted to approximately $198,100,000 and $168,500,000 for the years ended December 31, 2012 and 2011, respectively. The Ministry liquidates contributed securities upon receipt. The amounts, therefore, are included on the consolidated statement of cash flows as an operating activity. 8

12 Samaritan s Purse Notes to Consolidated Financial Statements, Continued Functional Classification of Expenses GAAP pertaining to Financial Statements of Nonprofit Organizations requires reporting of expenses by their functional classification in major classes such as ministry, fund raising, and general and administrative. Ministry expenses consist of activities that result in food, medicine, clothing, shelter, other relief supplies and Operation Christmas Child gift boxes being distributed to beneficiaries and all Christian evangelical activities such as sharing the Gospel through the distribution of Bibles or literature, training pastors, Christian education, intercessory prayer, religious services, lifestyle evangelism, or other activities that fulfill the purpose or mission for which the Ministry exists. These services are the major purpose for, and the major output of, the Ministry. Ministry expenses are in furtherance of our stated purpose as presented in our Articles of Incorporation, Bylaws, and representations to government authorities. Fund raising expenses involve informing potential donors and facilitating contributions of money, securities, materials, facilities, other assets, or time. Fund raising activities include publicizing and conducting fund raising campaigns, maintaining donor mailing lists, conducting special fund raising events, preparing and distributing fund raising manuals and other materials, and conducting other activities involved with soliciting contributions from individuals, foundations, government agencies, and others. General and administrative expenses are those that are not identifiable with a single ministry or fund raising activity, but are indispensable to the conduct of those activities and to the Ministry s existence. They include oversight, business management, general record keeping, budgeting, and financing activities. Allocation of Joint Costs In 2012, the Ministry conducted activities that included requests for contributions, as well as ministry and general and administrative components. Those activities included print communications, broadcasting, and ministry operations. The costs of conducting those activities included a total of $61,445,082 and $57,408,582 of joint costs for 2012 and 2011, respectively. These joint costs are not specifically attributable to particular components of the activities and were allocated as follows: Ministry $ 31,234,557 $ 29,807,659 Fund raising 22,724,126 20,530,843 General and administrative 7,486,399 7,070,080 Total $ 61,445,082 $ 57,408,582 Income Taxes The Ministry is exempt from federal income taxes, and contributions to the Ministry are deductible as charitable contributions under Internal Revenue Code Section 170. The Internal Revenue Service has issued a determination letter to the Ministry stating that it qualifies for taxexempt status under Internal Revenue Code Section 501(c)(3). The Internal Revenue Service has also issued a ruling stating that the Ministry will not be treated as a private foundation within the meaning of Internal Revenue Code Sections 509(a)(1), 509(a)(2), and 509(a)(3). 9

13 Samaritan s Purse Notes to Consolidated Financial Statements, Continued The Ministry has determined that it does not have any material unrecognized tax benefits or obligations as of December 31, Fiscal years ending on or after December 31, 2009, remain subject to examination by federal and state authorities. Assessment The Board of Directors has established a policy that all donor-restricted contributions for a specific project may be assessed up to 10 percent to be used for administering the gift if needed. Unrestricted and Restricted Support and Revenue Contributions received are recorded as unrestricted or temporarily restricted, depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily restricted net assets, depending on the nature of the restriction. When a 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 consolidated statement of activities as satisfaction of program and property restrictions. The Ministry has no permanently restricted net assets. Subsequent Events Subsequent events have been evaluated through March 21, 2013, which is the date the consolidated financial statements were available to be issued. Comparative Data The consolidated financial statements include certain summarized prior year comparative information in total but not by net asset classification. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with the Ministry s consolidated financial statements for the year ended December 31, 2011, from which the summarized information is derived. Reclassifications Certain reclassifications have been made to the 2011 amounts to conform to the 2012 consolidated financial statement presentation. 2. Property and Equipment A summary of property and equipment and related accumulated depreciation at December 31 follows: Equipment, furniture and fixtures $ 30,021,444 $ 26,652,461 Ministry and missionary aircraft 27,837,336 25,368,572 Land and land improvements 5,596,725 4,601,645 Buildings 48,774,765 45,672,883 Total 112,230, ,295,561 Less accumulated depreciation 47,307,438 40,259,570 64,922,832 62,035,991 Construction in progress 225,222 - Property and equipment, net $ 65,148,054 $ 62,035,991 10

14 Samaritan s Purse Notes to Consolidated Financial Statements, Continued The Ministry places assets in various countries at any given time to be used for support of missions, medical assistance, and emergency relief. These assets are subject to the laws of the governments in the countries in which they reside. Aircraft, equipment, and other assets that have a cost basis of $13,241,298 in 2012 and $17,185,297 in 2011 have been placed in various foreign countries. 3. Investments Investments are composed of the following: Cash $ 2,911,083 $ 4,412,176 Equities 16,044,003 13,642,267 Fixed income 59,133,345 86,752,782 Real estate 90,000 90,000 Total $ 78,178,431 $ 104,897,225 Investment income (loss), exclusive of annuities and trusts, consists of: Interest and dividends $ 1,257,247 $ 1,642,172 Net realized losses (1,280,000) (384,399) Net unrealized gains (losses) 1,681,224 (1,318,093) Total $ 1,658,471 $ (60,320) 4. Planned Giving Program The assets and liabilities of the planned giving program are as follows: Assets: Gift annuities $ 19,871,275 $ 18,471,630 Irrevocable trusts 904, ,900 Revocable trusts 4,663,749 4,619,460 Total $ 25,439,959 $ 23,984,990 Liabilities: Gift annuities $ 13,299,679 $ 13,146,116 Irrevocable trusts 513, ,638 Revocable trusts 4,663,749 4,619,460 Total $ 18,477,047 $ 18,288,214 11

15 Samaritan s Purse Notes to Consolidated Financial Statements, Continued The change in value of annuities and trusts presented on the consolidated statement of activities consists of: Interest and dividends $ 828,360 $ 810,667 Net realized gains on investments 321,063 54,544 Net unrealized gains on investments 339, ,515 Actuarial adjustments 431, ,969 Administrative fees (127,832) (124,309) Payments to income beneficiaries (1,732,122) (1,644,420) Total $ 60,971 $ (323,034) 5. Fair Value Measurements The carrying amount of cash and cash equivalents and accounts receivable approximates fair value because of the short-term maturities of those instruments. The fair values of investments are based on market prices obtained from various financial institutions. The carrying amount of accounts payable and accrued expenses approximates fair value because of the short-term maturities of those instruments. Prices for certain cash equivalents, such as investment securities and U.S. government agency instruments, which are readily available in the active markets in which those securities are traded, are categorized as Level 1. Prices for non-u.s. government agency fixed income instruments and real estate are based on inputs that are readily available in public markets or can be derived from information available in publicly quoted markets and are categorized as Level 2. Prices for privately held stocks are based on assumptions developed by management and are categorized as Level 3. There were no changes during the years ended December 31, 2012 and 2011 to the Ministry s valuation techniques used to measure asset and liability fair values on a recurring basis. The following tables set forth by level within the fair value hierarchy the Ministry s assets accounted for at fair value on a recurring basis as of December 31, 2012 and Assets are classified in their entirety based on the lowest level of input that is significant to the fair value measurement. The Ministry s assessment of the significance of a particular input to the fair value measurement requires judgment, and may affect the valuation of fair value assets and liabilities and their placement within the fair value hierarchy levels. 12

16 Samaritan s Purse Notes to Consolidated Financial Statements, Continued Measured at Fair Value on a Recurring Basis As of December 31, 2012 Description Level 1 Level 2 Level 3 Total Equities Energy/mining $ 4,893,952 $ - $ - $ 4,893,952 Financial 2,317, ,317,472 Healthcare 1,156, ,156,146 Manufacturing 2,277, ,277,587 Services 4,044, ,044,321 Transportation 1,231, ,231,973 Mutual funds - 122, ,552 Fixed income U.S. government 12,458, ,458,207 Municipal - 2,045,440-2,045,440 Mortgage backed securities - 5,275,956-5,275,956 Asset backed securities - 4,612,461-4,612,461 Corporate - 31,785,138-31,785,138 Mutual funds - 2,956,143-2,956,143 Other Real estate - 90,000-90,000 Other assets Donated equity securities and other financial instruments included in other assets 129,600 20,000 5, ,324 Total $ 28,509,258 $ 46,907,690 $ 5,724 $ 75,422,672 As of December 31, 2011 Description Level 1 Level 2 Level 3 Equities Energy/mining $ 4,713,517 $ - $ - $ 4,713,517 Financial 1,738, ,738,996 Healthcare 1,455, ,455,713 Manufacturing 1,576, ,576,043 Services 2,868, ,868,654 Transportation 1,039, ,039,525 Mutual funds - 249, ,819 Fixed income U.S. government 12,572, ,572,395 State government - 6,898,491-6,898,491 Municipal - 2,483,509-2,483,509 Mortgage backed securities - 10,057,046-10,057,046 Asset backed securities - 7,163,623-7,163,623 Corporate - 46,821,066-46,821,066 Mutual funds - 756, ,652 Other Real estate - 90,000-90,000 Other assets Donated equity securities and other financial instruments included in other assets 42,933-7,027 49,960 Total $ 26,007,776 $ 74,520,206 $ 7,027 $ 100,535,009 13

17 Samaritan s Purse Notes to Consolidated Financial Statements, Continued Cash and cash equivalents, money market deposit accounts, and certificates of deposit are not defined within the levels as prescribed in Fair Value Measurements. Accordingly, $2,911,083 as of December 31, 2012 and $4,412,176 as of December 31, 2011 of cash and cash equivalents, money market deposits, and certificates of deposit are not included in the table above. The determination of fair value above incorporates various factors. These factors include not only the credit standing of the counterparties involved and the impact of credit enhancements, but also the impact of the Ministry s nonperformance risk on its liabilities. 6. Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes as of December 31: Africa projects $ 3,726,395 $ 8,157,067 Agriculture projects 5,455,882 4,925,864 Asia projects 542,408 1,223,266 Bibles and Christian literature 268, ,799 Central and South America projects 363, ,039 Children's projects - Operation Christmas Child 23,087,140 23,522,791 Children's projects - other 4,777,196 2,905,545 Church construction projects 288, ,770 Clean water projects 2,791,109 1,921,321 Development projects 135, ,054 Eastern Europe relief 41,935 53,885 Emergency relief 1,543,856 2,498,917 Haiti earthquake relief 1,040,162 7,154,868 Housing construction projects 607, ,905 Japan relief 1,718,441 12,450,966 Medical missionaries' expenses to foreign field 2,475,895 2,324,205 Medical projects 2,806,641 3,074,399 Middle East projects 223, ,344 Missionary aid 1,071, ,954 U.S.A. - disaster relief 16,497,008 6,976,154 U.S.A. - nonemergency relief 3,626,383 4,902,646 Other 1,047, ,505 Inventories: Operation Christmas Child materials 6,302,720 36,884,737 Medical equipment and supplies 2,790,722 2,954,436 Other equipment and supplies 127, ,481 Total $ 83,358,732 $ 125,499,918 14

18 Samaritan s Purse Notes to Consolidated Financial Statements, Continued 7. Related-Party Transactions The Chief Executive Officer, President, and Chairman of the Ministry serves as Chief Executive Officer, President, and First Vice Chairman of Billy Graham Evangelistic Association. Billy Graham Evangelistic Association is controlled by an independent Board of Directors, though the two ministries share certain board members. To gain efficiencies over administrative services supporting their individual ministries, Billy Graham Evangelistic Association and the Ministry entered into a shared services agreement to provide a meaningful structure for regulating and overseeing the shared services and expenses. In accordance with the provisions of the agreement, the Ministry reimbursed the sum of $818,738 in 2012 and $934,628 in 2011 to Billy Graham Evangelistic Association and Billy Graham Evangelistic Association reimbursed the sum of $1,623,199 in 2012 and $1,404,698 in 2011 to the Ministry. Billy Graham Evangelistic Association received and forwarded contributions totaling $336,846 in 2012 and $192,821 in 2011 to the Ministry designated for support of their ministry activities. The Ministry received and forwarded contributions totaling $128,556 in 2012 and $104,414 in 2011 to Billy Graham Evangelistic Association for support of their ministry activities. Amounts receivable from Billy Graham Evangelistic Association at December 31, 2012 and 2011 were $69,171 and $323,215, respectively, and are included in other current assets on the consolidated statement of financial position. Amounts payable to Billy Graham Evangelistic Association at December 31, 2012 and 2011 were $225,963 and $62,870, respectively, and are included in accounts payable-suppliers on the consolidated statement of financial position. The Ministry provided cash grants totaling $1,150,000 in 2012 and $82,725 in 2011 and in-kind contributions valued at $207,475 in 2012 and $245,823 in 2011 to Billy Graham Evangelistic Association in support of various ministry projects. Billy Graham Evangelistic Association provided cash grants totaling $458,115 in 2012 and in-kind contributions valued at $40,788 in 2012 and $7,325 in 2011 to the Ministry in support of various ministry projects. The Ministry and Billy Graham Evangelistic Association had a joint ministry project in South Sudan in The Ministry had expenses of $2,090,633 for this joint project. Following is 2012 un-audited summary financial information for Billy Graham Evangelistic Association: total assets - $347,811,028; total liabilities - $77,017,548; total net assets - $270,793,480; total revenues - $108,255,220; and total expenses - $95,999,329. The Ministry maintains Affiliated Ministry and Trademark License Agreements with the following unconsolidated organizations: Samaritan s Purse-Australia, The Samaritan s Purse-Canada, Samaritan s Purse International-United Kingdom, and Gifts of Hope-Germany. The Affiliated Ministry and Trademark License Agreements with Samaritan s Purse-Hong Kong was terminated in The Agreements outline how the affiliate organizations coordinate program activities and the terms and conditions of their use of the Ministry s registered name and trademarks. The Ministry paid these affiliated organizations $1,835,992 in 2012 and $762,745 in 2011 for employment cost reimbursement and support of various projects. These affiliated organizations reimbursed the Ministry $370,044 in 2012 and $559,045 in 2011 for ministry support and materials. Amounts receivable from these affiliates at December 31, 2012 and 2011 were $764,454 and $50,146, respectively, and are included in other current assets on the consolidated statement of financial position. Amounts payable to these affiliates at December 31, 2012 and 2011 were $280,860 and $100,661, respectively, and are included in accounts payable-suppliers on the consolidated statement of financial position. Funds held by the Ministry as an agent of these affiliates at December 31, 2012 and 2011 were $624,774 and $711,999, respectively, and are included in funds held on behalf of affiliates on the consolidated statement of financial position. 15

19 Samaritan s Purse Notes to Consolidated Financial Statements, Continued One board member of the Ministry is also a board member of Mafraq Sanatorium Association. The Ministry donated $725,125 in 2012 and $659,423 in 2011 to Mafraq Sanatorium Association, of which $79,586 and $194,423, respectively, was donor-restricted. The Ministry paid for some ministry and administrative expenditures which amounted to $20,869 in 2012 and $110,276 in Retirement Plan The Ministry sponsors a defined contribution retirement and salary reduction plan (the Plan ) that covers eligible employees as determined by the Plan agreement. Employer contributions are five percent of each participant s salary with a matching provision which provides a $1 employer contribution to each $1 employee contribution up to three percent of each participant s salary. Retirement expense was $2,479,865 in 2012 and $2,104,808 in The assets of the Plan are held in an employee benefit trust and are not included in the accompanying consolidated financial statements. 9. Operating Lease In December 2010, the Ministry entered an operating lease for a ministry aircraft which expires December 1, Rent expense was $1,995,321 in 2012 and $1,966,004 in The approximate future minimum lease payments under the operating lease are $1,995,321 per year payable over the next three years. 10. Concentrations of Credit Risk The Ministry has deposits in various banks in excess of the amounts covered by federal depository insurance. Management believes that credit risk related to these deposits is minimal. 11. Self-Insurance Program The Ministry maintains a self-insurance program for hospitalization and medical coverage for its employees. The Ministry limits its losses through the use of stop-loss policies from reinsurers. Specific individual losses for claims are limited to $75,000 per year. The Ministry s aggregate annual loss limitation is based on a formula that considers, among other things, the total number of employees. At December 31, 2012 and 2011, the estimated liability for these claims approximated $847,000 and $902,000 respectively, and is included in accrued expenses. 12. Line of Credit On October 23, 2012, Branch Banking and Trust Company, Inc. ( BB&T ) extended to the Ministry a $5,000,000 unsecured line of credit bearing interest at bank prime rate (3.25% at December 31, 2012) until its expiration in October There were no outstanding borrowings under this line of credit at December 31, This line of credit is subject to certain restrictive financial covenants. At December 31, 2012, the Ministry was in compliance with the covenants. 16

20 SAMARITAN S PURSE Schedule of Functional Expenses Information For The Year Ended December 31, 2012 (With Comparative Totals for 2011) Ministry General and Expenses Fund raising administrative Total Total Grants and allocations-cash $ 11,476,602 $ - $ - $ 11,476,602 $ 8,160,360 Grants and allocations-non cash 198,107, ,107, ,540,055 Direct project costs 52,068, ,068,155 40,309,497 Salaries and wages 38,521,684 8,425,126 8,131,814 55,078,624 49,529,371 Retirement 1,395, , ,376 2,479,865 2,104,808 Other employee benefits 8,464,771 1,585,749 1,710,760 11,761,280 9,750,594 Payroll taxes 1,919, , ,590 3,105,276 2,738,168 Professional fees 1,982, , ,612 3,442,127 3,057,936 Supplies 4,638, , ,520 5,798,041 4,576,759 Telecommunications 2,180, , ,324 3,122,564 2,525,263 Postage and shipping 2,473,572 2,718, ,675 5,342,707 5,535,499 Rental expense 2,281, , ,446,229 2,214,194 Printing and publications 3,412,329 4,693, ,263 8,556,005 8,631,717 Travel 25,337,907 2,046,827 1,008,448 28,393,182 23,079,548 Conferences, conventions, meetings 997, ,728 85,675 1,542,313 1,272,732 Depreciation 5,041,043 1,296,952 1,405,030 7,743,025 7,237,862 Utilities 2,011, , ,427 2,273,062 1,910,268 Insurance 185,206 85,872 93, , ,647 Dues and fees 116,500 10,351 29, , ,887 Broadcast 64, , ,710 1,223,953 Janitorial/grounds/equip. maint. 1,154, ,207 1,092,314 2,358,406 1,976,780 Bank charges - 1,063,525 18,150 1,081,675 1,228,729 Contracted services 3,690,866 89,206 19,321 3,799,393 4,085,348 Contributed services 13,601, ,601,099 12,730,161 Miscellaneous 665,148 77,076 (29,806) 712, ,824 Total expenses $ 381,790,682 $ 26,300,692 $ 17,667,206 $ 425,758,580 $ 363,540,960 17

21 SAMARITAN S PURSE Schedule of Ministry Expenses Information For The Year Ended December 31, Emergency Community Medical Children's Children's Christian Miscellaneous Other ministry Total Ministry relief dev. min. ministry ministry-occ ministry-other education ministry services Expenses Grants and allocations-cash $ 1,935,604 $ 405,889 $ 2,909,408 $ 163,967 $ 1,527,592 $ 4,179,551 $ 354,591 $ - $ 11,476,602 Grants and allocations-non cash 678,132 47,727 5,270, ,110, ,107,764 Direct project costs 13,010,572 10,514,333 4,085,257 16,655,536 3,200,531 4,589,747 11, ,068,155 Salaries and wages 6,775,576 13,417,680 3,540,729 6,748,065 1,778,872 5,162, , ,367 38,521,684 Retirement 289, , , ,069 31, ,533 18,328 59,382 1,395,246 Other employee benefits 1,397,214 3,513, ,208 1,061, ,170 1,045,818 63, ,509 8,464,771 Payroll taxes 408, , , ,799 36, ,977 18,229 56,830 1,919,658 Professional fees 105, ,405 61, ,607 43, , ,752 58,210 1,982,985 Supplies 1,127,302 1,969, , , , ,983 1,361 8,207 4,638,694 Telecommunications 515, ,927 98, ,803 66, ,792 9,538 13,242 2,180,776 Postage and shipping 26,673 41,367 19, ,783 2,251 1,555,422 4,925 2,352 2,473,572 Rental expense 790, ,223 83, ,891 71, , ,281,954 Printing and publications 281,127 14,982 5,711 1,113,378 13,335 1,980, ,852 3,412,329 Travel 5,661,692 6,265,288 2,592,694 3,655, ,563 5,594, , ,945 25,337,907 Conferences, conventions, meetings 141, ,455 67, ,237 16, ,001 12,831 20, ,910 Depreciation 1,975, , , ,595 8,378 1,272,192 4, ,159 5,041,043 Utilities 323, ,270 72, , , ,677 1,366 20,599 2,011,841 Insurance 32,202 38,329 14,312 53, ,202-14, ,206 Dues and fees 25,053 46,221 12,314 4,285 3,304 18, , ,500 Broadcast ,862-40, ,087 Janitorial/grounds/equip. maint. 180, ,608 34, , , , ,351 1,154,885 Contracted services 840, ,061 84,950 1,466, , , ,267 3,690,866 Contributed services - 50,720 10,074,527 3,373, , ,601,099 Miscellaneous 71,736 25,259 37, ,297 18, ,268 18,349 26, ,148 Total ministry expenses 2012 $ 36,594,887 $ 42,038,841 $ 30,711,063 $ 231,142,791 $ 9,056,329 $ 29,093,024 $ 1,397,384 $ 1,756,363 $ 381,790,682 18