AMERICA S BLOOD CENTERS FINANCIAL STATEMENTS YEARS ENDED MARCH 31, 2011 AND 2010

Transcription

1 FINANCIAL STATEMENTS YEARS ENDED

2 TABLE OF CONTENTS YEARS ENDED INDEPENDENT AUDITORS REPORT 1 FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION 2 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS 3 STATEMENTS OF CASH FLOWS 4 5

3 INDEPENDENT AUDITORS REPORT To the Members of America s Blood Centers Washington, DC We have audited the accompanying statements of financial position of America s Blood Centers (ABC) as of March 31, 2011 and 2010, and the related statements of activities and changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of ABC 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 examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes 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. As disclosed in Note 1, ABC controls an affiliated entity (The Foundation for America s Blood Centers, hereinafter referred to as the Foundation ) that, under accounting principles generally accepted in the United States of America, should be consolidated with the accounts of ABC. The accompanying financial statements have not been consolidated with the Foundation. We also have audited, in accordance with auditing standards generally accepted in the United States of America, the consolidated statements of financial position of ABC and its affiliate as of March 31, 2011 and 2010, and the related consolidated statements of activities and changes in net assets, and cash flows for the years then ended (not presented herein), and we expressed unqualified opinions on those financial statements. Such consolidated financial statements are the general-purpose financial statements of ABC and its affiliate. In our opinion, except for the effects of not consolidating the affiliated entity discussed in the preceding paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of America s Blood Centers as of March 31, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with U.S. generally accepted accounting principles. Arlington, Virginia July 27, 2011 LarsonAllen LLP (1)

4 STATEMENTS OF FINANCIAL POSITION ASSETS CURRENT ASSETS Cash and Cash Equivalents $ 405,251 $ 446,906 Accounts Receivable 89, ,989 Due from GSABC 374, ,074 Due from FABC 81,785 75,532 Prepaid Expenses and Other Assets 72,126 38,695 Total Current Assets 1,023, ,196 PROPERTY AND EQUIPMENT 1,333,964 1,173,951 Less: Accumulated Depreciation (926,887) (827,214) Total Property and Equipment 407, ,737 OTHER ASSETS Deferred Compensation Annuity 681, ,417 Investment - GSABC Stock Total Assets $ 2,111,776 $ 1,873,360 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts Payable and Accrued Expenses $ 376,528 $ 300,169 Deferred Revenue 45,032 29,461 Total Current Liabilities 421, ,630 DEFERRED COMPENSATION ANNUITY PAYABLE 681, ,417 Total Liabilities 1,103, ,047 NET ASSETS Unrestricted - Undesignated 988, ,313 Temporarily Restricted 19,731 - Total Net Assets 1,008, ,313 Total Liabilities and Net Assets $ 2,111,776 $ 1,873,360 See accompanying Notes to Financial Statements. (2)

5 STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS YEARS ENDED Temporarily Temporarily Unrestricted Restricted Total Unrestricted Restricted Total REVENUE Membership Assessments $ 2,573,676 $ - $ 2,573,676 $ 2,496,030 $ - $ 2,496,030 Contributions - 188, , , ,410 Administrative Services 469, , , ,863 Meetings and Workshops 327, , , ,702 Foundation Expense Reimbursement 256, , , ,540 Newsletter Income 38,491-38,491 42,364-42,364 Other Project Income 106, , , ,820 Interest ,472-1,472 Net Assets Released from Restrictions 168,797 (168,797) - 100,410 (100,410) - Total Revenue 3,940,215 19,731 3,959,946 3,883,201-3,883,201 EXPENSES Administrative Services 210, , , ,111 Member Services 574, , , ,584 Government Affairs 245, , , ,070 Meetings and Workshops 360, , , ,318 Scientific, Medical, and Technical 607, , , ,127 Foundation 190, ,986 49,680-49,680 Total Program Expenses 2,188,996-2,188,996 2,216,890-2,216,890 General and Administrative 1,749,722-1,749,722 1,658,013-1,658,013 Total Expenses 3,938,718-3,938,718 3,874,903-3,874,903 CHANGE IN NET ASSETS 1,497 19,731 21,228 8,298-8,298 Net Assets - Beginning of Year 987, , , ,015 NET ASSETS - END OF YEAR $ 988,810 $ 19,731 $ 1,008,541 $ 987,313 $ - $ 987,313 See accompanying Notes to Financial Statements. (3)

6 STATEMENTS OF CASH FLOWS YEARS ENDED CASH FLOWS FROM OPERATING ACTIVITIES Change in Net Assets $ 21,228 $ 8,298 Adjustments to Reconcile Change in Net Assets to Net Cash Provided by (Used in) Operating Activities: Depreciation and Amortization Expense 124, ,778 Changes in Assets and Liabilities: Accounts Receivable 19,472 (100,030) Due from GSABC (74,261) (21,918) Due from FABC (6,253) (11,672) Prepaid Expenses and Other Assets (33,431) 20,099 Accounts Payable and Accrued Expenses 76,359 (93,135) Due to FABC - (382) Deferred Revenue 15,571 (53,196) Net Cash Provided by (Used in) Operating Activities 143,020 (134,158) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of Property and Equipment (184,675) (108,469) Net Cash Used in Investing Activities (184,675) (108,469) NET DECREASE IN CASH AND CASH EQUIVALENTS (41,655) (242,627) Cash and Cash Equivalents - Beginning of Year 446, ,533 CASH AND CASH EQUIVALENTS - END OF YEAR $ 405,251 $ 446,906 See accompanying Notes to Financial Statements. (4)

7 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization America s Blood Centers (ABC) is a not-for-profit membership organization that was incorporated in Arizona in ABC s primary goal is to provide a forum for blood center administrators, medical directors, and senior management to exchange information, discuss pertinent issues, and work together to improve the quality and efficiency of service to hospitals, patients, and blood donors. Its membership is composed entirely of non-profit blood banks located throughout the United States and Canada. ABC controls The Foundation for America s Blood Centers (hereinafter referred to as the Foundation ) by a majority voting interest of the Foundation s Board of Directors, an economic interest, and inter-related management. In such circumstances, accounting principles generally accepted in the United States of America require that financial statements of the controlling organization be consolidated with the accounts of the controlled organization. The accompanying financial statements are for ABC alone, and do not include the accounts of the Foundation. ABC wholly owns a for-profit subsidiary, Group Services for America s Blood Centers (hereinafter referred to as GSABC ), accounted for on a cost basis. ABC, on an annual basis, relinquishes 100% of its voting rights on all matters to the members of GSABC. GSABC is not a controlled group of ABC. In such circumstances, accounting principles generally accepted in the United States of America do not require consolidated financial statements with GSABC. Subsequent to March 31, 2011, ABC sold 100% of its interest in GSABC to the members of GSABC (See Note 11). Cash and Cash Equivalents For financial statement purposes, ABC considers all investments with an original maturity of 90 days or less to be cash equivalents. Accounts Receivable The majority of accounts receivable is from GSABC. Accounts past due are individually analyzed for collectibility. When all collection efforts have been exhausted, the account is written off against bad debt expense. Management estimates that all receivables are fully collectible. Therefore, no allowance for doubtful accounts has been recognized. Property and Equipment Property and equipment with a cost above $2,500 is capitalized as property and equipment. Depreciation and amortization are computed using the straight-line method over the estimated useful lives of the respective assets, which range from three to five years. Leasehold improvements are amortized over the shorter of the lease term or useful life of the asset. (5)

8 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Net Assets Resources are classified for accounting and reporting purposes into net asset groups established according to their nature and purpose and based on the existence or absence of donor-imposed restrictions. The net assets groups are as follows: Unrestricted Net Assets Undesignated: represents funds available at management s discretion to fund ABC s general operations. Temporarily Restricted Net Assets - represents resources received for member association programs (i.e., advertising campaigns, public awareness and marketing initiatives, awards, and scholarships) that are restricted as to their use. ABC classifies all such resources received as temporarily restricted and reports amounts released from restrictions when expenditures are incurred. Revenue Recognition ABC recognizes newsletter subscription revenue on a monthly basis over the term of the subscription. Membership assessments are allocated to revenue on a quarterly basis during the year. Advertising Costs All advertising costs are expensed as incurred. Allocation of Expenses ABC allocates salaries and benefits, travel, consulting fees, and certain other costs to each department based on actual resources used in each program area. Occupancy expense, depreciation and amortization, and other fixed expenses are considered to be supporting costs of the various programs of ABC and are classified as General and Administrative expenses. Basis of Accounting ABC prepares its financial statements on the accrual basis of accounting. Consequently, revenue is recognized when earned and expenses when obligations are incurred. Income Tax Status ABC is exempt from the payment of federal income taxes on its exempt purpose activities under Section 501(c)(6) of the Internal Revenue Code. However, ABC is subject to income tax on unrelated business income activity. ABC had no unrelated business income subject to income tax for the years ended March 31, 2011 and ABC has adopted a policy that clarifies the accounting for uncertainty in income taxes recognized in an entity s financial statements. The policy prescribes a recognition threshold and measurement principles for the financial statement recognition and measurement of tax positions taken or expected to be taken on a tax return that are not certain to be realized. The implementation of this policy had no impact on the ABC s financial statements as of and for the years ended March 31, 2011 and (6)

9 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Income Tax Status (Continued) ABC s tax returns are subject to review and examination by federal, state and local authorities. As of March 31, 2011, the tax returns for the years 2008, 2009 and 2010 are open to examination by federal, local and state authorities. Use of Estimates The preparation of financial statements in conformity of 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates. Fair Value Measurements Statement of Financial Accounting Standards, Fair Value Measurements, defines fair value, establishes a framework for measuring fair value, establishes a fair value hierarchy based on the quality of inputs used to measure fair value, and requires expanded disclosures about fair value measurements. ABC accounts for a significant portion of its financial instruments at fair value or considers fair value in its measurement. ABC accounts for certain financial assets and liabilities at fair value under various accounting literature, including, Accounting for Certain Investments Held by Not-for-Profit Organizations. ABC also accounts for certain assets at fair value under applicable industry guidance. Fair Value Hierarchy In accordance with Fair Value Measurements, ABC has categorized its financial instruments, based on the priority of the inputs to the valuation technique, into a three-level fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). If the inputs used to measure the financial instruments fall within different levels of the hierarchy, the categorization is based on the lowest level input that is significant to the fair value measurement of the instrument. Financial assets and liabilities recorded on the Statements of Financial Position are categorized based on the inputs to the valuation techniques as follows: Level 1 Financial assets and liabilities whose values are based on unadjusted quoted prices for identical assets or liabilities in an active market that ABC has the ability to access. Level 2 Financial assets and liabilities whose values are based on quoted prices in markets that are not active or model inputs that are observable either directly or indirectly for substantially the full term of the asset or liability. Level 2 inputs include among others, quoted prices for similar assets or liabilities in active market or non-active market. (7)

10 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value Hierarchy (Continued) Level 3 Financial assets and liabilities whose values are based on prices or valuation techniques that require inputs that are both unobservable and significant to the overall fair value measurement. These inputs reflect management s own assumptions about the assumptions a market participant would use in pricing the asset or liability. Subsequent Events In preparing these financial statements, ABC has evaluated events and transactions for potential recognition or disclosure through July 27, 2011, the date the financial statements were available for issuance. NOTE 2 CONCENTRATION OF CREDIT RISK Financial instruments that subject ABC to a concentration of credit risk consist of cash and cash equivalents deposited with financial institutions which may, at times, exceed federally insured limits. NOTE 3 AFFILIATED ORGANIZATIONS ABC shares personnel, office space, and partially subsidizes operating expenses of affiliated organizations The Foundation for America s Blood Centers (the Foundation) and Group Services for America s Blood Centers (GSABC). The Foundation is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and is classified as an organization that is not a private foundation. ABC has a written service agreement with the Foundation whereby it reimburses ABC for certain expenses plus assessed overhead. Expenses paid by ABC on behalf of the Foundation for the years ended March 31, 2011 and 2010 were $256,123 and $113,540, respectively. The Foundation reimbursed ABC for the years ended March 31, 2011 and 2010 in the amount of $250,551 and $101,486, respectively. ABC has a receivable balance due from the Foundation of $81,785 and $75,532, as of March 31, 2011 and 2010, respectively. For the years ended March 31, 2011 and 2010, the Foundation made grants to ABC in the amount of $188,528 and $100,410, respectively, which are initially recognized as temporarily restricted contributions and released from restrictions when expenditures occur. (8)

11 NOTE 3 AFFILIATED ORGANIZATIONS (CONTINUED) GSABC is a corporation operating on a cooperative basis within the meaning of Section 1381(a)(2) of the Internal Revenue Code and is classified as a Cooperative Association. ABC has a written service agreement with GSABC whereby GSABC agreed to pay ABC a minimum of $2,130,000 over ten years for certain administrative and financial services, meeting coordination, IT support and other services, and certain equipment and office space to be made available to GSABC and also reimburse ABC for certain expenses. Expenses paid by ABC on behalf of GSABC for the years ended March 31, 2011 and 2010 were $469,389 and $485,863, respectively. GSABC reimbursed ABC for the years ended March 31, 2011 and 2010 in the amount of $477,760 and $463,945, respectively. ABC has a receivable balance due from GSABC of $374,335 and $300,074 as of March 31, 2011 and 2010, respectively. NOTE 4 INVESTMENTS Group Services for America s Blood Centers America s Blood Centers owns 100% of the outstanding shares (1,000) of GSABC Cooperative Association. The book value of the stock at March 31, 2011 and 2010 is $10. NOTE 5 PROPERTY AND EQUIPMENT Property and equipment consist of the following at March 31: Furniture $ 43,419 $ 43,419 Leasehold Improvements 28,602 28,602 Office Equipment 1,256,483 1,101,930 AIM - Software WIP 5,460-1,333,964 1,173,951 Less Accumulated Depreciation and Amortization (926,887) (827,214) Total Property and Equipment $ 407,077 $ 346,737 NOTE 6 DEFERRED COMPENSATION PLAN ABC maintains a deferred compensation plan for certain highly compensated employees. To fund this obligation, ABC has purchased an annuity contract that provides for the deferred compensation. ABC accrues as additional compensation the amount earned under the annuity contract. (9)

12 NOTE 7 FAIR VALUE MEASUREMENTS ABC uses fair value measurements to record fair value adjustments to certain assets and liabilities and to determine fair value disclosures. For additional information on how ABC measures fair value refer to Note 1 Summary of Significant Accounting Policies. The following table presents ABC s fair value hierarchy for those assets and liabilities measured at fair value on a recurring basis as of March 31: 2011 Level 1 Level 2 Level 3 Total Assets Investments Under Deferred Compensation Annuity Plan Mutual Funds $ 681,675 $ - $ - $ 681,675 Liabilities Deferred Compensation Annuity Plan $ 681,675 $ - $ - $ 681, Level 1 Level 2 Level 3 Total Assets Investments Under Deferred Compensation Annuity Plan Mutual Funds $ 556,417 $ - $ - $ 556,417 Liabilities Deferred Compensation Annuity Plan $ 556,417 $ - $ - $ 556,417 NOTE 8 COMMITMENTS Leases ABC is obligated under an operating lease for office space through May 31, The lease contains provisions for a base rate to remain the same throughout the life of the lease and to share certain operating expenses at prorated 18.3%. Rent expense for the years ended March 31, 2011 and 2010 was $167,936 and $181,149, respectively. The following are the future minimum lease commitments under the lease as of March 31: Years Ending March 31, 2012 $ 155, , , , ,331 Thereafter, cumulatively 181,220 $ 957,875 \ Hotel Contracts ABC has committed to hotel space for future meetings and workshops. These contracts specify that, if canceled, ABC may be subject to cancellation penalties totaling approximately $194,000 as of March 31, Management believes the risk of loss due to cancellation is minimal. (10)

13 NOTE 9 PENSION PLAN ABC maintains a defined contribution 401(k) pension plan for its employees with six months of service. Employer contributions to the plan are at the discretion of the Board of Directors. Pension expense for the years ended March 31, 2011 and 2010 was $179,616 and $166,875, respectively. NOTE 10 AIM PROJECT ABC entered into a licensing agreement with NHS Blood and Transplant ( NHS ), a UK company, to have a non-transferable, royalty-free license to use, copy, and modify software (AIM) and share its usage and related data with certain participants who are members of ABC. NHS retains the ownership of the software at all times. ABC incurred start-up costs of approximately $200,000, which is supported by sixteen participants who signed respective sub-licensing agreements with ABC during the year ended March 31, 2010, and all participants agreed to reimburse any additional charges incurred for the development of this software, and ongoing support payments on a quarterly basis to ABC. ABC may increase or decrease the quarterly ongoing supporting payments at its reasonable discretion to the extent that funds received exceed or fall short of the amount required for further development and use for participants. During the year ended March 31, 2010, total expenses incurred by ABC and fully reimbursed by the above sixteen participants was approximately $235,000. NOTE 11 SUBSEQUENT EVENTS Effective May 24, 2011, GSABC members bought the GSABC common stock held by ABC and became an independent for-profit cooperative association. GSABC will pay $975,000 in the form of a promissory note with a term of six years, and an annual interest rate of approximately 2.46% for the stock. This promissory note is discounted at 3% on the effective date of the agreement. In addition, GSABC has agreed to purchase a nonrefundable, two-year ABC membership for $95,280. Finally, GSABC has agreed to pay ABC $3,750 per month for certain accounting/bookkeeping, financial services and information technology support services. (11)