THE KIDNEY FOUNDATION OF CANADA

Transcription

1 Financial statements of THE KIDNEY FOUNDATION OF CANADA

2 Table of contents Independent Auditor s report... 1 Statement of operations... 3 Statement of changes in fund balances... 4 Balance sheet... 5 Statement of cash flows

3 Deloitte & Touche LLP 1 Place Ville Marie Suite 3000 Montreal QC H3B 4T9 Canada Tel: Fax: Independent auditor s report To the Directors of The Kidney Foundation of Canada We have audited the accompanying financial statements of The Kidney Foundation of Canada, which comprise the balance sheet as at, and the statements of operations, changes in fund balances and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian generally accepted accounting principles, and for such internal control as management determines is necessary to enable the preparation 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 financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and 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 financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Basis for Qualification In common with many charitable organizations, the Foundation derives most of its revenue from the general public in the form of fundraising projects and donations, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of these revenues was limited to the amounts recorded in the books of the Foundation and we were unable to determine whether any adjustments might be necessary to donation revenues, excess of revenue over expenditures, assets and fund balances.

4 Qualified Opinion In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of The Kidney Foundation of Canada as of, and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. May 4, Chartered accountant auditor permit No

5 Statement of operations year ended General Fund Endowment Fund Total (restated) (restated) Revenue Public support 14,954,340 15,306, ,954,340 15,306,377 Corporate and individual donations 4,247,482 4,506, ,903 96,953 4,419,385 4,603,062 Planned giving and in memoriam 2,780,252 2,709, ,780,252 2,709,983 Investment income 265,754 1,202,672 23,623 25, ,377 1,228,338 22,247,828 23,725, , ,619 22,443,354 23,847,760 Fundraising expenses 9,761,244 10,435,264-9,761,244 10,435,264 Net revenue 12,486,584 13,289, , ,619 12,682,110 13,412,496 Expenditures Programs Research 4,580,344 4,683, ,580,344 4,683,212 Patient services 2,215,727 2,354, ,215,727 2,354,444 Organ donation 796, , , ,251 Public education services and communications 3,502,319 3,055, ,502,319 3,055,688 Foundation development 1,127,529 1,002, ,127,529 1,002,181 12,222,048 11,744, ,222,048 11,744,776 Management and general 2,018,489 1,657,672 12,275 16,522 2,030,764 1,674,194 Restructuring costs (Note 12) 1, , , ,263 14,242,267 13,664,711 12,275 16,522 14,254,542 13,681,233 (Deficiency) excess of revenue over expenditures (1,755,683) (374,834) 183, ,097 (1,572,432) (268,737) Page 3 of 15

6 Statement of changes in fund balances year ended General Endowment Total Fund Fund Fund balances, beginning of year 8,705,764 5,199,561 13,905,325 13,855,952 (Deficiency) excess of revenue over expenditures (1,755,683) 183,251 (1,572,432) (268,737) Reclassification of losses realized on investments to statement of operations 168,860 13, ,934 1,225,161 Unrealized (depreciation) appreciation on investments 203, , ,039 (907,051) Interfund transfer or reinvested investment income (20,318) 20, Fund balances, end of year 7,302,163 5,677,703 12,979,866 13,905,325 Page 4 of 15

7 Balance sheet as at General Endowment Total Fund Fund Assets Current Cash 450, ,921 1,420,955 Short-term deposits 29,574-29,574 27,889 Interest and sundry receivable 784, , ,277 Prepaid expenses 820, , ,351 2,084,835-2,084,835 2,864,472 Capital assets (Note 4) 1,666,921-1,666,921 1,805,438 Investments (Note 5) 9,808,521 5,677,703 15,486,224 15,664,282 13,560,277 5,677,703 19,237,980 20,334,192 Liabilities Current Accounts payable and accrued liabilities 1,258,127-1,258,127 1,456,429 Deferred contributions (Note 6a) 2,674,606-2,674,606 2,782,837 Deferred contributions - KRESCENT program (Note 6b) 1,508,874-1,508,874 1,332,840 Deferred contributions - capital assets (Note 6c) 816, , ,761 6,258,114-6,258,114 6,428,867 Commitments (Note 9) Fund balances Contributed land 335, , ,000 Invested in capital assets 515, , ,677 Internally restricted for endowment (Note 7) - 1,717,617 1,717,617 1,610,262 Externally restricted for endowment (Note 7) - 3,960,086 3,960,086 3,589,299 Internally restricted (Note 8) 3,688,220-3,688,220 2,860,806 Unrestricted 2,763,529-2,763,529 4,896,281 7,302,163 5,677,703 12,979,866 13,905,325 13,560,277 5,677,703 19,237,980 20,334,192 Approved by the Board... Director... Director Page 5 of 15

8 Statement of cash flows year ended Operating activities Deficiency of revenue over expenditures (1,572,432) (268,737) Adjustment for: Amortization of capital assets 326, ,754 Amortization of deferred contributions - capital assets (40,254) (39,654) Loss on redemption of investments 181,934 1,225,161 Loss on disposal of capital assets 7,385 - Deferred contributions recognized as revenue (2,205,288) (2,455,311) (3,301,927) (1,225,787) Changes in non-cash operating working capital items Interest and sundry receivable (33,747) (97,439) Prepaid expenses (154,965) 233,763 Accounts payable and accrued liabilities (198,302) (237,880) (387,014) (101,556) Increase in deferred contributions 2,268,747 2,009,341 (1,420,194) 681,998 Investing activities Short-term deposits (1,685) 470,312 Acquisition of investments (9,965,707) (11,294,584) Proceeds on redemption of investments 10,613,148 9,357,754 Acquisition of capital assets (200,596) (273,588) Proceeds on disposal of capital assets 5, ,160 (1,740,106) Net decrease in cash (970,034) (1,058,108) Cash, beginning of year 1,420,955 2,479,063 Cash, end of year 450,921 1,420,955 Page 6 of 15

9 1. Mission of the Foundation The Kidney Foundation of Canada (the Foundation ) is the national volunteer organization committed to reducing the burden of kidney disease through: Funding and stimulating innovative research; Providing education and support; Promoting access to high quality healthcare; and Increasing public awareness and commitment to advancing kidney health and organ donation. The Foundation relies on its extensive network of qualified volunteers working in partnership with staff to deliver its programs and services throughout Canada. The Foundation is a registered charity under the Income Tax Act and is incorporated under the laws of Canada. Until, the Foundation was designated as a public foundation. Effective January 1, 2011, the Foundation was re-designated as a charitable organization. 2. Changes in accounting policies and prior period adjustment Prior to 2010, one of the Foundation branches was allocating management and general expenses in a manner inconsistent with other branches. The allocation base amount excluded management salary costs. To be consistent with all branches, it was deemed appropriate to revise the 2009 allocation. This change in accounting policy has been applied retrospectively and comparative figures have been restated. However, the impact of this change was limited to reclassifying expenses on the statement of operations and had no impact on net earnings. Management judges that this policy provides reliable and more relevant information to the readers of the financial statements. The results of these changes are as follows: Increase (decrease) from amount previously reported as at Account December 31, 2009 $ Fundraising expenses 480,783 Patient services 58,866 Organ donation 5,556 Public education 42,164 Management and general (587,369) (Deficiency) excess of revenue over expenditures Nil Page 7 of 15

10 3. Significant accounting policies These financial statements have been prepared in accordance with Canadian generally accepted accounting principles ( GAAP ), and include the following significant accounting policies: Fund accounting The Foundation follows the Restricted Fund method of accounting for contributions. Under the Restricted Fund Method, restricted contributions for which no separate restricted fund exists are reported in the General Fund and are accounted for using the deferral method of accounting for contributions. The General Fund accounts for and reports all unrestricted and restricted operating activities of the Foundation. The activities include program delivery, administrative and general operations, as well as research, both internally and externally funded, and other restricted activities. The Endowment Fund accounts for gifts received for which the Foundation is required to maintain the capital amount of the gift or for amounts approved as internal endowments by the National Board of Directors. Revenue recognition Contributions are recognized in the year received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Pledged contributions not received are not recorded. Unrestricted contributions are recognized as revenue of the General Fund. Restricted contributions are recorded as deferred contributions in the General Fund and recognized as revenue when the related expense is incurred. The Foundation has complied with the restrictions of such contributions. Contributions for endowments are recognized as revenue in the Endowment Fund. Unrestricted investment income is recognized as revenue of the General Fund. Restricted investment income is recorded as a deferred contribution in the General Fund and is recognized as revenue of the General Fund when the related expense is incurred. Donated services The Foundation derives significant benefit from time and services donated by volunteers. These valuable contributions are not recorded in the financial statements. Financial instruments The Foundation has elected to use the exemption provided by the Canadian Institute of Chartered Accountants ( CICA ) permitting-not-for profit organizations not to apply the following Sections of the CICA Handbook: 3862 and 3863, which would otherwise have applied to the financial statements of the Foundation. The Foundation applies the requirements of Section 3861 of the CICA Handbook. Financial assets and liabilities are initially recognized at fair value and their subsequent measurement is dependent on their classification described below. Page 8 of 15

11 3. Significant accounting policies (continued) Financial instruments (continued) Cash is classified as held for trading and is measured at fair value. Short-term deposits and investments are classified as available for sale and are carried at fair value. Short-term deposits comprise Canadian mutual funds. The change in fair value of these investments is recognized in the statement of changes in fund balances. When gains and losses are realized, the cumulative change in fair value is transferred to investment income. Interest and sundry receivable are classified as loans and receivables and accounts payable and accrued liabilities are classified as other financial liabilities. Financial instruments classified as loans and receivables and as other financial liabilities are carried at amortized cost using the effective interest rate method. Capital assets Capital assets are recorded at cost and amortized on a straight-line basis over their estimated useful lives. Furniture, fixtures and other are amortized over five years. Leasehold improvements are amortized over the remaining term of the lease. Computer equipment is amortized over three years. The building was donated and recorded at its appraised fair value and is being amortized over 25 years. Allocations The Foundation classifies its activities between its five program-related activities of research, patient services, organ donation, public education services and communications and Foundation development, and management and general activities. The costs of each activity include the direct costs associated with those activities, including personnel costs and other direct expenses. In addition, the Foundation incurs a certain number of common operating expenses in connection with these activities. Where shared or indirect costs relate to more than one activity, such as the management and administration of these activities, the Foundation allocates these costs to all of the activities. These costs include the cost of administrative personnel, occupancy costs and other operating expenses not directly attributable to specific activities. These expenses are allocated by applying a percentage to direct costs of each activity. The percentages are based on averages established from historical analysis of the level of activity or support applicable to each area. As part of its fundraising activities, most significantly the Door-to-Door and National Direct Mail campaigns, the Foundation incurs costs that achieve both an education and communication component. Many of these costs, including personnel costs and educational materials such as brochures and other information sources, are also applicable to educating members of the community about kidney disease, research and services available to support individuals affected by kidney disease. Accordingly, some of these costs are allocated to the public education services and communications and organ donation activities. The costs are allocated based on management s best estimate of the portion of the direct costs of these activities and the portion of time or educational materials that apply to the non-fundraising activity. Page 9 of 15

12 3. Significant accounting policies (continued) Use of estimates The preparation of financial statements, in conformity with Canadian GAAP, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from these estimates. Future accounting changes New accounting framework The CICA has approved a new accounting framework applicable to not-for-profit organizations. Effective for fiscal years beginning on January 1, 2012, not-for-profit organizations will have to choose between International Financial Reporting Standards ( IFRS ) and accounting standards for not-for-profit organizations, whichever suits them best. Early adoption of these standards is permitted. The Foundation currently plans to adopt the new accounting standards for not-for-profit organizations, however the date of transition to the new standards and the impact of this transition has not yet been determined. 4. Capital assets Accumulated Net book Net book Cost amortization value value Furniture and fixtures 440, , , ,738 Leasehold improvements 165,218 73,473 91, ,164 Computer equipment 1,125, , , ,859 Building 915, , , ,800 Land 335, , ,000 Other 20,269 8,446 11,823 15,877 3,001,522 1,334,601 1,666,921 1,805,438 Amortization expense of $326,728 was recorded during the year ( $312,754). 5. Investments Fair value Cost Fair value Cost Money Market Fund 10,189 10,199 5,441,364 5,442,225 Bond Funds 9,345,118 9,919,552 3,839,938 4,555,507 Canadian Equity Funds 2,123,087 1,917,880 2,154,621 2,253,229 International Equity Funds 1,998,376 2,103,852 2,097,558 2,214,363 US Equity Funds 2,009,454 2,186,568 2,130,801 2,502,102 15,486,224 16,138,051 15,664,282 16,967,426 Page 10 of 15

13 6. Deferred contributions a) Deferred contributions Deferred contributions consist of contributions which the donor has restricted to a specific purpose, plus investment income on restricted endowments. These amounts are only recognized in income when expenditures meeting the restriction are made. The Foundation complies with these external restrictions. Balance, beginning of year 2,782,837 3,239,713 Plus: contributions received 1,529,330 1,478,380 Plus: restricted investment income 15,537 69,976 Plus (less): unrealized change in fair value 4,344 (40,269) Less: amount recognized as revenue during the year (1,657,442) (1,964,963) Balance, end of year 2,674,606 2,782,837 b) Deferred contributions - KRESCENT program The Foundation is responsible for the Kidney Research Scientist Core Education and National Training Program ( KRESCENT ) secretariat that manages the overall program and raises and administers funds for the initiative. The funds raised by the Foundation, and dedicated to the program, are subject to the normal accounting policies and practices of the Foundation s research program. Balance, beginning of year 1,332,840 1,385,266 Plus: sponsorships and donations received 723, ,922 Less: amount recognized as revenue during the year (547,846) (490,348) Balance, end of year 1,508,874 1,332,840 c) Deferred contributions - capital assets This balance includes donated capital assets and capital assets purchased with funds restricted for that purpose. Balance, beginning of year 856, ,415 Plus: contributions received - 3,000 Less: amount recognized as revenue during the year (40,254) (39,654) Balance, end of year 816, ,761 Page 11 of 15

14 7. Restricted for endowment fund balance The Endowment Fund balance includes funds which have been designated as endowments by the National Board of Directors and classified as Internally Restricted. The total endowment funds consist of the following: Internally Restricted Endowments Allocation Original of change in Fair endowment fair value Fair value Value Undesignated 190,548 (8,933) 181, ,205 Research 1,391,555 (65,239) 1,326,316 1,239,235 Other designated activities 220,000 (10,314) 209, ,822 1,802,103 (84,486) 1,717,617 1,610,262 Externally Restricted Endowments Undesignated 379,220 (17,779) 361, ,075 Research 2,390,509 (112,072) 2,278,437 2,078,132 Other designated activities 1,385,146 (64,938) 1,320,208 1,181,092 4,154,875 (194,789) 3,960,086 3,589,299 Total 5,956,978 (279,275) 5,677,703 5,199,561 The Foundation expects to recuperate the deficiency of the fair value from the original endowment over its long-term investment strategy. 8. Internally restricted fund balance The internally restricted fund balance consists of resources designated by the National Board of Directors for specific activities. These funds are not available for unrestricted purposes without approval of the National Board of Directors and are comprised of: General Fund Restricted for research (including the KRESCENT program) 3,544,908 2,708,595 Reserve for future capital expenditures and other 143, ,211 3,688,220 2,860,806 Page 12 of 15

15 9. Commitments The Foundation has commitments for research (including the KRESCENT program). These commitments, less deferred contributions for research, amount to $3,495,638. The Foundation has commitments under existing long-term operating leases, exclusive of certain operating costs, for which the Foundation is also responsible. These amounts are expected to be disbursed in the forthcoming years as follows: Research Lease commitments commitments ,565, , ,515, , , , , and thereafter - 1,516,513 3,495,638 4,224, Allocations As described in the significant accounting policies note, management and general expenses have been allocated as follows: Fundraising expenses 1,083,012 1,245,488 Research 492, ,477 Patient services 456, ,872 Organ donation 139, ,213 Public education services and communications 660, ,354 Foundation development 195, ,678 As described in the significant accounting policies note, certain fundraising expenses have been allocated to other activities as follows: Public education services and communications 918, ,103 Organ donation 204,119 30,698 Page 13 of 15

16 11. Financial instruments Fair value The carrying values of short-term financial assets and liabilities approximate their fair values due to their short-term maturities. Credit risk The Foundation is exposed to credit risk to the extent that its donors and debtors may experience financial difficulty and would be unable to meet their obligations. However, the Foundation has a large number of diverse donors and debtors which minimizes concentration of credit risk. Market risks The Foundation is subject to market risk, which is the risk that the value of a financial instrument will fluctuate as a result of changes in market prices, whether those changes are caused by factors specific to the individual security or its issuer or factors affecting all securities traded in the market. These risks include exposure to fluctuations in interest rates and in foreign currencies. The concentration of risk is minimized because of the Foundation s diversification of its investment portfolio. The Foundation intends to continue to take a long-term perspective for its investments by preserving and enhancing capital and generating income to meet its objectives. The Foundation s investment portfolio reflects a diversification investment strategy to manage its risk and is monitored on a periodic basis by the Foundation s Investment Committee. The Foundation does not enter into any derivative financial instrument arrangements. 12. Restructuring costs In 2009, the Foundation incurred restructuring costs in order to maximize operational efficiencies. The Foundation expected to incur charges of $177,060 for termination benefits, $70,272 for lease termination costs net of expected sublease revenues from the closure of offices, and $40,199 of legal and other charges in connection with these activities. Of these amounts, $262,263 was expensed in 2009, and the remainder was expensed in In 2010, the sublease arrangement was finalized resulting in a recovery of $23,538. As of, no amounts remain payable. 13. Capital disclosures The Foundation s objective when managing capital is to ensure it has adequate cash flow to maintain its operations and to meet its obligations with respect to externally restricted contributions. The Foundation includes both fund balances and deferred contributions in its definition of capital. The Foundation manages its capital through appropriate investment strategies and safeguarding of assets. External capital requirements consist of restrictions on contributions made by the donors. Depending on the nature of the contribution, the capital may be included in fund balance as an endowment, or in deferred contributions. The Foundation is in compliance with all externally imposed capital requirements and restrictions placed by donors. Page 14 of 15

17 13. Capital disclosures (continued) In order to maintain its registered charity status, the Foundation must meet certain spending requirements ( disbursement quota ) according to the Income Tax Act. The disbursement quota is a minimum amount that the registered charity must spend on charitable programs or as gifts to qualified donees in order to maintain its registered charity status. As at, the Foundation complies with the requirement. 14. Supplemental information The total remuneration paid to employees of the province of Alberta whose principal duties include fundraising were as follows: General Fundraising 367, ,855 Door-to-door campaign 114, , , , Comparative figures Certain comparative figures have been reclassified to conform to the current year s presentation. Page 15 of 15