Financial Statements. The Christian and Missionary Alliance in Canada. December 31, 2014

Transcription

1 Financial Statements The Christian and Missionary Alliance in Canada

2 Contents Page Independent Auditor s Report 1-2 Statement of Financial Position 3 Statement of Operating Fund Activities 4 Statement of Property Fund Activities 5 Statement of Restricted Fund Activities 5 Statement of Cash Flows 6 Notes to the Financial Statements 7-14

3 Independent Auditor s Report To the Directors of The Christian and Missionary Alliance in Canada Grant Thornton LLP Suite City Centre Drive Mississauga, ON L5B 2T4 T F We have audited the accompanying financial statements of The Christian and Missionary Alliance in Canada, which comprise the statement of financial position as at and the statements of activities 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 accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of 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 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. Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 1

4 Independent Auditor s Report (continued) 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 financial statements present fairly, in all material respects, the financial position of The Christian and Missionary Alliance in Canada as at, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Mississauga, Canada April 7, 2015 Chartered Accountants Licensed Public Accountants Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 2

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6 Statement of Operating Fund Activities Year ended December 31 Global Multicultural Advance Ministries Fund Fund Total Total Revenue General contributions $ 12,753,836 $ - $ 12,753,836 $ 12,012,765 Districts contributions 52, , , ,267 General Assembly registration 301, ,670 - Estates and legacies 280, , ,732 Investment income (Note 5) 443, , ,381 Support contribution 293, , ,888 Sundry 92,757 18, , ,094 14,218, ,016 14,538,511 14,055,127 Expenditures Global ministries 9,635,202-9,635,202 9,490,894 Canadian ministries National 2,123,567-2,123,567 1,453,882 Multicultural - 335, , ,556 Ambrose and IBVIE grants 701, , ,078 Seamless link 898, , ,653 Administration 1,033,752 45,923 1,079,675 1,260,517 Communication 246, , ,443 14,639, ,596 15,020,644 14,317,023 Deficiency of revenue over expenditures (420,553) (61,580) (482,133) (261,896) Fund balances, beginning of year 2,789,668 30,079 2,819,747 3,201,643 Fund transfer to property fund (Note 2) (300,000) Fund transfer from restricted funds (Note 2) 511, , ,000 Fund balances, end of year $ 2,880,285 $ (31,501) $ 2,848,784 $ 2,819,747 See accompanying notes to the financial statements. 4

7 Statement of Property Fund Activities Year ended December Revenue Resource property income (Note 5) $ 42,527 $ 31,251 Expenditures Amortization of property and equipment 61,848 62,646 Operating costs (rental income) (30,088) 8,692 31,760 71,338 Excess (deficiency) of revenue over expenditures 10,767 (40,087) Fund balance, beginning of year 1,261,114 1,001,201 Fund transfer from operating fund (Note 2) - 300,000 Fund balance, end of year $ 1,271,881 $ 1,261,114 The Christian and Missionary Alliance in Canada Statement of Restricted Fund Activities Year ended December Increases Designated contributions $ 6,382,617 $ 4,733,987 Decreases Designated funds disbursed 5,340,373 4,340,825 Net increase in funds 1,042, ,162 Fund balance, beginning of year 5,663,775 5,450,613 Fund transfer to operating fund (Note 2) (511,170) (180,000) Fund balance, end of year $ 6,194,849 $ 5,663,775 See accompanying notes to the financial statements. 5

8 Statement of Cash Flows Year ended December Increase (decrease) in cash and cash equivalents Operating Deficiency of revenue over expenditures - Operating funds $ (482,133) $ (261,896) Excess (deficiency) of revenue over expenditures - Property fund 10,767 (40,087) Net increase in Restricted funds 1,042, ,162 Items not involving cash Amortization of property and equipment 114, ,549 Amortization of intangible assets 91,342 90,750 Realized gains on investments (Note 5) (41,134) (17,080) Unrealized gains on investments (Note 5) (310,239) (265,727) 425,114 9,671 Net change in non-cash working capital items Accounts receivable 42,771 (25,275) Prepaid expenses 86,177 (65,807) Accounts payable and accrued liabilities (36,284) (160,815) 92,664 (251,897) 517,778 (242,226) Investing Repayments from Saint Lawrence District 44,410 25,193 Purchase of investments (2,400,942) (3,938,219) Proceeds on disposal of investments 2,346,028 3,552,613 Advance of loans receivable (173,000) (326,998) Purchase of property and equipment (59,022) (123,318) Purchase of intangible assets (50,000) - (292,526) (810,729) Net change in cash and cash equivalents during the year 225,252 (1,052,955) Cash and cash equivalents, beginning of year 2,427,592 3,480,547 Cash and cash equivalents, end of year $ 2,652,844 $ 2,427,592 Cash and cash equivalents consist of cash on hand, cash on deposit, and investments in shortterm fixed income securities with maturities of less than six months, bearing interest at 1.65% to 2.85% ( % to 3.3%) Cash and cash equivalents are held as follows: Cash and cash equivalents - Operating funds $ 1,712,522 $ 1,714,088 Cash - Property fund 93,223 20,608 Cash and cash equivalents - Restricted funds 847, ,896 $ 2,652,844 $ 2,427,592 6

9 Notes to the Financial Statements 1. Purpose and governing statutes The Christian and Missionary Alliance in Canada (the C&MA) is a religious denomination which is committed to world evangelization, stressing the fullness of Christ in personal experience, building the Church, and preaching the gospel to the ends of the earth. The C&MA is incorporated as a not-for-profit organization under the Canada Not-for-profit Corporations Act. The C&MA is also registered as a Canadian charity, and as such is exempt from income taxes. 2. Summary of significant accounting policies The financial statements have been prepared by management in accordance with Canadian accounting standards for not-for-profit organizations, the more significant of which are outlined below. Use of estimates The preparation of financial statements in conformity with Canadian accounting standards for notfor-profit organizations requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. The most significant estimates include the collectability of accounts and loans receivable, amortization of property and equipment and intangible assets and the accrual of liabilities. Actual results could differ from those estimates. Fund accounting Separate funds are maintained to account for and to report on the separate activities or objectives as determined by donors or by resolution of the Board of Directors. Operating funds Global Advance fund The Global Advance fund reflects all general programs and activities and missionary work of the C&MA. Multicultural Ministries fund The Multicultural Ministries fund reflects the broad scope of Alliance Church planting efforts among all Canadians. Internally restricted funds (further detailed in note 8) Emergency Reserve The Emergency Reserve was established in 1993 pursuant to a resolution by the Board of Directors to protect the C&MA against unforeseen expenses or reductions in revenue. Cash Flow Reserve The Cash Flow Reserve was established by the Board of Directors in This reserve was established to have sufficient cash on hand to meet approved expenses, especially during the summer and fall months when cumulative expenditures often exceed cumulative revenue. 7

10 Notes to the Financial Statements 2. Summary of significant accounting policies (continued) Internally restricted funds (further detailed in note 8) (continued) Legacy and Matured Gift Annuity Reserve The Legacy and Matured Gift Annuity Reserve was established by the Board of Directors (the Board ) in This reserve provides further protection against unforeseen expenses or reductions in revenue, over and above the Emergency Reserve. This reserve may only be accessed by Board of Director approval. Missionary Medical Reserve The Missionary Medical Reserve was established in 1993 pursuant to a resolution by the Board of Directors. This reserve fund maintains funds on hand to deal quickly with a costly medical emergency situation, such as a medical evacuation. Multicultural Ministries Operating Reserve The Multicultural Ministries Operating Reserve was established in Pursuant to a resolution by the Board of Directors in 1999, a reserve equivalent to two months of the Multicultural Ministries operating budget was established as a medium term goal. Property fund The Property fund includes revenue, expenditures and net assets related to the C&MA s long-term property and equipment. Restricted funds Contributions held pending disbursement Designated contributions held pending disbursement are contributions received for various designated projects (Note 9). Property and equipment and intangible assets Purchased property and equipment and intangible assets, in excess of $1,000, are recorded at cost. Contributed property and equipment are recorded at fair value at the date of contribution. Amortization is provided on a straight-line basis over the assets estimated useful life as follows: Property and equipment Building Building improvements Computer equipment Furniture and equipment Intangible assets Major computer software (systems) Database system Over 25 years Over 10 years Over 3 years Over 5 years Over 5 years Over 5 years Amortization is recorded in the statement of operating fund activities and also the property fund activities as a component of Global Ministries and Canadian Ministries expenditures. 8

11 Notes to the Financial Statements 2. Summary of significant accounting policies (continued) Revenue recognition The C&MA follows the restricted fund method of accounting. As such, unrestricted contributions and legacies are recognized as revenue of the Operating funds in the year received. Contributions which are externally restricted by the donor are recorded in the appropriate restricted funds in the year received. Investment income is recognized as earned. Registration fees are recognized when the event takes place. Donated investments are recorded in the accounts at fair market value at the time of receipt. Financial instruments The C&MA s financial instruments are comprised of cash and cash equivalents, accounts receivable, due from Saint Lawrence District, investments, loans receivable and accounts payable. Financial instruments are initially recorded at fair value and subsequently measured at amortized cost except for investments and loans receivable. Investments are recorded and carried at fair market value. Unrealized gains and losses arising from the change in fair value of investments are recorded in excess (deficiency) of revenue over expenditures for the year. The loans receivable are measured at cost as the amortized cost values, using the effective interest method, are not determinable given the undefined period of the obligations. Foreign operations and assets All expenditures and property and equipment purchases for operations in foreign countries are recorded as ministries expenditures when remitted. This policy is based on the assumption that such assets would rarely return to the C&MA once they are sent overseas. Interfund transfers Transfers between funds are made when resources of one fund have been authorized to finance activities and acquisitions of another fund. During 2014, the Board approved the transfer of $180,000 ( $180,000) from the North Africa Restricted Fund to the Operating Fund to be used for North Africa ministry. The Board also approved the transfer of $331,170 ( $Nil) of other Restricted Funds to appropriate Operating Fund activities. There were no transfers ( $300,000) from the Operating Fund to the Property Fund. Contributed services Contributed services are not recognized in the financial statements due to the difficulty in determining their fair value. 9

12 Notes to the Financial Statements 2. Summary of significant accounting policies (continued) Allocation of expenditures Expenses are reported by ministry program and support services. Certain employees perform a combination of ministry, fundraising and administrative activities. As a result, expenses for various staff, office, administrative infrastructure and regulatory compliance costs are allocated based on time dedicated to each activity. Other costs including printed material, video, web site expenses have been allocated based on the level of education and awareness building content for each activity. Expense allocations are applied on a consistent basis from year to year. See Note 10 for details. 3. Objectives, policies and processes for managing capital The C&MA's capital is comprised of the net amounts invested in property and equipment, intangible assets, unrestricted funds, restricted fund, internally restricted funds and endowments and trusts. Invested in property and equipment and intangible assets The investment in property and equipment at 30 Carrier Drive in Toronto provides a debt-free facility from which to minister. The C&MA occupies 12,600 square feet ( ,600) of an 18,000 square foot building. The remaining space is rented to tenants, which provides some net rental income for the C&MA. For municipal tax purposes, the property has been assessed to have a value of $1,973,000 for 2013 and The increase in taxes resulting from this assessment is being phased in over four years. The phased-in value used in 2014 was $1,645,000 ( $1,481,000). Capital budgets are approved by the Board of Directors as a part of the annual budget approval process. Capital spending is overseen by management and is reviewed by Board members who receive monthly financial reports. Restricted, unrestricted and internally restricted funds Restricted funds are managed according to donor designations. The Board's objective is to maintain unrestricted fund balance reserve levels sufficient to provide for current and future financial needs. Staff and Board members are provided with monthly financial reports which include details of these fund balances. Year end balances are reviewed and approved by the Audit Review Committee and by the Board of Directors. 4. Due from Saint Lawrence District In November 2010, the C&MA loaned $150,000 to Saint Lawrence District (the District ) at the rate of 2% per annum. The balance outstanding is $66,565 as of ( $110,975). The District provided $44,410 in principal payments during 2014 in addition to interest payments. The loan was paid in full on February 6,

13 Notes to the Financial Statements 5. Investments, at market value Operating fund investments (a) $ 473,934 $ 451,250 Restricted funds Fixed income 1,022,919 2,033,441 Mutual funds 3,268,159 2,901,541 Equities 1,027,507-5,318,585 4,934,982 $ 5,792,519 $ 5,386,232 (a) C&MA has received restricted donations that have been credited to the Global Advance fund in the Operating fund. The principal amount of the donation is to be held long-term, and the interest and dividends earned on those investments are recorded in the Global Advance fund. The funds are invested in GIC s and mutual funds. Investment income for the year is made up of the following: Interest $ 109,839 $ 108,329 Dividends and royalty income 60,509 61,147 Unrealized gains on investments 310, ,727 Realized gains on investments 41,134 17,080 $ 521,721 $ 452,283 Investment income is reported as follows: Operating funds $ 443,948 $ 390,381 Property fund 42,527 31,251 Restricted funds 35,246 30,651 $ 521,721 $ 452, Loans receivable The C&MA extends loans to employees who relocate as a consequence of assuming duties with the C&MA. The loans are interest-free and are repayable upon termination of employment. 11

14 Notes to the Financial Statements 7. Property and equipment and intangible assets Accumulated Cost Amortization Net Net Property and equipment Land $ 400,000 $ - $ 400,000 $ 400,000 Building 947, , , ,184 Building improvements 247,757 92, , ,322 Computer equipment 75,824 35,223 40,601 43,068 Furniture and equipment 169,275 64, ,404 95,334 $ 1,840,666 $ 513,002 $ 1,327,664 $ 1,382,908 Intangible assets Major computer software (systems) $ 111,200 $ 74,265 $ 36,935 $ 68,403 Database system 324, , , ,120 $ 435,573 $ 243,393 $ 192,180 $ 233, Internally restricted funds Permanent reserves Emergency $ 866,596 $ 925,321 Cash flow 565, ,000 Legacy and Matured Gift Annuity 423, ,422 Missionary Medical 100, ,000 Multicultural Ministries (31,498) 30,081 $ 1,923,600 $ 2,032, Funds held pending disbursement The C&MA receives designated gifts from a variety of sources and generally will hold these funds until the time that they are specifically needed. It is normally advantageous to the ministry purpose of the donation to hold the funds in a hard currency such as the Canadian dollar, rather than immediately sending the funds overseas into a softer currency, where the funds could have a greater risk of devaluation. Designated contributions are provided for a variety of ministry purposes, including the following: Alliance Women s Ministries Projects, Alliance Men s Ministries Projects, Missionary s Car funds, Missionary s Work funds, Approved Special projects, CAMA Services, and others. 12

15 Notes to the Financial Statements 10. Allocation of expenditures Certain administration and communication expenditures have been allocated as follows: Global National Ministries Ministries Total Total Administration $ 648,316 $ 280,301 $ 928,617 $ 670,295 Communication 163,451 70, , ,691 $ 811,767 $ 350,351 $ 1,162,118 $ 862, Post retirement benefits The C&MA participates in a defined contribution pension plan to provide post-retirement benefits to its eligible employees. The assets of the plan are held separately from those of the C&MA in an independently administered registered pension plan. The pension expense is equal to the contributions paid by the C&MA and for the year amounted to $415,131 ( $399,352) and recorded as expenditures in the statement of operating fund activities. The C&MA makes voluntary retirement supplement payments to certain former employees whose former pension plan arrangement did not provide adequate benefits for retirement. These payments are made on a benevolent, funds permitting, voluntary basis. There is no contractual requirement to make these payments, therefore, no obligation is recorded in these financial statements. 12. Financial instruments Transactions in financial instruments may result in an entity assuming or transferring to another party one or more of the financial risks described below. The required disclosures provide information that assists users of financial statements in assessing the extent of risk related to financial instruments. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to meet its obligation. This risk is mitigated by the C&MA through ensuring revenue is derived from qualified sources. The allowance for doubtful accounts in relation to accounts and loans receivable is $Nil ( $Nil). Interest rate risk Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The C&MA is exposed to interest rate risk with respect to investments with fixed interest rates. Other price risk The C&MA is exposed to other price risk on its investment in equities quoted in an active market since changes in market prices could result in changes in the fair value of these instruments. 13

16 Notes to the Financial Statements 12. Financial instruments (continued) Currency risk Currency risk is the risk arising from the change in price of one currency against another. The C&MA is exposed to currency risk with respect to a portion of its cash held in US dollars, and with mutual fund investments in underlying securities that are priced in a currency other than the Canadian dollar. Cash held in US bank accounts at year-end is $159,594 (2013 $58,865). The gain/loss on foreign exchange is insignificant. Liquidity risk Liquidity risk is the risk that an entity will encounter difficulty in meeting obligations associated with financial liabilities. The C&MA is exposed to liquidity risk with respect to its accounts payable. The C&MA reduces its exposure to liquidity risk related to accounts payable by ensuring that it documents when authorized payments are due and maintaining adequate cash reserves to meet obligations. Included in accounts payable and accrued liabilities are government remittances owing of $Nil ( $Nil). 14