Drug Policy Alliance. Financial Statements. May 31, 2013

Transcription

1 Financial Statements

2 Independent Auditors Report Board of Directors Drug Policy Alliance We have audited the accompanying financial statements of Drug Policy Alliance ( DPA ), which comprise the statement of financial position as of, and the related statements of activities, functional expenses and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit 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 involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors 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. 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 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 financial statements referred to above present fairly, in all material respects, the financial position of Drug Policy Alliance as of, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America Report on Summarized Comparative Information We have previously audited Drug Policy Alliance s May 31, 2012 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated October 11, In our opinion, the summarized comparative information presented herein as of and for the year ended May 31, 2012 is consistent, in all material respects, with the audited financial statements from which it has been derived. October 16, 2013

3 Statement of Financial Position (with comparative amounts at May 31, 2012) ASSETS Cash and cash equivalents $ 3,322,287 $ 2,480,645 Cash restricted for mortgage escrow - 591,338 Certificates of deposit 490, ,000 Grants receivable 37,001,808 39,425,255 Accounts receivable 71, ,569 Prepaid expenses and other assets 60,965 68,282 Deposits 22,709 90,048 Property, equipment and leasehold improvements, net 5,529,813 5,503,706 $ 46,498,673 $ 48,729,843 LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses $ 475,497 $ 545,730 Accrued compensated absences 292, ,477 Mortgage payable 3,015,760 3,082,145 Total Liabilities 3,783,532 3,906,352 Net Assets Unrestricted 6,865,876 6,033,363 Temporarily restricted 35,849,265 38,790,128 Total Net Assets 42,715,141 44,823,491 $ 46,498,673 $ 48,729,843 See notes to financial statements 2

4 Statement of Activities Year Ended (with summarized totals for the year ended May 31, 2012) 2013 Temporarily 2012 Unrestricted Restricted Total Total SUPPORT AND REVENUE Grants and contributions $ 3,883,917 $ 3,971,668 $ 7,855,585 $ 45,558,525 Registrations and conference income ,417 Current member contributions 850, , ,100 New member contributions 265, , ,981 Drug Policy Action administration 142, , ,604 Publications and videos 7,281-7,281 10,664 Interest income 8,277-8,277 7,828 Loss on disposal of property, equipment and leasehold improvements (7,948) Other income 11,415-11,415 20,181 Net assets released from restrictions 6,912,531 (6,912,531) - - Total Support and Revenue 12,083,655 (2,940,863) 9,142,792 47,135,352 EXPENSES Program services 7,981,383-7,981,383 7,053,842 Management and general 1,488,820-1,488,820 1,495,743 Fundraising 1,780,939-1,780,939 1,334,061 Total Expenses 11,251,142-11,251,142 9,883,646 Change in Net Assets 832,513 (2,940,863) (2,108,350) 37,251,706 NET ASSETS Beginning of year 6,033,363 38,790,128 44,823,491 7,571,785 End of year $ 6,865,876 $ 35,849,265 $ 42,715,141 $ 44,823,491 See notes to financial statements 3

5 Statement of Functional Expenses Year Ended (with summarized totals for the year ended May 31, 2012) Program Management Services and General Fundraising Total Total Grants $ 1,152,102 $ - $ - $ 1,152,102 $ 1,096,970 Salaries 3,234, , ,140 4,317,982 3,668,905 Payroll taxes and employee benefits 781, ,241 86,076 1,082, ,563 Management fees 2,900 18,066 3,675 24,641 45,649 Legal fees 25 38,690-38,715 11,525 Auditing and tax services - 34,793-34,793 30,408 Lobbying fees 426, , ,657 Fundraising fees , , ,493 Program fees 514,934 59,368 60, , ,923 Advertising and marketing fees 130, ,217 88,951 Office expenses 185,562 84,307 28, , ,832 Printing expenses 168, , , ,491 Postage and bulk mail 158,523 2, , , ,908 Information technology 49,499 8,470 3,565 61,534 87,307 Occupancy and related expenses 320,396 86,929 21, , ,509 Staff and other travel 410,920 34,401 12, , ,056 Conference, meetings and seminars 176,890 4,454 73, , ,776 Depreciation and amortization 41,865 16,638 6,700 65,203 37,989 Relocation expense ,961 Insurance 4,586 56,426-61,012 56,674 Lists 5,146-79,328 84,474 48,924 Books, subscriptions and memberships 108,689 2,421 4, ,707 45,194 Bank and merchant service charges - 21,307 16,222 37,529 35,632 Interest expense 86,516 50,236 20, , ,006 Sundry 20,795 4, ,773 11,789 Board expenses - 12,445-12,445 10,554 Total Expenses $ 7,981,383 $ 1,488,820 $ 1,780,939 $ 11,251,142 $ 9,883,646 See notes to financial statements 4

6 Statements of Cash Flows Year Ended (with comparative amounts for the year ended May 31, 2012) CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (2,108,350) $ 37,251,706 Adjustments to reconcile change in net assets to net cash from operating activities Contributed stock (667,092) - Realized loss on investment Depreciation and amortization 65,203 37,989 Loss on disposal of property, equipment and leasehold improvements - 7,948 Net changes in operating assets and liabilities Grants receivable 2,423,447 (37,421,257) Accounts receivable 54,478 (87,674) Prepaid expenses and other assets 7,317 57,321 Deposits 67,339 (8,784) Accounts payable and accrued expenses (70,233) (157,847) Accrued compensated absences 13,798 48,702 Net Cash from Operating Activities (213,644) (271,896) CASH FLOWS FROM INVESTING ACTIVITIES Acquisition of property, equipment and leasehold improvements (91,310) (5,429,392) Purchase of certificates of deposit (980,000) (707,073) Proceeds from sale of certificates of deposit 935, ,073 Proceeds from sale of investments 666,642 - Net Cash from Investing Activities 530,332 (5,874,392) CASH FLOWS FROM FINANCING ACTIVITIES Proceeds from mortgage - 3,140,092 Payments of mortgage (66,384) (57,947) Net Cash from Financing Activities (66,384) 3,082,145 Net Change in Cash and Cash Equivalents 250,304 (3,064,143) CASH AND CASH EQUIVALENTS Beginning of year 3,071,983 6,136,126 End of year $ 3,322,287 $ 3,071,983 SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest $ 157,201 $ 147,006 See notes to financial statements 5

7 1. Nature of Organization Drug Policy Alliance ( DPA ) is a nonprofit organization created on July 1, 2000, as a merger of The Lindesmith Center and the Drug Policy Foundation. DPA is a not-forprofit organization that is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code. DPA s mission is to promote alternatives to the war on drugs based on science, compassion, health and human rights. DPA s major program service activities consist of: Grants DPA has initiated a grants program for various projects. Communication DPA promotes a broader understanding of drug policy reform values through various forms of public education: Conferences Public speaking and community outreach. The executive director and other staff regularly address diverse audiences around the country, expanding public awareness and building coalitions for reform. Media relations. DPA s communications team works with journalists to develop positive media coverage of drug policy reform and to bring greater public attention to the harms of the war on drugs. Internet. DPA s web site ( provides in-depth information about drugs and drug-related issues, updates about breaking events in drug policy reform, and opportunities for viewers to participate in online activism campaigns. Publications. DPA publishes a range of materials to educate readers about drug policy reform issues and DPA s programs. Publications include reports and brochures and books, including Marijuana Myths Marijuana Facts; guides on addiction care issues and drug education; the newsletter; and the annual report. DPA hosts an international conference every second year, bringing together policymakers, public health workers, medical and legal professionals and hundreds of other people affected by the war on drugs. DPA also hosts regional and topical conferences. 6

8 1. Nature of Organization (continued) Health and Harm Reduction DPA educates the public, the media and lawmakers about alternatives to punitive drug policies, notably harm reduction approaches including syringe deregulation and overdose prevention. Public Policy and Legal Affairs To promote alternative drug laws and policies at the local and national level, DPA educates lawmakers through: State-based Reform Effort: DPA works to reform state and local drug policies by working with state legislators; building new coalitions for drug policy reform; and drafting model legislation based on organizational priorities. DPA is most actively engaged in those states in which it has offices (California, New Jersey, New Mexico and New York) though DPA is also active in many other states as opportunities arise. Federal Reform Effort: The Washington, D.C. based office monitors federal drug policy legislation; educates lawmakers, constituents and other interest groups about drug policy reform; and builds coalitions to promote reform legislation and block drug war initiatives. DPA s Office of Legal Affairs establishes, promotes and carries out a legal agenda to advance drug policy reform and promote alternative policies through: Legal Analysis and Litigation: DPA plays a direct role in many drug policyrelated court cases which have the potential either to set legal precedent or to affect large numbers of people. Policy Formulation and Legislative Drafting: DPA s legal team supports statebased and federal policy advocacy by drafting proposals for specific laws and initiatives. DPA also develops model legislation to promote among legislatures in many states. Legal Recruiting and Training: DPA seeks out and trains legal talent for drug policy reform movement. 2. Summary of Significant Accounting Policies Use of Estimates The preparation of financial statements 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. Accordingly actual results could differ from those estimates. 7

9 2. Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents For financial statement purposes, DPA considers all highly liquid debt instruments with maturities of three months or less at the time of purchase to be cash equivalents. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements are recorded at cost. Depreciation is provided using the straight-line method over the estimated useful lives of the assets or with respect to leasehold improvements, the remaining lease term, whichever is shorter. Property and equipment with a cost of $3,000 or higher is capitalized. The cost of property and equipment retired or disposed of is removed from the accounts along with the related accumulated depreciation, and any gain or loss is reflected in the statement of activities. Net Asset Presentation The financial statements report net assets separately by class of net assets. Unrestricted net assets are those that are not subject to donor imposed restrictions. Temporarily restricted net assets represent contributions with donor imposed restrictions that have not yet been satisfied, and earnings on the endowment which has not been appropriated. When a stipulated time restriction ends, a purpose restriction is accomplished or earnings on endowment are designated for appropriation, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restriction and/or spend rate allocation. Permanently restricted net assets are those which are established by donor gifts to provide a permanent endowment. Revenue Recognition Grants and contributions that are restricted by the donor are reported as an increase in unrestricted net assets if the restriction expires in the fiscal year in which the support is recognized. All other donor-restricted support is reported as an increase in temporarily restricted net assets depending on the nature of the restriction. Sales of publications and videos are reported as earned revenue when DPA has fulfilled its obligation under the terms of the sale. Functional Allocations of Expense The costs of providing for the various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the program and supporting services benefited. 8

10 2. Summary of Significant Accounting Policies (continued Joint Cost Allocation During fiscal year 2013, DPA incurred joint costs of $466,672 for informational materials and activities that included fund-raising appeals. DPA allocated $320,000 of these costs to fundraising expense and $146,672 of these costs to program services. Compensated Absences Employees of DPA are entitled to compensated absences, depending on length of service and other factors. DPA's policy is to recognize the costs of compensated absences when earned. Accounting for Uncertainty in Income Taxes DPA recognizes the effect of income tax positions only if those positions are more likely than not of being sustained. Management has determined that DPA had no uncertain tax positions that would require financial statement recognition. DPA is no longer subject to audits by the applicable taxing jurisdictions for the periods prior to Subsequent Events Evaluation by Management Management has evaluated subsequent events for disclosure and/or recognition in the financial statements through the date that the financial statements were available to be issued, which date is October 16, Prior Year Summarized Comparative Information Information as of and for the year ended May 31, 2012 is presented for comparative purposes only. The notes to the financial statements and certain activity by net asset classification are not included in this report. Accordingly, such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with DPA s financial statements as of and for the year ended May 31, 2012, from which the summarized comparative information was derived. 4. Concentrations of Credit Risk DPA's financial instruments that are potentially exposed to concentrations of credit risk consist primarily of cash and cash equivalents, certificates of deposit, grants and contributions. DPA places its cash with financial institution which at times, may be in excess of the Federal Deposit Insurance Corporation s insurance limit. 9

11 5. Certificates of Deposit Certificates of deposit are stated at cost. The certificates at May 31, 2012 bear interest ranging from.25% to.40% and have maturities ending August 2013 to November Grants Receivable Grants receivable from various foundations and individuals are due within two to ten years. Payments to be received after are discounted to their present value using an interest rate of 4.38%. The discount rate is based on the Federal Reserve s statistical release survey of terms of business lending in effect at December 31, Grants receivable at are summarized as follows: Receivable within one year $ 8,027,700 Receivable within two to ten years 35,665,000 Discount to present value (6,690,892) Total $ 37,001,808 Management expects all receivables to be collected, accordingly no allowance for accounts receivable has been provided for. 7. Property, Equipment and Leasehold Improvements Property, equipment and leasehold improvements as of and 2012 consist of the following: Office condominium $ 4,340,092 $ 4,340,092 Leasehold improvements 855, ,210 Furniture and equipment 680, ,578 Books and periodicals 49,910 49,910 5,926,100 5,834,790 Less accumulated depreciation. and amortization 396, ,084 $ 5,529,813 $ 5,503,706 Depreciation and amortization expense for the years ended and 2012 was $65,203 and $37,

12 8. Mortgage Payable Drug Policy Alliance entered into a mortgage loan agreement on June 28, 2011 in connection with the purchase of their new office space. The loan matures on June 28, Payments of principal and interest are due monthly and bear interest at 5.15%. Future principal payments for years ending May 31, are as follows: 9. Temporarily Restricted Net Assets 2014 $ 69, , , , ,864 Thereafter 2,627,348 $ 3,015,760 Temporarily restricted net assets at and 2012 are restricted for the following purposes: Purpose restricted New Jersey Office $ 205,000 $ 125,000 Los Angeles Office 69, ,083 San Francisco Office 20,000 19,750 New York Project 125,625 28,333 New Mexico 235,390 6,250 Office of National Affairs - 15,000 Grants 295,557 1,577,111 Conferences 100,000 - New Jersey Syringe Access Initiative 45,800 45,800 Hep. C. - Task Force 1,983 1,983 Total Purpose restricted 1,099,117 1,941,310 Time restricted 34,750,148 36,848,818 $ 35,849,265 $ 38,790,128 11

13 9. Temporarily Restricted Net Assets (continued) Net assets released from restrictions in fiscal 2013 and 2012 are as follows: Grants program $ 1,281,553 $ 113,234 DPA conference ,000 New Mexico 6,250 31,250 New York Project 28,333 71,667 San Francisco Office 19,750 36,500 Hep. C. - Task Force - 3,807 New Jersey Office 125, ,250 Office of National Affairs 15,000 - Los Angeles Office 69, ,042 Time restriction 5,366,853 1,083,333 $ 6,912,531 $ 1,552, Retirement Plans DPA provides retirement benefits through a 403(b) defined contribution plan (the plan ) for its employees. Effective June 1, 2010, DPA uses a a tiered match based on annual salaries. DPA's contributions to the plan were $285,205 and $259,615 for the years ended and DPA also provides a non-qualified retirement plan, (The Executive 457(b) Retirement Plan of Drug Policy Alliance), for highly compensated employees who do not receive full 403(b) employer match from DPA. DPA s contribution to the 457(b) plan was $9,750 and $8,051 years ended and Related Party Transactions As per an administrative service agreement between Drug Policy Alliance (DPA) and Drug Policy Action, Drug Policy Action reimburses DPA for all administrative, personnel and related expenses, and use of facilities. During the year ended and 2012, Drug Policy Alliance (DPA) received from Drug Policy Action approximately $143,000 and $124,000 for expenses paid by DPA. 12

14 12. Lease Commitments DPA leases its offices under various operating leases expiring up to Rent expense for various offices was $230,055 and $414,573 for the years ended and Future minimum lease obligations are payable as follows at : 2014 $ 181, , , ,047 Total $ 543,006 * * * * * 13