NATIONAL MULTIPLE SCLEROSIS SOCIETY NORTHERN CALIFORNIA CHAPTER

Transcription

1 NATIONAL MULTIPLE SCLEROSIS SOCIETY NORTHERN CALIFORNIA CHAPTER SEPTEMBER 30, 2004 AND 2003 INDEPENDENT AUDITORS' REPORT, FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION

2 Independent Auditors Report, Financial Statements and Supplementary Information Independent Auditors' Report 1 Financial Statements Statement of Financial Position 2 Statement of Activities and Changes in Net Assets 3 Statement of Cash Flows 4 Statement of Functional Expenses 5 Notes to Financial Statements 6-11 Independent Auditors' Report on Supplementary Information 12 Supplemental Schedules Schedule of Income from Special Events and Campaigns 13 Schedule of Amount Due National Schedule of Memberships and Contributions 16

3 Independent Auditor s Report Consultants and THE BOARD OF DIRECTORS NATIONAL MULTIPLE SCLEROSIS SOCIETY NORTHERN CALIFORNIA CHAPTER Oakland, California We have audited the accompanying statement of financial position of the NATIONAL MULTIPLE SCLEROSIS SOCIETY NORTHERN CALIFORNIA CHAPTER (the Organization) as of September 30, 2004, and the related statement of activities, changes in net assets, cash flows and functional expenses for the years then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year s summarized comparative information has been derived from the Organization s 2003 financial statements and in our report dated November 5, 2003, we expressed an unqualified opinion. 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 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 audit provides a reasonable basis for our opinion. Business Advisors 60 Spear Street Suite 400 San Francisco CA fax In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of September 30, 2004, and the changes in net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. November 2, 2004 (except as to note 10, which is as of November 10, 2004 San Francisco Menlo Park 1

4 Statement of Financial Position September 30, Assets Current Assets: Cash and cash equivalents 897,273 $ 1,857,235 Contributions receivable 208, ,611 Prepaid expenses and other assets 76,548 83,629 Total current assets 1,182,713 2,247,475 Gift Annuity Receivable from National Multiple Sclerosis Society 71,609 74,640 Furniture, Fixtures and Equipment, net 147, ,698 Total assets $ 1,402,263 $ 2,518,813 Liabilities and Net Assets Current Liabilities: Due National Multiple Sclerosis Society $ 1,132,035 $ 1,438,185 Accounts payable and accrued expenses 218, ,502 Deferred income 3,050 6,928 Total current liabilities 1,353,331 1,691,615 Net Assets: Unrestricted (53,944) 737,628 Temporarily restricted 102,876 89,570 Total net assets 48, ,198 Total liabilities and net assets $ 1,402,263 $ 2,518,813 The accompanying notes are an integral part of this statement. 2

5 Statement of Activities and Changes in Net Assets Year Ended September 30, 2004 (with comparative totals for 2003) 2004 Temporarily 2003 Unrestricted Restricted Total Total Revenue: Public revenue: Received directly: Special events (includes in-kind donations of $120,887 and $123,549 in 2004 and 2003, respectively $ 2,390,393 $ 1,510 $ 2,391,903 $ 2,756,931 Less benefit to donor costs (425,367) (425,367) (416,603) 1,965,026 1,510 1,966,536 2,340,328 Membership and contributions 558,861 11, , ,020 Legacies: Received by Chapter 138, ,544 1,130,053 Received at National (other than legacies) 293, , ,906 Total received directly 2,956,222 13,306 2,969,528 4,355,307 Received indirectly: Combined Federal Service Campaign ,673 Federated Fund Raising Organizations 80,713 80,713 59,160 Total received indirectly 81,431 81,431 60,833 Total revenue from the public 3,037,653 13,306 3,050,959 4,416,140 Other revenue: Investment income 2,680 2,680 11,088 Service program fees and subsidies 93,406 93,406 71,772 Miscellaneous income (includes in-kind donations of $6,979 and $5,525 in 2004 and 2003, respectively) 6,979 6,979 8,262 Total other revenue 103, ,065 91,122 Assets released from restriction Total revenue 3,140,718 13,306 3,154,024 4,507,262 Expenses: Programs: Client programs 1,031,699 1,031,699 1,078,842 Community programs 279, , ,131 Professional education and training 113, , ,781 Public education 478, , ,910 Total programs 1,902,364 1,902,364 2,001,664 Support: Fund-raising 850, , ,290 Management and general 154, , ,242 Total support 1,005,590 1,005,590 1,143,532 Allocation to National Program Expense 1,024,336 1,024,336 1,487,516 Total expenses 3,932,290 3,932,290 4,632,712 Changes in Net Assets (791,572) 13,306 (778,266) (125,450) Net Assets, beginning of year 737,628 89, , ,648 Net Assets, end of year $ (53,944) $ 102,876 $ 48, ,198 The accompanying notes are an integral part of this statement. 3

6 Statement of Cash Flows Year Ended September 30, Cash Flows from Operating Activities: Change in net assets $ (778,266) $ (125,450) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 59,423 70,118 Assets donated to clients 10,881 Investment income (11,088) Changes in operating assets and liabilities: Receivables 97, ,701 Gift annuity receivable from 3,031 National Multiple Sclerosis Society (8,223) Prepaid expenses and other assets 7,081 42,558 Accounts payable and accrued expenses (28,255) (49,114) Due to National (306,151) 1,060,630 Deferred income (3,878) (21,072) Net cash (used) provided by operating activities (938,415) 1,234,060 Cash Flows from Investing Activities: Purchases of furniture, fixtures, and equipment (21,547) (121,972) Proceeds from sale of investments 225,971 Net cash (used) provided by investing activities (21,547) 103,999 Net (Decrease) Increase in Cash and Cash Equivalents (959,962) 1,338,059 Cash and Equivalents - Beginning of year 1,857, ,176 Cash and Equivalents - End of year $ 897,273 $ 1,857,235 The accompanying notes are an integral part of this statement. 4

7 Statement of Functional Expenses Years Ended September 30, 2004 (with comparative totals for 2003) Programs Support Professional Management Allocation Client Community Education Public Fund and to Programs Programs and Training Education Total Raising General Total National Total Total Salaries $ 496,710 $ 107,958 $ 52,977 $ 234,572 $ 892,217 $ 391,481 $ 104,890 $ 496,371 $ 1,388,588 $ 1,472,632 Employee benefits 80,486 17,725 7,635 33, ,386 57,677 13,611 71, , ,369 Payroll taxes 45,449 9,697 4,407 21,082 80,635 36,097 8,244 44, , ,217 Total salaries and related expenses 622, ,380 65, ,194 1,112, , , ,000 1,724,238 1,800,218 Printing and artwork 49,919 8,890 9,710 41, ,903 90, , , ,574 Postage and shipping 27,491 5,700 5,272 14,139 52,602 27, ,855 80, ,630 Telephone 20,195 4,485 1,742 9,599 36,021 16,323 2,744 19,067 55,088 81,837 Office supplies 11,177 2,618 1,061 8,370 23,226 14, ,018 38,244 21,178 Dues and memberships ,123 3, ,083 4,727 4,277 Professional fees 49,730 40,685 7,840 37, ,509 78,870 3,718 82, , ,447 Travel 17,454 21,818 3,163 10,906 53,341 16, ,780 71,121 62,782 Meetings 65,445 32,960 6,838 4, ,545 6, , , ,855 Occupancy 73,235 14,791 6,405 34, ,450 63,164 10,634 73, , ,085 Insurance (property and casualty) 15,384 2,932 1,345 7,146 26,808 13,269 2,234 15,503 42,311 40,477 Furniture and equipment 18,276 3,706 1,666 8,637 32,285 15,525 2,615 18,140 50,425 51,903 Depreciation and amortization 21,606 4,118 1,890 10,037 37,651 18,635 3,138 21,773 59,424 70,118 Disbursements for individuals with MS 36,531 1,066 37,597 37,597 62,903 Awards (volunteer recognition) 1, ,221 3,545 2, ,502 6,047 6,953 Interest expense 4,958 Bad debt expense 33,001 National program expense $ 1,024,336 1,024,336 1,487,516 Total expenses 1,031, , , ,331 1,902, , ,966 1,005,590 1,024,336 3,932,290 4,632,712 Benefit donor costs 425, ,603 Total Expenses and Benefit Donor Costs $ 1,031,699 $ 279,044 $ 113,290 $ 478,331 $ 1,902,364 $ 850,624 $ 154,966 $ 1,005,590 $ 1,024,336 $ 4,357,657 $ 5,049,315 The accompanying notes are an integral part of this statement. 5

8 Notes to Financial Statements Note 1 - Summary of Business and Significant Accounting Policies: The National Multiple Sclerosis Society (the Organization) is a Chapter of the National Multiple Sclerosis Society (National). The mission of the National Multiple Sclerosis Society is to end the devastating effects of multiple sclerosis. The Organization carries out this mission to residents of Northern California through the funding of research to seek the causes and cure of multiple sclerosis, the conducting of educational and training programs and the providing of aid to individuals with multiple sclerosis and their families. A summary of the significant accounting policies applied in the preparation of the accompanying financial statements follows: a. Basic of Presentation The Organization is required to report information regarding its financial position and activities according to three classes of net assets described as follows: Unrestricted Net Assets Unrestricted net assets consist of all resources of the Organization which have not been specifically restricted by a donor. Temporarily Restricted Net Assets Temporarily restricted net assets consist of cash and other assets received with donor stipulations that limit the use of donated assets. Permanently Restricted Net Assets Permanently restricted net assets consist of assets, the use of which is restricted by the donor for investments in perpetuity. The income from these assets is available for other general operations or specific programs as specified by the donor. The Organization currently has no permanently restricted net assets. b. Accrual Basis The financial statements of the Organization have been prepared on the accrual basis of accounting. c. Cash and Cash Equivalents Cash and cash equivalents consist on cash of hand, demand deposits and highly liquid debt instruments purchased with original maturities of three months or less. 6

9 Notes to Financial Statements d. Office Equipment and Leasehold Improvements Office equipment and leasehold improvements are stated at cost. Depreciation and amortization are provided over their estimated service lives ranging from 3 to 7 years using the straight line method. e. Donated Materials and Services Donated materials are recorded as contribution at estimated fair value when received. Contributed services are recognized if the services received (a) create or enhance nonfinancial assets, or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donations. The amounts reflected in the accompanying financial statements as in-kind support are offset by like amounts included in expenses. The Organization receives a significant amount of contributed time by volunteers, which does not meet all of the recognition criteria described above. Accordingly, the value of this contributed time has not been determined and is not reflected in the accompanying financial statements. The Organization receives in-kind donations, consisting primarily of products that are for the benefit of donors. These contributions are reflected in the financial statements as both sponsorship income and benefit to donor expenses recognized at their fair value. There is no effect on the change in net assets. The Organization also receives donated advertising; however, it is the policy of the Organization not to expend public funds for the purchase of advertising. Donated advertising does not meet all of the recognition criteria described above. Accordingly, no donated advertising has been recorded in the accompanying financial statements. f. Contributions Contributions are recognized at their fair value when the donor makes a pledge to give the Organization that is, in substance, unconditional. Contributions are reported as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. All contributions are available for unrestricted use unless specifically restricted by the donor. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. 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 statements of activities as net assets released from restrictions. 7

10 Notes to Financial Statements The Organization records its proportional share of gifts received directly from the National office. For the direct mail and Helping Hands programs the Organization will recognize 40% of the net revenues of the programs. The Organization will recognize 60% of all other unrestricted gifts received directly by the National office. Contributions of gift annuities are valued based upon the Organization s perpetual interest of the fair value of the annuity. g. Functional Classifications of Expenses The costs of providing various educational and general services have been summarized on a functional basis in the accompanying financial statements of activities and statements of functional expenses. Accordingly, certain costs have been allocated, principally on a direct cost basis among these services. h. Tax Exempt Status The Organization has been granted tax-exempt status by the Internal Revenue Service and the California Franchise Tax board under sections 501(c)(3) and 23701(d) of the Internal Revenue Code and the Revenue and Taxation Code, respectively. i. Use of Estimates In preparing financial statements in conformity with accounting principles generally accepted in the United States of America, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosures of contingent assets liabilities at the date of the financial statements and revenues and expenses during the reporting period. Actual results could differ from those estimates. j. Prior Year Information The financial information shown for the year ended September 30, 2003 is included to provide a basis for comparison and presents summarized totals only. The information is not intended to include all information necessary for a fair presentation in accordance with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended September 30, 2003 from which the summarized information was derived. 8

11 Notes to Financial Statements Note 2 - Property and Equipment: Property and equipment consist of the following at September 30: Furniture and equipment $ 493,048 $ 490,875 Leasehold improvements 27,775 27,775 Total 520, ,650 Less accumulated depreciation and amortization (372,882) (321,952) $ 147,941 $ 196,698 Note 3 - Sharing of Public Support: In accordance with the affiliation agreement between the Organization and the National Office of the National Multiple Sclerosis Society (National) 40% of public support, as defined is shared with the National office for support of national research and other activities. Accrued amounts unpaid at September 30, 2004 are recognized as payable to National Office in the accompanying statements of financial position; amounts are not disbursed to National until the Organization has received cash from the donor. Note 4 - Donated Advertising: The Organization received donated advertising valued at $179,775 from various third parties to promote its special events during the year ended September 30, As discussed in Note 1, the value of donated advertising in not recorded in the accompanying financial statements. Note 5 - Retirement Plan: The Organization provides retirement benefits to its employees through a 403(b) tax deferred annuity purchase plan. Employees are eligible for participation after one year of service. Retirement expense was $82,813 for the year ended September 30,

12 Notes to Financial Statements Note 6 - Commitments: The Organization conducts its operations in leased facilities under noncancelable operating leases extending through July Various equipment leases extend through March Future minimum annual commitments under operating leases are as follows: Years ended September 30, Building Equipment Total 2005 $ 167,000 $ 29,000 $ 196, ,000 28, , ,000 10, , , ,000 $ 631,000 $ 67,000 $ 698,000 Rent expense for the years ended September 30, 2004 was $190,524. Note 7 - Joint Costs: For the years ending September 30, 2004, the Organization incurred joint costs of $696,226, for informational materials and activities that included fundraising appeals. The organization allocated $476,414 to fundraising expenses and $219,812 to public education. Note 8 - Concentrations of Credit Risk: The Organization maintains its cash balances in several major financial institutions in the Greater San Francisco Bay Area. Accounts are insured by Federal Deposit Insurance Corporation up to $100,000 per institution. Uninsured amounts at financial institutions amounted to $577,421. Concentrations of credit risk with respect to contributions receivable are limited due to the large number of contributors comprising the Organization s contributor base and their dispersion across different industries and geographic areas. 10

13 Notes to Financial Statements Note 9 - Chapter Consolidation: The Northern California and Mountain Valley California Chapters of the National Multiple Sclerosis Society merged to become one chapter in October As a result of this merger, the indebtedness to the home office carried by the Mountain Valley California Chapter was forgiven, and placed in a memorandum account. Additionally, as part of the Consolidation agreement, this memorandum debt is to be carried for a limited period of three (3) years, through fiscal year As of September 30, 2004, the amount of indebtedness carried by the Organization was $188,316 This memorandum debt can be reduced by any of the following circumstances: a. The Chapter will receive an automatic reduction of the memorandum account if the Chapter s normal 40% remittances on annual campaign income increase by more than 10% as compared to the previous year. (The reduction will equal the dollar amount by which the Chapter exceeds a 10% increase). b. The memorandum debt can be reduced when the Chapter receives an unrestricted bequest or unrestricted proceeds from the sale of real property from the counties previously in the Mountain Valley Chapter territory. Thirty percent of these donations will be used to reduce the memorandum account (50% remittance, 30% memorandum account, 20% chapter share). In the case of a bequest or proceeds from the sale of real property, the Chapter will be expected to remit an additional 30% of the proceeds to the home office. Note 10 - Subsequent Event: On November 10, 2004, the Organization received partial relief totaling $845,000 of the Amount Due National that will bring its Expendable Net Asset Ratio to at least 20%. Expendable Net Asset Ratio is defined as: Unrestricted Net Assets, less Furniture and Equipment (net of depreciation) divided by local expenses for the year. 11

14 Indpendent Auditors' Report on Supplemental Schedules Consultants and Business Advisors THE BOARD OF DIRECTORS NATIONAL MULTIPLE SCLEROSIS SOCIETY NORTHERN CALIFORNIA CHAPTER Oakland, California 60 Spear Street Our audit was conducted for the purpose of forming an opinion on the basic financial statements taken as a whole of the National Multiple Sclerosis Society Northern California Chapter as of and for the year ended September 30, 2004, which is presented on pages 2 through 11. The supplemental schedules for the year ended September 30, 2004 on pages 13 through 16 are presented for purposes of additional analysis and are not a required part of the basic financial statements. Such information has been subjected to the procedures applied in the audits of the basic financial statements and, in our opinion, is fairly stated in all material respects in relation to the basic financial statements taken as a whole. Suite 400 San Francisco CA fax November 2, 2004 San Francisco Menlo Park 12

15 Schedule of Income from Special Events and Campaigns Year Ended September 30, 2004 Total Total Sponsorship Benefit Other Costs Fund Sponsorship Restricted Total Campaign and to Donor Direct Less Total Raising Event Cash In-Kind Income Sponsorship Income Campaign Costs Costs Sponsorship Allowance MS Readathon $ 11,200 $ 15,504 $ 15,504 $ 139,474 $ 154,978 $ 23,980 $ 24,823 $ 33,299 MS 150 Bike Tours 11,700 34,498 45, , , ,237 68, ,278 One Day Bike Tour- 31,445 35,160 46, , ,821 70,357 19,281 42,778 MSWalk 24,437 $ 13,226 69, , , ,990 96, ,919 Dinner of Champions ,250 2, ,667 1,728 Ski Awareness 4,350 4,350 13,844 18,194 3,505 5 (840) Dusk Busters 8,249 8,249 20,066 28, ,280 (2,644) Team MS Activities 1, ,558 Subtotal 66, ,599 14, ,719 1,914,329 2,105, , , ,076 Excess sponsorship (3,484) (3,484) 3,484 Total subject to fund raising allowance 1,917,813 Fund raising allowance - 25% $ 479,453 Venture growth campaigns MS challenge walk 5,500 11,288 16, , ,855 70,145 59, , ,376 Total $ 68,960 $ 120,887 $ 14,176 $ 204,023 $ 2,187,880 $ 2,391,903 $ 425,367 $ 276,416 $ 508,452 $ 591,829 13

16 Schedule of Amount Due National September 30, 2004 Total Revenue October 1, September 30, 2004 $ 3,154,024 Add: Benefit to Donor Costs 425,367 Adjusted Gross Income 3,579,391 Deductions: Fund raising allowance 479,453 Fund raising allowance (Venture Growth) 112,376 Restricted for local use/sponsorship 72,444 Excess sponsorship (3,484) Restricted for local use/other 125,592 Research challenge received at the Chapter 100% 32,436 General research received at the Chapter 117,589 Received at National General research 20,557 Chapter's share of direct mail 230,143 Chapter's share of Helping Hands 35,411 Chapter's share of unrestricted gifts 7,680 Investment income 2,680 In-kind donations 127,866 Subsidies 71,169 Service program fees 22,237 Unrestricted legacies received at the Chapter subject to 50/50 Sharing 36,568 Total deductions 1,490,717 Divisible income subject to 40% sharing 2,088,674 Forty percent of divisible income 835,470 Fifty percent of unrestricted legacies received at the chapter (36,568 x.50) 18,284 Subtotal 853,754 Add: Research Received at the Chapter 100% 150,025 Received at National Research 20,557 National Program Expense 1,024,336 14

17 Schedule of Amount Due National September 30, 2004 Chapter Payments: October 2003 thru September ,347 Less Payments for Previous Year (665,372) Total paid for Fiscal Year ,975 Received At National Chapter's Share of unrestricted gifts received at 7,680 Chapter's share of direct mail 230,143 Research > $500 received at National 20,557 Chapter's share of Helping Hands 35,411 Less amounts applicable to prior years 293,791 Total received 293,791 Total Payments and received at National 443,766 Balance due National for the year ended September 30, ,570 Recap of indebtedness: Balance due National for the year ended September 30,2003 1,216,837 Less payments for previous year(s) in current year (665,372) Less received at national applied to past debt During the current year Adjusted balance due the National or (Chapter) for prior years 551,465 Total balance due National (Chapter) at 9/30/04 1,132,035 In addition: Amounts due for loans, supplies, advances, health insurance, liability insurance, pension at 9/30/04 $ 4,632 15

18 Schedule of Memberships and Contributions September 30, 2004 and 2003 Temporarily Unrestricted Restricted Total Total Individual Contributions General gifts $ 127,239 $ 127,239 $ 132,484 Major gifts 127, , ,611 Board appeal 45,404 45,404 36,414 Planned gifts 3,238 $ (204) 3,034 9,817 Tributes and memorials 61,678 61,678 62,563 Workplace giving 49,690 49,690 33,024 Total individual contributions 415,087 (204) 414, ,913 Corporate Contributions Corporate gifts 109,103 12, ,103 49,957 Matching gifts 4,316 4,316 2,850 Tributes and memorials 2,200 Total corporate contributions 113,419 12, ,419 55,007 Foundation Contributions Foundation gifts and grants 30,000 30,000 63,000 Government grants: Federal State Local United Way grants Tributes and memorials Total foundation contributions 30,355 30,355 63,100 Total memberships and contributions $ 558,861 $ 11,796 $ 570,657 $ 572,020 16