Report of Independent Auditors and Financial Statements Fanconi Anemia Research Fund, Inc. December 31, 2012 (With Summarized Comparative Information for 2011)
Contents REPORT OF INDEPENDENT AUDITORS 1-2 FINANCIAL STATEMENTS Statement of financial position 3 Statement of activities 4 Statement of functional expenses 5 Statement of cash flows 6 Notes to financial statements 7-12
To The Board of Directors Fanconi Anemia Research Fund, Inc. REPORT OF INDEPENDENT AUDITORS Report on Financial Statements We have audited the accompanying financial statements of Fanconi Anemia Research Fund, Inc., which comprise the statement of financial position as of December 31, 2012, 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. 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 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 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. 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 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 Fanconi Anemia Research Fund, Inc. as of December 31, 2012, and the results of its operations and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. 1
Report on Summarized Comparative Information We have previously audited the Fanconi Anemia Research Fund, Inc. s 2011 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated April 16, 2012. In our opinion, the summarized comparative information presented herein as of and for the year ended December 31, 2011 is consistent, in all material respects, with the audited financial statements from which it was derived. Eugene, Oregon April 5, 2013 2
STATEMENT OF FINANCIAL POSITION ASSETS For Comparative Purposes Only 2012 2011 CURRENT ASSETS Cash and cash equivalents $ 953,891 $ 1,273,100 Contributions receivable - 31,402 Prepaid expenses 1,642 1,781 Total current assets 955,533 1,306,283 EQUIPMENT, net 6,826 9,279 OTHER ASSETS, net 7,679 12,070 INVESTMENTS 4,832,579 5,141,302 Total assets $ 5,802,617 $ 6,468,934 LIABILITIES AND NET ASSETS DECEMBER 31, CURRENT LIABILITIES Accounts payable $ 5,124 3,079 Grants payable - current 782,455 291,942 Payroll accrual 22,040 21,558 Vacation accrual 13,117 4,244 Total current liabilities 822,736 320,823 GRANTS PAYABLE - LONG-TERM 204,165 13,916 Total liabilities 1,026,901 334,739 NET ASSETS Unrestricted 4,171,026 4,845,202 Temporarily restricted 604,690 1,288,993 Total net assets 4,775,716 6,134,195 Total liabilities and net assets $ 5,802,617 $ 6,468,934 See accompanying notes. 3
STATEMENT OF ACTIVITIES YEARS ENDED DECEMBER 31, For Comparative Purposes Only Temporarily 2012 2011 Unrestricted Restricted Total Total REVENUES, GAINS AND OTHER SUPPORT Contributions and grants $ 1,146,425 $ 427,736 $ 1,574,161 $ 2,936,870 Investment income 98,735-98,735 116,443 Realized and unrealized loss on investments (28,823) - (28,823) (55,658) Other income 2,197-2,197 14 1,218,534 427,736 1,646,270 2,997,669 Net assets released from restrictions Satisfaction of program restrictions 1,112,039 (1,112,039) - - Total revenue, gains and other support 2,330,573 (684,303) 1,646,270 2,997,669 EXPENSES Program services Research 2,464,743-2,464,743 962,227 Family support 315,206-315,206 255,974 Total program services 2,779,949-2,779,949 1,218,201 Support services Management and general 114,608-114,608 140,706 Fundraising 110,192-110,192 104,112 Total support services 224,800-224,800 244,818 Total expenses 3,004,749-3,004,749 1,463,019 CHANGE IN NET ASSETS (674,176) (684,303) (1,358,479) 1,534,650 NET ASSETS, beginning of year 4,845,202 1,288,993 6,134,195 4,599,545 NET ASSETS, end of year $ 4,171,026 $ 604,690 $ 4,775,716 $ 6,134,195 See accompanying notes. 4
STATEMENT OF FUNCTIONAL EXPENSES YEARS ENDED DECEMBER 31, For Comparative Program Services Support Services Purposes Only Total Total 2012 2011 Family Program Management Fund- Support Total Total Research Support Services & General raising Services Expenses Expenses Research grants 1,807,964-1,807,964 - - - 1,807,964 346,399 Conferences & meetings $ 427,690 $ 130,831 $ 558,521 $ 5,959 $ - $ 5,959 $ 564,480 $ 454,743 Payroll 117,243 93,673 210,916 48,256 14,168 62,424 273,340 262,720 Special projects 377-377 - 65,938 65,938 66,315 49,880 Payroll tax and benefits 27,868 21,728 49,596 11,036 3,311 14,347 63,943 68,411 Research materials 38,833-38,833 - - - 38,833 28,323 Printing 2,830 26,104 28,934-8,046 8,046 36,980 29,281 Postage 6,003 17,450 23,453 3,488 3,100 6,588 30,041 36,078 Accounting - - - 19,186-19,186 19,186 18,386 Supplies 8,436 7,209 15,645-2,366 2,366 18,011 24,552 Rent 6,198 6,198 12,396 2,656 2,656 5,312 17,708 20,688 Computer and equipment 6,023 2,884 8,907 1,336 3,915 5,251 14,158 17,733 Miscellaneous 56 3,575 3,631 4,796-4,796 8,427 44,955 Office expenses 505 2,834 3,339 3,845 2,164 6,009 9,348 15,365 Physician recruiting 7,899-7,899 - - - 7,899 7,593 Depreciation and amortization - - - 6,844-6,844 6,844 7,640 Legal 4,895-4,895 - - - 4,895 2,490 Telephone 923 2,621 3,544 1,292-1,292 4,836 4,094 Bank charges - - - 4,831-4,831 4,831 2,558 License & permits - - - - 4,528 4,528 4,528 4,821 Research awards 1,000-1,000 - - - 1,000 3,500 Insurance - - - 708-708 708 709 Maintenance - - - 375-375 375 763 Publications - 99 99 - - - 99 - Advertising - - - - - - - 11,337 Total $ 2,464,743 $ 315,206 $ 2,779,949 $ 114,608 $ 110,192 $ 224,800 $ 3,004,749 $ 1,463,019 See accompanying notes. 5
STATEMENT OF CASH FLOWS YEARS ENDED DECEMBER 31, For Comparative Purposes Only 2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (1,358,479) $ 1,534,650 Adjustments to reconcile change in net assets to net cash from operating activities: Depreciation and amortization 6,844 7,640 Realized and unrealized loss on investments 28,823 55,658 Changes in: Contributions receivable 31,402 (1,402) Prepaid expenses 139 354 Accounts payable 2,045 481 Payroll accrual 482 20,462 Vacation accrual 8,873 (2,626) Grants payable 680,762 (128,472) Net cash from operating activities (599,109) 1,486,745 CASH FLOWS FROM INVESTING ACTIVITIES Purchases of investments (2,035,971) (2,410,100) Proceeds from sale of investments 2,315,871 1,755,710 Net cash from investing activities 279,900 (654,390) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (319,209) 832,355 CASH AND CASH EQUIVALENTS, beginning of year 1,273,100 440,745 CASH AND CASH EQUIVALENTS, end of year $ 953,891 $ 1,273,100 See accompanying notes. 6
NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Fanconi Anemia Research Fund, Inc. (the Organization ) is a non-profit organization incorporated in the State of Oregon on February 27, 1989. The organization is exempt from income taxes under Internal Revenue Code 501(c)(3) and is not a private foundation. The Organization was established to fund research into a cure or effective treatment of victims of Fanconi Anemia and to offer support services to affected families. The primary funding sources are contributions from individuals and foundations. The Organization s current programs consist of the following: Research - This program supports various scientific studies, which may lead to a cure or effective treatment for Fanconi Anemia, and education on the progress of current research. Family Support - This program provides support to Fanconi Anemia families through education and networking. Basis of presentation - The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of Fanconi Anemia Research Fund, Inc. and changes therein are classified and reported as follows: Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Organization and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. The Organization had temporarily restricted net assets of $604,690 and $1,288,993 as of December 31, 2012 and 2011. Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organization. Generally, the donors of these assets permit the Organization to use all or part of the income earned on any related investments for general or specific purposes. As of December 31, 2012 and 2011, the Organization had no permanently restricted net assets. Cash and cash equivalents - For purposes of the Statement of Cash Flows, the Organization considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. These deposits may, from time to time, exceed the limits of depository insurance, which would subject the Organization to credit risk; however, management makes deposits in institutions with high credit quality which have not historically incurred credit losses. Additionally, the Organization does not believe it is exposed to any significant credit risk on cash, and has not experienced any losses in such accounts. 7
NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Investments - Investments in certificates of deposit with readily determinable fair value are valued at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Investment income or losses are reported as increases or decreases in unrestricted net assets unless the income on investments has been restricted by donors. Certificates of deposit, which are included in investments, are invested with federally insured financial institutions in amounts substantially covered by deposit insurance. Fair Value of financial instruments - The Organization has adopted Financial Accounting Standards Board ( FASB ) authoritative guidance that defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The fair value hierarchy requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. There are three levels of inputs that may be used to measure fair value: Level 1 - Unadjusted quoted prices in active markets for identical assets or liabilities; Level 2 - Quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in markets that are not considered active; observable inputs other than observable quoted prices for the asset or liability; or inputs derived principally from or corroborated by observable market data; Level 3 - Significant unobservable inputs for assets or liabilities. The fair values of the Organization s financial instruments fall within Level 1 of the valuation hierarchy. Contributions receivable - Contributions receivable are unconditional promises to give that are recognized as contributions when the promise is received. Contributions receivable that are expected to be collected in less than one year are reported at net realizable value. Contributions receivable that are expected to be collected in more than one year are recorded at fair value at the date of promise. That fair value is computed using a present value technique applied to anticipated cash flows. Amortization of the resulting discount is recognized as additional contribution revenue. The allowance for uncollectible contributions receivable is determined based on management s evaluation of the collectability of individual promises. Promises that remain uncollected more than one year after their due dates are written off unless the donors indicate that payment is merely postponed. All contributions receivable are expected to be collected, and no allowance for uncollectible accounts is considered necessary as of December 31, 2012 and 2011. 8
NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Equipment - The Organization follows the practice of capitalizing all expenditures for equipment in excess of $5,000 and having a useful life of more than one year. Purchased equipment is recorded at cost. Donated equipment is recorded at its estimated fair market value on the date of gift. The cost and accumulated depreciation of equipment sold or otherwise disposed of are eliminated from the accounts and the resulting gains or losses are reflected in revenue and expenses. Depreciation is computed over the estimated useful lives of the equipment using the straight-line method. Other assets - Patents are amortized on a straight-line basis over seventeen years. Amortization expense amounted to $4,391 for the years ended December 31, 2012 and 2011. Contributions - All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increase those net asset classes. However, if a restriction is fulfilled in the same time period in which the contribution is received, the organization reports the support as unrestricted. Donated materials and services - The Organization receives donated services from a variety of unpaid volunteers assisting the Organization in its program services and fundraising campaigns. No amounts have been recognized in the accompanying statement of activities because the criteria for recognition of such volunteer effort have not been satisfied. Donated materials and supplies are reflected as unrestricted support unless explicit donor stipulations specify how donated assets must be used. Use of estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Expense allocation - The expenses of the Organization are categorized as either program services or supporting services. Program services include direct and indirect costs related to providing the services and activities for which purpose the Organization exists. Supporting services include administration and fundraising activities. Administration expenses relate to the overall direction of the Organization, including board activities, general record keeping, business management, and budgeting. Fundraising expenses relate to the solicitation of contributions to support organizational goals. 9
NOTES TO FINANCIAL STATEMENTS NOTE 1 - DESCRIPTION OF ACTIVITIES AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Income taxes - Fanconi Anemia Research Fund, Inc. is a not-for-profit organization as described in Section 501(c)(3) of the Internal Revenue Code and is exempt from federal income taxes. The Organization has also been classified as an entity that is not a private foundation within the meaning of the Internal Revenue Code and as an entity that qualifies for deductible contributions. Accordingly, no provision has been made for income taxes in the financial statements pursuant to Accounting Standards Codification (ASC) 740, Income Taxes. The Organization generally evaluates any uncertain tax positions consistent with the accounting and disclosure requirements of ASC 450, Contingencies. Comparative financial information - The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended December 31, 2011, from which the summarized information was derived. Subsequent Events - Subsequent events are events or transactions that occur after the statement of financial position date but before the financial statements are available to be issued. The Organization recognizes in the financial statements the effects of all subsequent events that provide additional evidence about conditions that existed at the date of the statement of financial position, including the estimates inherent in the process of preparing the financial statements. The Organization s financial statements do not recognize subsequent events that provide evidence about conditions that did not exist at the date of the statement of financial position but arose after the statement of financial position date and before financial statements are available to be issued. The Organization has evaluated subsequent events through April 5, 2013 which is the date the financial statements were available to be issued. Reclassifications Certain amounts in the prior year financial statements have been reclassified to conform to the current year presentation. There was no effect on previously reported change in net assets. NOTE 2 - INVESTMENTS In accordance with the Organization s investment policy, a staggering or laddering of investment maturity dates is spread over a three year period. The investments shall be laddered so that approximately 25% of the total reaching maturity each year will mature in each quarter of that year. The Board of Directors must approve any investments with a maturity of longer than three years. 10
NOTES TO FINANCIAL STATEMENTS NOTE 2 INVESTMENTS (Continued) The Organization s investments are comprised of federally insured certificates of deposits as of December 31, 2012 and 2011. Investment balances were $4,832,579 as of December 31, 2012 and $5,141,302 as of December 31, 2011. NOTE 3 - EQUIPMENT Equipment consists of the following: DECEMBER 31, 2012 2011 Office equipment $ 90,803 $ 90,803 Less accumulated depreciation 83,977 81,524 $ 6,826 $ 9,279 NOTE 4 - GRANTS PAYABLE The Organization has entered into contracts for grants to researchers that will be made in installments over the terms of the contracts. Accordingly, the grant payments are classified as current and long-term as follows: DECEMBER 31, 2012 2011 Grants payable - current portion $ 782,455 $ 291,942 Grants payable - long-term portion 204,165 13,916 NOTE 5 - LEASES $ 986,620 $ 305,858 The Organization rents office space under an agreement that is accounted for as an operating lease. The base rent is $1,570 with an inflation adjustment based on the CPI for Portland with any increase not to exceed 3% per year. A five year extension of the original lease agreement was entered into during January 2010 with expiration in March 2015. The extension agreement includes a clause that allows for early termination with six months notice of intent. Rent expense was $17,708 and $20,688 for the years ended December 31, 2012 and 2011, respectively. 11
NOTES TO FINANCIAL STATEMENTS NOTE 6 - RETIREMENT PLAN The Organization has an IRS Section 403(b)(7) plan ( Fanconi Anemia Research Fund, Inc. Retirement Plan ) that covers eligible employees, as defined by the plan. Employees are eligible immediately upon becoming employed and may elect to have elective deferrals up to the maximum amount allowed by law to the plan each year, but not less than $200 annually. The employer provides a 50% match of employee contributions up to a maximum match of $1,000 per year. Retirement plan expense was $1,000 and $1,161 for the years ended December 31, 2012 and 2011, respectively. NOTE 7 - COMMITMENTS The Organization has entered into several contractual agreements securing hotel accommodations for future conferences. These agreements often contain cancellation clauses that would require Fanconi Anemia Research Fund, Inc. to pay some portion of the contracted fees if a future conference were cancelled or relocated. The possibility of cancellation of future conferences is remote and the potential financial impact of cancellation has been deemed to be not material. Therefore, no liability has been accrued. NOTE 8 - CONCENTRATIONS Financial instruments which potentially subject the Organization to credit risk consist of cash and cash equivalents. The Organization s cash balances are with reputable banks and periodically exceed insured limits. The Organization does not believe it is exposed to any significant credit risk on cash, and has not experienced any losses in such accounts. Included in contributions and grants were $572,080 of contributions attributable to the efforts of a related party fundraiser. These contributions comprise 35% of total 2012 revenue. Expenses related to this fundraiser were $6,322. Also included in contribution and grants were $190,280 of contributions attributable to the efforts of a second fundraiser. These contributions comprise 12% of total 2012 revenue. Expenses related to this second fundraiser were $1,765. 12