MEDICAL MINISTRY USA dba MEDICAL MINISTRY INTERNATIONAL

Transcription

1 Financial Statements Together with Independent Auditors Report For the Year Ended SWALM & ASSOCIATES, P.C. Certified Public Accountants

2 FINANCIAL STATEMENTS Table of Contents Page Independent Auditors Report 1 Financial Statements: Statements of Financial Position 2 Statements of Activities 3 Statements of Functional Expenses 4 Statements of Cash Flows 5 Notes to Financial Statements 6

3 SWALM & ASSOCIATES, P.C. Certified Public Accountants, Auditors and Consultants 2435 No. Central Expy., Suite 720 Richardson, Texas Office (972) Fax (972) INDEPENDENT AUDITORS REPORT To the Board of Directors Medical Ministry USA dba Medical Ministry International We have audited the accompanying Statements of Financial Position of Medical Ministry USA dba Medical Ministry International (the Ministry ) as of, and the related Statements of Activities, Functional Expenses, and Cash Flows for the years then ended. These financial statements are the responsibility of the Ministry's management. Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audits 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 audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Medical Ministry USA dba Medical Ministry International as of September 30, 2012 and 2011, and the results of its operations and its cash flows for the years then ended in conformity with accounting principals generally accepted in the United States of America. SWALM & ASSOCIATES, P.C. Swalm & Associates, P.C. Richardson, Texas November 28, 2012 MEMBERS OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS

4 STATEMENTS OF FINANCIAL POSITION ASSETS Current Assets Cash and cash equivalents $ 227,954 $ 590,620 Accounts and notes receivable, net of allowance for doubtful accounts 56,887 14,752 Prepaid expenses 17,342 66,525 Supplies and other assets 452, ,294 Investments 1,400,951 1,233,380 Total Current Assets 2,155,497 2,485,571 Property, Furniture and Equipment Office furniture and equipment 83,726 83,726 Computer systems and equipment 245, ,803 Donated warehouse 200, , , ,529 Less accumulated depreciation (366,452) (351,946) 163, ,583 Other Assets Deposits 4,576 4,576 Total Assets $ 2,323,264 $ 2,655,730 LIABILITIES AND NET ASSETS Current Liabilities Accounts payable and accrued expenses $ 110,717 $ 106,924 Deferred income 168, ,584 Total Current Liabilities 278, ,508 Net Assets Unrestricted 126, ,795 Temporarily restricted 516, ,047 Permanently restricted 1,401,536 1,233,380 Total Net Assets 2,044,471 2,418,222 Total Liabilities and Net Assets $ 2,323,264 $ 2,655,730 See Notes to Financial Statements -2-

5 STATEMENTS OF ACTIVITIES For the Years Ended Temporarily Permanently Temporarily Permanently Unrestricted Restricted Restricted Total Unrestricted Restricted Restricted Total Revenues Support and service revenue: General contributions $ 980,111 $ 907,603 $ 3,535 $ 1,891,249 $ 1,179,650 $ 792,397 $ 3,050 $ 1,975,097 Project participants cash contributions 1,368, ,368,586 1,426, ,426,261 Project participants contributions in services and donated supplies 42,157, ,157,936 40,748, ,748,490 Income from clinics 150, , , ,477 Other income (loss) 31, , ,577 55,273 - (12,767) 42,506 Net assets released from restrictions: Satisfaction of program restrictions 1,014,913 (968,793) (46,120) - 774,772 (723,009) (51,763) - Total Support and Service Revenue 45,704,188 (61,190) 168,156 45,811,154 44,331,923 69,388 (61,480) 44,339,831 Expenses Program Services 45,833, ,833,202 43,862, ,862,455 Supporting Services: Management and general 136, , , ,962 Fund-raising 214, , , ,002 Total Expenses 46,184, ,184,905 44,160, ,160,419 Change in Net Assets (480,717) (61,190) 168,156 (373,751) 171,504 69,388 (61,480) 179,412 Net Assets at Beginning of Year 606, ,047 1,233,380 2,418, , ,659 1,294,860 2,238,810 Net Assets at End of Year $ 126,078 $ 516,857 $ 1,401,536 $ 2,044,471 $ 606,795 $ 578,047 $ 1,233,380 $ 2,418,222 See Notes to Financial Statements -3-

6 STATEMENTS OF FUNCTIONAL EXPENSES For the Years Ended Support Services Support Services Program Management Program Management Services and General Fund-Raising Total Services and General Fund-Raising Total Employee salaries, taxes and benefits $ 793,046 $ 56,614 $ 150,291 $ 999,951 $ 676,226 $ 47,463 $ 123,053 $ 846,742 Project salaries and support paid 618, , , ,670 Participants services (donated) 40,045, ,045,710 38,342, ,342,085 Contract labor 135,680 17,820 35, , ,883 17,521 31, ,002 Depreciation expense 11,605 2, ,506 8,550 1, ,687 Insurance expense 44, ,793 47, ,517 Interest expense Rent, utilities and maintenance 66,941 6, ,704 63,767 6, ,573 Postage and mailing service 55, ,719 66, ,087 69,097 Printing and photocopy expense 34,719 2,034 4,067 40,820 39,776 2,424 4,644 46,844 Audit fees and accounting services - 15, ,660-15, ,500 Legal counsel Promotion expenses - - 7,152 7, ,678 6,678 Office supplies and expense 21,013 1, ,225 27,941 1, ,523 Computer supplies and software 16,087 3,016 1,005 20,108 11,165 2, ,956 Medical/clinic supplies and equipment 2,249, ,249,767 2,361, ,361,194 Telephone expense 47,910 1,481 1,481 50,872 46,211 1,476 1,476 49,163 Food, travel and accommodations 796,013 22,736 11, , ,876 15,078 7, ,363 MMI 500 clinic construction equipment and support 429, , , ,884 Property taxes 6, ,322 6, ,148 Other expenses 460,464 6,021 1, , ,844 3,021 1, ,975 Total Expenses $45,833,202 $ 136,717 $ 214,986 $ 46,184,905 $ 43,862,455 $ 115,962 $ 182,002 $ 44,160,419 See Notes to Financial Statements -4-

7 STATEMENTS OF CASH FLOWS For the Years Ended Cash Flows from Operating Activities Change in net assets $ (373,751) $ 179,412 Adjustments to reconcile change in net assets to net cash used by operating activities: Depreciation 14,506 10,687 Unrealized (gains) losses on investments (137,335) 12,767 Changes in operating assets and liabilities: Accounts receivable, net (42,134) (10,720) Prepaid expenses 49,183 (23,990) Supplies inventory 127,931 (45,211) Accounts payable 3,792 29,836 Deferred project revenues 37,492 (39,876) Cash provided by (used for) operating activities (320,316) 112,905 Cash Flows from Investing Activities Endowment investment (30,236) 47,913 Purchases of property, furniture and equipment (12,114) (15,977) Cash provided by (used for) investing activities (42,350) 31,936 Net (Decrease)Increase in Cash and Cash Equivalents (362,666) 144,841 Cash and Cash Equivalents at Beginning of Year 590, ,779 Cash and Cash Equivalents at End of Year $ 227,954 $ 590,620 See Notes to Financial Statements -5-

8 1. NATURE OF ORGANIZATION MEDICAL MINISTRY USA NOTES TO FINANCIAL STATEMENTS Medical Ministry USA dba Medical Ministry International (the Ministry ) was formed on June 5, 1995, as a Texas corporation. The Ministry was formed to organize and operate missions providing medical, dental and surgical services internationally; to institute programs promoting community health; to establish and support permanent health care facilities; to provide continuing medical education both in the United States and abroad; and to print, publish and distribute pamphlets and other periodicals in connection with the activities of the Ministry. The 500 Clinics Program represents the Ministry s vision to build five hundred medical facilities throughout the world over the next fifty years. These medical facilities are donated to local organizations upon completion. The Ministry is supported through donor contributions and support received in the form of professional services rendered without pay by volunteers traveling abroad. The Ministry is party to a Joint Ministry Agreement ( Joint Ministry ) dated September 19, 1995, with Medical Ministry Canada, Inc. (formerly Medical Group Missions - Canada, Inc.) whereby the two organizations provide services jointly under the name of Medical Ministry International. The Joint Ministry is governed by its own Board of Directors which is made up of representatives from both organizations, and each organization is expected to give support to the work of the Joint Ministry. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Contributions - Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and nature of donor restrictions. Cash contributions result from fund-raising efforts by the Ministry, including appeal letters and direct contract, and from project donations. Various organizations in the countries where missions are conducted provide facilities for the use of the Ministry. The value of the use of such facilities is not included in the financial statements. Contributed Services and Supplies - A significant portion of the services delivered by the Ministry is provided by volunteer medical professionals. Additionally, the majority of medical supplies are donated by pharmaceutical and other companies, and eyeglasses are donated by various individuals. The Ministry reports services rendered and the supplies that have been donated as support and program expenses in the statements of activities. The value of the services is calculated using a procedure-based methodology, and the value of the donated supplies is estimated based on published rates. The Ministry estimated $42,157,936 and $40,748,490 for the value of donated services and supplies for the years ended, respectively. Participant Contributions - A substantial amount of the Ministry s support comes in the form of donations to specific projects by participants in those projects. The donations are intended to defray the cost of travel, supplies, and administrative expenses of those projects. These contributions are recorded as support revenue in the statements of activities upon commencement of each project. Cash and Cash Equivalents - Cash and cash equivalents include cash on hand, demand deposits, money market accounts and certificates of deposit with original maturities of three months or less. -6-

9 NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Accounts Receivable - The Ministry has non-interest bearing trade receivables from participants. These receivables are comprised of contributions owed for projects. No collateral is required. Amounts due from participants are due 30 days prior to leaving for the trip and are considered to be past due upon the first day of the project. An allowance for uncollectible receivables is recorded based on historical writeoffs and current past due accounts. The Ministry writes off trade receivables when all attempts to collect have proved ineffective. Investments - The Ministry records investments in equity securities with readily determinable fair values and all investments in debt securities at fair value with gains and losses recorded in the statements of activities. Fair values are determined using quoted market prices. Promises to Give - Unconditional promises to give are recognized as revenues or gains in the period received and as assets, decreases of liabilities, or expenses, depending on the form of the benefits received. Conditional promises to give are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Property, Furniture and Equipment - Property, furniture and equipment are recorded at cost, except for donated assets, which are recorded at fair value on the date of donation. Property, furniture and equipment are depreciated using the straight-line method over their estimated useful lives which range from 3 to 39 years. Repairs and maintenance costs are expensed as incurred. Deferred Project Revenue - Deferred project revenue consists of funds received for participants mission expenses for projects that have not been started. Fair Value of Financial Instruments - Carrying amounts of the Ministry s financial instruments, including cash and cash equivalents, receivables, accounts payable and other current liabilities, approximate fair value because of their short maturities. Income Taxes - The Ministry is a not-for-profit organization that is exempt from income taxes under Section 501(c)(3) of the internal Revenue Service Code. Accordingly, no provision for income taxes is made in the accompanying financial statements. The Association s Forms 990, Return of Organization Exempt from Income Tax, for the years ending September 30, 2011, 2010, 2009 are subject to examination by the IRS, generally for three years after they are filed. Concentration of Risk - The Ministry maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Ministry has not experienced any losses in such accounts and does not believe it is exposed to any significant risk on cash. Use of Estimates - The preparation of financial statements in conformity with accounting principles generally accepted in the United States of American requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. -7-

10 3. RESTRICTED NET ASSETS MEDICAL MINISTRY USA NOTES TO FINANCIAL STATEMENTS Temporarily restricted net assets are available for the following purposes: Directors funds $ 49,254 $ 48,549 MMI 500 funds 218, ,168 Equipment funds 130, ,506 Miscellaneous funds 19,885 72,102 Project funds 36,370 29,250 Staff support 62, ,472 Total $ 516,857 $ 578,047 Permanently restricted net assets at September 31, 2012 and 2011 of $1,401,536 and $1,233,380, respectively, are set aside with the earnings, as described in the donors gift, available to fund training for ophthalmologists in the countries served by the Ministry. 4. EMPLOYEE BENEFIT PLAN The Ministry participates in a 401(k) tax deferred retirement plan. Full-time employees with at least one year of service may elect to defer up to 15% of their compensation to the Plan, subject to a limit on calendar year contributions set forth by the Internal Revenue Service. The Ministry s contributions are discretionary. For the years ended, the Board of Directors of the Ministry elected to contribute 8% of annual compensation. Contributions made by the Ministry were $53,193 and $47,770 for the years ended, respectively. 5. COMMITMENTS AND CONTINGENCIES The Ministry has a non-cancelable operating lease for office space in Allen, Texas. Future minimum lease payments as of September 30, 2012 are $33,718 in the fiscal year ending September 30, Lease expense was $33,718 and $33,718 for the years ended, respectively. 6. RELATED PARTY TRANSACTIONS In the statements of activities for the years ended September 20, 2012 and 2011, project participants contributions in cash include donations of $387,774 and $342,129, respectively, collected by and transferred from Medical Ministry Canada, Inc., an organization affiliated with Medical Ministry USA, Inc., under a joint ministries agreement. -8-

11 NOTES TO FINANCIAL STATEMENTS 7. INVESTMENTS The Association s investments are reported at fair value in the accompanying Balance Sheet. Fair Value Measurements Using: Quoted Prices Significant In active Markets Unobservable for Identical Assets Inputs Fair Value (Level 1) (Level 3) Mutual Funds $ 1,400,951 $ 1,400,951 $ - Common Stocks Total at September 30, 2012 $ 1,400,951 $ 1,400,951 $ - Fair Value Measurements Using: Quoted Prices Significant In active Markets Unobservable for Identical Assets Inputs Fair Value (Level 1) (Level 3) Mutual Funds $1,233,380 $ 1,233,380 $ - Common Stocks Total at September 30, 2011 $ 1,233,380 $ 1,233,380 $ - 8. ENDOWMENT FUND The Ministry s endowment fund consists of a fund established to train ophthalmologists in the countries served by the Ministry. A second fund was added for global ministries and funds are used as the organization determines is the best use of these funds. The endowments include donor-restricted funds only. As required by GAAP, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. The Board of Trustees of the Ministry has interpreted the State Prudent Management of Institutional Funds Act(SPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Ministry classifies as permanently restricted net assets (a) the original value of gifts donated t the permanent endowment, (b) the original value of subsequent gifts donated to the permanent endowment, and(c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor -restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the organization in a manner consistent with the standard of prudence prescribed by -9-

12 8. ENDOWMENT FUND (continued) MEDICAL MINISTRY USA NOTES TO FINANCIAL STATEMENTS SPMIFA. In accordance with SPMIFA, the organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1. The duration and preservation of the fund 2. The purposes of the organization and the donor-restricted endowment fund 3. General economic conditions 4. The possible effect of inflation and deflation 5. The expected total return from income and the appreciation of investments 6. Other resources of the organization 7. The investment policies of the organization Endowment Net Asset Composition by Type of Fund as of September 30, 2012 Temporarily Permanently Unrestricted Unrestricted Restricted Total Donor-restricted endowment funds $ - - $ 1,401,536 $ 1,401,536 Board-designated endowment funds Total funds $ - $ - $ 1,401,536 $ 1,401,536 Endowment Net Asset Composition by Type of Fund as of September 30, 2011 Temporarily Permanently Unrestricted Unrestricted Restricted Total Donor-restricted endowment funds $ - - $ 1,233,380 $ 1,233,380 Board-designated endowment funds Total funds $ - $ - $ 1,233,380 $ 1,233,

13 NOTES TO FINANCIAL STATEMENTS 8. ENDOWMENT FUND (continued) Changes in Endowment Net Assets for the Year Ended Temporarily Permanently Unrestricted Unrestricted Restricted Total Endowment net assets, September 30, 2010 $ - $ - $ 1,294,860 $ 1,294,860 Investment income - - (12,767) (12,767) Transfers - (51,763) (51,763) Contributions - - 3,050 3,050 Endowment net assets, September 30, 2011 $ - $ - $ 1,233,380 $ 1,233,380 Investment income (loss) , ,741 Transfers - - (46,120) (46,120) Contributions - - 3,535 3,535 Endowment net assets, September 30, 2012 $ - $ - $ 1,401,536 $ 1,401,536 Return Objectives and Risk Parameters - The Ministry has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Ministry must hold in perpetuity or for a donor-specified period as well as board-designated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is intended to produce results that employ a growth and income strategy that will allow annual distribution to keep pace with inflation. Strategies Employed for Achieving Objectives - To satisfy its long-term rate-of-return objectives, the Ministry relies on a growth and income strategy in investment returns are achieved through both capital appreciation(realized and unrealized) and current yield (interest and dividends). The Organization targets a broad range of investments to allocate risk among the various classes Spending Policy and How the Investment Objectives Relate to Spending Policy - The Ministry has a policy of appropriating for distribution each year 4% of the average market value of the fund for the previous 3 years can be used for Ophthalmology Residency training. If the value of the endowment fund drops below the original cost basis plus any additions to the fund, further distribution will be delayed until its value recovers to the original cost basis plus any additions to the fund. 9. SUBSEQUENT EVENTS The Association has evaluated the subsequent events through November 28, 2012, the date the financial statements were available to be issued, and has determined there are none to be reported -11-