The Institute for Spirituality and Health. Financial Statements and Independent Auditors Report for the years ended June 30, 2012 and 2011

Transcription

1 Financial Statements and Independent Auditors Report for the years ended June 30, 2012 and 2011

2 Blazek & Vetterling C ERTIFIED P UBLIC A CCOUNTANTS Independent Auditors Report To the Board of Directors of The Institute for Spirituality and Health: We have audited the accompanying statements of financial position of The Institute for Spirituality and Health (the Institute) as of June 30, 2012 and 2011 and the related statements of activities, of cash flows, and of functional expenses for the years then ended. These financial statements are the responsibility of the management of the Institute. Our responsibility is to express an opinion on these financial statements based on our audits. 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 our audits 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 Institute for Spirituality and Health as of June 30, 2012 and 2011 and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. February 25, Weslayan, Suite 200 Houston, Texas (713) Fax (713)

3 Statements of Financial Position as of June 30, 2012 and ASSETS Cash $ 218,118 $ 277,872 Pledges receivable 35,000 Prepaid expenses and other assets Beneficial interest in Endowment Trust (Notes 2 and 3) 1,523,944 1,676,387 Property, net (Note 4) 4,797 10,637 TOTAL ASSETS $ 1,782,428 $ 1,965,856 LIABILITIES AND NET ASSETS Liabilities: Accounts payable $ 802 $ 114 Net assets: Unrestricted 203, ,231 Temporarily restricted (Note 5) 54,427 22,124 Permanently restricted beneficial interest in Endowment Trust 1,523,944 1,676,387 Total net assets 1,781,626 1,965,742 TOTAL LIABILITIES AND NET ASSETS $ 1,782,428 $ 1,965,856 See accompanying notes to financial statements. 2

4 Statement of Activities for the year ended June 30, 2012 TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL REVENUE: Contributions and grants $ 161,767 $ 79,248 $ 241,015 Rental income (Note 6) 179, ,619 Distributions from Endowment Trust 78,331 78,331 Tuition and fees 28,527 28,527 Other 2,283 2,283 Total revenue 450,527 79, ,775 Net assets released from restrictions: Expenditure for program purposes 46,945 (46,945) Total 497,472 32, ,775 EXPENSES: Program services 341, ,605 Management and general 178, ,089 Fundraising 41,754 41,754 Total expenses 561, ,448 CHANGES IN NET ASSETS FROM OPERATIONS (63,976) 32,303 (31,673) Change in value of Endowment Trust $ (152,443) (152,443) CHANGES IN NET ASSETS (63,976) 32,303 (152,443) (184,116) Net assets, beginning of year 267,231 22,124 1,676,387 1,965,742 Net assets, end of year $ 203,255 $ 54,427 $ 1,523,944 $ 1,781,626 See accompanying notes to financial statements. 3

5 Statement of Activities for the year ended June 30, 2011 TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL REVENUE: Contributions and grants $ 27,490 $ 25,000 $ 52,490 Rental income (Note 6) 175, ,623 Distributions from Endowment Trust 80,405 80,405 Tuition and fees 23,821 23,821 Other 9,142 9,142 Total revenue 316,481 25, ,481 Net assets released from restrictions: Expenditure for program purposes 35,270 (35,270) Total 351,751 (10,270) 341,481 EXPENSES: Program services 251, ,180 Management and general 193, ,269 Fundraising 25,876 25,876 Total expenses 470, ,325 CHANGES IN NET ASSETS FROM OPERATIONS (118,574) (10,270) (128,844) Change in value of Endowment Trust $ 207, ,704 CHANGES IN NET ASSETS (118,574) (10,270) 207,704 78,860 Net assets, beginning of year 385,805 32,394 1,468,683 1,886,882 Net assets, end of year $ 267,231 $ 22,124 $ 1,676,387 $ 1,965,742 See accompanying notes to financial statements. 4

6 Statements of Cash Flows for the years ended June 30, 2012 and 2011 CASH FLOWS FROM OPERATING ACTIVITIES: Changes in net assets $ (184,116) $ 78,860 Adjustments to reconcile changes in net assets to net cash used by operating activities: Change in value of Endowment Trust 152,443 (207,704) Depreciation 5,840 5,840 Changes in operating assets and liabilities: Pledges receivable (35,000) 14,254 Prepaid expenses and other assets Accounts payable 688 (1,500) Net cash used by operating activities (59,754) (109,766) CASH FLOWS FROM FINANCING ACTIVITIES: Purchase of property (8,458) NET CHANGE IN CASH (59,754) (118,224) Cash, beginning of year 277, ,096 Cash, end of year $ 218,118 $ 277,872 See accompanying notes to financial statements. 5

7 Statements of Functional Expenses for the years ended June 30, 2012 and PROGRAM MANAGEMENT SERVICES AND GENERAL FUNDRAISING TOTAL Salaries and related benefits $ 140,918 $ 118,481 $ 20,587 $ 279,986 Contract labor 93, ,230 Occupancy 37,583 33,112 5,487 76,182 Programs and conferences 39,809 39,809 Professional fees 8,244 10,001 2,526 20,771 Office supplies 6,261 5, ,661 Postage and printing 6,511 1,059 3,684 11,254 Insurance 5,243 4, ,286 Event expenses 6,211 6,211 Depreciation 2,977 2, ,840 Other 595 2,596 1,027 4,218 Total $ 341,605 $ 178,089 $ 41,754 $ 561, PROGRAM MANAGEMENT SERVICES AND GENERAL FUNDRAISING TOTAL Salaries and related benefits $ 125,120 $ 113,569 $ 12,054 $ 250,743 Contract labor 17,389 2, ,787 Occupancy 34,315 31,145 3,308 68,768 Programs and conferences 53, ,223 Professional fees 15,465 7,650 23,115 Office supplies 8,771 7, ,577 Postage and printing 3,737 6, ,042 Insurance 4,260 3, ,537 Depreciation 2,914 2, ,840 Other 1,201 10, ,693 Total $ 251,180 $ 193,269 $ 25,876 $ 470,325 See accompanying notes to financial statements. 6

8 Notes to Financial Statements for the years ended June 30, 2012 and 2011 NOTE 1 ORGANIZATION AND SIGNIFICANT ACCOUNTING POLICIES Organization The Institute for Spirituality and Health (the Institute) is a Texas nonprofit corporation chartered in The mission of the Institute is to advance the integration of spirituality, health, and healing in the Texas Medical Center in Houston and in the surrounding community. The Endowment Fund of The Institute for Religion and Human Development (the Endowment Trust) is a perpetual trust formed in 1974 as a supporting organization of the Institute for the purpose of providing funds for the Institute. The Endowment Trust is administered and the assets are held by an independent corporate trustee. The Institute s beneficial interest in the Endowment Trust is reported at the fair value of the trust assets. The change in the value of the Endowment Trust from year to year is recognized as an increase or decrease in net assets in the statement of activities. Distributions received from the Endowment Trust are recognized as revenue when received. Federal income tax status The Institute is exempt from federal income taxes under 501(c)(3) of the Internal Revenue Code and is classified as a public charity under 509(a)(1) and 170(b)(1)(A)(ii). The Institute files annual federal information returns and is subject to routine examinations of its returns; however, there are no examinations for any tax periods currently in progress. The Institute believes it is no longer subject to examinations of returns for tax years ended before June 30, Pledges receivable that are expected to be collected within one year are reported at net realizable value. Pledges receivable that are expected to be collected in future years are reported at the present value of the expected future cash flows. All pledges receivable at June 30, 2012 are due within one year. Property is reported at cost if purchased and at fair value at the date of gift if donated. The Institute capitalizes additions with a cost of more than $1,000. Depreciation is provided on a straight-line basis over estimated useful lives of 3 to 10 years for furniture and equipment. Net asset classification Contributions and the related net assets are classified based on the existence or absence of donor-imposed restrictions, as follows: Unrestricted net assets include those net assets whose use is not restricted by donor-imposed stipulations, even though their use may be limited in other respects, such as by contract or board designation. Temporarily restricted net assets include contributions restricted by the donor for specific purposes or time periods. When a purpose restriction is accomplished or a time restriction ends, temporarily restricted net assets are released to unrestricted net assets. 7

9 Permanently restricted net assets include contributions that donors have restricted in perpetuity. Permanently restricted net assets consist of assets held by the Endowment Trust for the benefit of the Institute by the Endowment Trust. Contributions are recognized as revenue at fair value when an unconditional commitment is received from the donor. Contributions received with donor stipulations that limit their use are classified as restricted support. Conditional contributions are recognized in the same manner when the conditions are substantially met. Rental income and tuition and fees are recognized in the period in which the services are provided. Estimates Management must make estimates and assumptions to prepare financial statements in accordance with generally accepted accounting principles. These estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, the amounts of reported revenue and expenses, and the allocation of expenses among various functions. Actual results could vary from the estimates that were used. NOTE 2 FAIR VALUE MEASUREMENTS Generally accepted accounting principles require that certain assets and liabilities be reported at fair value and establish a hierarchy that prioritizes inputs used to measure fair value. 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 three levels of the fair value hierarchy are as follows: Level 1 Inputs are unadjusted quoted prices in active markets for identical assets or liabilities that the reporting entity has the ability to access at the reporting date. Level 2 Inputs are other than quoted prices included in Level 1, which are either directly observable or can be derived from or corroborated by observable market data at the reporting date. Level 3 Inputs are not observable and are based on the reporting entity s assumptions about the inputs market participants would use in pricing the asset or liability. Assets measured at fair value at June 30, 2012 are as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Beneficial interest in Endowment Trust $ 0 $ 1,523,944 $ 0 $ 1,523,944 Assets measured at fair value at June 30, 2011 are as follows: LEVEL 1 LEVEL 2 LEVEL 3 TOTAL Beneficial interest in Endowment Trust $ 0 $ 1,676,387 $ 0 $ 1,676,387 8

10 Beneficial interest in Endowment Trust is valued at the fair value of the underlying investments of the Endowment Trust held at June 30, 2012, which is valued based on closing prices reported on the active market for equity securities and at reported net asset value for mutual funds. Assets of the Endowment Trust are managed by a corporate trustee and are not directly accessible by the Institute. This valuation method may produce a fair value that may not be indicative of net realizable value or reflective of future fair values. Furthermore, while the Institute believes its valuation method is appropriate, the use of different methods or assumptions could result in a different fair value measurement at the reporting date. NOTE 3 BENEFICIAL INTEREST IN ENDOWMENT TRUST The assets of the Endowment Trust in which the Institute has a beneficial interest consists of the following: Equity securities: Domestic large-cap $ 529,012 $ 536,402 Domestic mid-cap 109, ,155 Mutual funds: Foreign large-blend 218, ,989 Domestic fixed-income 138, ,074 Foreign large-growth 126,082 84,870 Hedge funds 69,963 95,311 Money market mutual funds 69,025 54,108 Emerging market equity 59, ,538 Foreign fixed-income 45,329 51,535 Real estate funds 33,912 72,497 Commodities 98,220 94,971 Complementary structured strategies 23,298 Accrued interest receivable 3,345 1,937 Total $ 1,523,944 $ 1,676,387 Investments are exposed to various risks such as interest rate, market, and credit risks. Because of these risks, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the statement of financial position and statement of activities. 9

11 NOTE 4 PROPERTY Property consists of the following: Land $ 100 $ 100 Furniture 7,283 7,283 Equipment 28,843 28,843 Total property, at cost 36,226 36,226 Accumulated depreciation (31,429) (25,589) Property, net $ 4,797 $ 10,637 The Texas Medical Center (TMC), a Texas nonprofit organization, granted land in the medical center area to the Institute in The land is subject to permanent restrictions generally requiring the land to be used in compliance with various deed restrictions administered by the TMC for the purpose of promoting health, education, and research and for hospital, medical, and educational purposes. Until 2004, the Institute conducted its operations from a building located on that site. In 2004, the Institute leased its land to The Methodist Hospital (TMH), leased office space from TMH, and relocated its operations to the leased office space. See Note 6 related to lease commitments in connection with the land. NOTE 5 TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes: Visiting Distinguished Scholar $ 25,000 Leaders and Partnership Conference 12,254 $ 12,254 Psychotherapy and Faith 11,897 Nursing program 4,165 4,605 Other 1,111 5,265 Total temporarily restricted net assets $ 54,427 $ 22,124 NOTE 6 LEASE COMMITMENTS As lessor In fiscal year 2004, the Institute entered into an agreement with the TMC to lease the Institute s land to TMH for 99 years, with a renewal option for an additional 99 years. The lease calls for payments to the Institute totaling approximately $172,000 per year, subject to an annual consumer price index adjustment. The lease is a net lease, with TMH paying any taxes, insurance, construction, and maintenance. 10

12 As lessee In a related lease agreement, TMH agreed to provide office space to the Institute in a TMH building in proximity to the medical center for a term of 99 years, with a renewal option for an additional 99 years. The lease is a net lease, with the Institute paying a pro rata share of the building operating costs (utilities, cleaning, janitorial, repairs, restoration, insurance premiums, taxes, security, maintenance, and service contracts). The specific office space and the building operating expenses to be paid by the Institute are determined periodically. The lease term for the Institute s initial space is 10 years, with rental payments for operating costs of $5,682 per month. In addition to office space, the Institute leases certain office equipment under noncancellable operating leases. Total lease expense was approximately $71,000 in 2012 and $80,000 in Future minimum lease commitments at June 30, 2012 are as follows: 2013 $ 71, , ,432 Total $ 100,190 NOTE 7 SUBSEQUENT EVENTS Management has evaluated subsequent events through February 25, 2013, which is the date that the financial statements were available for issuance. As a result of this evaluation, no events were identified that are required to be disclosed or would have a material impact on reported net assets or changes in net assets. 11