Mercy Corps Jerusalem, West Bank and Gaza. Financial Statements As of June 30, 2012 and 2011 Together With Independent Auditors Report

Transcription

1 Mercy Corps Jerusalem, West Bank and Gaza Financial Statements As of June 30, 2012 and 2011 Together With Independent Auditors Report

2 El Wafa Company For Financial Consulting & Accounting Services Correspondents of the International Firm "MAZARS" Abu Shosheh bldg., - ~ st floor, Opposite of Arab Bank AI Balad Branch, Ramallah P.O.Box: 2056 Aamallah Tel: (+970 2) /1 Fax: (+970 2) musawafa@ palnet.com Independent Auditors' Report To: Mercy Corps- Jerusalem, West Bank and Gaza Jerusalem We have audited the accompanying financial statements of Mercy Corps- Jerusalem, West Bank and Gaza (MC-JWBG), which comprise the statement of financial position as at June 30, 2012, and the statement of activities and cash flow statement for the year then ended, and a summary of significant accounting policies and other explanatory notes. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards and Financial Accounting Standards No. 116 and 117 issued by the Financial Accounting Standards Board in the United States of America. This responsibility includes: designing, implementing and maintaining internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error; selecting and applying appropriate accounting policies; and making accounting estimates that are reasonable in the circumstances. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with International Standards on Auditing. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance 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 MC-JWBG'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 MC-JWBG's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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.

3 El Wafa Company For Financial Consulting & Accounting Services Correspondents of the International Firm "MAZARS" Abu Shosheh bldg., - ~ st fl~or, Opposite of Arab Bank AI Salad Branch, Ramallah P.O.Box: 2056 Ramallah Tel: (+970 2) /1 Fax: (+970 2) musawafa@ palnet.com Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Mercy Corps- Jerusalem, West Bank and Gaza as of June 30, 2012, and its financial performance and its cash flows for the year then ended in accordance with International Financial Reporting Standards and Financial Accounting Standards No. 116 and 117 issued by the Financial Accounting Standards Board in the United States of America. ElW~mpany M~ Dieh Ramallah, Palestine March 27, 2013

4 Mercy Corps Jerusalem, West Bank and Gaza Statement of Financial Position As at June 30, 2012 and 2011 (Currency: USD) Assets Note Current Assets Cash on Hand and at Banks 3 132,243 89,881 Employee Advances 4 100,000 3,572 Prepaid Expenses and Other Receivables 5 41,501 81,885 Total Current Assets 273, ,338 Total Assets 273, ,338 Liabilities and Net Assets Liabilities Current Liabilities Accounts Payable 11,012 8,529 Accrued Expenses 6 40, ,969 Accrued Employee Benefits 7 75,269 73,488 Deferred Revenue - 2,737 Total Current Liabilities 127, ,723 Provision for Severance Pay 8 367, ,794 Interoffice Current Accounts 9 742, ,045 Total Liabilities 1,236,806 1,032,562 Net Assets Net Assets 10 (963,062) (857,224) Total Net Assets (963,062) (857,224) Total Liabilities and Net Assets 273, ,338 The Accompanying Notes form an Integral Part of these Financial Statements

5 Mercy Corps Jerusalem, West Bank and Gaza Statement of Activities For the Years Ended June 30, 2012 and 2011 (Currency: USD) Note Total Total Revenues Program Revenues 11 9,379,058 7,173,713 Total Revenues 9,379,058 7,173,713 Expenses Program Related Personnel 12, 13 2,853,227 2,259,583 Operating 12, , ,219 Capital Expenditure 12, 15 61,745 23,624 Program Activities 12, 16 5,642,623 3,903,287 Total Program 9,379,058 7,173,713 Core and Regional Related Personnel 13 38,182 69,611 Operating 14 30,998 46,904 Capital Expenditure 15 1,854 4,692 Program Activities 16 34,804 - Total Core and Regional 105, ,207 Total Expenses 9,484,896 7,294,920 Change in Net Assets (105,838) (121,207) Net Assets, beginning of year (857,224) (736,017) Net Assets, end of year 10 (963,062) (857,224) The Accompanying Notes Form an Integral Part of these Financial Statements

6 Mercy Corps Jerusalem, West Bank and Gaza Cash Flow Statement For the Years Ended June 30, 2012 and 2011 (Currency: USD) Cash flow from Operating Activities Change in Net Assets (105,838) (121,207) Adjustments to reconcile change in net assets to net cash flow from operating activities (Increase) Decrease in Employee Advances (96,428) 1,085 Decrease (Increase) in Prepaid Expenses and Other Receivables 40,384 (65,991) Increase in Accounts Payable 2,483 3,853 (Decrease) Increase in Accrued Expenses (142,096) 171,836 Increase in Accrued Employee Benefits 1,781 34,690 (Decrease) Increase in Deferred Revenue (2,737) 2,737 Increase in Provision for Severance Pay 78, ,701 Increase (Decrease) in Interoffice Current Accounts 266,007 (440,370) Net cash provided by (used in) Operating Activities 42,362 (260,666) Net Increase (Decrease) in Cash on Hand and at Banks 42,362 (260,666) Cash on Hand and at Banks, beginning of year 89, ,547 Cash on Hand and at Banks, end of year 132,243 89,881 The Accompanying Notes Form an Integral Part of these Financial Statements

7 Mercy Corps Jerusalem, West Bank and Gaza Notes to the Financial Statements June 30, 2012 and 2011 (Currency: USD) 1. Mercy Corps - Jerusalem, West Bank and Gaza and its Activities Mercy Corps - Jerusalem, West Bank and Gaza (MC-JWBG) is a branch of Mercy Corps, a not-for-profit corporation incorporated under the laws of the state of Washington and located in Portland, Oregon, USA. MC-JWBG has been registered with the Ministry of Interior in Israel as a foreign organization as of September 13, 1990 under registration number In addition, MC-JWBG has been registered with the Ministry of Interior of the Palestinian Authority as a foreign not-for-profit organization as of August 11, 2008 under registration number QR-0094-F. MC-JWBG is the executive branch, in Jerusalem, West Bank and Gaza (JWBG), of Mercy Corps-Portland and Mercy Corps-Scotland (the Head Offices). Funds designated to activities to be undertaken in JWBG by grant agreements signed between Mercy Corps- Portland or Mercy Corps-Scotland with third party donors are regularly received by MC-JWBG from the Head Offices to finance these activities. MC-JWBG do not directly enter into grant agreements with third party donors. In addition to donor funds restricted for JWBG activities, certain other funding is received from the Head Offices from internal private (unrestricted) sources to cover core and regional costs. MC-JWBG aims to help Palestinians work toward building a more peaceful future. MC- JWBG programs focus on providing humanitarian assistance, improved job and economic opportunities, and community mobilization for peaceful change and inclusion of vulnerable groups. These efforts are supported with the funding from various donors, including the United States Agency for International Development (USAID), the UK government, EU programs and private foundations. During fiscal year 2012, the main programs/grants implemented by MC-JWBG were: Programs implemented under Mercy Corps Portland Grants: Program/Grant title Yalla Ma na: Strengthening Technical Vocational Education and Training Program Institutions (USAID TVET) Gaza Emergency Project (GEP) Middle East Children s Institute Afterschool Program (MECI Afterschool) Global Citizens Corps (ROTA GCC) Donor USAID through Save the Children Several Donors Middle East Children s Institute (MECI) Reach Out to Asia (ROTA) 1

8 Program/Grant title Palestinian Community Assistance Program (USAID PCAP) Youth Enterprise Start-Up Initiative (SOH YES) Arab Developer Network Initiative (Google ADNI) Sports for Change (SOH - SFC) Impact through Technology (USAID ITT) Donor USAID Source of Hope Foundation (SOH) Google Foundation (Google) SOH USAID Programs implemented under Mercy Corps Scotland Grants: Program/Grant title Investing in Peace II (EC PFP II) Sports for Change (EC SFC) Donor European Commission (EC) European Commission (EC) 2. Summary of Significant Accounting Policies The financial statements have been prepared under the historical cost convention. The significant accounting policies follow: - General Grant agreements with donors are signed with Mercy Corps-Portland and Mercy Corps-Scotland (the Head Offices) and the underlying grant funds are transferred from donors to the Head Offices. Cash is transferred from the Head Offices to MC- JWBG on regular basis to finance its programs under signed grant agreements. - Revenues MC-JWBG recognizes revenues when program related expenses are incurred. - Expenses Expenses are recorded by MC-JWBG when incurred in accordance with the accrual basis of accounting. Core and Regional disbursements are made on behalf of and are financed by the Head Offices. - Provision for Severance Pay The provision for severance pay for MC-JWBG employees is calculated in conformity with local labor law in Palestine. The Provision is computed based on the average salary of the last three months for each employee multiplied by the number of employment years. 2

9 - Fixed Assets Fixed assets are stated at cost and depreciated over their estimated useful lives using the straight-line method, at the following annual rates: % Vehicles 33 Equipment 39 MC-JWBG capitalizes fixed assets with a unit value equal to or greater than USD 5,000 funded from Mercy Corps private funds (unrestricted funds). Fixed assets purchases with a unit value equal to or greater than USD 5,000 funded from restricted grant funds are not capitalized; rather, they are fully expensed and charged under the related program. The cost of capitalized fixed assets includes all expenses that make it ready for use. Other expenses are calculated and capitalized only if these expenses increase the future economic benefits of these properties and equipment. All non-capital expenses are recorded in the Statement of Activities. - Foreign Currency Translation MC-JWBG maintains its records in United States Dollar (USD). MC-JWBG transactions during 2012 and 2011 are expressed or denominated in USD or New Israeli Shekel (NIS). Transactions in NIS are translated to USD using the same exchange rates used to make the internal bank transfers from USD to NIS. Monetary assets and liabilities denominated in NIS are translated to USD using exchange rates prevailing at the date of the Statement of Financial Position. Gains and losses arising from the translation are reflected in the statement of activities. Foreign currency exchange rates against USD at June 30, 2012 and 2011 were as follows: One New Israeli Shekel (NIS)

10 3. Cash on Hand and at Banks Cash on hand and at banks comprise: Cash on hand Jerusalem and West Bank Cash on hand Gaza Cash at bank in USD Jerusalem and West Bank 29,354 32,282 Cash at bank in NIS Jerusalem and West Bank 25,418 18,145 Cash at bank in USD Gaza 35,013 25,139 Cash at bank in NIS Gaza 42,172 13, ,243 89, Employee Advances Mainly represent payroll advances paid to expatriate employees. 5. Prepaid Expenses and Other Receivables Prepaid expenses and other receivables comprise: Prepaid rent 24,246 25,913 Prepaid employees medical allowance and health insurance 6,093 17,772 Prepaid professional services and IT support 4,871 4,237 Prepaid vehicle insurance 4,023 3,944 Refundable deposits 2,022 - Amounts due from employees 246 4,986 Amounts due from third parties - 23,862 Other - 1,171 41,501 81, Accrued Expenses Accrued expenses comprise: Professional fees 15,000 - Training and meeting 12,560 - Travel 10,749 16,623 Service contracts - 84,867 Materials and supplies - 50,635 Community mobilization - 13,818 Other 2,564 17,026 40, , Accrued Employee Benefits Represent the incurred 13 th salary benefit for employees covering the months from January to June and payable at the end of December each year. 4

11 8. Provision for Severance Pay Provision for severance pay at June 30, 2012 and 2011 and movement thereon during the year follow: JWB Gaza Total Total Balance, beginning of year 38, , , ,093 Additions during the year 37, , , ,252 Payments during the year (43,115) (32,529) (75,644) (35,551) Balance, end of year 32, , , ,794 Amounts due for future payment out of this provision are to be financed by Mercy Corps head offices in Portland and Scotland. 9. Interoffice Current Accounts MC-JWBG receives cash transfers from its head offices in Portland (MC-Portland) and Scotland (MC-Scotland) to finance its activities. Cash transfers are credited to the related interoffice current account. Program-related expenses are debited to the related interoffice current account and recognized as revenue. Purchases of fixed assets with a unit value equal to or greater than USD 5,000 funded from Mercy Corps private funds (unrestricted funds) are debited to the interoffice current account. Related depreciation expenses are charged to projects and credited to the interoffice account on regular basis. Interoffice current account balances at June 30, 2012 and 2011 and movements thereon during the year follow: Balance, beginning of year 476, ,415 Cash transferred MC-Portland Grants (A) 9,516,523 5,446,215 Cash transferred MC-Scotland Grants (B) 81,293 1,395,146 Total cash transfers 9,597,816 6,841,361 Revenue recognized MC-Portland Grants (9,283,217) (4,761,360) Revenue recognized MC-Scotland Grants (95,841) (2,362,654) Total recognized revenue (Note 11) (9,379,058) (7,124,014) Change in fixed assets, net (C) 58,452 (156,010) Payments made on behalf of MC-Portland (11,203) (141,583) Other interoffice transactions - 139,876 Balance, end of year 742, ,045 5

12 (A) During Fiscal Year 2012 and 2011, MC-JWBG received the following transfers from MC Portland: Date of Transfer Amount in USD Date of Transfer Amount in USD July 7, ,193 July 9, ,000 July 31, ,992 July 14, ,209 August 4, ,500 August 2, ,557 September 11, ,987 August 3, ,000 October 9, ,877 September 2, ,057 November 13, ,831 September 3, ,000 December 7, ,286 October 1, ,000 January 8, ,023 October 7, ,430 February 7, ,025 November 3, ,035 March 11, ,400 November 8, ,560 April 15, ,400 December 2, ,146 May 10, ,009 December 3, ,011 June 4, ,000 January 4, , January 5, , February 2, , March 1, , March 4, , April 1, , May 2, , June 1, ,602 9,516,523 5,446,215 (B) During Fiscal Year 2012 and 2011, MC-JWBG received the following transfers from MC Scotland: Date of Transfer Amount in USD Date of Transfer Amount in USD September 11, 2011* 4,470 July 9, ,347 December 22, ,000 August 4, ,213 December 14, 2011* 2,823 September 10, , October 1, , November 2, , December 6, , January 11, , March 3, , March 31, ,165 81,293 1,395,146 *These amounts were transferred directly from the British Consulate to MC-JWBG. 6

13 (C) Components of fixed assets costs and related accumulated depreciation as of June 30, 2012 and movement thereon during the year follow: Balance, Beginning of year Additions Disposals Balance, End of year Costs Vehicles 184, ,326 Equipment - 5,147-5, ,326 5, ,473 Accumulated Depreciation Vehicles 28,316 61,609-89,925 Equipment - 1,990-1,990 28,316 63,599-91,915 Net Book Value 156,010 97, Net Assets The negative net assets balance of USD 963,062 as at June 30, 2012 represents the cumulative core and regional expenses incurred by MC-JWBG and not charged to programs. These expenses are to be fully charged to and funded by the head office in Portland. 11. Program Revenues Represent revenue recognized from programs including cost sharing provided by MC-JWBG local partners as follows: JWB Gaza Total Total Designated grant funds 2,188,051 7,191,007 9,379,058 7,124,014 Cost sharing ,699 2,188,051 7,191,007 9,379,058 7,173,713 7

14 12. Program Expenses Program expenses during 2012 and 2011 include the following: USAID TVET GEP MECI Afterschool Mercy Corps Portland Grants Mercy Corps Scotland Grants ROTA USAID SOH Google SOH USAID GCC PCAP YES ADNI SFC ITT EC PFP II Other Total Total Personnel National Staff Salaries 17, ,287 36,117 1,751,392 6,897 16,091-71,236 9,017 11,247 2,090,417 1,553,834 Expat & HQ Staff Salaries ,738 National Staff Benefits 7, ,519 4, ,397 1,385 2,258-16,254 1,511 2, , ,635 Expat & HQ Staff Benefits ,600 Severance Pay 1, ,836 2, , ,354-7, , , ,059 Housing ,188 1,802 5, ,567 7,522 6, ,703 14, , ,646 Other , (21) 40,921 29,071 Total Personnel 26,215 25, ,606 49,328 2,375,701 16,967 26, ,305 26,732 16,359 2,853,227 2,259,583 Operating Travel ,691 8,684 72,886 4,592 4, ,682 3,326 4, , ,661 Equipment Purchases & Maintainance , ,628 1, ,529 3,030-52, ,810 Vehicle Rent, Fuel & Maintainance 2, , ,427 1,206 3, ,909 4, , ,338 Office Rent & Maintainance 1, ,972 1, ,819 1,340 1,276-4, , ,276 Communication & Printing ,581 1,743 89,442 1,157 1,341-2, , ,844 Office Supplies & Utilities ,933 2,852 43, ,366-1, ,384 65,641 Professional Fees & Consultancy 333 3, , ,144 - (364) 102,391 36,003 Advertising and Publicity , ,226 32,213 Other 958 1, , (75) ,746 30,433 Total Operating 7,621 7,400 22,678 17, ,229 11,672 12, ,964 11,694 6, , ,219 Capital Expenditure Depreciation 493 (633) 2, ,457 1,724 2,493-3,473 3, ,745 23,624 Total Capital Expenditure 493 (633) 2, ,457 1,724 2,493-3,473 3, ,745 23,624 8

15 Continued Mercy Corps Portland Grants Mercy Corps Scotland Grants USAID TVET GEP MECI Afterschool ROTA GCC USAID PCAP SOH YES Google ADNI SOH SFC USAID TPP EC PFP II Other Total Total Program Activities Cash Projects ,172,314 21, ,193,314 1,458,113 Materials & Supplies 131,967 (14,056) 34, , , , ,016 Service Contracts 14,267 4, ,650 1,033, , (12,069) 1,100, ,807 Beneficiaries Training and Meeting 56,052 7,144 4,170 21, ,821 23,812 48,282 2,097 12,089 16,367 6, , ,783 Subgrants to Local Agencies , , , ,856 Food Supplies ,248-40, ,857 70,684 Design, Monitoring & Evaluation , ,142 44,095 Transportation & Distrubution of Program Materials & Supplies , ,841 34,164 Construction Costs , ,070 4,769 Total Program Activities 202,286 (2,790) 102,925 79,762 5,014,252 44,812 48,282 86,890 34,789 16,807 14,608 5,642,623 3,903, ,615 29, , ,427 8,144,639 75,175 89,887 86, ,531 58,373 37,468 9,379,058 7,173,713 9

16 13. Personnel The composition of personnel expenses by location follows: Program Core and Regional JWB Gaza Total JWB Gaza Total Total Total National Staff Salaries 432,854 1,657,563 2,090,417 24, ,101 2,115,518 1,576,709 Expat & HQ Staff Salaries ,738 National Staff Benefits 68, , ,756 4,450-4, , ,099 Expat & HQ Staff Benefits ,602 Severance Pay 34, , ,253 2,196-2, , ,252 Housing 231,279 68, ,880 5,582-5, , ,540 Other 32,714 8,207 40, ,774 29, ,143 2,053,084 2,853,227 36,968 1,214 38,182 2,891,409 2,329, Operating The composition of operating expenses by location follows: Program Core and Regional JWB Gaza Total JWB Gaza Total Total Total Travel 68,414 42, ,990 6, , , ,329 Equipment Purchases & Maintainance 17,238 35,383 52, , ,555 Vehicle Rent, Fuel & Maintainance 43, , ,640 1,907-1, , ,649 Office Rent & Maintainance 56,606 69, ,332 4,846-4, , ,711 Communication & Printing 40,441 60, ,133 2, , , ,871 Office Supplies & Utilities 22,600 30,784 53,384 1,927-1,927 55,311 69,068 Professional Fees & Consultancy 24,355 78, ,391 11,656-11, ,047 37,303 Advertising and Publicity 3,069 14,157 17, ,284 32,274 Other 9,818 21,928 31, ,607 31, , , ,463 30, , ,461 1,034,123 10

17 15. Capital Expenditure Capital expenditure represent equipment, furniture and vehicle purchases with a unit value equal to or greater than USD 5,000 funded from restricted grant funds and are fully charged under the related program. In addition, capital expenditure include depreciation expenses on fixed assets (above USD 5,000) purchased from Mercy Corps private fund (unrestricted funds), where depreciation expenses are charged and allocated to MC-JWBG programs. The composition of capital expenditure by location follows: Program Core and Regional JWB Gaza Total JWB Gaza Total Total Total Depreciation 59,755 1,990 61,745 1,854-1,854 63,599 28,316 59,755 1,990 61,745 1,854-1,854 63,599 28, Program Activities The composition of program activity expenses by location follows: Program Core and Regional JWB Gaza Total JWB Gaza Total Total Total Cash Projects 21,000 2,172,314 2,193, ,193,314 1,458,113 Materials & Supplies 177, , , , ,016 Service Contracts 65,044 1,035,606 1,100,650 31,204-31,204 1,131, ,807 Beneficiaries Training and Meeting 133, , ,940 3,600-3, , ,783 Subgrants to Local Agencies 67,293 35, , , ,856 Food Supplies 63,248 40, , ,857 70,684 Design, Monitoring & Evaluation ,855 15, ,142 44,095 Transportation & Distrubution of Program Materials & Supplies 514,777 42, , ,841 34,164 Construction Costs - 4,070 4, ,070 4,769 1,042,005 4,600,618 5,642,623 34,804-34,804 5,677,427 3,903,287 11