STARLIGHT CHILDREN S FOUNDATION GLOBAL OFFICE. Financial Statements. December 31, (With Independent Auditors Report Thereon)

Transcription

1 Financial Statements (With Independent Auditors Report Thereon)

2 Table of Contents Page Independent Auditors Report 1 Statement of Financial Position 3 Statement of Activities 4 Statement of Functional Expenses 5 Statement of Cash Flows 6 7

3 KPMG LLP Suite Pacifica Irvine, CA Independent Auditors Report The Board of Directors Starlight Children s Foundation: We have audited the accompanying financial statements of Starlight Children s Foundation (Global Office), which comprise the statement of financial position as of, 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 U.S. generally accepted accounting principles; 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. Auditors 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 auditors 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 we have 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 Starlight Children s Foundation (Global Office) as of, and the results of its operations and its cash flows for the year then ended in accordance with U.S. generally accepted accounting principles. KPMG LLP is a Delaware limited liability partnership, the U.S. member firm of KPMG International Cooperative ( KPMG International ), a Swiss entity.

4 Emphasis of Matter As discussed in note 8 to the financial statements, Starlight Children s Foundation (Global Office) has disclosed certain financial information about an unconsolidated domestic chapter which is unaudited. Our opinion is not modified with respect to this matter. Irvine, California June 18,

5 Statement of Financial Position Assets Cash and cash equivalents $ 4,823,777 Pledges 39,250 Inventory 419,465 Prepaid expenses 235,419 Other assets 408,796 Property and equipment (net) 342,174 Total assets $ 6,268,881 Liabilities and Net Assets Liabilities: Accounts payable and accrued liabilities $ 892,091 Deferred revenue 64,400 Total liabilities 956,491 Net assets: Unrestricted 4,861,777 Temporarily restricted 450,613 Total net assets 5,312,390 Total liabilities and net assets $ 6,268,881 See accompanying notes to financial statements. 3

6 Statement of Activities Year ended Temporarily Unrestricted restricted Total Revenue and support: Special events: Gross receipts $ 433, ,572 Less direct benefit to donors (86,665) (86,665) Net special events revenue 346, ,907 Contributed goods, services, and use of facilities 1,280,974 1,280,974 Contributions 3,438, ,643 4,078,523 Revenue from related parties 626, ,214 Miscellaneous 10,444 10,444 Net assets released from restrictions 479,826 (479,826) Total revenue and support 6,183, ,817 6,343,062 Expenses: Program services 4,837,173 4,837,173 Management and general 559, ,907 Fundraising 497, ,715 Total expenses 5,894,795 5,894,795 Change in net assets 288, , ,267 Net assets beginning of year 4,573, ,796 4,864,123 Net assets end of year $ 4,861, ,613 5,312,390 See accompanying notes to financial statements. 4

7 Statement of Functional Expenses Year ended Program services Supporting services Starlight Starbright Total program Management Wish Lists World services and general Fundraising Total Advertising $ 3, , ,359 Bad debt expense 2,460 2,460 Bank charges 1,048 1,048 Depreciation 91,451 14, ,563 23,325 20, ,522 Donated materials and supplies 102, , ,040 Donated professional services 510, , ,717 17,134 15, ,008 Donated use of facilities 126,161 19, ,629 32,179 28, ,274 Equipment for program use 840, , ,501 Equipment rental and repair 59, ,834 1,280 1,133 62,247 Facilities rent and parking 24,794 3,746 28,540 6,192 5,478 40,210 Fees 2, ,343 21,484 5,036 28,863 Grants to affiliates 148, , ,611 Insurance 23,825 2,232 26,057 3,689 3,263 33,009 Membership dues 7,830 1,208 9,038 1,997 1,767 12,802 Miscellaneous 10,495 1,533 12,028 2,534 17,248 31,810 Office supplies 6, ,807 1,312 3,149 11,268 Outside IT Services 167,887 95, ,697 18,739 16, ,013 Postage, shipping and delivery 96, , ,604 Printing and publications 6, ,927 1,436 7,173 15,536 Professional services 58,592 9,563 68,155 78,284 62, ,012 Regulatory and other renewal fees 7,211 1,120 8,331 1,833 1,664 11,828 Renovation expense Starlight Sites 197, , ,780 Salaries and employee benefits 1,653, ,297 2,030, , ,490 2,657,945 Telephone 19,182 2,960 22,142 4,893 4,328 31,363 Travel and automobile 26,598 4,594 31,192 5,614 7,876 44,682 Total functional expenses $ 4,190, ,643 4,837, , ,715 5,894,795 See accompanying notes to financial statements. 5

8 Statement of Cash Flows Year ended Cash flows from operating activities: Change in net assets $ 448,267 Adjustment to reconcile change in net assets to net cash provided by operating activities: Donated property and equipment (319,420) Depreciation 149,522 Bad debt expense 2,460 (Increase) decrease in: Contributions and pledges receivable 132,987 Inventory (7,547) Prepaid expenses and other assets (44,413) Increase (decrease) in: Accounts payable and accrued liabilities 358,762 Deferred revenue (44,322) Net cash provided by operating activities 676,296 Cash flows from investing activities: Purchases of property and equipment (72,353) Net cash used in investing activities (72,353) Net increase in cash and cash equivalents 603,943 Cash and cash equivalents beginning of year 4,219,834 Cash and cash equivalents end of year $ 4,823,777 See accompanying notes to financial statements. 6

9 (1) Organization Founded in 1982, Starlight Children s Foundation is a leading global charity that partners with experts to improve the life and health of kids and families around the world. Collaborating with innovators in technology and pediatric healthcare, Starlight provides a unique blend of family centered programs and services from hospital to home. Starlight s two flagship programs the Starbright World online community and Starlight Wish Lists are innovative digital platforms where people gather to connect, share, and support the critical unmet needs of pediatric patients and their families. Starbright World online community: A fun, free and supportive environment tailored to the needs of teens and young adults ages affected by chronic or critical medical conditions, their own or their sibling s. More than just another social network, Starbright World empowers teens to express themselves while connecting globally with others experiencing similar medical journeys. Starlight Wish Lists: An online giving marketplace that empowers donors to improve pediatric care by funding critical unmet needs in local communities. Hospitals, clinics, specialty camps, and other nonprofit healthcare facilities can publish customized Wish Lists on Starlight.org at no cost, and donors can simply point, click, and ship items directly to their facilities of choice. Starlight also distributes large-scale product donations via the platform in order to meet the evolving needs of pediatric facilities. Starlight Children s Foundation (Global Office) supports children and families from hospital to home throughout the United States of America and around the world. Starlight raises funds and awareness and delivers programs that improve the pediatric care experience in children's hospitals, respite houses, hospices, clinics, and camps. One territory is operated through a domestic chapter: NY*NJ*CT. The chapter is independently governed by a Board of Directors operating under Starlight s standards and is responsible for its own fundraising, financial reporting, and related tax filing obligations. A Chapter Agreement entered into between the U.S. Chapter and Starlight Children s Foundation provides for common purposes and policy direction. The Chapter Agreement also provides Starlight Children s Foundation with a security interest in the assets of the U.S. Chapter (note 8). Starlight Children s Foundation previously operated through an additional chapter in the Midwest. During 2014, the Midwest chapter's board of directors officially voted to dissolve the corporation. The states previously served by the chapter are now served by the Global Office. Starlight Children s Foundation also provides ongoing programs throughout the United Kingdom, Canada, and Australia through international affiliates (International Affiliates). Affiliate Agreements entered into between each International Affiliate and Starlight provide for common purposes and policy direction (note 8). The accompanying financial statements were prepared for the purpose of presenting the separate financial information of Starlight Children s Foundation (Global Office) (referred to herein as the Foundation). The Foundation has elected not to consolidate the International Affiliates or U.S. Chapter s financial results into the accompanying financial statements, based on Accounting Standards Codification (ASC) , Consolidation. 7 (Continued)

10 (2) Summary of Significant Accounting Policies (a) Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. (b) Accounting The Foundation s net assets and changes therein are classified and reported as follows: Unrestricted. Net assets that are not subject to donor-imposed restrictions or law. The Foundation has $4,861,777 of unrestricted net assets at. Temporarily Restricted. Net assets subject to restrictions imposed by donor or law that may be met either by actions of the Foundation or the passage of time. When a donor restriction expires, that is, when a stipulated time restriction ends or the purpose of the restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. The Foundation reports restricted contributions whose restrictions are met in the same reporting period as unrestricted contributions. The Foundation has $450,613 in temporarily restricted net assets at, (note 2(d) and note 6). Permanently Restricted. Net assets subject to donor-imposed restrictions that the principal be maintained in perpetuity. Generally, the donors of these assets permit the Foundation to expend all of the income (or other economic benefits) derived from the donated assets. The Foundation has no permanently restricted net assets at. (c) Cash and Cash Equivalents The Foundation considers all highly liquid debt instruments purchased with original maturities of three months or less to be cash and cash equivalents. The carrying value of cash and cash equivalents at approximates its fair value. The Foundation maintains its cash, cash equivalents, and investments in bank deposit accounts and other investment accounts, which, at times, may exceed federally insured limits. The Foundation has not experienced any losses in such accounts. As of, the Foundation has $4,823,777 in cash and cash equivalents. (d) Contributions and Pledges Receivable Contributions, including pledges, representing unconditional promises to give are recorded at estimated fair value, and recognized as revenue in the period received. The Foundation reports unconditional contributions as restricted support if they are received with donor stipulations that limit the use of the donated assets. At, $5,000 of the pledges receivable includes restricted support. Total pledges receivable are expected to be collected in their entirety within one year subsequent to the year-end. 8 (Continued)

11 (e) (f) (g) (h) Inventory Inventory includes Starlight tablets and videogame players, monitors, and other electronics that make up the Starlight Fun Center units. Other inventory includes Starlight Comfort Kit backpacks and other materials collected for distribution through the Foundation s programs. Purchased inventory is stated at cost. Donated inventory is recorded at estimated fair value at the time of donation. The Foundation reviews the carrying value of its inventory for possible impairment whenever events or changes in circumstances indicate that the fair value may have declined since it was originally acquired. An impairment loss is recognized when the fair value of the inventory is lower than the carrying amount, in which case a write-down is recorded to reduce the related asset to its estimated fair value. No impairment losses were recognized during the year ended for donated materials and supplies. Prepaid Expenses Prepaid expenses primarily include a prepayment to Nintendo of America (Nintendo) of $117,759 for Starlight Fun Center units and prepaid operating expenses and insurance of $117,660 as of. Other Assets In March 2014, the Foundation entered into an agreement with Nintendo to purchase Starlight Fun Center units which would be built by Nintendo. Nintendo is to deliver the Starlight Fun Center units to a designated delivery location specified by the Foundation. Title and risk of loss of the Starlight Fun Center units passes from Nintendo to the Foundation once the Starlight Fun Center units are delivered to the designated delivery location in accordance with the applicable purchase order. The Foundation has obligations to pay Nintendo upon completion of such build. Other assets at primarily includes $325,000 which represents the amount to record balance of Starlight Fun Center units completed owed to the Foundation by Nintendo but not delivered as of. A corresponding liability was recorded by the Foundation to accrue its obligation for the undelivered units as of (see note 4). Property and Equipment Property and equipment having a useful life of more than one year are recorded at cost if purchased. Donated assets are capitalized at the estimated fair value at the date of receipt and restrictions are released once the asset has been placed into service. Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. Maintenance and repair costs are charged to expenses as incurred. Property and equipment are capitalized if the cost of an asset is greater than or equal to $5,000. The estimated useful lives of property and equipment are as follows: Software and computers Furniture and fixtures Office equipment 3 Years 7 Years 5 Years 9 (Continued)

12 Leasehold improvements are amortized on the straight-line basis over the term of the lease or the estimated useful life, whichever is shorter. (i) (j) (k) (l) Long-Lived Assets The Foundation reviews the carrying values of its long-lived assets for possible impairment whenever events or changes in circumstances indicate that the book value of the assets may not be recoverable. An impairment loss is recognized when the sum of the undiscounted future cash flows is less than the carrying amount of the asset, in which case a write-down is recorded to reduce the related assets to its estimated fair value. No impairment losses were recognized during the year ended. Deferred Revenue Deferred revenue is primarily related to advances received by the Foundation from certain affiliates for the future purchase of Starlight Fun Center units. As the Starlight Fun Center units had not been shipped by the Foundation to the affiliates as of, the advances were recorded as deferred revenue at year-end (note 8). Contributed Goods, Services, and Use of Facilities Contributions of donated noncash assets are recorded at fair value in the period received. Contributions of donated services that create or enhance nonfinancial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at fair value in the period received. Contributed goods generally consist of materials for distribution to partner facilities. For the year ended, the Foundation received $1,280,974 of contributed goods, services, and use of facilities (note 5). Fair Value of Financial Instruments Fair Value Determination The fair value of the Foundation s financial instruments as of represents management s best estimates of the amounts that would be received to sell those assets in an orderly transaction between market participants at that date. Those fair value measurements maximize the use of observable inputs. However, in situations where there are little, if any, observable inputs, management s own judgments about the assumptions of market participants were used in pricing the asset. Although the Foundation uses its best judgment in determining the fair value of financial instruments, there are inherent limitations in any methodology. Therefore, the values presented herein are not necessarily indicative of the amount the Foundation could realize in a current transaction. Future confirming events could affect the estimates of fair value and could be material to the financial statements. These events could also affect the amount realized upon liquidation of the financial instruments. Fair Value Hierarchy The Foundation s fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets (Level I measurements) and the lowest priority measurements involving significant 10 (Continued)

13 unobservable inputs (Level III measurements). The three levels of the fair value hierarchy are as follows: Level I inputs are quoted prices (unadjusted) in active markets for identical assets that the Foundation has the ability to access at the measurement date. Level II inputs are inputs other than quoted prices included within Level I that are observable for the asset, either directly or indirectly, such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other observable inputs that can be corroborated by observable market data. Level III are unobservable inputs that are supported by little or no market activity and that are significant to the fair value of the asset. The level in the fair value hierarchy within which a fair value measurement in its entirety falls is based on the lowest-level input that is significant to the fair value measurement in its entirety. Due to the short-term nature of cash equivalents, receivables, other assets, accounts payable, and accrued liabilities, fair value approximates carrying value. (m) Income Taxes The Foundation is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Service Code and corresponding California provisions. However, the Foundation remains subject to income taxes on any net income that is derived from a trade or business, regularly carried on and not in furtherance of the purpose for which it was granted exemption. No income tax provision has been recorded as the net income, if any, from any unrelated trade or business, in the opinion of management, is not material to the financial statements taken as a whole. ASC Topic 740, Income Taxes (ASC 740), prescribes a recognition threshold and measurement attribute for the financial statement recognition and measurement of a tax position taken or expected to be taken in a tax return, and provides guidance on derecognition, classification, interest and penalties, disclosure, and transition. Management believes that there are no such uncertain tax positions for the Foundation at. (n) (o) 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 the reported amounts of assets and liabilities, revenues and expenses as of the date and for the period presented. Actual results could differ from those estimates. Functional Allocation of Expenses The costs of providing the Foundation s programs and other activities have been presented in the statement of functional expenses. Indirect or shared costs are allocated among program and support services by a method that best measures the relative degree of benefit. 11 (Continued)

14 (3) Property and Equipment Property and equipment at consist of the following: Software and computers $ 635,183 Furniture and fixtures 26,230 Leasehold improvements 74,329 Total 735,742 Less accumulated depreciation (393,568) Property and equipment (net) $ 342,174 Depreciation expense was $149,522 for the year ended. (4) Accounts Payable and Accrued Liabilities Accounts payable and accrued liabilities at consist of the following: Accounts payable $ 96,713 Due to Nintendo completed Starlight Fun Center units 325,000 Accrued payroll 32,163 Accrued paid time off 86,150 Accrued warranty reserve Starlight Fun Center units 229,461 Other accrued liabilities 122,604 Total accounts payable and accrued liabilities $ 892,091 In 2014, the $229,461 warranty reserve relates to Starlight Fun Center units purchased from Nintendo of America. The Foundation is required to repair Starlight Fun Center units donated to healthcare facilities for 3 years after the units are distributed to the respective facilities. (5) Contributed Goods, Services, and Use of Facilities Contributed goods, services, and use of facilities during the year ended are as follows: Donated professional services $ 652,008 Donated materials and supplies 422,692 Donated use of facilities 206,274 Total $ 1,280, (Continued)

15 (6) Temporarily Restricted Net Assets Temporarily restricted net assets comprise the following as of : Purpose restrictions $ 445,613 Time restrictions 5,000 $ 450,613 (7) Defined Contribution Pension Plan The Foundation maintains a 403(b) defined contribution pension plan to which the Foundation made $42,723 in matching contributions for the year ended. (8) Related Party Transactions As of and for the year ended, the U.S. Chapter s financial results (excluding the Foundation, the financial results of which are presented in the accompanying financial) statements were as follows: Not covered by accompanying independent auditors report (unaudited) Total assets $ 3,414,722 Total liabilities 105,783 Total net assets 3,308,939 Total revenues 4,833,757 Total expenses 4,725, (Continued)

16 The accounts of the Foundation s International Affiliates are not included in the accompanying 2014 financial statements. The following table summarizes certain financial information from the audited (by other auditors) or unaudited financial statements of the International Affiliates. Not Covered by Accompanying Independent Auditors Report Canada Australia Kingdom Affiliate as Affiliate as of Affiliate as of of and for the and for the and for the year ended year ended year ended December 31, December 31, March 31, 2014 (CAD) 2014 (AUS) 2014 (GEP) (unaudited) Total assets $ 13,583,938 10,054,079 $ 3,206,468 Total liabilities 3,119, ,677 1,644,812 Net assets 10,464,916 9,849,402 1,561,656 Total revenues 30,313,721 9,934,822 6,196,349 Total expenses 30,638,033 9,691,133 5,093,329 The Foundation provided Starlight Fun Center units to its U.S. chapter. During the fiscal year 2014, the Foundation received revenue from the U.S. chapters totaling $568,614. Of that amount, $346,000 was for Starlight Fun Center units. Payables to the NY Chapter were $2,313 as of, resulting from revenue collected on behalf of the NY Chapter. There were no receivables from the U.S. Chapters at. There was no deferred revenue as of to the U.S. Chapters. The Foundation also provides Starlight Fun Center units to its Canadian affiliate. During the fiscal year 2014, the Foundation received revenue for Starlight Fun Center units from the Canadian affiliate totaling $57,600. Receivables from and payables to International Affiliates were both $0 at. The Foundation had received $64,400 from its Canadian affiliate related to future Starlight Fun Center unit purchases, which is included in deferred revenue as of. 14 (Continued)

17 (9) Commitments The Foundation leases certain facilities and equipment under long-term operating lease agreements that expire through March Future minimum lease payments for leases that have a remaining noncancelable term in excess of one year at are as follows $ 7, , ,070 Total noncancelable lease commitments $ 15,340 Rent expenses were $7,460 during the year ended. The Foundation also has certain commitments to Nintendo of America for the purchase of Starlight Fun Center units totaling approximately $409,501 as of. (10) Subsequent Events The Foundation has evaluated events and transactions occurring subsequent to the statement of financial position date of for items that should potentially be recognized or disclosed in these financial statements. The evaluation was conducted through June 18, 2015, the date these financial statements were available to be issued. 15