RONALD McDONALD HOUSE CHARITIES OF THE RIO GRANDE VALLEY by nenehilario

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									RONALD McDONALD HOUSE CHARITIES
 OF THE RIO GRANDE VALLEY, TEXAS

       Financial Statements and
     Independent Auditor's Report

     December 31, 2005 and 2004
SCOGGINS, MCKELVEY & ALMON, LLP
Certified Public Accountants
720 E. Harrison Ave., Harlingen, TX 78550-9150
Phone (956) 423-2111       Fax (956) 423-3253




                               INDEPENDENT AUDITOR’S REPORT



To the Board of Directors of
Ronald McDonald House Charities of the Rio Grande Valley, Texas

We have audited the accompanying statements of financial position of Ronald McDonald House
Charities of the Rio Grande Valley, Texas (a nonprofit organization) as of December 31, 2005 and
2004 and the related statements of activities, functional expenses, and cash flows for the years then
ended. These financial statements are the responsibility of the Organization’s management. 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 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 Ronald McDonald House Charities of the Rio Grande Valley, Texas as of
December 31, 2005 and 2004, 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.




July 25, 2006




                                                    1
Ronald McDonald House Charities of the Rio Grande Valley, Texas
Statements of Financial Position
December 31, 2005 and 2004
                                                          2005                2004

ASSETS
   Cash and cash equivalents                             $    286,972    $    275,945
   Pledge receivable                                          270,526         278,936
   Other receivables                                           19,992           3,256
   Prepaid expenses                                             6,197           4,653
   Assets designated as to use                                100,050               -
   Property and equipment - net                               693,990         719,656

                                       TOTAL ASSETS      $ 1,377,727     $ 1,282,446


LIABILITIES
    Accounts payable                                     $      8,079    $     14,343
    Accrued expenses                                           10,484           8,641
    Deferred revenue                                            9,050          14,679
    Capital lease obligation                                    1,145           3,033
    Mortgage payable                                           53,004          96,756
                                     TOTAL LIABILITIES         81,762         137,452

NET ASSETS
   Unrestricted                                                952,076         810,560
   Temporarily restricted                                      343,889         334,434
                                TOTAL NET ASSETS             1,295,965       1,144,994

              TOTAL LIABILITIES AND NET ASSETS           $ 1,377,727     $ 1,282,446




See notes to financial statements.



                                           2
Ronald McDonald House Charities of the Rio Grande Valley, Texas
Statements of Activities
Years Ended December 31, 2005 and 2004

                                                                       2005                                                      2004
                                                                   Temporarily                                              Temporarily
                                                    Unrestricted    Restricted                Total          Unrestricted    Restricted           Total
REVENUE AND SUPPORT
   Contributions                                $      256,427     $    53,005           $    309,432    $      166,627     $    10,131       $    176,758
   Gain (loss) on sale of assets                             -               -                      -            (1,366)              -             (1,366)
   Local fundraising (net of expenses)
      Wild Game Feast                                    52,908                  -             52,908             44,027                  -         44,027
      Golf Tournament                                     2,416                  -              2,416             22,597                  -         22,597
      Radiothon                                          36,170                  -             36,170             31,009                  -         31,009
      Tabloid                                            13,742                  -             13,742             13,697                  -         13,697
      World Children's Day                               27,222                  -             27,222             15,640                  -         15,640
      Other fundraising efforts                          14,348                  -             14,348              5,302                  -          5,302
   Revenue
      CDBG funding                                      13,524               -                 13,524             3,198                -             3,198
      Room fees                                          8,891               -                  8,891             2,485                -             2,485
      Coke machine sales                                   874               -                     874              616                -                616
      Interest income                                    5,256               -                  5,256             1,845                -             1,845
   Net assets released from restrictions                43,550         (43,550)                  -              222,476         (222,476)             -
                                                       475,328           9,455                484,783           528,153         (212,345)          315,808

EXPENSES
   Program services                                    195,977                   -            195,977           185,503                   -        185,503
   Supporting services
      Management and general                            79,719                   -             79,719            75,154                   -         75,154
      Fund-raising                                      25,697                   -             25,697            24,310                   -         24,310
   Unallocated payments to RMHC Global                  15,594                   -             15,594             8,135                   -          8,135
   Payments to RMHC Global for Katrina relief           16,825                   -             16,825                 -                   -              -
                                                       333,812                   -            333,812           293,102                   -        293,102

     CHANGE IN NET ASSETS                              141,516           9,455                150,971           235,052         (212,345)           22,707

NET ASSETS, BEGINNING OF YEAR                          810,560         334,434               1,144,994          575,508         546,779           1,122,287

                      NET ASSETS, END OF YEAR   $      952,076     $ 343,889             $ 1,295,965     $      810,560     $ 334,434         $   1,144,994



See notes to financial statements.

                                                                                     3
Ronald McDonald House Charities of the Rio Grande Valley, Texas
Statements of Functional Expenses
Years Ended December 31, 2005 and 2004

                                                              2005                                                        2004
                                         Program    Management                                       Program    Management
                                         Service    and General      Fundraising       Total         Service    and General      Fundraising       Total
Compensation
   Wages                             $     81,360   $   35,522    $     18,389     $   135,271   $     72,239   $   30,890    $     17,686     $   120,815
   Payroll taxes                            6,450        2,731           1,416          10,597          5,716        2,344           1,344           9,404
                                           87,810       38,253          19,805         145,868         77,955       33,234          19,030         130,219
Depreciation                               24,219        3,446             690          28,355         25,195        3,762           1,058          30,015
Utilities                                  22,367        3,798             918          27,083         21,444        2,205             178          23,827
Insurance                                  14,860        4,221           1,796          20,877         17,757        1,524             449          19,730
Professional fees                               -       20,410               -          20,410              -       21,106                          21,106
Maintenance and repairs                    14,854        1,516               -          16,370          8,116        1,021             122           9,259
Office operations                           6,791        2,965           1,545          11,301          5,176        4,627           2,575          12,378
HACER scholarships                          5,000            -               -           5,000              -            -               -               -
Rent                                        7,569          841               -           8,410          8,339          753             331           9,423
House supplies                              4,622           36               -           4,658          3,699          277               -           3,976
Interest                                    4,174          464               -           4,638         13,322        1,480               -          14,802
Conferences and training                    1,855        1,057             635           3,547          1,833        1,833               -           3,666
Marketing and public relations              1,309        1,607             297           3,213          2,667        1,029             560           4,256
Other expenses                                 47        1,105              11           1,163              -        2,303               7           2,310
Grants to others                              500            -               -             500              -            -               -               -
                                     $    195,977   $   79,719    $     25,697         301,393   $    185,503   $   75,154    $     24,310         284,967


Unallocated payments to RMHC Global                                                     15,594                                                       8,135
Payments to RMHC Global for Katrina Relief                                              16,825                                                           -

TOTAL EXPENSES                                                                     $   333,812                                                 $   293,102



See notes to financial statements.




                                                                           4
Ronald McDonald House Charities of the Rio Grande Valley, Texas
Statements of Cash Flows
Years Ended December 31, 2005 and 2004



                                                                    2005        2004
CASH FLOWS FROM OPERATING ACTIVITIES:
   Increase in net assets                                         $ 150,971   $ 22,707
   Adjustments to reconcile change in net assets to cash
     provided by operating activities:
        Depreciation and amortization                               28,355      30,015
        Donated equipment                                                -      (3,929)
        Loss on disposition of assets                                    -       1,366
        (Increase) decrease in operating assets
             Pledge receivable                                       8,410       8,410
             Beneficial interest in remainder trust                      -     258,333
             Other receivables                                     (16,736)     (2,552)
             Inventories                                                 -       8,841
             Prepaid expenses                                       (1,544)      6,252
        Increase (decrease) in operating liabilities
             Accounts payable                                       (6,264)     10,444
             Accrued expenses                                        1,843       6,659
             Deferred revenue                                       (5,629)       (296)
                 NET CASH PROVIDED BY OPERATING ACTIVITIES         159,406     346,250

CASH FLOWS FROM INVESTING ACTIVITIES:
   Deposits into assets designated as to use                      (100,050)          -
   Proceeds from sale of equipment                                       -          15
   Payments for equipment                                           (2,689)    (14,611)
                     NET CASH (USED) BY INVESTING ACTIVITIES      (102,739)    (14,596)

CASH FLOWS FROM FINANCING ACTIVITIES:
   Payments on capital lease obligation                             (1,888)     (1,797)
   Payments on mortgage                                            (43,752)   (283,369)
                     NET CASH (USED) BY FINANCING ACTIVITES        (45,640)   (285,166)

                 NET INCREASE IN CASH AND CASH EQUIVALENTS          11,027      46,488

BEGINNING CASH AND CASH EQUIVALENTS                                275,945     229,457

                            ENDING CASH AND CASH EQUIVALENTS      $ 286,972   $ 275,945



See notes to financial statements.




                                          5
Ronald McDonald House Charities of the Rio Grande Valley, Texas
Notes to the Financial Statements



A.     SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Nature of Activities
Ronald McDonald House Charities of the Rio Grande Valley, Texas (RMHCRGV or the House)
is a Texas not-for-profit corporation formed to provide comfort and care to children and their
families by supporting Ronald McDonald House in the Rio Grande Valley of Texas and by
making grants to other not-for-profit organizations whose programs help children in need.
Ronald McDonald Houses provide temporary housing for family members with seriously ill
children being treated in area hospitals and by the local medical community.

Basis of Presentation
The financial statements of RMHCRGV have been prepared on the accrual basis of accounting.
Revenues and expenses are recognized and recorded when earned or incurred. The financial
statements reflect unrestricted and temporarily restricted net assets and activities. RMHCRGV
does not have any permanently restricted net assets and activities at the present time. Net
assets of the restricted classes are created only by donor-imposed restrictions on their use. All
other net assets, including board-designated or appropriated amounts, are reported as part of
the unrestricted class.

Contributions are recognized when the donor makes a promise to give to the Organization that
is, in substance, unconditional. Donor-restricted contributions are reported as increases in
temporarily or permanently restricted net assets depending on the nature of the restrictions.
When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net
assets.

Cash and Cash Equivalents
For the purpose of the Statement of Cash Flows, RMHCRGV considers all unrestricted highly
liquid investments with an initial maturity of three months or less to be cash equivalents.

Contributed Services and Materials
Contributed services are recognized if they (a) create or enhance nonfinancial assets or (b)
require specialized skills that are provided by individuals possessing those skills and would
typically need to be purchased if not provided by donation. Many individuals volunteer their time
and perform a variety of tasks that assist the House with program service and fundraising
events, but these do not meet the criteria for recognition as contributed services. Contributed
materials (primarily items donated for fundraising events and various operating supplies) are
recorded as contributions at their estimated fair value.

Investments
Investments in equity securities with readily determinable fair values and all investments in debt
securities are measured at fair market value in the Statements of Financial Position. The
unrealized gain or loss on investments is reflected in the Statements of Activities.




                                             6
Property and Equipment
RMHCRGV capitalizes all property and equipment acquisitions in excess of $250. Purchased
property and equipment is recorded at cost. Donations of property and equipment are recorded
as contributions at their estimated fair value. Such donations are reported as unrestricted
support unless the donor has restricted the donated asset to a specific purpose. Assets
donated with explicit restrictions regarding their use and contributions of cash that must be used
to acquire property and equipment are reported as restricted support. Absent donor stipulations
regarding how long those donated assets must be maintained, the Organization reports the
expirations of donor restrictions when the donated or acquired assets are placed in service as
instructed by the donor. The cost and accumulated depreciation of property sold or retired is
removed from the related asset and accumulated depreciation accounts, and any resulting gain
or loss is recorded in the Statements of Activities. Maintenance and repairs are included as
expenses when incurred.

Property and equipment are depreciated using the straight line method over their estimated
useful lives. The estimated useful lives of respective assets are summarized as follows:
        House and improvements                       15-40 years
        House contents                                 5-10 years
        Office contents                                5-10 years

Deferred Revenue
Deferred revenue represents cash received from individuals and businesses for the subsequent
year’s fundraising event.

Functional Allocation of Expenses
The costs of providing the various program and support services have been summarized on a
functional basis in the Statements of Activities. Accordingly, certain costs have been allocated
among the program and supporting services benefited.

Concentration of Risk
Cash and cash equivalents of RHMCRGV are exposed to concentrations of credit risk due to
balances in excess of FDIC insurance limits. RMHCRGV’s cash is deposited in high quality
financial institutions but at times the amount on deposit does exceed the available FDIC
insurance limits.

Income Taxes
The Organization is exempt from Federal income taxes under Section 501(c)(3) of the Internal
Revenue Code and is classified by the Internal Revenue Service as other than a private
foundation.

Estimates
The preparation of financial statements in conformity with generally accepted accounting
principles requires management to make estimates and assumptions that affect certain reported
amounts and disclosures. Accordingly, actual results could differ from those estimates.

Reclassifications
Certain amounts in the financial statements and notes thereto have been reclassified to conform
to 2005 classifications.




                                             7
B.     RECEIVABLES

Pledge Receivable
Pledge receivable at December 31 consists only of the pledge by Valley Baptist Development
Foundation for the use of the land that the facility was constructed on. The fair market value of
the land was $336,404 at the inception of the lease and revenue is being recognized each year
at $8,410 over the anticipated 40 year lease term.

Other Receivables
Other receivables consist of the following:
                                                                2005           2004

            CDBG revenue                                        $5,996         $1,186
            RMHC Global funds                                    4,213              -
            Seed money for benefit concerts                      4,096          1,500
            Tabloid revenue                                      2,900              -
            Medicaid revenue                                     1,620              -
            Employee receivables for Radiothon                     657            570
            Due from concert auction                               510              -
                                                               $19,992         $3,256

All amounts were collected in full during the first part of the subsequent year except for the
employee receivables from the Radiothon which are collected through payroll deductions.


C.     ASSETS DESIGNATED AS TO USE

The Board took action during 2005 to designate assets for future financial needs which are
summarized as follows:

            Replacement reserves                                $6,000
            Capital campaign for family rooms                   40,000
            Operating reserve                                   50,000
            Future grants                                        4,050
                                                              $100,050

Replacement reserves were set at $500 a month during 2005 but will increase to $1,000 a
month during 2006. The capital campaign for family rooms is described in Note O.
Commitments. The operating reserve of $50,000 was established by the Board in case a
benefit concert by the owner-operator group is not scheduled during 2006. The House realized
over $93,000 in unrestricted donations from the 2005 Kelly Clarkson benefit concert but the
Board realizes this type of donation is not assured for each calendar year since successful
concerts are dependent upon available concert dates from a select group of artists.




                                                8
D.     PROPERTY AND EQUIPMENT

Major classifications of property and equipment are summarized as follows:

                                                              2005           2004
            Building and improvements                       $839,364      $839,364
            House contents                                    37,920        36,116
            Office contents                                   19,855        18,971
            Copier under capital lease                         5,981         5,981
                                                              903,120       900,431
            Accumulated depreciation                        (204,223)     (177,708)
            Accumulated amortization of capital lease          (4,907)       (3,067)
                                                            $693,990      $719,656


            Depreciation expense for the year                $26,515         $28,175
            Amortization expense for the year                 $1,840          $1,840


E.     DEFERRED REVENUE

Deferred revenue consisted of the following:

            Collections for subsequent year's fundraisers
              Wild Game Feast                                  $9,050         $9,750
              Paver tiles                                           -            460
            Funds received from contractor for sign
             reconstruction - in progress at year end                -         4,469
            Deferred revenue                                   $9,050        $14,679


F.     CAPITAL LEASE OBLIGATION

During 2003, the House entered into a capital lease for a new digital copier with a total cost of
$5,981. During 2006, the final payments of $1,164 will be made on the lease which includes
interest at 5%. The total lease payments made in 2005 were $1,995.




                                                9
G.     MORTGAGE PAYABLE

The mortgage on the House was refinanced with Texas State Bank during 2002 and is payable
in monthly installments of $4,041 including interest at 6% with a note maturity of August 23,
2014. A principal payment of $200,000 was made during May 2004 from funds received from
the Kroc remainder trust and then in December 2004 an additional $50,000 principal payment
was made both of which have significantly shortened the time line for retiring the debt. Based
upon the current balance outstanding, the principal requirements are as follows:

                              2006                            $46,587
                              2007                              6,417
                                                              $53,004


H.     RESTRICTIONS ON NET ASSETS

Temporarily restricted net assets are available for the following purposes or periods:

                                                               2005           2004

            Donor restricted amounts for board training         $1,276        $1,076
            Chairman's garden project                            3,116             -
            Donations restricted by co-op as seed money
             for concerts to benefit the House                  26,857         9,031
            Remainder of Kroc bequest                           42,114        45,391
            Present value of estimated lease value
             of land considered in kind donation               270,526       278,936
                                                             $343,889       $334,434


I.     NET ASSETS RELEASED FROM RESTRICTIONS

Net assets were released from restrictions by satisfying the donor’s restricted purposes or the
passage of time. Net assets released from restrictions are as follows:

      Time restrictions met:
        Use of donated land                                      $8,410         $8,410
      Purpose restrictions met:
        Board training                                                -          1,124
        Cost of chairman's garden project                         3,038              -
        Funding for salaries                                      5,000              -
        HACER scholarships                                        5,000              -
        Katrina relief collections                               16,825              -
        New freezer purchased                                     2,000              -
        Payments from Kroc bequest -
           Mortgage payment                                           -       200,000
           Maintenance and improvements                           3,277        12,942
                                                                $43,550      $222,476

                                             10
J.       FUNDRAISERS

The House has a number of fundraisers during the year. The following is a schedule of
revenues, expenses and net proceeds from the 2005 fundraisers:

                                                                    Cost of                   Net
                                       Proceeds                      direct      Fund-     proceeds
                                         from           In-kind     benefits    raising      from
                                         event         donations   to donors     costs       event

     Wild Game Feast                    $65,626         $30,164    ($42,882)        $  -    $52,908
     Radiothon                           36,208               -            -        (38)     36,170
     World Children's Day                28,278               -            -     (1,056)     27,222
     Tabloid                             24,275               -            -    (10,533)     13,742
     Golf Tournament                      6,840               -      (4,424)           -      2,416
     Other fundraising efforts -
      Pull tabs fundraiser                4,865               -            -           -      4,865
      Coventures                          3,406               -            -           -      3,406
      Light the house                     3,804               -            -           -      3,804
      Recycle first                       1,018               -            -           -      1,018
      Annual meeting                      2,300               -      (1,211)       (175)        914
      Paver tiles                           810               -            -       (469)        341
           Subtotal of other efforts     16,203               -      (1,211)       (644)     14,348
           Total fundraising efforts   $170,590         $30,164    ($44,093)   ($12,271)   $144,390


The following schedule provides data for 2004 fundraisers:

                                                                    Cost of                   Net
                                       Proceeds                      direct      Fund-     proceeds
                                         from           In-kind     benefits    raising      from
                                         event         donations   to donors     costs       event

     Wild Game Feast                    $59,644         $24,506    ($40,123)    $      -    $44,027
     Tight Lies Tour event               72,621             780     (50,804)           -     22,597
     Radiothon                           31,240               -            -      ($231)     31,009
     Tabloid                             28,859               -            -    (15,162)     13,697
     World Children's Day                15,640               -            -           -     15,640
     Other fundraising efforts -
       Pull tabs fundraiser               2,541               -            -        (46)      2,495
       House shower                         550               -            -         (2)        548
       Light the house                    1,244               -            -           -      1,244
       Recycle first                        582               -            -           -        582
       Annual meeting                     1,430               -      (1,262)           -        168
       Paver tiles                          553               -            -       (299)        254
       Items sold                            20               -          (9)           -         11
           Subtotal of other efforts      6,920               -      (1,271)       (347)      5,302
           Total fundraising efforts   $214,924         $25,286    ($92,198)   ($15,740)   $132,272



                                                  11
K.     CONTRIBUTIONS IN KIND

Contributions on the Statements of Activities includes cash contributions received from the
general public as well as in kind donations of goods and services that meet the criteria for
recording the donation as explained in Note A. The following is a recap of contributions in kind:

                                                              2005          2004
      Items included in contributions
            Accounting services                               $6,875       $11,100
            Airline tickets for conferences                    1,260           989
            Auditing services                                  8,535         5,507
            Communications                                     1,413           540
            Equipment                                              -         3,929
            House supplies                                     2,721         2,274
            Maintenance and repairs                            5,507         4,016
            Office and computer expense                          252         1,219
                                                             $26,563       $29,574

      Items included in local fundraising costs
            Wild Game Feast                                  $30,164       $24,506
            Golf Tournament                                        -           780
                                                             $30,164       $25,286


L.     LEASES

The land on which the Ronald McDonald House building was constructed belongs to Valley
Baptist Medical Center and Valley Baptist Development Corporation. The 1.42 acres of land is
leased from these entities on a long-term lease, the initial term of which is twenty years,
commencing April 7, 1997 and ending April 6, 2017. In addition, the lease contains three ten
year options to renew. The lease restricts the use of the land to the construction and operation
of a Ronald McDonald House and the maintenance of a roadway for ingress and egress to the
house. Payments under the terms of the lease are $10 per year.

The fair market value of the leased property is considered donated services and is valued at
$336,404 or $8,410 per year over the expected life of the lease. The expected life of the lease
is 40 years which is the life used to depreciate the house. The fair market value of the land of
$336,404 was determined by prorating the fair market value of the land transferred by Valley
Baptist to another nonprofit organization during 1998. The remaining value from the use of the
land at year end is included in pledge receivable and in temporarily restricted net assets.




                                                  12
M.     LICENSE AGREEMENT FINANCIAL REQUIREMENTS

RMHCRGV holds a license to operate in the community with McDonald’s Corporation and
Ronald McDonald House Charities, Inc. The license agreement requires the remittance of 25%
of “Special RMHC Fundraising Contributions” on a quarterly basis. In some cases, the
fundraising events are centrally collected by the global organization and the net amount is
remitted to the House. In other instances, the House receives the gross proceeds and remits
the required 25% to the global organization. Local contributions and proceeds from local
fundraisers are not subject to these remittance requirements.

The House remitted $15,594 and $8,135 to the global organization during 2005 and 2004
respectively. This increase is the result of increased canister collections from the various
McDonald’s stores.


N.     SUPPLEMENTAL INFORMATION ABOUT CASH FLOWS

Cash paid for interest was $4,638 for 2005 and $15,320 for 2004.


O.     COMMITMENTS

As part of the strategic goals for the Chapter, the Board charged an Expansion Task Force with
exploring potential expansion opportunities through the use of family rooms within various
hospitals in the Rio Grande Valley. During early 2006, the Board hired the Center for
Fundraising Management as fundraising consultants to assist with a capital campaign for this
expansion.




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