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2009-10 LF Audit Report

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2009-10 LF Audit Report Powered By Docstoc
					                                                                                CHRISTIAN REFORMED CHURCH
                                                                                LOAN FUND, INC. – U.S.

                                                                                Financial Statements
                                                                                Years Ended June 30, 2010, 2009 and 2008




The report accompanying these financial statements was issued by
BDO USA, LLP, a New York limited liability partnership and the U.S. member of
BDO International Limited, a UK company limited by guarantee.
CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.
                  Financial Statements
          Years Ended June 30, 2010, 2009 and 2008
CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                              Contents


  Independent Auditors’ Report                         3



  Financial Statements
      Statements of Financial Position as of
          June 30, 2010 and 2009                       5
      Statements of Activities for the
          Years Ended June 30, 2010, 2009 and 2008     6
      Statements of Cash Flows for the
          Years Ended June 30, 2010, 2009 and 2008      7
      Notes to Financial Statements                  8-12




                                   2
                                                                                Tel: 616-774-7000                                99 Monroe Avenue NW, Suite 800
                                                                                Fax: 616-776-3680                                Grand Rapids, MI 49503-2654
                                                                                www.bdo.com




INDEPENDENT AUDITORS’ REPORT


Board of Directors
Christian Reformed Church Loan Fund, Inc. – U.S.
Grand Rapids, Michigan

We have audited the accompanying statements of financial position of Christian Reformed Church
Loan Fund, Inc. – U.S. (the Fund) as of June 30, 2010, and the related statements of activities and
cash flows for the year then ended. These financial statements are the responsibility of the Fund’s
management. Our responsibility is to express an opinion on these financial statements based on our
audit. The financial statements of Christian Reformed Church Loan Fund, Inc. – U.S. as of June 30,
2009 and 2008 were audited by other auditors whose report dated August 11, 2009 expressed an
unqualified opinion on those statements.

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 of material misstatement. An audit
includes consideration of internal control over financial reporting as a basis for designing audit
procedures that are appropriate in the circumstances, but not for the purpose of expressing an
opinion on the effectiveness of the Fund’s internal control over financial reporting. Accordingly, we
express no such opinion. An audit also includes examining, on a test basis, evidence supporting the
amounts and disclosures in the financial statements, assessing the accounting principles used and
significant estimates made by management, as well as evaluating the overall financial statement
presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, the 2010 financial statements referred to above present fairly, in all material
respects, the financial position of Christian Reformed Church Loan Fund, Inc. – U.S. at June 30, 2010
and the changes in net assets and cash flows for the year then ended in conformity with accounting
principles generally accepted in the United States of America.




Grand Rapids, Michigan
August 18, 2010




BDO USA, LLP, a New York limited liability partnership, is the U.S. member of BDO International Limited, a UK company limited by guarantee, and forms part of
the international BDO network of independent member firms.

BDO is the brand name for the BDO network and for each of the BDO Member Firms.

                                                                                3
FINANCIAL STATEMENTS
                 CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                                          Statements of Financial Position


June 30,                                                                                   2010              2009


Assets


Cash and cash equivalents                                                       $     9,390,298   $     8,743,731
Interest receivable                                                                     116,010           138,287
Loans receivable - net of allowance for uncollectible loans
  of $527,947 in 2010 and $277,947 in 2009                                           25,098,326        28,540,375
Equipment and software - less accumulated depreciation of
  $42,063 in 2010 and $33,650 in 2009                                                         -             8,413


Total Assets                                                                    $    34,604,634   $    37,430,806


Liabilities and Net Assets


Liabilities
  Certificates payable                                                          $    28,308,886   $    31,231,422
  Accrued interest                                                                       75,477            91,334


Net Assets
  Unrestricted                                                                        6,220,271         6,108,050


Total Liabilities and Net Assets                                                $    34,604,634   $    37,430,806


                                                                  See accompanying notes to financial statements.




                                                              5
                CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                                              Statements of Activities


Year ended June 30,                                                         2010               2009            2008


Revenues
  Interest income                                                  $   1,498,614    $     1,776,838   $   1,652,964
  Interest income from concentrated cash management                      61,761            125,186         242,700
  Other income                                                           37,707              3,268             739


Total Revenues                                                         1,598,082          1,905,292       1,896,403


Expenses
  Interest                                                              971,766           1,244,851       1,279,056
  Provision for loan losses                                             250,000                   -               -
  Christian Reformed Church in North America support charges            142,412            142,575         109,897
  Administrative                                                        121,683            122,346          96,834


Total Expenses                                                         1,485,861          1,509,772       1,485,787


Excess of Revenues Over Expenses                                        112,221            395,520         410,616


Net Assets, beginning of year                                          6,108,050          5,712,530       5,301,914

Net Assets, end of year                                            $   6,220,271    $     6,108,050   $   5,712,530


                                                                   See accompanying notes to financial statements.




                                                               6
                CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                                                   Statements of Cash Flows


Year ended June 30,                                                         2010              2009              2008


Cash Flows From Operating Activities
 Excess of revenues over expenses                                 $     112,221     $     395,520     $     410,616
 Adjustments to reconcile excess of revenues over expenses
    to net cash from operating activities:
    Provision for loan losses                                           250,000                  -                 -
    Depreciation                                                          8,413             8,412             8,413
    Changes in operating assets and liabilities:
     Interest receivable                                                 22,277            (22,715)             713
     Accrued interest                                                    (15,857)          (15,443)          58,120


Net Cash From Operating Activities                                      377,054           365,774           477,862


Cash Flows From (for) Investing Activities
 Redemption of certificate of deposit                                          -        3,000,000                  -
 Issuance of certificate of deposit                                            -                 -        (1,000,000)
 Advances on loans receivable                                          (821,080)        (3,536,660)       (4,030,912)
 Collections on loans receivable                                      4,013,129         2,920,927         2,004,916


Net Cash From (for) Investing Activities                              3,192,049         2,384,267         (3,025,996)


Cash Flows From (for) Financing Activities
 Issuance of certificates payable                                     1,725,639         3,673,486         6,204,475
 Redemptions of certificates payable                                  (4,648,175)       (2,590,648)       (1,833,707)


Net Cash From (for) Financing Activities                              (2,922,536)       1,082,838         4,370,768


Net Increase in Cash and Cash Equivalents                               646,567         3,832,879         1,822,634


Cash and Cash Equivalents, beginning of year                          8,743,731         4,910,852         3,088,218

Cash and Cash Equivalents, end of year                            $   9,390,298     $   8,743,731     $   4,910,852


Supplemental Disclosure of Cash Flow Information
 Cash paid for interest                                           $     408,930     $     613,044     $     726,768
 Interest expense reinvested in certificates payable                    578,693           631,807           552,288

                                                                  See accompanying notes to financial statements.




                                                              7
         CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                              Notes to Financial Statements


1.   ORGANIZATION

     The purpose of the Christian Reformed Church Loan Fund, Inc. – U.S. (the Fund), a nonprofit
     corporation, is to assist congregations of the Christian Reformed Church in financing capital
     expansion projects. To accomplish this, the Fund grants loans, up to certain limits, for land
     and other capital expenditures to churches in the United States of America. Loan recipients
     are charged interest at rates sufficient to cover the Fund’s cost of borrowing and operating
     expenses.

     The Fund operates from office facilities provided by Christian Reformed Church in North
     America (CRCNA).

     The Fund is included in the CRCNA group exemptions as an organization described under
     Internal Revenue Code Section 501(c)(3), exempt from taxation under Section 501(a).
     Contributions to the Fund are deductible for federal tax purposes.

2.   SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

     Basis of Presentation

     Net assets of the Fund and changes therein are classified and reported as follows:

     Unrestricted Net Assets - Net assets which are not subject to donor-imposed stipulations.

     Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that
     should be met by actions of the Fund and/or the passage of time.

     Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations requiring
     that they be maintained permanently by the Fund.

     Revenues, contributions and investment income are reported as follows:

            Revenues are reported as increases in unrestricted net assets unless use of the related
             assets is limited by donor-imposed restrictions. Expenses are reported as decreases in
             unrestricted net assets. Gains and losses on investments and other assets or liabilities
             are reported as increases or decreases in unrestricted net assets unless their use is
             restricted by explicit donor stipulation. Expirations of temporary restrictions on net
             assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time
             period has elapsed) are reported as reclassifications between the applicable classes of
             net assets. Temporarily restricted contributions whose restrictions are satisfied in the
             same year in which the contribution revenue is recorded are reported as unrestricted
             contributions.




                                                8
    CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                         Notes to Financial Statements


      Contributions, including unconditional promises to give, are recognized as revenues in
       the period the promise is received. Conditional promises to give are not recognized
       until they become unconditional, that is, when the conditions on which they depend
       are substantially met. Contributions of assets other than cash are recorded at their
       estimated fair value.

Use of Estimates

The preparation of financial statements in conformity with the accounting principles generally
accepted in the United States of America requires management to make estimates and
assumptions that affect amounts reported in future periods may be based upon amounts which
differ from those estimates.

Subsequent Events

Management has evaluated subsequent events through August 18, 2010, the date the financial
statements were available to be issued. Based on evaluation, there were no matters identified
that had a significant impact on the financial statements as presented.

Income Taxes

As discussed in Note 1, the Fund is exempt from federal income taxes due to its status as a not-
for-profit corporation under Internal Revenue Code Section 501(c)(3). The Fund adopted
Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC)
Topic 740, Income Taxes, on July 1, 2009. Adoption of this standard did not impact the
financial statements for the years ended June 30, 2010, 2009 or 2008.

Cash and Cash Equivalents

Cash and cash equivalents consist of cash and highly liquid investments purchased with an
original maturity of three months or less at the date of purchase.

Concentrations of Credit Risk

The Fund maintains its cash in two bank and brokerage accounts managed by CRCNA and does
not consider there to be a significant credit risk arising from deposits in excess of federally
insured limits.

The risk associated with making many large loans is managed by limiting the size of each
secured loan to 6% of total assets. The total amount of all unsecured loans shall not exceed
10% of the total outstanding loans of the Fund.




                                           9
         CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                              Notes to Financial Statements


     Equipment and Software

     Equipment and software are recorded at cost less accumulated depreciation. Depreciation is
     computed by the straight-line method based on estimated useful lives of the related assets.

     Loans

     Loans that management has the intent and ability to hold for the foreseeable future or until
     maturity or payoff are reported at the principal balance outstanding, net an allowance for loan
     losses. A loan is considered “impaired” when full payment of principal and interest under the
     loan terms is not expected.

     Interest Income

     Interest income is recognized and accrued on loans receivable, and cash and cash equivalents
     when earned. Interest income on impaired loans is recognized only when interest payments are
     received.

     Allowance of Uncollectible Loans

     Allowances for uncollectible loans are recorded when it is determined that the Fund will be
     unable to collect all amounts due according to the terms of the underlying agreement. There
     were no charge-offs in 2010, 2009 or 2008.

     Fair Value Measurements

     The Fund has adopted the provisions of FASB ASC Topic 820 – Fair Value Measurements and
     Disclosures, which has had no impact on the statements of financial position or activities as
     there are no financial or nonfinancial instruments requiring additional disclosures. Recorded
     book value approximates fair value for all financial and nonfinancial instruments within the
     Fund.

     Reclassification

     Certain prior year amounts have been reclassified to conform with the current year
     presentation. These reclassifications had no effect on net assets.

3.   LOANS RECEIVABLE

     Loans receivable at June 30, 2010 bear interest at adjustable interest rates (5.25% at June 30,
     2010) and mature in various amounts through the year 2028. Substantially all loans receivable
     are secured by first or second real estate mortgages.



                                               10
         CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                              Notes to Financial Statements


     Maturities on loans receivable at June 30, 2010 are summarized as follows:

     Year ending June 30,

     2011                                                                            $       658,000
     2012                                                                                  1,594,800
     2013                                                                                    452,200
     2014                                                                                  4,416,300
     2015                                                                                  1,448,400
     Thereafter                                                                           17,056,573

     Total                                                                           $ 25,626,273


4.   CERTIFICATES PAYABLE

     Certificates payable are issued under certificate offerings either registered or exempt from
     registration in the states where the certificates are offered. The certificates are initially
     offered in minimum denomination of $1,000 or $5,000, depending on the type of certificate,
     and may be issued by the Fund at any time. Interest is paid monthly or quarterly, depending
     on the amount invested, and may be reinvested by the certificate holder at an annual
     percentage yield (predominately fixed) ranging from 1.30% to 3.00% at June 30, 2010
     (weighted-average at June 30, 2010, 2009 and 2008 of 2.76%, 3.73% and 4.59%, respectively).
     Principal amounts are due at maturity or upon demand, depending upon the type of certificate.

     Maturities on outstanding certificates at June 30, 2010 are summarized as follows:

     Year ending June 30,

     Flex certificates, payable upon demand                                          $     3,006,600
     2011                                                                                 15,127,486
     2012                                                                                  4,623,800
     2013                                                                                  3,362,400
     2014                                                                                  1,419,200
     2015                                                                                    769,400

     Total                                                                           $ 28,308,886


     In 2010, 2009 and 2008, the Fund had certificates payable renewed at maturity in the amount
     of approximately $11,786,000, $10,796,000 and $8,621,000, respectively.

5.   LINE OF CREDIT

     The Fund has an unsecured line of credit with a bank which permits borrowings up to
     $2,000,000 at the bank’s prime rate. This line of credit matures on February 28, 2011, and no
     amounts were outstanding as of June 30, 2010 and 2009.


                                               11
        CHRISTIAN REFORMED CHURCH LOAN FUND, INC. – U.S.


                             Notes to Financial Statements


6.   COMMITMENTS

     As of June 30, 2010, the Fund has outstanding commitments and approved loans aggregating
     approximately $452,000, which will be disbursed as they are requested by the churches.

7.   TRANSACTIONS WITH OTHER CHRISTIAN REFORMED CHURCH ENTITIES AND
     RELATED PARTIES

     During the years ended June 30, 2010, 2009 and 2008, the Fund incurred charges of
     approximately $142,000, $143,000 and $110,000, respectively, from CRCNA for support charges
     related to the consolidated financial services function.

     The Fund manages its cash in conjunction with the CRCNA consolidated cash management
     system. As part of this process, CRCNA may borrow funds from participating entities. The
     amounts borrowed at June 30, 2010 and 2009, respectively, were $2,000,000 and $0.

     Certificates payable includes approximately $252,000 and $281,000 at June 30, 2010 and 2009,
     respectively, due to certain directors, officers and employees of the Fund.




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