Avon Products Foundation, Inc. Financial Statements December 31, 2007 and 2006
Avon Products Foundation, Inc. Financial Statements December 31, 2007
Table of Contents
Page Independent Auditors' Report Financial Statements Statements of Financial Position Statements of Activities Statements of Functional Expenses Statements of Cash Flows Notes to Financial Statements 1
2 3 4 5 6-11
Independent Auditors' Report
The Board of Directors Avon Products Foundation, Inc. We have audited the accompanying statement of financial position of Avon Products Foundation, Inc. (the “Foundation”) as of December 31, 2007, and the related statements of activities, functional expenses and cash flows for the year then ended. These financial statements are the responsibility of the Foundation's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Foundation’s 2006 financial statements and, in our report dated February 16, 2007 we expressed an unqualified opinion on those financial 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 Foundation'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 financial statements referred to above present fairly, in all material respects, the financial position of Avon Products Foundation, Inc. as of December 31, 2007, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America.
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Avon Products Foundation, Inc. Statements of Financial Position December 31, 2007 (with comparative amounts as of December 31, 2006)
2007 ASSETS Cash and cash equivalents Equipment, net of depreciation of $50,000 Pledges receivable, net of allowance for uncollectible pledges of $48,410 and $69,141 Other receivables Prepaid expenses Due from Avon Products, Inc. Deferred program costs $ 47,187,745 100,000 237,566 247,227 125,000 348,500 2,734,173 $ 50,980,211
2006 $ 41,764,344 217,306 221,978 50,000 841,912 7,102,105 $ 50,197,645
LIABILITIES AND NET ASSETS Liabilities Accounts payable and accrued expenses Due to Avon Products, Inc. Grants payable, net Total Liabilities Net Assets Unrestricted Temporarily restricted Total Net Assets
$ 1,197,950 194,834 21,005,941 22,398,725
$
359,901 217,347 14,049,555 14,626,803
19,371,768 9,209,718 28,581,486 $ 50,980,211
11,458,313 24,112,529 35,570,842 $ 50,197,645
See notes to financial statements 2
Avon Products Foundation, Inc. Statements of Activities Year Ended December 31, 2007 (with summarized totals for the year ended December 31, 2006)
Unrestricted PUBLIC SUPPORT AND REVENUE Special events income Special event in-kind donations Contributions from Avon: Special Events Breast Cancer Crusade Scholarship/Women's Empowerment Domestic Violence Emergency Relief Fund General Support - Special Donation General Support - In-Kind Pledges Interest income Other income Net assets released from restrictions: Satisfaction of purpose restriction Satisfaction of time restriction Total Public Support and Revenue EXPENSES Program Services Breast Cancer Crusade Scholarship/Women's Empowerment Domestic Violence Emergency Relief Fund Total Program Expenses Supporting Services Management and general Fundraising Total Supporting Services Total Expenses Change in Net Assets NET ASSETS Beginning of year End of year See notes to financial statements 3 $ 1,620,700
2007 Temporarily Restricted $ 49,775,706 560,722 475,000 5,929,772 1,340,000 1,229,060 1,079,020 171,320 (74,551,657) (911,754) (14,902,811)
2006 Total $ 51,396,406 560,722 4,352,777 6,179,772 1,340,000 1,229,060 1,704,097 1,079,020 2,575,916 363,462 70,781,232 Total $ 46,055,560 4,007,777 7,211,959 1,660,000 590,059 176,796 5,000,000 1,754,626 911,754 2,259,688 318,194 69,946,413
3,877,777 250,000 1,704,097 2,575,916 192,142 74,551,657 911,754 85,684,043
56,355,722 1,422,394 2,787,826 358,215 60,924,157 2,019,418 14,827,013 16,846,431 77,770,588 7,913,455 11,458,313 $ 19,371,768
(14,902,811) 24,112,529 $ 9,209,718
56,355,722 1,422,394 2,787,826 358,215 60,924,157 2,019,418 14,827,013 16,846,431 77,770,588 (6,989,356) 35,570,842 $ 28,581,486
53,864,112 1,904,500 2,036,692 744,229 58,549,533 2,236,530 12,865,638 15,102,168 73,651,701 (3,705,288) 39,276,130 $ 35,570,842
Avon Products Foundation, Inc. Statements of Functional Expensese Year Ended December 31, 2007 (with summarized totals for the year ended December 31, 2006) Program Services Scholarship/ Domestic Women's Violence Empowerment Fund $ 1,226,195 1,226,195 139,130 202 6,414 5,086 8,682 24,801 9,125 2,759 196,199 $ 1,422,394 $ 2,274,758 14,525 2,289,283 343,099 551 17,470 13,853 23,649 67,553 24,854 7,514 498,543 $ 2,787,826 $ Supporting Services Emergency Relief Fund $ 331,149 331,149 17,825 34 1,038 824 1,405 4,015 1,478 447 27,066 358,215 $ Management and General $ 754,376 2,523 18,838 21,169 1,892 86,724 33,168 57,782 890,711 29,714 12,256 1,909,153 78,742 111 3,543 2,809 4,797 13,700 5,040 1,523 110,265 $ 2,019,418 Total Fundraising $ 1,048,111 861,524 389,099 130,299 408,536 2,581,743 102,275 869,047 4,980,230 2,734,109 47,677 116,266 6,537 50,000 8,735 14,334,188 211,844 368 11,667 9,251 15,794 66,236 45,114 16,599 110,934 5,018 492,825 $ 14,827,013 $ Total 754,376 1,048,111 864,047 407,937 151,468 408,536 2,581,743 104,167 869,047 5,066,954 2,734,109 80,845 174,048 897,248 29,714 12,256 50,000 8,735 16,243,341 290,586 479 15,210 12,060 20,591 66,236 58,814 21,639 110,934 6,541 603,090 $ 16,846,431 $ 2007 754,376 47,653,775 1,437,144 864,047 762,299 469,471 408,536 8,096,263 377,160 3,439,170 6,478,623 3,432,900 80,845 253,207 897,248 29,714 12,256 50,000 8,735 75,505,769 1,160,583 1,927 102,884 273,437 82,690 182,988 236,200 86,904 110,934 26,272 2,264,819 $ 77,770,588 $ 2006 635,971 44,248,455 1,360,545 913,307 451,335 592,436 533,628 7,403,341 324,860 2,783,498 6,884,496 4,177,283 160,681 209,125 813,659 77,507 279,205 47,743 71,897,075 1,154,588 1,317 83,542 19,765 82,690 66,365 279,650 66,709 1,754,626 $ 73,651,701
Breast Cancer Crusade EXPENSES Staffing Grants Equipment Communications Travel and meals Supplies Facilities Public awareness Public relations Printing Professional services Other Services Insurance Taxes and licenses Bank fees Agency Labor Bad Debt Expense Depreciation Expense Other Total Direct Expenses Staffing Communications Travel and meals Supplies Facilities Public awareness Public relations Professional services Other services Agency Labor Total In-Kind Expenses Total Expenses $ 43,821,673 389,033 354,362 318,003 5,514,520 272,993 2,570,123 1,397,144 698,791 79,159 55,415,801 369,943 661 62,752 241,614 28,363 116,752 81,017 29,808 9,011 939,921 $ 56,355,722
Total 47,653,775 389,033 354,362 318,003 5,514,520 272,993 2,570,123 1,411,669 698,791 79,159 59,262,428 869,997 1,448 87,674 261,377 62,099 116,752 177,386 65,265 19,731 1,661,729 $ 60,924,157 4
See notes to financial statements
Avon Products Foundation, Inc. Statements of Cash Flows Year Ended December 31, 2007 (with comparative amounts for the year ended December 31, 2006)
2007 CASH FLOW FROM OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation expense Net changes in operating assets and liabilities Pledges receivable, net Other receivable Prepaid expense Due from Avon Products, Inc. Deferred costs Accounts payable and accrued expenses Due to Avon Products, Inc. Grants payable, net Net Cash Provided by (Used in) Operating Activities CASH FLOW FROM INVESTING ACTIVITIES Purchase of equipment Net Change in Cash and Cash Equivalents CASH AND CASH EQUIVALENTS Beginning of year End of year
2006
$ (6,989,356)
$ (3,705,288)
50,000 (20,260) (25,249) (75,000) 493,412 4,367,932 838,049 (22,513) 6,956,386 5,573,401
417,535 (86,226) (513,031) 1,938,406 32,113 155,543 1,342,026 (418,922)
(150,000) 5,423,401
(418,922)
41,764,344 $ 47,187,745
42,183,266 $ 41,764,344
See notes to financial statements 5
Avon Products Foundation, Inc. Notes to Financial Statements 1. Organization Avon Products Foundation, Inc. (the "Foundation") was incorporated in the State of New York in 1955 by Avon Products, Inc. (“Avon”). The mission of the Foundation is to improve the lives of women and to bring this mission to life through two key philanthropic pillars: breast cancer and domestic violence. The Foundation also manages scholarships and women’s empowerment programs and special emergency relief funds for Avon Products, Inc. The Foundation is a public charity and is exempt from Federal income taxes pursuant to Section 501(c) (3) of the Internal Revenue Code. Programs The major program activities of the Foundation are as follows: a. Breast Cancer The Avon Breast Cancer Crusade funds breast cancer awareness, education, outreach programs, medical research and programs that assist people diagnosed with breast cancer, particularly the underserved, with services to improve their access to clinical care. The Foundation receives its financial support from Avon and the general public through the Avon Walk for Breast Cancer (“AWBC”), other special events and donations. b. Domestic Violence In its commitment to ending domestic violence, the Foundation supports awareness, education, direct services and prevention programs. In July 2004, the Foundation announced the Speak Out Against Domestic Violence program, which expanded the domestic violence program and developed new community outreach and support for victims. c. Scholarships/Women’s Empowerment Scholarships The Foundation has U.S. college scholarship programs for children of Avon associates, Avon independent sales representatives, children and grandchildren of Avon independent sales representatives and for children residing in and around the Suffern New York school district. Economic Advancement The Foundation periodically supports other women’s empowerment causes, including programs that advance women’s issues, including career development mentoring, educational support, counseling and life-skills training. 6
Avon Products Foundation, Inc. Notes To Financial Statements 1. Organization (Continued) d. Emergency Relief Funds Through donations from Avon and the sale of selected Avon Products from time to time, the Foundation provides support in emergency and crisis situations, such as the following: Heart of Asia Relief Fund In response to the tsunami tragedy in Asia, the Foundation created the Heart of Asia Relief Fund in late 2004 to assist in the relief and rebuilding efforts. Support was directed to longterm aid organizations that provide medical care, shelter, food distribution, education for children and help to reunite families and create stronger communities. Yellow Ribbon Fund In response to the military action in Iraq and Afghanistan, the Foundation established the Yellow Ribbon Fund in 2003 to provide direct financial assistance and emotional support to the families who have lost loved ones in the line of duty and to armed services members who suffered injuries in the line of duty. Funds were directed to various institutions and programs that provide support, including counseling, rehabilitation, housing for families while recuperating service people undergo treatment, and education for those wounded and their families. Heart of America In an effort to assist the victims of the September 11th tragedies, the Foundation established the Avon Foundation Heart of America Charity in 2001 for the benefit of the children affected by the events of September 11th. These funds were directed to educational institutions, after-school programs and children's programs that provide counseling, safety education, and childcare. In 2005 in response to the devastation of Hurricanes Katrina and Rita, the Heart of America campaign was renewed with the sale of a special keychain. Support was directed to recovery and rebuilding efforts, as well as to domestic violence and breast cancer victims and programs that experienced relocation or damages as a result of the unprecedented storms. 2. Summary of Significant Accounting Policies Basis of Presentation The financial statement presentation is in conformity with accounting principles generally accepted in the United States of America for nonprofit organizations, which requires the Foundation to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted net assets. There are no permanently restricted net assets as of December 31, 2007.
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Avon Products Foundation, Inc. Notes To Financial Statements 2. Summary of Significant Accounting Policies (Continued) Functional Allocation of Expenses The costs of providing the various programs and supporting services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services in reasonable ratios determined by management. Cash and Cash Equivalents The Foundation considers all highly liquid investments with a maturity of three months or less at the time of purchase to be cash equivalents. 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 and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Accordingly, actual results could differ from those estimates. Comparative Data The financial statements include prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Foundation’s financial statements for the year ended December 31, 2006 from which the summarized information was derived. Grants Grants are recorded when a commitment is made and approved by the Board of Directors. Multi-year grants are recorded at present value using a risk-free interest rate, which generally approximates the rate of the two year treasury bill. Public Awareness Public awareness and education costs consisted primarily of television, radio, direct-mail campaigns, local and national print and point-of-sale materials. The Foundation expensed public awareness costs as incurred. At December 31, 2007, public awareness expense was $8,279,251.
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Avon Products Foundation, Inc. Notes To Financial Statements 3. Concentration Risk Financial instruments that potentially subject the Foundation to concentration of credit risk consist principally of cash and cash equivalents. The Foundation places its cash with high quality financial institutions. Cash accounts at banks are insured by the Federal Deposit Insurance Corporation (“FDIC”) up to $100,000. Amounts in excess of the insured limits were approximately $4,064,000 at December 31, 2007. Cash equivalents consist of investments in money market funds with two money managers the balances of which totaled approximately $42,705,000 at December 31, 2007. The Foundation monitors this risk on a regular basis. 4. Related Party Transactions Contributions Avon made a pledge of $14,805,706 to the Foundation in 2007. The Foundation received $14,457,206 of this amount during the year. The balance of $348,500 is reflected as a receivable at December 31, 2007. This receivable was subsequently collected in 2008. The Foundation under an administrative services arrangement has outstanding obligations to Avon for reimbursement of the salaries, accrued compensated absences and other expenses of the finance and operations department amounting to $194,834 as of December 31, 2007. In-Kind Contributions Avon provides the Foundation with a substantial amount of support including the following: Staffing $ 1,160,583 Communications 1,927 Travel & Meals 61,084 Supplies 48,437 Facilities 82,690 Public Relations 236,200 Professional Service 86,904 Agency Labor 26,272 $ 1,704,097 The support of $1,704,097 is reflected in the financial statements as contributions and expenses for the year ended December 31, 2007. The Foundation also received valuable management support from the Board of Directors and Associates of Avon Products, Inc. which do not meet the requirements for measurement and recognition in the financial statements.
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Avon Products Foundation, Inc. Notes To Financial Statements 5. Special Events One awareness and fundraising program in 2007 was the Avon Walk for Breast Cancer (“AWBC”) comprised of eight weekend awareness and fundraising walks in the United States. Other fundraising programs in 2007 were the Foundation gala and the Need for Speed Relay against Domestic Violence. In 2007, all special events provided the Foundation with total income of $57,221,659, $52,308,160 from the public (including $911,754 of 2007 special events income pledged in 2006), $560,722 of in-kind donations from sponsors and $4,352,777 from Avon. 6. Joint Costs The Foundation conducted activities that included direct-mail campaigns and special events. The costs of conducting those activities included a total of $16,199,122 of joint costs. These joint costs were allocated as follows: Breast Cancer Crusade Scholarships/Women’s Empowerment Domestic Violence Emergency Relief Fund Management and General Fundraising Total 7. Equipment Equipment consists of tents purchased for AWBC. Depreciation is provided by the straight-line method over an estimated life of three years. 8. Grants Payable The Foundation has entered into longer-term commitments with certain research/care organizations. Payments to these organizations at December 31, 2007 are due to be made as follows: Less than one year One to three years Less: Present value discount Grants payable, net $ 19,292,210 1,766,000 21,058,210 52,269 $ 21,005,941 $ 10,214,075 196,199 498,454 26,885 110,447 5,153,062 $ 16,199,122
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Avon Products Foundation, Inc. Notes To Financial Statements 9. Temporarily Restricted Net Assets Temporarily restricted net assets are available as follows at December 31, 2007: Time restriction Breast Cancer Crusade Purpose restriction Breast Cancer Crusade Scholarships/Women’s Empowerment Emergency Relief Fund $ $ 1,079,020 7,264,838 717,639 148,221 9,209,718
The time restriction relates to contributions received and pledges made towards the 2008 events received in 2007. 10. Deferred Program Costs Expenses related to the 2008 events have been reflected as deferred program costs at December 31, 2007. 11. Tuition Commitments The Foundation sponsors multiyear scholarship programs for children of Avon associates and for children residing in and around the Suffern New York school district. The Foundation intends to provide continuing support for selected participating students until completion of their college education, contingent upon fulfilling certain requirements of the award. The anticipated future tuition cost for those students to complete their studies over a four-year period is approximately $240,000. The Foundation intends to obtain the necessary funds to support the participating students through future grants from Avon Products, Inc. The Scholarship program is administered by the Educational Testing Service and Scholarship America.
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