pdc 2011 audited financial statement
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PARTNERS FOR DEMOCRATIC CHANGE
Financial Statements
Together with Report of Independent Public Accountants
For the Years Ended September 30, 2011 and 2010
SEPTEMBER 30, 2011 AND 2010
CONTENTS
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS 1
FINANCIAL STATEMENTS
Statements of Financial Position 2
Statements of Activities and Changes in Net Assets 3
Statements of Cash Flows 4
Statements of Functional Expenses 5
Notes to the Financial Statements 7
1776 I Street 9
th Floor Washington, DC 20006 P 202-756-4811 F 202-756-1301
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
Board of Directors
Partners for Democratic Change
We have audited the accompanying statements of financial position of Partners for Democratic
Change (Partners) as of September 30, 2011 and 2010, and the related statements of activities
and changes in net assets, cash flows and functional expenses for the years then ended. These
financial statements are the responsibility of Partners’ 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 and the standards applicable to financial audits contained in Government
Auditing Standards, issued by the Comptroller General of 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 Partners as of September 30, 2011 and 2010, 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.
In accordance with Government Auditing Standards, we have also issued our report dated
February 10, 2012, on our consideration of Partners’ internal control over financial reporting and
on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant
agreements and other matters. The purpose of that report is to describe the scope of our testing of
internal control over financial reporting and compliance and the results of that testing, and not to
provide an opinion on internal control over financial reporting or on compliance. That report is
an integral part of an audit performed in accordance with Government Auditing Standards and
should be considered in assessing the result of our audit.
Washington, DC
February 10, 2012
PARTNERS FOR DEMOCRATIC CHANGE
Statements of Financial Position
As of September 30, 2011 and 2010
The accompanying notes are an integral part of these financial statements.
2
2011 2010
ASSETS
Cash and cash equivalents 468,209$ 184,725$
Investments, restricted - 78,861
Accounts receivable:
Grants and contracts 561,570 482,539
Pledges - 75,000
Advances to affiliates 346,949 251,674
Prepaid expenses 24,530 15,464
Furniture and equipment, net 5,000 -
Deposits 9,710 5,035
Total Assets 1,415,968$ 1,093,298$
LIABILITIES AND NET ASSETS
Accounts payable and accrued expenses 234,882$ 262,600$
Grant and contract advances 564,166 455,343
Note payable, related party 60,000 60,000
Severance payable 48,973 179,334
Total Liabilities 908,021 957,277
Net Assets
Unrestricted 507,947 61,021
Temporarily restricted - 75,000
Total Net Assets 507,947 136,021
Total Liabilities and Net Assets 1,415,968$ 1,093,298$
PARTNERS FOR DEMOCRATIC CHANGE
Statements of Activities and Changes in Net Assets
For the Years Ended September 30, 2011 and 2010
The accompanying notes are an integral part of these financial statements.
3
2011 2010
CHANGE IN UNRESTRICTED NET ASSETS
Revenue and Other Support
Contracts and grants:
Government 4,081,005$ 2,448,752$
Corporate 382,533 458,789
Other 212,258 222,706
Contributions 3,650 11,725
Consulting fees - 1,510
Interest and dividends - 11
Unrealized loss on investments - (1,656)
Other revenue 335 9,092
Net asset released from restrictions 75,000 -
Total Revenue and Other Support 4,754,781 3,150,929
Expenses
Program services 3,329,162 2,363,119
Management and general 978,693 664,155
Total Expenses 4,307,855 3,027,274
Change in Unrestricted Net Assets 446,926 123,655
CHANGE IN TEMPORARILY RESTRICTED NET
ASSETS
Contributions - 75,000
Net assets released from restrictions (75,000) -
Change in Temporarily Restricted Net Assets (75,000) 75,000
Changes in net assets 371,926 198,655
Net assets, beginning of the year 136,021 (62,634)
Net Assets, End of the Year 507,947$ 136,021$
PARTNERS FOR DEMOCRATIC CHANGE
Statements of Cash Flows
For the Years Ended September 30, 2011 and 2010
The accompanying notes are an integral part of these financial statements.
4
2011 2010
Cash Flows from Operating Activities
Changes in net assets 371,926$ 198,655$
Adjustments to reconcile changes in net assets to
net cash from operating activities:
Depreciation 1,000 460
Unrealized and realized loss on investments - 1,656
Effect of changes in non-cash operating assets and
liabilities:
Grants and contracts receivable (79,031) (335,466)
Pledges receivable 75,000 (55,000)
Advances to affiliates (95,275) (227,778)
Prepaid expenses (9,066) (3,969)
Accounts payable and accrued expenses (27,718) 138,064
Grant and contract advances 108,823 156,509
Severance payable (51,500) (17,625)
Deposit (4,675) -
Net Cash Flow from Operating Activities 289,484 (144,494)
Cash Flows from Investing Activities
Purchase of Equipment (6,000) -
Net change in cash and cash equivalents 283,484 (144,494)
Cash and cash equivalents, beginning of year 184,725 329,219
Cash and Cash Equivalents, End of Year 468,209$ 184,725$
Supplemental Cash Flow Disclosure
Cash paid for interest 527$ -$
Non-cash transfer of investment to severance payable 78,861$ -$
PARTNERS FOR DEMOCRATIC CHANGE
Statement of Functional Expenses
For the Year Ended September 30, 2011, with Comparative Totals for 2010
The accompanying notes are an integral part of this financial statement.
5
Salaries and related expenses 1,789,144$ 365,891$ 2,155,035$ 1,419,080$
Communications 25,439 36,620 62,059 36,448
Rent 59,992 203,567 263,559 138,946
Professional fees 28,475 124,006 152,481 129,050
Travel 350,667 53,054 403,721 553,702
Consulting 464,221 81,830 546,051 406,670
Meetings 19,112 5,848 24,960 14,304
Supplies 14,614 13,819 28,433 60,742
Printing and copying 11,922 852 12,774 21,124
Publications and materials - 248 248 17,328
Training 456,646 15,516 472,162 79,534
Small equipment 15,109 28,342 43,451 49,641
Program expenses 83,520 - 83,520 55,202
Other 10,301 45,173 55,474 42,643
Total Before Depreciation and Interest 3,329,162 974,766 4,303,928 3,024,414
Depreciation - 1,000 1,000 460
Interest - 2,927 2,927 2,400
Total Expenses 3,329,162$ 978,693$ 4,307,855$ 3,027,274$
2011
Program
General and
Administrative Total 2010 Total
PARTNERS FOR DEMOCRATIC CHANGE
Statement of Functional Expenses
For the Year Ended September 30, 2010
The accompanying notes are an integral part of this financial statement.
6
Salaries and related expenses 1,083,977$ 335,103$ 1,419,080$
Communications 21,616 14,832 36,448
Rent 69,714 69,232 138,946
Professional fees 13,960 115,090 129,050
Travel 523,537 30,165 553,702
Consulting 364,952 41,718 406,670
Meetings 10,529 3,775 14,304
Supplies 43,345 17,397 60,742
Printing and copying 19,456 1,668 21,124
Publications and materials 17,309 19 17,328
Training 78,313 1,221 79,534
Small equipment 47,622 2,019 49,641
Program expenses 55,022 180 55,202
Other 13,767 28,876 42,643
Total Before Depreciation and Interest 2,363,119 661,295 3,024,414
Depreciation - 460 460
Interest - 2,400 2,400
Total Expenses 2,363,119$ 664,155$ 3,027,274$
General and
AdministrativeProgram Total
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
7
1. BACKGROUND OF ORGANIZATION
Partners for Democratic Change (Partners) is a non-profit corporation established on
February 18, 1988, which operates offices in Washington, DC. Partners is an international
organization committed to building sustainable local capacity to advance civil society and a
culture of change and conflict-management worldwide. Partners accomplishes its mission
directly and in partnership with Partners for Democratic Change International Centers (the
Centers) located in Albania, Argentina, Bulgaria, Columbia, The Czech Republic, Georgia,
Hungary, Jordan, Kosovo, Lithuania, Mexico, Peru, Poland, Romania, Senegal, Serbia,
Slovakia and Yemen through various programs.
Partners builds new local institutions that respond to the diverse change and conflict
management needs of its constituents and improves the skills of existing institutions across
all sectors. It helps communities resolve local issues by introducing conflict management
processes and establishing conflict resolution services within communities that strengthen
relationships among diverse populations. Partners also works to integrate change and
conflict management processes into evolving legal systems by promoting new legislation that
legitimizes and sanctions mediation and citizen participation processes and utilizes
participatory methods to implement effective policies and advance democratic change.
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting
The accompanying financial statements of Partners is presented on the accrual basis of
accounting in accordance with accounting principles generally accepted in the United States
of America.
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 as of the date of the financial statements, and the reported
amounts of revenue and expenses during the reporting period. Actual results could differ
from those estimates.
Cash and Cash Equivalents
Cash consists of amounts on hand and on demand deposits with banks or other financial
institutions. Cash equivalents represent short-term, highly liquid investments with original
maturities of three months or less. Cash equivalents as of September 30, 2010, consisted of
money market and overnight investment accounts. There are no cash equivalents as of
September 30, 2011.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
8
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Investments, Restricted
Investments consist of amounts held to satisfy a future severance compensation liability.
Investments are recorded at market value. They consisted of money market funds held by
Transamerica as of September 30, 2010. These investments were board designated to fund
the severance compensation liability. Partners no longer held the investments as of
September 30, 2011. See Footnote 6 for further discussion of this liability.
Grants and Contracts Receivable
Grants and contracts receivable consist of billed and unbilled amounts due for expenditures
incurred in excess of payments received under cost reimbursement grants and billings for
services rendered in excess of payments received under consulting and other service
contracts. The amount of unbilled receivables as of September 30, 2011 and 2010, was
$165,629 and $279,936, respectively.
Partners periodically evaluates its outstanding receivables for collectability and records an
allowance. There is no allowance for doubtful accounts as of September 30, 2011 and 2010,
as management believes the balances were fully collectible.
Pledges Receivable
Partners records pledges from various corporations and records amounts due at the time of
the pledge. All pledges were deemed collectible within one year as of September 30, 2010.
There were no pledges receivable as of September 30, 2011.
Advances to Affiliates
Advances to affiliates relate to cash advances made by Partners to the Centers for program
expenses, net of the actual program expenses incurred by the Centers through year-end.
Partners had $346,949 and $251,674, in advances to affiliates as of September 30, 2011 and
2010.
Furniture and Equipment
Furniture and equipment purchased for greater than $5,000 are recorded at cost or the
estimated fair value for donated property. Depreciation on furniture and equipment is
calculated on a straight-line basis over their estimated useful lives of 3 to 5 years.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
9
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Grant and Contract Advances
Grant and contract advances consist of payments advanced in excess of billed and unbilled
expenditures under its grants.
Severance Payable
The severance payable represents the present value of the unfunded liability under a deferred
compensation agreement with an ex-president of Partners.
Net Assets
Unrestricted net assets are assets and contributions that are not restricted by donors or for
which restrictions have expired.
Temporarily restricted net assets are those whose use by Partners has been limited by donors
primarily for a specific time period or purpose. When a donor restriction is met, temporarily
restricted net assets are reclassified to unrestricted net assets. If a donor restriction is met in
the same reporting period in which the contribution is received, the contribution (to the
extent that the restrictions have been met) is reported as unrestricted net assets. The
temporarily restricted net assets as of September 30, 2010, relates to a time restricted grant.
There were no temporarily restricted net assets as of September 30, 2011.
Permanently restricted net assets are those that are restricted by donors to be maintained by
the Center in perpetuity. There were no permanently restricted net assets as of September 30,
2011 and 2010.
Restricted and Unrestricted Support and Revenue
Grant and contributions received are recorded as unrestricted, temporarily or permanently
restricted support, depending on the existence and/or nature of any donor-imposed
restrictions. Donor-restricted support is reported as an increase in temporarily restricted net
assets, depending on the nature of the restriction.
Gifts of cash and other assets are reported as restricted support if they are received with
donor stipulations that limit the use of the donated assets. When a donor restriction expires,
that is, when some stipulated time restriction ends or purpose of the restriction is
accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and
reported in the statements of activities and changes in net assets as net assets released from
restrictions.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
10
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Functional Allocation of Expenses
The costs of providing the various programs and other activities have been summarized on a
functional basis in the accompanying statements of activities and changes in net assets.
Accordingly, certain costs have been allocated among the program and supporting services
that benefit from those costs. Management and general expenses include those expenses that
are not directly identified with any other specific program but provide for the overall support
and direction of Partners.
Federal Income Tax Status
Partners is a not-for-profit organization exempt from Federal income taxes under Section
501(c) (3) of the Internal Revenue Code (IRC) and is recognized as such by the Internal
Revenue Service.
Fair Value Measurement
Financial Accounting Standards Board Accounting Standards Codification (FASB ASC)
Topic 820, Fair Value Measurements and Disclosures, establishes a framework for
measuring fair value. That framework provides a fair value hierarchy that 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 or liabilities (Level
1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The
three levels of the fair value hierarchy under FASB ASC Topic 820 are described below:
Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical
assets or liabilities in active markets that the entity has the ability to access.
Level 2 Inputs to the valuation methodology include:
• Quoted prices for similar assets or liabilities in active markets;
• Quoted prices for identical or similar assets or liabilities in inactive
markets;
• Inputs other than quoted prices that are observable for the asset or
liability; and
• Inputs that are derived principally from or corroborated by observable
market data by correlation or other means.
If the asset or liability has a specified (contractual) term, the Level 2 input must
be observable for substantially the full term of the asset or liability.
Level 3 Inputs to the valuation methodology are unobservable and significant to the fair
value measurement.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
11
2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)
Fair Value Measurement (continued)
The asset’s or liability’s fair value measurement level within the fair value hierarchy is based
on the lowest level of any input that is significant to the fair value measurement. Valuation
techniques used need to maximize the use of observable inputs and minimize the use of
unobservable inputs.
Financial instruments consist of investments, receivables, payables and debt. The carrying
value of Partners’ financial instruments in the accompanying statements of financial position
approximated their respective estimated fair values as of September 30, 2011 and 2010. Fair
values are estimated based on current market rates or liquidation value.
Subsequent Events
Partners evaluated the accompanying financial statements for subsequent events and
transactions through February 10, 2012, the date these financial statements were available for
issue and have determined that, other than the event noted below, no material subsequent
events have occurred that would affect the information presented in the accompanying
financial statements or require additional disclosure.
Partners has several major programs in Yemen, a country which is undergoing significant
political instability and conflict. The turmoil has delayed and hindered Partners’ ability to
execute its programs. Partners is currently working with its funders to devise new programming
schedules and activities that can achieve realistic goals taking into consideration the current
political crisis.
Reclassification
Certain amounts from 2010 were reclassified to conform to 2011 presentation.
3. INVESTMENTS
The following is a description of the valuation methodologies used for investments measured
at fair value as of September 30, 2010. There was no investments as of September 30, 2011.
Mutual fund: Valued on the underlying investments of the fund as valued by the fund’s
management.
The methods described above may produce a fair value calculation that may not be indicative
of net realizable value or reflective of future fair values. Furthermore, while Partners believes
its valuation methods are appropriate and consistent with other market participants, the use of
different methodologies or assumptions to determine the fair value of certain financial
instruments could result in a different fair value measurement at the reporting date.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
12
3. INVESTMENTS (continued)
The following table sets forth by level, the fair value hierarchy of the Partners’ investments at
fair value as of September 30, 2010:
Level 1 Level 2 Level 3 Total
Mutual fund -$ 78,861$ -$ 78,861$
Cost Unrealized Gain Unrealized Loss Market Value
Mutual fund 65,228$ 13,633$ -$ 78,861$
2010
2010
The activity related to the investments was an unrealized loss of $1,656 for the year ended
September 30, 2010. There is no unrealized gain or loss for the year ended September 30,
2011.
4. PROPERTY AND EQUIPMENT
As of September 30, 2011 and 2010, property and equipment consist of the following:
2011 2010
Estimated
Useful Lives
Furniture and equipment $ 55,211 $ 49,211 3-5 years
Less: accumulated depreciation 50,211 49,211
Property and equipment, net $ 5,000 $ -
Depreciation expense for the years ended September 30, 2011 and 2010, was $1,000 and
$460, respectively.
5. Note PAYABLE
In November 2006, Partners entered into a note payable with a board member for $200,000,
which accrues interest at 4% per annum. The board member forgave $100,000 and $40,000
of the note during the years ended September 30, 2007 and 2009, respectively. Partners
recorded $2,400, as accrued interest expense related to this note during the years ended
September 30, 2011 and 2010. The remaining $60,000, plus accrued interest outstanding as
of September 30, 2011, is payable on or before December 15, 2012.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
13
6. POSTRETIREMENT BENEFIT PLAN
Partners provides a deferred compensation benefit plan for an ex-president. This deferred
compensation plan provides an annual severance benefit to the ex-president in the amount of
one month of his annual salary until he retires or terminates employment with Partners. The
officer retired in June 2010. This severance liability is funded by Partners through (1)
discretionary contributions to an Internal Revenue Code Section 403(b) supplemental plan,
(2) 8.33% of the officer’s eligible compensation to a 457 plan, and (3) discretionary
contributions to an informal investment account plus any accrued interest earnings on the
above three plans. Partners did not contribute to the supplemental 403(b) plan during the
years ended September 30, 2011 and 2010. Partners contributed $15,500 to the 457 plan
during the year ended September 30, 2010. There was no contribution to the 457 plan during
year ended September 30, 2011. Partners did not make any contributions to the informal
investment account during the years ended September 30, 2011 and 2010.
The informal investment account is recorded at fair market value of $78,861 as investments,
restricted account in the accompanying statements of financial position as of September 30,
2010. The informal investment account was transferred to pay the severance payable during
the year ended September 30, 2011, and there is no investment balance for the Partners as of
September 30, 2011. The gross unfunded liability as of September 30, 2011 and 2010, is
$48,973 and $179,334. This liability is accrued on the accompanying statements of financial
position.
7. DEFINED CONTRIBUTION PENSION PLAN
Partners has a defined contribution 403(b) Plan (the Plan) covering all permanent
employees. Under the Plan, Partners makes discretionary contributions based on a percentage
of the annual salary of covered employees. During the years ended September 30, 2011 and
2010, Partners did not make contributions to the Plan.
8. SUPPORT, REVENUE AND CONCENTRATIONS
During the years ended September 30, 2011 and 2010, Partners received support in excess of
10% of its total support and revenue from the following organizations:
2011 2010
American Embassy, Sana’a Yemen 28% 33%
Embassy of the Kingdom of Netherlands 4 12
General Electric Foundation 7 13
USAID 30 7
A significant reduction in the level of any of the support from these organizations could
adversely affect the level and quality of programs and activities of Partners.
PARTNERS FOR DEMOCRATIC CHANGE
Notes to the Financial Statements
September 30, 2011 and 2010
14
9. COMMITMENTS AND CONTINGENCIES
Leases
Partners rented an office facility in Washington, DC pursuant to a non-cancelable operating
lease, which expired on December 30, 2010. There is no future minimum obligation under
this lease as of September 30, 2011.
Partners entered into a new lease agreement for an office facility in Washington, DC. The
new agreement commenced on January 1, 2011 and expires on December 31, 2015. The
future minimum principal payments are as follows:
Year Ending September, Amount
2012 $ 116,520
2013 116,520
2014 116,520
2015 116,520
2016 29,130
Total $ 495,210
Rent expense for the office lease for the years ended September 30, 2011 and 2010, was
$152,651 and $123,075, respectively.
Grants
Partners receives grant support that is subject to audit or review by grantor agencies.
Management believes that Partners has complied with all aspects of the grant and contract
provisions and that disallowed costs, if any, would be immaterial to the financial position of
Partners as of September 30, 2011 and 2010.
Partners charges certain indirect costs to U.S. Government agencies based on its final and
provisional negotiated indirect cost rates. Partners is obligated to pay (or in certain
circumstances may collect) the difference between indirect costs charged and collected based
on its provisional and final rates. On September 8, 2009, the United States Agency for
International Development (USAID) approved final negotiated indirect cost rates effective
for the period September 30, 2006, through September 30, 2007, and provisional negotiated
indirect cost rates beginning October 1, 2007. There was no material difference between the
final negotiated indirect cost rates approved by USAID and the provisional negotiated
indirect cost rates used by Partners during the period September 30, 2006, through September
30, 2007. The management of Partners believes that any obligation of Partners to return
excess indirect costs charged to U.S. Government agencies because of differences between
the provisional and final negotiated indirect cost rates applicable to the year ended September
30, 2011 and 2010, would be immaterial to its financial position.
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