GLOBAL BRIGADES, INC. Financial Statements For the Year Ended December 31, 2015
Table of Contents Independent Auditor’s Report Financial Statements: Statement of Financial Position Statement of Activities Statement of Functional Expenses Statement of Cash Flows Notes to the Financial Statements
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Independent Auditor’s Report To the Board of Directors Global Brigades, Inc. Fresno, California We have audited the accompanying financial statements of Global Brigades, Inc. (the Organization), which comprise the statement of financial position as of December 31, 2015, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting principles used and the reasonableness of significant estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Organization as of December 31, 2015, and changes in its net assets, its functional expenses, and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter As discussed in Note 6 to the financial statements, during the year ended December 31, 2015, the Organization adopted a change in accounting method. Our opinion is not modified with respect to this matter. Certified Public Accountants December 6, 2016
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GLOBAL BRIGADES, INC. Statement of Financial Position December 31, 2015 Assets Cash and cash equivalents Pledges receivable Prepaid expenses and other assets Accounts receivable from related parties Notes receivable from related parties, net Investment in GBVI
$ 2,888,572 45,500 2,362,000 36,503 427,712 94,588
Total Assets
$ 5,854,875
Liabilities and Net Assets Liabilities: Accounts payable Grants and accounts payable to related parties Accrued liabilities
$ 86,051 111,055 24,588
Total Liabilities
221,694
Net Assets: Unrestricted Temporarily restricted
1,050,843 4,582,338
Total Net Assets
5,633,181
Total Liabilities and Net Assets
$ 5,854,875
See accompanying notes. ‐ 3 ‐
GLOBAL BRIGADES, INC. Statement of Activities For the Year Ended December 31, 2015 Unrestricted
Temporarily Restricted
Total
Operating Support and Revenue: Contributions Interest and other Net assets released from restriction
$ 10,076,780 6,250 3,986,417
$ 4,427,181
Total Operating Support and Revenue
14,069,447
440,764
Expenses: Program General and administrative Fundraising
12,502,870 661,795 396,371
Total Expenses
13,561,036
‐
13,561,036
Change in Net Assets From Operating Activities
508,411
440,764
949,175
Nonoperating Activities: Gain on investment in GBVI Loss on note receivable from related party
20,784 (171,170)
Change in Net Assets From Nonoperating Activities
(150,386)
Change in Net Assets
358,025
440,764
798,789
Net assets, beginning of year
692,818
4,141,574
4,834,392
Net Assets, End of Year
$ 1,050,843
$ 4,582,338
$ 5,633,181
$ 14,503,961 6,250
(3,986,417) 14,510,211
12,502,870 661,795 396,371
20,784 (171,170) ‐
(150,386)
See accompanying notes. ‐ 4 ‐
GLOBAL BRIGADES, INC. Statement of Functional Expenses For the Year Ended December 31, 2015 Supporting Services
Program
General and Administrative
Grants to other organizations Grants for travel Salaries Merchant credit card fees Employee benefits Association dues Accounting fees Airfare and transportation Payroll tax Information technology Meals and lodging Grant writing fees Media and public relations Insurance Telephone Organizational expenses Advertising and marketing Supplies Other Printing and copying Conferences Bank service charges Postage and shipping Fuel
$ 6,721,865 5,455,802 82,496
$ ‐
144,732
37,335 119,295 62,870
Total Expenses
$ 12,502,870
Fundraising $ ‐
341,000 360,655
45,420 14,417
29,501 37,125
36,182 17,740 13,275 12,140 5,840 5,048 4,701 3,341 2,814 2,276 1,956 1,303 988 919 $ 661,795
See accompanying notes. ‐ 5 ‐
$ 396,371
Total Supporting Services
Total
$ ‐ ‐ 341,000 360,655 37,335 119,295 62,870 ‐ 29,501 37,125 ‐ 17,740 13,275 12,140 5,840 5,048 4,701 3,341 2,814 2,276 ‐ 1,303 988 919
$ 6,721,865 5,455,802 423,496 360,655 182,067 119,295 62,870 45,420 43,918 37,125 36,182 17,740 13,275 12,140 5,840 5,048 4,701 3,341 2,814 2,276 1,956 1,303 988 919
$ 1,058,166
$ 13,561,036
GLOBAL BRIGADES, INC. Statement of Cash Flows For the Year Ended December 31, 2015 Cash Flows From Operating Activities: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities‐ Noncash investing gains and losses: Gain on investment in GBVI Loss on note receivable from related party Change in assets and liabilities: Pledges receivable Prepaid expenses and other assets Accounts receivable from related parties Undeposited funds Accounts payable Grants and accounts payable to related parties Accrued liabilities
(45,500) 456,897 55,383 2,473 (56,789) 30,788 18,925
Net Cash Provided by Operating Activities
1,411,352
Cash Flows From Investing Activities: Payments received on notes receivable from related parties Advances made on notes receivable from related parties
122,288 (200,000)
Net Cash Used by Investing Activities
(77,712)
Net Change in Cash and Cash Equivalents
1,333,640
Cash and cash equivalents, beginning of year
1,554,932
Cash and Cash Equivalents, End of Year
$ 2,888,572
$ 798,789
(20,784) 171,170
See accompanying notes. ‐ 6 ‐
GLOBAL BRIGADES, INC. Notes to the Financial Statements For the Year Ended December 31, 2015 Note 1 ‐ Organization and Basis of Presentation Organization ‐ Global Brigades, Inc. (the Organization) is an international nonprofit that empowers communities to meet their health and economic goals through university volunteers and local teams. Through student‐led brigades, participating student and professional volunteers empower communities in developing countries with sustainable solutions that improve quality of life and environment, while respecting local culture. The Organization was established in 2007 and is one of the world’s largest student‐let volunteer relief organizations. Basis of Presentation ‐ The Organization works with Global Brigades affiliates located in South and Central America and Africa to achieve its mission. The Global Brigades affiliates are separate legal entities with independent boards of directors. Global Brigades Association is the governing organization of all Global Brigades entities worldwide. Its board of directors consists of one member from each of the Global Brigades affiliates, including from the Organization. Global Brigades affiliates and Global Brigades Association (collectively, the related parties) are not controlled by the Organization. Global Brigades Ventures, Inc. (GBVI) is a California corporation created to manage travel logistics for each brigade. The Organization owns 40% of the voting stock of GBVI; therefore, the Organization’s investment in GBVI is accounted for under the equity method of accounting (Note 2). The Related Parties and GBVI are not consolidated with the Organization for financial reporting purposes. Note 2 ‐ Significant Accounting Policies Basis of Accounting ‐ The financial statements of the Organization are presented on the accrual basis of accounting. Net assets, revenues, gains, and losses are classified based on the existence or absence of donor‐imposed restrictions. Accordingly, the net assets of the Organization and changes therein are classified and reported as follows: Unrestricted Net Assets ‐ Net assets that are not subject to donor‐imposed restrictions. Temporarily Restricted Net Assets ‐ Net assets subject to donor‐imposed restrictions that will be met either by actions of the Organization and/or the passage of time. Temporarily restricted net assets consist primarily of contributions received to fund specific brigades. Permanently Restricted Net Assets ‐ Support received in the form of endowment or sustaining funds which can never be spent. The Organization had no permanently restricted net assets at December 31, 2015. 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 assets and liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor‐stipulated purpose has been fulfilled or the stipulated time period has lapsed) are reported as reclassifications between the applicable classes of net assets, except for contributions with restrictions that are satisfied in the same year, which are reported as unrestricted. Revenue Recognition ‐ Contributions received for specific brigades are generally refundable until the brigade occurs. Therefore, contributions are considered conditional until the brigade occurs, at which time the contributions are recognized as contribution revenue. However, contributions received and on hand in September each year become nonrefundable and are recognized as temporarily restricted contribution revenue. Unused temporarily restricted net assets are released for unrestricted use after they have been on hand for more than one year.
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GLOBAL BRIGADES, INC. Notes to the Financial Statements For the Year Ended December 31, 2015 Note 2 ‐ Continued The Organization works with university chapters to raise funds for each brigade. At the time the brigade is established, the chapter determines an approximate amount it intends to raise. Unpaid amounts from these estimates are considered conditional pledges and are, therefore, not recognized until they are received. Operating Activities ‐ The statement of activities includes a measure of change in net assets from operating activities. Nonoperating activities include gains and losses on the Organization’s investment in GBVI and notes receivable from related parties. Cash and Cash Equivalents ‐ Cash and cash equivalents consist of checking and money market accounts. The Organization holds all of its cash and cash equivalents with one financial institution. All transactions of the Organization are conducted in the U.S. dollar. The Organization holds no foreign bank accounts or accounts in foreign currencies. Concentrations of Credit Risk ‐ Financial instruments that potentially subject the Organization of concentrations of credit risk consist of cash and cash equivalents and notes receivable from related parties. The Organization has cash balances that are in excess of federal deposit insurance corporation limits. Notes receivable from related parties are reviewed for impairment by management. Pledges Receivable ‐ Pledges receivable, unconditional promises to give, that are expected to be collected within one year are recorded at net realizable value. Unconditional pledges that are expected to be collected in future years are recorded at the present value of their estimated future cash flows. Pledges receivable are expected to be received within one year at December 31, 2015. An allowance for doubtful accounts is determined by management based on a reasonable estimate of collectability and past experience. Management deemed an allowance was not necessary at December 31, 2015. Prepaid Expenses and Other Assets ‐ Prepaid expenses consist of travel and other costs paid related to brigades that will occur after year end. Accounts Receivable From Related Parties ‐ Accounts receivable from related parties consist of payments made by the Organization on behalf of the related parties in the normal course of operations. The Organization will be reimbursed for these payments generally within 30 days (Note 3). Notes Receivable From Related Parties ‐ Notes receivable from related parties consists of loans made by the Organization to three Global Brigades affiliates. The notes are reported at the lower of their outstanding principal balances plus accrued interest or impaired value (Note 3). Investment in GBVI ‐ The Organization holds 40% of the issued and outstanding shares of BGVI, and certain staff and board members of the Organization participate on the board of GBVI. Therefore, the Organization accounts for its investment in GBVI under the equity method of accounting. Accordingly, the Organization adjusts the value of its investment in GBVI on the statement of financial position and recognizes its share of BGVI’s results of operations as gain or loss on investment in GBVI on the statement of activities. The gain on its investment in GBVI totaled $20,784 for the year ended December 31, 2015. GBVI stock is closely held, and its financial statements are unaudited.
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GLOBAL BRIGADES, INC. Notes to the Financial Statements For the Year Ended December 31, 2015 Note 2 ‐ Continued Grants and Accounts Payable to Related Parties ‐ The Organization supports brigades with Global Brigades affiliates through grants awarded by the Organization to cover travel and other brigade expenses (Note 3). Accounts payable to related parties consist of dues and fees paid by the Organization to the related parties (Note 3). Federal Income Tax ‐ The Organization is a California Nonprofit Public Benefit Corporation and is tax‐exempt under Section 501(c)(3) of the Internal Revenue Code. Accordingly, no provision has been made for federal income tax in the accompanying financial statements. The Organization files tax returns with the U. S. government and the State of California. The Organization may be subject to income tax examinations for the current year and certain prior years based on the applicable laws and regulations. Use of Estimates ‐ The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America (U.S. GAAP) requires management to make estimates and assumptions that affect amounts reported in the financial statements. Actual results may differ from such estimates. Functional Allocation of Expenses ‐ The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities and the statement of functional expenses. Accordingly, certain costs have been allocated among the program, general and administrative, and fundraising categories based on the benefits derived. Gifts‐in‐Kind ‐ A substantial number of volunteers have donated significant amounts of their time to support the Organization’s programs and fund raising campaigns. In addition, goods are donated to be used in various brigades; however, these goods are generally provided directly to the brigade site. The donated services and goods do not meet the criteria for recognition in accordance with U.S. GAAP. Therefore, they are not reflected in these financial statements. Property and Equipment ‐ The Organization capitalizes property and equipment with a cost or fair value, if donated, over $10,000. Property and equipment are depreciated on the straight‐line basis over their estimated useful lives. The Organization has no capitalized property and equipment at December 31, 2015. Subsequent Events ‐ The Organization has evaluated subsequent events through December 6, 2016, the date on which the financial statements were available to be issued. In April 2016, the Organization obtained a revolving line of credit with maximum borrowings of $250,000 at an interest rate of 3.25% above the Prime rate. The revolving line of credit is secured by all outstanding pledges receivables. Note 3 ‐ Related Party Transactions Notes Receivable From Related Parties ‐ Outstanding notes receivable from related parties make up approximately 10% of the Organization’s total assets at December 31, 2015. The notes are generally collateralized by the tangible and intangible assets of each related party. Interest rates on the notes are generally determined by market rates and range from 2.5% ‐ 5.0%. An allowance for doubtful accounts is established based on prior collection experience, current economic factors and management’s review of individual loan balances. Balances are written off through a charge to the allowance if the note is determined to be uncollectible. During the year ended December 31, 2015, management determined that one of the notes receivable was likely uncollectible and recorded an allowance for doubtful accounts totaling $171,170 which is included as a nonoperating loss on the statement of activities. Interest on this loan is no longer accrued. ‐ 9 ‐
GLOBAL BRIGADES, INC. Notes to the Financial Statements For the Year Ended December 31, 2015 Note 3 ‐ Continued Related party notes receivable and the allowance for doubtful accounts are as follows at December 31, 2015: Notes receivable from affiliates in‐ South America $ 227,711 Central America 200,001 Africa 171,170
598,882 Less allowance for doubtful accounts‐ Allowance at January 1, 2015 Recorded during 2015
(171,170)
Allowance at December 31, 2015
(171,170)
Related Party Notes Receivable, Net
$ 427,712
Other than the loan for which an allowance has been recorded, no loans are past due at December 31, 2015. The notes are scheduled to be paid as follows: For the Year Ending December 31, 2016 2017 2018 2019 2020 Thereafter
$ 52,172 85,060 89,412 93,986 70,190 36,892
Related Party Notes Receivable, Net
$ 427,712
Grants Payable to Related Parties and Grants to Other Organizations ‐ The Organization awards grants to a number of Global Brigades affiliates (Note 1) to carry‐out each brigade. The Global Brigades affiliates consist of: Global Brigades Honduras, Global Brigades Nicaragua, Global Brigades Panama and Global Brigades Ghana. For the year ended December 31, 2015, grants awarded to these entities totaled $6,721,865. Grants payable to related parties totaled $89,743 and will be paid within one year at December 31, 2015. Fees and Dues Paid to Related Parties ‐ The Organization utilizes GBVI to manage travel logistics for each brigade. Fees paid to GBVI totaled $280,360 for the year ended December 31, 2015. Accounts payable due to GBVI totaled $6,420 at December 31. 2015. Dues paid to Global Brigades Association totaled $119,295 for the year ended December 31, 2015. Accounts payable due to Global Brigades Association totaled $14,892 at December 31. 2015. Accounts Receivable From Related Parties ‐ The Organization is reimbursed for expenses it pays on behalf of the related parties in the normal course of operations. Amounts due from the related parties totaled $36,427 at December 31, 2015, and are expected to be received within 30 days. An allowance for doubtful accounts was deemed unnecessary by management at December 31, 2015. ‐ 10 ‐
GLOBAL BRIGADES, INC. Notes to the Financial Statements For the Year Ended December 31, 2015 Note 4 ‐ Temporarily Restricted Net Assets Temporarily restricted net assets that were available for specific brigades scheduled to occur after year end totaled $4,536,838 at December 31, 2015. Temporarily restricted net assets restricted for other programs totaled $45,500 at December 31, 2015. Net assets released from restriction for specific brigades totaled $3,986,417 during the year ended December 31, 2015. Note 5 ‐ Retirement Plan The Board of Directors implemented a policy during the year ended December 31, 2015, in which the Organization may provide a contribution to employee’ Individual Retirement Accounts (IRAs), subject to annual approval of the Compensation Committee. These contributions totaled approximately $16,000 for the year ended December 31, 2015. Note 6 ‐ Change in Accounting Method During the year ended December 31, 2015, management determined that funding received to support brigades are nonreciprocal transactions, as the providers of the funds receive no direct personal benefit in return. Beginning January 1, 2015, funds received for brigades are considered purpose restricted contributions versus earned revenue. Management believes this treatment more accurately reflects the character of the funding. Nonrefundable purpose restricted gifts are classified as temporarily restricted net assets. Previously, such funds were reported as deferred revenue. This change was applied retrospectively; thus, temporarily restricted net assets have been increased by $4,141,574, and unrestricted net assets have been increased by $62,572 at December 31, 2014.
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