RECONCILING MINISTRIES NETWORK FINANCIAL STATEMENTS AND INDEPENDENT AUDITOR'S REPORT For the Year Ended December 31, 2011

~Sikich®
Certified Public Accountants & Advisors

CONIENIS.

Page(s) INDEPENDENT AUDITOR'S FINANCIAL STATEMENTS Statement of Financial Position Statement of Activities Statement of Functional Expenses " _ "'. "...... 4 5 6 7 8-13 REPORT "......................... 3

,..............................................

Statement of Cash Flows..................................................................................................... Notes to Financial Statements..............................................

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Certified

Public Accountants

& Advisors

~Sikich.
1415 W. Diehl Road, Suite 400 • Naperville, IL 60563

Members of American Institute of Certified Public Accountants

INDEP .:oNnENT AUDITOR'S RE]'ORT

Board of Directors Reconciling Ministries Network Chicago, Illinois We have audited the accompanying statement of financial position of Reconciling Ministries Network (RMN) as of December 31, 2011, and the related statements of activities, functional expenses, and cash flows for the year then ended. These financial statements are the responsibility of RMN' s management. 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 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 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 Reconciling Ministries Network at December 31, 2011, 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.

Naperville, Illinois April 25, 2012

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FINANCIAL STATEMENTS

RECONCILING MINISTRIES NETWORK STATEMENT OF FINANCIAL POSITION December 31,2011

Temporarily Unrestricted ASSETS CURRENT ASSETS Cash and cash equivalents Pledges, grants and accounts receivable Inventory Prepaid expenses Total current assets NONCURRENT ASSETS Property and equipment, net Total noncurrent assets TOTAL ASSETS LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and payroll liabilities Total current liabilities NET ASSETS Unrestricted Undesignated Board designated Total unrestricted net assets Temporarily restricted Total net assets TOTAL LIABILITIES AND NET ASSETS $ 438,548 447,476 $ 220,382 218,166 438,548 557,364 557,364 557,364 $ 220,382 218,166 438,548 557,364 995,912 1,004,840 $ 8,928 8,928 $ $ 8,928 8,928 $ 2,301 2,301 447,476 $ 557,364 $ 2,301 2,301 1,004,840 $ 415,929 9,920 14,675 4,651 445,175 557,364 $ 342,364 215,000 $ 758,293 224,920 14,675 4,651 1,002,539 Restricted Total

See accompanying notes to financial statements. -4-

RECONCILING MINISTRIES NETWORK STATEMENT OF ACTIVITIES For the Year Ended December 31, 2011

Unrestricted REVENUE AND OTHER SUPPORT Grants Individual gifts Convocation In-kind donations Book, bible study, and miscellaneous sales Interest and dividends Other income Net assets released from restrictions Total revenue and other support EXPENSES Program Management and general Fundraising Total expenses CHANGE IN NET ASSETS NET ASSETS, BEGINNING OF YEAR NET ASSETS, END OF YEAR $

Temporarily Restricted

Total

$

35,000 300,253 186,932 14,837 5,622 383 3,770 495,972 1,042,769

$

801,000 69,048

$

836,000 369,301 186,932 14,837 5,622 383 3,770

(495,972) 374,076 1,416,845

883,547 80,285 66,284 1,030,116 12,653 426,220 438,873 $ 374,076 183,288 557,364 $

883,547 80,285 66,284 1,030,116 386,729 609,508 996,237

See accompanying notes to financial statements. -5-

RECONCILING MINISTRIES NETWORK STATEMENT OF FUNCTIONAL EXPENSES For the Year Ended December 31, 2011

Program Salaries, benefits, and taxes Contract services Accounting and legal Advertising and promotion Information technology Occupancy Conferences, meetings, and travel Depreciation expense Insurance Convocation and conference Parents reconciling network Outreach Supplies Equipment rental Miscellaneous expenses TOTAL $ 324,395 92,605 23,415 16,799 23,046 17,849 1,440 2,200 268,399 10,849 57,938 13,266 8,211 23,135 $ 883,547

Management and General $ 30,849 7,841 12,679 2,019 2,498 15,325 176 2,187 $

Fundraising 40,237 13,853 $

Total 395,481 114,299 12,679 23,415 20,814 27,766 33,174 1,756 4,575 268,399 10,849 57,938 15,860 10,013 33,098 1,030,116

1,996 2,222 140 188

1,585 1,101 4,025 $ 80,285 $

1,009 701 5,938 66,284 $

See accompanying notes to financial statements. -6-

RECONCILING MINISTRIES NETWORK STATEMENT OF CASH FLOWS For the Year Ended December 31,2011

CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets Adjustments to reconcile change in net assets to net cash from operating activities Depreciation Increase (decrease) in Pledges, grants, and accounts receivable Inventory Prepaid expenses (Increase) decrease in Accounts payable and accrued expenses Total adjustments Net cash from operating activities CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment Net cash from investing activities CASH FLOWS FROM FINANCING ACTIVITIES None NET INCREASE IN CASH AND CASH EQUIVALENTS CASH AND CASH EQUIV ALENTS, BEGINNING OF YEAR CASH AND CASH EQUIVALENTS, END OF YEAR See accompanying notes to financial statements. -7$ 758,293 545,507 212,786 (330) (330) 2,079 (173,613) 213,116 (207,788) 1,821 28,519 1,756 $ 386,729

RECONCILING MINISTRIES NETWORK NOTES TO FINANCIAL STATEMENTS December 31, 2011

1.

NATURE OF ACTIVITIES Reconciling Ministries Network (RMN) is a District of Columbia nonprofit corporation based in Chicago, Illinois that leads a growing movement of United Methodist individuals, congregations, campus ministries, and other groups working for the full participation of all people in The United Methodist Church. RMN mobilizes United Methodists of all sexual orientations and gender identities to transform our Church and world into the full expression of Christ's inclusive love. RMN envisions a renewed and vibrant Wesleyan movement that is biblically and theologically centered on the full inclusion of God's children. RMN is committed to making disciples of Jesus Christ for the transformation of the world by living out the Gospel's teaching of justice and inclusion. RMN's primary activities include grassroots organizing with individuals and United Methodist congregations and communities to develop formal statements of inclusion, advocacy work to change the policies of The United Methodist Church, media and communications to disseminate a message of inclusion and the moral equality of LGBT people in the church and society, as well as consulting with church agencies, churches, groups, and individuals on how to promote LGBT -inclusive faith communities.

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation RMN is required to report information regarding its financial position and activities according to three classes of net assets; unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Unrestricted net assets - net assets that are not subject to donor-imposed stipulations. Unrestricted net assets consist of both undesignated and board designated amounts. Temporarily restricted net assets - net assets subject to donor-imposed stipulations that mayor will be met either by action ofRMN and/or passage of time. When a restriction does expire, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets - net assets subject to donor-imposed stipulations that they be maintained permanently by RMN. RMN did not have any permanently restricted net assets at December 31, 2011. -8-

RECONCILING MINISTRIES NETWORK NOTES TO FINANCIAL STATEMENTS (Continued)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) 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 disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and the differences could be material to these financial statements. Cash and Cash Equivalents For purposes of the cash flows statement, RMN considers all short-term investments with a maturity of three months or less to be cash equivalents. Concentrations of Credit Risk RMN maintains demand deposits with financial institutions. From time to time, cash balances in these accounts may exceed federally insured limits. Pledges, Grants, and Accounts Receivable Receivables are stated at the amount management expects to collect from outstanding balances. Management provides for probable uncollectable amounts through a provision of bad debt expense and an adjustment to a valuation allowance based on its assessment of the current status of individual accounts. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the valuation allowance and a credit to accounts receivable. Changes in the valuation allowance have not been material to the financial statements. Inventories Inventories are carried at the lower of cost first-in, first-out (FIFO) method or market. Property and Equipment Property and equipment are carried at cost less accumulated depreciation. Additions, major renewals, replacements, and betterments are capitalized; maintenance and repairs are charged against income as incurred. Provision for depreciation is computed by using the straight-line method over the estimated useful lives of the respective assets, which are as follows: Years Computer equipment

5

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RECONCILING MINISTRIES NETWORK NOTES TO FINANCIAL STATEMENTS (Continued)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Grants and Contributions In accordance with authoritative guidance issued by the Financial Accounting Standards Board (FASB), grants and pledges are recognized as revenue when the grant is awarded or the unconditional promise to pay is made by a donor. Those grants and contributions which are designated by their donors for a subsequent fiscal year or for a particular project which will occur after year end, are reported as temporarily restricted revenue. When the time restriction expires or the designated activity occurs, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activity as net assets released from restrictions. Grants and contributions restricted to a particular purpose are classified as unrestricted if the revenue and the related expenses both are recognized entirely within the same fiscal year. Donated Assets Donated marketable securities and other noncash donations are recorded as contributions at their estimated fair values at the date of donation. RMN has a policy of selling marketable securities as soon as received. Income Taxes RMN is exempt for deferral income taxes under Section 501 (c)(3) of the Internal Revenue Code and is classified as a public charity by the Internal Revenue Service. RMN follows authoritative guidance issued by FASB that clarifies the accounting for uncertainty in income taxes recognized in an entity's financial statements and prescribes a recognition threshold of more-likely-than-not to be sustained upon examination. Measurement of the tax uncertainty occurs if the recognition threshold has not been met. This guidance also addresses derecognition, classification, interest and penalties, disclosure, and transition. RMN conducts business solely in the U.S. and, as a result, files information returns for U.S. and Illinois. In the normal course of business, the RMN is subject to examination by taxing authorities. RMN's information returns for years subsequent to the year ended December 31, 2007 are open, by statute, for review by authorities. However, at present, there are no ongoing income tax audits or unresolved disputes with the various tax authorities that RMN currently files or has filed with.

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RECONCILING MINISTRIES NETWORK NOTES TO FINANCIAL STATEMENTS (Continued)

2.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Fair Value Measurements RMN follows the authoritative guidance issued by FASB which defines fair value, establishes a framework for measuring fair value by providing a hierarchy used to classify the source of the information measuring fair value, and expands disclosures about fair value measurements. Assets and liabilities carried at fair value are classified and disclosed in one of the following categories: Level 1: Quoted market prices in active markets for identical assets or liabilities. Level 2: Observable market based inputs or unobservable inputs that are corroborated by market data. Level 3: Unobservable inputs that are not corroborated by market data. RMN did not have any material Level 1, 2, or 3 inputs at December 31, 2011.

3.

PLEDGES, GRANTS, AND ACCOUNTS RECEIVABLE Receivables consisted of the following as of December 31 : Grants receivable Pledges receivable TOTAL $ 215,000 9,920 224,920

$

Allowance for doubtful accounts for December 31, 2011 was zero as management considers all accounts to be collectible. 4. PROPERTY AND EQUIPMENT Following is a summary of property and equipment at December 31 : Computer equipment Less accumulated depreciation TOTAL Depreciation expense for the year ended December 31, 2011 was $ 1,756. $ $ 24,428 (22,127) 2,301

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RECONCILING MINISTRIES NETWORK NOTES TO FINANCIAL STATEMENTS (Continued)

5.

TEMPORARILY RESTRICTED NET ASSETS Temporarily rested net assets at December 31 were available for the following purposes: Clergy Legal Defense Fund Cloud of Witness Fund Convocation Extension Ministries Fund Called to Witness Fund TOTAL $ 553 50,000 23,736 25,583 457,492 557,364

$

6.

PROFIT SHARING PLAN RMN has a 403(b) profit sharing plan which covers substantially all employees who have attained a certain age and service requirement. RMN makes a matching contribution equal to 100% ofthe employee's salary deferral. The employer's contribution shall not exceed 5% of the employee's eligible compensation. RMN's expense for contribution for the year ended December 31, 2011 was $6,913.

7.

LEASE COMMITMENTS RMN leases its office space from a United Methodist Church. The lease was renewed effective January 1,2012 and extends through September 30, 2012. Rent expense for the year ended December 31, 2011 was $26,400. RMN also leases a copier. The lease agreement runs through May of2016. rental for the year ended December 31, 2011 was $10,013. The future minimum lease payments by year are as follows: Year Ended December 3 1, 2012 2013 2014 2015 2016 TOTAL FUTURE MINIMUM LEASE PAYMENTS $ Lease Payment 29,040 9,240 9,240 9,240 3,850 60,610 Equipment

$

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RECONCILING MINISTRIES NETWORK NOTES TO FINANCIAL STATEMENTS (Continued)

8.

CONVOCATION EXPENSE RMN hosts a biennial national reconciling convocation. Revenue for December 31, 2011 was $186,932. Expenses for the national convocation were $177,655 for the year ended December 31, 2011.

9.

SUBSEQUENT EVENTS Subsequent events are events or transactions that occur after the balance sheet date but before financial statements are issued or are available to be issued. These events and transactions either provide additional evidence about conditions that existed at the date of the statement of assets, liabilities, and net assets, including the estimates inherent in the process of preparing financial statements (that is, recognized subsequent events), or provide evidence about conditions that did not exist at the date of the balance sheet but arose after that date (that is, nonrecognized subsequent events). RMN has evaluated subsequent events through April 25, 2012, which was the date that these financial statements were available for issuance, and determined that there were no significant nonrecognized subsequent events through that date.

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