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INDEPENDENT AUDITOR’S REPORT

Tennessee Annual Conference of the United Methodist Church


Council on Finance and Administration
Nashville, Tennessee

I have audited the accompanying statement of financial position of the Conference Treasurer of the
Tennessee Annual Conference of the United Methodist Church as of December 31, 2005, and the related
statements of activities and cash flows and the details of transactions in restricted funds and the schedule of
general and administrative expenses for the year then ended. These financial statements are the
responsibility of the Conference Treasurer. My responsibility is to express an opinion on these financial
statements based on my audit.

I conducted my audit in accordance with auditing standards generally accepted in the United States of
America. Those standards require that I 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. I believe that my audit provides a reasonable basis
for my opinion.

In my opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of the Conference Treasurer as of December 31, 2005 and the changes in net assets and
its cash flows for the year then ended in conformity with accounting principles generally accepted in the
United States of America.

s/Nancy C. Crabtree, CPA

Nashville, Tennessee
October 10, 2007
TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
STATEMENT OF FINANCIAL POSITION
DECEMBER 31, 2005

ASSETS

Current Assets:
Cash and securities purchased under agreement
to repurchase $ 416076
Support and revenue receivable 1518466
Marketable securities 816000
Investment management accounts 1473565

Total Current Assets $ 4224107

Other Assets:
Participation certificates $ 242447

Total Assets $ 4466554

LIABILITIES AND NET ASSETS

Current Liabilities:
Program funds payable $ 803672

Total Current Liabilities /


Total Liabilities $ 803672

Net Assets:
Unrestricted $ ( 105625)
Temporarily restricted 3343507
Permanently restricted 425000

Total Net Assets $ 3662882

Total Liabilities and Net Assets $ 4466554

See accompanying notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2005

Unrestricted Restricted Total

Revenues and Other Support:


Contributions from districts, charges & churches $ $ 12843704 $ 12843704
Interest 43962 4850 48812
Other support & revenue 111304 3654923 3766227

Total Revenues and Other Support $ 155266 $ 16503477 $ 16658743

Expenses:
Program Services $ $ 16446810 $ 16446810
General and administrative services 461194 461194

Total Expenses $ 461194 $ 16446810 $ 16908004

Increase (Decrease) in Net Assets $ ( 305928) $ 56667 $ ( 249261)

Other Increase (Decrease) in Net Assets:


Transfers applied to Conference Administration $ 238164 $ ( 238164) $
Net appreciation (depreciation) of investments 13671 13671

Total Other Increases (Decreases)


In Net Assets $ 238164 $ ( 224493) $ 13671

Net Assets at the beginning of the year $( 37861) $ 3936333 $ 3898472

Net Assets at the end of the year $( 105625) $ 3768507 $ 3662882

See accompanying notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
STATEMENT OF GENERAL AND ADMINISTRATION EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2005

OFFICE OF ADMINISTRATIVE SERVICES:

Salaries and benefits $ 208421


Travel 8327
Computer services 4259
Printing and supplies 3859
Telephone 4052
Postage 4656
Equipment service 155
Audit and accounting 950
Payroll processing 9551
Other 898

Total $ 245128

OTHER GENERAL AND ADMINISTRATIVE SERVICES:

Conference secretary $ 654


Conference sessions 42138
Conference journal 10300
Liability insurance 50642
Payroll deductions 3746
Conference contingency 108586

Total $ 216066

Total General and Administrative Expenses $ 461194

See accompanying notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
DETAILS OF TRANSACTIONS IN RESTRICTED FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2005

Contributions Investment Other


& Revenues Earnings Additions

Advance Special – World $ 1304745 $ $ 27779


Advance Special – National
Advance Special – Conference 94021 3065
Advance Special – Miscellaneous 41048
Africa University Fund 33229
Audio Visual Resource Center 15
Bishop’s Appeal
Black College Fund 137800
Board of Ordained Ministry 154433 49188
Board of Pensions 75051
Camping 876508
Campus Ministry 528205 11382
Center for Church Leadership
Children and Poverty 4808 2466
Childrens’ Ministry Institute 3220
Clergy Health Insurance 2378771 1699 121638
Clergy Pensions 2483595 19259
Columbia District Trustees 615
Commission on Archives 26004 108
Conference Administration 319035
Conference Council on Ministries 285821
Conference Headquarters 50547
Conference Trustees
Congo Projects 2904
Clarksville Disaster Response
Cookeville District Trustees
Cornerstone Fellowship 34388
Corrections Ministry 409 670
Course of Study School 55096
Delayed Compensation 4477
Delegate Expense – SEJ/General Conference
Diaconal Divisional Grant
Disability Fund

See accompanying notes to the financial statements.

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Payments Transfers Excess(Deficit)
& Other From (To) Revenue & Support Net Assets - Net Assets
Distributions Other Funds Over Distributions Beginning December 31, 2005

$ 1225706 $( 1000) $ 105818 $ 452906 $ 558724


0 0 0 10148 10148
31716 ( 16850) 48520 94307 142827
27387 0 13661 82476 96137
33229 0 0 0 0
0 0 15 1771 1786
2001 0 ( 2001) 2001 0
137800 0 0 0 0
62412 ( 129339) 11870 53515 65385
0 0 75051 1012229 1087280
894818 109825 91515 ( 231491) ( 139976)
555281 ( 138) ( 15832) 162879 147047
53600 ( 2900) ( 56500) ( 112675) ( 169175)
0 0 7274 36266 43540
1575 ( 1700) ( 55) ( 1161) ( 1216)
3824622 1689407 366893 1149497 1516390
2096671 ( 103820) 302363 134929 437292
0 0 615 17076 17691
21519 ( 836) 3757 24170 27927
0 ( 319035) 0 0 0
884734 598846 ( 67) 153590 153523
36812 0 13735 44109 57844
0 0 0 9045 9045
4204 1000 ( 300) 300 0
0 0 0 3892 3892
0 0 0 4570 4570
43325 10000 1063 ( 22004) ( 20941)
0 0 1079 9053 10132
54579 9300 9817 34615 44432
12167 0 ( 7690) 29623 21933
12 4429 4417 ( 2246) 2171
0 0 0 1177 1177
1825 0 ( 1825) 34458 32633

See accompanying notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
DETAILS OF TRANSACTIONS IN THE RESTRICTED FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2005 (continued)

Contributions Investment Other


& Revenues Earnings Additions

Disability Awareness Sunday 270


Disaster Fund 7515 8332
Disciples Divinity Fund
District Administration 539361
District Superintendents Fund 720160
Episcopal Fund 262616
Episcopal Office 47135
Episcopal Residence Fund 13805
Equitable Compensation Fund 235596 1950
Fellowship of Associate and Local Pastors 1180
General Administration 82930
Hispanic Fellowship 21000
Hispanic Ministries – Seed Money
Hispanic Ministries – Unidos en Cristo
Hollowell Fund 7704
Human Relations Fund 4457
Igniting Ministry
Interdenomination Cooperation Fund 27308
Jurisdictional Fund 75060
Kelly Fund 185
Love and Justice Ministries 57706 755
McKendree Village 194232
Martin Methodist College 526391
Ministerial Education Fund 344407 9492
Miriams Promise 106658
Mission to Middle Tennessee 765
Mountain Lodge ( 1342)
Murfreesboro Fellowship
Nashville Area Administrative Assistant 70639
NAACT Meeting 5524
Nashville Area United Methodist Foundation 205682
Native American Ministry 10004 1220

See accompanying notes to the financial statements.

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Payments Transfers Excess(Deficit)
& Other From (To) Revenue & Support Net Assets - Net Assets -
Distributions Other Funds Over Distributions Beginning December 31, 2005

$ 0 $ 0 $ 270 $ 158 $ 428


22365 0 ( 6518) 18548 12030
25812 0 ( 25812) 27065 1253
539361 0 0 328 328
716651 ( 25200) ( 21691) 83844 62153
262616 0 0 0 0
66481 8105 ( 11241) 11863 622
34956 4207 ( 16944) 47094 30150
215342 36713 58917 118338 177255
996 0 184 141 325
82930 0 0 0 0
91 ( 14891) 6018 ( 6018) 0
0 0 0 19892 19892
321 0 ( 321) 9101 8780
0 0 7704 146517 154221
4457 0 0 0 0
46669 0 ( 46669) 85567 38898
27308 0 0 0 0
75060 0 0 0 0
0 0 185 980 1165
55519 540 3482 2357 5839
194232 0 0 0 0
549107 0 ( 22716) 22716 0
321956 0 31943 219160 251103
94129 0 12529 2189 14718
3006 ( 583) ( 2824) 3079 255
0 0 ( 1342) 1342 0
0 0 0 ( 240) ( 240)
113623 59186 16202 ( 21104) ( 4902)
5511 ( 13) 0 0 0
187532 ( 14379) 3771 25170 28941
8463 ( 145) 2616 3011 5627

See accompanying notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
DETAILS OF TRANSACTIONS IN RESTRICTED FUNDS
FOR THE YEAR ENDED DECEMBER 31, 2005

Contributions Investment Other


& Revenues Earnings Additions

New Church Development 284060 1800


Office of Ministerial Concerns 910
Office of Pastoral Formation 333449
One Great Hour 46575 1219
Pensions Campaign 11327
Property – Conference Headquarters 11811
Pulaski District Trustees
Religion and Race 1836
Settlement Account 1439 634734
Sexual Ethics Seminar
Shalom Zone
Status and Role of Women 1804 470
Student Day 7537
Sustentation Fund
Task Force on the Lottery
Tennessee Conference Health Insurance 587628
Tillett Loan Fund 2536
Tillett Fund Dividend
Trustee Risk Management
UMCOR Human Emergency
Vanderbilt Divinity UMSA 41653
Volunteers in Mission 5335 23154
World Order Sunday 3855
World Service/Conference Benevolence 1763397
Worldwide Communion Offering 16742
Youth Ministry Institute 6000
Youth Service Fund 86 7095
Early Apportionments
Early Program Receipts

Total $ 12843704 $ 4850 $ 3668594

See accompanying notes to the financial statements.

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Payments Transfers Excess (Deficit)
& Other From (To) Revenue & Support Net Assets - Net Assets -
Distributions Other Funds Over Distributions Beginning December 31, 2005

$ 131458 $ ( 19907) $ 134495 $ 287477 $ 421972


96669 104420 8661 3142 11803
223745 ( 132) 109572 ( 56297) 53275
47794 0 0 0 0
0 0 11327 56929 68256
0 0 11811 233176 244987
0 0 0 4920 4920
3082 ( 327) ( 1573) 13773 12200
812500 200000 23673 0 23673
1521 ( 1561) ( 3082) 3357 275
0 0 0 100 100
1621 ( 292) 361 9181 9542
7537 0 0 0 0
70315 0 ( 70315) ( 151608) ( 221923)
0 0 0 158 158
317795 ( 1592909) ( 1323076) ( 627089) ( 1950165)
0 0 2536 105489 108025
0 0 0 10000 10000
400 0 ( 400) 0 ( 400)
0 0 0 5133 5133
85982 0 ( 44329) 10246 ( 34083)
19159 ( 150) 9180 4377 13557
1927 0 1928 4602 6530
939531 ( 823630) 236 0 236
16742 0 0 0 0
4298 ( 572) 1130 4906 6036
4095 ( 620) 2466 10763 13229
0 0 0 154 154
150 ( 3213) ( 3363) ( 6679) ( 10042)

$ 16446810 $( 238164) $ ( 167826) $ 3936333 $ 3768507

See accompany notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2005

Unrestricted Restricted Total


Cash Flows from Operating Activities:

Increase (decrease) in net assets $ ( 305928) $ 56667 $ ( 249261)


Adjustments to reconcile changes in net assets
to cash provided by operating activities:
Decrease (increase) in:
Support and revenue receivable (206967) ( 206967)
Marketable securities 220000 220000
Investment management accounts ( 94567) ( 94567)
Increase (decrease) in:
Program funds payable 397200 397200

Net Cash provided (used) by operating activities $ ( 305928) $ 372333 $ 66405

Cash Flows from Investing Activities:


(Increase) decrease in participation certificates $ $ ( 9209) $ ( 9209)
Appreciation (depreciation) in investments 13671 13671

Net Cash provided (used) by investing activities $ $ 4462 $ 4462

Net Increase (Decrease) in Cash and Cash Equivalents $ ( 305928) $ 376795 $ 70867

Cash and Cash Equivalents at beginning of the year ( 2441271) 2786480 $ 345209

Cash and Cash Equivalents at end of the year $ ( 2747199) $ 3163275 $ 416076

See accompanying notes to the financial statements.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
NOTES TO THE FINANCIAL STATEMENTS

NOTE A – SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES:

A summary of the significant accounting policies applied in the preparation of the accompanying financial
statements follow:

1. Nature of Organization. The Conference Treasurer administers Conference operating and program
funds that are received from churches, boards and agencies, and individuals of the Conference, in
accordance with the budget and other directives of the Conference and of the respective boards and
agencies. The Treasurer administers income from such funds and other revenue related to the
Conference’s programs, and disburses funds to Conference boards and agencies and other recipients in
accordance with the stipulations of the donors and of the Conference.

2. Basis of Presentation. The Conference Treasurer reports information regarding its financial position
and activities in accordance with the Statement of Financial Accounting Standards (SFAS) No. 117,
Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117, the organization 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 based upon the existence or absence of donor-imposed restrictions. In addition, the Corporation
reports information regarding contributions in accordance with SFAS No. 116, Accounting for
Contributions Received and Contributions Made. In accordance with SFAS No. 116, contributions
received are recorded as restricted, temporarily restricted, or permanently restricted support, depending
on the existence and/or nature of any donor restrictions.

3. Basis of Accounting. The accompanying financial statements have been prepared on the accrual basis
of accounting in accordance with generally accepted accounting principles.

4. Cash Equivalents. Cash equivalents consist of short-term, highly liquid investments which are readily
convertible into cash within ninety days of purchase.

5. Revenue and Support. The Conference Treasurer records support, revenue, and expenses in the years
to which they apply, as specified by the Conference and as designated by the respective contributors.
The Conference Treasurer recognizes as receivable those items of support and revenue that are
designated for the present fiscal year but are received subsequent to year end. Similarly, the
Conference Treasurer recognizes as payable those program funds that are designated for distribution
in the present fiscal year but which remain unpaid as of year end.

6. Marketable Securities. Funds that are not expected to be required for immediate operation of the
Conference are maintained in various short-term investments. Such investments are reported at market
value at December 31, 2005.

7. Donated Services. Unpaid volunteers make contributions of time in various administrative


and program functions. The value of contributed time is not reflected in the financial statements
as it is not susceptible to objective measurement of valuation.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
NOTES TO THE FINANCIAL STATEMENTS (continued)

8. 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. Accordingly, certain costs
have been allocated among the programs and supporting services benefited.

9. Estimates. The preparation of financial statements in conformity with generally accepted


accounting principles requires management to make estimates and assumptions that affect certain
reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

10. Income taxes. The Conference Treasurer is recognized as a not-for-profit entity that is exempt from
federal income taxes under Section 501( C ) (3) of the Internal Revenue Code. Therefore, no
provision has been made for federal income taxes in the accompanying financial statements.

NOTE B – RESTRICTED NET ASSETS:

Temporarily restricted net assets are those assets that are designated by action of the Tennessee Annual
Conference of the United Methodist Church for program ministries of the respective Conference boards
and agencies. Permanently restricted net assets consist of endowment fund investments, the income from
which is expendable for clergy pensions and other designated purposes.

Restricted assets include certain assets that are maintained by the Treasurer on behalf of certain boards and
agencies for investment and administration. These are as follows:

Fund Title Board or Agency Balance – December 31, 2005

Board of Pensions Board of Pensions $ 1087280


Columbia District Trustees Columbia District Trustees $ 17691
Conference Trustees Conference Board of Trustees $ 9045
Cookeville District Trustees Cookeville District Trustees $ 4570
Hollowell Fund Conference Board of Pensions $ 154221
Nashville Area United Nashville Area United
Methodist Foundation Methodist Foundation $ 28941
Pulaski District Trustees Pulaski District Trustees $ 4920
Tillett Loan Fund Board of Ordained Ministry $ 108025
Trust Fund Dividend Board of Missions $ 10000

Temporarily restricted net assets total $ 3343507 as of December 31, 2005 and permanently restricted net
assets total $ 425000 as of December 31, 2005, bringing total restricted net assets to $ 3768507.

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TENNESSEE ANNUAL CONFERENCE OF THE UNITED METHODIST CHURCH
CONFERENCE TREASURER
NOTES TO THE FINANCIAL STATEMENTS (continued)

NOTE C – CONTINGENCIES:

The financial statements have been prepared to reflect the effect of allocation among the funds of payment
made during the year ended December 31, 2005, in a settlement resulting from mediation of a claim
brought against the Conference. On April 2, 2005, the Tennessee Annual Conference of the United
Methodist Church, in a special session, resolved to allocate payment among the funds as follows;

Contingency $ 100000
Connectional Ministries 100000
Camp Maintenance 2764
Camp Fund 277236
NAUMF Reserve 53027

Total $ 533027

NOTE D – CONCENTRATIONS OF CREDIT RISK:

The Conference Treasurer maintains depository accounts for Conference funds with Suntrust Bank,
Nashville, Tennessee. Accounts at banking institutions are insured by the Federal Deposit Insurance
Corporation (FDIC) up to $ 100000. At December 31, 2005, Conference funds on deposit with Suntrust
Bank exceeded the insured amounts by $ 316076.

In addition, the Conference Treasurer has arranged with Suntrust Bank to invest on a daily basis certain
funds that are not expected to be required immediately for Conference financial operations, but may be
required for current operations at any given time. The Conference Treasurer has invested in commercial
paper that has been issued by major corporations. As of December 31, 2005, the amounts of these
investments were $ 816000.

The Conference Treasurer also maintains investment accounts with Morgan Keegan, an investment
brokerage firm. These funds are not expected to be required for current financial operations. The value of
these investments at December 31, 2005 was $ 1473565.

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