Kids for the Kingdom 2018 Independent Financial Audit
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KIDS FOR THE KINGDOM, INC.<br />
FINANCIAL STATEMENTS (REISSUED)<br />
FOR THE YEAR ENDED<br />
DECEMBER 31, <strong>2018</strong>
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INTRODUCTORY SECTION
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KIDS FOR THE KINGDOM, INC.<br />
<strong>Financial</strong> Statements (REISSUED)<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
Table of Contents<br />
Page<br />
INTRODUCTORY SECTION<br />
Table of Contents ........................................................................................................................................... i<br />
Board of Directors ......................................................................................................................................... ii<br />
FINANCIAL SECTION<br />
<strong>Independent</strong> <strong>Audit</strong>or's Report .................................................................................................................. 1<br />
<strong>Financial</strong> Statements:<br />
Statement of <strong>Financial</strong> Position .......................................................................................................... 3<br />
Statement of Activities ........................................................................................................................ 4<br />
Statement of Functional Expenses ..................................................................................................... 5<br />
Statement of Cash Flows ..................................................................................................................... 6<br />
Notes to <strong>Financial</strong> Statements ............................................................................................................. 7<br />
i
KIDS FOR THE KINGDOM, INC.<br />
BOARD OF DIRECTORS<br />
December 31, <strong>2018</strong><br />
Rebecca Love, Chairman<br />
Wendell Walker, Treasurer<br />
Valerie Willams, Secretary<br />
Greg Dabel<br />
Peter Lundblad<br />
Melody Miles<br />
Omar Tannehill<br />
ii
FINANCIAL SECTION
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INDEPENDENT AUDITOR'S REPORT<br />
To <strong>the</strong> Board of Directors of <strong>the</strong><br />
<strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong>, Inc.<br />
Sebastopol, Cali<strong>for</strong>nia<br />
We have audited <strong>the</strong> accompanying financial statements of <strong>the</strong> <strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong>, Inc. (a nonprofit<br />
organization), which comprise <strong>the</strong> statement of financial position as of December 31, <strong>2018</strong>, and <strong>the</strong> related<br />
statements of activities, functional expenses and cash flows <strong>for</strong> <strong>the</strong> year <strong>the</strong>n ended, and <strong>the</strong> related notes to<br />
<strong>the</strong> financial statements.<br />
Management’s Responsibility <strong>for</strong> <strong>the</strong> <strong>Financial</strong> Statements<br />
Management is responsible <strong>for</strong> <strong>the</strong> preparation and fair presentation of <strong>the</strong>se financial statements in<br />
accordance with accounting principles generally accepted in <strong>the</strong> United States of America; this includes <strong>the</strong><br />
design, implementation, and maintenance of internal control relevant to <strong>the</strong> preparation and fair presentation<br />
of financial statements that are free from material misstatement, whe<strong>the</strong>r due to fraud or error.<br />
<strong>Audit</strong>or’s Responsibility<br />
Our responsibility is to express an opinion on <strong>the</strong>se financial statements based on our audit. We conducted<br />
our audit in accordance with auditing standards generally accepted in <strong>the</strong> United States of America. Those<br />
standards require that we plan and per<strong>for</strong>m <strong>the</strong> audit to obtain reasonable assurance about whe<strong>the</strong>r <strong>the</strong><br />
financial statements are free from material misstatement.<br />
An audit involves per<strong>for</strong>ming procedures to obtain audit evidence about <strong>the</strong> amounts and disclosures in <strong>the</strong><br />
financial statements. The procedures selected depend on <strong>the</strong> auditor’s judgment, including <strong>the</strong> assessment<br />
of <strong>the</strong> risks of material misstatement of <strong>the</strong> financial statements, whe<strong>the</strong>r due to fraud or error. In making<br />
those risk assessments, <strong>the</strong> auditor considers internal control relevant to <strong>the</strong> Organization’s preparation and<br />
fair presentation of <strong>the</strong> financial statements in order to design audit procedures that are appropriate in <strong>the</strong><br />
circumstances, but not <strong>for</strong> <strong>the</strong> purpose of expressing an opinion on <strong>the</strong> effectiveness of <strong>the</strong> Organization’s<br />
internal control. Accordingly, we express no such opinion. An audit also includes evaluating <strong>the</strong><br />
appropriateness of accounting policies used and <strong>the</strong> reasonableness of significant accounting estimates<br />
made by management, as well as evaluating <strong>the</strong> overall presentation of <strong>the</strong> financial statements.<br />
We believe that <strong>the</strong> audit evidence we have obtained is sufficient and appropriate to provide a basis <strong>for</strong> our<br />
audit opinion.<br />
Opinion<br />
In our opinion, <strong>the</strong> financial statements referred to above present fairly, in all material respects, <strong>the</strong> financial<br />
position of <strong>the</strong> <strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong>, Inc. as of December 31, <strong>2018</strong>, and <strong>the</strong> changes in its net assets and its<br />
cash flows <strong>for</strong> <strong>the</strong> year <strong>the</strong>n ended in accordance with accounting principles generally accepted in <strong>the</strong><br />
United States of America.<br />
1
Emphasis of Matters<br />
Restatement<br />
As discussed in Note 2N, <strong>the</strong> Organization restated beginning net assets by $7,257 to correct an<br />
understatement of accounts payable in <strong>the</strong> prior period.<br />
Reissued <strong>Financial</strong> Statements<br />
These financial statements were previously released in September 2019, however, in November of 2019,<br />
management determined that <strong>the</strong> estimate of its receivable from a bequest could be significantly different<br />
to <strong>the</strong> amount it will receive once <strong>the</strong> related estate affairs have been completed and assets are distributed.<br />
There<strong>for</strong>e, management has deemed it necessary to write down <strong>the</strong> receivable to <strong>the</strong> amount that has been<br />
received as of <strong>the</strong> time this report is reissued. In addition, management has adjusted <strong>the</strong> investment<br />
receivable and related income balance, and has modified verbiage in its footnotes.<br />
The emphasis of <strong>the</strong>se matters do not constitute a change in our opinion.<br />
Report on Summarized Comparative In<strong>for</strong>mation<br />
We have previously audited <strong>the</strong> <strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong>, Inc.’s 2017 financial statements, and we expressed<br />
an unmodified audit opinion on those audited financial statements in our report dated April 10, <strong>2018</strong>. In our<br />
opinion, <strong>the</strong> summarized comparative in<strong>for</strong>mation presented herein as of and <strong>for</strong> <strong>the</strong> year ended December<br />
31, 2017 is consistent, in all material respects, with <strong>the</strong> audited financial statements from which it has been<br />
derived, o<strong>the</strong>r than <strong>the</strong> restatement discussed above.<br />
Pleasant Hill, Cali<strong>for</strong>nia<br />
Original Issue Date: September 24, 2019<br />
Reissued: November 27, 2019<br />
2
KIDS FOR THE KINGDOM, INC.<br />
STATEMENT OF FINANCIAL POSITION<br />
DECEMBER 31, <strong>2018</strong><br />
WITH COMPARATIVE AMOUNTS AT DECEMBER 31, 2017<br />
ASSETS <strong>2018</strong> 2017<br />
Current Assets:<br />
Cash $21,434 $23,254<br />
Investments 44,917<br />
Bequest receivable (Note 3) 15,000,000<br />
Investment income receivable (Note 3) 2,564,239<br />
Total current assets 17,585,673 68,171<br />
Computer equipment, less accumulated depreciation<br />
of $8,719 and $8,484, respectively (Note 2H) 470 705<br />
Total Assets $17,586,143 $68,876<br />
LIABILITIES<br />
Current Liabilities:<br />
Accounts payable $10,662 $7,257<br />
Accrued payroll 3,340<br />
Total Liabilities 14,002 7,257<br />
NET ASSETS (Note 2A)<br />
With donor restrictions (Note 5):<br />
Restricted in perpetuity 15,000,000<br />
Restricted <strong>for</strong> time purposes 2,564,239<br />
Total net assets with donor restrictions 17,564,239<br />
Without donor restrictions 7,902 61,619<br />
Total Net Assets 17,572,141 61,619<br />
Total Liabilities and Net Assets $17,586,143 $68,876<br />
See accompanying notes to financial statements<br />
3
KIDS FOR THE KINGDOM, INC.<br />
STATEMENT OF ACTIVITIES<br />
FOR THE YEAR ENDED DECEMBER 31, <strong>2018</strong><br />
WITH SUMMARIZED TOTALS FOR THE YEAR ENDED DECEMBER 31, 2017<br />
Totals<br />
Without Donor With Donor<br />
Restrictions Restrictions <strong>2018</strong> 2017<br />
SUPPORT AND REVENUES<br />
Contributions $176,397 $176,397 $171,308<br />
Bequest (Note 3) $15,000,000 15,000,000<br />
Campaign 26,374 26,374 31,249<br />
Grants 158,387 158,387 115,865<br />
In-kind contributions (Note 4) 15,220 15,220 16,920<br />
Investment income 273 2,564,239 2,564,512 24<br />
Donated securities 50,244 50,244 118,851<br />
Unrealized gain (loss) on investments, net (2,172) (2,172) 6,677<br />
Total Support and Revenues 424,723 17,564,239 17,988,962 460,894<br />
EXPENSES<br />
Program 421,553 421,553 405,236<br />
Management and general 56,887 56,887 51,074<br />
Fundraising<br />
Total Expenses 478,440 478,440 456,310<br />
Changes in Net Assets (53,717) 17,564,239 17,510,522 4,584<br />
Net Assets at beginning of year, as restated (Note 1N) 61,619 61,619 57,035<br />
Net Assets at end of year $7,902 $17,564,239 $17,572,141 $61,619<br />
See accompanying notes to financial statements<br />
4
KIDS FOR THE KINGDOM, INC.<br />
STATEMENT OF FUNCTIONAL EXPENSES<br />
FOR THE YEAR ENDED DECEMBER 31, <strong>2018</strong><br />
WITH SUMMARIZED TOTALS FOR THE YEAR ENDED DECEMBER 31, 2017<br />
Management<br />
Totals<br />
and<br />
Program General Fundraising <strong>2018</strong> 2017<br />
EXPENSES<br />
Grants and allocations $229,596 $229,596 $202,315<br />
Advertising (Note 2I) 5,926 5,926 9,771<br />
Bank service charges $523 523 448<br />
Credit card processing 1,059 1,059 1,650<br />
Depreciation 235 235 349<br />
Dues and subscriptions 579 579 1,133<br />
Insurance 3,407 3,407 3,193<br />
Licenses and permits 0 48<br />
Medical 22,864 22,864 22,313<br />
Miscellaneous 992 2,074 3,066 1,566<br />
Payroll 108,248 38,835 147,083 144,099<br />
Postage, shipping and freight 2,977 21 2,998 5,489<br />
Printing and publications 5,971 5,971 9,571<br />
Professional fees 2,088 8,104 10,192 10,083<br />
Occupancy (Note 4) 11,520 2,880 14,400 14,400<br />
In-kind expense (Note 4) 820 820 2,520<br />
Supplies 5,539 600 6,139 5,738<br />
Telephone 2,106 605 2,711 2,503<br />
Travel 18,108 18,108 16,386<br />
Utilities 2,211 552 2,763 2,735<br />
Total Functional Expenses $421,553 $56,887 $0 $478,440 $456,310<br />
See accompanying notes to financial statements<br />
5
KIDS FOR THE KINGDOM, INC.<br />
STATEMENT OF CASH FLOWS<br />
FOR THE YEAR ENDED DECEMBER 31, <strong>2018</strong><br />
WITH COMPARATIVE AMOUNTS FOR THE YEAR ENDED DECEMBER 31, 2017<br />
CASH FLOWS FROM OPERATING ACTIVITIES<br />
<strong>2018</strong> 2017<br />
Changes in net assets $17,510,522 $4,584<br />
Adjustments to reconcile to net cash provided by<br />
operating activities:<br />
Depreciation 235 349<br />
(Increase) in bequest receivable (15,000,000)<br />
(Increase) in investment income receivable (2,564,239)<br />
Increase in accounts payable 3,405 7,257<br />
Increase in accrued payroll 3,340<br />
Cash Flows (used) provided by operating activities (17,557,259) 7,606<br />
NET CASH FLOWS (46,737) 12,190<br />
Cash and cash equivalents at beginning of year 68,171 55,981<br />
Cash and cash equivalents at end of year $21,434 $68,171<br />
<strong>Financial</strong> Statement Presentation:<br />
Cash $21,434 $23,254<br />
Investments 44,917<br />
Cash and investments at end of year $21,434 $68,171<br />
SUPPLEMENTAL DISCLOSURES<br />
Non-Cash Activities<br />
Contribution of goods, rent and services $15,220 $16,920<br />
No taxes or interest were paid by <strong>the</strong> Organization during <strong>2018</strong><br />
and 2017.<br />
See accompanying notes to financial statements<br />
6
NOTE 1 – REPORTING ENTITY<br />
A. Description of <strong>the</strong> Organization<br />
KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
<strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong>, Inc. (<strong>the</strong> Organization) is a nonprofit organization whose mission is to<br />
trans<strong>for</strong>m <strong>the</strong> living conditions and spiritual lives of children and families, especially in third-world<br />
and war-torn countries, so that <strong>the</strong>y can trans<strong>for</strong>m <strong>the</strong>ir nation <strong>for</strong> Christ.<br />
B. Programs<br />
The Organization’s primary purposes and objectives are to provide support <strong>for</strong> Christian nationals<br />
(indigenous workers) and <strong>for</strong>eign NGO’s (non-government organizations) committed to meeting<br />
<strong>the</strong> physical and spiritual needs of children and families around <strong>the</strong> world, especially in third<br />
world countries, war-torn nations, and disaster sites, including such activities as <strong>the</strong> provision of<br />
food, medicines, medical services, clothing, blankets, education, schools, Bible training,<br />
vocational-training, micro-enterprise loans, and <strong>the</strong> fulfilling of <strong>the</strong> Great Commission and<br />
spreading of <strong>the</strong> Word of God as described in <strong>the</strong> Bible.<br />
Program Service Accomplishments<br />
During <strong>the</strong> year ended December 31, <strong>2018</strong>, <strong>the</strong> Organization provided funding, logistical support,<br />
and oversight <strong>for</strong> <strong>the</strong> following programs:<br />
CHINA The organization provided and delivered services to 460 children, widows, and families<br />
including orphan care, handicapped and widow care services, education and school services, and<br />
distribution of blankets, medicines, and food. For security reasons exact location of <strong>the</strong> project<br />
(interior China) is not published. Total cash grant funding <strong>for</strong> projects and support in China during<br />
<strong>2018</strong> was $2,200.<br />
EL SALVADOR The organization provided and delivered services to 403 children, widows, and<br />
families including feeding and nutrition programs, Bible Clubs, and job-training in San Salvador,<br />
Cangrejera, and Quezalapa. Total cash grant funding <strong>for</strong> projects and support in El Salvador<br />
during <strong>2018</strong> was $2,345.<br />
GERMANY The organization provided and delivered services to 560 children, widows, and<br />
families including children’s Bible Clubs, Youth Clubs, community outreach, summer camp<br />
experience, job-training, food distribution in Hellersdorf-East Berlin. Total cash grant funding <strong>for</strong><br />
projects and support in Germany during <strong>2018</strong> was $2,845.<br />
GHANA The organization provided and delivered services to 7,750 children, widows, and<br />
families including feeding programs, job-training programs, Bible Clubs, medical clinic,<br />
community water project, and micro-enterprise loan program in Accra, Jasikan, and <strong>the</strong> Volta<br />
Region. Total cash grant funding <strong>for</strong> projects and support in Ghana during <strong>2018</strong> was $8,165.<br />
GUATEMALA The organization provided and delivered services to 92,736 children, widows,<br />
and families including operation of medical clinics, dental clinics, schools, job-training, feeding<br />
(breakfast) program, nutrition programs, sports training, family counseling, community pharmacy,<br />
and eye clinic in Guatemala City and Zacapa. Total cash grant funding <strong>for</strong> projects and support in<br />
Guatemala during <strong>2018</strong> was $6,535.<br />
7
NOTE 1 – REPORTING ENTITY (Continued)<br />
KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
INDIA The organization provided and delivered services to 8,331 children, widows, and families<br />
including Bible Clubs and hot dinner/lunch feeding programs in sixty-eight locations throughout<br />
Chennai, Manapakkam, Nandambakkam, Coimbatore, Bhopal, Erode, Salem, and Maduravoil;<br />
job-training programs, income-generation projects, tuition centers, Christmas outreach programs,<br />
and outreach to poor and needy. Total cash grant funding <strong>for</strong> projects and support in India during<br />
<strong>2018</strong> was $17,350.<br />
KENYA The organization provided and delivered services to 63,318 children, widows, and<br />
families including operation and maintenance of community water wells, projects, and systems<br />
throughout <strong>the</strong> Nakuru Region; job-training and self-sufficiency programs; feeding programs,<br />
Bible Clubs, health clinic, immunization programs, mercy projects, and children’s homes in<br />
Nakuru and Nairobi. Total cash grant funding <strong>for</strong> projects and support in Kenya during <strong>2018</strong> was<br />
$43,827.<br />
MALAWI The organization provided and delivered services to 14,528 children, widows, and<br />
families including education, feeding, skill-training, and mercy projects in Lilongwe. Total cash<br />
grant funding <strong>for</strong> projects and support in Malawi during <strong>2018</strong> was $10,566.<br />
NICARAGUA The organization provided and delivered services to 930 children, widows, and<br />
families including orphanages, job-training programs, ethics classes, operation of schools, feeding<br />
programs, micro-enterprise loan project, business training, mercy projects, and parenting classes<br />
in Managua, Leon, Los Braziles, La Concha, El Corozal, and Nueva Guinea. Total cash grant<br />
funding <strong>for</strong> projects and support in Nicaragua during <strong>2018</strong> was $7,154.<br />
PAKISTAN The organization provided and delivered services to 207 children, widows, and<br />
families including orphan care, earthquake relief, distribution of relief supplies, and persecution<br />
relief. For security reasons <strong>the</strong> exact location of projects inside Pakistan is not published. Total<br />
cash grant funding <strong>for</strong> projects and support in Pakistan during <strong>2018</strong> was $7,159.<br />
RUSSIA The organization provided and delivered services to 890 children, widows, and families<br />
including counseling, medical services, food supplies; weekly visits to children’s psychiatric<br />
hospital in Maikop to provide counseling services, medical intervention, clothing to children;<br />
provide food and counseling services to babies and toddlers at children’s orphanage in Maikop;<br />
programming and foods/medicines <strong>for</strong> children at orphanages in Sevastopol and Krasnodar. Total<br />
cash grant funding <strong>for</strong> projects and support in Russia during <strong>2018</strong> was $22,100.<br />
SOUTH SUDAN The organization provided and delivered services to 1,925 children, widows,<br />
and families including orphan care, 2 deep water wells, emergency medical care, and distribution<br />
of flood relief supplies. Total cash grant funding <strong>for</strong> projects and support in South Sudan during<br />
<strong>2018</strong> was $4,725.<br />
ZAMBIA The organization delivered services to 4,385 children, widows, and families affected by<br />
HIV/AIDS in Lusaka. Total cash support <strong>for</strong> programs in Zambia during <strong>2018</strong> was $26,279.<br />
ZIMBABWE The organization provided and delivered services to 1,043 children, widows, and<br />
families including feeding programs, mercy projects, and job-training. Total cash grant funding<br />
<strong>for</strong> projects and support in Zimbabwe during <strong>2018</strong> was $535.<br />
8
KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES<br />
A. Basis of Presentation<br />
The accompanying financial statements have been prepared on <strong>the</strong> accrual basis of accounting in<br />
accordance with accounting principles generally accepted in <strong>the</strong> United States of America (GAAP).<br />
The financial statement presentation follows <strong>the</strong> recommendations of <strong>the</strong> <strong>Financial</strong> Accounting<br />
Standards Board (FASB) in <strong>the</strong> Accounting Standards Codification (ASC), No. 958, <strong>Financial</strong><br />
Statements of Not-<strong>for</strong>-Profit Organizations.<br />
The Organization reports in<strong>for</strong>mation regarding its financial position and activities according to<br />
two classes of net assets:<br />
Net Assets Without Donor Restrictions – Net assets available <strong>for</strong> use in general operations that are<br />
not subject to or are no longer subject to donor-imposed restrictions.<br />
Net Assets With Donor Restrictions – Net assets whose use is limited by donor-imposed time and/or<br />
purpose restrictions. K4K WoSome donor-imposed restrictions are temporary in nature, such as<br />
those that will be met by <strong>the</strong> passage of time or o<strong>the</strong>r events specified by <strong>the</strong> donor. O<strong>the</strong>r donorimposed<br />
restrictions are perpetual in nature, where <strong>the</strong> donor stipulates that resources be maintained<br />
in perpetuity. Donor-imposed restrictions are released when a restriction expires, that is, when <strong>the</strong><br />
stipulated time has elapsed, when <strong>the</strong> stipulated purpose <strong>for</strong> which <strong>the</strong> resource was restricted has<br />
been fulfilled, or both.<br />
Revenues are reported as increases in net assets without donor restriction unless use of <strong>the</strong> related<br />
assets is limited by donor-imposed restrictions. Expenses are reported as decreases in net assets<br />
without donor restrictions. Gains and losses on investments and o<strong>the</strong>r assets or liabilities are<br />
reported as increases or decreases in net assets without donor restrictions unless <strong>the</strong>ir use is<br />
restricted by explicit donor stipulation or by law. Expirations of donor restrictions on <strong>the</strong> net assets<br />
(i.e., <strong>the</strong> donor-stipulated purpose has been fulfilled and/or <strong>the</strong> stipulated time period has elapsed)<br />
are reported as reclassifications between <strong>the</strong> applicable classes of net assets. The Organization has<br />
adopted a policy to classify donor restricted contributions as without donor restrictions to <strong>the</strong> extent<br />
that donor restrictions were met in <strong>the</strong> year <strong>the</strong> contribution was received.<br />
B. Cash and Cash Equivalents<br />
The Organization considers all unrestricted highly liquid investments with an initial maturity of three<br />
months or less to be cash equivalents.<br />
C. Investments<br />
Investments are reported at <strong>the</strong>ir fair values in <strong>the</strong> statement of financial position using readily<br />
determinable market values. Net investment return/(loss) is reported in <strong>the</strong> statement of activities and<br />
consists of interest and dividend income, realized and unrealized capital gains and losses, less<br />
external and direct internal investment expenses.<br />
9
KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)<br />
D. Receivables<br />
Contributions and grants receivable are stated at <strong>the</strong> amount <strong>the</strong> Organization’s management expects<br />
to collect from outstanding balances. Management provides <strong>for</strong> probable uncollectible amounts<br />
through a charge to bad debt expense and a credit to a valuation based on its assessment of <strong>the</strong><br />
current status of individual accounts. Management believes <strong>the</strong> entire balance of receivables is<br />
collectible, and <strong>the</strong>re<strong>for</strong>e, no allowance was recorded as of December 31, <strong>2018</strong>.<br />
E. Support and O<strong>the</strong>r Revenue<br />
Contributions consist of grants and gifts from individuals, corporations, and organization.<br />
Unconditional promises to give are recognized as revenues or gains in <strong>the</strong> period received and as<br />
assets depending on <strong>the</strong> <strong>for</strong>m of <strong>the</strong> benefits received. Conditional promises to give are recognized<br />
only when <strong>the</strong> conditions on which <strong>the</strong>y depend are substantially met and <strong>the</strong> promises become<br />
unconditional.<br />
F. Functional Allocation of Expenses<br />
The costs of providing <strong>the</strong> various programs and activities have been summarized on a functional<br />
basis in <strong>the</strong> statement of activities. Those expenses which cannot be specifically identified by<br />
function type have been allocated to functions based upon management’s best estimate of usage.<br />
For certain such expenses, such as payroll costs, <strong>the</strong>se estimates are based on time incurred in<br />
different activities.<br />
G. Use of Estimates<br />
The preparation of financial statements, in con<strong>for</strong>mity with generally accepted accounting<br />
principles requires management to make estimates and assumptions that affect certain reported<br />
amounts and disclosures. Accordingly, actual results could differ from those estimates.<br />
H. Computer Equipment<br />
Computer equipment is stated at cost. Depreciation is computed over <strong>the</strong> estimated useful lives<br />
(generally, five years), of <strong>the</strong> respective assets on a straight-line basis. Expenses <strong>for</strong> maintenance<br />
and repairs are charged against operations as incurred.<br />
I. Advertising Costs<br />
Advertising costs are expensed as incurred. The Organization spent $8,452 <strong>for</strong> advertising <strong>for</strong> <strong>the</strong><br />
year ended December 31, <strong>2018</strong>.<br />
10
KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)<br />
J. Income Taxes<br />
The Organization is exempt from income tax under Section 501(c)(3) of <strong>the</strong> United States Internal<br />
Revenue Code. Accordingly, no provision <strong>for</strong> income taxes has been provided in <strong>the</strong>se financial<br />
statements. In addition, <strong>the</strong> Organization qualifies <strong>for</strong> <strong>the</strong> charitable contribution deduction under<br />
Section 170(b)(1)(a) and has been classified as an organization that is not a private foundation<br />
under Section 509(a)(1). Unrelated business income, if any, may be subject to income tax. The<br />
Organization paid no taxes on unrelated business income in <strong>the</strong> year ended December 31, <strong>2018</strong>.<br />
Generally accepted accounting principles require <strong>the</strong> recognition, measurement, classification, and<br />
disclosure in <strong>the</strong> financial statements of uncertain tax positions taken or expected to be taken in<br />
<strong>the</strong> organization’s tax returns. Management has determined that <strong>the</strong> Organization does not have<br />
any uncertain tax positions and associated unrecognized benefits that materially impact <strong>the</strong><br />
financial statements or related disclosures. Since tax matters are subject to some degree of<br />
uncertainty, <strong>the</strong>re can be no assurance that <strong>the</strong> Organization’s tax returns will not be challenged by<br />
<strong>the</strong> taxing authorities and that <strong>the</strong> Organization will not be subject to additional tax, penalties, and<br />
interest as a result of such challenge. Generally, <strong>the</strong> Organization’s tax returns remain open <strong>for</strong><br />
federal income tax examination <strong>for</strong> three years from <strong>the</strong> date of filing, and Cali<strong>for</strong>nia state income<br />
tax examination <strong>for</strong> four years from <strong>the</strong> date of filing.<br />
K. Fair Value Measurements<br />
Fair value is defined as <strong>the</strong> price that would be received to sell an asset or paid to transfer a<br />
liability in an orderly transaction between market participants at <strong>the</strong> measurement date.<br />
Accounting standards set a framework <strong>for</strong> measuring fair value using a three-tier hierarchy based<br />
on <strong>the</strong> extent to which inputs used in measuring fair value are observable in <strong>the</strong> market.<br />
Level 1: Quoted prices in active markets <strong>for</strong> identical assets or liabilities.<br />
Level 2: Observable inputs o<strong>the</strong>r than Level 1 prices such as quoted prices <strong>for</strong> similar assets or<br />
liabilities, quoted prices in markets that are not active, or inputs (interest rates, currency exchange<br />
rates, commodity rates and yield curves) that are observable or corroborated by observable market<br />
data <strong>for</strong> substantially <strong>the</strong> full term of <strong>the</strong> assets or liabilities.<br />
Level 3: Inputs that are not observable in <strong>the</strong> market and reflect <strong>the</strong> management’s judgment about<br />
<strong>the</strong> assumptions that market participants would use in pricing <strong>the</strong> asset or liability.<br />
L. Prior Year Totals<br />
The financial statements include certain prior year summarized comparative in<strong>for</strong>mation in total,<br />
but not by net asset class. Such in<strong>for</strong>mation does not include sufficient detail to contribute a<br />
presentation in con<strong>for</strong>mity with generally accepted accounting principles. Accordingly, such<br />
in<strong>for</strong>mation should be read in conjunction with <strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong> Inc.’s financial statements<br />
<strong>for</strong> <strong>the</strong> year ended December 31, 2017, from which <strong>the</strong> summarized in<strong>for</strong>mation is derived.<br />
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KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)<br />
M. New Accounting Pronouncement<br />
During <strong>the</strong> year ended December 31, <strong>2018</strong>, <strong>the</strong> Organization adopted <strong>the</strong> requirements of <strong>the</strong><br />
<strong>Financial</strong> Accounting Standards Board’s (FASB) Accounting Standards Update No. 2016-14,<br />
Not-<strong>for</strong>-Profit Entities (Topic 958): Presentation of <strong>Financial</strong> Statements of Not-<strong>for</strong>-Profit Entities<br />
(ASU 2016-14). The Update addresses <strong>the</strong> complexity and understandability of net asset<br />
classification, deficiencies in in<strong>for</strong>mation about liquidity and availability of resources, and <strong>the</strong><br />
lack of consistency in <strong>the</strong> type of in<strong>for</strong>mation provided about expenses and investment return<br />
between not-<strong>for</strong>-profit entities. A key change required by ASU 2016-14 is <strong>the</strong> net asset classes<br />
used in <strong>the</strong>se financial statements. Amounts previously reported as unrestricted net assets are now<br />
reported as net assets without donor restrictions and amounts previously reported as temporarily<br />
restricted net assets and permanently restricted net assets are now reported as net assets with donor<br />
restrictions. A footnote on liquidity has also been added (see Note 6).<br />
N. Restatement<br />
During <strong>the</strong> year ended December 31, <strong>2018</strong>, management determined that accounts payable was<br />
understated <strong>for</strong> <strong>the</strong> year ended December 31, 2017. As a result, a restatement of <strong>the</strong> prior period<br />
expenses was recorded, resulting in a decrease of net assets without donor restrictions of $7,257.<br />
O. Subsequent Events<br />
<strong>Kids</strong> <strong>for</strong> <strong>the</strong> <strong>Kingdom</strong>, Inc. evaluated subsequent events <strong>for</strong> recognition and disclosure through<br />
September 24, 2019, <strong>the</strong> date which <strong>the</strong>se financial statements were available to be issued.<br />
Management concluded that no material subsequent events have occurred since December 31, <strong>2018</strong><br />
that requires recognition or disclosure in such financial statements.<br />
NOTE 3 – BEQUEST RECEIVABLE<br />
During <strong>the</strong> year ended December 31, <strong>2018</strong>, <strong>the</strong> Organization became entitled to a distribution from<br />
<strong>the</strong> Rouse Family Living Trust. As of <strong>the</strong> date of reissuance of <strong>the</strong>se financial statements, <strong>the</strong><br />
Organization has received $15,000,000, which has been recorded as a receivable as of December<br />
31, <strong>2018</strong>. Management has estimated that <strong>the</strong> total amount it will receive is approximately $53<br />
million based on <strong>the</strong> fair value of <strong>the</strong> assets held in <strong>the</strong> trust as of December 31, <strong>2018</strong>. Management<br />
expects to receive distributions from <strong>the</strong> trust in 2019 and 2020. The amounts received from <strong>the</strong><br />
trust will be placed in an endowment fund to be held in perpetuity.<br />
In addition to <strong>the</strong> corpus of <strong>the</strong> bequest, interest, dividends and capital gains accumulated as of<br />
December 31, <strong>2018</strong>, amounted to $2,564,239, and was recorded as interest receivable as of yearend.<br />
The Organization will be allowed to utilize <strong>the</strong> investment earnings from <strong>the</strong> endowment to advance<br />
its ministry worldwide.<br />
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NOTE 4 – IN-KIND DONATIONS<br />
KIDS FOR THE KINGDOM, INC.<br />
NOTES TO THE FINANCIAL STATEMENTS<br />
For <strong>the</strong> Year Ended December 31, <strong>2018</strong><br />
The Organization is not charged <strong>for</strong> <strong>the</strong> use of its office space. Fair value of <strong>the</strong> office space was<br />
$14,400 <strong>for</strong> <strong>the</strong> year ended December 31, <strong>2018</strong> and is recognized in <strong>the</strong> accompanying financial<br />
statements as in-kind donations, offset by expenses <strong>for</strong> occupancy.<br />
The Organization also received a one-time donation of clothing. Fair value of <strong>the</strong> clothing was<br />
$820 <strong>for</strong> <strong>the</strong> year ended December 31, <strong>2018</strong> and is recognized in <strong>the</strong> accompanying financial<br />
statements as in-kind donations, offset by in-kind expense.<br />
NOTE 5 – NET ASSETS WITH DONOR RESTRICTIONS<br />
As of December 31, <strong>2018</strong>, <strong>the</strong> Organization had $17,564,239 of net assets with donor restrictions.<br />
This amount consisted solely of <strong>the</strong> Allison and Dorothy Rouse Endowment discussed in Note 3.<br />
$15 million is classified as Net Assets with Donor Restrictions – in Perpetuity, as <strong>the</strong> corpus of <strong>the</strong><br />
bequest is to be held in a permanent endowment. The remaining $2,564,239 relating to <strong>the</strong><br />
investment earnings as of year-end are classified as Net Assets with Donor Restrictions, until such<br />
time as it is received and spent on programs.<br />
NOTE 6 – LIQUIDITY AND AVAILABILITY OF RESOURCES<br />
<strong>Financial</strong> assets available <strong>for</strong> general expenditure, that is, without donor or o<strong>the</strong>r restrictions<br />
limiting <strong>the</strong>ir use, within one year of <strong>the</strong> balance sheet date, consisted of cash and cash equivalents<br />
of $21,434 and interest receivable of $2,564,239, totaling $2,585,673, as of December 31, <strong>2018</strong>.<br />
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