F Y E DECEMBER 31, 2018 AND 2017 - Our Military Kids · Depreciation and amortization 1,809 47 97...

FINANCIAL STATEMENTS

FOR THE YEARS ENDED

DECEMBER 31, 2018 AND 2017

OUR MILITARY KIDS, INC.

CONTENTS

PAGE NO.

INDEPENDENT AUDITOR'S REPORT 2

EXHIBIT A - Statements of Financial Position, as of December 31, 2018 and 2017 3

EXHIBIT B - Statements of Activities and Changes in Net Assets, for the YearsEnded December 31, 2018 and 2017 4 - 5

EXHIBIT C - Statement of Functional Expenses, for the Year Ended December 31,2018 6

EXHIBIT D - Statement of Functional Expenses, for the Year Ended December 31,2017 7

EXHIBIT E - Statements of Cash Flows, for the Years Ended December 31, 2018and 2017 8

NOTES TO FINANCIAL STATEMENTS 9 - 14

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INDEPENDENT AUDITOR'S REPORT

To the Board of DirectorsOur Military Kids, Inc.McLean, Virginia

We have audited the accompanying financial statements of Our Military Kids, Inc. (OMK), whichcomprise the statements of financial position as of December 31, 2018 and 2017, and the relatedstatements of activities and changes in net assets, functional expenses and cash flows for the years thenended, 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 statementsin accordance with accounting principles generally accepted in the United States of America; this includesthe design, implementation and maintenance of internal control relevant to the preparation and fairpresentation of financial statements that are free from material misstatement, whether due to fraud orerror.

Auditor’s Responsibility

Our responsibility is to express an opinion on these financial statements based on our audits. Weconducted our audits in accordance with auditing standards generally accepted in the United States ofAmerica. Those standards require that we plan and perform the audits to obtain reasonable assuranceabout whether the financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures 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 tofraud or error. In making those risk assessments, the auditor considers internal control relevant to theentity’s preparation and fair presentation of the financial statements in order to design audit proceduresthat are appropriate in the circumstances, but not for the purpose of expressing an opinion on theeffectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit alsoincludes evaluating the appropriateness of accounting policies used and the reasonableness ofsignificant accounting estimates made by management, as well as evaluating the overall presentation ofthe financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.

Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of OMK as of December 31, 2018 and 2017, and the changes in its net assets andits cash flows for the years then ended in accordance with accounting principles generally accepted in theUnited States of America.

April 24, 2019

4550 MONTGOMERY AVENUE · SUITE 650 NORTH · BETHESDA, MARYLAND 20814(301) 951-9090 · FAX (301) 951-3570 · WWW.GRFCPA.COM

___________________________

MEMBER OF CPAMERICA INTERNATIONAL, AN AFFILIATE OF HORWATH INTERNATIONAL

MEMBER OF THE AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS' PRIVATE COMPANIES PRACTICE SECTION

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EXHIBIT A


STATEMENTS OF FINANCIAL POSITIONAS OF DECEMBER 31, 2018 AND 2017

ASSETS

2018 2017CURRENT ASSETS

Cash and cash equivalents $ 1,146,920 $ 1,424,483Investments 6,737 -Grants and accounts receivable 190,924 145,731Prepaid expenses 1,235 9,912

Total current assets 1,345,816 1,580,126

PROPERTY AND EQUIPMENT

Computers and related equipment 54,613 54,613Less: Accumulated depreciation and amortization (54,613) (53,785)

Net property and equipment - 828

NONCURRENT ASSETS

Security deposit 3,500 3,500Grants receivable, net of current portion 66,667 50,000

Total noncurrent assets 70,167 53,500

TOTAL ASSETS $ 1,415,983 $ 1,634,454

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES

Accounts payable and accrued liabilities $ 49,725 $ 16,180

NET ASSETS

Without Donor Restrictions 978,330 1,385,908With Donor Restrictions 387,928 232,366

Total net assets 1,366,258 1,618,274

TOTAL LIABILITIES AND NET ASSETS $ 1,415,983 $ 1,634,454

See accompanying notes to financial statements. 3


STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

2018WithoutDonor

RestrictionsWith DonorRestrictions Total

SUPPORT AND REVENUE

Grants and contributions $ 1,396,893 $ 904,070 $ 2,300,963Investment income 1,443 - 1,443Net assets released from donor restrictions 748,508 (748,508) -

Total support and revenue 2,146,844 155,562 2,302,406

EXPENSES

Program Services 2,290,978 - 2,290,978

Supporting Services:Management and General 56,971 - 56,971Fundraising 206,473 - 206,473

Total supporting services 263,444 - 263,444

Total expenses 2,554,422 - 2,554,422

Changes in net assets (407,578) 155,562 (252,016)

Net assets at beginning of year 1,385,908 232,366 1,618,274

NET ASSETS AT END OF YEAR $ 978,330 $ 387,928 $ 1,366,258


EXHIBIT B

2017WithoutDonor

RestrictionsWith DonorRestrictions Total

$ 1,517,281 $ 578,025 $ 2,095,306824 - 824

544,572 (544,572) -

2,062,677 33,453 2,096,130

1,921,776 - 1,921,776

32,874 - 32,874136,507 - 136,507

169,381 - 169,381

2,091,157 - 2,091,157

(28,480) 33,453 4,973

1,414,388 198,913 1,613,301

$ 1,385,908 $ 232,366 $ 1,618,274


EXHIBIT C


STATEMENT OF FUNCTIONAL EXPENSESFOR THE YEAR ENDED DECEMBER 31, 2018

Supporting Services

ProgramServices

Managementand General Fundraising

TotalSupporting

ServicesTotal

Expenses

Salaries and benefits $ 383,253 $ 6,473 $ 187,917 $ 194,390 $ 577,643Printing and production 11,147 1,595 - 1,595 12,742Professional fees - 15,037 - 15,037 15,037Occupancy 42,231 2,501 4,327 6,828 49,059Accounting and audit fees - 15,640 - 15,640 15,640Insurance - 7,116 - 7,116 7,116Depreciation and amortization - 828 - 828 828Telecommunications 6,215 1,716 5,247 6,963 13,178Travel and transportation 803 785 1,395 2,180 2,983Postage and delivery 16,276 - 1,100 1,100 17,376Supplies 1,335 470 - 470 1,805Events and meetings 25,553 - 2,187 2,187 27,740Grants 1,803,357 - - - 1,803,357Licenses and permits 588 350 2,155 2,505 3,093Other 220 4,460 1,988 6,448 6,668

TOTAL $ 2,290,978 $ 56,971 $ 206,473 $ 263,444 $ 2,554,422


EXHIBIT D


STATEMENT OF FUNCTIONAL EXPENSESFOR THE YEAR ENDED DECEMBER 31, 2017

Supporting Services

ProgramServices

Managementand General Fundraising

TotalSupporting

ServicesTotal

Expenses

Salaries and benefits $ 284,246 $ 11,856 $ 108,828 $ 120,684 $ 404,930Printing and production 32,257 1,268 1,397 2,665 34,922Occupancy 41,979 2,360 4,720 7,080 49,059Accounting and audit fees - 11,592 - 11,592 11,592Insurance - 2,776 - 2,776 2,776Depreciation and amortization 1,809 47 97 144 1,953Telecommunications 7,419 377 4,052 4,429 11,848Travel and transportation 703 58 458 516 1,219Postage and delivery 10,186 67 4,113 4,180 14,366Supplies 2,578 703 101 804 3,382Events and meetings 22,185 610 10,394 11,004 33,189Grants 1,517,155 - - - 1,517,155Licenses and permits - 377 2,270 2,647 2,647Other 1,259 783 77 860 2,119

TOTAL $ 1,921,776 $ 32,874 $ 136,507 $ 169,381 $ 2,091,157


EXHIBIT E


STATEMENTS OF CASH FLOWSFOR THE YEARS ENDED DECEMBER 31, 2018 AND 2017

2018 2017CASH FLOWS FROM OPERATING ACTIVITIES

Changes in net assets $ (252,016) $ 4,973

Adjustments to reconcile changes in net assets to net cash (used) provided by operating activities:

Depreciation and amortization 828 1,953Donated stock (18,810) -Realized loss on investments 477 -Unrealized gain on investments (250) -

(Increase) decrease in:Grants and accounts receivable (61,860) 242,716Prepaid expenses 8,677 (6,505)

Increase (decrease) in:Accounts payable and accrued liabilities 33,545 (315)

Net cash (used) provided by operating activities (289,409) 242,822

CASH FLOWS FROM INVESTING ACTIVITIES

Sale of investments 11,846 -

Net cash provided by investing activities 11,846 -

Net (decrease) increase in cash and cash equivalents (277,563) 242,822

Cash and cash equivalents at beginning of year 1,424,483 1,181,661

CASH AND CASH EQUIVALENTS AT END OF YEAR $ 1,146,920 $ 1,424,483

SUPPLEMENTAL INFORMATION:

Donated Stock $ - $ 16,231



NOTES TO FINANCIAL STATEMENTSDECEMBER 31, 2018 AND 2017

1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION

Organization -

Our Military Kids, Inc. (OMK) is a nonprofit organization, incorporated in the Commonwealth ofVirginia and located in McLean. OMK's purpose is to provide financial assistance to children,ages five to eighteen years of age, of the nation's deployed National Guard and ReserveService Members, and all Wounded Warriors. The assistance is awarded to qualified recipientsto help with expenses associated with sports, dance, music, art and tutoring programs during amilitary parent or guardian's overseas deployment or recovery from severe injury.

Basis of presentation -

The accompanying financial statements are presented on the accrual basis of accounting, andin accordance with the Financial Accounting Standards Board (FASB) Accounting StandardsUpdate (ASU) 2016-14 Presentation of Financial Statements for Not-for-Profit Entities. The ASUwas adopted for the year ended December 31, 2018 and applied retrospectively.

Cash and cash equivalents -

OMK considers all cash and other highly liquid investments with initial maturities of threemonths or less to be cash equivalents.

Bank deposit accounts are insured by the Federal Deposit Insurance Corporation (“FDIC”) up toa limit of $250,000. At times during the year, OMK maintains cash balances at financialinstitutions in excess of the Federal Deposit Insurance Corporation (FDIC) limits. Managementbelieves the risk in these situations to be minimal.

Investments -

Investments are recorded at their readily determinable fair value. Realized and unrealized gainsand losses are included in investment income in the Statements of Activities and Changes inNet Assets. Donated investments are recorded at their fair value at the date of donation.

Grants and accounts receivable -

Grants and accounts receivable are recorded at their net realizable value, which approximatefair value. All grants and accounts receivable are considered by management to be fullycollectible. Accordingly, an allowance for doubtful accounts has not been established.

Property and equipment -

Property and equipment purchases in excess of $500 are stated at cost. Property andequipment purchases are depreciated on a straight-line basis over the estimated useful lives ofthree years. Depreciation and amortization expense for the years ended December 31, 2018and 2017 totaled $828 and $1,953, respectively.

Income taxes -

OMK is exempt from Federal income taxes under Section 501(c)(3) of the Internal RevenueCode. Accordingly, no provision for income taxes has been made in the accompanying financialstatements. OMK is not a private foundation.

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1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES AND GENERAL INFORMATION(Continued)

Uncertain tax positions -

For the years ended December 31, 2018 and 2017, OMK has documented its consideration ofFASB ASC 740-10, Income Taxes, that provides guidance for reporting uncertainty in incometaxes and has determined that no material uncertain tax positions qualify for either recognitionor disclosure in the financial statements.

Net assets classification -

Net assets, revenues, gains, and losses are classified based on the existence or absence ofdonor or grantor imposed restrictions. Accordingly,net assets and changes therein are classifiedand reported as follows:

Net Assets Without Donor Restrictions - Net assets available for use in general

operations and not subject to donor (or certain grantor) restrictions are recorded as net

assets without donor restrictions. Assets restricted solely through the actions of the Board

are referred to as Board designated and are also reported as net assets without donor

restrictions.

Net Assets With Donor Restrictions - Contributions restricted by donors (or certain

grantors) are reported as increases in net assets without donor restrictions if the restrictions

expire (that is, when a stipulated time restriction ends or purpose restriction is

accomplished) in the reporting period in which the revenue is recognized. All other donor-

restricted contributions are reported as increases in net assets with donor restrictions,

depending on the nature of the restrictions. When a restriction expires, net assets with donor

restrictions are reclassified to net assets without donor restrictions and reported in the

Statements of Activities and Changes in Net Assets as net assets released from donor

restrictions.

Contributions and grants -

Contributions and grants are recorded as revenue in the year notification is received from thedonor. Contributions and grants with donor restrictions are recognized as without donorrestrictions only to the extent of actual expenses incurred in compliance with the donor-imposedrestrictions and satisfaction of time restrictions. Such funds in excess of expenses incurred areshown as net assets with donor restriction in the accompanying financial statements.

Use of estimates -

The preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America requires management to make estimates andassumptions that affect the reported amounts of assets and liabilities at the date of the financialstatements and the reported amounts of revenue and expenses during the reporting period.Accordingly, actual results could differ from those estimates.

Reclassification -

Certain amounts in the prior year's financial statements have been reclassified to conform to thecurrent year's presentation.

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Reclassification (continued) -

The reclassifications are primarily due to the adoption of Accounting Standards Update 2016-14, as discussed above, which requires two classifications of net assets from the previouslypresented three classes. Net assets previously classified as of December 31, 2017 asunrestricted net assets in the amount of $1,385,908 are now classified as without donorrestrictions. Net assets previously classified as temporarily restricted net assets in the amountof $232,366 are now classified as net assets with donor restrictions.

New accounting pronouncements -

In May 2014, the FASB issued ASU 2014-09, Revenue from Contracts with Customers (Topic606) (ASU 2014-09). The ASU establishes a comprehensive revenue recognition standard forvirtually all industries under generally accepted accounting principles in the United States (U.S.GAAP) including those that previously followed industry-specific guidance. The guidance statesthat an entity should recognize revenue to depict the transfer of promised goods or services tocustomers in an amount that reflects the consideration to which the entity expects to be entitledin exchange for those goods or services. The FASB issued ASU 2015-14 in August 2015 thatdeferred the effective date of ASU 2014-09 by a year; thus, the effective date is years beginningafter December 15, 2018. Early adoption is permitted. OMK has not yet selected a transitionmethod and is currently evaluating the effect that the updated standard will have on its financialstatements.

In June 2018, the FASB issued ASU 2018-08, Not-for-Profit Entities (Topic 958): Clarifying theScope and Accounting Guidance for Contributions Received and Contributions Made, which isintended to clarify and improve current guidance about whether a transfer of assets is anexchange transaction or a contribution. The amendments in this ASU provide a more robustframework to determine when a transaction should be accounted for as a contribution underSubtopic 958-605 or as an exchange transaction accounted for under other guidance (forexample, Topic 606). The amendments also provide additional guidance about how todetermine whether a contribution is conditional or unconditional. The amendments in this ASUcould result in more grants and contracts being accounted for as contributions than underprevious GAAP. The ASU recommends application on a modified prospective basis; however,retrospective application is permitted. OMK has not yet decided on a transition method. TheASU is effective for fiscal years beginning after December 15, 2018.

In 2016, the FASB issued ASU 2016-02, Leases (Topic 842). The ASU changes the accountingtreatment for operating leases by recognizing a lease asset and lease liability at the presentvalue of the lease payments in the Statements of Financial Position and disclosing keyinformation about leasing arrangements. The ASU is effective for private entities for yearsbeginning after December 15, 2019. Early adoption is permitted. The ASU should be applied atthe beginning of the earliest period presented using a modified retrospective approach.

OMK plans to adopt the new ASUs at the respective required implementation dates.

Functional allocation of expenses -

The costs of providing the various programs and other activities have been summarized on afunctional basis in the Statements of Activities and Changes in Net Assets.

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Functional allocation of expenses (continued) -

Accordingly, certain costs have been allocated among the programs and supporting servicesbenefited. Expenses directly attributed to a specific functional area of OMK are reported asdirect expenses to the programmatic area and those expenses that benefit more than onefunction are allocated on a basis of estimated time and effort or other reasonable basis.

2. GRANTS AND ACCOUNTS RECEIVABLE

As of December 31, 2018 and 2017, donors of OMK have made written promises to give totaling$257,591 and $195,731, respectively.

Grants and accounts receivable are due as follows at December 31, 2018 and 2017:

2018 2017

Less than one year $ 190,924 $ 145,731One to five years 66,667 50,000

TOTAL $ 257,591 $ 195,731

3. INVESTMENTS

Investments consisted of the following at December 31, 2018:

Fair Value

Common Stocks $ 6,737

In accordance with FASB ASC 820, Fair Value Measurement, OMK has categorized its financialinstruments, based on the priority of the inputs to the valuation technique, into a three-level fairvalue hierarchy. The fair value hierarchy gives the highest priority to quoted prices in activemarkets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs(Level 3). Common stocks are valued at the closing price reported on the active market in whichthe individual securities are traded, and have been identified at Level 1 in the fair value hierarchy.There have been no changes in the methodologies used at December 31, 2018.

Included in investment income are the following:

Interest and dividends $ 1,670Unrealized gain 250Realized loss (477)

TOTAL INVESTMENT INCOME $ 1,443

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4. NET ASSETS WITH DONOR RESTRICTION

Net assets with donor restrictions consisted of the following at December 31, 2018 and 2017:

2018 2017

State Grant Restricted $ 146,156 $ 117,366Special Grant Award 31,175 35,000Children of Wounded Warriors 77,264 10,000Time Restricted 133,333 70,000

TOTAL NET ASSETS WITH DONOR RESTRICTIONS $ 387,928 $ 232,366

5. NET ASSETS RELEASED FROM RESTRICTIONS

The following net assets with donor restrictions were released from donor restrictions by incurringexpenses (or through the passage of time), which satisfied the restricted purposes specified by thedonors:

2018 2017

State Grant Restricted $ 90,520 $ 110,659Special Grant Award 308,825 85,663Children of Wounded Warriors 232,496 265,000Age Restriction - 25,000Passage of Time 116,667 58,250

TOTAL NET ASSETS RELEASED FROM RESTRICTIONS $ 748,508 $ 544,572

6. LIQUIDITY

Financial assets available for use for general expenditures within one year of the Statements ofFinancial Position, comprise the following at December 31, 2018 and 2017:

2018 2017

Cash and cash equivalents $ 1,146,920 $ 1,424,483Investments 6,737 -Grants and accounts receivable 257,591 195,731Funds subject to donor-imposed purpose and time restrictions (321,261) (182,366)

FINANCIAL ASSETS AVAILABLE TO MEET CASH NEEDSFOR GENERAL EXPENDITURES WITHIN ONE YEAR $ 1,089,987 $ 1,437,848

OMK has a policy to structure its financial assets to be available and liquid as its obligationsbecome due. As of December 31, 2018 and 2017, OMK has financial assets equal toapproximately five and eight months, respectively, of operating expenses. Effective January 2019,the Board established a $300,000 designated reserve fund to ensure that assets would beavailable to draw on in the event of financial distress or any immediate liquidity needs.

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7. LEASE COMMITMENT

On December 20, 2017, OMK modified its lease agreement, extending the lease term throughDecember 31, 2020. The lease includes an eighteen-month termination clause; the lease alsorequires a rent escalation of 3.5% per annum.

Future minimum rental payments due at December 31, 2018 are as follows:

Year Ending December 31

2019 $ 48,8522020 50,562

$ 99,414

During the years ended December 31, 2018 and 2017, occupancy expense totaled $49,059,respectively.

8. RETIREMENT PLAN

Starting January 1, 2018, OMK provides a 403(b) retirement plan to its employees through adefined contribution plan covering all full-time employees. OMK may make matching contributionsto each eligible employee. During the year ended December 31, 2018, OMK did not make anycontributions to the Plan.

9. SUBSEQUENT EVENTS

In preparing these financial statements, OMK has evaluated events and transactions for potentialrecognition or disclosure through April 24, 2019, the date the financial statements were issued.

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F Y E DECEMBER 31, 2018 AND 2017 - Our Military Kids · Depreciation and amortization 1,809 47 97...

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