the shepherd's call, inc. financial … estate taxes 924 111 1,035 2,669 rescue support ... the...

THE SHEPHERD'S CALL, INC.

FINANCIAL STATEMENTS

December 31, 2015

The Shepherd's Call, Inc.December 31, 2015

Contents

Page

Independent Auditor's Report 1 - 2

Financial Statements:

Statement of Financial Position 3

Statement of Activities 4

Statement of Cash Flows 5

Statement of Functional Expenses 6 - 7

Notes to the Financial Statements 8 - 14

The Shepherd's Call, Inc.Statement of Financial Position

December 31, 2015

ASSETS

CURRENT ASSETSCash and cash equivalents $ 178,348Promises to give 50,103Rent receivable 33,740Prepaid expenses 219

Total Current Assets 262,410

PROPERTY AND EQUIPMENTLand 152,600Buildings and improvements 3,379,626Furniture and fixtures 80,109Equipment 1,336,564Website 95,728

5,044,627Less: accumulated depreciation ( )2,247,380

Property and Equipment, Net 2,797,247

Total Assets $ 3,059,657

LIABILITIES AND NET ASSETS

CURRENT LIABILITIESAccounts payable and accrued liabilities $ 115,549Current portion of long-term liabilities 263,034Employee benevolence 4,633

Total Current Liabilities 383,216

LONG-TERM LIABILITIESNotes payable, less current portion above 2,223,580

NET ASSETSUnrestricted 402,758Temporarily restricted 50,103

Total Net Assets 452,861

Total Liabilities and Net Assets $ 3,059,657

The accompanying notes are an integral part of these financial statements.

3

The Shepherd's Call, Inc.Statement of Activities

For the year ended December 31, 2015

UnrestrictedTemporarily

Restricted Total

SUPPORT AND REVENUESContributions $ 2,195,770 $ 50,103 $ 2,245,873In-kind contributions 454,968 - 454,968Rental income, net of expenses ( )52,562 - ( )52,562Interest income 773 - 773Other income 5,927 - 5,927Net assets released from restrictions 166,500 ( )166,500 -

Total Support and Revenues 2,771,376 ( )116,397 2,654,979

EXPENSESProgram services:

Radio 1,017,798 - 1,017,798Hopeline 1,210,257 - 1,210,257Web and social media outreach 155,095 - 155,095

Total Program Services 2,383,150 - 2,383,150

Supporting services:Management and general 332,321 - 332,321Fundraising 361,049 - 361,049

Total Supporting Services 693,370 - 693,370

Total Expenses 3,076,520 - 3,076,520

Increase (Decrease) in Net Assets ( )305,144 ( )116,397 ( )421,541

Net assets, beginning of year 707,902 166,500 874,402

Net assets, end of year $ 402,758 $ 50,103 $ 452,861


4

The Shepherd's Call, Inc.Statement of Cash Flows


CASH FLOWS FROM OPERATING ACTIVITIESChange in net assets $( )421,541Adjustments to reconcile change in net assets to net cash

used by operating activities:Depreciation 127,333Changes in operating assets and liabilities:

Rent receivable ( )12,740Pledges receivable 111,397Other receivable 200Prepaid expenses ( )219Accounts payable and accrued liabilities 40,763

Cash Flows Used by Operating Activities ( )154,807

CASH FLOWS FROM INVESTING ACTIVITIESPurchases of fixed assets ( )43,464

CASH FLOWS FROM FINANCING ACTIVITIESPrincipal payments on notes payable ( )135,714

Net Decrease in Cash and Cash Equivalents ( )333,985

Net Cash and Cash Equivalents, beginning of year 512,333

Net Cash and Cash Equivalents, end of year $ 178,348

SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:

Interest paid $ 151,872

Income taxes paid $ -


5

The Shepherd's Call, Inc.Statement of Functional Expenses


Program services

Radio Hopeline

Web andSocial Media

Outreach Total

Accounting fees $ - $ - $ - $ -Building and groundsmaintenance 2,281 4,092 - 6,373

Business registrations - - - -Communications 15,047 17,933 1,861 34,841Depreciation 14,566 26,626 - 41,192Development support - - 1,050 1,050Employee travel 5,504 3,044 903 9,451Gifts and donations - 70 - 70Hopeline call centerexpenses - 23,427 - 23,427

Insurance 41,177 13,455 858 55,490Interest 9,894 11,386 - 21,280Internet communication 11,994 11,851 1,221 25,066Meetings expense 3,817 1,239 80 5,136Promotion 20,760 16,908 - 37,668Other expense 2,263 4,766 188 7,217Outside services 2,475 3,681 525 6,681Salaries and payroll taxes 552,894 622,572 93,288 1,268,754Payroll fees - - - -Postage and shipping 479 1,948 520 2,947Printing and reproduction 876 2,299 344 3,519Radio production andsyndication expense 277,373 264,088 - 541,461

Real estate taxes 759 875 - 1,634Rescue support 4,500 86,316 120 90,936Staff development 1,849 - - 1,849Supplies 2,349 2,881 271 5,501Technology support 44,826 81,581 23,235 149,642Utilities 1,927 2,222 - 4,149Website support 188 6,997 30,631 37,816

Total Expenses $ 1,017,798 $ 1,210,257 $ 155,095 $ 2,383,150


6

The Shepherd's Call, Inc.Statement of Functional Expenses - Continued


Supporting services

Managementand General Fundraising

TotalSupporting

Services Total

Accounting fees $ 12,600 $ - $ 12,600 $ 12,600Building and groundsmaintenance 3,028 335 3,363 9,736

Business registrations andtaxes 10,358 4,786 15,144 15,144

Communications 4,376 3,840 8,216 43,057Depreciation 17,826 2,134 19,960 61,152Development support - 82,624 82,624 83,674Employee travel 2,028 9,611 11,639 21,090Gifts and donations 682 - 682 752Hopeline call centerexpenses - - - 23,427

Insurance 4,708 1,182 5,890 61,380Interest 16,661 1,446 18,107 39,387Internet communication 2,267 1,619 3,886 28,952Meetings expense 4,118 633 4,751 9,887Promotion - 67 67 37,735Other expense 3,612 10,633 14,245 21,462Outside services 4,742 4,689 9,431 16,112Salaries and payroll taxes 191,963 180,170 372,133 1,640,887Payroll fees 4,146 - 4,146 4,146Postage and shipping 1,499 10,154 11,653 14,600Printing and reproduction 837 33,356 34,193 37,712Radio production andsyndication expense - - - 541,461

Real estate taxes 924 111 1,035 2,669Rescue support - - - 90,936Staff development 4,979 - 4,979 6,828Supplies 5,143 1,405 6,548 12,049Technology support 33,478 11,162 44,640 194,282Utilities 2,346 282 2,628 6,777Website support - 810 810 38,626

Total Expenses $ 332,321 $ 361,049 $ 693,370 $ 3,076,520


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The Shepherd's Call, Inc.Notes to the Financial Statements

December 31, 2015

Note 1. BACKGROUND INFORMATION

The Shepherd’s Call (the "Organization") is incorporated as a nonprofit organization whosepurpose is to provide real hope through Jesus Christ to teenagers and young adults in crisis. This isaccomplished by Christ-centered clear thinking and right values promoted through nationwideradio programming, web and social media outreach, as well as one-on-one interactions throughchat, but also by telephone and social media, with those seeking help from across the country andoften from persons in countries other than the United States of America.

The programs through which the Organization provides its services are as follows:

Radio Production / Syndication

During 2015, the Organization provided live and pre-recorded content to over 60 top-40 radioaffiliates serving thousands of listeners in the United States and Canada, as well as liveprogramming heard on more than 70 Christian radio affiliates across the country. The liveprogramming consists primarily of one-on-one talk between Dawson McAllister and callers intothe show who are seeking help and advice from Dawson on life issues. Radio content is alsooffered by the Organization through 24/7 internet streaming, featuring replays of the most recenttop-40 and Christian programming. The streams are available via the Organization’s website, or afree smartphone application available for Android and iPhone devices.

HopeLine

In conjunction with the radio and internet programs, the Organization operates TheHopeLine, anoff-air, toll-free call center serving teenagers and young adults worldwide between the ages of 13-29. In 2015, the organization shifted from a volunteer model to a paid staffing model forTheHopeLine, resulting in interactions with 51,567 teenagers and young adults via one-on-onechat and telephone. This represented almost a 72% increase from 2014. HopeLine interactionsalways offer, but do not force, prayer and a faith-based perspective on the issue being dealt with.Interactions also always conclude with an offer encouraging young people to connect with one of20 vetted, faith-based partners, providing specific long-term services that address their need.TheHopeLine also offers, when appropriate, tangible resources including Bibles, books, e-booksand more, which provide encouragement, education, and support to those who seek to receive help.

Web and Social Media Outreach

In 2015, the Organization maintained a robust presence on the Web and in Social Media. TheOrganization’s website, www.thehopeline.com, had more than 3,215,000 unique visits. Almost14,000,000 impressions were made through the Organization’s presence on Social Mediaplatforms including Facebook, Twitter and Instagram. A new prayer website was also beta testedin 2015, www.theprayerzone.com, whereby young people post their prayer requests, which will beprayed for by “prayer champions” recruited by the Organization. Live radio broadcasts routinelyengaged the audience via social media, and resources were regularly offered via social media andemail.

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December 31, 2015

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Accounting

The Organization uses the accrual basis of accounting whereby revenue and support arerecognized when earned and expenses are recognized when incurred.

Classification of Net Assets

In the accompanying financial statements, the Organization’s net assets that have similarcharacteristics have been combined into the following three categories:

• Unrestricted net assets are free of donor-imposed restrictions and included all revenues,expenses, gains and losses that are not subject to donor-imposed restrictions.

• Temporarily restricted net assets include gifts, grants, income, gains, and pledges for whichdonor-imposed restrictions have not been met.

• Permanently restricted net assets include gifts and trusts which require that the corpus beinvested in perpetuity in accordance with donor restrictions and gains which have been donor-stipulated to be permanently invested.

Cash and Cash Equivalents

Cash equivalents consist of short-term, highly liquid investments which are readily convertibleinto cash within ninety days of purchase. The Organization considers all investments with anoriginal maturity of three months or less on their acquisition date to be cash equivalents.

The Organization classifies investments with an original maturity of more than three months ontheir acquisition date as investments.

Financial Instruments

The following methods and assumptions were used to estimate the fair value of each class offinancial instrument.

Cash and cash equivalents – Fair value approximates carrying value due to the initial maturities ofthe instruments being three months or less.

Bank loans payable – Fair value approximates carrying value since stated rates are similar to ratescurrently available to the Organization for debt with similar terms and remaining maturities.

Pledges Receivable

When a donor has unconditionally promised to contribute funds in future periods, the Organizationrecognizes the fair value of the pledge receivable. Pledges expected to be collected within one yearare recorded as a donation and a receivable at net realizable value, which approximates fair value.Pledges expected to be collected in future years are recorded as a donation and a receivable at thepresent value of the expected future cash flows. Pledges receivable at December 31, 2015 areexpected to be fully collected within one year and accordingly no allowance been recorded.

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December 31, 2015

Note 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Property and Equipment

Fixed assets are recorded at cost, or in the case of contributed property, at the fair market value atthe date of contribution. When assets are retired, or otherwise disposed of, the cost and relatedaccumulated depreciation is removed from the accounts and any resulting gain or loss is reflectedin income for the period. The cost of maintenance and repairs is expensed as incurred.Depreciation is computed generally using the straight-line method over estimated useful lives asfollows:

Asset Category YearsBuildings & Improvements 20-39Furniture & Fixtures 5-7Equipment 5-7Vehicles 5

Website 3

Depreciation expense for the year ended December 31, 2015 totaled $127,333.

Advertising and Promotion

The Organization uses advertising to promote its programs among the audiences it serves.Advertising costs are expensed as incurred. Advertising/promotional expenses for the year endedDecember 31, 2015 totaled $37,735.

Contributions

Contributions are recognized when the donor makes a pledge to give that is, in substance, anunconditional promise. The Organization does not recognize a conditional promise to give until theconditions on which the promise depends are substantially met. A promise that calls for specificoutcomes to be achieved will be treated as a conditional promise to give. Contributions arerecorded as unrestricted, temporarily restricted, or permanently restricted depending on the natureof donor restrictions. Restricted contributions are reported as increases in restricted net assets.When the restriction is met the amount is shown as a reclassification of restricted net assets tounrestricted net assets. If a donor’s restriction is met in the same period that the support isrecognized, the contribution is reported as an increase in unrestricted net assets.

Donated Service

Unpaid volunteers make contribution 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 toobjective measurement of valuation.

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December 31, 2015


In-Kind Donations

Contributions of donated non-cash assets are recorded at the fair values in the period received.

These financial statements give monetary recognition of in-kind donations in the amount of$454,968. This amount represents $264,000 of donated CRM technology licenses, $133,809 ofdonated air-time and $57,159 of donated facility use and support services. Corresponding expensesare included in the statement of functional expenses.

Functional Allocation of Expenses

The costs of providing the various programs and other activities have been summarized on afunctional basis. Accordingly, certain costs have been allocated among the programs andsupporting services benefited.

Estimates

The preparation of financial statements in conformity with the cash basis of accounting requiresmanagement to make estimates and assumptions that affect certain reported amounts anddisclosures. Accordingly, actual results could differ from those estimates.

Income Tax Status

The Organization is exempt from federal and state income taxes under Section 501(c)(3) of theInternal Revenue code and similar state income tax laws. However, income unrelated to theOrganization's exempt purpose is subject to state and federal taxes. The rental income theOrganization receives is subject to taxation as unrelated business income ("UBI"). TheOrganization had a UBI net operating loss in the amount of $52,562 for the year ended December31, 2015. The Organization is a non-private foundation and contributions to the Organizationqualify as a charitable tax deduction by the contributor.

The Organization recognizes a tax position as a benefit only if it is “more likely than not” that thetax position would be sustained in a tax examination, with a tax examination being presumed tooccur.

The amount recognized is the largest amount of tax benefit that is greater than 50% likely of beingrealized on examination. For tax positions not meeting the “more likely than not” test, no taxbenefit is recorded.

As of December 31, 2015, the Organization has accrued no interest or penalties related touncertain tax positions. It is the Organization’s policy to recognize interest and/or penalties relatedto income tax matters in income tax expense.

The Organization's Form 990, Return of Organization Exempt from Income Tax, for the yearsended December 31, 2015 and 2014 and 2013 are subject to examination by the Internal RevenueService, generally for three years after they were filed.

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December 31, 2015


Subsequent Events

Subsequent events have been evaluated through July 16, 2016, which is the date the financialstatements were available to be issued.

Note 3. PLEDGES RECEIVABLE

Pledges receivable at December 31, 2015 were as follows:

Receivable in less than one year $ 50,103

Note 4. ACCOUNTS PAYABLE AND ACCRUED LIABILITIES

Accounts payable and accrued liabilities as of December 31, 2015 are as follows:

Accounts payable $ 74,514Accrued interest payable 13,663Credit cards payable 7,825Deferred rental income 13,600Payroll liabilities 5,947

$ 115,549

Note 5. COMPENSATED ABSENCES

Employees of the Organization are entitled to paid vacation, paid sick days, and personal days off,depending on job classification, length of service, and other factors. It is impractical to estimatethe amount of compensation for future absences, and accordingly, no liability has been recorded inthe accompanying financial statements. The Organization's policy is to recognize the cost ofcompensated absences when actually paid to employees.

Note 6. NOTES PAYABLE

Notes payable as of December 31, 2015 are as follows:

Monthly payment to Heritage Bank & Trust of $22,734, includingprincipal and interest at 5.85%, secured by real estate, final paymentof $2,218,580 due on January 8, 2017. $ 2,361,724

Monthly payment to Heritage Bank & Trust of $1,227, includingprincipal and interest at 5.85%, secured by real estate, final paymentof $119,067 due on December 20, 2016. 124,890

2,486,614

Less current portion ( )263,034

$ 2,223,580

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December 31, 2015

Note 6. NOTES PAYABLE - CONTINUED

Future minimum principal payment on notes payable are as follows:

Year Ending December 31,

2016 $ 263,0342017 2,223,580

Total $ 2,486,614

Note 7. TEMPORARILY RESTRICTED NET ASSETS

Temporarily restricted net assets consist of $50,103 of contributions receivable that is consideredtime restricted as of December 31, 2015.

Note 8. RENTAL INCOME

The organization leases office space to tenants under non-cancelable operating leases with terms oftwelve to sixty-three months.

Minimum future rentals required under the operating lease agreements in effect at December 31,2015 was as follows:

Year Ending December 31,

2016 $ 129,9702017 80,0002018 8,000

Total $ 217,970

Rental income is reported net of expenses on the statement of activities. The following scheduleprovides the detail of net rental income/(loss) as reported in the statement of activities.

Rental income $ 187,582

Depreciation 66,181Insurance 5,289Interest 113,428Other facility expenses 2,843Repairs and maintenance 25,198Taxes and licenses 7,689Utilities 19,516

Net Rental Loss $( )52,562

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December 31, 2015

Note 8. RENTAL INCOME - CONTINUED

As of December 31, 2015, 20,617 square feet of the 27,776 square foot building was being utilizedunder leasing agreements or held for lease. A summary of property held for leasing activities is asfollows:

Rental portion of building, at cost $ 2,510,033Less: accumulated depreciation ( )603,101

$ 1,906,932

Note 9. CONCENTRATIONS

The Organization maintains deposits in financial institutions that at times exceed the amountscovered by insurance provided by the Federal Deposit Insurance Corporation (FDIC).

Two donors contributions and pledges account for approximately 57% of total contributionrevenue.

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