The General Council of the Assemblies of God and Affiliated Entities Auditor’s Report and Consolidated Financial Statements March 31, 2013 and 2012 The General Council of the Assemblies of God and Affiliated Entities March 31, 2013 and 2012 Contents Independent Auditor’s Report ............................................................................................... 1 Consolidated Financial Statements Statements of Financial Position ........................................................................................................ 3 Statements of Activities ...................................................................................................................... 4 Statements of Cash Flows ................................................................................................................... 6 Notes to Financial Statements ............................................................................................................ 8 Supplementary Information Consolidating Schedule – Statement of Financial Position Information .......................................... 45 Consolidating Schedule – Statement of Activities Information ....................................................... 49 The General Council Consolidating Schedule – Statement of Financial Position Information ....... 53 The General Council Consolidating Schedule – Statement of Activities Information ..................... 57 Independent Auditor’s Report The Executive Presbytery The General Council of the Assemblies of God and Affiliated Entities Springfield, Missouri We have audited the accompanying consolidated financial statements of The General Council of the Assemblies of God (The General Council) and Affiliated Entities (collectively, the “Organization”) as of March 31, 2013 and 2012, and the related consolidated statements of activities and cash flows for the years then ended, 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 consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. The Executive Presbytery The General Council of the Assemblies of God and Affiliated Entities Page 2 Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of The General Council of the Assemblies of God and Affiliated Entities as of March 31, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Supplementary Information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating schedules listed in the table of contents are presented for purposes of additional analysis and are not a required part of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. July 11, 2013 Springfield, Missouri The General Council of the Assemblies of God and Affiliated Entities Consolidated Statements of Financial Position March 31, 2013 and 2012 (In Thousands) Assets 2013 2012 Cash $ 48,046 $ 44,802 Investments 1,209,582 1,027,761 Accrued interest, dividends and fees receivable 16,713 12,734 Accounts receivable, net of allowance; $434 – 2013, $783 – 2012 Trade 6,821 4,494 Other 2,187 3,118 Inventory 6,313 7,604 Mortgages, loans and notes receivable, net of allowance; $24,615 – 2013, $23,627 – 2012 1,679,961 1,758,928 Deposits and assets limited as to use - 4,119 Other real estate owned, net 109,955 89,386 Property and equipment, net 117,677 152,458 Prepaid expenses and other 25,649 28,838 Assets held by others 2,905 2,669 Total assets $ 3,225,809 $ 3,136,911 See Notes to Consolidated Financial Statements Liabilities and Net Assets 2013 2012 Liabilities Accounts payable, accrued expenses and other $ 45,156 $ 40,868 Deposits and funds held for others 799 811 Participants’ accounts Personal contribution accounts 165,399 192,956 Retirement contribution accounts 1,140,164 1,074,483 Federal contribution to loan program 4,188 4,139 Assets held for others 84,082 96,764 Deferred revenue 2,362 2,205 Notes, bonds and deposits payable 1,087,583 1,091,567 Donor advised funds 93,154 57,440 Annuity and trust obligations 150,510 149,256 Accrued pension liability 17,443 15,659 Total liabilities 2,790,840 2,726,148 Net Assets Unrestricted 384,042 350,163 Temporarily restricted 15,360 26,718 Permanently restricted 35,567 33,882 Total net assets 434,969 410,763 Total liabilities and net assets $ 3,225,809 $ 3,136,911 3 The General Council of the Assemblies of God and Affiliated Entities Consolidated Statements of Activities Years Ended March 31, 2013 and 2012 (In Thousands) 2013 2012 Changes in Unrestricted Net Assets Revenues, gains and other support Contributions, gifts and donations $ 304,261 $ 270,334 Less amounts raised on behalf of others 53,027 22,188 Net contributions, gifts and donations 251,234 248,146 Investment return 19,749 7,379 Interest on mortgages and loans receivable 114,547 124,739 Publication sales 25,009 26,405 Student tuition and fees 29,883 30,724 Auxiliary enterprises 9,466 9,768 Other support 19,161 31,152 Net management and other fees 14,644 9,584 Actuarial gain (loss) on annuity and trust obligations 290 (1,484) Loss on assets held for sale (513) (1,777) Change in donor restriction 3 11 Net assets released from restrictions 3,861 5,588 Total unrestricted revenues, gains and other support 487,334 490,235 Expenses and losses Program services 347,828 365,275 Support services 97,265 93,159 Abandoned project costs 749 - Expense on other real estate owned 4,718 3,481 Provision for income taxes 2,665 2,515 Total expenses and losses 453,225 464,430 Defined benefit pension plan Net gain arising during the year 1,051 995 Amortization of prior service cost and net loss in net periodic pension cost (3,360) (2,172) (2,309) (1,177) Change in Unrestricted Net Assets Before Equity Removed in Deconsolidation 31,800 24,628 Equity removed in deconsolidation 2,079 - Change in Unrestricted Net Assets 33,879 24,628 See Notes to Consolidated Financial Statements 4 The General Council of the Assemblies of God and Affiliated Entities Consolidated Statements of Activities Years Ended March 31, 2013 and 2012 (In Thousands) 2013 2012 Changes in Temporarily Restricted Net Assets Contributions, gifts and donations $ 4,531 $ 2,825 Investment return 735 288 Actuarial gain (loss) on annuity and trust obligations 200 675 Unfulfilled pledge commitment - (105) Net assets released from restrictions (3,861) (5,588) Change in Temporarily Restricted Net Assets Before Equity Removed in Deconsolidation 1,605 (1,905) Equity removed in deconsolidation (12,963) - Change in Temporarily Restricted Net Assets (11,358) (1,905) Changes in Permanently Restricted Net Assets Revenues, gains and other support Contributions, gifts and donations 1,080 1,592 Investment return 69 (303) Gain (loss) on beneficial interest in trusts held by others 95 (253) Actuarial gain on annuity and trust obligations 444 884 Change in donor restriction (3) 94 Change in Permanently Restricted Net Assets 1,685 2,014 Change in Net Assets 24,206 24,737 Net Assets, Beginning of Year 410,763 386,026 Net Assets, End of Year $ 434,969 $ 410,763 See Notes to Consolidated Financial Statements 5 The General Council of the Assemblies of God and Affiliated Entities Consolidated Statements of Cash Flows Years Ended March 31, 2013 and 2012 (In Thousands) 2013 2012 Operating Activities Change in net assets $ 24,206 $ 24,737 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 10,360 11,223 Deferred income taxes 430 302 Loss on other real estate owned 117 336 (Gain) loss on disposal of property and equipment (62) 1,256 Net realized and unrealized gains on investments (18,431) (6,147) Actuarial gain on annuity and trust obligations (934) (75) (Gain) loss on beneficial interest in trusts held by others (95) 253 Provision for losses on loans 3,464 4,632 Interest allocated to participant accounts 33,119 36,911 Contributions restricted for long-term investment (1,244) (1,755) Student loans cancelled 25 23 Change in control of affiliate, net of cash 8,116 (5,897) Noncash investmetn contributions (73) - Abandoned project costs 740 - Changes in Accrued interest, dividends and fees receivable (3,979) 2,064 Accounts receivable (2,306) 2,087 Inventory 1,291 299 Prepaid expenses 2,110 8,867 Accounts payable and accrued expenses 4,977 3,704 Deferred revenue (26) (188) Assets held for others (12,694) (3,181) Accrued pension liability 1,784 1,178 Net cash provided by operating activities 50,895 80,629 Investing Activities Purchases of property and equipment (2,363) (14,766) Proceeds from sale of property and equipment 174 3,559 Proceeds from sale of other real estate owned 5,500 1,281 Capitalized costs on other real estate owned (680) (277) Purchases of investments (286,955) (187,469) Proceeds from sales and maturities of investments 144,924 114,101 Originations of mortgages, loans and notes receivable (174,428) (202,548) Principal collected on mortgages, loans and notes receivable 224,622 191,394 Net cash used in investing activities (89,206) (94,725) See Notes to Consolidated Financial Statements 6 The General Council of the Assemblies of God and Affiliated Entities Consolidated Statements of Cash Flows Years Ended March 31, 2013 and 2012 (In Thousands) 2013 2012 Financing Activities Contributions restricted for long-term investment $ 1,244 $ 1,755 Contributions to personal accounts 30,952 35,292 Withdrawals from personal accounts (60,343) (70,334) Contributions to retirement accounts 65,585 61,642 Payments to retiring participants (54,207) (55,958) Proceeds from issuance of notes and bonds payable 279,936 318,070 Payment of principal on notes and bonds payable (271,182) (236,781) Net borrowings from line of credit 11,500 - Investments subject to annuity obligations (3,209) (2,731) Payments of annuity obligations (3,003) (6,403) Investments subject to trust obligations 11,457 50,486 Payments of trust obligations (3,067) (49,201) Investments subject to donor advised funds 44,692 8,016 Payments of donor advised funds (8,978) (4,067) Repayments of asset backed notes - (9,041) Other 178 36 Net cash provided by financing activities 41,555 40,781 Increase in Cash 3,244 26,685 Cash, Beginning of Year 44,802 18,117 Cash, End of Year $ 48,046 $ 44,802 Supplemental Cash Flows Information Sale and financing of other real estate owned $ 6,012 $ 4,439 Gain on self-directed accounts $ 23,018 $ 7,906 Payables incurred for property and equipment $ 834 $ 146 Note payable issued for purchase of business unit $ - $ 1,400 Interest paid $ 71,556 $ 75,439 Real estate acquired in settlement of loans $ 31,296 $ 24,537 Accrued interest on retirement loan default $ - $ 52 Obligation relieved due to abandoned project costs $ 20 $ - See Notes to Consolidated Financial Statements 7