NFP report

CHILD FOUNDATION

FINANCIAL STATEMENTS

Year Ended May 31, 2020

with

Independent Auditors’ Report

CHILD FOUNDATION

Table of Contents

Page

Independent Auditors’ Report 1

Financial Statements

Statement of Financial Position 3

Statement of Activities 4

Statement of Functional Expenses 5

Statement of Cash Flows 6

Notes to Financial Statements 7

– 1 –

Independent Auditors’ Report

The Board of Directors
Child Foundation

Report on the Financial Statements

We have audited the accompanying financial statements of Child Foundation (the Organization), which
comprise the statement of financial position as of May 31, 2020, and the related statements of activities,
functional expenses, and cash flows for the year 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 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 financial statements that are free from material misstatement, whether due to fraud or
error.

Auditors’ Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We
conducted our audit 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 financial statements are free from material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the financial statements. The procedures selected depend on the auditors’ judgment, including the
assessment of the risks of material misstatement of the 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 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 financial statements.

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

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Opinion

In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of Child Foundation as of May 31, 2020, and the changes in its net assets and its cash
flows for the year then ended in accordance with accounting principles generally accepted in the United
States of America.

Emphasis of a Matter

As discussed in Note 2 to the financial statements, the Organization has adopted Accounting Standards
Update (ASU) 2018-08, Not-for-Profit Entities (Topic 958): Clarifying the Scope and the Accounting
Guidance for Contributions Received and Contributions Made. Our opinion is not modified with respect
to this matter.

Report on Summarized Comparative Information

We have previously audited Child Foundation’s 2019 financial statements and we expressed an
unmodified audit opinion on those audited financial statements in our report dated October 9, 2019. In
our opinion, the summarized comparative information presented herein as of and for the year ended
May 31, 2019, is consistent, in all material respects, with the audited financial statements from which it
has been derived.

Lake Oswego, Oregon
February 9, 2021

May 31, 2020 (With Comparative Amounts for 2019) 2020 2019

Cash and cash equivalents 3,653,852$ 1,342,011$
Contributions receivable – due within one year 15,678 11,772
Other receivables 16,844 2,889
Prepaid expenses and other assets 26,391 46,650
Property and equipment – net (Note 4) 409,600 410,723
Investments (Note 5) 85,000 60,000
Restricted cash 10,000 33,300

Total assets 4,217,365$ 1,907,345$

Liabilities:
Accounts payable 4,735$ 16,915$
Accrued payroll and related costs 43,295 32,315
Accrued direct program aid 2,808,719 719,915
Refundable advances 73,300 63,300

Total liabilities 2,930,049 832,445

Net assets:
Net assets without donor restrictions:
Available for programs and general expenditures 1,053,005 898,941
Board-designated for creation of endowment 21,700 30,000

Total net assets without donor restrictions 1,074,705 928,941

Net assets with donor restrictions (Note 6) 212,611 145,959

Total net assets 1,287,316 1,074,900

Total liabilities and net assets 4,217,365$ 1,907,345$

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

LIABILITIES AND NET ASSETS

ASSETS

CHILD FOUNDATION

Statement of Financial Position

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Year Ended May 31, 2020 (With Comparative Totals for 2019)

Without Donor With Donor 2020 2019
Restrictions Restrictions

Support and revenue:
Contributions 814,708$ 3,295,800$ 4,110,508$ 4,533,238$
Donated materials and services 393 – 393 3,402
Other income – net 3,963 – 3,963 6,207
Interest income 7,503 – 7,503 1,785
Net assets released from

restriction (Note 6) 3,229,148 (3,229,148) – –

Net support and revenue 4,055,715 66,652 4,122,367 4,544,632

Expenses:
Program services (Note 7) 3,521,121 – 3,521,121 4,126,102
General and administrative 261,132 – 261,132 207,092
Fundraising 127,698 – 127,698 186,420

Total expenses 3,909,951 – 3,909,951 4,519,614

Increase in net assets 145,764 66,652 212,416 25,018

Net assets, beginning of year 928,941 145,959 1,074,900 1,049,882

Net assets, end of year 1,074,705$ 212,611$ 1,287,316$ 1,074,900$

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

Total

CHILD FOUNDATION

Statement of Activities

– 4 –

Year Ended May 31, 2020 (With Comparative Totals for 2019)

General
Program and
Services Administrative Fundraising 2020 2019

Payroll and related
costs 528,762$ 87,296$ 32,424$ 648,482$ 693,370$

Direct program aid 2,784,067 – – 2,784,067 3,392,147
Bank fees 54,412 1,713 15,291 71,416 81,112
Professional fees 58,661 39,385 38,684 136,730 121,520
Printing 28,451 957 1,546 30,954 45,914
Postage 9,323 697 674 10,694 16,283
Audit and accounting – 21,225 – 21,225 20,350
Repairs and

maintenance 3,217 531 197 3,945 10,921
Legal fees – 72,497 – 72,497 10,553
Miscellaneous 189 9,611 12 9,812 1,935

Outreach events – 355 21,481 21,836 23,169
Compliance – 15 13,048 13,063 12,746
Information

technology 14,046 3,817 1,326 19,189 13,927
Depreciation and

amortization 16,660 2,751 1,022 20,433 9,982
Internet and telephone 6,790 2,045 416 9,251 9,096
Travel 1,747 1,000 134 2,881 9,159
Utilities 5,863 1,052 360 7,275 7,248
Advertising 199 934 315 1,448 4,856
Supplies 2,904 793 411 4,108 16,231

Small equipment 2,539 1,113 156 3,808 8,232
Insurance 2,246 2,962 138 5,346 5,094
Executive meetings – 7,472 – 7,472 3,957
Web design 1,027 457 63 1,547 499
Dues and subscriptions – 315 – 315 –
Licenses and fees – 50 – 50 803
Training 18 2,089 – 2,107 510

Total expenses 3,521,121$ 261,132$ 127,698$ 3,909,951$ 4,519,614$

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

Total

CHILD FOUNDATION

Statement of Functional Expenses

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Year Ended May 31, 2020 (With Comparative Totals for 2019) 2020 2019

Cash flows from operating activities:
Increase in net assets 212,416$ 25,018$

Adjustments to reconcile increase in net assets to net
cash provided by operating activities:

Depreciation and amortization 20,433 9,982
Loss on disposal of property and equipment – 1,329

(Increase) decrease in:
Contributions receivable (3,906) 123,688
Other receivables (13,955) 27,860
Prepaid expenses and other assets 20,259 (22,233)

Increase (decrease) in:
Accounts payable (12,180) (2,655)
Accrued payroll and related costs 10,980 (920)
Accrued direct program aid 2,088,804 219,713

Net cash provided by operating activities 2,322,851 381,782

Cash flows from investing activities:
Purchases of investments (33,300) (60,000)
Proceeds from sale of investments 8,300 –
Purchases of property and equipment (19,310) (55,354)

Net cash used by investing activities (44,310) (115,354)

Cash flows from financing activities:
Cash received restricted for endowment 10,000 63,300
Principal payments on capital lease obligation – (42)

Net cash used by financing activities 10,000 63,258

Increase in cash and cash equivalents and restricted cash 2,288,541 329,686

Cash and cash equivalents, and restricted cash, beginning of year 1,375,311 1,045,625

Cash and cash equivalents, and restricted cash,
end of year 3,663,852$ 1,375,311$

Reconciliation to statement of financial position:
Cash and cash equivalents 3,653,852$ 1,342,011$
Restricted cash 10,000 33,300

3,663,852$ 1,375,311$

Supplemental disclosure of cash flow information:
Cash paid during the year for interest -$ 158$

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

CHILD FOUNDATION

Statement of Cash Flows

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CHILD FOUNDATION

Notes to Financial Statements

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1. Nature of Organization

Child Foundation (the Organization), an Oregon nonprofit corporation formed in 1994, has no
political, religious, ethnic, or racial affiliations. The Organization supports social service work
primarily in five countries as follows:

Iran – The Organization matches supporters from the United States of America and other countries
with disadvantaged children who need assistance in order to stay in school. The children and their
families are identified by a non-governmental humanitarian organization in Iran, Bonyad-e
Koodak (formerly Refah Koodak), and are then referred to the Organization. As of May 31, 2020,
there were approximately 6,700 active sponsorships.

During the year ended May 31, 2017, the Organization received a renewable two-year license from
the Office of Foreign Assets Control (OFAC) to send $3,000,000 in cash per year to Iran for the
purpose of providing financial and material support to the sponsored children. The OFAC license
expired on February 28, 2019.

Several months prior to the OFAC license expiration date, the Organization, through its legal
counsel, filed an application for renewal. On November 20, 2019, the Organization was informed
by OFAC that the license to send cash to sponsored children in Iran was not renewed.

The Organization’s legal counsel believes the Organization is not prohibited to deliver food to
Iranian children because food exports to Iran for humanitarian purposes does not require an OFAC
license. Therefore, pursuant to the OFAC response on November 20, 2019, the Organization
initiated a food package delivery program in lieu of cash disbursements to the sponsored children
in Iran. The Organization’s legal counsel informed OFAC of the food package program for
continued support of the sponsored children in Iran through a voluntary disclosure submittal.

Due to delays related to the COVID-19 pandemic and distribution challenges throughout Iran, the
Organization was not able to import food to Iran until December 2020. During the period the
Organization was waiting to formally launch the food package delivery program (from November
20, 2019 through December 2020), the Organization continued to accrue direct program aid on
funds received for sponsored children in Iran.

In accordance with General License E, the Organization is authorized by OFAC to send $500,000
in cash annually to Iran for activities related to non-commercial reconstruction projects in response
to natural disasters. Total cash amounts transmitted to Iran during the years ended May 31, 2020
and 2019, were $376,161 and $2,880,990, respectively.

Afghanistan – The Organization matches supporters in the United States of America and other
countries with disadvantaged children in Afghanistan who need assistance in order to stay in
school. As of May 31, 2020, there were 614 active sponsorships. In addition to the sponsorship
program in Afghanistan, the Organization has supports a thalassemia clinic.

Indonesia – The Organization provides support to needy children, enabling them to continue their
education. The Organization supported 41 active sponsorships during the year ended May 31,
2020. This support has been through voluntary efforts of local social workers.

CHILD FOUNDATION

Notes to Financial Statements – Continued

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1. Nature of Organization – Continued

Nepal – The Organization works with Empower Nepali Girls Foundation, a United States
501(c)(3) organization, in Nepal, matching supporters with children there. During the year ended
May 31, 2020, the Organization provided support for 40 girls in Nepal, regardless of whether
sponsors have been identified.

Cambodia – The Organization works with Angkor Kids Center, a private non-profit organization
that provides education to needy children in rural areas of Cambodia. There were 33 active
sponsorships during the year ended May 31, 2020.

The Organization also assists with medical expenses for surgeries and other medical treatment for
individual children who are referred by its partner social service agencies. When earthquakes,
mudslides, and other natural disasters occur, the Organization organizes support and sends relief to
the affected areas through its partner social service agencies. The Organization also provided care
packages to families impacted by the COVID-19 pandemic.

2. Summary of Significant Accounting Policies

The significant accounting policies followed by the Organization are described below to enhance the
usefulness of the financial statements to the reader.

Basis of Accounting – The Organization’s financial statements have been prepared on the accrual
basis of accounting, in accordance with accounting principles generally accepted in the United
States of America (GAAP).

Basis of Presentation – Net assets and all balances and transactions are presented based on the
existence or absence of donor-imposed restrictions. Accordingly, the net assets of the
Organization and changes therein are classified and reported as follows:

Net assets without donor restrictions – Net assets not subject to donor-imposed stipulations.

Net assets with donor restrictions – Net assets subject to donor-imposed stipulations that will be
met by actions of the Organization and/or the passage of time. Other donor-imposed restrictions
are perpetual in nature, where the donor stipulates that certain resources be maintained in
perpetuity.

Expenses are reported as decreases in net assets without donor restrictions. Gains and losses on
other assets or liabilities are reported as increases or decreases in net assets without donor
restrictions, unless their use is restricted by explicit donor stipulation or by law. Expirations of
restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated
time period has elapsed) are reported as net assets released from restriction.

CHILD FOUNDATION

Notes to Financial Statements – Continued

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2. Summary of Significant Accounting Policies – Continued

Use of Estimates – The preparation of the financial statements in conformity with GAAP requires
management to make estimates and assumptions that affect the reported amounts of assets and
liabilities and disclosure of contingent assets and liabilities at the date of the financial statements
and the reported amounts of revenues and expenses during the year. Actual results could differ
from these estimates. Among other things, estimates are used in the financial statements to
calculate depreciation and amortization expense (based on the estimated useful lives of the
underlying assets), and to allocate certain expenses by function.

Cash and Cash Equivalents and Restricted Cash – For purposes of the financial statements, the
Organization considers all liquid investments having initial maturities of three months or less to be
cash equivalents. Restricted cash consists of donor contributions restricted for the creation of an
endowment.

Investments – Investments in annuities are carried at contract value, which approximates fair
value (Note 5).

Property and Equipment – Land, buildings, and equipment purchased by the Organization are
recorded at cost, with a capitalization threshold of $1,000. Donated equipment is recorded at fair
market value as of the date received. Depreciation and amortization is computed on the straight-
line method over the following estimated useful lives:

Furniture and equipment 5 to 10 years
Buildings and improvements 10 to 25 years
Software and website 5 years

Construction in progress is carried at cost and not depreciated until placed in service.

Contribution Recognition – Contributions, including unconditional promises to give, are
recognized as revenues in the period received. Conditional promises to give, that is, those with a
measurable performance or other barrier, and a right of return, are not recognized as revenue until
the conditions on which they depend have been substantially met. Consequently, at May 31, 2020
and 2019, contributions totaling $73,300 and $63,300, respectively, have not been recognized as
contributions in the accompanying statement of activities because the condition on which they
depend have not been met. These funds are conditioned on the Organization formalizing a donor
restricted endowment, which has not been implemented as of May 31, 2020. These conditional
contributions are reported as refundable advances in the accompanying statement of financial
position.

The Organization reports gifts of cash and other assets as increases in net assets with donor
restrictions if they are received with donor stipulations that limit the use of the donated assets.
When a restriction expires, net assets with donor restrictions are reclassified to net assets without
donor restrictions and reported in the statement of activities as net assets released from restriction.

.

CHILD FOUNDATION

Notes to Financial Statements – Continued

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2. Summary of Significant Accounting Policies – Continued

Donated Goods and Services – Donations of property, equipment, materials, and other assets are
recorded as support at their estimated fair value at the date of donation. Such donations are
reported as unrestricted support unless the donor has restricted the donated asset to a specific
purpose. During the year ended May 31, 2019, the Organization received donated supplies
totaling $2,820, which is included in supplies expense in the accompanying statement of
functional expenses. The Organization did not receive any donated supplies during the year ended
May 31, 2020.

The Organization recognizes donated services that create or enhance nonfinancial assets or require
specialized skills, are provided by individuals possessing those skills, and would typically need to
be purchased if not provided by donation. During the years ended May 31, 2020 and 2019, the
Organization recognized specialized donated services totaling $393 and $1,582, respectively.
Donated services not meeting the above criteria have not been reflected in the accompanying
financial statements.

Functional Allocation of Expenses – The costs of providing the Organization’s various program
services and other activities have been allocated among the programs and supporting services
benefited. The statement of functional expenses presents the natural classification detail of
expenses by function.

The statement of functional expenses reports certain categories of expenses that are attributable to
more than one program or supporting service function. Therefore, these expenses require
allocation on a reasonable basis that is consistently applied. The expenses that are allocated
include payroll and related costs, which are allocated on the basis of estimated time and effort.

Income Taxes – Income taxes are not provided for in the financial statements since the
Organization is exempt from federal and state income taxes under Section 501(c)(3) of the Internal
Revenue Code and similar state provisions. The Organization is not classified as a private
foundation.

GAAP prescribes a recognition threshold and measurement process for accounting for uncertain
tax positions and provides guidance on various related matters such as interest, penalties, and
required disclosures. Management believes the Organization does not have any uncertain tax
positions. The Organization files informational returns. Generally, the returns are subject to
examination by income tax authorities for three years from the filing of a return. The
Organization has not paid any interest or penalties related to its income tax positions, and there are
no audits for any tax periods in progress. Interest or penalties assessed by taxing authorities, if
any, would be included with general and administrative expenses.

CHILD FOUNDATION

Notes to Financial Statements – Continued

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2. Summary of Significant Accounting Policies – Continued

Foreign Currency Translation – Certain assets of the Organization are translated into U.S.
dollars at year-end exchange rates. Management has determined that adjustments resulting from
translating the foreign currency are immaterial to the financial statements, and have not separately
disclosed this cumulative translation adjustment.

New Accounting Standard – In June 2018, the Financial Accounting Standards Board (FASB)
issued Accounting Standard Update (ASU) 2018-08, Not-for-Profit Entities (Topic 958):
Clarifying the Scope and Accounting Guidance for Contributions Received and Contributions
Made. This standard assists entities in evaluating whether transactions should be accounted for as
contributions or exchange transactions and determining whether a contribution is conditional. The
Organization has implemented the provisions of ASU 2018-08 in the accompanying financial
statements under a modified prospective basis. Accordingly, there is no effect on net assets in
connection with the implementation of ASU 2018-08.

Summarized Financial Information for 2019 – The financial statements include certain prior
year summarized comparative information. Such information does not include sufficient detail to
constitute a presentation in conformity with GAAP. Accordingly, such information should be read
in conjunction with the Organization’s financial statements for the year ended May 31, 2019, from
which the summarized information was derived.

Reclassifications – Certain reclassifications have been made to the 2019 information to conform
to the 2020 presentation.

CHILD FOUNDATION

Notes to Financial Statements – Continued

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3. Liquidity and Availability of Resources

The Organization’s financial assets available for general expenditure within one year of the
statement of financial position date consist of the following at May 31:

2020 2019

Cash and cash equivalents 3,653,852$ 1,342,011$
Contributions receivable 15,678 11,772
Other receivables 16,844 2,889

Total financial assets available within one year 3,686,374 1,356,672

Less amounts unavailable for general expenditures
within one year due to donor-stipulated restrictions (212,611) (145,959)

Total financial assets available for general
expenditures within one year 3,473,763$ 1,210,713$

As part of the Organization’s liquidity management, the Organization has a practice to structure its
financial assets to be available as its general expenditures, liabilities and other obligations come due.

4. Property and Equipment – Net

Property and equipment consists of the following at May 31:

2020 2019

Furniture and equipment 28,622$ 22,623$
Buildings and improvements 216,733 159,467
Land 194,344 194,344
Software and website 20,301 16,701

460,000 393,135

Less accumulated depreciation and amortization (50,400) (29,967)

409,600 363,168

Construction in progress – 47,555

409,600$ 410,723$

CHILD FOUNDATION

Notes to Financial Statements – Continued

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5. Fair Value Measurements

The classification of assets and liabilities within the fair value hierarchy is based on whether the
inputs to the valuation methodology used for measurement are observable or unobservable.
Observable inputs reflect market-derived or market-based information obtained from independent
sources while unobservable inputs reflect estimates about market data.

The three levels of the fair value hierarchy and the valuation methodologies used for assets are
described below:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets

or liabilities in active markets the Organization has the ability to access.

Level 2 Inputs to the valuation methodology include:
 Quoted prices for similar assets or liabilities in active markets.
 Quoted prices for identical or similar assets or liabilities in inactive markets.
 Inputs other than quoted prices that are observable for the asset or liability.
 Inputs derived principally from or corroborated by observable market data by

correlation or other means.

If the asset or liability has a specified (contractual) term, the Level 2 input must be
observable for substantially the full term of the asset or liability.

Level 3 Fair value is based on significant unobservable inputs.

The asset’s fair value measurement level within the fair value hierarchy is based on the lowest level
of any input that is significant to the fair value measurement. Valuation techniques used need to
maximize the use of observable inputs and minimize the use of unobservable inputs.

CHILD FOUNDATION

Notes to Financial Statements – Continued

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5. Fair Value Measurements – Continued

The following table set forth by level, within the fair value hierarchy, the Organization’s asset
measured at fair value on a recurring basis at May, 31 2020:

Level 1 Level 2 Level 3 Total

Annuity -$ 85,000$ -$ 85,000$

Following is a description of the valuation methodology used for the asset measured at fair value:

Annuity: Recorded at contract value, which approximates fair …