AMERICAN DIABETES ASSOCIATION
CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with Independent Auditors’ Report Thereon)
________
Independent Auditors’ Report
The Board of Directors
American Diabetes Association:
We have audited the accompanying consolidated balance sheet of the American Diabetes
Association (the Association) as of December 31, 2010, and the related consolidated statements of
activities, functional expenses, and cash flows for the year then ended. These consolidated
financial statements are the responsibility of the Association’s management. Our responsibility is
to express an opinion on these consolidated financial statements based on our audit. The prior
year summarized comparative information has been derived from the Association’s 2009 financial
statements and, in our report dated July 7, 2010, we expressed an unqualified opinion on those
statements.
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 of material misstatement. An
audit includes consideration of internal control over financial reporting as a basis for designing
audit procedures that are appropriate in the circumstances, but not for the purpose of expressing
an opinion on the effectiveness of the Association’s internal control over financial reporting.
Accordingly, we express no such opinion. An audit also includes examining, on a test basis,
evidence supporting the amounts and disclosures in the financial statements, assessing the
accounting principles used and significant estimates made by management, as well as evaluating
the overall financial statement presentation. We believe our audit provides a reasonable basis for
our opinion.
In our opinion, the consolidated financial statements referred to above present fairly, in all
material respects, the financial position of the American Diabetes Association as of December 31,
2010, and the changes in its net assets and its cash flows for the year then ended in conformity
with U.S. generally accepted accounting principles.
May 31, 2011
KPMG LLP
2001 M Street, NW
Washington, DC 20036-3389
See accompanying notes to the consolidated financial statements.
2
AMERICAN DIABETES ASSOCIATION
CONSOLIDATED BALANCE SHEET
December 31, 2010
(with comparative information as of December 31, 2009)
(in thousands of dollars)
________
2010 2009
Cash and cash equivalents 12,132$ 9,895$
Investments (notes 4 and 5) 28,769 26,046
Accounts receivable, net (not es 6 and 18) 10,533 8,360
Inventory and supplies, net 1,454 1,881
P repaid expens es and o ther assets 4,117 4,947
Accounts payable and accrued liabilities (note 15) 15,733$ 16,81 0$
Line of credit (note 16) 6,080 1,320
Research grants payable 9,324 10,464
Deferred revenues 11,849 11,824
Total liabilities 42,986 40,418
ASSETS
LIABILITIES AND NET ASSETS
See accompanying notes to the consolidated financial statements.
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AMERICAN DIABETES ASSOCIATION
CONSOLIDATED STATEMENT OF ACTIVITIES
Year ended December 31, 2010
(with summarized information for the year ended December 31, 2009)
(in thousands of dollars)
________
Temporarily Permanently 2010 2009
Unrestricted Restricted Restricted Total Total
Revenues:
Contributions and grant s:
Donations 45,040$ 27,537 220 72,797 74,991
Special events 49,381 3,341 – 52,722 50,534
Less: Costs of direct benefits to donors (7,220) – – (7,220) (7,503)
Bequests 13,978 9,322 1,444 24,744 27,140
Federated and nonfederated organizations 8,544 9 – 8,553 8,922
Total contributions and grants 109,723 40,209 1,664 151,596 154,084
Total revenues 194,490 5,866 2,127 202,483 205,404
Expenses (note 13):
Program activities:
Research 42,638 – – 42,638 43,303
Information 54,956 – – 54,956
58,354
Advocacy and public awareness 44,000 – – 44,000 47,036
Total program activities 141,594 – – 141,594 148,693
See accompanying notes to the consolidated financial statements.
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AMERICAN DIABETES ASSOCIATION
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES
Year ended December 31, 2010
(with summarized information for the year ended December 31, 2009)
(in thousands of dollars)
________
Advocacy Management
and public and 2010 2009
Research Information awareness Total general Fundraising Total Total Total
Grants 33,242$ 145 2 33,389 – – – 33,389 33,654
Emplo yee costs 2,3 65 18,184 20,246 40,795 1,844 17,261 19,105 59,900 60,453
Professional fees 954 8,154 4,866 13,974 1,685 4,351 6,036 20,010 22,798
Supplies 51 2,745 594 3,390 34 388 422 3,812 3,942
Telecommun ications 1 03 882 864 1,849 78 668 746 2,595 2,852
Postage and shipping 315 4,477 3,378 8,170 455 6,358 6,813 14,983 15,226
Program Activities Supporting Services
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AMERICAN DIABETES ASSOCIATION
CONSOLIDATED STATEMENT OF CASH FLOWS
Year ended December 31, 2010
(with comparative information for the year ended December 31, 2009)
(in thousands of dollars)2010 2009
Cash flows from operating activities:
Change in net assets 7,659$ 913$
Adjustments to reconcile change in net assets
to net cash provided by operating activities:
Depreciation and amortization 3,888 3,573
Net unrealized and realized gain on investments (1,283) (1,989)
Loss on disposal of assets 11 14
Provisions for doubtful receivables and obsolete inventory 2,658 3,697
Increase (decrease) in deferred revenues 25 (1,610)
Net cash provided by (used in) operating activities 1,884 (656)
Cash flows from investing activities:
Purchases of investments (16,479) (46,257)
Sales or maturities of investments 14,576 58,778
Purchase of fixed assets (2,402) (5,362)
Net cash (used in) provided by investing activities (4,305) 7,159
Cash flows from financing activities:
Proceeds from contributions restricted for investment in endowment 248 353
Proceeds from borrowing on line of credit 9,700 12,500
Payments on line of credit (4,940) (12,740)
Payments on capital lease agreements (350) (450)
Net cash provided by (used in) financing activities 4,658 (337)
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
1. Consolidation and organization
The consolidated financial statements include the American Diabetes Association, the
American Diabetes Association Research Foundation, Inc., and the American Diabetes
Association Property Title Holding Corporation (consolidated, the Association). All
significant inter-Association transactions have been eliminated.
2. Program activities
The Association is a not-for-profit voluntary health agency that works to prevent and
cure diabetes and to improve the lives of all people affected by diabetes. This mission is
accomplished through programs in communities throughout the country. The principal
program activities of the Association are:
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
(continued)
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Information – The Association conducts programs that provide diabetes
information to individuals with diabetes, their families, and their health care
providers.
3. Summary of significant accounting policies
Basis of accounting
The Association prepares its financial statements on an accrual basis in
accordance with U.S. generally accepted accounting principles.
The net assets and revenues, gains and losses of the Association are classified for
accounting and reporting purposes in three classes of net assets based on the
existence or absence of donor-imposed restrictions. A description of the three
classes follows:
Cash and cash equivalents
Cash and cash equivalents are defined as currency on hand, demand deposits with
banks or financial institutions, federally insured certificates of deposit with
original maturities of less than three months, money market funds of U.S.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
(continued)
8
Investments
Investments in marketable equity securities and all debt securities are recorded at
fair value, which is based on quoted market prices or dealer quotes. The real
estate investment is reported at the appraised value at the time of the donation and
Fair value of financial instruments
As of December 31, 2010 and 2009, the carrying value of cash and cash
equivalents, accounts receivable, and accounts payable approximated their fair
value, based on the short-term maturities of these instruments. Additional fair
value information is presented in note 5.
Inventory
Inventory is comprised primarily of publications and is valued at the lower of cost
(first-in, first-out method) or market at net realizable value.
Fixed assets
All fixed assets are stated at cost or fair value on the date of receipt and are
depreciated on a straight-line basis over the following useful lives:
Recognition of revenues
Contributions, including unconditional promises to give, are recognized when
received. All contributions are considered to be available for unrestricted use
unless specifically restricted by the donor.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
(continued)
9
Contributions that are restricted by the donor for a specific time or purpose are
reported as temporarily or permanently restricted contributions based on the
nature of the restriction. When a donor restriction expires, that is, when a
stipulated time restriction ends or purpose restriction is accomplished, temporarily
restricted net assets are reclassified to unrestricted net assets and are reported in
the consolidated statement of activities as net assets released from restrictions. In
the event a donor makes changes to the nature of a restricted gift which affects its
classification among the net asset categories, such amounts are reflected as
reclassifications in the consolidated statement of activities.
Split-interest agreements
The Association receives certain planned gift donations that benefit not only the
Association, but also the donor or another beneficiary designated by the donor. These
contributions are termed split-interest agreements and are generally gifts to be received
by the Association in the future. The Association benefits from the following types of
split-interest agreements: perpetual trusts, charitable lead and remainder trusts, gift
annuities, and a pooled income fund.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
(continued)
10
Contributed services and materials
Contributed services and materials are reported in the consolidated statement of
activities at the fair value of the services and materials received. Contributions of
services are recognized if the services received create or enhance nonfinancial
assets or if the services require specialized skills and would typically need to be
purchased if not provided by donation.
Research program
The research program of the American Diabetes Association is administered
sheet.
Concentrations of credit risk
Financial instruments that potentially subject the Association to concentrations of
credit risk consist of deposits in banks and investments, including collateralized
Management estimates and uncertainties
The preparation of financial statements in conformity with U.S. generally
accepted accounting principles requires management to make estimates and
Functional allocation of expenses
Expenses have been summarized on a functional basis in the consolidated
statement of activities. Accordingly, certain costs have been allocated among
program activities and supporting services.
AMERICAN DIABETES ASSOCIATION
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
December 31, 2010
(with comparative information as of and for the year ended December 31, 2009)
________
11
Comparative financial statements
The consolidated statements of activities and functional expenses include certain
summarized comparative information for the year ended December 31, 2009.
Reclassifications
Certain prior year balances have been reclassified to conform to the current year
presentation.
4. Investments
Investments as of December 31, 2010 and 2009, consist of the following (in thousands):
2010 2009
Real estate 12,850$ 12,850$
Fixed-income mutual funds 6,626 6,064
Certificates of deposit 5,055 1,896