PCI - Media Impact, Inc.Financial StatementsDecember 31, 2012
O’CONNOR DAVIES, LLP 665 Fifth Avenue, New York, NY 10022 I  Tel: 212.286.2600  I  Fax: 212.286.4080  I  www.odpkf.com   O...
 The Board of DirectorsPCI - Media Impact, Inc.Page 2OpinionIn our opinion, the financial statements referred to above pre...
2012 2011ASSETSCash and cash equivalents 154,455$ 208,748$Contributions and grants receivable 160,465 31,289Prepaid expens...
PCI - Media Impact, Inc.Statement of ActivitiesYear Ended December 31, 2012(with summarized totals for the year ended Dece...
PCI - Media Impact, Inc.Statement of Functional ExpensesYear Ended December 31, 2012(with summarized totals for 2011)Progr...
2012 2011CASH FLOWS FROM OPERATING ACTIVITESChange in net assets (515,759)$ (440,424)$Adjustments to reconcile change in n...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 201271. Organization and Tax StatusPCI - Media Impact, I...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 201282. Summary of Significant Accounting Policies (cont...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 201292. Summary of Significant Accounting Policies (cont...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 2012103. Leasehold Improvements and EquipmentLeasehold i...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 2012116. Board Designated Net AssetsMedia Impact establi...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 2012128. Lease CommitmentsMedia Impact leases office spa...
PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 20121312. Prior Year InformationThe financial statements...
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  1. 1. PCI - Media Impact, Inc.Financial StatementsDecember 31, 2012
  2. 2. O’CONNOR DAVIES, LLP 665 Fifth Avenue, New York, NY 10022 I  Tel: 212.286.2600  I  Fax: 212.286.4080  I  www.odpkf.com   O’Connor Davies, LLP is a member firm of the PKF International Limited network of legally independent firms and does not accept any responsibility or liability for the actions or inactions on the part of any other individual member firm or firms.Independent Auditors ReportThe Board of DirectorsPCI - Media Impact, Inc.We have audited the accompanying financial statements of PCI - Media Impact, Inc., whichcomprise the statement of financial position as of December 31, 2012, and the relatedstatements of activities, statement of functional expenses and cash flows for the year thenended, and the related notes to the financial statements.Management’s Responsibility for the Financial StatementsManagement is responsible for the preparation and fair presentation of these financialstatements in accordance with accounting principles generally accepted in the United States ofAmerica; this includes the design, implementation, and maintenance of internal control relevantto the preparation and fair presentation of financial statements that are free from materialmisstatement, whether due to fraud or error.Auditors’ ResponsibilityOur responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with auditing standards generally accepted in the UnitedStates of America. Those standards require that we plan and perform the audit to obtainreasonable assurance about whether the financial statements are free of 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 auditors’judgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the entity’s preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of theentity’s internal control. Accordingly, we express no such opinion. An audit also includesevaluating the appropriateness of accounting policies used and the reasonableness ofsignificant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.We believe that the audit evidence we have obtained is sufficient and appropriate to provide abasis for our audit opinion.
  3. 3.  The Board of DirectorsPCI - Media Impact, Inc.Page 2OpinionIn our opinion, the financial statements referred to above present fairly, in all material respects,the financial position of PCI - Media Impact, Inc. as of December 31, 2012, and the changes inits net assets and its cash flows for the year then ended in accordance with accountingprinciples generally accepted in the United States of America.Report on Summarized Comparative InformationWe have previously audited PCI - Media Impact, Inc.’s December 31, 2011 financial statements,and we expressed an unmodified audit opinion on those audited financial statements in our reportdated May 16, 2012. In our opinion, the summarized comparative information presented hereinas of and for the year ended December 31, 2011 is consistent, in all material respects, with theaudited financial statements from which it has been derived.New York, New YorkMay 2, 2013
  4. 4. 2012 2011ASSETSCash and cash equivalents 154,455$ 208,748$Contributions and grants receivable 160,465 31,289Prepaid expenses and other assets 43,184 41,927Investments 692,308 1,349,155Beneficial interest in charitable remainder trust 13,000 14,833Leasehold improvements and equipment, net 36,827 36,5501,100,239$ 1,682,502$LIABILITIES AND NET ASSETSLiabilitiesAccounts payable and accrued expenses 47,818$ 63,280$Advances payable 116,470 159,326Capital lease obligations 7,585 12,867Annuities payable 45,737 48,641Total Liabilities 217,610 284,114Net assetsUnrestrictedOperating 23,168 54,208Board designated 675,333 1,322,648698,501 1,376,856Temporarily restricted 184,128 21,532Total Net Assets 882,629 1,398,3881,100,239$ 1,682,502$PCI - Media Impact, Inc.Statement of Financial PositionDecember 31, 2012(with comparative amounts at December 31, 2011)See notes to financial statements3
  5. 5. PCI - Media Impact, Inc.Statement of ActivitiesYear Ended December 31, 2012(with summarized totals for the year ended December 31, 2011)Temporarily 2011Unrestricted Restricted Total TotalOPERATING REVENUE AND SUPPORTContributions and grants (includes in-kindcontributions of $42,951 and $145,098) 1,108,970$ 763,090$ 1,872,060$ 1,398,927$Investment return (loss), net 10,360 - 10,360 (1,723)Other income 61,883 - 61,883 61,4391,181,213 763,090 1,944,303 1,458,643Net assets released from restrictions 600,494 (600,494) - -Total Operating Revenue and Support 1,781,707 162,596 1,944,303 1,458,643EXPENSESProgram services 1,977,839 - 1,977,839 1,486,434Administrative 223,036 - 223,036 237,167Fundraising 254,330 - 254,330 209,246Total Expenses 2,455,205 - 2,455,205 1,932,847Excess of Operating Revenue andSupport Over Expenses (673,498) 162,596 (510,902) (474,204)NON-OPERATING ACTIVITIESBequests 1,092 - 1,092 38,1302012See notes to financial statements4Bequests 1,092 1,092 38,130Change in value ofsplit interest agreements (5,949) - (5,949) (4,350)Total Non-operating Activities (4,857) - (4,857) 33,780Change In Net Assets (678,355) 162,596 (515,759) (440,424)NET ASSETSBeginning of year 1,376,856 21,532 1,398,388 1,838,812End of year 698,501$ 184,128$ 882,629$ 1,398,388$See notes to financial statements4
  6. 6. PCI - Media Impact, Inc.Statement of Functional ExpensesYear Ended December 31, 2012(with summarized totals for 2011)Program Adminis- Fund 2011Services trative Raising Total TotalSalaries 550,494$ 90,000$ 133,099$ 773,593$ 569,818$Payroll taxes and employee benefits 130,087 35,145 22,843 188,075 124,418Total Salaries and Related Expenses 680,581 125,145 155,942 961,668 694,236Consulting fees (includes $16,720 of in-kind consulting fees in 2011) 487,989 7,933 10,000 505,922 291,411Professional fees (includes $9,137 and $1,330 of in-kindlegal services) 5,194 48,690 - 53,884 44,816Broadcast production/airtime(includes $7,500 and $97,218 of in-kind broadcast production/airtime) 292,807 601 - 293,408 391,262Temporary personnel 2,000 - - 2,000 4,050Travel (includes $26,314 and $29,830 of in-kind travel) 225,844 8,884 234,728 177,357Rent 94,241 15,407 46,220 155,868 156,240Telecommunications 19,114 1,161 - 20,275 20,6062012See notes to financial statements5Printing and duplicating 6,276 - 4,889 11,165 14,456Mailing services 1,271 - - 1,271 -Public representation and outreach 35,328 - 170 35,498 17,149Postage 2,056 343 3,043 5,442 6,368Office supplies 33,808 3,456 134 37,398 28,927Meetings and conferences 43,826 - - 43,826 3,091Tapes and films 391 - - 391 -Equipment rentals, repairs and maintenance 27,319 4,787 12,432 44,538 27,414Registration dues and fees 3,613 - 9,967 13,580 14,888Insurance 6,911 12,893 - 19,804 19,046Depreciation 9,270 1,324 2,649 13,243 20,153Interest - 1,296 - 1,296 1,377Total Expenses 1,977,839$ 223,036$ 254,330$ 2,455,205$ 1,932,847$See notes to financial statements5
  7. 7. 2012 2011CASH FLOWS FROM OPERATING ACTIVITESChange in net assets (515,759)$ (440,424)$Adjustments to reconcile change in net assetsto net cash from operating activitiesDepreciation 13,243 20,153Net realized and unrealized (gain) loss on investments (10,288) 1,867Change in beneficial interest in charitable remainder trust 1,833 -Donated securities (19,027) -Changes in operating assets and liabilitiesContributions receivable (129,176) 260,383Prepaid expenses and other assets (1,257) (4,817)Accounts payable and accrued expenses (15,462) 22,431Advances payable (42,856) 159,326Net Cash from Operating Activities (718,749) 18,919CASH FLOWS FROM INVESTING ACTIVITIESPurchase of property and equipment (13,520) (16,329)Proceeds from sale of investments 686,162 91,383PCI - Media Impact, Inc.Statement of Cash FlowsYear Ended December 31, 2012(with comparative amounts for the year ended December 31, 2011)See notes to financial statements6Proceeds from sale of investments 686,162 91,383Purchase of investment - (8,446)Net Cash from Investing Activities 672,642 66,608CASH FLOWS FROM FINANCING ACTIVITIESPrincipal payments on capital lease obligations (5,282) (3,558)Annuities payments (2,904) (2,669)Net Cash from Financing Activities (8,186) (6,227)Net Change in Cash and Cash Equivalents (54,293) 79,300CASH AND CASH EQUIVALENTSBeginning of year 208,748 129,448End of year 154,455$ 208,748$SUPPLEMENTAL CASH FLOWS INFORMATIONCash paid for interest 1,296$ 1,377$Non cash financing activitiesEquipment purchased through capital lease - 16,425See notes to financial statements6
  8. 8. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 201271. Organization and Tax StatusPCI - Media Impact, Inc.’s (“Media Impact”) unique approach to communications combinesthe principles of Entertainment-Education with the reach of mass media to mobilizeindividual and community action and catalyze positive change. Entertainment-Education is aform of entertainment designed to educate and amuse audiences and can be done with avariety of formats, ranging from comic books, to TV, radio productions, and street theatre.Our programs primarily focus on promoting sexual and reproductive health, prevention ofHIV/AIDS, biodiversity conservation, sustainable development, human rights anddemocracy. Media Impact is a not-for-profit organization exempt from income taxes underSections 501(c)(3) and 509(a)(1) of the Internal Revenue Code.2. Summary of Significant Accounting PoliciesUse of EstimatesThe preparation of financial statements in conformity with accounting principles generallyaccepted in the United States of America (U.S. GAAP) requires Media Impact’smanagement to make certain estimates and assumptions relating to the reporting of assetsand liabilities and the disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during thereporting period. Actual results could differ from those estimates.Operating MeasureMedia Impact has elected to present an operating measure in its statement of activities.Accordingly, items not affecting operations are segregated from those affecting operations.Items not affecting operations include bequests and other planned giving.Fair Value MeasurementsMedia Impact follows Financial Accounting Standards Board (FASB) guidance on Fair ValueMeasurements which defines fair value and establishes a fair value hierarchy organized intothree levels based upon the input assumptions used in pricing assets. Level 1 inputs havethe highest reliability and are related to assets with unadjusted quoted prices in activemarkets. Level 2 inputs relate to assets with other than quoted prices in active marketswhich may include quoted prices for similar assets or liabilities or other inputs which can becorroborated by observable market data. Level 3 inputs are unobservable inputs and areused to the extent that observable inputs do not exist.Cash and Cash EquivalentsFor statement of cash flows purposes, Media Impact considers investments in highly liquiddebt instruments with a maturity of three months or less at the time of purchase to be cashequivalents, except for those held for investment purposes.
  9. 9. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 201282. Summary of Significant Accounting Policies (continued)Leasehold Improvements and EquipmentMedia Impact capitalizes all expenditures for property and equipment in excess of $1,000.Leasehold improvements and equipment are stated at cost or fair value on the date ofdonation. Depreciation is computed on the straight-line method over the estimated usefullives of the related assets. Office furniture and computer equipment are deemed to have auseful life of between five and seven years. Leasehold improvements are capitalized andamortized over the period of the lease and expected renewal. Equipment leased undercapital leases is amortized over its economic useful lives.Split-Interest AgreementsSplit-interest agreements with donors consist primarily of charitable gift annuities and acharitable remainder unitrust. A charitable gift annuity provides for payments of fixedamounts to the donor or other designated beneficiaries over the annuitys term (usually thedesignated beneficiarys lifetime). The assets received are recorded at fair value whenreceived and a payment liability is recognized for the present value of the future cash flowsexpected to be paid to the donors designated beneficiary. The difference between thesetwo amounts is recorded as unrestricted contribution revenue unless the donor restricts theuse of the gift. The initial present value of the estimated future payments is determinedusing appropriate discount rates and mortality tables.On an annual basis, Media Impact revalues the gift annuity liability for principal paymentsmade, the amortization of the initial discount associated with the gift annuity, andrevaluations of expected future payments to beneficiaries, based on changes in lifeexpectancy and other actuarial assumptions.Media Impact has a beneficial interest in a charitable remainder trust, which is a time-restricted contribution not available to Media Impact until after the death of the donor, who,while living, receives an annual payout from the trust based on a fixed percentage of themarket value of the invested funds. The value of Media Impact’s beneficial interest in thecharitable trust is estimated to be equivalent to the discounted present value of MediaImpact’s future cash flows from the trust. The underlying assets in the trust are principallymarketable securities.Net Assets PresentationUnrestricted net assets include funds having no restriction as to use or purpose imposed bydonors. Temporarily restricted net assets are those whose use is limited by donors to aspecific time period or purpose. Permanently restricted net assets are limited by donors forinvestment in perpetuity.
  10. 10. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 201292. Summary of Significant Accounting Policies (continued)Contributions and GrantsContributions are recognized as revenue when an unconditional promise to give is madeand the gift is subject to reasonable valuation. Contributions are considered to be availablefor unrestricted use unless specifically restricted by the donor. Contributions receivableconsist of gifts pledged. Grant awards received for specific purposes are recognized assupport and revenue to the extent related expenses are incurred in compliance with thespecific grants terms. The unexpended funds are considered refundable advances andreported as advances payable. Media Impact believes that all grants and other receivablesare collectible.Contributed ServicesContributed services are reported as contributions at their fair value if such services createor enhance non-financial assets, or would have been provided by donation, requirespecialized skills, and are provided by individuals possessing such specialized skills.Investment Income RecognitionPurchases and sales of securities are recorded on a trade-date basis. Interest income isrecorded on the accrual basis and dividends are recorded on the ex-dividend date. Realizedand unrealized gains and losses are included in the determination of the change in netassets.Functional Allocation of ExpensesExpenses have been charged to program and supporting services, either directly whenidentifiable to a specific program, or indirectly based on managements estimate of thefunctional area benefited.Accounting for Uncertainty in Income TaxesMedia Impact recognizes the effect of income tax positions only if those positions are morelikely than not of being sustained. Management has determined that the Organization hadno uncertain tax positions that would require financial statement recognition. TheOrganization is no longer subject to audits by the applicable taxing jurisdictions for periodsprior to December 31, 2009.Subsequent Events Evaluation by ManagementManagement has evaluated subsequent events for disclosure and/or recognition in thefinancial statements through the date that the financial statements were available to be issued,which date is May 2, 2013.
  11. 11. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 2012103. Leasehold Improvements and EquipmentLeasehold improvements and equipment consist of the following at December 31:2012 2011Equipment 66,215$ 52,695$Accumulated depreciation and amortization (29,388) (16,145)36,827$ 36,550$Leased equipment included in equipment are as follows:2012 2011Equipment under capital leases 16,425$ 16,425$Accumulated depreciation (6,570) (3,285)9,855$ 13,140$4. Investments and Investment ReturnThe following are major categories of investments measured at fair value on a recurringbasis at December 31, grouped by the fair value hierarchy:2012 2011Money market funds 600,269$ 1,258,958$Equity funds 18,407 24,796Bond funds 73,632 65,401692,308$ 1,349,155$Investments at December 31, 2012 and 2011 were valued using a Level 1 fair value input.Investment return (loss) for 2012 consists of the following:2012 2011Interest and dividends from investments, net 72$ 144$Net realized and unrealized gain (loss) 10,288 (1,867)Investment return 10,360$ (1,723)$5. Annuities PayableChanges in actuarial liability under the gift annuity program at December 31, 2012 and 2011,consist of annuity payments of $2,904 and $2,669.
  12. 12. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 2012116. Board Designated Net AssetsMedia Impact established a board designated fund into which gifts and contributions receivedthrough Media Impact’s planned giving program are placed, as well as certain other assetsand liabilities. The components of these board designated net assets at December 31, are asfollows:2012 2011InvestmentsGeneral investment account 316,219$ 1,105,147$Gift annuity accounts 107,801 97,498Cash held for investments 284,050 153,811Beneficial interest in charitable remainder trust 13,000 14,833Gift annuity payable (45,737) (48,641)675,333$ 1,322,648$The changes in board designated net assets for the years ended December 31, are asfollows:2012 2011Balance, beginning of year 1,322,648$ 1,684,463$Contributions designated for investment 2,171 47,051Investment return 10,443 (1,535)Release to fund general operations (661,000) (400,000)Other 1,071 (7,331)Balance, end of year 675,333$ 1,322,648$7. Temporarily Restricted Net Assets and Net Assets Released from RestrictionsTemporarily restricted net assets and their related purposes and net assets released fromrestrictions are as follows:Net Assets Net Assets,Released December 31,in 2012 2012For programs in Latin America 128,180$ 91,678$For programs in the Caribbean 167,304 -For programs in Africa 139,908 41,021For programs in the USA 165,102 51,429600,494$ 184,128$
  13. 13. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 2012128. Lease CommitmentsMedia Impact leases office space in New York City. The lease contains clauses forescalations for Media Impact’s share of increased building costs and expires on April 30,2015.Future minimum annual lease payments for capital leases and non-cancellable operatingleases and the related capital lease payments at December 31, 2012 are as follows:Capital OperatingLease Leases2013 5,973$ 155,080$2014 1,612 155,0802015 - 51,694Total minimum annual lease payments 7,585$ 361,854$9. Concentrations of Credit RiskFinancial instruments that potentially subject Media Impact to concentrations of credit riskconsist principally of cash and cash equivalents, contributions receivable and investments.Media Impact maintains its cash with high credit quality financial institutions and its policy isdesigned to limit exposure to any one institution. At times, cash balances may be in excess ofbalances insured by the FDIC.10. Retirement PlanMedia Impact maintains a Simplified Employee Pension Plan (the “Plan”) for the benefit ofeligible employees. Media Impact’s contribution rate, determined by its Board, was 6% for2012 and 2011. Plan expense was $34,560 and $26,565 for 2012 and 2011.11. Donated ServicesDonated services for the years ended December 31, consisted of the following:2012 2011Legal 9,137$ 1,330$Broadcast production/airtime 7,500 97,218Consulting - 16,720Travel 26,314 29,83042,951$ 145,098$
  14. 14. PCI - Media Impact, Inc.Notes to Financial StatementsDecember 31, 20121312. Prior Year InformationThe financial statements include certain prior year summarized comparative information intotal but not by net asset class. Such information does not include sufficient detail to constitutea presentation in conformity with accounting principles generally accepted in the United Statesof America. Accordingly, such information should be read in conjunction with Media Impactsfinancial statements for 2011, from which the summarized information was derived.13. Management Plans to Reduce Operating DeficitsThe Board of Directors continues to evaluate the reasons for the operating deficits duringrecent years. Media Impact has taken measures to manage costs, and expand fundraisingefforts with the organizational goal to achieve no drawdown from the board designated fund infuture years. Future plans and budgets are being developed to produce a positive change innet assets. Specifically, in 2013, organizational budgeted expenses have been reduced 15%and a board challenge grant which could increase unrestricted revenue by $275,000 has beenreceived.* * * * *

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