Consolidated Financial Statements, Supplemental Schedules and ...
Consolidated Financial Statements, Supplemental Schedules and Report of Independent Certified Public Accountants ACCION International December 31, 2013 and 2012
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Transcript of Consolidated Financial Statements, Supplemental Schedules and ...
Consolidated Financial Statements, Supplemental Schedules and Report of Independent Certified Public Accountants
ACCION International
December 31, 2013 and 2012
Report of Independent Certified Public Accountants 3
Consolidated Statements of Financial Position 5
Consolidated Statement of Activities 2013 6
Consolidated Statement of Functional Expenses 2013 8
Consolidated Statements of Cash Flows 10
Notes to Consolidated Financial Statements 11
Supplemental Schedules
Consolidating Schedule of Financial Position 31
Consolidating Schedule of Activities 33
Basis for qualified opinion The Organizations investment in Banco Solidario S.A. (BancoSol), a foreign affiliate accounted for under the equity method of accounting, is carried at $43,842,764 and $33,310,836 on the consolidated statement of financial position as of December 31, 2013 and 2012, respectively, and the Organization included its share of BancoSols net income in the consolidated change in net assets with an increase of $9,427,128 and a decrease of $8,852,273, respectively, for the years then ended. We were unable to obtain, through our own work or the use of the work of BancoSols auditors, sufficient appropriate audit evidence regarding the carrying amount of the Organizations investment in BancoSol as of December 31, 2013 and 2012 and the Organizations share of BancoSols net income for the years then ended, because our access to the financial information, management, and the auditors of BancoSol is restricted by circumstances that cannot be overcome within a reasonable period of time. Consequently, we were unable to determine whether any adjustments to these amounts were necessary.
Qualified opinion In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of ACCION International and subsidiaries as of December 31, 2013 and 2012, and the results of their operations and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
Other matter - supplementary information Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidated statement of functional expenses, and the consolidating schedules of financial position and schedules of activities are presented for purposes of additional analysis, rather than to present the financial position, results of operations, and cash flows of the individual entities, and is not a required part of the consolidated financial statements. Such supplementary 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 audit of the consolidated financial statements and certain additional procedures. These additional procedures included comparing and reconciling the 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, except for the possible effects on the supplementary information of the matter resulting in the qualified opinion on the consolidated financial statements described above, the consolidating information is fairly stated, in all material respects, in relation to the consolidated financial statements as a whole.
Boston, Massachusetts October 31, 2014
ACCION INTERNATIONAL AND SUBSIDIARIESConsolidated Statements of Financial PositionDecember 31, 2013 and 2012
CURRENT ASSETS:Cash and cash equivalents $ 19,790,095 $ 40,449,646 Short-term investments 86,837,478 80,652,713 Notes receivable from affiliates 3,000,000 200,671 Grants receivable - net 1,609,017 3,916,877 Contributions receivable - net 490,087 328,359 Contracts receivable - net 938,739 428,810 Microloans receivable- net 19,452,197 11,305,042 Prepaid expenses 1,136,688 1,201,701 Deposits, advances and other receivables 1,025,343 652,179
NON-CURRENT ASSETS:Cash restricted by foundation for long-term purposes 702,623 1,440,639 Grants receivable - net 1,550,030 2,806,348 Contributions receivable - net 624,445 9,525 Global Bridge Guarantee Program investments 7,305,722 7,494,309 Investments in affiliates 204,861,544 172,797,536 Notes receivable from affiliates - 2,000,000 Property and equipment - net 1,197,087 790,123
Total assets $ 350,521,095 $ 326,474,478
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES:Accounts payable and accrued liabilities $ 4,960,327 $ 3,346,177 Deferred revenue 293,863 209,223 Bank line of credit - 22,585 Deposit from investor (Note B) 6,349,106 6,349,106 Notes payable 1,271,435 1,507,211
Total current liabilities 12,874,731 11,434,302
NON-CURRENT LIABILITIES:Notes payable - net of current portion 4,750,669 4,562,875
Total non-current liabilities 4,750,669 4,562,875
Total liabilities 17,625,400 15,997,177
NET ASSETS:Unrestricted:
Accion 320,419,592 299,514,988 Non-controlling interest in SCM (Note B) 440,597 771,305 Non-controlling interest in Accion Investment in Nigeria (Note B) 3,833,276 -
Total unrestricted net assets 324,693,465 300,286,293 Temporarily restricted 8,202,230 10,191,008
Total net assets 332,895,695 310,477,301
Total liabilities and net assets $ 350,521,095 $ 326,474,478 See notes to consolidated financial statements.
ACCION INTERNATIONAL AND SUBSIDIARIESConsolidated Statement of ActivitiesYear ended December 31, 2013
TemporarilyUnrestricted restricted Total
REVENUES:Contributions and grants $ 3,804,609 $ 7,428,888 $ 11,233,497 Dividend and interest income from program investments 10,938,979 15,818 10,954,797 Dividend and interest income from short-term investments 2,698,295 - 2,698,295 Contract revenues and training fees 4,488,187 - 4,488,187 Net assets released from restrictions 9,432,204 (9,432,204) -
Total revenues 31,362,274 (1,987,498) 29,374,776
FUNCTIONAL EXPENSES:Program services:
Global Programs 18,198,564 - 18,198,564 Microlending 6,342,512 - 6,342,512 Global Investments 6,297,867 - 6,297,867 ACCION Investment Management Company 7,448 - 7,448 Center for Financial Inclusion 6,015,264 - 6,015,264 Communications 1,948,186 - 1,948,186
Total program services 38,809,841 - 38,809,841
Supporting servicesGeneral and administrative 5,266,266 - 5,266,266 Fundraising 2,588,954 - 2,588,954
Total supporting services 7,855,220 - 7,855,220
Total functional expenses 46,665,061 - 46,665,061
Change in net assets from operations (15,302,787) (1,987,498) (17,290,285)
Income taxes (Note F) (85,649) - (85,649) Equity in income of equity investments 9,530,056 - 9,530,056 Purchase of interest in SCM by noncontrolling shareholder (Note B) 629,221 - 629,221 Purchase of interest in Accion Investment in Nigeria
by noncontrolling shareholder (Note B) 3,839,389 - 3,839,389 Net unrealized gain on investments 8,311,700 - 8,311,700 Net realized gain on investments 17,577,622 - 17,577,622 Foreign currency translation losses, net (92,380) (1,280) (93,660)
Change in net assets 24,407,172 (1,988,778) 22,418,394
Net assets - Beginning of year 300,286,293 10,191,008 310,477,301
Net assets - End of year $ 324,693,465 $ 8,202,230 $ 332,895,695
See notes to consolidated financial statements.
REVENUES:Contributions and grants $ 4,496,216 $ 7,676,943 $ 12,173,159 Dividend and interest income from program investments 6,311,683 3,578 6,315,261 Dividend and interest income from short-term investments 3,337,685 - 3,337,685 Management fees (Note F) 11,007,515 - 11,007,515 Contract revenues and training fees 3,027,438 - 3,027,438 Net assets released from restrictions 8,841,803 (8,841,803) -
Global Programs 17,305,359 - 17,305,359 Microlending 4,247,532 - 4,247,532 Global Investments 5,632,415 - 5,632,415 ACCION Investment Management Company 2,801,514 - 2,801,514 Center for Financial Inclusion 4,031,672 - 4,031,672 Communications 1,856,366 - 1,856,366
Change in net assets from operations (7,172,777) (1,161,282) (8,334,059)
Income taxes (Note F) (3,121,031) - (3,121,031) Change in equity income of equity investments (6,075,778) - (6,075,778) Purchase of interest in SCM by noncontrolling shareholder (Note B) 786,543 - 786,543 Net unrealized loss on investments (10,967,811) - (10,967,811) Net realized gain on investments 23,509,673 - 23,509,673 Foreign currency translation losses, net (298,672) (11,347) (310,019)
Change in net assets (3,339,853) (1,172,629) (4,512,482)
Net assets - End of year $ 300,286,293 $ 10,191,008 $ 310,477,301
ACCION INTERNATIONAL AND SUBSIDIARIESConsolidated Statement of Functional ExpensesYear ended December 31, 2013
Program Services Supporting ServicesACCION
Investment Center forGlobal Global Management Financial General and Total
Programs Microlending Investments Company Inclusion Communications Administrative Fundraising Expenses
FUNCTIONAL EXPENSES:Salaries and related expenses $ 9,622,798 $ 3,163,951 $ 2,879,808 $ 5,197 $ 2,486,785 $ 1,061,245 $ 3,283,646 $ 2,074,454 $ 24,577,884 Professional services 2,055,333 858,022 2,296,973 6,274 1,312,261 325,814 900,148 109,581 7,864,406 Travel and conferences 1,774,662 177,432 604,196 (5,545) 1,662,141 209,442 302,518 128,441 4,853,287 Office and occupancy 1,248,371 557,944 297,796 (75) 377,828 330,890 689,876 223,202 3,725,832 Awards and grants 1,516,806 - - - 70,000 - - - 1,586,806 Provision for doubtful accounts 1,671,289 835,164 - - 50,490 - - - 2,556,943 Taxes and penalties 101,069 487,160 15,802 295 - - 4,698 - 609,024 Depreciation 118,725 87,992 17,682 - 24,938 10,993 39,576 15,391 315,297 Interest and fees 22,055 55,604 170,342 1,302 4,469 - 43,687 18,237 315,696 Miscellaneous 67,459 119,243 15,268 - 26,352 9,802 2,117 19,648 259,889
Total $ 18,198,567 $ 6,342,512 $ 6,297,867 $ 7,448 $ 6,015,264 $ 1,948,186 $ 5,266,266 $ 2,588,954 $ 46,665,064
FUNCTIONAL EXPENSES:Salaries and related expenses $ 8,683,469 $ 2,025,659 $ 2,058,357 $ 2,418,221 $ 2,203,535 $ 785,556 $ 3,465,277 $ 2,045,963 $ 23,686,037 Professional services 3,370,510 735,654 2,650,562 119,376 634,985 602,933 808,584 287,065 9,209,669 Travel and conferences 2,045,245 120,730 465,792 141,954 884,321 167,253 183,831 109,941 4,119,067 Office and occupancy 1,053,444 450,869 240,926 81,963 270,616 288,972 815,216 513,372 3,715,378 Awards and grants 1,843,804 - - - 3,320 - - - 1,847,124 Provision for doubtful accounts 55,134 386,052 - - - - - - 441,186 Taxes and penalties 49,950 308,454 19,833 - - - 6,038 - 384,275 Depreciation 136,385 46,642 16,436 - 18,612 6,264 44,896 16,673 285,908 Interest and fees 36,608 23,814 156,837 2,380 1,115 - 39,824 25,231 285,809 Miscellaneous 30,810 149,658 23,672 37,620 15,168 5,388 (55,529) 13,877 220,664
Total $ 17,305,359 $ 4,247,532 $ 5,632,415 $ 2,801,514 $ 4,031,672 $ 1,856,366 $ 5,308,137 $ 3,012,122 $ 44,195,117
ACCION INTERNATIONAL AND SUBSIDIARIESConsolidated Statements of Cash FlowsYears ended December 31, 2013 and 2012
2013 2012CASH FLOWS FROM OPERATING ACTIVITIES:
Change in net assets $ 22,418,394 $ (4,512,482) Adjustments to reconcile change in net assets to net cash used in
operating activities:Unrealized loss on investments (8,311,700) 10,967,811 Realized gain on sale of investments (17,577,622) (23,509,673) Provision for doubtful accounts 1,581,940 441,186 Depreciation and amortization 315,297 285,907 Equity in income of investments (9,530,056) 6,075,778 Investment by non-controlling interests 4,468,610 786,543 Foreign currency translation gains 463,518 244,400 Increase (decrease) in cash and cash equivalents as a result of a change in:
Prepaid expenses 2,982 (596,747) Grants receivable 3,559,831 313,266 Contributions receivable (776,648) 238,236 Deposits, advances and other receivables (374,287) 179,272 Contract payments receivable (1,267,680) (139,875) Cash restricted by foundation 738,016 1,089,252 Accounts payable and accrued liabilities 1,724,319 268,116 Deferred revenue 90,066 151,327
Net cash used in operating activities (2,475,020) (7,717,683)
CASH FLOWS FROM INVESTING ACTIVITIES:Purchase of property and equipment (786,979) (312,749) Purchase (sale) of short-term investments (8,354,975) (3,379,687) Purchase of investments (17,977,878) (26,261,980) Proceeds from sale of investments 17,633,379 24,992,202 Dividends received from investments in affiliates 1,273,801 6,807,415 Net loan originations and principal repayments (9,295,351) (6,255,113)
Net cash (used in) provided by investing activities (17,508,003) (4,409,912)
CASH FLOWS FROM FINANCING ACTIVITIES:Notes payable received 525,690 820,899 Proceeds from deposit from investors - 6,349,106 Notes payable paid (573,672) (708,000) Line of credit borrowing (repayment) (21,139) (183,986)
Net cash provided by (used in) financing activities (69,121) 6,278,019
EFFECT OF EXCHANGE RATE CHANGES ON CASH (607,407) (246,534)
INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS (20,659,551) (6,096,110)
CASH AND CASH EQUIVALENTS - Beginning of year 40,449,646 46,545,756
CASH AND CASH EQUIVALENTS - End of year $ 19,790,095 $ 40,449,646
Supplemental disclosureInterest paid $ 110,640 $ 132,020 Taxes paid $ 439,687 $ 3,452,949
ACCION INTERNATIONAL AND SUBSIDIARIES Notes to Consolidated Financial Statements As of and for the years ended December 31, 2013 and 2012
NOTE A - NATURE OF ORGANIZATION
ACCION International and its subsidiaries (Accion) is headquartered in Boston, Massachusetts with offices in Washington, D.C., Accra, Ghana and Manaus, Brazil and subsidiaries in Bangalore, India, Bogot, Colombia, Beijing and Chifeng, China, Ebne, Republic of Mauritius and Manaus, Brazil. Accion is an independent, nonprofit microfinance organization dedicated to promoting economic development around the world by providing people in impoverished and developing areas the financial tools they need - small business loans, training, and related financial services - to work their way out of poverty.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Principles of Consolidation
The consolidated financial statements include the accounts of Accion and the following entities:
Fundacin Centro Accin Microempresarial (Centro) Centro is a non-profit foundation and was incorporated in Bogot, Colombia as a Latin American training and technical support arm of Accion. The accounts of Centro reflect total assets and liabilities of $507,335 and $2,081,289 at December 31, 2013, and $830,410 and $792,648 at December 31, 2012. In 2012, Centro launched a new activity, Avanza, providing loan origination services to Colombian microfinance institutions in exchange for a fee. ACCION Gateway Fund, LLC (Gateway) Gateway is a wholly owned subsidiary of Accion and was created as a limited liability company in Delaware to hold several investments in affiliates. ACCION Investment Management Company, LLC (AIMCO) AIMCO is a wholly owned subsidiary and was created as a limited liability company in Delaware for the purpose of providing investment management services for ACCION Investments in Microfinance, SPC (AINV), a separate legal entity. In 2012, AINV was sold and AIMCO has since then been inactive. The accounts of AIMCO reflect total assets and liabilities of $65,248 and $0 at December 31, 2013, and $5,067,213 and $16,400 at December 31, 2012. ACCION Technical Advisors, India (ATA) ATA is a wholly owned subsidiary of Accion. ATA is a nonprofit company according to Section 25 of the Indian Companies Act of 1956 and is the training and technical support arm of Accion in India. The accounts of ATA reflect total assets and liabilities of $222,151 and $187,705 at December 31, 2013, and $407,569 and $222,434 at December 31, 2012. ACCION Beijing Consultation Services Company, Ltd (ACC) - ACC was created as a wholly owned subsidiary of Accion as the training and technical arm of Accion in China. ACC is a for-profit company operating in the Peoples Republic of China. The accounts of ACC reflect total assets and liabilities of $284,319 and $313,179 at December 31, 2013, and $64,688 and $210,655 at December 31, 2012. Chifeng City Yuanbaoshan District ACCION Micro-Credit Company, Ltd (AMC) AMC was created as a wholly owned subsidiary of Accion and is a for-profit microfinance company operating in the Peoples Republic of China. A contribution of $3,236,500 and $7,978,953 was made by Accion in 2013 and 2012, respectively. The accounts of AMC reflect total assets and liabilities of $18,510,543 and $346,195 at December 31, 2013, and $13,440,951 and $124,531 at December 31, 2012. In November 2012, Accion received a cash deposit of $6,349,106 from an investor interested in purchasing shares of AMC. The sale of shares in AMC had not occurred as of December 31, 2013 and the deposit is presented as a liability on the statement of financial position. See Footnote N for a subsequent event in 2014.
ACCION INTERNATIONAL AND SUBSIDIARIES Notes to Consolidated Financial Statements Continued As of and for the years ended December 31, 2013 and 2012
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued
Principles of Consolidation - Continued ACCION Africa-Asia Investment Company (AAIC) AAIC is a wholly owned subsidiary of Accion. AAIC was created as a for-profit company incorporated in the Republic of Mauritius to own several investments in affiliates in Asia and Africa. ACCIN Microfinanas Sociedade de Crdito ao Microempreendedor e Empresa de Pequeno Porte, S.A. (SCM) SCM was created between Accion, an international governmental organization and an individual investor. SCM is a for-profit microfinance company operating in Manaus, Amazonas, Brazil. Accion is the majority shareholder and owns 92.31% of SCMs shares. An additional $4,058,140 and $2,480,657 was contributed in 2013 and 2012, respectively. The non-controlling interest in SCMs equity is $440,597 and $771,305 at December 31, 2013 and 2012, respectively, as presented on the statement of financial position. The accounts of SCM reflect total assets and liabilities of $3,963,690 and $818,425 at December 31, 2013, and $3,677,721 and $1,822,649 at December 31, 2012. Accion Investments in Microfinance Nigeria (AINV Nigeria) AINV Nigeria is a 51% owned subsidiary of Accion. AINV Nigeria was created as a for-profit company incorporated in the Cayman Islands to own an investment in Nigeria in partnership with one minority shareholder.
The following provides changes in total unrestricted net assets attributable to the non-controlling interests, as well as total unrestricted net assets under Accions control:
Controlling Non-controllingInterest Interest Total
Balance at December 31, 2011 $ 303,339,317 $ 286,829 $ 303,626,146 Purchase of interest in SCM by outside party - 786,543 786,543 Change in net assets (3,824,329) (302,067) (4,126,396)
Balance at December 31, 2012 299,514,988 771,305 300,286,293 Purchase of interest in SCM by outside party - 636,221 636,221 Purchase of interest in AINV Nigeria by outside party - 3,839,389 3,839,389 Change in net assets 21,879,604 (973,042) 20,906,562
Balance at December 31, 2013 $ 321,394,592 $ 4,273,873 $ 325,668,465
All intercompany balances and transactions involving the subsidiaries above have been eliminated in consolidation.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Continued Basis of Presentation
The accompanying consolidated financial statements are prepared in accordance with accounting principles generally accepted in the United States of America using the Not-for-Profit Organizations Audit Guide issued by the American Institute of Certified Public Accountants. Net assets, revenues, and expenses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of Accion and the changes thereof are classified and reported as follows:
Unrestricted Net Assets - Net assets that are not subject to donor-imposed restrictions.
Temporarily Restricted Net Assets - Contributions, grants, and income whose use by Accion has been limited by donors or grantors to a specific time period or purpose.
Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations that are maintained permanently by Accion. Accion had no permanently restricted net assets at December 31, 2013 and 2012.
Cash and cash equivalents include all highly liquid investments with original maturities of three months or less when purchased, excluding amounts restricted by donors for long-term purposes. At times, the cash balances maintained at a single institution may exceed federally insured limits, insured by the Federal Deposit Insurance Corporation. Accion has not experienced any losses in these accounts. Accion holds $702,623 and $1,440,639 in cash restricted by a foundation for long term purposes as of December 31, 2013 and 2012, respectively. Total cash held in foreign accounts was $2,608,142 and $6,114,318 at December 31, 2013 and 2012, respectively.
Short-term investments consist of investments in certificates of deposit, commercial paper, corporate bonds, government reserves funds, mutual funds and US treasury bonds, which invest primarily in securities rated BBB or better, as determined by Standard & Poors Corporation. These investments are carried at fair value, determined as the price that would be received to sell the asset. The changes in fair value are reflected in the consolidated statement of activities.
Global Bridge Guarantee Program Investments
Investments in marketable equity securities with readily determinable fair values, and all investments in debt securities, are reported at fair value, determined as the price that would be received to sell the asset, with gains and losses included in the consolidated statement of activities.
Investments in Affiliates
With the exception of Accions investment in Gentera, formerly known as Compartamos, whose stock trades on the Mexican Stock exchange, investments in affiliates do not have a readily determinable fair value and, as such, are recorded at cost or under the equity method of accounting whenever Accion can exercise significant influence which is generally indicated when its equity position in the affiliate equals or exceeds 20% and does not exceed 50%. Under the equity method, Accion records its proportional share of the net income in the investment at each measurement date. Under the equity method, Accion records dividends as decreases in the investments. Investments in affiliates carried at cost are reviewed periodically to determine whether the underlying value of the affiliate has been impaired. If impairment has been identified and such impairment is deemed to be other than temporary, the carrying value of the investment is written down to the impaired value. Accion did not identify any investments requiring an impairment adjustment in 2013 or 2012.
Contract Revenue and Training Fees
Contract revenue and training fees consist of mission-related consulting agreements with microfinance institutions. Revenue is recognized based on the proportional performance method. As of December 31, 2013 and 2012, the provision for bad debt was $57,178 and $8,938, respectively.
Contributions and Grants
Contributions and grants are received from individuals, private industry, foundations, and government agencies. Contributions and grants may be designated by the donor for a specific purpose or given on an unrestricted basis. All contributions and grants are considered to be available for general use unless specifically restricted by the donor. Contributions and grants, including unconditional promises to give, are recorded at fair value when received. Fair value is determined as the amount to be received less the net present value, using a risk adjusted interest rate. Contributions and grants restricted for purposes which have not been fulfilled at the measurement date are accounted for as temporarily restricted revenue. Amounts received which are required by the donor to be passed on to other organizations are recorded as a liability and reflected in accounts payable and accrued liabilities in the consolidated statements of financial position until the transfer is made. Conditional promises to give are not included in revenues until the conditions are substantially met. Any assets contributed before the conditions are substantially met would be accounted for as a refundable advance and reflected in accounts payable and accrued liabilities in the consolidated statements of financial position. No conditional promises met this definition as of December 31, 2013 and 2012. As of December 31, 2013 and 2012, Accion had $881,000 and $1,925,417, respectively, in conditional promises to give.
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Contributions and Grants - Continued
Grants and contributions receivable at December 31, 2013 and 2012 include amounts due in future years. Grants and contributions receivable are expected to be collected during the following periods:
2013 2012Due in one year or less $ 2,124,104 $ 4,285,236 Due in one to five years 2,328,490 3,026,348 Provision (25,000) (40,000) 4,427,594 7,271,584 Present value discount (approx 5%) (154,008) (210,475)
Net contributions receivable $ 4,273,586 $ 7,061,109
Microloans Receivable
Loans are stated at their principal balance net of the allowance for loan losses. Interest on loans is included in interest and dividend income from program investments as earned based upon interest rates applied to unpaid principal. Accrual of interest on loans is discontinued when, in the judgment of management, the collectability of principal or interest becomes doubtful. Past due status is based on the contractual terms of the loan. Interest subsequently received on nonaccrual loans is either applied against principal or recorded as income based on managements judgment as to the collectability of principal. Interest accruals are resumed on such loans only when they are brought fully current as to principal and interest and when, in the judgment of management, the loans are estimated to be fully collectible. The allowance for loan losses is established as losses are estimated to have occurred through a provision for doubtful accounts charged to functional expenses. Loan losses are charged against the allowance when management believes the un-collectability of a loan balance is confirmed. Subsequent recoveries, if any, are credited to the allowance. The adequacy of the allowance for loan losses is evaluated on a periodic basis by management. Factors considered in evaluating the adequacy of the allowance include current economic conditions and their effect on borrowers, the composition and size of the loan portfolio, and experience with other microlending entities. This evaluation is inherently subjective as it requires estimates that are susceptible to significant revision as more information becomes available. Microloans receivable consisted of the following at December 31:
Microloans receivable $ 20,890,240 $ 11,965,620 Allowance for doubtful accounts (1,438,043) (660,578)
Microloans receivable, net $ 19,452,197 $ 11,305,042
NOTE B - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued
Changes in the allowance for loan losses were as follows for the years ended December 31:
Balance at beginning of year $ 660,578 $ 322,610 Write-offs and exchange rate fluctuation (57,699) (48,084) Provision for loan losses 835,164 386,052
Balance at end of year $ 1,438,043 $ 660,578
Furniture, fixtures, and equipment are recorded at cost and depreciated on a straight-line basis over their useful lives, which range from 3 to 10 years. Leasehold improvements are recorded at cost and amortized on a straight-line basis over the shorter of the life of the lease or estimated useful life of the improvement. Donated equipment is recorded at the fair market value as of the date the gift is made and amortized over its useful life.
Donated Services
Donated services which are specialized and which would otherwise need to be purchased are reflected as contribution revenue and expensed or capitalized, as appropriate, at their fair market values at the date of receipt. Fair market value is determined as the price at which services would have been purchased. Included in contributions and grant revenue, global programs, global investments, and general administrative expenses are donated services, computer equipment, and legal services having an aggregate value of $1,461,359 and $2,033,383 in fiscal 2013 and 2012, respectively.
Foreign Currency Translation The functional currency of Centro is the local currency, which is the Colombian peso. The functional currency of ATA is the local currency, which is the Indian rupee. The functional currency of ACC and AMC is the Chinese Yuan Renminbi. The functional currency of SCM is the Brazilian Real. The functional currency of Accions branch in Ghana is the Cedi, and the functional currency of Accions branch in Brazil is the Brazilian Real. Assets and liabilities of these subsidiaries are translated into U.S. dollars using the current exchange rates at the date of the statement of financial position. Changes in net assets are translated using the average rate for the fiscal year. Foreign currency exchange transaction gains and losses are recorded in the statements of activities.
Income Tax Accion is a tax-exempt organization as described in Section 501(c)(3) of the Internal Revenue Code and is generally exempt from income taxes pursuant to Section 501(a). Centro and ATA are registered charitable organizations in Colombia and India, respectively. Gateway, as a single member limited liability company which has not made a Form 8832 election, reports all of its taxable income or loss directly through its single member, Accion. Gateway is fully consolidated on Accions federal income tax return. ACC AAIC, AIMCO, AINV in Nigeria, AMC and SCM are taxable subsidiaries of Accion, filing their own tax returns. The income tax consequences, if any, are reflected in the financial statements, Footnote I, and do not have a material effect, individually or in the aggregate, upon Accions financial statements. Accion believes it has taken no uncertain tax positions.
Risks and Uncertainties
Accion facilitates access to letters of credit for affiliates outside the United States, which may involve significant risks not present in domestic transactions. For example, foreign companies usually are not bound by uniform accounting, auditing, and financial reporting requirements and standards of practice comparable to those applicable to domestic companies. Other risks include political or financial instability or diplomatic and other developments which could affect foreign operations and investments in foreign-based entities.
Non-controlling Interest
A non-controlling interest is defined as the portion of the net assets in a subsidiary not attributable, directly or indirectly, to a parent. Revenues, expenses, gains, losses and change in net assets are reported in the consolidated financial statements at the consolidated amounts, which include the amounts attributable to the non-controlling interest. The consolidated statement of activities separately presents Accion, as well as the change in net assets attributable to Accion and the non-controlling interest.
NOTE C - FAIR VALUE OF FINANCIAL INSTRUMENTS
As required by existing guidance, Accion reports certain assets at fair value. Fair value is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. A fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy are described below:
Level 1 - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical unrestricted assets or liabilities;
Level 2 - Quoted prices in markets that are not active, or inputs that are observable, either directly or indirectly,
for substantially the full term of the asset or liability; Level 3 - Unobservable inputs that are supported by little or no market activity and are significant to the fair
value of the assets or liabilities. Level 3 includes values determined using pricing models, discounted cash flow methodologies, or similar techniques reflecting Accions own assumptions.
NOTE C - FAIR VALUE OF FINANCIAL INSTRUMENTS - Continued
A financial instruments level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. The following is a description of the valuation methodologies used for assets recorded at fair value: Contributions and Grants Receivable
Contributions and grants receivable are reported based on non-recurring fair value measurements. Multi-year pledges are recorded at the present value of future cash flows using a discount rate, adjusted for market conditions, to estimate fair value.
Investments whose values are based on quoted market prices in active markets are classified as Level 1 assets. These investments primarily include money market funds, U.S. Treasury, and equity securities. Investments whose values are based on quoted prices in markets that are not active, inputs that are not observable, and for prices obtained from comparable securities of issuers with similar credit ratings, are classified as Level 2 assets. These investments include certificate of deposits and corporate bonds.
The following table sets forth, by level within the fair value hierarchy, the financial assets and liabilities recorded at fair value on a recurring basis as of December 31, 2013 and 2012:
Level 1 Level 2 Level 3 TotalShort-term investments:
U.S. Treasury $ 26,703,590 $ - $ - $ 26,703,590 Certificate of deposits - 7,000,000 - 7,000,000 Corporate bonds - 53,133,888 - 53,133,888
Investment in affiliate at fair value 116,506,547 - - 116,506,547 Global Bridge Guarantee Program
investments:Cash and cash equivalents 4,998,443 - - 4,998,443 Certificate of deposits - 252,214 - 252,214 Corporate bonds - 2,055,065 - 2,055,065
$ 148,208,580 $ 62,441,167 $ - $ 210,649,747
Accion recognizes transfers between fair value hierarchy levels at the approximate date or change in circumstances that cause the transfer. There were no significant transfers between fair value hierarchy levels during the years ended December 31, 2013 and 2012. The following are Accions assets accounted for at fair value on a non-recurring basis as of December 31, 2013 and 2012:
Level 1 Level 2 Level 3 Total
AssetsContribution and grant receivables $ - $ - $ 4,273,579 $ 4,273,579
$ - $ - $ 4,273,579 $ 4,273,579
NOTE D - PROPERTY AND EQUIPMENT
Property and equipment at December 31, 2013 and 2012 consist of the following:
Furniture, fixtures, equipment and software $ 2,493,497 $ 1,938,311 Leasehold improvements 764,470 710,273
Subtotal 3,257,967 2,648,584
Less accumulated depreciation (2,060,880) (1,858,461)
Property and equipment net $ 1,197,087 $ 790,123
Depreciation expense as of December 31, 2013 and 2012 was $315,297 and $285,908, respectively, as reported on the consolidated statement of functional expenses.
NOTE E - INVESTMENTS IN AFFILIATES
Investments in affiliates at December 31, 2013 and 2012 consist of the following: 2013 2012
Investments in microfinance institutions with greater than20% participation (equity method) Akiba Commercial Bank (Tanzania) $ 2,206,999 $ 1,635,243 Banco Solidario S.A (Bolivia) 43,842,764 33,310,836
Swadhaar Finserve (India) 2,755,675 2,996,662 Saija (India) 1,867,666 1,817,733
Other (Various) 180,143 -
$ 50,853,247 $ 39,760,474
Investments in microfinance institutions with less than20% participation Gentera SAB de C.V. (formerly Compartamos) (Mexico) (Fair Value) $ 116,506,547 $ 102,611,355 Finamrica Compania de Financiamiento Comercial (Colombia) (Cost) 1,448,673 1,366,373 Grupo BanDelta Holding Corp., Inc. (Panama) (Cost) 2,542,500 2,542,500
Banco de la Microempresa S.A. (Mibanco) (Peru) (Cost) 4,210,438 4,210,438 Microfinance Growth Fund, LLC (USA) (Cost) 1,000,000 1,000,000 ACCION Investments in Microfinance, 1,821,909 4,317,819
Sub-Sahara Africa Segregated Portfolio (Africa) (Cost)ACCION Microfinance Bank (Nigeria) (Cost) 7,819,882 - Desarrolladora e Impulsora de Negocios (CrediConfia) (Mexico) (Cost) 3,723,776 905,020
Other (Various) (Cost) 739,001 1,056,939
$ 139,812,726 $ 118,010,444
Investments in mission-related non microfinance institutionswith less than 20% participation (Cost Method) GloboKas Peru SAC (Peru) $ 1,959,043 $ 1,659,043 Leapfrog Financial Inclusion Fund (USA) 2,043,273 1,864,733 Lok Capital LLC (Mauritius) 1,470,706 2,184,406
MFX Solutions (USA) 1,250,000 1,250,000 Zoona Transactions International (Zambia) 1,626,557 1,626,557 ParaLife Holdings Inv (Switzerland) 244,000 1,200,000 Shubham Housing Development Finance Company (India) 1,924,105 1,924,105 ZonaMovil, Inc (Tiaxa) (USA) 3,500,014 3,000,014
Other (Various) 177,873 317,760
Total investments in affiliates $ 204,861,544 $ 172,797,536
NOTE E - INVESTMENTS IN AFFILIATES - Continued
AKIBA Commercial Bank Ltd. (ACB) ACB is a private commercial bank focused on serving micro, small and medium enterprises and low income households in Tanzania. In 2012, Accion purchased 1,649,464 shares of ACB, representing 20% of ACBs total common shares. The accounts of ACB reflect total assets and total liabilities of $76.7 and $77.2 million and $65.7 and $63.4 million, respectively, at December 31, 2013 and 2012.
Banco Solidario S.A. (BancoSol)
BancoSol is a private commercial bank focused on microenterprises in Bolivia. Accions investment in BancoSol as of December 31, 2013 and 2012 represented 47.56% of BancoSols total common shares for both years. In 2012, Accion purchased 1,165,481 and sold 133,040 shares of BancoSol. In 2013, Accion purchased 163,512 shares of BancoSol. For the years ended December 31, 2013 and 2012, Accion received dividends of $1,273,801 and $873,971, respectively, and reported its share of BancoSols equity with an increase of $9,427,128 and a decrease of $8,852,273, respectively. The accounts of BancoSol reflect total assets and total liabilities of $1,098,147,732 and $1,005,963,620, and $911,745,553 and $841,705,947, at December 31, 2013 and 2012, respectively.
Swadhaar FinServe (Swadhaar)
Swadhaar is a nonbank microfinance institution operating in Mumbai, India. Accions investment in Swadhaar as of December 31, 2013 and 2012 represented 35.94% and 38% of Swadhaars total common shares, respectively. For the years ended December 31, 2013 and 2012, Accion reported its share of Swadhaars net loss of $240,988 and $29,584, respectively. The accounts of Swadhaar reflect total assets and total liabilities of $31,943,525 and $24,276,098, and $18,851,442 and $10,970,026, respectively, at December 31, 2013 and 2012.
Saija Finance (Saija)
Saija is a nonbank microfinance institution operating in Bihar, India. During 2012, Accion purchased 10,762,808 shares of Saija. Accions investment in Saija as of December 31, 2013 and 2012 represented 40.60% and 41% of Saijas total common shares, respectively. For the years ended December 31, 2013 and 2012, Accion reported its share of Saijas net gain of $49,933 and net loss of $592,581, respectively. The accounts of Saija reflect total assets and total liabilities of $7,932,422 and $3,633,490, and $4,951,664 and $475,202, respectively, at December 31, 2013 and 2012.
Gentera SAB de C.V (Gentera)
Gentera, formerly known as Banco Compartamos Institucin de Banca Mltiple (Compartamos) is the largest microfinance institution operating in Mexico. Accion accounts for its investment in Gentera at fair market value based on quoted market prices on the Mexican exchange. As of December 31, 2013 and 2012, Accions investment in Gentera represented 4.38% and 4.36% of Genteras common shares, respectively. In 2013, Accion sold 10 million shares, equal to 14% of its holdings and realized a gain of approximately $17 million. In 2012, Accion sold 20,028,399 shares, equal to 22% of its holdings and realized a gain of approximately $25 million. For the years ended December 31, 2013 and 2012, Accion received dividends of $5,360,488 and $1,975,518, respectively. For the years ended December 31, 2013 and 2012, Accion reported an unrealized gain of approximately $14 million and unrealized loss of approximately $10 million on investment, respectively.
Finamrica Compania de Financiamiento Comercial (Finamrica) Finamrica is a nonbank microfinance institution operating in Colombia. Accions investment in Finamrica as of December 31, 2013 and 2012 represented 6.43 and 6.30% of Finamricas total common shares, respectively. For the year ended December 31, 2013 and 2012, Accion received dividends of $0 and $387,354, respectively.
Grupo BanDelta Holding Corp., Inc. (BanDelta)
BanDelta is the holding company of Banco Delta S.A., a microfinance-specialized bank in Panama. Accions investment in BanDelta as of December 31, 2013 and 2012 represented 11.33% and 11.38% of BanDeltas total common shares, respectively. For the years ended December 31, 2013 and 2012, Accion received dividends of $46,932 and $50,137, respectively.
Banco de la Microempresa S.A. (Mibanco) Mibanco is Peru's first for-profit, fully-regulated commercial bank dedicated to microenterprise. Accions investment in Mibanco as of December 31, 2013 and 2012 represented 6.33% of Mibancos total common shares, respectively. For the years ended December 31, 2013 and 2012, Accion received dividends of $479,725 and $749,942, respectively.
Microfinance Growth Fund, LLC (MIGROF)
MIGROF, a Delaware company, provides loans to microfinance institutions which facilitate funding to small and micro enterprises in Latin America and the Caribbean. In 2012, Accion made a capital contribution of $187,624. Accions investment in MIGROF as of December 31, 2013 and 2012 represented 3.60 % ownership for both years.
ACCION Investments in Microfinance Sub-Sahara Africa Segregated Portfolio (AINV Africa)
AINV, a segregated portfolio of a Cayman Islands holding company, owns investments in African microfinance institutions. In October 2012, Accion purchased 2,335 Class B Shares of AINV Africa, representing 51% of the total portfolio and indirectly 12.24% of Accion Microfinance Bank Limited in Nigeria (AMfB); 15.30% of EB-Accion Savings & Loans in Ghana (EASL); and 15.30% of EB-Accion Microfinance in Cameroon (EAMF). In July 2013, Accion transferred AMfBs shares to AINV Nigeria, an Accion subsidiary. In August 2013, Accion purchased indirectly 324 shares of EAMF. As of December 31, 2013, Accion owned indirectly 15.30% of EASL and 16.62% of EAMF.
ACCION Microfinance Bank Ltd. (AMfB)
AMfB is a Nigerian Microfinance institution. In July 2013, shares of AMfB were transferred from AINV Africa to Accion Investment in Microfinance Nigeria (AINV Nigeria), a 51% Accion owned entity. In August 2013, AINV Nigeria purchased 74,184,039 additional shares. AINV Nigerias investment in AMfB as of December 31, 2013 represented 18.24% of AMfBs total shares.
NOTE E - INVESTMENTS IN AFFILIATES - Continued Desarrolladora e Impulsora de Negocios, S.A.P.I. de C.V., SOFOM., E.N.R (CrediConfia)
CrediConfia is a Mexican microfinance institution. In May 2012, Accion purchased 131,912 common shares and agreed to provide technical assistance over three years in exchange for 341,655 common shares. Through this agreement Accion acquired 102,497 shares in 2012 and 26,854 shares in 2013. In June 2013, Accion provided a loan of $208,716 to CrediConfia at an interest rate of 17.5%. In November 2013, Accion converted the loan to shares and invested an additional $2.5 million, totaling a $2.7 million investment, towards future capitalizations of tier one capital. Accions investment in Crediconfia as of December 31, 2013 and 2012 represented 5% and 4.46% of Crediconfias total common shares, respectively.
GloboKas Peru SAC (GKN)
GKN, the Peruvian subsidiary of GTV GlobokasNet LLC. GKN is a provider of business and financial transaction data transmission services, including processing and settlement services to banks, microfinance institutions, NGOs and corporations seeking cashless payment solutions. In 2012, Accion purchased 234,375 of preferred shares (Series C). As of December 31, 2013 and 2012 Accions investment in GKN represented 16.31% of GKNs total shares for both years. In 2013, Accion invested $300,000 in warrants with the option to convert the warrants into equity shares at a discount price of up to 20%.
Leapfrog Financial Inclusion Fund (Leapfrog)
Leapfrog, incorporated in Mauritius, is a global investment fund focused exclusively on micro-insurance and other financial products to meet the financial needs beyond working-capital credit of low-income people in developing countries. As of December 31, 2013 and 2012, Accions total investment in Leapfrog represented 2.2% of Leapfrogs total shares for both years.
Lok Capital LLC (Lok)
Lok is a Mauritius-based venture fund dedicated to providing equity investments to microfinance institutions in India. In 2013 and 2012, Accion redeemed 7,137 and 895 shares, respectively. In 2012, Accion purchased an additional 544 shares. Accions investment in Lok as of December 31, 2013 and 2012 represented 11.36% of Loks total common shares, for both years.
MFX Solutions (MFX)
MFX is a US-based for-profit enterprise providing microfinance lenders with the expertise to quantify currency risk along with affordable and accessible hedging instruments to mitigate currency risk. Accions investment in MFX as of December 31, 2013 and 2012 represented 10.61% of MFXs total common shares for both years.
Zoona Transactions International (Zoona)
Formerly known as Mobile Transactions International, Zoona is a third-party provider of an array of mobile payment solutions in Zambia. The bulk of Zoona s revenue is earned through its core product offerings of money transfers, ordering & supplier payments, and agent payments. Accions investment in Zoona as of December 31, 2013 and 2012 represented 18.16% of Zoonas total common shares for both years.
ParaLife Holdings Inv (ParaLife)
ParaLife is a Swiss-based for-profit enterprise offering life insurance and other micro-insurance products to low-income people in developing nations with a special emphasis on people with disabilities and their families. Accions investment in ParaLife as of December 31, 2013 and 2012 represented 3.70% and 3.85% of ParaLifes total common shares, respectively.
Shubham Housing Development Finance Company (Shubham)
Shubham focuses on mortgage lending for quality affordable urban and semi-urban housing in India. Shubham targets informal sector workers (vegetable vendors, rickshaw pullers, etc), slum rehabilitation program customers, and anyone who does not have access to regular home loans (under/un-banked). In 2012, Accion purchased 198,410 Series B Compulsory Convertible Preferred Shares (CCCPs) and 10 Class A Series B shares representing 10% of Shubhams total shares as of December 31, 2013 and 2012.
Zonamovil, Inc (Tiaxa)
Tiaxa is a business solutions provider for Mobile Network Operators (MNOs). Tiaxa is currently focused on Latin America and South East Asia. Tiaxa offers turnkey solutions for real-time pricing and billing of pre-paid mobile phone transactions, as well as value added and business intelligence services to help MNOs and corporations market more effectively to their customers. In 2012, Accion purchased 652,773 shares of Series F Preferred Stock. As of December 31, 2013 and 2012, Accions investment in Tiaxa represented 3.74 % and 4.11% of Tiaxas total shares, respectively. In 2013, Accion invested $500,000 in a bond with an annual coupon of 15% and a maturity date of November 2017.
Accion invests in several other microfinance institutions or other organizations providing products and technologies to support and complement the development of microfinance. The investments are individually under $1 million and are recorded at cost net of any recorded temporary impairment. For the years ended December 31, 2013 and 2012, Accion received dividends from these investments of $221,341 and $342,644, respectively.
NOTE F - RELATED PARTY TRANSACTIONS
ACCION, the US Network (the US Network) is a network of microfinance institutions in the U.S. related to Accion through a brand licensing agreement. Accion provides accounting and information technology support to the US Network through a shared services agreement and through Accions membership in the US Network. Under the agreement, certain salaries incurred by Accion are charged to the US Network. Such amounts aggregated $32,843 in 2013 and are reflected as contract revenue in the accompanying consolidated statements of activities. ACCION East, formerly known as ACCION USA and a member of the US Network, shares office space with Accion in Boston, Massachusetts. The use and cost allocation of this shared office space as well as administrative support is administered through a shared services agreement. Under the agreement, certain salaries and occupancy expenses incurred by Accion are charged to ACCION EAST. Such amounts aggregated to $231,901 in 2013 and $326,150 in 2012, and are reflected as contract revenue in the accompanying consolidated statements of activities. On December 5, 2013, Accion provided a secured loan to ACCION Texas, a member of the US Network. The outstanding principal amount of $1,000,000 is maturing on December 5, 2014 at a fixed rate of 3% and is reported as note receivable from affiliates in the statement of financial position. AIMCO was created for the purpose of providing investment services for AINV, an equity method investment holding of Accion. AIMCO received investment management fees from AINV of $11,007,515 for the year 2012. On October 30, 2012, AINV closed its fund and compensated AIMCO with a closing management fee of $9,879,126. Income tax expense included $85,649 and $3,121,032 income taxes on AIMCOs management fees income related to the sale of ACCION Investment in Microfinance, SPC (See note B) for the years ended December 31, 2013 and 2012, respectively.
NOTE G - GLOBAL BRIDGE GUARANTEE PROGRAM INVESTMENTS
Global Bridge Guarantee Program investments (at fair value) at December 31, 2013 and 2012 consist of the following:
2013 2012Global Bridge Guarantee Program investments:
Cash and cash equivalents $ 4,998,443 $ 1,734,865 Certificate of deposits 252,214 252,214 Corporate bonds 2,055,065 5,507,230
The Global Bridge Guarantee Program borrows funds by issuing notes payable and utilizing the proceeds to purchase investments rated BBB or better. These investments serve as collateral for letters of credit issued in favor of banks which lend funds to independent microfinance institutions in their counties. The microfinance institutions then lend those funds to self-employed, low-income individuals who would not otherwise have access to bank loans. There are cash or cash equivalents held within Global Bridge Guarantee Program investments to reserve against potential loan losses totaling $1,259,405 and $1,252,762 at December 31, 2013 and 2012, respectively.
NOTE H - NOTES PAYABLE
Notes payable as of December 31, 2013 and 2012 consist of the following:
Total notes payable $ 6,022,103 $ 6,070,086
Global Bridge Guarantee Program - unsecured notes payable tofoundations, institutions, individuals, and religious organizations; variousinterest rates from 0% to 5% per annum; due in varying amounts through2023
The scheduled principal repayments under these notes as of December 31, 2013, are as follows:
2014 $ 1,271,435 2015 2,224,212 2016 1,221,456 2017 300,000 2018 255,000
Thereafter 750,000
NOTE I - INCOME TAXES
The provision for income taxes for the years ended December 31, 2013 and 2012 is comprised of the following:
2013 2012Current provision
Federal $ 66,652 $ 2,473,009 State 18,997 648,023 Foreign 334,482 98,732
Deferred provision (benefit) (279,927) (15,274)
Provision (benefit) for income taxes $ 140,204 $ 3,204,490
NOTE I - INCOME TAXES - Continued
Deferred income tax assets at December 31, 2013 and 2012 consist of the following:
2013 2012Deferred income tax assets
Net operating loss carryforwards $ 934,000 $ 495,000 Provision for doubtful accounts 324,587 44,660
Less: valuation allowance (934,000) (495,000)
$ 324,587 $ 44,660
The available net operating loss carryforwards at December 31, 2013 and 2012 are $6,225,000 and $3,303,000, respectively. Deferred income tax assets and liabilities are attributed to temporary differences between financial and taxable reports applying a blended income tax rate of 15%. Management has concluded that it is more likely than not that a portion of its deferred tax asset as of December 31, 2013 and 2012 will not be realized and as such a valuation allowance has been recorded.
NOTE J - COMMITMENTS AND CONTINGENCIES
In order to obtain letters of credit used as collateral on bank loans made to affiliates globally, Accion has placed investments in certain accounts as a guarantee. These accounts are included in bridge fund and loan fund investments in the consolidated statements of financial position (see Note G). At December 31, 2013 and 2012, the Global Bridge Guarantee Program was contingently liable for letters of credit in the amount of $4,750,000 and $3,500,000, respectively.
At December 31, 2013, Accion had a $4,000,000 loan facility with Bank of America. The loan facility includes a line of credit at a rate of interest of LIBOR plus 1.75% plus an annual fixed fee and a sublimit working capital agreement of $1,000,000 for the benefit of ACCION Technical Advisors India at a fixed rate of 15.25%. There was no balance outstanding in both years under the line of credit and there was a balance of $0 and $22,585 outstanding under the India sublimit agreement at December 31, 2013 and 2012, respectively. The loan facility expired on July 31, 2013 and was not renewed. At December 31, 2013, SCM had a $212,000 overdraft loan facility with Bradesco Bank at a fixed rate of 29.38%. There was no outstanding balance under the line of credit as of December 31, 2013 and 2012.
NOTE J - COMMITMENTS AND CONTINGENCIES - Continued Capital Calls
For the years ended December 31, 2013 and 2012, Accion had approximately $3.7 million and $3 million, respectively, in capital call commitments with investment affiliates. The balance will be disbursed on an as-needed basis during the commitment period, which extends through 2014.
Accion leases office space in various countries in which they operate. These leases expire over periods ranging from July 2012 through June 2024. The remaining net minimum payment obligation under these leases is as follows:
$ 911,951 760,341 779,065
2017 808,438 2018 634,998 Thereafter 3,333,659
Total $ 7,228,452
Rent expense was approximately $1,582,000 and $1,640,000 for the years ended December 31, 2013 and 2012, respectively. Contractual Repurchase Commitment
As part of the Avanza loan origination services, Centro is under a contractual commitment to repurchase, from its customer, loans over 90 days past due. In 2013, Centro repurchased a total of $445,000 and recorded an allowance for repurchases of $1,203,000 resulting in a total bad debt expense of $1,648,000. Due to the various assumptions built into the loans repurchase estimate, future actual repurchases might defer from the estimated allowance. As of December 31, 2013, the total outstanding loans originated by Centro totaled $8,645,000 and this amount represented Centros maximum possible repurchase commitment. Due to the uncertainty of various assumptions built into the loan repurchase estimate, future actual repurchases may differ from the estimated allowance.
NOTE K - EMPLOYEE BENEFIT PLAN
Accion has established a defined contribution retirement plan which is available to substantially all salaried employees. Accions contribution to this plan is based on a percentage of participant salaries and totaled $585,331 and $551,503 in 2013 and 2012, respectively.
NOTE L - TEMPORARILY RESTRICTED NET ASSETS
Temporarily restricted net assets have been restricted by donors to be used in a specific time period, for a specific location, or scope of work. Temporarily restricted net assets are available as of December 31, 2013 and 2012, for the following purposes:
Global programs $ 2,664,521 $ 3,805,200 Global investments 494,152 343,074 Fundraising 790,947 Center for financial inclusion 4,252,610 6,042,734
Total $ 8,202,230 $ 10,191,008
NOTE M - CONCENTRATIONS OF CREDIT RISK
Financial instruments that potentially subject Accion to concentrations of credit risk are investments, cash equivalents, and other interest-bearing investments. Approximately 58% of Accions investments in affiliates are invested in the common stock of Gentera, a Mexican-based bank (see Note E). In addition, one donor represents 84% of contributions receivable.
NOTE N - SUBSEQUENT EVENTS
Management has evaluated subsequent events through October 31, 2014, which is the date financial statements were available for issuance. Other than the items disclosed below, there were no subsequent events that required adjustments or disclosure in the financial statements. On February 19, 2014, Accion sold 355,731 shares of BancoSol, representing 8.58% of its holdings, for $10,296,660. On February 24, 2014, Accion sold 9,182 shares of Financiera El Comercio, representing 100% of its holding, for $5,773,593, and realized a capital gain of $5,264,365. On June 4, 2014, Accion sold 30,489,398 shares of Mibanco, representing 100% of its holding, for $18,707,521, and realized a capital gain of $14,526,124. On September 23, 2014, Accion purchased 5,921,963 shares of Credinka for $4,979,176. In 2014, Accion sold 13,438,480 shares of Gentera (formerly known as Compartamos), representing 21.53% of its holdings, for $26,190,277, and realized a capital gain of $26,240,789. On May 20, 2014 Accion became an indirect minority shareholder of AMC by transferring its full ownership interest in AMC in exchange for a minority portion of equity shares of a newly created parent company of AMC.
ACCION INTERNATIONAL AND SUBSIDIARIESConsolidating Schedule of Financial PositionDecember 31, 2013
ACCION Microlending Elimination International* Subsidiaries** Entries Consolidated
CURRENT ASSETS:Cash and cash equivalents $ 17,737,474 $ 2,052,621 $ - $ 19,790,095 Investments 86,837,478 - - 86,837,478 Notes receivable from affiliates 3,500,486 - (500,486) 3,000,000 Grants receivable - net 1,609,017 - - 1,609,017 Contributions receivable - net 490,087 - - 490,087 Contract receivables - net 938,739 - - 938,739 Microloans receivable- net - 19,452,197 - 19,452,197 Prepaid expenses 938,321 198,367 - 1,136,688 Deposits, advances and other receivables 700,756 324,587 - 1,025,343
Total current assets 112,752,358 22,027,772 (500,486) 134,279,644
NON-CURRENT ASSETS:Cash restricted by foundation for long-term purposes 702,623 - - 702,623 Grants receivable - net 1,550,030 - - 1,550,030 Contributions receivable - net 624,445 - - 624,445 Global Bridge Guarantee Program investments 7,305,722 - - 7,305,722 Investments in affiliates 204,861,544 - - 204,861,544 Investments in subsidiaries 24,624,670 - (24,624,670) - Property and equipment - net 750,626 446,461 - 1,197,087
Total non-current assets 240,419,660 446,461 (24,624,670) 216,241,451
Total assets $ 353,172,018 $ 22,474,233 $ (25,125,156) $ 350,521,095
CURRENT LIABILITIES:Accounts payable and accrued liabilities $ 4,296,193 $ 664,134 $ - $ 4,960,327 Deferred revenue 293,863 - - 293,863 Deposit from investor 6,349,106 - - 6,349,106 Notes payable 1,271,435 - - 1,271,435
Total current liabilities 12,210,597 664,134 - 12,874,731
NON-CURRENT LIABILITIES:Notes payable - net of current portion 4,750,669 500,486 (500,486) 4,750,669
Total non-current liabilities 4,750,669 500,486 (500,486) 4,750,669
Total liabilities 16,961,266 1,164,620 (500,486) 17,625,400
NET ASSETS:Capital - 24,624,670 (24,624,670) - Unrestricted:
ACCION 328,018,766 (3,325,301) (4,273,873) 320,419,592 Non-controlling interest in SCM (Note B) - - 440,597 440,597 Non-controlling interests in Accion Investment in Nigeria (Note B) - - 3,833,276 3,833,276
Total unrestricted net assets 328,018,766 (3,325,301) - 324,693,465 Temporarily restricted 8,191,986 10,244 - 8,202,230
Total net assets 336,210,752 21,309,613 (24,624,670) 332,895,695
Total liabilities and net assets $ 353,172,018 $ 22,474,233 $ (25,125,156) $ 350,521,095
ACCION International includes Centro ACCION Microempresarial, ACCION Gateway Fund, LLC, ACCION Investment Management Company LLC, ACCION Technical Advisors, ACCION Beijing Consultation Services Company, Ltd, ACCION Africa Asia Investment Company, and Accion Investments in Microfinance Nigeria.Microlending subsidiaries include Chifeng City Yuanbaoshan District ACCION Micro-Credit Company Ltd and ACCION Microfinancas-Sociedade de Credito ao Microempreendor e a Empresa de Pequeno Porte, SA.
CURRENT ASSETS:Cash and cash equivalents $ 35,231,067 $ 5,218,579 $ - $ 40,449,646 Investments 80,652,713 - - 80,652,713 Notes receivable from affiliates 200,671 - - 200,671 Grants receivable - net 3,916,877 - - 3,916,877 Contributions receivable - net 328,359 - - 328,359 Contract receivables - net 428,810 - - 428,810 Microloans receivable- net - 11,305,042 - 11,305,042 Prepaid expenses 1,075,101 126,600 - 1,201,701 Deposits, advances and other receivables 525,688 126,491 - 652,179
Total current assets 122,359,286 16,776,712 - 139,135,998
NON-CURRENT ASSETS:Cash restricted by foundation for long-term purposes 1,440,639 - - 1,440,639 Grants receivable - net 2,806,348 - - 2,806,348 Contributions receivable - net 9,525 - - 9,525 Global Bridge Guarantee Program investments 7,494,309 - - 7,494,309 Investments in affiliates 172,797,536 - - 172,797,536 Investments in subsidiaries 17,330,030 - (17,330,030) - Notes receivable from affiliates - net of current portion 3,400,000 - (1,400,000) 2,000,000 Property and equipment - net 448,163 341,960 - 790,123
CURRENT LIABILITIES:Accounts payable and accrued liabilities $ 3,043,162 $ 303,015 $ - $ 3,346,177 Deferred revenue 209,223 - - 209,223 Bank line of credit (221,580) 244,165 - 22,585 Deposit from investor 6,349,106 - - 6,349,106 Notes payable 1,507,211 - - 1,507,211
NON-CURRENT LIABILITIES:Notes payable - net of current portion 4,562,875 1,400,000 (1,400,000) 4,562,875
Total non-current liabilities 4,562,875 1,400,000 (1,400,000) 4,562,875
Total liabilities 15,449,997 1,947,180 (1,400,000) 15,997,177
ACCION 302,456,648 (2,170,355) (771,305) 299,514,988 Non-controlling interests in SCM (Note B) - - 771,305 771,305
Total unrestricted net assets 302,456,648 (2,170,355) - 300,286,293 Temporarily restricted 10,179,191 11,817 - 10,191,008
ACCION INTERNATIONAL AND SUBSIDIARIESConsolidating Schedule of ActivitiesYear ended December 31, 2013
ACCION International*
Microlending Subsidiaries**
Elimination Entries Consolidated
REVENUES:Contributions and grants $ 11,014,274 $ 219,223 $ - $ 11,233,497 Dividend and interest income from program services 6,866,238 4,202,912 (114,353) 10,954,797 Dividend and interest income from short-term investments 2,617,691 80,604 - 2,698,295 Contract revenues and training fees 4,750,708 - (262,521) 4,488,187
Total revenues 25,248,911 4,502,739 (376,874) 29,374,776
Global Programs 18,198,564 - - 18,198,564 Microlending 376,874 6,342,512 (376,874) 6,342,512 Global Investments 6,297,867 - - 6,297,867 ACCION Investment Management Company 7,448 - - 7,448 Center for Financial Inclusion 6,015,264 - - 6,015,264 Communications 1,948,186 - - 1,948,186
Total program services 32,844,203 6,342,512 (376,874) 38,809,841
Supporting servicesGeneral and administrative 5,266,266 - - 5,266,266 Fundraising 2,588,954 - - 2,588,954
Total supporting services 7,855,220 - - 7,855,220
Total functional expenses 40,699,423 6,342,512 (376,874) 46,665,061
Change in net assets from operations (15,450,512) (1,839,773) - (17,290,285)
Income taxes (85,649) - - (85,649) Equity in income of equity investments 9,530,056 - - 9,530,056 Purchase of interest in SCM from noncontrolling shareholder - 629,221 - 629,221 Purchase of interest in Accion Investment in Nigeria 3,839,389 - - 3,839,389
by noncontrolling shareholder (Note B)Change in net unrealized gain on investments 8,311,700 - - 8,311,700 Net realized gain on investments 17,587,361 (9,739) - 17,577,622 Foreign currency translation gains, net (157,432) 63,772 - (93,660)
Change in net assets 23,574,913 (1,156,519) - 22,418,394
Net assets - Beginning of year 312,635,839 (2,158,538) - 310,477,301
Net assets - End of year:Unrestricted 328,018,766 (3,325,301) - 324,693,465 Temporary restricted 8,191,986 10,244 - 8,202,230
Net assets - End of year $ 336,210,752 $ (3,315,057) $ - $ 332,895,695
ACCION International includes Centro ACCION Microempresarial, ACCION Gateway Fund, LLC, ACCION Investment Management Company LLC, ACCION Technical Advisors, ACCION Beijing Consultation Services Company, Ltd, ACCION Africa Asia Investment Company, and Accion Investments in Microfinance Nigeria.Microlending subsidiaries include Chifeng City Yuanbaoshan District ACCION Micro-Credit Company Ltd and ACCION Microfinancas-Sociedade deCredito ao Microempreendor e a Empresa de Pequeno Porte, SA.
REVENUES:Contributions and grants $ 12,036,750 $ 136,409 $ - $ 12,173,159 Dividend and interest income from program services 4,279,143 2,289,688 (253,570) 6,315,261 Dividend and interest income from short-term investments 3,196,342 141,343 - 3,337,685 Management fees 11,007,515 - - 11,007,515 Contract revenues and training fees 3,242,720 3,600 (218,882) 3,027,438
Global Programs 17,305,359 - - 17,305,359 Microlending 215,282 4,504,702 (472,452) 4,247,532 Global Investments 5,632,415 - - 5,632,415 ACCION Investment Management Company 2,801,514 - - 2,801,514 Center for Financial Inclusion 4,031,672 - - 4,031,672 Communications 1,856,366 - - 1,856,366
Change in net assets from operations (6,400,397) (1,933,662) - (8,334,059)
Income taxes (3,121,031) - - (3,121,031) Change in equity income of equity investments (6,075,778) - - (6,075,778) Purchase of interest in SCM from noncontrolling shareholder - 786,543 - 786,543 Change in net unrealized gain on investments (10,967,811) - - (10,967,811) Net realized gain on investments 23,509,673 - - 23,509,673 Foreign currency translation gains, net (71,987) (238,032) - (310,019)
Change in net assets (3,127,331) (1,385,151) - (4,512,482)
Net assets - Beginning of year 315,763,170 (773,387) - 314,989,783
Net assets - End of year:Unrestricted 302,456,648 (2,170,355) - 300,286,293 Temporary restricted 10,179,191 11,817 - 10,191,008
ACCION International includes Centro ACCION Microempresarial, ACCION Gateway Fund, LLC, ACCION Investment Management Company LLC, ACCION Technical Advisors, ACCION Beijing Consultation Services Company, Ltd, ACCION Africa Asia Investmen
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