THE VOICE OF THE MARTYRS, INC. Financial Statements Year Ended December 31, 2016 With Comparative Information as of December 31, 2015 With Independent Auditor's Report THE VOICE OF THE MARTYRS, INC.
TABLE OF CONTENTS
PAGE
Independent Auditor's Report 1 - 2
Financial Statements:
Statement of Financial Position - December 31, 2016 3
Statement of Activities - Year Ended December 31, 2016 4
Statement of Cash Flows - Year Ended December 31, 2016 5
Statement of Functional Expenses - Year Ended December 31, 2016 6
Notes to Financial Statements 7 - 18 ,RSE&CO.
A Professional Limited Liability Company Consultants & Certified Public Accountants
Indcpcnclent A ud itor's Ileport
[]oard ol'Dircctors 'l'he Voice ol'tlre Martyrs. lnc
ILc;lort on thc I.-inancial Statcntents
Wc have ar,rditcd the accontpanyirrg flnallcial staternerrts ol"l'he Voicc ol'tlre Martyrs. Inc.. (the "Mittistry"). rvlrich conrprise the statelnent o1'financial position as ol'Decettrber 31. 2016. and the relatcd slatetncrlts ol' nctivities. caslt flows. and functional cxpcnscs lbr the ycar tlten cttded. and tlte related ltotes to the llnancial statenlcnts.
Management's Rcsponsibilitl' for thc Financial Statcments
Managcrrent is lesponsiblc tbr the prcpalation and lair presentatiorr ol- thesc financial statetnents irt accordallce u,ith accounting principles getrerally accel;tcd in the United States of Anterica; tltis irrcltrdes the desigrr. inrplementation. and nraintenance ol'internal contl'ol relevant to the preparation and thir presentation o1'llnancial statelnents that are fl'ee fi'orn nratcrial rnisstaternent. whetlter dLre to fi'attd or error.
Auditor's llcsponsibility
Our rcspotrsibility is to express arr opinion on these llnartcial stalenrents based ott ottr audit. We conducted our arrdil in accordancc rvitlr auditing staudards generally accepted irr thc United States ol'Arnerica. Those stattdards require that rve plan and perfbrnt tlre audit to obtail.l lcasonable assurancc about wltetltel the financial statentents are ll'cc ll'orn nratcrial rnisstaternent.
An auclit involves pertbrmirrg procedr.rres to obtain audit evidence about the atnotttrts and disclostrres in the Ilrrarrcial statclnents. 1'lre procedurcs selected dcpcnd on thc auditor's.iudgrnent. includirtg the assesslnent ol'the risks ol'rnaterial rnisstatenrent of tlre llnancial statenrents. lvhetlrer clue to fl'aud or error. Itt mal Wc belicve that thc audit evidcncc u'c have otrtairrc'd is sulllcient artd allltropt'iatc to provide a basis lbr otrr aLrdit opiniort. 5121 SouthWheelingAvenue,Suite200 lTulsa,OklahomaT4105-6421 lPhone:918-749-'1040 lFax:918-749-1050 Opinion In our opinion. the llrrtrncial staternents rcltrrcd to above prcsent fairll'. in all rnatcrial l'espects. thc llrlarlcial position ol"l'he Voicc of thc Martyrs. Inc. as of- Dcccnrber 3 I. 2016. ancl tlte cltangcs in its ttet assets. cash flou's and firrrctiorral cxpenses fbr the ycal then endcd in accordance u,itlt accounting prirrciples generalll'accepted in the Unitecl Statcs o1'Atrrerica. Iteport on Suntnrarized Comparativc Inlbrntation We have previously audited l'lre Voice of the Martyrs. Inc. 20 l5 finarrcial statentents. and our t'eport dated April 21 .2016. expressed an unrnodifled opinion on lhose audited finartcial statelnents. ln our opir-rion. the surnmarized cornparative infornralion prescnted het'ein as of and lbr the year ended Decelnber 31. 20 l-5. is consistent, in all rrraterial respects. tvith the audited llnarrcial staterxents ll'orn u,lticlt it ltas becn derived. M,ac=a { b. ,?'o l-ulsa. Oklaltorna April 18. 201 7 THE VOICE OF THE MARTYRS, INC. STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2016 (With Comparative Totals for 2015) ASSETS 2016 2015 Current assets Cash and cash equivalents $ 7,719,614 $ 11,834,898 Cash held for donor-restricted ministry purposes 5,816,236 5,378,388 Accounts receivable, net of allowances of $2,695 and $3,203 in 2016 and 2015, respectively 296,929 286,074 Prepaid expenses 1,425,127 1,180,706 Inventory 1,165,396 1,016,338 Notes receivable, current portion 5,490 5,276 Short-term investments 7,125,308 6,535,082 Total current assets 23,554,100 26,236,762 Noncurrent assets Notes receivable 52,796 58,286 Other assets 229,606 229,606 Property and equipment, net 28,308,432 29,620,090 Total noncurrent assets 28,590,834 29,907,982 Total assets $ 52,144,934 $ 56,144,744 LIABILITIES AND NET ASSETS Current liabilities Accounts payable $ 792,939 $ 663,896 Accrued expenses 598,566 568,390 Planned giving agreements, current portion 71,721 61,707 Donor commitments, current portion 22,345 22,345 Deferred revenue 9,000 11,000 Total current liabilities 1,494,571 1,327,338 Noncurrent liabilities Planned giving agreements 1,263,307 1,076,992 Donor commitments 219,908 227,495 Total noncurrent liabilities 1,483,215 1,304,487 Total liabilities 2,977,786 2,631,825 Net assets Unrestricted 43,350,912 48,134,531 Temporarily restricted 5,816,236 5,378,388 Total net assets 49,167,148 53,512,919 Total liabilities and net assets $ 52,144,934 $ 56,144,744 See independent auditor's report and accompanying notes to financial statements. - 3 - THE VOICE OF THE MARTYRS, INC. STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) 2016 2015 Temporarily Unrestricted Restricted Total Total Support and revenue Contributions and bequests $ 32,829,944 $ 20,771,595 $ 53,601,539 $ 53,157,485 Contributions in-kind - 357,629 357,629 322,009 Ministry related resources 1,241,036 - 1,241,036 1,408,403 Investment income (loss) 321,324 - 321,324 (234,670) Gain (loss) on sale of fixed assets 1,921 - 1,921 (8,438) Other income 208,926 - 208,926 222,688 Total support and revenue 34,603,151 21,129,224 55,732,375 54,867,477 Reclassifications Satisfaction of program restrictions 20,691,376 (20,691,376) - - Expenses Program services Persecution response, Bibles and front-line ministry 34,535,141 - 34,535,141 35,631,475 Fellowship and inspiration 14,598,752 - 14,598,752 12,549,159 Supporting activities General and administrative 7,231,268 - 7,231,268 5,954,321 Fundraising 3,712,985 - 3,712,985 2,289,457 Total expenses 60,078,146 - 60,078,146 56,424,412 Increase (decrease) in net assets (4,783,619) 437,848 (4,345,771) (1,556,935) Net assets, beginning of year 48,134,531 5,378,388 53,512,919 55,069,854 Net assets, end of year $ 43,350,912 $ 5,816,236 $ 49,167,148 $ 53,512,919 See independent auditor's report and accompanying notes to financial statements. - 4 - THE VOICE OF THE MARTYRS, INC. STATEMENT OF CASH FLOWS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) 2016 2015 Cash flows from operating activities Change in net assets $ (4,345,771) $ (1,556,935) Adjustments to reconcile change in net assets to net cash provided by (used for) operating activities: Depreciation 1,948,536 1,874,202 Net realized and unrealized investment (gains) losses (394,738) (589,719) Investment income, net of fees 162,621 355,049 (Gain) loss on disposal of fixed assets (1,921) 8,438 Stock contributions (477,110) (361,047) Changes in assets and liabilities: Accounts receivable (10,855) (24,237) Prepaid expenses (244,421) (634,439) Inventory (149,058) (43,688) Other assets - 6,172 Accounts payable 129,043 57,327 Accrued expenses 30,176 44,101 Deferred revenue (2,000) 1,000 Net cash provided by (used for) operating activities (3,355,498) (863,776) Cash flows from investing activities Payments received on notes receivable 5,276 5,066 Payments for property and equipment (638,107) (830,211) Purchases of investments (461,935) (6,565,007) Proceeds from sale of investments 584,086 7,139,925 Net cash provided by (used for) investing activities (510,680) (250,227) Cash flows from financing activities Changes in planned giving agreements 196,329 164,575 Change in donor commitments (7,587) 13,534 Net cash provided by (used for) financing activities 188,742 178,109 Change in cash and cash equivalents (3,677,436) (935,894) Cash and cash equivalents at beginning of year 17,213,286 18,149,180 Cash and cash equivalents at end of year $ 13,535,850 $ 17,213,286 Supplemental disclosure of cash flow information Cash paid for interest $ 40,987 $ 63,786 See independent auditor's report and accompanying notes to financial statements. - 5 - THE VOICE OF THE MARTYRS, INC. STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) 2016 2015 Persecution Response, Bibles, and Fellowship Total Total Front-Line and Program General and Supporting Ministry Inspiration Services Administrative Fundraising Activities Total Total Central America and Caribbean $ 496,595 $ - $ 496,595 $ - $ - $ - $ 496,595 $ 457,989 East Asia and Pacific 5,384,486 - 5,384,486 - - - 5,384,486 6,304,359 Europe 733,861 13,800 747,661 - - - 747,661 511,416 Middle East and North Africa 9,616,630 - 9,616,630 - - - 9,616,630 9,223,505 North America 237,262 - 237,262 - - - 237,262 119,263 Non-Region 2,904,763 - 2,904,763 42,662 - 42,662 2,947,425 2,339,328 Russia 741,011 - 741,011 - - - 741,011 613,770 South America 721,094 49,995 771,089 - - - 771,089 1,037,935 South Asia 4,826,754 - 4,826,754 - - - 4,826,754 4,942,525 Sub-Saharan Africa 5,815,215 - 5,815,215 - - - 5,815,215 6,664,578 Mission support 1,506,580 63,683 1,570,263 335,830 - 335,830 1,906,093 1,881,969 VOM newsletter - 2,736,488 2,736,488 996,110 1,004,179 2,000,289 4,736,777 3,784,274 Cost of sales - 1,159,426 1,159,426 - - - 1,159,426 1,338,607 Development costs - 5,162,746 5,162,746 1,475,035 1,853,133 3,328,168 8,490,914 5,972,242 Salaries, taxes, and benefits 622,559 2,085,670 2,708,229 2,305,806 384,074 2,689,880 5,398,109 4,563,842 Equipment lease/rentals 14,391 31,425 45,816 24,346 7,609 31,955 77,771 93,221 Interest expense and bank fees 19,397 9,313 28,710 470,003 9,313 479,316 508,026 491,913 Professional fees 36,998 48,670 85,668 84,194 8,927 93,121 178,789 185,132 Insurance 36,663 110,995 147,658 40,342 18,303 58,645 206,303 198,618 Occupancy cost 16,772 108,478 125,250 40,448 29,650 70,098 195,348 253,721 Office expense 141,896 409,489 551,385 268,223 70,160 338,383 889,768 742,466 Postage 13,651 377,962 391,613 77,430 67,262 144,692 536,305 1,014,608 Telephone and utilities 83,484 176,362 259,846 120,006 28,662 148,668 408,514 461,127 Other expenses 196,738 1,132,134 1,328,872 435,925 88,542 524,467 1,853,339 1,353,803 Depreciation 368,341 922,116 1,290,457 514,908 143,171 658,079 1,948,536 1,874,202 Total expenses $ 34,535,141 $ 14,598,752 $ 49,133,893 $ 7,231,268 $ 3,712,985 $ 10,944,253 $ 60,078,146 $ 56,424,413 As a percentage of Total Expenses 57.48% 24.30% 81.78% 12.04% 6.18% 18.22% 100.00% See independent auditor's report and accompanying notes to financial statements. - 6 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Organization The Voice of the Martyrs, Inc. (The Ministry) is a not-for-profit ministry whose five main purposes are based on Hebrews 13:3: 1. To encourage and empower Christians to fulfill the Great Commission in areas of the world where they are persecuted for sharing the gospel of Jesus Christ. 2. To provide practical relief and spiritual support to the families of Christian martyrs. 3. To equip persecuted Christians to love and win to Christ those who are opposed to the gospel in their part of the world. 4. To undertake projects of encouragement, helping believers rebuild their lives and Christian witness in countries where they have formerly suffered oppression. 5. To promote the fellowship of all believers by informing the world of the faith and courage of persecuted Christians, thereby inspiring believers to a deeper level of commitment to Christ and involvement in His Great Commission. The Voice of the Martyrs was founded in 1967 by Pastor Richard Wurmbrand, who spent a total of 14 years in communist prisons in Romania for his Christian witness. When he and his family were ransomed to the West for $10,000, he traveled the world, sharing his story and awakening the free world to Christian persecution worldwide. In so doing, he encouraged Christians in free countries to remember their persecuted Christian family (Heb. 13:3). The Ministry continues in this mission today. We provide help to those persecuted or in prison for their faith, give Bibles to Christians in countries where they are illegal or extremely difficult to obtain, equip local believers in hostile countries to share the gospel, and tell their stories to Christians in the U.S. in order to bring them into fellowship with their persecuted brothers and sisters in Christ. The Voice of the Martyrs, Inc. is a 501 (c)(3) exempt organization that has been classified as a mission society. Under Treasury regulation section l .6033-2(g)(1)(iv), a mission society affiliated with or sponsored by one or more churches or church denominations and with more than one-half of the activities of such society conducted in, and directed at persons in foreign countries, is not required by the Internal Revenue Service to complete and file Form 990. (Continued) - 7 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Description of Organization (Continued) What We Do Serve persecuted Christians through practical and spiritual assistance and lead other members of the body of Christ into fellowship with them. Total number of individuals employed 157 Total number of volunteers 1,430 Basis of Accounting The accompanying financial statements of the Ministry are prepared on the accrual basis of accounting in accordance with the accounting principles generally accepted in the United States of America (GAAP). Net assets are classified in the financial statements based on the existence or absence of donor-imposed restrictions, as follows: Unrestricted Net assets currently available at the discretion of the Board of Directors for use in the Ministry's mission projects and for operations. Temporarily restricted Net assets which are restricted by donors for a particular purpose. When a donor's restriction is satisfied by using the resources in the manner specified by the donor, the expiration of the restriction is reported in the financial statements by reclassifying the net assets from temporarily restricted to unrestricted. Revenue Recognition Contributions are recorded when the donor makes a promise to give to the Ministry that is, in substance, unconditional. Donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. All contributions are considered available for unrestricted use unless specifically restricted by the donor or subject to other legal restrictions. Revenue derived from the sale of resources is recorded at the point of sale. (Continued) - 8 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Contributed Services During the years ended December 31, 2016 and 2015, the Ministry received an estimated 48,542 and 44,595 hours of donated services from domestic volunteers, respectively. These performed services are not reflected in the financial statements as the services did not require specialized skills as specified by Generally Accepted Accounting Principles (GAAP) pertaining to Accounting for Contributions Received and Contributions Made. Cash and Cash Equivalents The Ministry defines cash and cash equivalents to be all cash on hand and cash in bank accounts with original maturities of three months or less. Cash and cash equivalents include donor restricted deposits that are readily available and will be consumed during the next operating cycle. Accounts Receivable Accounts receivable are short-term, non-interest bearing, and uncollateralized. The ministry provides an allowance for uncollectible accounts based upon management's assessment of existing specific accounts. An allowance of $2,695 and $3,203 has been established for the years ended December 31, 2016, and 2015, respectively. Inventory Inventory consists of ministry-related resources held for future distribution. These are valued at lower of cost or market using the first-in, first-out method. Investments Investments in equity securities with readily determinable fair market value and all investments in debt securities are measured at fair value in the statement of financial position. Dividends, interest, and other investment income are reported in the period earned as increases in unrestricted net assets unless the use of the assets received is limited by donor-imposed restrictions, in which case earnings are reported in the same category as the donations. Fair Value Measurement Fair value is defined under GAAP as an exit price, representing the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. The Ministry utilizes market data or assumptions that market participants would use in pricing the asset or liability. (Continued) - 9 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Fair Value Measurement (Continued) GAAP establishes a three-tier fair value hierarchy, which prioritizes the inputs used in measuring fair value. These tiers include: Level 1, defined as observable inputs such as quoted market prices in active markets; Level 2, defined as inputs other than quoted prices in active markets that are either directly or indirectly observable; and Level 3, defined as unobservable inputs about which little or no market data exists, therefore requiring an entity to develop its own assumptions. Property and Equipment Property and equipment are stated at cost if purchased by the Ministry. Donations of property and equipment are recorded as support at the estimated fair market value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted support. Unless the donor has stipulated how long donated assets must be maintained, the Ministry reports the expiration of donor restrictions when the donated or acquired assets are placed in service. At that time, the assets are transferred from restricted net assets to unrestricted net assets. Property and equipment are depreciated using the straight-line method. Useful lives of assets range from three to thirty years. The Ministry follows the practice of capitalizing all expenditures for property and equipment in excess of $2,000 if their useful lives exceed one year. The Ministry records impairment to property and equipment when it becomes probable that the carrying value of the assets will not be fully recovered over their estimated lives. Impairments are recorded to reduce the carrying value of the assets to their estimated fair values determined by the Ministry based on facts and circumstances in existence at the time of determination, estimates of probable future economic conditions, and other information. No impairments were recorded in 2016 or 2015. Other Assets Included in other assets, the Ministry acquired the rights to two works of art. The acquired rights give the Ministry permission to use the images in Ministry endeavors in perpetuity and have no expiration. As a result, these rights are not subject to amortization. Allocation of Expenses The costs of providing the various programs and supporting activities of the Ministry have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated between the program and supporting activities on the basis of estimates made by the Ministry's management. Reclassifications Certain reclassifications have been made to the 2015 balances to conform to the 2016 financial statement presentation. (Continued) - 10 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Deferred Revenue Deferred revenue represents income collected in advance for lease payments related to the rental of the Adeline Warehouse. Advertising The Ministry expenses advertising costs as incurred. Advertising expense amounted to $4,274,114 and $3,839,871 for the years ended December 31, 2016 and 2015, respectively. Income Taxes The Ministry is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code and comparable state law, and contributions to it are tax deductible within the limitations prescribed by the code. The Ministry has been classified as a publicly-supported organization which is not a private foundation under Section 509(a) of the code. The Ministry has adopted FASB ASC 740-10-25, Accounting for Uncertainty in Income Taxes. The Ministry will record a liability for uncertain tax positions when it is more likely than not that a tax position would not be sustained if examined by the taxing authority. The Ministry's evaluation on December 31, 2016, revealed no uncertain tax positions that would have a material impact on the financial statements. The Ministry will recognize future interest and penalties related to unrecognized tax benefits in income tax expense, if incurred. The Ministry is no longer subject to examinations by taxing authorities for years before 2013. Estimates The preparation of financial statements, in conformity with accounting principles generally accepted in the United States of America, requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements, reported amounts of revenues and expenses, and related disclosures during the reporting period. Actual results could differ from those estimates. Comparative Data The financial statements include certain summarized prior year comparative information in total but not by net asset classification. Such information does not include sufficient detail to constitute a presentation in conformity with GAAP. Accordingly, such information should be read in conjunction with the Ministry's financial statements for the year ended December 31, 2015, from which the summarized information is derived. (Continued) - 11 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Subsequent Events The Ministry has evaluated subsequent events through, April ??, 2017, the date the financial statements were available to be issued. NOTE 2 - SHORT-TERM INVESTMENTS Short-term investments are presented in the financial statements at fair market value and are summarized as follows: 2016 2015 Managed Accounts - General $ 5,451,807 $ 4,934,208 Managed Accounts - Annuities 1,673,501 1,600,874 $ 7,125,308 $ 6,535,082 Investment income and gains and losses on investments consist of the following for the years ended December 31, 2016 and 2015: 2016 2015 Dividend and interest, net of fees $ 237,773 $ 357,704 Net change in unrealized gains (losses) on investments 83,551 (592,374) $ 321,324 $ (234,670) NOTE 3 - FAIR VALUE MEASUREMENTS Assets measured at fair value on a recurring basis consist of short-term investments. Fixed income and equity investments represent Level 1 inputs. The balances as of December 31, 2016, and 2015, were $7,125,308 and $6,535,082, respectively. During the year there were no transfers between input levels. Liabilities measured at fair value on a non-recurring basis consist of planned giving agreements and donor commitments. The split-interest agreements and donor commitments are reported at present value of future cash flows at the balance sheet date. The split-interest agreements and donor commitments represent Level 3 inputs. The balances at December 31, 2016 and 2015, were $1,577,281 and $1,388,539, respectively. During the year there were no transfers between input levels. (Continued) - 12 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 4 - PROPERTY AND EQUIPMENT Property and equipment at December 31, 2016 and 2015, consist of the following: 2016 2015 Land $ 455,606 $ 455,606 Land improvements 5,324,744 5,313,449 Buildings 29,757,046 29,718,400 Office furniture and equipment 9,554,179 9,170,180 Automobiles 293,126 293,126 45,384,701 44,950,761 Accumulated depreciation (17,076,269) (15,330,671) Property and equipment, net $ 28,308,432 $ 29,620,090 Depreciation in the amount of $1,948,536 and $1,874,202 in 2016 and 2015, respectively, has been allocated to program services and supporting activities in the statement of activities. NOTE 5 - LINE OF CREDIT The Ministry has a $5,000,000 revolving line of credit with a current interest rate of 3.50%, based on the Wall Street Journal Floating Prime Rate. The line of credit matures on June 27, 2017. For years ended December 31, 2016 and 2015, there were no borrowings outstanding against this line of credit. NOTE 6 - PLANNED GIVING AGREEMENTS The Ministry's planned giving agreements with donors consist of charitable gift annuities. Assets are invested, and payments are made to donors or other beneficiaries in accordance with the respective agreements, commencing on a specified date and continuing for their lifetime. Contribution revenue for charitable gift annuities is recognized at the date the agreement is established, and is classified as either unrestricted or temporarily restricted depending on donor instructions. A liability is also recorded on the date the agreement is established, using the current IRS mortality table and discount rate. Annually, the present value of the estimated future liability is calculated using the more conservative IAR mortality table (updated in 2012) used by the American Council on Gift Annuities, with the original discount rate. The gain or loss resulting from this annual present value adjustment is recorded as the change in the value of planned giving agreements. The loss on change in value of planned giving agreements was $83,319 and $39,038, in 2016 and 2015, respectively. Contributions of $104,943 and $92,678 were recognized relating to charitable gift annuities during 2016 and 2015, respectively. (Continued) - 13 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 6 - PLANNED GIVING AGREEMENTS (CONTINUED) Annuity assets are maintained in a separate account and are invested in various mutual funds. At December 31, 2016 and 2015, the fair market value of assets invested related to annuities payable were $1,673,501 and $1,600,874, respectively. The Ministry is licensed to issue annuity contracts in many states. The Ministry is in compliance with those state laws which require a minimum reserve amount be maintained. NOTE 7 - DONOR COMMITMENTS In 2012, the Ministry became aware of a situation that was negatively affecting a small number of donors who had funded Charitable Gift Annuities (CGA's) and Charitable Remainder Annuity Trusts (CRAT's) with a third party. These donors had designated the Ministry to be the recipient of their gifts. However, the third party making the CGA and CRAT payments to these donors encountered severe financial difficulties and was unable to continue making payments. The Ministry's Board of Directors carefully studied the circumstances and made the decision to assist the small number of donors who were no longer receiving payments per their contracts with the third party (the Ministry was not legally obligated to do so). As a result, the Ministry entered into a new contract with each of these donors, whereby the Ministry will make quarterly payments to each donor in an amount equal to the payments that were specified in their original CGA/CRAT agreements. In 2012, the Ministry recorded the present value of these obligations as a liability and recorded a one-time charge of approximately $366,000. The present value of these obligations using IAR mortality table (updated in 2012) and current IRS discount rate was $242,253 and $249,840 at December 31, 2016 and 2015, respectively. NOTE 8 - OTHER COMMITMENTS In 2012, the Ministry entered into a long-term contract for the production of two films. The Ministry plans to distribute these films in hostile and restricted nations, as well as in the U.S., in a manner consistent with the Ministry's five main purposes. Total production costs of $1,400,000 are to be paid over a four year period on a schedule that will vary depending upon the completion of various production benchmarks (generally a maximum of $350,000 each year). As of December 31, 2016, $200,000 is remaining. Certain terms of the contract may vary due to external events beyond the control of the parties. In 2015, the Ministry entered into an additional film production contract of $1,000,000. This contract is scheduled to be completed in 2017. As of December 31, 2016, the remaining future commitment is $100,000. The commitment total as of December 31, 2016, for film and other projects was $650,000. (Continued) - 14 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 9 - ALLOCATION OF JOINT COST The Ministry incurred expenses that were identifiable with a particular function but served joint purposes. Expenses related to certain events, donor communication, and program materials jointly support program services, fundraising, or management and general. These expenses were allocated by their functional classification as follows at December 31: 2016 2015 Persecution Response, Bibles, and Front-Line Ministry $ - $ 232,665 Fellowship and Inspiration 6,617,588 6,029,156 General and Administrative 2,153,812 562,694 Fundraising 2,341,913 1,318,558 Total $ 11,113,313 $ 8,143,073 NOTE 10 - RELATED PARTIES The Ministry incurred no related party expenses in 2016. In 2015, $13,957 was paid to a related ministry for program services. NOTE 11 - RETIREMENT PLAN The Ministry provides a Tax Deferral Savings - Section 403(b) Retirement Plan (the Plan) for its employees. Under the Plan, each eligible employee is allowed to contribute up to the lesser of 100% of their annual compensation, or $18,000 for the years ended 2016 and 2015. "Catch up" contributions are allowed for employees over age 50. Each employee has the option to contribute funds as a pre-tax salary deferral or after tax Roth deferral. The Ministry matches 100% of employee contributions up to an annual discretionary employer percent of employee wages. Contributions of $201,419 and $205,677 were made to the Plan for the years ended December 31, 2016 and 2015, respectively. NOTE 12 - LEASE COMMITMENTS The Ministry leases various equipment and facilities through operating leases. Total rental expense for years ending December 31, 2016 and 2015, was $841,737 and $842,083, respectively. NOTE 13 - GIFTS-IN-KIND The Ministry receives various types of donated items which are sent to aid persecuted Christians in various countries. The total value of gifts-in-kind received during 2016 and 2015 totaled $357,629 and $322,009, respectively. These noncash transactions are not reflected in the cash flow statements. (Continued) - 15 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 14 - CONCENTRATION OF CREDIT AND MARKET RISK The Ministry's financial instruments exposed to concentrations of credit risk consist primarily of cash equivalents and investments. The Ministry maintains its cash balances at high-quality financial institutions. At times the balances may be in excess of $250,000, the amount insured by the Federal Deposit Insurance Corporation (FDIC). The Ministry performs an ongoing evaluation of the commercial bank to limit its concentration of credit risk exposure. In addition the Ministry utilizes certificates of deposits at numerous financial institutions, none of which exceed insured limits. Management believes credit risk related to these deposits is minimal. The Ministry maintains its investment balances at a financial institution. The balances are insured by the Securities Investor Protection Corporation (SIPC) up to $500,000 coverage for cash and securities held by a firm that is forced into bankruptcy. Cash coverage is limited at $250,000. At times, the Ministry's deposits may exceed insured amounts. Management believes the funds are not exposed to any significant risks due to the diversity of high-grade financial instruments held by the fund and management's routine assessment of the portfolio. NOTE 15 - RESTRICTIONS ON ASSETS All of the restrictions on assets at December 31, 2016 and 2015, relate to funds contributed to support certain mission projects. Temporarily-restricted net assets are available for the following purposes: 2016 2015 East Asia and Pacific $ 9,955 $ 76,896 Europe 22,670 31,162 Middle East and North Africa 1,544,061 1,756,787 North America - 10,098 Russia 1,400 100 South America 20 - South Asia 58,510 33,516 Sub-Saharan and Africa 1,062 15,191 Non-Region 4,178,557 3,454,638 Total $ 5,816,235 $ 5,378,388 (Continued) - 16 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 16 - NET ASSETS RELEASED FROM RESTRICTIONS Net assets were released from donor restrictions by incurring expenses satisfying the restrictions or by the occurrence of events specified by the donors. The following amounts reflect only donor-restricted contributions expended on the listed programs. Purpose of restrictions: 2016 2015 Central America and Caribbean $ 1,719 $ 1,885 East Asia and Pacific 1,032,612 1,779,689 Europe 16,315 20,951 Mideast and North Africa 1,162,852 2,002,941 North America 43,226 9,586 Russia 22,716 18,478 South America 44,424 116,775 South Asia 648,401 489,940 Sub-Saharan and Africa 709,315 723,186 Non-Region 17,009,796 18,372,056 Total $ 20,691,376 $ 23,535,487 NOTE 17 - CURRENT BOARD MEMBERS AND KEY EMPLOYEES Employer Name Title Compensation Provided Benefits Harvey Little Chairman of the Board $ - $ - C. Mark Shumaker Vice-Chairman - - Thomas Holland Secretary/Treasurer - - Marshal Wright Member - - Mervyn Knight Member - - David Dyson Member - - Paul Gustafson Member - - Donald Banner * Member - - Paul Peterson Member - - Edwin Baelde Member - - Blake Stice Member - - James Dau * Member, President & CEO 157,045 10,795 * Donald Banner and James Dau are related. Key Employees Corey Odden Chief Financial Officer $ 110,507 $ 6,228 (Continued) - 17 - THE VOICE OF THE MARTYRS, INC. NOTES TO FINANCIAL STATEMENTS YEAR ENDED DECEMBER 31, 2016 (With Comparative Totals for 2015) NOTE 18 - PROGRAM SERVICE ACCOMPLISHMENTS 2016 2015 Persecution Response: $ 7,680,581 $ 8,662,216 When a pastor, evangelist or other Christian worker is imprisoned or killed because of his or her witness, the immediate family is often left with little means of financial support. The Ministry helps sustain these believers until a job or other financial provision can be obtained. The Ministry also provides immediate support to those who have suffered persecution themselves according to their needs, including living expenses, relocation, medical assistance or vocational training. The Ministry provided persecuted-related support in 50 countries in 2016 and 51 countries in 2015. Bibles: $ 8,150,838 $ 8,655,881 Christians in restricted nations and hostile areas are often denied access to Bibles. They are considered illegal or can be extremely difficult to obtain. The Ministry prints Bibles in the languages of the countries where we work and smuggles them to believers who would otherwise never have an opportunity to read God's Word. The Ministry also provides New Testaments, children's Bibles, study Bibles and digital Bibles. Audio Bibles are distributed to those who cannot read. The Ministry distributed more than 1.5 million Bibles in 49 countries in 2016, and 1.5 million Bibles in 55 countries in 2015. Front-Line Ministry: $ 18,703,721 $ 18,313,374 The Ministry directly assists pastors, evangelists and Christian workers who carry out their ministry in the face of hostility and persecution. Assistance includes supplies that allow them to minister in remote villages, evangelistic materials, and training. In addition, The Ministry may provide support to workers and their families, helping them meet daily needs such as food, clothing, and housing. The Ministry provided support to front-line workers in 76 countries in 2016 and 74 countries in 2015. Fellowship and Inspiration: $ 14,598,752 $ 12,549,163 The Ministry is committed to informing believers in the U.S. of the persecution endured by their Christian family worldwide in order to create fellowship in the Body of Christ and inspire all believers to make a deeper commitment to Christ and His Great Commission. The Ministry uses various forms of media to publicize stories of hope, faith and courage as persecuted Christians stand boldly for Jesus Christ, but our flagship communication piece is our free, monthly newsletter. The newsletter was sent to an average of 527,000 readers each month and to another 301,000 each quarter in 2016. In 2015, the newsletter was sent to an average of 378,000 each month and to another 311,000 each quarter. The Ministry also publishes books, videos and related material and utilizes several online tools. The Ministry held regional conferences (24 in 2016 and 2015) as well as various local events across the U.S., where 717 and 332 volunteer speakers shared about persecuted Christians in 2016 and 2015, respectively. Total $ 49,133,892 $ 48,180,634 - 18 -