Certified Public Accountants
525 Old Orchard, Suite 525
Skokie IL 60007-1035
Tel (847) 966-6696
Fax (847) 966-6608
AUDITORS REPORT . 1
Statements of Financial Position ................................................................................................................... 2
Statements of Activities ................................................................................................................................ 4
Statements of Changes in Net Assets............................................................................................................ 5
Statements of Cash Flows............................................................................................................................. 6
Notes to Financial Statements....................................................................................................................... 7
To the Board of Directors
Americans For Effective Law Enforcement, Inc.
Park Ridge, Illinois
We have audited the accompanying statements of financial position of Americans For Effective Law Enforcement, Inc. (a not-for-profit organization) as of December 31, 2002 and 2001, and the related statements of activities, changes in net assets, and cash flows for the years then ended. These financial statements are the responsibility of the Organizations management. Our responsibility is to express an opinion on these financial statements based on our audits.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Americans for Effective Law Enforcement, Inc. as of December 31, 2002 and 2001, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America.
Skokie, Illinois
May 7, 2003
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AMERICANS FOR EFFECTIVE LAW ENFORCEMENT, INC.
STATEMENTS OF FINANCIAL POSITION
December 31,
2002
2001
ASSETS
CURRENT ASSETS
Cash in checking accounts $ 13,164 33,848
Cash in savings and
short-term investments Note A 442,351 38,415
Marketable securities Note D 1,237,228 1,369,861
Accounts receivable Note A 13,659
Prepaid
expenses 29,762 62,352
TOTAL CURRENT ASSETS 1,729,366 2,118,135
PROPERTY AND EQUIPMENT Notes A and C
Building and improvements 565,634 564,193
Furniture
and equipment 96,132 89,374
TOTAL PROPERTY AND EQUIPMENT 661,76 653,567
Less
accumulated depreciation 119,185 86,510
NET PROPERTY AND EQUIPMENT 542,581 567,057
OTHER ASSETS
Investment partnership Note B (126,332) (131,858)
TOTAL ASSETS $ 2,145,615 2,553,334
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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December 31,
2002 2001
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable and accrued expenses $ 187,331 $ 157,346
Deferred
revenue Note A 101,968 92,870
TOTAL CURRENT LIABILITIES 289,299 250,216
NET ASSETS Note A
Unrestricted 1,856,316 2,303,118
TOTAL LIABILITIES AND NET ASSETS $ 2,145,615 $ 2,553,334
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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AMERICANS FOR EFFECTIVE LAW ENFORCEMENT, INC.
STATEMENTS OF ACTIVITIES
December 31,
2002 2001
Unrestricted Unrestricted
Revenues Note A
Workshops 492,556 437,202
Subscriptions and audio visual 292,803 301,610
Investment income 32,909 57,462
Realized and unrealized gains (losses) on
marketable securities (203,719) (64,833)
Public information and other income 2,533 5,537
Investment gain (loss) partnership TOTAL REVENUES 633,962 741,787
Expenses
Salaries 290,584 361,008
Workshops 267,287 189,952
Publication writing 94,526 71,227
Insurance 95,098 90,080
Rent and utilities 6,605 7,148
Postage and shipping 16,836 48,203
Law library and subscriptions 21,705 21,325
Sample issues 5,045 36,402
Publications 72,697 13,643
Office supplies 14,627 30,299
Outside services 35,715 46,496
Professional fees 12,213 15,291
Payroll taxes 18,374 20,639
Telephone 7,283 8,139
Travel and entertainment 11,955 20,109
Computer expense 10,348 15,729
Depreciation 36,006 31,754
Amicus briefs 2,895 0
Taxes and service charges 7,679 4,650
Miscellaneous printing 855 3,347
Miscellaneous expense 1,911 2,203
Repairs and maintenance 3,473 4,884
Investment management fees 24,011 28,174
Real estate
taxes 23,036 20,345
TOTAL EXPENSES 1,080,764 1,091,047
DECREASE IN NET ASSETS (446,802) (349,260)
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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AMERICANS FOR EFFECTIVE LAW ENFORCEMENT, INC.
STATEMENTS OF CHANGES IN NET ASSETS
Years ended December 31,
2002 2001
Unrestricted Unrestricted
Net assets at beginning of year $ 2,303,118 2,652,378
Decrease in net assets (446,802) (349,260)
NET ASSETS AT END OF YEAR $ 1,856,316 $
2,303,118
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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AMERICANS FOR EFFECTIVE LAW ENFORCEMENT, INC.
STATEMENTS OF CASH FLOWS
Years Ended December 31,
2002 2001
CASH FLOWS FROM OPERATING ACTIVITIES
Decrease in net assets (446,802) (349,260)
Adjustments to reconcile decrease in net assets
To net cash provided by operating activities:
Depreciation 36,006 31,754
Unrealized losses 208,930 75,325
Investment (gains) losses partnership (15,797) (4,777)
(Increase) decrease in:
Accounts receivable 6,798 6,085
Prepaid expenses 32,590 (40,240)
Increase (decrease) in:
Accounts payable and accrued expenses 29,985 (2,078)
Deferred
revenue 9,098 (52,761)
NET CASH USED IN OPERATING ACTIVITIES (139,192) (335,952)
CASH FLOWS FROM INVESTING ACTIVITIES
Purchase of marketable securities (1,360,544) (348,748)
Sale of marketable securities 1,284,247 314,107
Purchase of property and equipment (8,199) (13,152)
Capital distribution
partnership 6,940 6,940
NET CASH USED IN INVESTING ACTIVITIES (77,556) (40,853)
NET DECREASE IN CASH AND CASH EQUIVALENTS (216,748) (376,805)
CASH AND CASH EQUIVALENTS AT
BEGINNING
OF YEAR NOTE A 672,263
1,049,068
CASH AND CASH EQUIVALENTS
AT END OF YEAR NOTE A $ 445,515 672,263
SEE ACCOMPANYING NOTES TO FINANCIAL STATEMENTS
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NOTES
TO FINANCIAL STATEMENTS
DECEMBER 31, 2002 and 2001
NOTE ASUMMARY OF SIGNIFICANT ACCOUNTING POLICIESContinued
The Organization provides credit in the normal course of business to customers throughout the United States. The Company maintains its cash balances at various financial institutions. The accounts are insured by the Federal Deposit Insurance Corporation up to $100,000. At December 31, 2002 and 2001, the Organizations uninsured cash balances totaled $142,354 and $593,973, respectively.
Voluntary contributions are recorded as revenue when received, except when specified by the donor for use in future periods. There were no contributions received in 2002 and 2001.
Deferred revenue arises from contributions, prepayments of workshop fees and subscription revenue applicable to future periods. Specifically, the Organization recognizes all subscription revenues received for subscriptions commencing in the current year as revenue in the current year. Subscription revenue received in the current year for subscriptions commencing in the following year is deferred.
Americans for Effective Law Enforcement, Inc. is a not-for-profit organization which is exempt from federal income taxes on its not-for-profit activities under Internal Revenue Code Section 501(C)(3). However, unrelated activities are subject to income taxation under the Internal Revenue Code. During 1999 and 1998, the Organization reported losses from unrelated activities and, therefore, paid no income taxes. At December 31, 2002, a loss carry-forward of approximately $20,000 exists to offset future income from unrelated activities.
Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements for Not-for-Profit Organizations. Under SFAS No. 117, the organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. No permanently or temporarily restricted assets were held, and accordingly, these financials do not reflect any activity related to these classes of net assets.
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DECEMBER 31, 2002 and 2001
In 1993, the Organization purchased an interest in Spectrum, LLC (a real estate limited liability company) for $150,000, which is accounted for using the equity method. In 2000, an additional $41,640 was contributed due to a capital call by the managing partner. At December 31, 2002 and 2001, the book value of the Organizations 13.88% interest amounted to $(126,332) and $(131,858), respectively. A summary of financial information of Spectrum, LLC as of December 31, 2002 and 2001 is shown below:
2002 2001
Net assets $ (57,597) $ (55,645)
Net sales $ 999,098 $ 975,640
Net income (loss) $ 89,814 $ 34,408
In August 2000, the Organization purchased a building in Park Ridge, Illinois for its own exclusive use for $495,000 in cash. In conjunction with this purchase, the Organization applied for charitable organization status with the State of Illinois for the purpose of obtaining an exemption of approximately $20,000 in annual county real estate taxes. This application is currently pending and an outcome is deemed indeterminable at this time.
Until a final decision is reached on this application, the Organization is required to pay the real estate taxes as they are regularly assessed. In the event the exemption is granted, all taxes since the date of occupancy will be refunded. Consequently, taxes amounting to $21,318 and $20,345 have been accrued for the years ended December 31, 2002 and 2001, respectively.
Marketable securities are stated at fair value and consist of equity securities. As of December 31, 2002 and 2001, the Organization had unrealized holding gains (losses) on these securities as follows:
2002 2001
Market value $ 1,237,227 $ 1,369,861
Original cost 1,388,133 (1,302,636)
Unrealized gain (loss) $ (150,906) $ 67,225
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DECEMBER 31, 2002 and 2001
In January, 2002, the Organization entered into a Joint Publishing Agreement with the Public Safety Personnel Research Institute, Inc. (PSPRI), an Illinois corporation owned entirely by the Executive Director. Subsequently, in 2002, PSPRI liquidated its assets and ceased operations, with the Executive Director assuming the Agreement. Pursuant to the Agreement, which is effective January 1, 2002, the Organization produces a joint publication, which includes two publications owned by AELE and a single publication owned by the former PSPRI. The purpose of the agreement is to pursue a web-based platform for the publications, which is anticipated to enhance subscriber value and increase circulation. Net profits from the publication will be apportioned using an agreed upon formula, based on respective subscriber counts for each publication from the previous year. AELE will be responsible for the website administration, bills and collection, and any printing and mailing of associated documentation. Applicable direct and indirect expenses will be apportioned based on external criteria and reasonable estimates of overhead. The amount accrued to the Executive Director under this agreement amounted to $33,438 at December 31, 2002.
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