American Association of the Deaf-Blind, Inc. Financial Statements and Report of Independent Certified Public Accountants December 31, 2008 and 2007 ----Page 1---- REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors American Association of the Deaf-Blind, Inc. We have audited the accompanying statements of financial position of the American Association of the Deaf-Blind, Inc. (a non-profit organization) as of December 31, 2008 and 2007, and the related statements of activities and changes in net assets, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of the Association's 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 the American Association of the Deaf-Blind, Inc. as of December 31, 2008 and 2007, 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. May 13, 2009 Linton Shafer Warfield & Garrett, P. A. ----Page 2---- AMERICAN ASSOCIATION OF THE DEAFBLIND, INC. Notes to Financial Statements December 31, 2008 and 2007 ASSETS Current Assets: *Cash: 2008: $40,672 2007: $42,199 *Investment: 2008: $189,737 2007: $177,292 *Accounts receivable: 2008: $10,831 2007: $28,736 *Deposits: 2008: $4,802 2007: $4,802 *Prepaid expenses 2008: $1,928 2007: $3,771 *Total Current Assets: 2008: $247,970 2007: $256,800 Property and Equipment at Cost *Furniture: 2008: $5,353 2007: $5,353 *Office Equipment: 2008: $26,615 2007: $25,229 *Less accummulated depreciation 2008: ($28,554) 2007: ($26,473) *Net Property and Equipment: 2008: $3,424 2007: $4,109 *Total Assets: 2008: $251,394 2007: $260,909 LIABILITIES AND NET ASSETS Current Liabilities: *Accounts Payable: 2008: $1,997 2007: $8,839 *Payroll taxes withheld: 2008: $4,431 2007: $3,992 *Retirement payable: 2008: $1,447 2007: $1,473 *Accrued salaries and vacation 2008: $10,865 2007: $9,032 *Total Liabilities: 2008: $18,770 2007: $23,336 Net Assets *Unrestricted: 2008: $216,297 2007: $234,162 *Temporarily Restricted: 2008: $16,327 2007: $3,411 *Total Net Assets: 2008: $232,624 2007: $237,573 *Total Liabilities and Unrestricted aanet Assets: 2008: $251,394 2007: $260,909 The accompanying notes are an intergral part of these statements. ----Page 3---- AMERICAN ASSOCIATION OF THE DEAFBLIND, INC. Statement of Activities and Change in Net Assets For the Year Ended December 31, 2008 Revenues: *Contribution-UDS: Unrestricted: $580,968 Restricted: $0 Total: $580,968 *Contributions: Unrestricted: $294,507 Restricted: $8,890 Total: $303,397 *Grant Income: Unrestricted: $5,000 Restricted: $10,500 Total: $15,500 *Membership Due: Unrestricted: $4,850 Restricted: $0 Total: $4,850 *Interest and dividends: Unrestricted: $6,989 Restricted: $0 Total: $6,989 *Other income: Unrestricted: $15,956 Restricted: $0 Total: $15,956 *Increase in cash surrender value of annuity: Unrestricted: $5,549 Restricted: $0 Total: $5,549 *Released from restriction: Unrestricted: $14,277 Restricted: $(14,277) Total: $0 *Total Revenues: Unrestricted: $928,096 Restricted: $5,113 Total: $933,209 Expenses: *Program services: Unrestricted: $202,310 Restricted: $0 Total: $202,310 Supporting serivice: *Management and general: Unrestricted: $97,558 Restricted: $0 Total: $97,558 Fundraising: Unrestricted: $638.290 Restricted: $0 Total: $638,290 Total Expenses: Unrestricted: $938,158 Restricted: $0 Total: $938,158 *Change in net assets: Unrestricted: $(10,062) Restricted: $5,113 Total: $(4,949) *Net Assets-Beginning of Year: Unrestricted: $234,162 Restricted: $3,411 Total: $237,573 *Transfer from unrestricted: Unrestricted: $(7,803) Restricted: $7,803 Total: $0 *Net Assets-End of Year: Unrestricted: $216,297 Restricted: $16,327 Total: $232,624 The accompanying notes are an intergral part of this statement. ----Page 4---- AMERICAN ASSOCIATION OF THE DEAFBLIND, INC. Statement of Activities and Change in Net Assets For the Year Ending December 31, 2007 Revenues: *Contribution-UDS: Unrestricted: $579,969 Restricted: $0 Total: $579,969 *Contribution-others: Unrestricted: $286,822 Restricted: $5,847 Total: $292,669 *Grant income: Unrestricted: $17,500 Restricted: $0 Total: $17,500 *Membership dues: Unrestricted: $17,470 Restricted: $0 Total: $17,470 *Internest and dividends: Unrestricted: $6,522 Restricted: $0 Total: $6,522 *Other income: Unrestricted: $805 Restricted: $0 Total: $805 *Increase in cash surrender value of annuity: Unrestricted: $3,739 Restricted: $0 Total: $3,739 *Released from restriction: Unrestricted: $2,436 Restricted: $(2,436) Total: $0 *Total Revenues: Unrestricted: $915,263 Restricted: $3,411 Total: $918,674 Expenses: *Program services: Unrestricted: $224,080 Restricted: $0 Total: $224,080 Supporting services: *Management and general: Unrestricted: $106,302 Restricted: $0 Total: $106,302 *fundraising: Unrestricted: $608,997 Restricted: $0 Total: $608,977 *Total Expenses: Unrestricted: $939,359 Restricted: $0 Total: $939,359 *Change in net assets: Unrestricted: $(24,096) Restricted: $3,411 Total: $(20,685) *Net Assets-Beginning of Year; Unrestricted: $258,258 Restricted: $0 Total: $258,258 *Net Assests-End of Year: Unrestricted: $234,162 Restricted: $3,411 Total: $237,573 The accompanying notes are an integral part of this statement. ---page 5---- AMERICAN ASSOCIATION OF THE DEAFBLIND, INC. Statement of Functional Expenses For the Year Ended December 31,2008 (with comparative totls for 2007) Expenses: *Salaries: Program Services: $111,447 Management & General: $48,386 Fund Raising: $12,123 2008 Total: $171,959 2007 Total: $162,499 *Payroll taxes: Program Services: $8,528 Management & General: $3,703 Fund Raising: $928 2008 Total: $13,159 2007 Total: $12,648 *Dental and health: Program Services: $6,622 Management & General: $2,871 Fund Raising: $719 2008 Total: $10,202 2007 Total: $8,661 *Workers compensation: Program Services: $473 Management & General: $205 Fund Raising: $52 2008 Total: $730 2007 Total: $931 *Retirement: Program Services: $2,337 Management & General: $1,014 Fund Raising: $254 2008 Total: $3,605 2007 Total: $4,250 *Recruiting: Program Services: $0 Management & General: $0 Fund Raising: $0 2008 Total: $0 2007 Total: $375 *Temporary help: Program Services: $0 Management & General: $0 Fund Raising: $0 2008 Total: $0 2007 Total: $82 *Outreach coordinator: Program Services: $0 Management & General: $0 Fund Raising: $0 2008 Total: $0 2007 Total: $25 *Telemarkerting: Program Services: $0 Management & General: $0 Fund Raising: $604,341 2008 Total: $604,341 2007 Total: $584,465 *Convention: Program Services: $0 Management & General: $0 Fund Raising: $0 2008 Total: $0 2007 Total: $556 *Magazine: Program Services: $0 Management & General: $0 Fund Raising: $0 2008 Total: $0 2007 Total: $3,045 *Travel: Program Services: $2,754 Management & General: $0 Fund Raising: $0 2008 Total: $2,754 2007 Total: $4,240 *Rent: Program Services: $20,404 Management & General: $8,858 Fund Raising: $2,219 2008 Total: $31,482 2007 Total: $30,416 *Telephone: Program Services: $1,743 Management & General: $308 Fund Raising: $0 2008 Total: $2,051 2007 Total: $2,004 *Office supplies: Program Services: $655 Management & General: $285 Fund Raising: $71 2008 Total: $1,011 2007 Total: $3,613 *Accounting: Program Services: $0 Management & General: $9,453 Fund Raising: $0 2008 Total: $9,453 2007 Total: $9,981 *Technology: Program Services: $0 Management & General: $1,530 Fund Raising: $0 2008 Total: $1,530 2007 Total: $3,850 *Caging experses: Program Services: $0 Management & General: $0 Fund Raising: $12,129 2008 Total: $12,129 2007 Total: $10,922 *Meeting: Program Services: $13,959 Management & General: $3,490 Fund Raising: $0 2008 Total: $17,449 2007 Total: $40,922 *NTFDBI & Honoraria: Program Services: $11,746 Management & General: $0 Fund Raising: $0 2008 Total: $11,746 2007 Total: $10,753 *Insurance: Program Services: $1,818 Management & General: $1,817 Fund Raising: $0 2008 Total: $3,635 2007 Total: $4,255 *Braille Service: Program Services: $1,828 Management & General: $1,827 Fund Raising: $0 2008 Total: $3,655 2007 Total: $4,913 *Registration fees: Program Services: $0 Management & General: $0 Fund Raising: $3,575 2008 Total: $3,575 2007 Total: $3,583 *Depreciation: Program Services: $1,342 Management & General: $587 Fund Raising: $146 2008 Total: $2,071 2007 Total: $1,792 *Legal: Program Services: $0 Management & General: $6,305 Fund Raising: $0 2008 Total: $6,305 2007 Total: $8,839 *Bank charges: Program Services: $5,269 Management & General: $2,288 Fund Raising: $573 2008 Total: $8,130 2007 Total: $6,938 *Parking: Program Services: $699 Management & General: $291 Fund Raising: $73 2008 Total: $1,033 2007 Total: $805 *Postage: Program Services: $527 Management & General: $229 Fund Raising: $57 2008 Total: $813 2007 Total: $1,047 *Membership fee: Program Services: $324 Management & General: $141 Fund Raising: $35 2008 Total: $500 2007 Total: $700 *Multimedia Project: Program Services: $5,262 Management & General: $2,285 Fund Raising: $572 2008 Total: $8,119 2007 Total: $6,528 *Interpreters: Program Services: $871 Management & General: $65 Fund Raising: $16 2008 Total: $952 2007 Total: $80 *Printing: Program Services: $3,742 Management & General: $1,624 Fund Raising: $407 2008 Total: $5,773 2007 Total: $6,341 *Total Expenses: Program Services: $202,310 Management & General: $97,558 Fund Raising: $638,290 2008 Total: $938,158 2007 Total: $939,359 The accompanying noties are an integral part of these statements. ----page 6---- AMERICAN ASSOCIATION OF THE DEAFBLIND, INC. Statement of Cash Flows For the years Ended December 31, INCREASE (DECREASE) IN CASH Cash Flows from Operating Activities *Changes in net assets: 2008: (4,949) 2007: (20,685) Adjustment to reconcile chage in net assets to net cash prvide by (used in) operaing activities: *Depreciation: 2008: $2,071 2007: $1,792 *Increase n cash surrender value of annuity: 2008: $(5,549) 2007: $(3,739) Changes in assets and liabilities *Accounts receivable: 2008: $17,905 2007: $(12,143) *Prepaid expense: 2008: $1,842) 2007: 448 *Payroll taxes withheld: 2008: $439 2007: $100 *Accrued salaries and vacation: 2008: $1,833 2007: $(1,007) *Retirement payable: 2008: $4 2007: $0 *Accounts payable: 2008: $(6,842) 2007: $1,177 *Net Cash Provided by (Used in) Operating Activities: 2008: $6,754 2007: $(34,057) Cash Flow from Investing Activities *Purchase of investments: 2008: $(6,895) 2007: $(6,297) *Pruchase of equipment: 2008: $(1,386) 2007: $(1,540) *Net Cash Used in Investing Activities: 2008: $(8,281) 2007: $(7,837) *Decrease in cash: 2008: $(1,527) 2007: $(41,894) *Cash Balance-Beginning of year: 2008: $42,199 2007: $84,093 *Cash Balance-End of Year: 2008: $40,672 2007: $42,199 Supplemental Information: *Interest paid: 2008: $0 2007: $0 *Income tax paid: 2008: $0 2007: $0 The accompanying notes are an integral part of these statements. ----page 7---- AMERICAN ASSOCIATION OF THE DEAF-BLIND, INC. Notes to Financial Statements December 31,2008 and 2007 1. Organization American Association of the DeafBlind, Inc., (AADB) is a Maryland corporation organized under the general nonprofit corporation law of the State of Maryland. The Association also qualifies under Section 501(c)(3) of the Internal Revenue Code, which allows operation as a nonprofit organization that is exempt from income taxes. The Association is a national consumer organization benefiting Americans with dual vision and hearing loss. They publish large type and braille magazines, organize conventions, and demonstrate new products to the deaf and blind. 2. Summary of Significant Accounting Policies (a) Basis of Presentation The Association presents its financial statements on the accrual method of accounting. Under this method, revenue is recognized when earned and expenses are recognized when incurred. The Association has adopted Statement of Financial Accounting Standards (SFAS) No. 117, "Financial Statements of Not-for-Profit Organizations." Under SFAS No. 117, the Association is required to report information regarding its financial position and activities according to three classes of net assets; unrestricted, temporarily restricted and permanently restricted. In addition, the Association is required to present a statement of cash flows. The Association’s financial statements present the three classes of net assets, which are defined as follows: * Unrestricted Net Assets - represent resources that are currently available for support of the Association's operations. * Temporarily Restricted Net Assets - represent resources that may be utilized only in accordance with the restricted purposes established by the provider of such funds. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as funds released from temporary restrictions. * Permanently Restricted Net Assets - represent resources for which the principal is to be maintained intact and the income, including appreciation in market value, may only be spent in accordance with the intent of the donor. The Association currently does not have any permanently restricted funds. ----Page 8---- AMERICAN ASSOCIATION OF THE DEAF-BLIND, INC. Notes to Financial Statements December 31, 2008 and 2007 2. Summary of Significant Accounting Policies (continued) (b) Property and Equipment The Association records depreciation on its furniture and equipment in accordance with generally accepted accounting principles. The Association's policy is to capitalize all expenditures for furniture and equipment in excess of $200 and that benefit more than one accounting period. Depreciation is provided on the straightline basis over the estimated useful lives of the assets, which is five years. When fixed assets are retired or otherwise disposed of, the cost is removed from the asset account and the related accumulated depreciation is adjusted with the difference being charged to income as either a gain or loss on disposal. Maintenance and repairs are charged to expense as incurred. (c) Accounts Receivable Accounts receivable are stated at the amount management expects to collect from outstanding balances. If amounts become uncollectible, they will be charged to operations when that determination is made. (d) Cash and Cash Equivalents For purposes of the statement of cash flows, the Association considers all highly liquid debt instruments with a maturity of three months or less to be cash equivalents. (e) Concentration of Credit Risk The Company maintains cash balances at two financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. There were no uninsured balances at December 31, 2008. The Association has not experienced any losses in such financial institutions and believes it is not exposed to any significant credit risk on cash. ----Page 9---- AMERICAN ASSOCIATION OF THE DEAF-BLIND, INC. Notes to Financial Statements December 31, 2008 and 2007 2. Summary of Significant Accounting Policies (continued) (f) Investments The Association has adopted SFAS No. 124 “Accounting for Certain Investments Held by Not-for-Profit Organizations.” Under SFAS No. 124, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. (g) Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. (h) Fair Value The Association adopted SFAS 157 Fair Value Measurements. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and expands disclosures about fair value measurements and establishes a hierarchy for valuation inputs. The hierarchy prioritizes the inputs into three levels based on the extent to which inputs used in measuring fair value are observable in the market. Fair value measurement is reported in one of the three levels which are determined by the lowest level input that is significant to the fair value measurement in its entirety. These levels are: * Level 1 - inputs are based upon unadjusted quoted prices for identical instruments traded in active markets. * Level 2 - inputs are based upon quoted prices for similar instruments in active markets, quoted prices for identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant assumptions are observable in the market or can be corroborated by observable market data for substantially the full term of the assets or liabilities. ----Page 10---- AMERICAN ASSOCIATION OF THE DEAF-BLIND, INC. Notes to Financial Statements December 31, 2008 and 2007 2. Summary of Significant Accounting Policies (continued) * Level 3 - inputs are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The fair values are therefore determined using model-based techniques that include option pricing models, discounted cash flow models, and similar techniques. 3. Officers The Board of Directors are elected by the members for a term of four years. Officers for the year ended December 31, 2008, are as follows: Arthur Roehrig, President Vincent Lee Clark, Vice President Marilyn Fernandez-Trader, Secretary Jeffrey Bohrman, Treasurer 4. Support and Revenue Income to the Association consists primarily of membership dues, convention registration, grants and donations. 5. Lease Commitments The Association is currently occupying space in the building located at 8630 Fenton Street, Silver Spring, Maryland, which expires March 31, 2008. The base rent is $2,401 per month with 3% increases each year. The lease has been amended for a five year term expiring March 31, 2013. The base rent will increase each year by 4%. Total rent expense for the years ended December 31, 2008 and 2007 were $31,481 and $30,416, respectively. The Association’s obligations under the leases are as follows: 2009: $32,741 2010: $34,050 2011: $35,412 2012: $36,829 2013: $9,297 ----Page 11---- AMERICAN ASSOCIATION OF THE DEAF-BLIND, INC. Notes to Financial Statements December 31, 2008 and 2007 6. Fund-Raising Expenses The Association has contracted with United Deaf Services (UDS), a division of Heritage Publishing Company of North Little Rock, Arkansas, to conduct a public relations and fund-raising campaign in the Association's name throughout the United States. During 2006, the Association renewed their contract with UDS for the years 2007 through 2009. As stated in the American Institute of Certified Public Accountant’s (AICPA) Statement of Position No. 98-2, an organization may allocate program, management and general, and fund-raising costs associated with a fund-raising activity if the following three criteria have been met; purpose, audience, and content. Since the Association has not met all three criteria, all of the costs of this campaign have been reported as fund-raising costs (telemarketing expenses) in these financial statements. 7. Retirement The Association has a Simple IRA Retirement Plan covering eligible employees. Eligible employees are those full-time and have one year of service with the Association. The Association matched up to 3% of employee’s annual salary if they make a similar contribution to the plan. Employer contributions to the plan are vested when the contribution is made. 8. Investments Investments at December 31, 2008 and 2007, which are all considered level 1, consist of the following: *Certificate of deposit: 2008: $69,821 2007: $66,981 *Life insurance annuity: 2008: $119,916 2007: $110,312 *Total Investment: 2008: $189,737 2007: $177,293 The Association invests in a professionally managed portfolio that contains an annuity fund and a certificate of deposit. Such investments are exposed to various risks such as interest rates, market and credit. Due to the level of risk associated with such investments and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term would materially affect investment balances and the amounts reported in the financial statements. ----Page 12---- AMERICAN ASSOCIATION OF THE DEAF-BLIND, INC. Notes to Financial Statements December 31, 2008 and 2007 9. Temporarily Restricted Net Assets Activity in temporarily net assets is as follows: *Advocacy and Awareness: Balance - 12/31/2007: $655 Transfer from Unrestricted: $0 Revenue: $1,491 Expenses: $2,146 Balance - 12/31/2008: $0 *NFDBI meeting: Balance - 12/31/2007:$0 Transfer from Unrestricted: $6,747 Revenue: $15,600 Expenses: $11,606 Balance - 12/31/2008: $10,741 *Task force: Balance - 12/31/2007:$147 Transfer from Unrestricted: $775 Revenue: $0 Expenses: $0 Balance - 12/31/2008: $922 *SSP meals and lodging: Balance - 12/31/2007:$334 Transfer from Unrestricted: $125 Revenue: $0 Expenses: $0 Balance - 12/31/2008: $459 *Conference - participants: Balance - 12/31/2007:$2,275 Transfer from Unrestricted: $(169) Revenue: $1,774 Expenses: $0 Balance - 12/31/2008: $3,880 *Conference - general: Balance - 12/31/2007:$0 Transfer from Unrestricted: $325 Revenue: $0 Expenses: $0 Balance - 12/31/2008: $325 *Braille materials: Balance - 12/31/2007:$0 Transfer from Unrestricted: $0 Revenue: $25 Expenses: $25 Balance - 12/31/2008: $0 *Braille honorarium: Balance - 12/31/2007:$0 Transfer from Unrestricted: $0 Revenue: $25 Expenses: $25 Balance - 12/31/2008: $0 *Total Temporarily Restricted Net Assets: Balance - 12/31/2007:$3,411 Transfer from Unrestricted: $7,803 Revenue: $19,390 Expenses: $14,277 Balance - 12/31/2008: $16,327 10. Related Parties In 2008 and 2007, the Association’s paid the husband of an officer of AADB for interpreting services. Fees paid to him were $718 and $945 for fiscal years ended December 31, 2008 and 2007 respectively.