A NONPROFIT TRUST SERVING VETERANS, TROOPS, CHILDREN ... · troops, children & communities american...

1ANNUAL REPORT AND FINANCIAL STATEMENT

A NONPROFIT TRUST

SERVING VETERANS,

TROOPS, CHILDREN

& COMMUNITIES

American Legion Charities, Inc.

A N N U A L R E P O R T A N D F I N A N C I A L S T A T E M E N T

2 3AMERICAN LEGION CHARITIES, INC. ANNUAL REPORT AND FINANCIAL STATEMENT

PREAMBLE TO THE AMERICAN LEGION CONSTITUTIONFOR GOD AND COUNTRY WE ASSOCIATE OURSELVES TOGETHERFOR THE FOLLOWING PURPOSES:To uphold and defend the Constitution of the United States of America;

To maintain law and order;

To foster and perpetuate a one hundred percent Americanism;

To preserve the memories and incidents of our associations in the Great Wars;

To inculcate a sense of individual obligation to the community, state and nation;

To combat the autocracy of both the classes and the masses;

To make right the master of might;

To promote peace and goodwill on earth;

To safeguard and transmit to posterity the principles of justice, freedom and democracy;

To consecrate and sanctify our comradeship by our devotion to mutual helpfulness.

The American Legion Family, with more than 3 million members, serves in every corner of the country and around the world. The largest organization of veterans in the United States, it is also among the nation’s greatest armies of volunteers and charitable providers for people in financial need, disaster victims, children, causes and programs in communities, states and the nation.

Since its founding in 1919, The American Legion has built its identity around four pillars of service: veterans, defense, Americanism and youth. The organization has worked tirelessly to strengthen the nation by leading the charge for the GI Bill of Rights, fighting for a properly equipped military, bringing into existence a code of respect for the U.S. flag and creating opportunities for countless children.

American Legion programs not only enhance quality of life for the organization’s members, but they also fulfill medical needs for children and youth, fund scholarships for students, and build character through Boys State, Boys Nation, oratorical competition, American Legion Baseball, Junior Shooting Sports and a multitude of other programs.

The American Legion Family is made up of the wartime veterans of The American Legion, the American Legion Auxiliary (female descendants of wartime veterans), Sons of The American Legion (male descendants of wartime veterans) and the American Legion Riders (a motorcycle-oriented group for members of all three organizations).

American Legion Charities was launched as a 501(c)(3) nonprofit trust in 2010 to allow American Legion Family members and friends to contribute to the overall organization and its many services or choose a specific program to support. Donors have the ability to select the pillar that best suits them, or all of the pillars, depending on their wishes.

The following pages illustrate just a fraction of the programs and services supported by American Legion Charities, followed by an audited financial statement of the trust.

To learn more or to donate by phone, call 1-800-433-3318 or visit www.legion.org/donate/contact online.

AMERICAN LEGION CHARITIES


The American Legion Veterans & Children Foundation provides essential, life-changing support for military and veteran parents, with children at home, who are facing unforeseen financial hardships. The foundation also funds expert, free-of-charge assistance to disabled veter-ans and families working to understand and receive government benefits they are due. The foundation’s parent is the 1925-established American Legion Endowment Fund, a distinct 501(c)(3) nonprofit corporation, which has provided tens of millions of dollars in emergency help to qualified, struggling military and veteran families and has supported tens of thousands of American Legion service officers over the years. More than $800,000 in American Legion Temporary Financial Assistance grants are delivered annually. More than 3,000 trained American Legion service officers are continuously helping more than 700,000 veterans with their government benefits, education and employment opportunities, and health-care needs.

AMERICAN LEGION VETERANS & CHILDREN FOUNDATION

“IT’S HARD TO IMAGINE HOW MANY LIVES ARE BEING TOUCHED. NOT JUST MILITARY LIFE – BUT THE FAMILY UNIT AS A WHOLE.” - Army veteran Ken Lee, recipient of an American Legion Temporary Financial

Assistance grant through an American Legion service officer

Photo by Lucas Carter


The American Legion’s National Emergency Fund directs immediate cash grants to American Legion Family members – and Legion posts – whose lives have been turned upside-down due to natural disasters. The fund, created in response to Hurricane Hugo in 1989, has provided more than $8 million in direct financial assistance – up to $3,000 for qualified American Legion Family members and up to $10,000 for posts. By providing this emergency aid, the National Emergency Fund has prevented damaged posts from closing and enabled individual mem-bers to recover from tragedy.

NATIONAL EMERGENCY FUND

“AS A POST, WE WOULD LIKE EVERYONE TO KNOW WE ARE HERE FOR THE COMMUNITY AND, MOST IMPORTANTLY, OUR VETERANS.” - Rock Hill, S.C., American Post 34 Commander Tommy Ayers, as local

Legionnaires were providing disaster-relief services and access to National Emergency Fund grants in the aftermath of Hurricane Florence

Photo by Clay Lomneth


Created by The American Legion in 1954 as a distinct 501(c)(3), the Child Welfare Foundation awards grants to nonprofit organizations nationwide that contribute to the physical, mental, emotional and spiritual needs of children and youth. The foundation also improves the lives of children in multiple ways, including support for youth activities and programs sponsored by The American Legion.

CHILD WELFARE FOUNDATION

“THE AMERICAN LEGION IS IMPORTANT TO US AND OUR WORK. IT’S SUPPORTING THE AMERICAN FAMILY NO MATTER WHAT CIRCUMSTANCES OR CHALLENGES THEY’VE HAD.” - Joseph Quintanilla, vice president of development for National Braille Press,

which received a $10,370 American Legion Child Welfare Foundation grant to create Braille books on the U.S. Constitution and the Declaration of Independence



Operation Comfort Warriors, established in 2007 to provide relief for active-duty military personnel recovering from wounds and illnesses at Department of Defense health-care facilities and transition units, purchases and delivers items not normally provided by the federal government, such as art and sports therapy equipment, recre-ational opportunities and entertainment for recovering warriors and their families. The program also serves veterans receiving treatment at Depart-ment of Veterans Affairs facilities.

OPERATION COMFORT WARRIORS

“AFTER YOU SUFFER AN INJURY LIKE MINE, GETTING HELP CAN SOMETIMES BE DIFFICULT. BUT FOR AN ORGANIZATION TO COME TO ME AND SAY, ‘WHAT DO YOU NEED?’ IS INCREDIBLE. IT’S REALLY HARD TO DESCRIBE HOW THAT FEELS.” - U.S. Army and Air Force veteran Michael Bacon, who suffered a traumatic

brain injury after a roadside-bomb attack in Iraq in 2006, and in 2018 received a custom-fitted all-terrain trike from Operation Comfort Warriors so he can resume riding with his 14-year-old daughter



The American Legion Legacy Scholarship Fund, established in 2006, awards college money for youth whose parents have died on active duty since 9/11, or who have received VA disability ratings of 50 percent or greater. Each needs-based scholarship provides up to $20,000 in aid for undergraduate or post-graduate college education.

LEGACY SCHOLARSHIP FUND

“KNOWING THAT THE AMERICAN LEGION CAN GIVE BACK TO THE COMMUNITY LIKE THAT, SOMETHING AS IMPORTANT AS A YOUNG MAN’S OR YOUNG WOMAN’S COLLEGE EDUCATION, IS AMAZING. IT MAKES YOUR HEART SWELL WITH PRIDE.” - Disabled Marine Corps veteran Ron Cooke, whose son Chase received a $16,000

American Legion Legacy Scholarship in 2018



American Legion Charities offers donors a convenient opportunity to select programs and services of particular interest, such as American Legion Boys Nation, as specific destinations for their charitable gifts. American Legion Boys Nation – which has provided unparalleled education in U.S. democracy and government for thousands of high school students since 1947 – is just one of the youth and veteran-support programs that receive funding through American Legion Charities.

AMERICAN LEGION PROGRAMS

“SERVING OUR COUNTRY AND THEN BEING IN THE AMERICAN LEGION AND SERVING COMMUNITIES … YOU’RE STILL SERVING THE COUNTRY, DOING THESE YOUTH PROGRAMS, HELPING ME GET A SCHOLARSHIP, HELPING ME DO THIS … THAT’S A BIG THING.” - Darius Thomas of Phenix City, Ala., 2017 American Legion Boys Nation President

Photo by Clay Lomneth


INDEPENDENT AUDITOR’S REPORTMembers of the Board of Directors of the American Legion Charities, Inc. The American Legion Charities Indianapolis, Indiana

Report on Financial Statements We have audited the accompanying consolidated financial statements of The American Legion Charities (“Charities”), which comprise the consolidated statements of financial position as of Decem-ber 31, 2017 and 2016, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error.

Auditor’s Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the audi-tor’s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation of the consoli-dated financial statements in order to design audit procedures that are appropriate in the circum-stances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriate-ness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The American Legion Charities as of December 31, 2017 and 2016, 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.

Crowe Horwath LLP Indianapolis, Indiana May 1, 2018

THE AMERICAN LEGION CHARITIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

December 31, 2017 and 2016

See accompanying notes to consolidated financial statements.

3.

2017 2016ASSETS

Cash and cash equivalents $ 405,725 $ 172,414Contributions receivable 168,838 -Interest receivable 34,470 23,088Investments 4,749,866 3,791,850

$ 5,358,899 $ 3,987,352

LIABILITIESAccounts payable $ 2,268 $ 32,664

NET ASSETSUnrestricted 1,847,165 1,310,387Temporarily restricted 3,509,466 2,644,301

Total net assets 5,356,631 3,954,688

$ 5,358,899 $ 3,987,352


THE AMERICAN LEGION CHARITIESCONSOLIDATED STATEMENTS OF FINANCIAL POSITION

DECEMBER 31, 2017 AND 2016


THE AMERICAN LEGION CHARITIESCONSOLIDATED STATEMENT OF ACTIVITIES

Year ended December 31, 2017


4.

Temporary PermanentlyUnrestricted Restricted Restricted Total

Revenue, gains and other supportContributions 698,259 1,067,143 - 1,765,402Interest and dividends income 26,928 85,081 - 112,009Net realized losses oninvestments (6,783) (346) - (7,129)

Total revenues, gains, and othersupport 718,404 1,151,878 - 1,870,282

Net assets released from restriction 307,543 (307,543) - -1,025,947 844,335 - 1,870,282

ExpensesProgram expense 551,805 - - 551,805Fundraising 10,413 - - 10,413Management and general 10,208 - - 10,208

572,426 - - 572,426

Change in net assets fromOperations 453,521 844,335 - 1,297,856

Net unrealized gains oninvestments 83,257 20,830 - 104,087

Change in net assets 536,778 865,165 - 1,401,943

Net assets, beginning of year 1,310,387 2,644,301 - 3,954,688

Net assets, end of year $ 1,847,165 $ 3,509,466 $ - $ 5,356,631


Year ended December 31, 2016


5.

Temporary PermanentlyUnrestricted Restricted Restricted Total

Revenue, gains and other supportContributions 604,177 1,024,623 - 1,628,800Interest and dividend income 27,344 66,287 - 93,631Net realized gains on

investments 400 - - 400Total revenues, gains, and othersupport 631,921 1,090,910 - 1,722,831

Net assets released from restriction 543,883 (543,883) - -1,175,804 547,027 - 1,722,831

ExpensesProgram expense 736,383 - - 736,383Fundraising 11,110 - - 11,110Management and general 83,000 - - 83,000

830,493 - - 830,493

Change in net assets fromoperations 345,311 547,027 - 892,338

Net unrealized gains oninvestments 20,924 20,202 - 41,126

Change in net assets 366,235 567,229 - 933,464

Net assets, beginning of year 944,152 2,077,072 - 3,021,224

Net assets, end of year $ 1,310,387 $ 2,644,301 $ - $ 3,954,688

See accompanying notes to consolidated financial statements.See accompanying notes to consolidated financial statements.


YEAR ENDED DECEMBER 31, 2016


YEAR ENDED DECEMBER 31, 2017


THE AMERICAN LEGION CHARITIESCONSOLIDATED STATEMENTS OF CASH FLOWS

Years ended December 31, 2017 and 2016


6.

2017 2016Cash flows from operating activities

Change in net assets $ 1,401,943 $ 933,464Adjustments to reconcile change in net assets to net cash from

operating activitiesRealized (gain) loss on sale of investments 7,129 (400)Unrealized gain on investments (104,087) (41,126)

Changes in assets and liabilities:Accounts receivable (168,838) -Interest receivable (11,382) (3,637)Accounts payable (30,396) (373,741)

Net cash from operating activities 1,094,369 514,560

Cash flows from investing activitiesPurchase of investments (3,574,624) (1,424,486)Sales of investments 2,713,566 908,312

Net cash from investing activities (861,058) (516,174)

Net increase (decrease) in cash and cash equivalents 233,311 (1,614)

Cash and cash equivalents, beginning of year 172,414 174,028

Cash and cash equivalents, end of year $ 405,725 $ 172,414


NOTE 1 - NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIESNature of Organization: The American Legion Charities Trust (“Trust”) is a tax exempt trust established to solicit funds from individuals, organizations and corporations and to disburse said funds as may be directed to various American Legion National Headquarters (“Legion”) programs and charities. The American Legion Charities, Inc. is a tax exempt 501(c)(3) corporation organized for the purpose of promoting the common good and general welfare of the people of the United States of American by raising money for the programs of The American Legion and its departments and posts.The American Legion National Headquarters is a national veterans organization which was declared to be a corporate body by an Act of the United States Congress on September 16, 1919.Principles of Consolidation: The consolidated financial statements include the accounts of the American Legion Charities Trust and the American Legion Charities, Inc. (collectively, “Charities”). All material inter-organizational accounts and transactions have been eliminated in consolidation. The consolidated financial statements of the Charities does not include the activity or accounts of the Legion.Income Taxes: The American Legion Charities, Inc. is exempt from federal income taxes under section 501(c)(3) of the U.S. Internal Revenue Code. The Charities isn’t considered to be a private foundation. The Charities is subject to income tax on unrelated business income. In 2017 and 2016, the Charities incurred no tax expense.Current accounting standards require the Charities to disclose the amount of potential benefit or obligation to be realized as a result of an examination performed by a taxing authority. For the years ended December 31, 2017 and 2016, management has determined that the Charities does not have any tax positions that result in any uncertainties regarding the possible impact on the Legion’s financial statements. The Charities does not expect the total amount of unrecognized tax benefits to significantly change in the next 12 months. The Charities recognizes interest and/or penalties related to income tax matters in income tax expense. The Charities did not have any amounts accrued for interest and penalties at December 31, 2017 and 2016.Basis of Accounting: The financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America (“GAAP”).Use of Estimates in Preparation of Financial Statements: The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues, expenses, gains, losses and other changes in net assets during the reported period. Actual results could differ from those estimates.Financial Statement Presentation: The financial statements have been prepared in accordance with GAAP, which requires, among other things, that the financial statements report the changes in and total of each of the net asset classes, based upon donor restrictions, as applicable. Net assets are to be classified as unrestricted, temporarily restricted and permanently restricted.The following classes of net assets are maintained:

Unrestricted Net Assets - The unrestricted net asset class includes general assets and liabilities of the Charities. The unrestricted net assets of the Charities may be used at the discretion of management to support the Charities’s purposes and operations.Temporarily Restricted Net Assets - The temporarily restricted net asset class includes assets of the Charities related to gifts with explicit donor-imposed restrictions that have not been met as to specified purpose, or to later periods of time or after specified dates. Unconditional promises to give that are due in future periods and are not permanently restricted are classified as temporarily restricted net assets. As the restrictions are met, the net assets are released from restrictions and included in unrestricted net assets. Contributions for which the restrictions are met in the same period in which the contribution is received are

also recorded as temporarily restricted revenue and releases from restrictions.Cash and Cash Equivalents: Cash and cash equivalents include cash on hand and less than 90 day deposit balances with banks. The Charities maintains all of its cash deposits in banks and brokerage firms. This may result in a concentration of credit risk in the case of a severe regional financial failure. The maximum amount at risk is the excess of the deposit liabilities reported by the banks over the amounts that would have been covered by federal insurance. The Federal Deposit Insurance Corporation (“FDIC”) insures deposits up to $250,000 per financial institution.Contributions Receivable and Allowance for Uncollectible Accounts: The Charities collects donations from members, posts, and departments. Losses are charged off to the reserve when management deems further collection efforts will not produce additional recoveries. Management estimated that no allowance was necessary for the years ended December 31, 2017 and 2016.Investments: Investments are carried at fair value. The fair values of investments are based on quoted market prices, where available. If quoted market prices are not available, fair values are based on quoted market prices of comparable instruments. Realized and unrealized gains and losses are reflected in the consolidated statements of activities. Premiums or discounts on investments are generally recognized at the time of disposal or maturity.Fair Value of Financial Instruments: The carrying amount of all financial instruments of the Charities, which include cash and cash equivalents, accounts receivable, investments and accounts payable, approximate fair value.Expense Allocation: Expenses have been classified as program services, management and general, and fund raising based on actual direct expenditures. Additionally, some expenses are allocated based upon estimates of the amount of time spent by Legion employees performing these services.Subsequent Events: Management has performed an analysis of the activities and transactions subsequent to December 31, 2017, to determine the need for any adjustments or disclosures to the financial statements for the year ended December 31, 2017. Management has performed their analysis through May 1, 2018, the date the financial statements were available to be issued.NOTE 2 - FAIR VALUE OF FINANCIAL INSTRUMENTSFair value is defined as the price that would be received for an asset or paid to transfer a liability (an exit price) in the Charities’ principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.GAAP establishes a fair value hierarchy which requires an entity to maximize the use of observable inputs and minimize the use of unobservable inputs when measuring fair value. GAAP describes three levels of inputs that may be used to measure fair value:

Level 1: Quoted prices for identical assets or liabilities in active markets that the entity has the ability to access as of the measurement date.Level 2: Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities; quoted prices in markets that are not active; or other inputs that are observable or can be corroborated by observable market data.Level 3: Significant unobservable inputs that reflect a reporting entity’s own assumptions about the assumptions that market participants would use in pricing an asset or liability.

In many cases, a valuation technique used to measure fair value includes inputs from multiple levels of the fair value hierarchy. The lowest level of significant input determines the placement of the entire fair value measurement in the hierarchy.The fair value of money markets and common stock are based on quoted prices in active markets (Level 1 inputs). The fair value of U.S. government obligations, corporate bonds, and state and municipal bonds are based on quoted market prices of similar securities with similar due dates using the market approach (Level 2 inputs).

THE AMERICAN LEGION CHARITIESNOTES TO CONSOLIDATED FINANCIAL STATEMENTS

YEARS ENDED DECEMBER 31, 2017 AND 2016

THE AMERICAN LEGION CHARITIESCONSOLIDATED STATEMENTS OF CASH FLOWS

YEARS ENDED DECEMBER 31, 2017 AND 2016

22 AMERICAN LEGION CHARITIES, INC.

Assets and Liabilities Measured on a Recurring Basis: Assets and liabilities measured at fair value on a recurring basis are summarized below:

Fair Value Measurements at Dec. 31, 2017 using

Quoted Prices in Active Markets

for Identical Assets (Level 1)

Significant Other

Observable Inputs (Level 2)

Significant Unob-

servable Inputs

(Level 3)

Assets:Money market accounts 77,253 - -U.S. Government obligations - 790,372 -State and municipal bonds - 1,553,609 -Corporate bonds - 1,866,625 -Common Stock 462,007 - -

$ 539,260 $ 4,210,606 -

Fair Value Measurements at December 31, 2016 Using

Quoted Prices in Active Markets

for Identical Assets (Level 1)

Significant Other

Observable Inputs (Level 2)

Significant Unob-

servable Inputs

(Level 3)

Assets:

Money market accounts 302,903 - -

U.S. Government obligations - 559,638 -

State and municipal bonds - 954,779 -

Corporate bonds - 1,974,530 -

Common Stock - - -

$302,903 $ 3,488,947 -

NOTE 3 - TEMPORARILY RESTRICTED NET ASSETSTemporarily restricted net assets are donor-restricted for specific purposes. At December 31, 2017 and 2016 the restricted purposes are as follows:

2017 2016

Benevolent Fund $ 28,561 $ 26,642

National Commander’s Charity Fund 213,133 36,465

American Legion Legacy Scholarship Fund 118,448 423

National Emergency Fund 37,220 -

Endowment Fund 9,151 -

Operation Comfort Warrior 3,074,711 2,550,222

Child Welfare Foundation 2,014 768

Soldier’s Wish 26,090 22,011

Others 138 7,770

$ 3,509,466 $ 2,644,301

NOTE 4 - NET ASSETS RELEASED FROM RESTRICTIONNet assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by occurrence of other events specified by donors.

2017 2016

Benevolent Fund 9,296 1,447

American Legion Legacy Scholarship Fund 21,696 262,929

National Emergency Fund 6,649 23,515

Endowment Fund 5,049 9,047

Operation Comfort Warrior 169,266 169,595

Child Welfare Foundation 21,181 11,773

Soldier’s Wish 8,325 6,812

American Legion Youth Program - 2,365

Economic - 10,000

Other 66,081 46,400

$ 307,543 $ 543,883

24 AMERICAN LEGION CHARITIES, INC.

The American LegionP.O. Box 1055

Indianapolis, IN 46206(317) 630-1200

www.legion.org

Follow The American Legion online: www.legion.org/facebook

@AmericanLegion

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