THE AMERICAN NATIONAL RED CROSS

[Pages:29]THE AMERICAN NATIONAL RED CROSS Consolidated Financial Statements June 30, 2007

(With Independent Auditors' Report Thereon)

KPMG LLP 2001 M Street, NW Washington, DC 20036

Independent Auditors' Report

The Board of Governors The American National Red Cross:

We have audited the accompanying consolidated statement of financial position of the American National Red Cross (American Red Cross) as of June 30, 2007, and the related consolidated statements of activities, functional expenses and cash flows for the year then ended. These consolidated financial statements are the responsibility of the American Red Cross. Our responsibility is to express an opinion on these consolidated financial statements based on our audit. We did not audit the financial statements of certain chapters, which statements reflect total assets constituting 20 percent and total revenues and gains constituting 18 percent of the related consolidated totals. Those statements were audited by other auditors whose reports have been furnished to us, and our opinion, insofar as it relates to amounts included for such chapters, is based solely on the reports of the other auditors. The prior year summarized comparative information has been derived from the American Red Cross' 2006 consolidated financial statements and, in our report dated January 5, 2007, we expressed an unqualified opinion on those consolidated financial statements.

We conducted our audit 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the American Red Cross' internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion.

In our opinion, based on our audit and the reports of the other auditors, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of the American Red Cross as of June 30, 2007, and changes in its net assets and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles.

As discussed in Note 9 to the consolidated financial statements, the American Red Cross adopted the recognition and disclosure provisions of Statement of Financial Accounting Standards No. 158, Employers' Accounting for Defined Benefit Pension and Other Postretirement Plans, as of June 30, 2007.

October 16, 2007

KPMG LLP. KPMG LLP, a U.S. limited liability partnership, is a member of KPMG International, a Swiss cooperative.

DEPARTMENT OF THE ARMY

U.S. ARMY AUDIT AGENCY OFFICE OF THE AUDITOR GENERAL

3101 PARK CENTER DRIVE ALEXANDRIA, VA 22302-1596

A-2008-0015-FFM

31 October 2007

Independent Auditor's Report

This report presents the results of our review of the independent certified public accountant's audit of the American Red Cross consolidated financial statements for the fiscal year ended 30 June 2007. In the auditor's opinion, the American Red Cross statements are fairly presented, in all material respects, in accordance with accounting principles generally accepted in the United States of America.

The Act of Congress that incorporated the American Red Cross, as implemented by DOD Directive 1000.26E (Support for Non-Federal Entities Authorized to Operate on DOD Installations) and Army Regulation 930-5 (American National Red Cross Service Program and Army Utilization), requires that U.S. Army Audit Agency perform an annual audit of the consolidated financial statements of the American Red Cross. The American Red Cross contracted with the certified public accounting firm of KPMG LLP as the principal auditor to perform a financial audit of its 2007 consolidated financial statements. To fulfill our audit responsibilities, avoid duplication and unnecessary expense, and make the most efficient use of our available resources, we reviewed the principal auditor's work and reports.

The American Red Cross is the instrument chosen by an Act of Congress, approved 5 January 1905, to help carry out obligations assumed by the United States under certain international treaties known as the Geneva or Red Cross Conventions. Its congressional charter imposes on the American Red Cross the duties to act as the medium of voluntary relief and communications between the American people and the Armed Forces, and to carry on a system of national and international relief to prevent and mitigate suffering caused by disasters.

We conducted our review of the principal auditor's work in accordance with generally accepted government auditing standards issued by the Comptroller General of the United States. To determine the reasonableness of the principal auditor's work and the extent to which we could rely on it, we:

? Reviewed the principal auditor's approach and planning of the audit.

? Evaluated the qualifications and independence of the audit staff.

? Reviewed the consolidated financial statements and principal auditor's report to evaluate compliance with generally accepted accounting principles.

? Reviewed and tested the principal auditor's working papers to determine (i) the nature, timing, and extent of the audit work performed; (ii) the extent of audit quality control methods the auditor used; (iii) whether a study and evaluation was conducted of the entity's internal accounting controls; and (iv) whether the evidence in the working papers supported the principal auditor's opinion on the consolidated financial statements.

In the opinion of KPMG LLP, the American Red Cross consolidated financial statements present fairly, in all material respects, its financial position as of 30 June 2007 and the related statement of activities, functional expenses, and the changes in its net assets and cash flows for the year ended, in conformity with accounting principles generally accepted in the United States of America. During our review we found nothing to indicate that KPMG LLP's opinion on the American Red Cross 2007 consolidated financial statements is inappropriate or cannot be relied on. We believe that the consolidated financial statements, together with the KPMG LLP opinion and our review of that work, provide Congress with a dependable basis for evaluating the financial position of the American Red Cross. This report presents the American Red Cross consolidated financial statements and the auditor's opinion thereon. We are sending copies of this report to the American Red Cross Board of Governors.

PATRICK J. FITZGERALD, CPA The Auditor General

2

THE AMERICAN NATIONAL RED CROSS

Consolidated Statement of Financial Position

June 30, 2007 (with comparative information as of June 30, 2006) (In thousands)

Assets

Current assets: Cash and cash equivalents Investments (Notes 7 and 8) Trade receivables, including grants, net of allowance for doubtful accounts of $4,274 in 2007 and $2,674 in 2006 Contributions receivable (Note 2) Inventories, net of allowance for obsolescence of $2,630 in 2007 and $618 in 2006 Other current assets

Total current assets

Investments (Notes 7 and 8) Contributions receivable (Note 2) Land, buildings, and other property, net (Note 3) Other assets (Note 8)

Total assets

Liabilities and Net Assets

Current liabilities: Accounts payable and accrued expenses Current portion of debt (Note 4) Postretirement benefits (Note 9) Other current liabilities (Notes 1 and 8)

Total current liabilities

Debt (Note 4) Pension and postretirement benefits (Note 9) Other liabilities (Notes 1 and 8)

Total liabilities

Net assets (Note 6): Unrestricted net assets Temporarily restricted net assets Permanently restricted net assets

Total net assets

Commitments and contingencies (Notes 4, 5, 7, and 12)

Total liabilities and net assets

See accompanying notes to the consolidated financial statements.

2007

2006

$

211,240 $

427,573

1,088,021

1,104,975

104,981 94,532

133,748 97,121

152,666 20,505

121,831 17,608

1,671,945

1,902,856

1,473,531 31,863

1,205,898 80,186

1,333,560 23,211

1,165,790 87,579

4,463,423

4,512,996

369,884 136,400

6,621 27,789

540,694

353,338 228,001 117,087

1,239,120

1,801,654 879,816 542,833

3,224,303

416,299 42,127 31,302 24,960

514,688

389,023 306,448 117,274

1,327,433

1,596,067 1,095,221

494,275

3,185,563

$

4,463,423 $

4,512,996

2

THE AMERICAN NATIONAL RED CROSS

Consolidated Statement of Activities

Year ended June 30, 2007 (with summarized information for the year ended June 30, 2006) (In thousands)

Operating revenues and gains: Contributions: Corporate, foundation and individual giving United Way and other federated Legacies and bequests Services and materials Grants Products and services: Biomedical Program materials Contracts, including federal government Investment income (Note 7) Other revenues Net assets released from restrictions

Total operating revenues and gains

Operating expenses: Program services: Armed Forces Emergency Services Biomedical services (Note 12) Community services Domestic disaster services Health and safety services International relief and development services

Total program services

Supporting services: Fund raising (Note 11) Management and general

Total supporting services

Total operating expenses

Change in net assets from operations

Nonoperating gains (Notes 4 and 7) Additional minimum pension liability (Note 9) Effect of adoption of recognition provisions of

FASB Statement No. 158 (Note 9)

Change in net assets

Net assets, beginning of year

Net assets, end of year

See accompanying notes to the consolidated financial statements.

Temporarily Permanently Unrestricted Restricted Restricted

Totals 2007

2006

$ 209,798 $ 111,929 $

58,441

100,070

59,233

10,700

22,180

20,228

28,048

40,498

2,071,781 157,449 48,274 133,274 56,166 503,162

348 (138) 2,389 (503,162)

3,347,806

(217,138)

44,573 -

-

44,573

$ 321,727 $ 2,645,044

158,511

162,300

114,506

92,687

42,408

238,341

68,546

74,452

2,071,781 157,797 48,136 135,663 56,166 -

2,165,172 141,687 311,435 109,979 67,528 -

3,175,241

6,008,625

55,219

-

2,064,355

-

131,214

-

442,439

-

243,673

-

142,272

-

3,079,172

-

-

55,219

54,096

-

2,064,355

2,103,572

-

131,214

133,467

-

442,439

2,630,766

-

243,673

224,594

-

142,272

154,283

-

3,079,172

5,300,778

142,711

-

229,411

-

-

142,711

140,082

-

229,411

187,249

372,122

-

3,451,294

-

-

372,122

327,331

-

3,451,294

5,628,109

(103,488)

(217,138)

44,573

(276,053)

380,516

182,223 -

1,733 -

3,985 -

187,941 -

64,456 94,470

126,852

-

-

126,852

-

205,587

(215,405)

48,558

38,740

539,442

1,596,067

1,095,221

494,275

3,185,563

2,646,121

$ 1,801,654 $ 879,816 $ 542,833 $ 3,224,303 $ 3,185,563

3

THE AMERICAN NATIONAL RED CROSS

Statement of Functional Expenses

Year ended June 30, 2007 (with summarized information for the year ended June 30, 2006) (In thousands)

Salaries and wages Employee benefits

Subtotal

Travel and maintenance Equipment maintenance and rental Supplies and materials Contractual services (Note 5) Financial and material assistance Depreciation and amortization

Total expenses

Program Services

Armed Forces Emergency Services

Biomedical Services

Community Services

Domestic Disaster Services

Health and Safety

Services

Int'l Relief & Development

Services

Total Program Services

$

30,113 $ 863,229 $

52,544 $ 103,281 $ 107,733 $

19,794 $ 1,176,694

8,262

249,246

13,920

28,181

27,967

5,709

333,285

38,375

1,112,475

66,464

131,462

135,700

25,503

1,509,979

1,269 1,055 2,164 8,675 1,952 1,729

31,757 71,830 495,982 300,905

3,410 47,996

3,137 5,826 18,493 19,706 12,046 5,542

25,862 14,538 23,294 105,412 128,070 13,801

4,523 5,293 46,749 38,000 4,201 9,207

4,242 2,249 2,523 8,267 99,174

314

70,790 100,791 589,205 480,965 248,853 78,589

$

55,219 $ 2,064,355 $ 131,214 $ 442,439 $ 243,673 $ 142,272 $ 3,079,172

Salaries and wages Employee benefits

Subtotal

Travel and maintenance Equipment maintenance and rental Supplies and materials Contractual services Financial and material assistance Depreciation and amortization

Total expenses

Supporting Services

Fund Raising

Management and

General

Total Supporting

Services

Total Expenses

2007

2006

$

52,117 $

88,325 $ 140,442 $ 1,317,136 $ 1,284,395

13,942

24,724

38,666

371,951

386,810

66,059

113,049

179,108

1,689,087

1,671,205

3,419 1,801 19,254 40,009 9,362 2,807

6,698 4,223 3,473 84,425 3,270 14,273

10,117 6,024 22,727

124,434 12,632 17,080

80,907 106,815 611,932 605,399 261,485

95,669

158,433 148,922 585,683 726,994 2,243,647

93,225

$ 142,711 $ 229,411 $ 372,122 $ 3,451,294 $ 5,628,109

See accompanying notes to the consolidated financial statements. 4

THE AMERICAN NATIONAL RED CROSS

Consolidated Statement of Cash Flows

Year ended June 30, 2007 (with comparative information for the year ended June 30, 2006) (In thousands)

Cash flows from operating activities: Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization Provision for doubtful accounts receivable Provision for obsolete inventory Net gain on sales of property Net investment and derivative gains Additional minimum pension liability Effect of adoption of FASB Statement No. 158 Permanently restricted contributions Changes in operating assets and liabilities: Receivables Inventories Other assets Pension intangible asset Accounts payable and accrued expenses Other liabilities Pension and postretirement benefits

Net cash (used in) provided by operating activities

Cash flows from investing activities: Purchases of property Proceeds from sales of property Purchases of investments Proceeds from sales of investments

Net cash used in investing activities

Cash flows from financing activities: Permanently restricted contributions Proceeds from borrowings Repayments of debt

Net cash provided by financing activities

Net increase (decrease) in cash and cash equivalents

Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

Supplemental disclosures of cash flow information: Cash paid during the year for interest

Noncash investing and financing transactions: Acquisition of equipment under capital lease agreements Donated stock and beneficial interest in perpetual trust

See accompanying notes to the consolidated financial statements.

5

2007

2006

$ 38,740 $ 539,442

95,669 1,600 2,012

(33,980) (218,765)

(126,852)

(44,573)

21,104 (32,847)

4,496 -

(46,415) 2,938

23,724

(313,149)

93,225 (3,307)

(73) (53,738) (82,776) (94,470)

(23,412)

126,300 30,302 (28,331) 10,555 31,096 24,030 43,310

612,153

(176,897) 75,312

(209,897) 306,071

(5,411)

(172,167) 66,068

(743,001) 347,847

(501,253)

43,851 169,398 (111,022)

20,694 441,640 (438,220)

102,227

24,114

(216,333)

135,014

427,573

292,559

$ 211,240 $ 427,573

$ 26,583 $ 21,729

212 3,386

338 17,628

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