CharityWatch's rating of National 4-H Council also includes the financial activities of the controlled affiliates consolidated in the National 4-H Council's audited financial statements for the fiscal year ended February 29, 2020. Each of the controlled affiliates included in CharityWatch's rating of National 4-H Council is organized as a 501(c)(3) public charity; the controlled affiliates are: (1) National 4-H Activities Foundation; (2) National 4-H Congress Foundation; and (3) Global Clover Network, Inc. (formerly National 4-H Foundation for Innovation, Inc.). All significant transactions between the organizations, including all inter-organization balances, have been eliminated in the audit consolidation.
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According to the National 4-H Council consolidated audit of February 29, 2020 (Note 2, Management's Plans):
"As a result of the outbreak of a novel coronavirus (COVID-19), which was declared a global pandemic by the World Health Organization in March of 2020 (See Note 17 [cited in a separate Analysts' Note, below]), Council's conference center activities were closed from March 2020 forward and remain closed as of the date of this report [January 12, 2021]. To mitigate COVID-19 impact on operations, National 4-H Council's Board of Directors approved a new three-phase financial strategy, which includes stabilizing cash flow, recovery to breakeven, and the statement of financial position growth. As of report date, Council successfully accomplished the first phase of the strategy. Council secured a $10 million term loan and paid off its existing $3 million credit outstanding as well as closed its existing credit facility. In addition, Council opened a separate $5 million credit facility with another bank for working capital purposes. This liquidity, along with cost reductions, is expected to provide sufficient cash flow to address the adverse impact arisen from closure of the Conference Center operation in 2020, and it also provides sufficient time to assess the strategic options for the Center. Based on actual results through December of 2020, cost reductions implemented and the liquidity discussed above, Council expects to meet its obligations as they come due and bank covenants for a period of one year from the date these financial statements are issued."
According to the National 4-H Council consolidated audit of February 29, 2020 (Note 11, Deferred Revenue): "Due to the impact of COVID-19 and the related travel restrictions, certain National 4-H Center events required cancellation. As of February 29, 2020, $865,824 was reclassified from meeting registrations deferred revenue to accounts payable and accrued expenses for refunds processed after fiscal year-end as a result of those cancellations."
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According to the National 4-H Council consolidated audit of February 29, 2020 (Note 17, COVID-19 and CARES Act):
"On January 30, 2020, the World Health Organization (WHO) announced a new strain of coronavirus. ... [O]n March 11, 2020 the WHO declared the novel coronavirus a global pandemic. "The full impact of the COVID-19 outbreak continues to evolve as of the date of this report [January 12, 2021]. As such, it is uncertain as to the full magnitude that the pandemic will have on Council's financial condition, liquidity, and future results of operations. Management is actively monitoring the global situation on its financial condition, liquidity, operations, suppliers, industry, and workforce. "Although Council cannot estimate the length or gravity of the impact of the COVID-19 outbreak at this time, if the pandemic continues, it may have an adverse effect on results of future operations, financial position, and liquidity in fiscal year 2021 and beyond. "On March 27, 2020 the President of the United States, signed into law the 'Coronavirus Aid, Relief and Economic Security (CARES) Act' to provide certain relief as a result of the COVID-19 outbreak. On May 3, 2020, Council received funds under the Paycheck Protection Program (PPP) totaling $2,156,636. PPP is an SBA [Small Business Administration] 7(a) loan to cover eligible expenses such as payroll, mortgage interest payments, rent, and utilities. This loan...has a 1% interest rate, and has up to 100% loan forgiveness, if certain criteria are met. Council submitted a Payment Protection Program (PPP) application to help recover some of the economic damages due to the COVID-19 pandemic. The application for these funds requires Council to, in good faith, certify that the current economic uncertainty made the loan request necessary to support the ongoing operations of Council. The forgiveness of the loan is dependent on Council's future adherence to the forgiveness criteria." |
According to the National 4-H Council tax filing for the fiscal year ended February 29, 2020, the Council reports for Business Transactions Involving Interested Persons a transaction in the amount of $261,440, described as follows: "Legal Services – Edward J. Beckwith and Janis Penman, who both served as an officer of National 4-H Council during the tax year, work at the law firm of Baker & Hostetler LLP, an independent contractor, which provides a full range of legal services for the Organization. All fees are reviewed and approved by the CEO monthly and all legal services provided are reviewed annually by the executive committee of the board of trustees" (IRS Form 990, Schedule L, Parts IV & V).
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According to the National 4-H Council consolidated audit of February 29, 2020 (Note 18, Subsequent Events): "Council evaluated subsequent events through January 12, 2021, which is the date the [audited] consolidated financial statements were available to be issued... "On October 20, 2020, Council received a $3,000,000 grant award from the United States Department of Agriculture with a period of performance November, 2020 to April 20, 2022. "On November 19, 2020, Council obtained a $10,000,000 term loan and a $5,000,000 revolving loan through a bank. Council plans to use [the] proceeds from the loan and term loan to pay off it's [sic] existing line of credit and other working capital needs. Beginning in fiscal year 2022, Council will be required to ensure changes in net assets without donor restrictions do not fall below certain thresholds."
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