annual report 2006

table of

contents

03 president’s message 06 ministry overview 07 servants on assignment larry ward: building a legacy of love tetsunao yamamori: establishing strong roots benjamin homan: championing real transformation 18 fiscal 2006 highlights rebuilding from the rubble breaking the stigma of AIDS equipping the youth for service and leadership promoting healthy growth of children 28 countries of operation 30 independent auditors’ report

,

President s message

03

a vision for

seasons

all

food for the hungry timeline : Celebrating 35 Years of Transforming Lives

19 71

1971 D r . L arry W ard the

H ungry . T he

starts

F ood

for

name is inspired by

P salm 146:7, “H e

upholds the cause of

the oppressed and gives food to the hungry .”

1972 P rovides

relief in war - torn

B angladesh .

1973 P rovides

earthquake relief

to victims of the

D ecember 1972

earthquake that rips through

M anagua ,

the capital of

destroying nearly

90

N icaragua ,

percent of the

city .

1974 S ends

emergency supplies to the

survivors of the drought .”

1974)

T he

“ great W est A frican

six - year drought

killed between

250,000

people .

100,000

(1968and

The year was 1971. Idi Amin declared himself president of Uganda. Apollo 14 landed on the Moon. Walt Disney World opened in Florida.

In the same year, Food for the Hungry was born, albeit quietly – with neither fanfare nor media frenzy – but founded solidly on God’s unconditional love toward the poor around the world. Thirty-five years later, and with greater hope and intentionality, we continue to carry our God-given vision to defeat all forms of human poverty by helping one person, one family, one village – one at a time.

This vision has taken countless Food for the Hungry staff, partners and advocates to some of the world’s poorest and most fragile territories to convey God’s big idea of transformation.

Fiscal Year 2006, in particular, saw Food for the Hungry responding immediately and effectively to natural disasters that hit the countries of Pakistan, Guatemala, Philippines, Indonesia and Ethiopia. We provided affected families with essential household and medical supplies, compassionate care, and counseling. In most cases, we transitioned these relief programs to long-term development. To this day, we work actively in these countries, helping survivors of natural calamities rebuild their lives through our agriculture, water, health, education, and child development programs.

We continue to raise the awareness of many adults and young people in sub-Saharan Africa about HIV/AIDS care and prevention, while supporting global efforts to build a better world for the poor and the afflicted. Our dedicated staff members and community volunteers serve with excellence, visiting AIDS patients, caring for the orphans and vulnerable children, and providing medical assistance, prayers and counseling.

We accelerated our efforts to invest in the youth and the future with the launch of several programs designed to equip college-aged adults for service and leadership. We believe that God has called and gifted this young generation to take His love to the hard places around the world.

The past 35 years testify to God’s work of calling forth and carrying forward. And just as we saw His faithfulness in inspiring one man to pioneer a work that goes beyond relief and development, we have faith that God will continue to direct us as we faithfully execute our calling.

Our great vision to see physical and spiritual hungers ended worldwide compels us to walk in humility and total dependence on God, but it also requires that we move forward with boldness, engaging leaders of the nations, speaking out with courage, and sending people to help communities transform themselves.

As you read through the pages of this report, I know you’ll see why we celebrate God’s goodness. Thank you for your faithful partnership with us all these years.

1975 P rovides

assistance to some

“ boat

of the earliest

people ” from

V ietnam .

1976 S ends

relief to victims of

G uatemala

and

1978 L aunches

R omania

earthquakes .

child sponsorship

program .

1979 P rovides

assistance to

S outheast A sian 1980 B egins

program called

1981 F ood F ood

refugees .

long - term missionary

H unger C orps .

for the

H ungry U.S.

become two organizations .

1982 P rovides in

assistance to refugees

P oland .

1983 O pens

a support office in

1984 D r . T etsunao Y amamori president of

U.S.

and

F ood

F ood

for the

for the

H ungry

H ungry

I nternational • O pens

a support

office in

N orway •

P rovides

emergency

famine in

J apan .

becomes

relief to victims of

Benjamin K. Homan President and Chief Executive Officer

and

H ungry I nternational

for the

E thiopia .

1 9 84

Food for the Hungry

06

ministry

overview

who we are Since 1971, Food for the Hungry has boldly served and spoken out for the poor, sending courageous men and women to help communities transform themselves.

Food for the Hungry is more than a relief and development organization. We are a tested, trusted and innovative partner who respectfully walks with the poor while intentionally reflecting the love of Jesus. what is our Vision God called and we responded until physical and spiritual hungers ended worldwide. what is our mission Food for the Hungry embraces an intensely personal and biblical response to God’s call to end physical and spiritual hungers worldwide. We humbly walk with churches, leaders and families in helping them overcome all forms of human poverty by living in healthy relationship with God and His creation. how do we achieve our mission Motivated by Christ’s love, we achieve our mission through a threedimensional approach: Speaking out to all people and nations about God’s call to end physical and spiritual hungers.

1985 P rovides

relief to survivors of a

1986 B egins

work in

C hina .

1987 B egins

work in

M ozambique .

1988 O pens

a

support office in

C anada .

1989 O pens support offices in

K orea ,

the

U nited

K ingdom

and

W ashington ,

Sending people to share Christ’s love.

D.C. 1990 B egins

Serving the transformation of communities

1991 R esponds

who do we serve Food for the Hungry goes to the hard places – places darkened by poverty, war and injustice – to shine the light of Jesus and bring hope and help to children, families and communities in the most impoverished countries around the world. why we serve The love of Christ compels us to reach out to the least of our neighbors and advance God’s Kingdom on earth. Micah 6:8, our Scriptural basis, undergirds our work: “What does the Lord require of you but to do justice, love mercy, and to walk humbly with your God.”

M exico C ity .

massive earthquake in

work in

crisis in northern I raq in

L aos .

to humanitarian

• B egins

C ambodia . 1992 D rafts

work

ministry

philosophy statement called a

V ision

of

C ommunity .

1993 L aunches W eb

site , www .

fh . org work in

• B egins V ietnam .

1994 B egins

work in

H onduras • P rovides relief help to victims of the

N orthridge

1994

earthquake that hits

A ngeles , C alifornia .

L os

our leaders 07

SErvanTs on aSsiGnmEnt

nistry Food for the Hungry’s mi Over the past 35 years of l roles d three men to play pivota to the poor, God has calle of toward fulfilling His vision in leading the organization These tual hungers worldwide. iri sp d an l ica ys ph g din en e d thousands of Food for th servants of the Lord – an nd poverished countries arou im in e rv se o wh ff sta ry Hung ine ed their unique gifts to sh the world – have exercis rty, a world darkened by pove the love of Jesus Christ to disease and oppression.

oF

rd started Dr. Larry Wa Hungry in Food for the onviction c 1971 with the e one at di that “people can help e a time, and w me.” a ti them one at

LoVE

Dr. Larry Ward, founder of Food for the Hungry, was well-educated and had both masters and doctorate degrees from Columbia Pacific University. Early in his career, he successfully scaled the publishing ladder and became the managing editor of Christian Life and Christianity Today magazines. He also was director of EP News, a source for news stories written from a biblical worldview.

But Dr. Ward was, foremost, a compassionate person with a heart for the poor – and it was this passion that led him to start Food for the Hungry.

“What was most Christ-like about Larry Ward was his respect for every person, whether that was a child or a refugee or a foreign minister. They were the same to him,” says Dwight Vogt, Vice President for Ministry Services and Operations at Food for the Hungry, and friend of Ward for 24 years.

Dr. Ward often was one of the first to offer help after natural disasters, no matter where in they world they occurred. In 1971, he flew to Haiti and gave $1,000 from his own pocket to meet emergency needs.

And thus began Food for the Hungry. After returning from Haiti, Dr. Ward sailed the South China Sea with the Vietnamese “boat people,” who were fleeing the war in their home country. He helped them learn English and gain training to secure jobs upon landing on the California coast.

But despite such generous giving of himself and his resources, Dr. Ward made it a point never to provide handouts. Rather, with love and humility, he helped those in need become self-sustaining.

Dr. Ward recognized the inseparable link between one’s soul and body and the need to minister to both.

“He wanted Food for the Hungry to be known as a Christian organization that was unashamedly following Jesus Christ,” says Vogt. “His vision for the organization was one of helping people actually get involved and work. He wanted to connect people, and I see that still happening.”

Thirty-five years after Dr. Ward started his ministry, Food for the Hungry works in impoverished communities on four continents, helping meet the physical and spiritual needs of the poor. And as these communities experience the hope that comes when God’s people share with those in need, the legacy of Dr. Ward lives on.

Larry Ward

a legacy

10

1 9 9 5

1995 P rovides

relief to

R wandan

people in the aftermath of the

• R esponds

genocide

to powerful

earthquake that strikes

K obe , J apan .

1996 B egins organizing short term team trips to developing countries

• S tarts

program for child headed households in

R wanda .

1997 P rovides

relief

help in response to the humanitarian crisis in

S udan • L aunches

C hristian A rtist

the

program to raise

sponsorships for children around

• F orms D iscipling N ations

the world

A lliance .

1998 O pens

a support office in

S weden • P rovides of

H onduras

help to the people

in the aftermath of

H urricane M itch .

1999 S ends emergency help to refugees in

M acedonia and

A lbania • P rovides relief help to

T urkey

after a massive

earthquake kills more than

17,000

and destroys the city of I zmit

R esponds coastal

V enezuela ,

that kill

•

to heavy rains in northern

15,000

causing mudslides

people .

TeD Yamamori

11

establishing

RooTS actIoN

and a plan for

2 0 0 0

2000 R esponds to near famine conditions in

E thiopia • P rovides temporary living quarters , food and medical supplies to thousands in flooding in

2001 F ood

M ozambique

50

after worst

years .

H ungry P resident

for the

D r . T ed Y amamori

retires after

years as president

17

• R andall H oag

assumes presidency of

F ood

for the

H ungry I nternational • B en H oman assumes presidency of

F ood

for the

H ungry U.S. • P rovides earthquake response to

E l S alvador and I ndia , two earthquakes striking within two weeks of each other

R esponds in

to the

S eptember 11

N ew Y ork • B egins

A fghanistan .

•

attacks

relief efforts in

Dr. Ted Yamamori was 7 years old at the end of World War II, and was one of many young Japanese children who faced starvation and sought refuge in Buddhist temples. “Famine was on,” he recalls. There was no food anywhere, even for those with money to buy it.

Dr. Yamamori caught the vision of Food for the Hungry in the summer of 1979 while ministering to Cambodian refugees in Thailand.

“In my mind’s eye, I began seeing my own face on the faces of those dying children,” he recalls of the experience.

After returning from Thailand to his teaching position at Biola University in California, Dr. Yamamori found himself unable to focus on his academic work, as his heart had been stirred by the desperation he witnessed. In June 1981, he joined Food for the Hungry.

Dr. Yamamori embraced all that Dr. Ward envisioned for the organization and implemented specific programs and strategies to help it grow.

By the end of his nearly 17 years as president, Dr. Yamamori had helped build support offices in Japan, Korea, Norway and the United Kingdom.

He also had forged strong relationships with other humanitarian agencies and the U.S. government, securing grants from USAID (United States Agency for International Development). As a result, Food for the Hungry experienced significant growth during his tenure.

Dr. Yamamori was instrumental in putting into action God’s vision of ending hunger – physical and spiritual – by walking alongside churches, leaders and families in impoverished communities.

And as the organization matured beyond initial relief efforts and toward community development, physical and spiritual transformation became the hallmark of the ministry of Food for the Hungry.

In February 2001, Dr. Yamamori retired from Food for the Hungry, but he still remains closely connected, consulting with FH leadership, speaking at FH events and chapel services, and serving as academic advisor of Micah Initiatives, a Food for the Hungry department that is tasked with equipping and mobilizing young adults for service and leadership.

Food for the Hungry also supports Dr. Yamamori’s efforts as senior advisor for the Lausanne Committee for World Evangelization, a global movement committed to holistic ministry. In addition to his ongoing involvement with Food for the Hungry, Dr. Yamamori teaches doctoral classes at seminaries in Kentucky and Oregon, serves as honorary wing chaplain at the U.S. Air Force Base in Glendale, Ariz, and is finishing his 24th book, Global Pentecostalism: The New Face of Christian Social Engagement, which is scheduled for release in August 2007.

2002 P rovides

relief and

development help to those affected by famine in southeastern

M alawi ,

A frica • F ood

H ungry I nternational

in

for the

relocates to

B angkok , T hailand • R esponds

to

victims of the volcanic eruption in the

D emocratic R epublic

C ongo • O pens • A ssists

office in

of the

H ong K ong

victims of typhoon

R usa ,

one of the worst storms to hit

K orea

in

43

years

• P rovides

food

and construction materials to flood victims in

O pens

H onduras

and

N icaragua •

a support office in

2003 P rovides

C osta R ica .

emergency relief

to fleeing refugees and displaced people in

I raq .

Benjamiin K. Homan

14

championing

change

reAl

Food for th CEO Benja

e Hungry

min K. Ho

President

man goes

and

the nally reac h out to the poor a nd hurtin g around the world and to wo rk with ch urches, fa milies and leade rs in over coming p hysical and spirit ual hunge rs in plac es ravaged b y poverty , war and injustice. extra mil

e to perso

Micah 6:8

do in g ju st ice lo vi ng me rc y an d wa lk in g hu mb ly wi th ou r go d

Building upon the foundation laid by the former presidents of Food for the Hungry, Benjamin K. Homan is leading the organization into an exciting era of its ministry.

Definitely not an “armchair general,” Homan often traverses the most impoverished parts of the world to see first-hand God’s work among the poor through Food for the Hungry. And as one who puts a high premium on relationships, Homan makes it a point to meet with field staff – “heroes,” he calls them – and encourage them to fulfill God’s vision to end physical and spiritual hungers around the world.

His message to everyone who works in partnership with Food for the Hungry carries a sense of urgency and a gentle challenge: “We have to be the kind of people that can engage the leaders of this world and help them bring about transformation, rather than just criticize them.”

“Our calling and expertise will give us the authority to speak to leaders of the nations,” he says.

Homan’s passion to see real transformation take place in the lives of the poor as well as the powerful has propelled him to several influential leadership positions, among them as president of AERDO (Association of Evangelical Relief and Development Organizations), chairperson of ACVFA (Advisory Committee on Voluntary Foreign Aid), and presidential appointee to the HELP (Helping to Enhance the Livelihood of People around the Globe) Commission, an entity formed by the U.S. Congress to advise the government on how to reform foreign assistance.

These leadership roles have granted him the platform to connect with key leaders and decision makers and challenge them to impact the world.

As Homan leads the multifaceted ministry of Food for the Hungry into the future, he exhorts everyone in the organization to move towards excellence in fulfilling God’s call to end physical and spiritual hungers around the world.

2 00 3

2003 F ood H ungry

for the

founder

D r . L arry W ard dies on

25, 2003 •S ends

O ct .

relief supplies to

victims of a powerful earthquake that destroys most of the city of

I ran • F ood from

for the

H ungry U.S.

S cottsdale , A riz .,

P hoenix ,

B am ,

moves

to downtown

strengthening its local ties

by working with churches , leaders and families . in

P rovides

earthquake relief

B achu C ounty , C hina • L aunches

A dvocates

program .

2004 P rovides following

emergency supplies

T sunami

tragedy and

sends teams to assess and implement long - term development programs in I ndonesia ,

T hailand , I ndia and

S ri L anka •

P rovides

relief

to victims of

H urricane J eanne in the

D ominican

R epublic

and

• P rovides

H aiti

relief

assistance to refugees fleeing to eastern war - torn

S udan .

C had

from

ON e a t a t i m e

35 years of

t r a n s F o R m in g

L iv e s

2005 F ood

for the

H ungry P resident /

CEO B enjamin K. H oman chairman of the on

is appointed

A dvisory C ommittee

V oluntary F oreign A id (ACVFA)

of the

U.S. A gency

for I nternational

D evelopment (USAID) • P rovides emergency relief to the survivors

15

of

H urricane K atrina • P rovides

emergency relief to the food crisis in

N iger ’ s

R elief

nomadic communities

•

teams bring tents , food and

other supplies to victims of massive earthquake near I slamabad ,

• B enjamin K. H oman president of the

A ssociation

E vangelical R elief

P akistan

serves as the

and

of

D evelopment

O rganizations (AERDO),

a network

that serves relief organizations and assists in creating partnershiips .

2004 R estores railway in the

C ongo ,

of the

15

nearly

300

miles of

D emocratic R epublic

providing access for

million people to numerous areas

that were previously inaccessible

S ends

•

emergency relief response

to victims of

M orocco

O pens US R elief U nit

earthquake . office in

W ashington , D.C • F ood

for the

H ungry P resident /CEO B enjamin K. H oman

is appointed to the

A dvisory C ommittee

on

F oreign A id (ACVFA) U.S. A gency

V oluntary

of the

for I nternational

D evelopment (USAID) • P rovides flood relief in

P rovides

B angladesh •

flood relief in the

P hilippines .

2005 F orms

unprecedented

partnership with the

C ity

of

in response to the tsunami . partnership , called

“R ising

aims to restore the city of

( which

P hoenix

T he to

H elp ,”

M eulaboh

lost one - third of its population

to the tsunami ) and help individuals rebuild their lives .

relief

Food for the Hungry’s long-term recovery program also included the reconstruction of damaged roads and the rebuilding of retaining walls to prevent further erosions.

With roads repaired and opened for the public once again, social and economic recovery was stimulated.

The successful implementation of Food for the Hungry’s programs in Muzaffarabad and outlining areas did not go unnoticed. The local media reported about it, and the municipal authorities publicly welcomed and appreciated Food for the Hungry for how its relief and development work alleviated people’s suffering and supported the city’s efforts toward recovery.

20

Other R elief Ef for ts in 2006 • Heavy rains from hurricane Stan caused an avalanche of mud and massive flooding in

rebuilding from thE

rubbLE

When a massive earthquake rocked the northern areas of Pakistan in October 2005, displacing millions of people and killing tens of thousands more, Food for the Hungry responded immediately in partnership with local relief and development organizations.

Food for the Hungry was most active in the Muzaffarabad district, where nearly 70 percent of the city was destroyed by the earthquake. Displaced families set up hundreds of spontaneous camps on the mountainsides and in the valley surrounding Muzaffarabad, and as the harsh winter set in, these families struggled to keep warm and alive.

Responding to the grave threat to people’s lives, Food for the Hungry took the role as the lead nongovernmental organization in the management and distribution of relief goods to these camps. Food, clean water and nonfood emergency supplies such as blankets, jerry cans and winterized tents were distributed to affected villages, many of which were in the mountainous regions where roads had been rendered impassable by numerous landslides. Relief efforts faced many challenges, but through its distribution networks, Food for the Hungry was able to reach settlement areas that were in desperate need of help.

When the summer season started, relief work immediately transitioned into rebuilding and development. With so much wreckage covering the land, the city of Muzaffarabad had become a huge dumpsite. To help the residents start the rebuilding process, Food for the Hungry embarked on a rubble-removal program that saw the clearing of 700,000 cubic feet of debris. Many residents participated in this project through a cash-forwork program, which helped provide income for their families.

the Mayan highland area of Guatemala, killing hundreds of people and destroying many homes. Food for the Hungry distributed food, medicine and other emergency supplies to survivors.

Two months apart from each other, super typhoons “Milenyo” and “Reming” slammed the Philippines, causing massive loss of lives and widespread damage to property and infrastructure. Food for the Hungry responded by providing medical assistance, blankets and other emergency supplies to affected families.

A powerful earthquake devastated Yogyakarta, Indonesia. Food for the Hungry arrived on the ground the next day and began relief operations including water and sanitation projects. Food for the Hungry provided blankets, tarpaulins, hygiene kits, tents, cooking kits, temporary shelters and other relief goods to thousands of people in the provinces of Central Java and Yogyakarta.

Heavy rains caused rivers to overflow in the Amhara region of Ethiopia resulting in the destruction of many farmlands. Food for the Hungry responded by providing seed support to farmers in the affected districts.

•

•

•

battling hiv/aids

Stella Betty Pedum, a Ugandan widow infected with HIV, found support through “Bringing Hope,” a Food for the Hungry program aimed at stopping the spread of HIV/ AIDS and providing care to those affected by it.

21

breaking THE

s ti g mof a

Since the first cases of AIDS were reported in 1981, 25 million people have died of the disease and 65 million have been infected with HIV. The pandemic is felt most strongly in the developing world, particularly in sub-Saharan Africa where approximately 25 million adults and children were living with HIV at the end of 2005.

Across the world, support and sympathy pours in for HIV/AIDS victims, resulting in increased funding for prevention, treatment and care. However, stigma and discrimination remains an enormous barrier to the fight against AIDS. People living with HIV/AIDS suffer rejection, even violent assaults, from family members and their communities when what they need the most is support.

Such was the case of Stella Betty Pedun, a 30-year-old Ugandan widow and mother of five girls.

Following her husband’s death, Stella decided to get tested for AIDS, and when the test showed that she was HIV-positive, her life turned into a nightmare. While many African families and churches show compassion to those with AIDS, Stella’s husband’s relatives drove her and her children out of their home, calling them “dead bodies” and threatening to kill them if they did not leave.”

Thankfully, Stella’s brother gave her a small hut, where she and her children lived in isolation – without food, without water, without hope.

Then help came. Staff members of Food for the Hungry’s “Bringing Hope” program learned of Stella’s plight, and they immediately visited her and gave her and her children food, blankets, clean water, mosquito nets and other basic household supplies. They also provided her with counseling support and training to raise her awareness of AIDS and its care and prevention.

Today, Stella lives a life of hope and gratitude.

Stella represents many HIV-positive people in Africa who benefit from the Bringing Hope program of Food for the Hungry. The program is funded by a private grant and addresses the AIDS crisis from a biblical perspective. In Ethiopia, Kenya, Mozambique, Rwanda and Uganda, Food for the Hungry’s HIV/AIDS program focuses on (a) prevention based on abstinence and marital faithfulness, (b) home-based care and counseling for those living with HIV/AIDS and (c) support for orphans and vulnerable children. AIDS education is a crucial component of the program as it fights the ignorance that causes people to discriminate against those with HIV/AIDS. Since Bringing Hope was launched in 2004, Food for the Hungry has exponentially increased its ability to address the AIDS pandemic in the developing world. Strategic partnerships with churches and community-based organizations have allowed for more resources and services, resulting in a much more effective approach to AIDS prevention and care.

esponse R c i g e t Stra

V/AIDS to the HI

s

Pandemic

serviceAnd leadership It is amazing what can happen in a short time when God’s people align their hopes and efforts with His will.

Fiscal year 2006 saw the launch of several progressive programs designed to serve and engage college-aged adults. The programs have helped create an environment where young people can be nurtured professionally, spiritually and personally while growing their vision and mission to meet physical and spiritual needs worldwide.

Living life

a bit differently “Together we can unite to serve a powerful God who intrepidly, daringly and boldly calls us to take His love to hard places around the world.”

– Ben Homan, Food for the Hungry President and CEO

“We celebrate how God actively uses the vigorous brillance of young people and values their radical and sacrificial service.”

– Ben Homan Food for the Hungry President and CEO

student ministries

equipping The Youth for

“Francis Schaeffer once said that we must preach the gospel in the vernacular of every generation,” says Bo White, senior manager of the department of internships and college initiatives. “So, if we are going to preach the gospel with clarity – in word and in deed – we must seek to understand and equip young people.”

One strategy to engage this vital generation is the internship program, which has doubled in size since its formal inception in early 2006. With several internship opportunities in five countries, students responding to God’s call on their lives put their passions and talents to work in the office or in the field.

Interns get involved in areas such as emergency relief operations, health and nutrition education, agricultural training and promotion, community development, and communication. They play a big role in bringing transformation to hard places around the world.

In September 2006, with the arrival of the first batch of students in Kampala, Uganda, Food for the Hungry launched its cutting-edge study-abroad program called Go ED. Having experienced Food for the Hungry’s holistic ministry first-hand, they returned to the United States with a broader perspective and a stronger desire to serve the poor.

To provide experiential learning to each participant, the Go ED. program offers eight weeks of challenging classroom instruction followed by a four-week practicum in one of four African countries where Food for the Hungry works.

During the practicum, students engage in programs involving education, health and sanitation, agriculture, communication, and church development.

The Go ED. program will expand with an additional site in Chengdu, China, as soon as fall 2008.

Food for the Hungry gives thanks to God for how He equips the young generation to advance His kingdom in places broken by poverty, war and injustice.

24

health & nutrition

25

p rom ot ing healthy

g r o w th of

childRen Severe malnutrition in children under the age of 5 often causes lifelong and irreversible consequences. Robbed of vital nutrients during their formative years, young children grow up stunted and sickly, significantly diminishing – if not totally eliminating – any chance of a better future.

In 53 developing countries, nearly 13 million children under the age of 5 die each year, and more than half of those deaths are associated with malnutrition. In Africa alone, five million children under the age of 5 died in 2005, and malnutrition was a major contributor to half of those deaths.

Food for the Hungry addresses the issue of malnutrition in very young children through preventive care and nutrition education. In Mozambique, for example, Food for the Hungry works in partnership with the United States Agency for International Development (USAID) in reducing malnutrition through food security and child survival programs that include health and nutrition training.

Food for the Hungry uses a methodology called “Hearth nutritional rehabilitation” where all malnourished preschool children and their parents are invited to attend a 12-day nutrition class.

In any poor community, you will find some poor mothers who are coping and have well-nourished children. During the first days of the class, the mothers conduct a participatory study to find out why some of their poor neighbors in their village have healthy, well-nourished children: how they care for their children, their health care practices, what and how they feed their children, and their spiritual beliefs.

The results of this study are then used to put together recipes for healthy, low-cost meals and messages that are taught during the classes. Mothers are taught how to feed their children these special meals and to adopt these new practices and ways of thinking during the class and beyond.

In several districts in Mozambique, an average of 81 percent of malnourished children completed the Hearth program. The results are very encouraging: As much as 78 percent of children who attended the nutrition training are still well-nourished six months after participating in the program. In the last evaluation, severe malnutrition was cut in half in the districts where Food for the Hungry was working.

Eradicating malnutrition and hunger in developing countries remains a big challenge to governments and humanitarian agencies. However, Food for the Hungry continues to equip the poor with skills, tools and training so they can provide sufficient food for their families and effectively transform their communities.

To help minimize malnutrition in of Mozambique, a group ow farmers started to gr n, a community garde providing mothers a thy steady source of heal n. re food for their child

C OUNTRIE S OF O P ER A TION

28

financials

independent auditors’ report 29

Board of Directors Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc. Phoenix, Arizona We have audited the accompanying consolidated statements of financial position of Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc. as of September 30, 2006, and 2005, and the related consolidated statements of activities, functional expenses, and cash flows for the years then ended. These consolidated financial statements are the responsibility of the organization’s management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits.

We conducted our audits in accordance with U.S. generally accepted auditing standards and Government Auditing Standards issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal controls 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 organization’s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the consolidated financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall consolidated financial statement presentation. We believe that our audits provide a reasonable basis for our opinion.

In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc. as of September 30, 2006, and 2005, and the results of its consolidated activities, functional expenses, and cash flows for the years then ended in conformity with U.S. generally accepted accounting principles.

Atlanta, Georgia January 10, 2007

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Consolidated Statement of Financial Position

Consolidated Statement of Activities

Year Ended September 30, 2006 Temporarily Permanently Unrestricted Restricted Restricted Total

Year Ended September 30, Assets 2006 2005 Current Asset: Cash and cash equivalents $ 1,647,836 $ 3,168,733 Investments 2,320,146 2,951,695 Grants receivable 4,579,476 1,842,813 Loan receivable 500,000 Gifts-in-kind inventory 2,155,410 Inventory of commodities awaiting monetization 1,126,217 1,704,681 Prepaid expenses and other assets 658,175 496,434

12,987,260 10,164,356 Investments Held for Charitable Trusts Gift Annuity Reinsurance Asset Land, buildings, and equipment, at cost–net Child Vocational Scholarship Fund Total Assets

155,172 429,981 2,219,197 1,174,769

$ 16,966,379

159,975 468,231 2,269,550 1,157,713

$ 14,219,825

Liabilities and Net Assets Current Liabilities: Accounts payable $ Accrued expenses Grants payable Gifts-in-kind payable Amounts due other ministries from pending commodity sales Long-term debt - current portion

3,306,214 $ 148,993 1,588,014 2,155,410 1,126,217 251,651 8,576,499

1,024,019 101,328 884,038 1,704,681 558,542 4,272,608

Trusts and Annuities Long-Term debt - net of current portion Total Liabilities

514,306 29,133 9,119,938

557,934 44,744 4,875,286

Net Assets: Unrestricted: Undesignated Board designated - Child Vocational Scholarship Fund Net investment in land, buildings, and equipment

Temporarily restricted Permanently restricted - Child Vocational Scholarship Fund Total net assets Total Liabilities and Net Assets See notes to consolidated financial statements.

(149,077) 160,000 2,158,166 2,169,089

1,118,971 160,000 2,111,152 3,390,123

5,337,352 340,000 7,846,441

5,614,416 340,000 9,344,539

$ 16,966,379

Support, Revenue and Reclassifications Contributions $ 4,310,152 $ 15,599,603 $ Government grants 21,825,870 - Government donated commodities 12,070,823 - Private gifts-in-kind 18,943,217 - Investment income 218,086 77,631 Change in value of trusts and annuities (11,772) 12,348 Other income 163,599 - Net assets released from restrictions: Administrative allocations Child sponsorship International Hunger Corps staff support Child Vocational Scholarships granted Relief efforts and other projects

- $ 19,909,755 $ 4,218,699 $ 16,418,190 $ - 21,825,870 12,873,413 -

- $ 20,636,889 - 12,873,413

- 12,070,823 9,017,483 - 18,943,217 23,783,136 - 295,717 114,366

- 9,017,483 - 23,783,136 - 304,334

- -

576 163,599

(16,889) 43,848

- - 189,968 20,423 -

- -

3,534 43,848

5,363,234 (5,363,234) 3,403,265 (3,403,265)

- -

- 5,511,204 (5,511,204) - 2,966,573 (2,966,573)

- -

- -

2,713,326 (2,713,326)

-

- 1,934,267 (1,934,267)

-

-

(74,720)

-

-

(50,624)

-

-

4,412,101 (4,412,101)

-

- 4,494,304 (4,494,304)

-

-

74,720

Total Support, Revenue and Reclassifications 73,486,621 (277,064) Expenses Program ministries: Grants to Food for the Hungry International 39,042,258 Gifts-in-kind to other organizations 18,593,569 Other programs 8,598,291 Information and education 596,200 66,830,318 Supporting services: Fundraising 4,719,322 General and administrative 3,158,015 7,877,337

Net Assets, Beginning of Year 3,390,123 $ 2,169,089

- 66,662,637

-

- 39,042,258 28,519,890

-

- 28,519,890

- -

- 18,593,569 23,237,869 - 8,598,291 4,853,145

- -

- 23,237,869 - 4,853,145

- -

- 596,200 520,476 - 66,830,318 57,131,380

- -

- 520,476 - 57,131,380

-

- 4,719,322 4,480,061

-

-

4,480,061

- -

- -

3,158,015 3,016,035 7,877,337 7,496,096

- -

- -

3,016,035 7,496,096

- 74,707,655 64,627,476

-

- 64,627,476

5,614,416

$ 5,337,352

$ 14,219,825 See notes to consolidated financial statements.

50,624

- 73,209,557 64,991,028 1,671,609

Total Expenses 74,707,655 -

Change in Net Assets (1,221,034) (277,064)

Net Assets, End of Year

Year Ended September 30, 2005 Temporarily Permanently Unrestricted Restricted Restricted Total

- (1,498,098)

363,552 1,671,609

-

340,000 9,344,539 3,026,571 3,942,807

340,000

$ 340,000

$ 7,846,441

$ 3,390,123

$ 5,614,416

$ 340,000

2,035,161

7,309,378

$ 9,344,539

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Consolidated Statement of Functional Expenses

Consolidated Statement of Cash Flows

Program Ministries Direct Program Distributions

Years Ended September 30,

2006 2005

Support Services

Information General and and Education Fundraising Administrative Total Total

Grants to Food for the Hungry International

$ 39,042,258

In-Kind Grants to Other Organizations

18,593,569

$

-

$

-

-

$

-

-

$ 39,042,258

$ 28,519,890

-

18,593,569

23,237,869

Grants to Other Organizations

1,862,929

-

-

-

1,862,929

457,188

Salaries and Benefits

4,452,688

363,185

1,011,010

1,856,368

7,683,251

6,106,261

Professional Services

486,612

25,196

146,061

195,703

853,572

703,067

Travel

729,338

20,469

298,314

172,282

1,220,403

788,123

Office Expense

199,682

38,950

94,222

225,096

557,950

456,188

Occupancy

131,502

29,293

159,996

3,680

324,471

294,147

Postage

80,056

787

54,833

24,221

159,897

132,838

Interest

507

-

17

40,994

41,518

47,897

Depreciation

36,859

6,188

27,776

202,360

273,183

238,058

General Information, Education and Promotion

75,649

88,695

2,852,901

7,277

3,024,522

2,850,355

Other Expenses

542,469

23,437

74,192

430,034

1,070,132

795,595

Total Expenses 2006

$ 66,234,118

$

596,200

$

4,719,322

$

3,158,015

$ 74,707,655

Total Expenses 2005

$ 56,610,904

$

520,476

$

4,480,061

$

3,016,035

$ 64,627,476

See notes to consolidated financial statements.

Public Support

90%

Programs

93%

Individuals

6%

Fund Raising

5%

Businesses

4% Administrative

2%

Foundations

Commodities Distributed

At Food for the Hungry, we are accountable before God and before you to use your gifts in the best way possible to help hungry people.

Medical Supplies

12%

Clothing

2%

Seeds/Food/Other

2006

2005

(1,498,098) $ 273,183 (238,027) (77,845) 3,774 (2,032,687) - (161,741) 2,282,195 47,665 (1,401,581)

2,035,161 238,058 (144,566) (173,020) 27,478 (837,641) 1,183,961 (229,478) 369,176 12,893 2,482,022

Cash Flows from Investing Activities: Fixed asset purchases Proceeds from sale of fixed assets Issuance of loan receivable Investment purchases Proceeds from sale of investments Net Cash Provided (Used) by Investing Activities

(196,482) 993 (500,000) (123,371) 1,041,616 222,756

(250,317) 900 (1,116,948) 676,931 (689,434)

Cash Flows from Financing Activities: Payments on long-term debt Change in trusts and annuities Net Cash Used by Financing Activities

(341,497) (575) (342,072)

(131,499) (3,564) (135,063)

Cash Flows from Operating Activities: Reconciliation of change in net assets to net cash provided by operating activities: Change in net assets $ Depreciation Non-cash stock gifts Net realized and unrealized loss on investments Net loss on sale of fixed assets Net change in grant receivable and payable Net change in bequest and promises-to-give receivable Net change in prepaids and other assets Net change in accounts payable Net change in accrued expenses Net Cash Provided by Operating Activities

Increase (Decrease) in Cash and Cash Equivalents (1,520,897) Cash and Cash Equivalents, Beginning of Year 3,168,733 Cash and Cash Equivalents, End of Year $ 1,647,836 $

Use of Resources

86%

Years Ended September 30,

We’re a charter member of the Evangelical Council for Financial Accountability (ECFA) and abide by all of its strict reporting standards.

Supplemental Disclosures: Cash paid for interest - net of capitalized interest Non-cash transactions: Gifts-in-kind and donated commodities received and distributed Gifts-in-kind received and held for distribution Fixed assets acquired through accounts payable See notes to consolidated financial statements.

$

40,891

$ 31,014,040 $ 2,155,410 $ -

$

1,657,525 1,511,208 3,168,733

43,655

$ 32,800,619 $ $ 17,212

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Notes to Consolidated Financial Statements

Notes to Consolidated Financial Statements

September 30, 2006

September 30, 2006

1. NATURE OF ORGANIZATION: Food for the Hungry, Inc. (FHUS) is a Christian international relief and development organization, incorporated in the United States in 1971, and dedicated to helping people in the poorest areas of the world by advocating for them and providing relief, rehabilitation, and development programs.

The Operational Statement or Vision of Community philosophy is: FHUS seeks to walk with churches, leaders, and families in overcoming all forms of human poverty by living in healthy relationship with God and His Creation.

Food for the Hungry Foundation, Inc. (FHF) incorporated in the United States in 2003. FHF is organized and operated under the control and for the benefit of FHUS. Food for the Hungry International (FHI), incorporated in Geneva, Switzerland, works in 43 countries through the help of donors who support its 11 national organizations (N.O.s),–one of those being Food for the Hungry, Inc. These N.O.s, located around the world, raise funds, supply human resources, and help design and evaluate relief and development programs implemented in communities across South and Central America, Asia, Africa, Europe and the Middle East. The 11 N.O.s are: Costa Rica, Canada, Hong Kong, Japan, Korea, Sweden, Switzerland, Thailand, United Kingdom, United States, and United States–Korea.

The 41 countries that Food for the Hungry, Inc. has an ongoing presence in as a relief and development or exploratory fields, or supported by FHI are: Afghanistan, Bangladesh, Bolivia, Brazil, Cambodia, China, Costa Rica, DRC Congo, Cuba, Dominican Republic, Ethiopia, Guatemala, Haiti, Honduras, Indonesia, India, Iraq, Iran, Kazakhstan, Kenya, Krygystan, Laos, Malaysia, Mongolia, Mozambique, Nepal, Nicaragua, North Korea, Paraguay, Pakistan, Peru, Philippines, Romania, Rwanda, Sudan, Tajikistan, Tanzania, Thailand, Uganda, United States, and Uzbekistan.

Food for the Hungry’s activities include:

2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The consolidated financial statements of Food for the Hungry, Inc. have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. A summary of significant accounting policies followed are described below to enhance the usefulness of the consolidated financial statements to the reader.

Principles of Consolidation The consolidated financial statements include the operations of Food For the Hungry, Inc. and Food for the Hungry Foundation, Inc., collectively referred to as the Food for the Hungry, Inc. All significant intercompany balances and transactions have been eliminated. For the years ended September 30, 2006, and 2005, Food for the Hungry Foundation, Inc. had total assets of $1,856,572 and $2,321,288 and total liabilities of $1,726,269 and $2,281,270, respectively.

Affiliated Organizations Food for the Hungry, Inc. and Food for the Hungry International have separate and distinct Boards of Directors. Therefore, the financial statements have not been consolidated with those of Food for the Hungry International.

The primary purpose of Food for the Hungry, Inc. is to provide support for the programs of Food for the Hungry International. Accordingly, grants to Food for the Hungry International for the years ended September 30, 2006, and 2005, totaled $39,042,258 and $28,519,890 as follows:

Child Sponsorship $28 a month helps provide a child with access to nutritious food, clothing, medical care, and spiritual nourishment through community development programs. Because the programs are family and community based, gifts help the entire family and community.

September 30, 2006 2005 Cash Grants $ 17,352,040 $ 13,353,298 Government donated commodities monetized or awaiting monetization overseas 5,428,861 4,807,354 Government donated commodities distributed overseas 6,641,962 4,755,396 Private gifts-in-kind distributed overseas 349,649 Reimbursements for costs of shipping gifts-in-kind and donated government commoditites 9,269,746 5,603,842

$ 39,042,258 $ 28,519,890

Hunger Corps Staff also work with indigenous organizations to help them better serve the needs of people in their own communities. Missions opportunities are offered through Food for the Hungry, Inc.’s short-term teams and longerterm assignments with our unique Hunger Corps program.

Grants payable to Food for the Hungry International are related to government grants for which valid expenditures had been incurred at year end. Grants payable as of September 30, 2006, and 2005, were $952,824 and $884,038, respectively.

General Relief and Development Food for the Hungry, Inc., using the Vision of Community philosophy, provides emergency relief and rehabilitation, community clean-water projects, health education and intervention, agriculture development, income generation, life-skills training, and education.

Cash and Cash Equivalents Cash and cash equivalents consist primarily of cash on hand and cash on deposit. These accounts may, at times, exceed federally insured limits.

Food for the Hungry, Inc. has not experienced any losses in such accounts.

Management believes it is not exposed to any significant credit risk on cash and cash equivalents.

Micah Initiatives College students can receive first-hand experience and training through several programs offered through Micah Initiatives. Go-ED is an accredited overseas learning experience where college students spend a semester abroad. Other programs for college students include the College Campus Ministry and the Internship Program.

Gifts-in-Kind Food for the Hungry, Inc. procures donations for food, seeds, clothing, medical supplies, and other commodities for use in relief, rehabilitation, and development programs. These donations are then matched with the needs of Food for the Hungry International and other agencies.

Information and Education By providing information and implementing educational programs, Food for the Hungry, Inc. serves as an advocate for some of the poorest people in the world.

Summary Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc. are not-for-profit corporations exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and are also exempt from state income taxes. Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc. have been classified as a publicly supported organizations, which are not private foundations, under section 509(a) of the Code. Contributions by the public are deductible for income tax purposes. During the years ending September 30, 2006, and 2005, contributions approximated 27% and 31% of total support and revenue, respectively. In the same years, gifts-in-kind and government donated commodities approximated 42% and 49% of total support and revenue, and cash government grants approximated 30% and 19% of total support and revenue.

Investments Money market mutual funds, certificates of deposit, and cash in investment brokerage accounts held in trust for the Child Vocational Scholarship Fund and to fund trusts and annuities are included in investments. Investments are carried at market value. Donated securities are recorded at market value on the date of the gift and thereafter carried in accordance with the above provisions.

Investments are held for the Child Vocational Scholarship Fund and to fund trusts and annuities for which Food for the Hungry, Inc. is trustee.

Gifts-In-Kind Inventory Gifts-in-kind inventory consists of private donated commodities that are held by a third-party in an off-site storage facility. Food for the Hungry, Inc. receives the donations of commodities at these off-site storage facilities, which are then shipped to another nonprofit organization.

Inventory of Commodities Food for the Hungry, Inc. receives donations of commodities for monetization from the United States Agency for International Development (USAID). Proceeds from monetized commodities are used to fund program activities. These commodities are valued at the estimated future proceeds from monetization.

Land, Buildings, and Equipment Expenditures greater than $1,000 for land, buildings, and equipment are capitalized at cost. During the year ended September 30, 2006, Food for the Hungry, Inc. adopted the provisions of Statement of Financial Accounting Standards No. 154, Accounting Changes and Error Corrections and increased their capitalization to include only expenditures greater than $2,500. Accordingly, items which would have been previously capitalized approximating $67,000 are now expensed. Donated items are recorded at

fair market value on the date of the gift. Depreciation is computed on the straight line method over the estimated useful lives of the assets, ranging from 2 years for software to 30 years for buildings.

Trusts and Annuities Food for the Hungry, Inc. has established a gift annuity plan that allows donors to contribute assets to the organization in exchange for the right to receive a fixed dollar annual return during their lifetimes. A portion of the transfer is considered a charitable contribution for income tax purposes.

As trustee, Food for the Hungry, Inc. administers irrevocable charitable remainder unitrusts. These trusts provide for the payment of lifetime distributions to the grantor or other designated beneficiaries. At the death of the lifetime beneficiaries, the trusts provide for the distribution of assets to Food for the Hungry, Inc. The difference between the amount contributed for gift annuities and irrevocable agreements and the liability for future payments, determined on an actuarial basis, is recognized as income at the date of the gift and is included on the consolidated statements of activities in contributions.

The difference between assets in trust and liabilities is reported on the consolidated statements of financial position as net assets.

The present value of the expected payments to the trustors and annuitants over their life expectancy is included on the consolidated statements of financial position as a liability under the caption trusts and annuities.

The liability is revalued annually based upon actuarially computed present values. The change in the present value, net of investment income, payments to annuitants, and terminations, is included on the consolidated statements of activities as change in value of trusts and annuities.

The present value of expected payments to annuitants over their life expectancy is $429,981 and $468,231, respectively as of September 30, 2006, and 2005. The present value of expected payments to trustors over their life expectancy is $84,325 and $89,703, respectively as of September 30, 2006, and 2005.

In March 2002, Food for the Hungry, Inc. purchased a Nonparticipating Terminal Funding Group Annuity from an insurance company. The purpose of this policy is to reinsure the gift annuity obligations of Food for the Hungry, Inc. The insurance company has assumed all mortality and investment risk associated with the gift annuities. However, Food for the Hungry, Inc. remains liable for fulfilling the requirements of the gift annuity agreements. The value of this policy has been determined to equal the outstanding annuity obligations of Food for the Hungry, Inc. and is included on the consolidated statements of financial position as gift annuity reinsurance asset.

As a result of the reinsurance of the mortality and investment risk associated with gift annuities, changes in the present value of expected payments to annuitants over their life expectancies from the date of the policy forward represent changes in the associated gift annuity reinsurance asset and not income to Food for the Hungry, Inc. Net Assets The consolidated financial statements report amounts by classification of net assets as follows: •Unrestricted amounts are those currently available at the discretion of the board for use in the organization’s operations, those for specific purposes as designated by the board, and those resources invested in land, buildings, and equipment.

•Temporarily restricted amounts are those which are stipulated by donors for specific operating purposes, for capital projects, and for time restrictions. See Note 7 for a summary of temporarily restricted net assets.

•Permanently restricted amounts are those which represent permanent endowments where it is stipulated by donors that the principal remain in perpetuity and only the income is available as unrestricted or temporarily restricted, as specified in endowment agreements. Permanently restricted net assets consist of the Child Vocational Scholarship Fund. Each year, all or part of the investment income from the Child Vocational Scholarship Fund is available for award to graduates of the child sponsorship program for additional vocational training. The investment income can also be used

by Food for the Hungry International staff toward funding of courses that would enable them to better serve the country in which they minister.

All contributions are considered available for unrestricted use unless specifically restricted by the donor or subject to legal restrictions.

Contributions are recorded as temporarily restricted if they are received with donor stipulations that limit their use through purpose and/or time restrictions. When donor restrictions expire, that is, when the purpose restriction is fulfilled or the time restriction expires, the net assets are reclassified from temporarily restricted to unrestricted net

assets and reported in the consolidated statements of activities as net assets released from restrictions. Food for the Hungry, Inc.’s policy is to record temporarily restricted contributions received and expended in the same accounting period as temporarily restricted contributions and net assets released from restrictions. Temporarily restricted contributions are subject to assessments ranging from 10% to 60%, which is used for general and administrative expenses. Assessments are classified as unrestricted contributions at the time the contributions are received.

For contributions restricted by donors for the acquisition of property or other long-lived assets, the restriction is considered to be met when the property or other long-lived asset is placed in service.

Public Support, Revenue and Expenses Contributions are recorded when cash or unconditional promises-to-give have been received or ownership of donated assets is transferred to Food for the Hungry, Inc. Conditional promises-to-give are recognized when the conditions on which they depend are substantially met. Food for the Hungry, Inc. receives noncash gifts which are recorded as support at the estimated fair market value on the date of the gift. Goods given to Food for the Hungry, Inc. that do not have an objective basis for valuation are not recorded.

Revenue is recorded when earned. Expenses are recorded when incurred in accordance with the accrual basis of accounting.

Contributed Services Statement of Financial Accounting Standards No. 116, Accounting for Contributions Received and Contributions Made, requires recording the value of donated services that create or enhance nonfinancial assets or require specialized skills. Many volunteers have contributed significant amounts of their time to activities of Food for the Hungry, Inc. However, since the above requirements were not met, the value of the contributed services is not recorded in the consolidated financial statements.

Functional Allocation of Expenses The costs of providing the various program services and supporting activities have been summarized on a functional basis. Accordingly, certain costs, such as depreciation and payroll, have been allocated among the program and supporting activities benefited.

Allocation of Joint Costs Food for the Hungry, Inc. has implemented the American Institute of Certified Public Accountants’ Statement of Position 98-2, Accounting for Costs of Not-for-Profit Organizations and State and Local Governmental Entities that Include Fundraising. Food for the Hungry, Inc.’s policy is to allocate all costs of activities which have a fundraising component as 100% fundraising.

Use of Estimates The preparation of consolidated financial statements in conformity with U.S. 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.

3. INVESTMENTS: Investments consist of the following: September 30, 2006 Money market funds $ 1,756,034 $ Treasury notes 575,117 Common stock 953,624 Corporate bonds 109,559 Mutual funds 255,753 3,650,087 Less long-term investments: Investments held for charitable trusts and annuities (155,172) Investments held for Child Vocational Scholarship Fund (1,174,769) Current Investments $ 2,320,146 $ Investment income consists of: Interest and dividends $ Realized and unrealized gain on investments

Investment fees

Less investment income included in change in value of trusts and annuities Net investment income $

2005 963,957 1,401,544 1,136,829 672,453 94,600 4,269,383 (159,975) (1,157,713 2,951,695

238,942 $

143,861

83,219 (14,096) 308,065

188,114 (7,218) 324,757

(12,348) 295,717 $

(20,423) 304,334

Food for the Hungry, Inc. and Food for the Hungry Foundation, Inc.

Notes to Consolidated Financial Statements September 30, 2006

4. LAND, BUILDINGS AND EQUIPMENT: Land, buildings and equipment consist of the following: September 30, 2006 2005 Land $ 168,851 $ 168,851 Buildings and improvements 1,777,468 1,691,189 Furniture and fixtures 283,359 283,359 Office equipment 274,103 211,968 Computer equipment 604,607 631,618 Vehicles 41,540 29,420 3,149,928 3,016,405 Less accumulated depreciation (930,731) (746,855 Land, buildings and equipment–net 2,219,197 2,269,550 Less debt secured by land, buildings and equipment (61,031) (158,398) Net investment in land, buildings and equipment $ 2,158,166 $ 2,111,152 Depreciation expense $ 273,183 $ 238,058 5. GRANTS PAYABLE: Food for the Hungry, Inc. receives government grants for use in relief and development programs. Food for the Hungry, Inc. expends a portion of these funds and sub-receipts the remaining portions to Food for the Hungry International and similar not-for-profit organizations. The amounts payable to these sub-recipients are as follows: September 30, Food for the Hungry International $ Other agencies

$

2006 952,824 $ 635,190 1,588,014 $

2005 884,038 884,038

6. LONG-TERM DEBT: Long-term debt consists of the following: Food for the Hungry Inc. leases various equipment from unaffiliated entities under capital lease agreements with total monthly payments of $10,979 due from October 2006 to January 2011. At September 30, 2006, the gross amount of equipment and related accumulated amortization recorded under the capital leases was $281,216 and $280,359, respectively.

September 30,

$

2006 61,031 $

2005 158,398

Food for the Hungry, Inc. has a secured line of credit with a bank with a limit of $500,000, due on demand. The interest rate is LIBOR plus a sliding percentage depending on the loan balance. The rate at September 30, 2006 was 7.079%.

219,753 444,888

280,784 603,286 Less current portion

(251,651) (558,542)

$ 29,133 $ 44,744 Interest expense $ 41,518 $ 47,897 The future minimum payments are as follows: Capital Leases Line of Credit Year Ending September 30,

2007 $ 37,263 $ 219,753

2008 22,110

2009 4,032

2010 4,032

2011 1,008

$ 68,445 $ 219,753 Less amount representing interest (7,414) Present value of net minimum capital lease payment $ 61,031 7. TEMPORARILY RESTRICTED NET ASSETS: Temporarily restricted net assets consist of the following: September 30, 2006 2005 Program restrictions: Relief efforts and international projects $ 3,252,031 $ 3,632,637 International Hunger Corps staff support 1,207,017 917,859 Child sponsorship 85,837 243,382 Child Vocational Scholarship Fund 674,769 657,713 Future interest in irrevocable trusts 70,848 70,272 Other

46,850 92,553

$ 5,337,352 $ 5,614,416

8. GIFTS-IN-KIND Food for the Hungry, Inc. receives donations of food, clothing, medical supplies, and other commodities for use in relief and development programs. Food for the Hungry, Inc. transfers all such gifts-in-kind to Food for the Hungry International and similar not-for-profit organizations for ultimate distribution to the poor and hungry throughout the world.

Gifts-in-kind for the years ended September 30, 2006, and 2005, include $12,073,780 and $9,017,483, respectively, of commodities received through the United States Agency for International Development (USAID), of which $6,641,962 and $4,210,129, respectively, were distributed to foreign programs. The remainder was monetized overseas and the proceeds used in foreign programs. Such goods were valued at wholesale value using guidelines published by the United States Department of Agriculture and USAID. The remaining $18,943,217 and $23,783,136 for the years ended September 30, 2006, and 2005, respectively, relates to gifts-in-kind received through private donations, which were recorded at estimated fair value on the date of the gift.

Gifts-in-kind and government donated commodities were distributed as follows: September 30, 2006 2005 Food for the Hungry International $ 12,420,471 $ 9,562,750 Other agencies 18,593,569 23,237,869

$ 31,014,040 $ 32,800,619 In accordance with Interagency Standards established by the Association of Evangelical Relief and Development Organizations (AERDO), Food for the Hungry, Inc. only records the value of gifts-in-kind for which they were either the original recipient of the gift, were involved in partnership with another organization for distribution internationally, or granted the gift for use in a Food for the Hungry International program.

During 2005, Food for the Hungry, Inc.’s management voluntarily applied more rigorous verification requirements to external partners that facilitated gifts-in-kind to nonprofit organization recipients supported

by Food for the Hungry, Inc. other than those received directly by Food for the Hungry International. One external partner that facilitated both donations and shipments did not meet these more stringent requirements and hence the value of those shipments are not included in this report.

Only gifts-in-kind donations and shipments that could be substantiated by supporting evidence obtained from and verified by independent third parties were deemed acceptable for reporting in the current year financial statements.

9. LEASES Food for the Hungry, Inc. leases office space in Washington D.C. under a month to month operating lease agreement with monthly payments of $6,048.

Food for the Hungry, Inc. also leases office equipment with total monthly payments of $2,952, maturing from May 2007 to July 2011. Total lease expense was $109,350 and $92,591 for the years ended September 30, 2006 and 2005, respectively.

The future minimum payments are as follows: Year Ending September 30,

2007 $ 30,036

2008

25,070

2009

13,558

2010

6,326

2011 5,457

$ 80,447 10. RETIREMENT PLAN Food for the Hungry, Inc. has a defined contribution pension plan covering substantially all employees over 18 years of age who have completed one year of service. Food for the Hungry, Inc. makes contributions based on a percentage of salary, and employees may make additional contributions.

Vesting in Food for the Hungry, Inc. contributions is based on years of continuous service, which reaches 100% after the fifth year of service.

Retirement expense was $198,440 and $172,194 for the years ended September 30, 2006, and 2005, respectively.

11. RELATED PARTY During the year ended September 30, 2006, Food for the Hungry, Inc. loaned $500,000 to Canadian Food for the Hungry, Inc. to be repaid in full within one year with no interest.

In addition, during the year ended September 30, 2006, the CFO for Food for the Hungry, Inc. took over the CFO responsibilities for Food for the Hungry International. All salaries and benefits have been paid by Food for the Hungry, Inc.

boaRd of directors Howard Berg Consultant Scottsdale, AZ Ray J. Berryman Businessman Windermere, FL Theodore S. Corwin, Jr. Businessman Hickory, NC Shelle Ensio Engineer Tucson, AZ

Randall L. Hoag ’l Food for the Hungry Int d Bangkok, Thailan Benjamin K. Homan .

Food for the Hungry, Inc Phoenix, AZ Scott Krippayne Artist/Songwriter Tacoma, WA Scot Riddle Businessman Canyon Country, CA

John Rowell Missions Executive Atlanta, GA John A. Tanksley Physician Springfield, MO Gregory L. Vestri Consultant Austin, TX Carolyn Wheeler Realtor/Developer Nicholasville, KY

our thae tonthkansk our advocate for the hungry world, photographegrrapRohicdney We would lik support in maintaining inting, for their faithful Pr eil O’N rds to God d an , na sco Ra us to be faithful stewa ing ow all , sts co ed uc red industry standards at rs. and our dono

eet 1224 E. Washington Sr 4 03 85 AZ ix, Phoen Phone: 480-998-3100 Toll-free: 1-800-2-HUNGERS www.fh.org