YEO & YEO CPAs & BUSINESS CONSULTANTS

Transcription

1 Financial Statements YEO & YEO CPAs & BUSINESS CONSULTANTS

2 Table of Contents Independent Accountants Review Report 1 Page Basic Financial Statements Statement of Financial Position 2 Statement of Activities 3 Statement of Functional Expenses 4 Statement of Cash Flows 5 Notes to the Financial Statements 6

3 Independent Accountants Review Report To the Board of Directors Lansing, Michigan We have reviewed the accompanying financial statements of (a nonprofit organization), which comprise the statement of financial position as of, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. A review includes primarily applying analytical procedures to management s financial data and making inquiries of management. A review is substantially less in scope than an audit, the objective of which is the expression of an opinion regarding the financial statements as a whole. Accordingly, we do not express such an opinion. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 financial statements that are free from material misstatement, whether due to fraud or error. Accountants Responsibility Our responsibility is to conduct the review engagement in accordance with Statements on Standards for Accounting and Review Services promulgated by the Accounting and Review Services Committee of the AICPA. Those standards require us to perform procedures to obtain limited assurance as a basis for reporting whether we are aware of any material modifications that should be made to the financial statements for them to be in accordance with accounting principles generally accepted in the United States of America. We believe that the results of our procedures provide a reasonable basis for our conclusion. Accountants Conclusion Based on our review, we are not aware of any material modifications that should be made to the accompanying financial statements in order for them to be in conformity with accounting principles generally accepted in the United States of America. Lansing, Michigan February 6,

4 Statement of Financial Position 2017 Assets Current assets Cash $ 70,201 Accounts receivable 20,987 Prepaid expenses 179 Total current assets 91,367 Fixed assets, net of accumulated depreciation 417,561 Total assets $ 508,928 Liabilities and Net Assets Current liabilities Accounts payable $ 20,397 Accrued wages 115,098 Accrued paid time off 20,794 Other accrued liabilities 2,243 Line of credit 73,227 Current portion of mortgage payable 8,137 Capital lease payable 567 Total current liabilities 240,463 Long-term liabilities Noncurrent portion of mortgage payable 219,703 Total liabilities 460,166 Net assets Unrestricted 47,661 Temporarily restricted 1,101 Total net assets 48,762 Total liabilities and net assets $ 508,928 See Accompanying Accountants' Review Report and Notes to the Financial Statements 2

5 Statement of Activities For the Year Ended Temporarily Unrestricted Restricted Total Revenue Donations $ 19,539 $ - $ 19,539 Tuition and fees 1,516,395-1,516,395 Fundraising 47,480-47,480 Other 31,458-31,458 Net assets released from restrictions 2,145 (2,145) - Total revenue 1,617,017 (2,145) 1,614,872 Expenses Program services 1,376,497-1,376,497 Supporting services Management and general 268, ,518 Fundraising 6,573-6,573 Total expenses 1,651,588-1,651,588 Change in net assets (34,571) (2,145) (36,716) Net assets, beginning of year (restated) 82,232 3,246 85,478 Net assets, end of year $ 47,661 $ 1,101 $ 48,762 See Accompanying Accountants' Review Report and Notes to the Financial Statements 3

6 Statement of Functional Expenses For the Year Ended Supporting Services Program Management Services and General Fundraising Total Salaries and wages $ 901,235 $ 197,832 $ - $ 1,099,067 Payroll taxes and other employee benefits 184,343 40, ,809 Total salaries and related expenses 1,085, ,298-1,323,876 Utilities 42, ,169 Information technology 2,345 9,378-11,723 Office supplies 408 5,424-5,832 Property maintenance, repair and cleaning 33, ,747 Program equipment and supplies 52, ,800 Marketing and advertising 5,232 2,943-8,175 Staff development 8, ,709 Program food 52,847 1,634-54,481 Professional fees - 6,281-6,281 Licensing and accreditation 3, ,135 Banking fees 28, ,567 Insurance 18,238 4,560-22,798 Interest expense - building mortgage 10, ,441 Fundraising expense - - 6,573 6,573 Depreciation 32, ,281 Total expenses $ 1,376,497 $ 268,518 $ 6,573 $ 1,651,588 See Accompanying Accountants' Review Report and Notes to the Financial Statements 4

7 Statement of Cash Flows For the Year Ended 2017 Cash flows from operating activities Change in net assets $ (36,716) Items not requiring cash Depreciation 32,281 Changes in operating assets and liabilities Accounts receivable (7,178) Prepaid expenses 7,041 Accounts payable 6,084 Accrued wages 60,432 Accrued paid time off 8,524 Other accrued liabilities 1,180 Net cash provided by operating activities 71,648 Cash flows from investing activities Purchase of fixed assets (3,816) Cash flows from financing activities Principal payments on line of credit 5,550 Principal payments on mortgage (7,782) Payments on capital lease (3,682) Net cash used by financing activities (5,914) Net change in cash 61,918 Cash, beginning of year 8,283 Cash, end of year $ 70,201 See Accompanying Accountants' Review Report and Notes to the Financial Statements 5

8 Notes to the Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies Nature of Organization and Purpose The (EC3) (the Center) was organized in 1984 as a nonprofit corporation to improve the quality of early education for young children. EC3 s vision is to be the premier child care center in the greater Lansing area. Their mission is to provide developmentally appropriate child care in a nurturing environment that promotes growth of the child while responding to the needs of the family. The Center operates under a volunteer Board of Directors and an Executive Director. The majority of the Center's revenue is from tuition and fees for services. The accounting policies of the Center conform to U.S. generally accepted accounting principles (GAAP) as applicable to nonprofit entities. The Financial Accounting Standards Board (FASB) is the accepted standardsetting body for establishing nonprofit accounting and financial reporting principles. Basis of Accounting Basis of accounting refers to when revenues and expenses are recognized in the accounts and reported in the financial statements. Basis of accounting relates to the timing of the measurements made regardless of the measurement focus applied. The financial statements of the Center are accounted for using the accrual basis of accounting in accordance with generally accepted accounting principles for nonprofit organizations. Basis of Presentation In accordance with accounting policies generally accepted in the United States of America (GAAP), the Center is required to report information regarding its financial position and activities according to three (3) classes of net assets (unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets) based upon the existence or absence of donor-imposed restrictions. Currently, the Center has no net assets classified as permanently restricted. GAAP also requires contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. The Center has not received any contributions with donor-imposed restrictions that would result in permanently restricted net assets. Cash Cash consists of three (3) checking accounts, two (2) savings accounts, and petty cash on hand. Accounts Receivable Accounts receivable represents amounts that have been billed but not yet collected for various items such as tuition. Management reviews outstanding accounts receivable periodically through the year, with particular attention paid on amounts over 90 days. It is the Center s policy to charge off uncollectible accounts receivable when management determines the receivable will not be collected. Fixed Assets Fixed assets consist of building, building improvements, and equipment and are valued at historical cost. Depreciation is computed under the straight-line method over the estimated useful lives of the assets. The Center capitalizes all items with a useful life greater than one year and in excess of $350. The cost of normal maintenance that does not add to the value of assets or materially extend the asset lives is not capitalized. See Accompanying Independent Accountants Review Report 6

9 Notes to the Financial Statements Functional Expenses Certain costs of the Center have been allocated to program service and supporting service activities. Salary and related expenses have been allocated based upon estimated time percentages for each employee. Most other costs are allocated to the activities based on estimated activity. Income Tax Status is a nonprofit corporation and has been granted exemption from income taxes under Section 501(c)(3) of the Internal Revenue Code. The Center is not classified as a private foundation. The Center files information returns in the U.S. Federal jurisdiction. Concentration of Credit Risk The Center is required to disclose significant concentrations of credit risk regardless of the degree of such risk. Financial instruments which potentially subject the Center to concentrations of credit risk consist principally of cash. The Center places cash with FDIC insured financial institutions. At, the Center s deposits were fully insured. Long-term Obligations Long-term debt is recognized as a liability in the financial statements when incurred. The portion of those liabilities expected to be paid within the next year is a current liability with the remaining amounts shown as long-term debt. Contributions All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted support that increases those net asset classes. When a temporary restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Tuition and Fees The majority of the Center s revenue is from tuition and fees charged for the services provided for child care by the Center. Comparative Data Comparative data for the prior year has not been presented in the accompanying financial statements since its inclusion would make the statements unduly complex and difficult to read. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Subsequent Events In preparing these financial statements, the Center has evaluated events and transactions for potential recognition or disclosure through February 6, 2018, the date the financial statements were available to be issued. See Accompanying Independent Accountants Review Report 7

10 Notes to the Financial Statements Note 2 - Fixed Assets Fixed asset activity for the year ended is as follows: Balance Balance Oct. 1, 2016 Additions Deletions Sept. 30, 2017 Fixed assets being depreciated Building $ 386,672 $ - $ - $ 386,672 Building improvements 127, ,010 Equipment 165,432 3, ,638 Subtotal 679,504 3, ,320 Less accumulated depreciation for: Building (100,579) (11,715) - (112,294) Building improvements (17,100) (8,126) - (25,226) Equipment (115,799) (12,440) - (128,239) Note 3 - Line of Credit Subtotal (233,478) (32,281) - (265,759) Fixed assets, net $ 446,026 $ (28,465) $ - $ 417,561 The Center has a line of credit agreement with Michigan State University Federal Credit Union (MSUFCU) to cover cash flow shortages. The line of credit limit is $75,000. As of, the balance payable was $73,227. Interest on this line of credit is 5.75% annual percentage rate. Note 4 - Capital Lease In December 2012, the Center entered into a long term lease agreement with the Ervin Leasing Company to pay for the lighting replacement throughout the building. Beginning in January 2013 the Center started making monthly payments to re-pay the balance owed. The Center will continue to make monthly payments of $283 over the next year until the liability is fully repaid. The agreement has a varying interest rate. Minimum future lease payments under capital leases as of, were as follows: Year Ending Capital Lease Payable Sept. 30, Principal Interest 2018 $ 567 $ 5 See Accompanying Independent Accountants Review Report 8

11 Notes to the Financial Statements Note 5 - Mortgage Payable $240,000 mortgage note payable with 4.5% interest dated February 25, Due in monthly installments of $1,588 through February 25, 2021, with a balloon payment of the remaining balance due February 25, $ 227,840 Less current portion 8,137 $ 219,703 Interest expenses for 2017 amounted to $10,441. Future minimum payments for the Center s mortgage payable are as follows: Note 6 - Temporarily Restricted Net Assets Year Ending Mortgage Payable Sept. 30, Principal Interest 2018 $ 8,137 $ 10, ,511 9, ,902 9, ,290 3,764 $ 227,840 $ 32,885 The following is a summary of the temporarily restricted net assets at : Note 7 - Reliance on Funding Sources Building Blocks Campaign $ 1,101 The Center receives a substantial amount of its support from tuition revenues and fees for services. A significant reduction in the level of support, if it were to occur, would have an effect on the Center s programs and activities. Note 8 - Prior Period Adjustment During the year, the Center discovered that it had not recognized interest expenses on lease payments made in the past. Accordingly, adjustments were made to correct the capital lease payable balance. The cumulative effect will be to increase capital lease payable $3,045 and decrease net assets by $3,045. See Accompanying Independent Accountants Review Report 9