Community Futures Wood Buffalo Financial Statements March 31, 2014

Transcription

1 Financial Statements March 31, 2014

2 Management's Responsibility To the Directors of Community Futures Wood Buffalo: Management is responsible for the preparation and presentation of the accompanying financial statements, including responsibility for significant accounting judgments and estimates in accordance with Canadian accounting standards for not-for-profit organizations and ensuring that all information in the annual report is consistent with the statements. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required. In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements. The Board of Directors is composed entirely of Directors who are neither management nor employees of the Organization. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information included in the annual report. The Board fulfils these responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and external auditors. The Board is also responsible for recommending the appointment of the Organization's external auditors. MNP LLP is appointed by the directors to audit the financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Board and management to discuss their audit findings. September 16, 2014 Kenton Price, General Manager

3 Independent Auditors Report on Compliance with Agreement To the Directors of Community Futures Wood Buffalo: We have audited Community Futures Wood Buffalo s compliance as at March 31, 2014 with the criteria established by the amended funding agreement for project dated March 28, 2013 with Western Economic Diversification. Compliance with the criteria established by the provisions of the agreement is the responsibility of the Community Futures Wood Buffalo s management. Our responsibility is to express an opinion on this compliance based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we plan and perform an audit to obtain reasonable assurance whether Community Futures Wood Buffalo complied with the criteria established by the provisions of the agreement referred to above. An audit includes examining, on a test basis, evidence supporting compliance, evaluating the overall compliance with these criteria, and where applicable, assessing the accounting principles used and significant estimates made by management. In our opinion, Community Futures Wood Buffalo is in compliance, in all material respects, with the criteria established by the amended funding agreement for project with Western Economic Diversification as at March 31, Fort McMurray, Alberta September 16, 2014 Chartered Accountants 9707 Main Street, Fort McMurray, Alberta, T9H 1T5, Phone: (780) , 1 (866)

4 Independent Auditors Report To the Directors of Community Futures Wood Buffalo: We have audited the accompanying financial statements of Community Futures Wood Buffalo, which comprise the statement of financial position as at March 31, 2014, and the statements of operations, changes in net assets (deficit) and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Community Futures Wood Buffalo as at March 31, 2014 and the results of its operations, changes in net assets (deficit) and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Fort McMurray, Alberta September 16, 2014 Chartered Accountants 9707 Main Street, Fort McMurray, Alberta, T9H 1T5, Phone: (780) , 1 (866)

5 Statement of Financial Position As at March 31, 2014 General Fund Non- Disabilities Economic Development Fund Capital Fund (Restated - Note 3) Assets Current Cash and cash equivalents (Note 4) 156, ,476 2,719 31, , ,469 Funds held in trust , ,000 - Marketable securities , , ,118 Accounts receivable 7,674-2, , ,798 Goods and services tax 3, ,949 4,443 Prepaid expenses 12, ,349 3,465 Inter-fund receivable (payable) 43,212 1,267,198 (1,386,759) 83,484 (7,135) ,452 1,267,198 (934,857) 267,629 25, , ,293 Foreclosed assets held for sale (Note 5) - 84, ,100 - Capital assets (Note 6) ,040 21,040 18,380 s receivable (Note 7) - 19,847 2,086, ,106,743 2,284, ,452 1,371,145 1,152, ,629 25,000 21,040 3,060,305 2,889,882 Continued on next page The accompanying notes are an integral part of these financial statements 1

6 Statement of Financial Position As at March 31, 2014 General Fund Non- Disabilities Economic Development Fund Capital Fund (Restated - Note 3) Liabilities Current Accounts payable and accruals 50, ,819 62,089 Deferred revenue (Note 8) 27, ,000-52,363 20,988 Callable debt (Note 9) - 1,317,169 1,300, , ,817,169 2,817,169 78,182 1,317,169 1,300, ,000 25,000-2,920,351 2,900,246 Commitments (Note 10) Net Assets (Deficit) General Fund 145, , ,837 Funds - 53,976 (147,961) 67, (26,356) (180,581) Capital ,040 21,040 18, ,270 53,976 (147,961) 67,629-21, ,954 (10,364) 223,452 1,371,145 1,152, ,629 25,000 21,040 3,060,305 2,889,882 Approved on behalf of the Board Director Director The accompanying notes are an integral part of these financial statements 2

7 Statement of Operations General Fund Non- Disabilities Economic Development Fund Capital Fund (Restated - Note 3) Revenue Western Economic Diversification contribution 319, , ,963 Economic development ,988-45,988 43,278 Other income 69, ,905 91,851 Interest income - 7, ,418 4, , , ,868 7, ,418 4,331 45, , ,902 Expenses Advertising 8, ,103 6,111 Amortization ,899 5,899 6,911 Bad debts (recovery) 5,127 - (1,140) , ,953 Bank charges and interest 1, ,732 1,890 Economic development ,397-45,397 42,413 Goods and services tax expense 3, ,931 8,551 Insurance 4, ,370 2,343 Interest on callable debt - 30, ,480 33,087 Meals and entertainment 13, ,557 7,415 Conference fees 4, ,207 1,034 Office 16, ,381 23,026 Professional fees 41, ,974 29,861 Rent 24, ,300 24,527 Repairs and maintenance 8, ,550 8,099 Salaries and benefits 251, , ,105 Telephone 5, ,668 10,688 Travel 13, ,259 6, ,037 30,480 (556) - 45,988 5, , ,457 Continued on next page The accompanying notes are an integral part of these financial statements 3

8 Statement of Operations General Fund Non- Disabilities Economic Development Capital Fund Excess (deficiency) of revenue over (11,169) (23,080) 172,974 4,331 - (5,899) 137,157 (321,555) expenses before other items Unsupported revenues (expenses), net of recoveries 13, ,161 21,989 Excess (deficiency) of revenue over expenses 1,992 (23,080) 172,974 4,331 - (5,899) 150,318 (299,566) The accompanying notes are an integral part of these financial statements 4

9 Statement of Changes in Net Assets (Deficit) General Fund Non- Disabilities Economic Development Fund Capital Fund (Restated - Note 3) Net assets (deficit), as previously stated 151,837 77,056 (372,999) 63,298-18,380 (62,428) 289,202 Correction of errors (Note 3) , ,064 - Net assets (deficit), beginning of year, as restated 151,837 77,056 (320,935) 63,298-18,380 (10,364) 289,202 Excess (deficiency) of revenue over expenses 1,992 (23,080) 172,974 4,331 - (5,899) 150,318 (299,566) Capital asset additions (8,559) , Net assets (deficit), end of year 145,270 53,976 (147,961) 67,629-21, ,954 (10,364) The accompanying notes are an integral part of these financial statements 5

10 Statement of Cash Flows (Restated - Note 3) Cash flows from operating activities Operating Excess (deficiency) of revenue over expenses 150,318 (299,566) Amortization 5,899 6, ,217 (292,655) Changes in working capital accounts Accounts receivable 136,698 (126,445) Funds held in trust (100,000) 330,000 Goods and services tax receivable 494 4,739 Prepaid expenses (8,884) 1,325 Accounts payable and accruals (11,273) 53,564 Deferred revenue 31,375 (2,793) 204,627 (32,265) Investing Increase in marketable securities (4,308) (4,173) Purchase of capital assets (8,559) - s receivable, net of foreclosed assets 93, ,162 80,502 98,989 Increase in cash cash and cash equivalents 285,129 66,724 Cash and cash equivalents, beginning of year 255, ,745 Cash and cash equivalents, end of year 540, ,469 The accompanying notes are an integral part of these financial statements 6

11 Notes to the Financial Statements 1. Incorporation and nature of the organization Community Futures Wood Buffalo (the Organization ) was incorporated under the authority of the Business Corporations Act of Alberta as a not-for-profit organization and is exempt from income taxes under Section 149 of the Income Tax Act. The Organization provides loans and financial services to small businesses that are otherwise unable to obtain financing. 2. Significant accounting policies The financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations as issued by the Accounting Standards Board in Canada and include the following significant accounting policies: Fund accounting The Organization follows the restricted fund method of accounting for contributions, and maintains four funds: the General Fund, the Fund, the Economic Development Fund and the Capital Fund. The General Fund reports the Organization s accounts for the organization's operating costs and general revenues. This fund reports unrestricted resources and restricted operating grants. The Fund reports the Organization s restricted resources that are to be used for assistance to small businesses and entrepreneurs in the form of loans, loan guarantees or equity participation. The Disabilities Fund reports the Organization s and the Canadian Youth Business Foundation partnership and provides financing to businesses owned and operated by disabled and youth entrepreneurs respectively. The Economic Development Fund reports restricted resources that are to be used for Economic Development. The Capital Fund reports all contributions and expenditures relating to capital assets. The Organization is restricted in the types of loans that can be made according to its agreements with Western Economic Diversification Canada ("WED") and Community Futures Network of Alberta ("CF"). Revenue recognition The Organization uses the deferral method of accounting for contributions and reports on a fund accounting basis. Restricted contributions are recognized as revenue of the appropriate fund in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue in the General Fund when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Restricted investment income is recognized in the appropriate deferred contribution balance or in net assets depending on the nature of the restrictions. Unrestricted investment income is recognized as revenue in the General Fund when earned. Contributed materials and services Contributions of materials and services are recognized both as contributions and expenses in the statement of operations when a fair value can be reasonably estimated and when the materials and services are used in the normal course of the Organization's operations and would otherwise have been purchased. Cash and cash equivalents Cash and cash equivalents include balances with banks and cash on hand. Cash subject to restrictions that prevent its use for current purposes is included in restricted cash. Marketable securities Marketable securities with prices quoted in an active market are measured at fair value while those that are not quoted in an active market are measured at cost less impairment. 7

12 Notes to the Financial Statements 2. Significant accounting policies (Continued from previous page) Capital assets Purchased capital assets are recorded at cost. Contributed capital assets are recorded at fair value at the date of contribution if fair value can be reasonably determined. Amortization is provided using the following methods at rates intended to amortize the cost of assets over their estimated useful lives. Method Rate Computer equipment declining balance 30 % Computer software straight-line 5 years Furniture and fixtures declining balance 20 % Leasehold improvements straight-line 5 years Financial instruments The Organization recognizes its financial instruments when the Organization becomes party to the contractual provisions of the financial instrument. All financial instruments are initially recorded at their fair value except for certain related party transactions that are initially measured at their carrying or exchange amount in accordance with CICA 3840 Related Party Transactions. The Organization subsequently measures all of its financial assets and liabilities at cost or amortized cost, except for equity instruments that are quoted in an active market which are measured at fair value. Fair value is determined by published price quotations. Changes in fair value of these financial instruments are recognized in excess (deficiency) of revenue over expenses. Transaction costs and financing fees directly attributable to the origination, acquisition, issuance or assumption of financial instruments subsequently measured at fair value are immediately recognized in excess (deficiency) of revenue over expenses. Conversely, transaction costs and financing fees are added to the carrying amount for those financial instruments subsequently measured at amortized cost or cost. Financial asset impairment: The Organization assesses impairment of all its financial assets measured at cost or amortized cost when there are indicators of impairment. The amount of the impairment, which is not considered temporary, is recognized in excess (deficiency) of revenue over expenses. The previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance accounts, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in excess (deficiency) of revenue over expenses in the year the reversal occurs. Measurement uncertainty (use of estimates) The preparation of financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Accounts receivable and loans receivable are stated after evaluation as to their collectability and an appropriate allowance for doubtful accounts is provided where considered necessary. Amortization is based on the estimated useful lives of capital assets. These estimates and assumptions are reviewed periodically and, as adjustments become necessary they are reported in excess (deficiency) of revenue over expenses in the periods in which they become known. s s are initially recorded at fair value and subsequently measured at their amortized cost less impairment. Amortized cost is calculated as the loans principal amount plus unamortized loan administration fees less any allowance for anticipated losses. Interest revenue is recorded on the accrual basis using the effective interest method. administration fees are amortized over the term of the loan using the effective interest method. The effective interest rate is the rate that exactly discounts the estimated future cash receipts through the expected life of the financial asset to the carrying amount of the financial asset. 8

13 Notes to the Financial Statements 2. Significant accounting policies (Continued from previous page) Long-lived assets Long-lived assets consist of foreclosed assets, capital assets and loans receivable. Long-lived assets held for use are measured and amortized as described in the applicable accounting policies. Long-lived assets are classified as held for sale when all of the following criteria are met: Management, having the authority to approve the action, commits the Organization to a plan to sell the asset; The asset is available for immediate sale in its present condition; The Organization has initiated an active program to locate a buyer; The sale is probable, and is expected to qualify for recognition as a completed sale within one year; The asset is being actively marketed for sale at a reasonable price relative to its fair value; and It is unlikely that the plan to sell the asset will be withdrawn or that significant changes will be made to the plan. Long lived assets classified as held for sale are initially measured at the lower of their carrying amount and fair value less costs to sell, and are not amortized. Any difference between the carrying amount of the loan prior to foreclosure and the amount at which the foreclosed assets are initially measured is recognized in excess (deficiency) of revenue over expenses. Subsequent increases in fair value not in excess of the cumulative loss previously recorded are recognized as gains. 3. Correction of errors During the year, the Organization determined that the loans receivable in the prior year were understated. For March 31, 2013, the impact of these corrections has resulted in an increase in loans receivable of $52,064 (net of an increase to the allowance for doubtful accounts of $81,194), a decrease to unsupported revenues (expenses), net of recoveries of $52,064, and an increase to excess (deficiency) of revenue over expenses and net assets (deficit) of $52, Cash and cash equivalents Unrestricted cash 508, ,018 Restricted cash 31,616 6, , ,469 The Organization defers unexpended revenue from Economic Development funding until the approved expenses are incurred. 5. Foreclosed assets held for sale During the year, the Organization foreclosed upon a loan, and obtained a truck and trailer, which had been held as collateral against the debt. As management has committed to a plan of sale within the next year, the foreclosed assets have been separately presented as held for sale. The difference between the carrying amount of the loan prior to foreclosure and the fair value less selling costs of the foreclosed assets of $9,174 has been been recognized as bad debt expense. 9

14 Notes to the Financial Statements 6. Capital assets Accumulated Net book Net book Cost amortization value value Computer equipment 86,354 76,085 10,269 12,973 Computer software 5, ,572 - Furniture and fixtures 57,249 51,050 6,199 5,407 Leasehold improvements 45,098 45, , ,741 21,040 18, s receivable (Restated - Note 3) s receivable 2,122,226 2,880,697 Less: allowance for doubtful accounts 15, ,488 2,106,743 2,284,209 s receivable include term loans and line of credits which bear interest at fixed rates varying from 6% % ( % to 11%), with monthly principal payments and interest repayments amortized for terms between 14 and 60 months ( and 60 months). Security is taken on these loans and include personal guarantees, general security agreements covering business assets and mortgages on land and buildings. It is impractical at this time to determine the current portion of loans receivable. 8. Deferred revenue Deferred revenue consists of unspent contributions externally restricted. Recognition of these amounts as revenue is deferred to periods when the specified expenditures are made. Changes in the deferred contribution balance are as follows: General Fund Amount received during the year 27,363 - Balance, end of year 27,363 - Economic Development Balance, beginning of year 20,988 23,781 Amount received during the year 50,000 40,485 Less: Amounts recognized as revenue during the year (45,988) (43,278) Balance, end of year 25,000 20,988 52,363 20,988 10

15 Notes to the Financial Statements 9. Callable debt Western Economic Development Canada loan, non-interest bearing, unsecured with no set repayment terms. 300, ,000 Western Economic Development Canada loan, non-interest bearing, unsecured with no set repayment terms. 1,300,000 1,300,000 Western Economic Development Canada - Disabilities loan, non-interest bearing, unsecured, with no set repayment terms. 200, ,000 Community Futures Network of Alberta line of credit, interest at the RBC prime rate, due on demand and in any case not later than November 2018, and is secured by a demand promissory note of $1,250,000 and a registered general security agreement securing all assets and undertakings of the borrower. 1,017,169 1,017,169 2,817,169 2,817,169 Callable debt is subject to certain financial covenants and conditions as stipulated in the Western Economic Diversification contribution agreement. As at March 31, 2014, the Organization is in compliance with all such covenants required in this agreement. 10. Commitments At at March 31, 2014, the Organization has $233,064 of undisbursed funds that has been committed. The Organization has also entered into a rental lease agreement and equipment lease agreements with estimated minimum annual payments as follows: , ,714 39, Financial instruments The Organization, as part of its operations, carries a number of financial instruments. It is management's opinion that the Organization is not exposed to significant interest, currency, credit, liquidity or other price risks arising from these financial instruments except as otherwise disclosed. Interest rate risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by a change in the interest rates. Changes in market interest rates may have an effect on the cash flows associated with some financial assets and liabilities, known as cash flow risk, and on the fair value of other financial assets or liabilities, known as price risk. The Organization is exposed to interest rate cash flow risk on its Community Futures Network of Alberta line of credit with an interest rate at RBC prime. They are also exposed to interest rate cash flow risk on their loans receivable with varying fixed interest rates. Liquidity risk Liquidity risk is the risk that the Organization will encounter difficulty in meeting obligations associated with financial liabilities. The Organization enters into transactions to borrow funds from financial institutions or other creditors for which repayment is required at various maturity dates. The Organization s exposure to liquidity risk is dependent on the collection of loans receivable to meet commitments and sustain operations. 11

16 Notes to the Financial Statements 11. Financial instruments (Continued from previous page) Credit concentration Financial instruments that subject the Organization to concentrations of credit risk consist primairly of accounts receivable and loans receivable. The balance of accounts receivable and loans receivable is widely distributed among the Organization's customer base. The Organization performs regular credit assessments of its customers and provides allowances for potentially uncollectible accounts. 12. Economic dependence The Organization receives a substantial portion of its funding from Western Economic Diversification Canada. 13. Supplemental cash flow information Cash flow related to loans receivable have been presented on a net basis as it is impracticable for management to determine the gross cash receipts and repayments. 14. Comparative figures Certain comparative figures have been reclassified to conform with the current year presentation. 12