Audited Financial Statements. June 30, Quigley & Miron

Transcription

1 Audited Financial Statements June 30, 2016 Quigley & Miron

2 Audited Financial Statements Table of Contents June 30, 2016 (with comparative totals for 2015) Page Number Independent Auditor s Report... 1 Audited Financial Statements Statement of Financial Position... 3 Statement of Activities... 4 Statement of Functional Expenses... 5 Statement of Cash Flows... 6 Notes to Financial Statements... 7

3 Quigley & Miron Certified Public Accountants Suite 1660 Suite Wilshire Boulevard 1999 South Bascom Avenue Los Angeles, California Campbell, California Telephone: (213) Telephone: (408) Facsimile: (213) Facsimile: (213) Board of Directors The Mr. Holland's Opus Foundation Studio City, California Independent Auditor s Report We have audited the accompanying financial statements of The Mr. Holland's Opus Foundation (MHOF), a nonprofit organization, which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant 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.

4 Board of Directors The Mr. Holland's Opus Foundation Page 2 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Mr. Holland's Opus Foundation as of June 30, 2016, and the changes in its net assets and cash flows for the year then ended, in accordance with accounting principles generally accepted in the United States of America. Report on Summarized Comparative Information We have previously audited The Mr. Holland's Opus Foundation's June 30, 2015 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated November 6, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2015 is consistent, in all material respects, with the audited financial statements from which it has been derived. Los Angeles, California November 4, 2016

5 Statement of Financial Position June 30, 2016 (with comparative totals for 2015) Temporarily Unrestricted Restricted Total Total Assets Cash and cash equivalents $ 707,023 $ 857,431 $ 1,564,454 $ 1,671,377 Contributions receivable Note 2 86,750 86,750 56,250 Musical instrument inventory Note 3 25,675 25,675 30,465 Property, net Note 4 17,261 17,261 6,395 Total Assets $ 749,959 $ 944,181 $ 1,694,140 $ 1,764,487 Liabilities and Net Assets Liabilities Accounts payable $ $ $ $ 556 Employee benefits payable 8,607 8,607 19,661 Total Liabilities 8,607 8,607 20,217 Net Assets Unrestricted 741, , ,538 Temporarily restricted Note 5 944, , ,732 Total Net Assets 741, ,181 1,685,533 1,744,270 Total Liabilities and Net Assets $ 749,959 $ 944,181 $ 1,694,140 $ 1,764,487 See notes to financial statements. 3

6 Statement of Activities Year Ended June 30, 2016 (with comparative totals for 2015) Temporarily Unrestricted Restricted Total Total Public Support and Revenue Corporate contributions $ 147,547 $ 54,606 $ 202,153 $ 202,069 Foundation grants 217, , , ,940 Individual contributions 478,870 16, , ,692 Donated musical instruments and accessories Note 6 195, ,021 63,402 Music Rising grants and contributions Note ,353 Other revenue and support 1,686 1,686 9,560 Total Public Support and Revenue 1,040, ,324 1,517,455 1,518,016 Net assets released from restrictions 413,875 (413,875) Total Support, Revenue, and Reclassifications 1,454,006 63,449 1,517,455 1,518,016 Expenses Program services Mr. Holland's Opus Foundation 1,170,007 1,170,007 1,629,262 Music Rising Note 7 58,423 58, ,257 Total Program Services 1,228,430 1,228,430 1,776,519 Management and general 164, , ,601 Fund development 183, , ,746 Total Expenses 1,576,192 1,576,192 2,001,866 Change in Net Assets (122,186) 63,449 (58,737) (483,850) Net Assets at Beginning of Year 863, ,732 1,744,270 2,228,120 Net Assets at End of Year $ 741,352 $ 944,181 $ 1,685,533 $ 1,744,270 See notes to financial statements. 4

7 Statement of Functional Expenses Year Ended June 30, 2016 (with comparative totals for 2015) Program Services Supporting Services Management Fund MHOF Music Rising Totals and General Development Totals Totals Expenses Salaries $ 165,253 $ $ 165,253 $ 103,387 $ 110,207 $ 378,847 $ 326,166 Employee benefits 20,260 20,260 12,676 13,512 46,448 49,424 Payroll taxes 15,540 15,540 9,722 10,365 35,627 25,951 Total Personnel 201, , , , , ,541 Instrument distributions and related expenses Distributed instruments and accessories 907,936 39, , ,022 1,421,473 Instrument repairs 3,095 3,095 3,095 15,659 Site visits 2,179 2,179 2, Instrument delivery 2,155 2,155 2,155 1,058 Total Instrument Distributions and Related Expenses 915,365 39, , ,451 1,438,549 Rent 37,334 37,334 10,667 5,333 53,334 51,856 Professional services 4,570 16,500 21,070 7,523 2,970 31,563 27,373 Office expense 2,243 2,837 5,080 15,229 6,276 26,585 20,725 Grant 25,000 Bank and merchant fees 1,075 7,876 8,951 7,278 Cultivation events 7,816 7,816 Postage and mailing ,449 5,072 7,246 6,816 Printing and reproduction ,431 6,389 4,801 Insurance 3,554 3,554 1, ,077 3,674 Public relations and marketing costs 4,720 4,720 3,005 Telephone and fax 2,193 2, ,742 2,708 Depreciation 1,160 1, ,659 2,203 Equipment rental and maintenance ,953 2,253 Travel and mileage 268 1,516 1,784 4,084 Total Expenses $ 1,170,007 $ 58,423 $ 1,228,430 $ 164,544 $ 183,218 $ 1,576,192 $ 2,001,866 See notes to financial statements. 5

8 Statement of Cash Flows Year Ended June 30, 2016 (with comparative totals for 2015) Cash Flows from Operating Activities Change in net assets $ (58,737) $ (483,850) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation 2,659 2,203 Changes in operating assets and liabilities: Contributions receivable (30,500) 81,250 Musical instrument inventory 4,790 12,180 WQXR inventory receivable 688,535 Accounts payable (556) 556 Employee benefits payable (11,054) 9,400 Net Cash Provided by (Used in) Operating Activities (93,398) 310,274 Cash Flows from Financing Activities Purchased property (13,525) (1,588) Net Cash Used in Financing Activities (13,525) (1,588) Increase (Decrease) in Cash and Cash Equivalents (106,923) 308,686 Cash and Cash Equivalents at the Beginning of Year 1,671,377 1,362,691 Cash and Cash Equivalents at the End of Year $ 1,564,454 $ 1,671,377 Supplementary Disclosures Interest paid $ $ Income taxes paid $ $ See notes to financial statements. 6

9 Notes to Financial Statements June 30, 2016 (with comparative totals for 2015) Note 1 Organization and Summary of Significant Accounting Policies Organization The Mr. Holland's Opus Foundation (MHOF) is a non-profit organization that keeps music alive in schools and communities by donating musical instruments to under-funded music programs, giving youngsters the many benefits of music education, including helping them to be better students and inspiring creativity and expression through playing music. MHOF was inspired by the acclaimed motion picture Mr. Holland s Opus, which highlighted the impact that a motivated and dedicated music teacher had on students. During the year ended June 30, 2016, MHOF donated a total of 1,404 new and refurbished instruments to help 48 under-funded K-12 schools in low-income communities. Over the life of the instruments, an estimated 14,000 plus students will be impacted. The donations allow students in those schools who can t afford to rent or buy an instrument, and/or that are on waiting lists, an opportunity to join the music program and play quality instruments. This improves their experience, inspires confidence and increases skills and overall academic engagement. Financial Statement Presentation The financial statements are prepared on the accrual basis of accounting. MHOF recognizes contributions, including unconditional promises to give, as revenue in the period received. Contributions and net assets are classified on the existence or absence of donorimposed restrictions. The net assets of MHOF and changes therein are classified and reported as follows: Unrestricted net assets Net assets that are not subject to donor-imposed stipulations and that may be expendable for any purpose in performing the primary objectives of MHOF. Unrestricted net assets include amounts available to be used at the discretion of the Board of Directors in MHOF s programs and operations. All donations are considered available for unrestricted use unless specifically restricted by the donor. Temporarily restricted net assets Net assets subject to donor-imposed stipulations that may or will be met either by actions of MHOF and/or passage of time. As the restrictions are satisfied, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the accompanying financial statements as net assets released from restrictions. Permanently restricted net assets Net assets that are restricted by the donors for investment in perpetuity. The investment income generated from these funds is available for general support of MHOF s programs and operations. There were no permanently restricted net assets as of June 30, 2016 and It is the policy of MHOF to record restricted support as unrestricted support where the donorrestrictions have been satisfied within the reporting period. Income Taxes MHOF is exempt under Section 501(c)(3) of the Internal Revenue Code (Code). Accordingly, no provision for federal or state income taxes is included in the accompanying financial statements. In addition, MHOF has been determined by the Internal Revenue Service not to be a private foundation within the meaning of Section 509(a) of the Code. 7

10 Notes to Financial Statements Continued Note 1 Organization and Summary of Significant Accounting Policies Continued Accounting standards require an organization to evaluate its tax positions and provide for a liability for any positions that would not be considered more likely than not to be upheld under a tax authority examination. Management has evaluated its tax positions and has concluded that a provision for a tax liability is not necessary at June 30, Generally, MHOF s information returns remain open for examination for a period of three (federal) or four (state of California) years from the date of filing. Cash and Cash Equivalents MHOF considers highly liquid investments with a maturity of less than three months to be cash equivalents. Cash consists of balances in checking and savings accounts at banks. Property and Equipment Property and equipment are stated at purchased cost or fair value at the date of donation. MHOF capitalizes assets with an initial purchase price of $500 or more. Depreciation is computed using the straight-line method over the estimated useful lives of the assets. Concentrations of Credit Risk Financial instruments which potentially subject MHOF to concentrations of credit risk consist of cash and cash equivalents, and contributions receivable. MHOF places its cash with a high credit quality financial institution where the funds are guaranteed by the Federal Deposit Insurance Corporation (FDIC) up to $250,000 per institution. At times, such cash and cash equivalent balances are in excess of the FDIC insurance limits. Management regularly reviews the financial stability of its cash and money market fund depositories and deems the risk of loss due to these concentrations to be minimal. Contributions receivable consist of balances from local foundations and corporations. MHOF has analyzed these receivables and determined that no allowance for potential losses due to uncollectible receivables was necessary at June 30, 2016 and Revenue recognition MHOF s revenue recognition policies are as follows: Contributions Contributions are reported as support revenue in the period received and as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expiration of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as net assets released from restrictions in the accompanying statement of activities. In-kind contributions/donated musical instruments All donated musical instruments and accessories are recorded as revenue at fair market value at the time of donation. Purchased musical instruments distributed through MHOF s programs are bought at a discounted price and are recorded as program expense at cost. Donated Services Donated services are not reflected in the accompanying financial statements as they do not meet the requirements of generally accepted accounting principles; however, a substantial number of volunteers have donated a significant number of hours to MHOF s program services, management and fundraising activities. 8

11 Notes to Financial Statements Continued Note 1 Organization and Summary of Significant Accounting Policies Continued Functional Expenses The costs of providing the various program and supporting services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated between the program services and supporting services benefitted. Functional expenses have been allocated between program services, management and general, and fund development expenses, based on an analysis of personnel time utilized for the related activities. Use of Estimates The preparation of financial statements in conformity with 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. Comparative Totals for 2015 The accompanying financial statements include certain prior-year summarized comparative financial information in total, but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with MHOF s audited financial statements for the year ended June 30, 2015, from which the summarized information was derived. Note 2 Contributions Receivable Contributions receivable at June 30, 2016 and 2015 consist of receivables from corporations and foundations due within one year, totaling $86,750 and $56,250, respectively. Note 3 Musical Instrument Inventory Musical instrument inventory consists of donated and purchased musical instruments and accessories which are stated at their estimated fair market value. Costs incurred to refurbish or repair donated musical instruments are expensed in the year incurred. Note 4 Property, Net Net property consists of the following at June 30, 2016 and 2015: Office equipment $ 83,034 $ 69,509 Less accumulated depreciation (65,773) (63,114) Net $ 17,261 $ 6,395 9

12 Notes to Financial Statements Continued Note 5 Temporarily Restricted Net Assets Temporarily restricted net assets at June 30, 2016 and 2015 consist of the following: Music Rising program $ 389,761 $ 449,691 Instrument distribution in specified areas 554, ,041 Totals $ 944,181 $ 880,732 Note 6 Donated Musical Instruments and Accessories In-kind contributions of musical instruments and accessories are reported on the statements of financial position and functional expenses as follows: Statement of Financial Position Musical instrument inventory $ 10,735 $ Statement of Functional Expenses Distributed instruments and accessories 184,286 63,402 Totals $ 195,021 $ 63,402 Note 7 Music Rising In January 2014, MHOF assumed the operations of the Music Rising program from the Gibson Foundation, the program s primary stakeholder. Music Rising is a national program that rebuilds music education programs in the aftermath of a natural or financial disaster. In exchange for MHOF agreeing to carry out the responsibilities and operations of the program, the remaining funds in the program were transferred from the Gibson Foundation to MHOF and classified as temporarily restricted. For clarity of reporting, these program funds are on deposit in a separate bank account from which all Music Rising activity is processed. A reconciliation of activities related to the Music Rising program s temporarily restricted net assets for the years ended June 30, 2016 and 2015 are as follows: Balance, Beginning of Fiscal Year $ 449,691 $ 528,094 Interest income ,353 Functional expenses, Music Rising (58,423) (147,257) MHOF administrative fee (1,634) (9,499) Balance, End of Fiscal Year $ 389,761 $ 449,691 10

13 Notes to Financial Statements Continued Note 8 Operating Lease In August 2016, MHOF signed a five-year extension of its current operating lease of office space, with the inclusion of additional square footage. The new lease requires monthly payments of $5,538 with a 3 percent increase in base rent on the anniversary date of the lease. Future minimum payments on this lease are as follows: Year Ending June 30, 2017 $ 55, , , , ,520 Thereafter 43,628 Total $ 380,346 Note 9 Subsequent Events Management evaluated all activities of The Mr. Holland's Opus Foundation through November 4, 2016, which is the date the financial statements were available to be issued, and concluded that, other than the lease extension described in Note 8, no other material subsequent events have occurred that would require adjustment to the financial statements or disclosure in the notes to the financial statements. 11