Leadership, Education and Athletics in Partnership, Inc. Financial Statements and Independent Auditors' Report. August 31, 2012 and 2011

Transcription

1 Leadership, Education and Athletics in Partnership, Inc. Financial Statements and Independent Auditors' Report August 31, 2012 and 2011

2 Index Page Independent Auditors' Report 2 Statements of Financial Position 3 Statements of Activities 4 Statements of Functional Expenses 5 Statements of Cash Flows

3 Independent Auditors' Report To the Board of Directors Leadership, Education and Athletics in Partnership, Inc. We have audited the accompanying statements of financial position of Leadership, Education and Athletics in Partnership, Inc. (the "Organization") (a nonprofit organization) as of August 31, 2012 and 2011, and the related statements of activities, functional expenses and cash flows for the years then ended. These financial statements are the responsibility of the Organization's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. 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 includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Leadership, Education and Athletics in Partnership, Inc. as of August 31, 2012 and 2011, and the changes in its net assets and cash flows for the years then ended, in conformity with accounting principles generally accepted in the United States of America. In accordance with Government Auditing Standards, we have also issued our report dated January 23, 2013 on our consideration of Leadership, Education and Athletics in Partnership, Inc.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards and should be considered in assessing the results of our audit. C Glastonbury, Connecticut January 23,

4 Statements of Financial Position August 31, 2012 and 2011 Assets Current assets: Cash and cash equivalents $ 1,021,759 $ 942,223 Grants and pledges receivable 149, ,604 Prepaid insurance 23,468 18,009 Other current assets Total current assets 1,195,487 1,112,925 Property and equipment: Recreation field and improvements 35,865 35,865 Furniture and fixtures 241, ,297 Vehicles 89,327 89,327 Leasehold improvements 552, , , ,925 Less accumulated depreciation and amortization (597,433) (557,522) 321, ,403 Other assets: Deposits 1,200 1,250 Investments 444, , , ,527 Total assets $ 1,962,994 $ 1,933,855 Liabilities and Net Assets Current liabilities: Accounts payable and accrued expenses $ 41,765 $ 40,844 Deferred income 24,905 24,011 Total current liabilities 66,670 64,855 Commitments and contingencies Net assets: Unrestricted: Designated for operating reserve 1,250,000 1,250,000 Undesignated 404, ,941 1,654,878 1,636,941 Temporarily restricted 161, ,883 Permanently restricted 80,226 80,176 Total net assets 1,896,324 1,869,000 Total liabilities and net assets $ 1,962,994 $ 1,933,855 See. 3

5 Statements of Activities Years Ended August 31, 2012 and Changes in unrestricted net assets: Support and revenues: Federal and state financial assistance $ 882,345 $ 1,017,686 Private foundation and other contributions 770, ,904 Interest and investment income 4,585 7,891 Program service fees 10,106 5,347 Total support and revenues 1,667,351 1,645,828 Net assets released from restrictions - satisfied by meeting restrictions 119,959 93,376 Total unrestricted support and revenues 1,787,310 1,739,204 Expenses: Program services (1,357,488) (1,345,806) Management and general (233,277) (229,701) Fund development (178,608) (159,355) Total expenses (1,769,373) (1,734,862) Increase in unrestricted net assets 17,937 4,342 Changes in temporarily restricted net assets: Private foundation and other contributions 121,026 79,637 Interest and investment income 8,270 11,974 Net assets released from restrictions (119,959) (93,376) Increase (decrease) in temporarily restricted net assets 9,337 (1,765) Changes in permanently restricted net assets: Contributions 50 - Increase in permanently restricted net assets 50 - Change in net assets 27,324 2,577 Net assets at beginning of year 1,869,000 1,866,423 Net assets at end of year $ 1,896,324 $ 1,869,000 See. 4

6 Statements of Functional Expenses Years Ended August 31, 2012 and Management Management Program and Fund Program and Fund Services General Development Total Services General Development Total Salaries and wages $ 940,241 $ 141,435 $ 127,703 $ 1,209,379 $ 906,264 $ 137,780 $ 121,370 $ 1,165,414 Benefits and taxes 118,729 29,026 10, , ,755 42,406 11, ,927 Travel and transportation 44, ,789 45, ,153 Contract services and professional fees 36,023 23,677 4,359 64,059 34,210 23,186 1,478 58,874 Materials, books and supplies 31,933 12,091 28,739 72,763 41,023 6,085 17,704 64,812 Educational activities and programs 50, ,801 45, ,142 Telephone and utilities 32,237 6,787 1,606 40,630 41,907 5,570 3,516 50,993 Insurance 37,229 10,573 5,471 53,273 39,440 8,386 3,423 51,249 Depreciation and amortization 39, ,911 45, ,886 Bank fees - 6,966-6,966-5,813-5,813 Building and pool maintenance 19, ,826 35, ,603 Other expenses 5,896 2,722-8,618 6, ,996 Totals $ 1,357,488 $ 233,277 $ 178,608 $ 1,769,373 $ 1,345,806 $ 229,701 $ 159,355 $ 1,734,862 See. 5

7 Statements of Cash Flows Years Ended August 31, 2012 and Operating activities: Change in net assets $ 27,324 $ 2,577 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 39,911 45,886 Realized and unrealized gains on investments (5,384) (11,328) Changes in operating assets and liabilities: Grants and pledges receivable 2,844 29,456 Prepaid insurance (5,459) (4,035) Other current assets (411) 601 Deposits 50 4,108 Accounts payable and accrued expenses ,704 Deferred income Net cash provided by operating activities 60,690 86,969 Investing activities: Purchase of property and equipment (7,938) (10,800) Proceeds from the sale of investments 1,013, ,117 Purchase of investments (986,410) (843,940) Net cash provided by (used in) investing activities 18,846 (106,623) Increase (decrease) in cash and cash equivalents 79,536 (19,654) Cash and cash equivalents at beginning of year 942, ,877 Cash and cash equivalents at end of year $ 1,021,759 $ 942,223 See. 6

8 Note 1 - Organization and summary of significant accounting policies: Organization: Leadership, Education and Athletics in Partnership, Inc. (the "Organization") was created in 1992 to harness the power of young people from challenging urban neighborhoods to change their lives and the lives of others. As described in the Organization's Charter, it develops leaders through mentorship and experiential learning around education, athletics and community. The Organization works with youth and children ages 5-23 from the local community and hires, trains, guides and supervises college and high school counselors to run year-round after-school and summer programs for young children. The program provides children with engaging and creative year-round academic and social development programs and youth role models and provides counselors with the support and guidance to excel in their work as teachers and mentors for children, in their own education and professional lives and in their leadership abilities. Basis of presentation: The accompanying financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. The financial statements report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. They are described as follows: Unrestricted - Net assets that are not subject to explicit donor-imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of the Board of Directors or may otherwise be limited by contractual agreement with outside parties. Temporarily Restricted - Net assets whose use by the Organization is subject to either explicit donor-imposed stipulations or to those imposed by operation of law, which can be fulfilled by actions of the Organization pursuant to those stipulations or that expire by the passage of time. Permanently Restricted - Net assets subject to explicit donor-imposed stipulations that they be maintained permanently by the Organization and stipulate the use of income and/or appreciation as temporarily restricted based on donor imposed stipulations or by operation of law. Cash and cash equivalents: The Organization considers all short-term, highly liquid investments with a maturity of three months or less when acquired to be cash equivalents. Cash equivalents include money market funds which are readily convertible to cash, and are stated at cost which approximates fair value. Cash equivalents as of August 31, 2012 and 2011 were $826,578 and $776,234, respectively. 7

9 Investments: Investments consist of mutual funds that invest in equity securities that have readily determinable fair values and investments in debt securities which are reported at fair value. Investments also include certificates of deposit which are recorded at amortized cost. Gains and losses are included in the statements of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by donor stipulation or by operation of law. Mutual fund investments are managed by the Community Foundation of Greater New Haven ("CFGNH"). Endowment and spending policy: The Organization's endowment consists of individual funds established for the support of the Organization's operating budget. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Investment Return Objectives, Risk Parameters and Strategies. The Organization invests its portfolio with the CFGNH and, as such, follows the CFGNH's investment policy. The CFGNH's investment policy follows a total return approach to investing. This investment approach strives to balance income and potential for capital appreciation so that both components can contribute to the long-term total return of the Organization's pooled investment portfolio. Spending Policy. Since the Organization invests its portfolio with the CFGNH, it also follows the CFGNH spending policy, which determines the amount that will be available each year for the support of the Organization's operating budget. The spending formula is designed to minimize the impact of market fluctuations and provide for adjustments to spending in favorable and unfavorable markets. It applies to all funds, with the exception of portions of funds that represent non-liquid assets, funds that hold income generating investments and where gift instruments specifically provide for distributions of other amounts. The investment and spending policy guidelines are designed to operate in concert in order to provide a significant and stable flow of funds over the short-term to provide resources to meet current operating needs and, at the same time, maintain the purchasing power of the funds over the long-term. Property and equipment: The Organization capitalizes expenditures for property and equipment in excess of $5,000 and for software in excess of $500. Property and equipment are recorded at cost and include expenditures which materially increase values or extend useful lives. Upon disposition or retirement of property and equipment, the cost and related accumulated depreciation and amortization are eliminated from the respective accounts and the resulting gain or loss is included in the statement of activities. Expenditures in the nature of normal repairs and maintenance are charged to operations as incurred. 8

10 Depreciation of property and equipment is computed using the straight-line method over the estimated useful lives of the assets. Leasehold improvements are amortized over the shorter of the term of the lease agreement or estimated useful lives of the assets. Estimated lives for financial reporting purposes are as follows: Asset Recreation field and improvements Furniture and fixtures Vehicles Leasehold improvements Estimated Lives 15 years 3-7 years 3 years years The Organization reviews long-lived assets for impairment using an undiscounted cash flow method whenever events or circumstances indicate the carrying value of an asset may not be recoverable. There were no impairment losses related to long-lived assets during the years ended August 31, 2012 and Revenue recognition: Government grants and deferred income: The Organization receives various grants to provide educational, leadership and academic development to children. These grants are generally on a cost reimbursement basis, including recoverable overhead. Revenues from grants are deemed earned and recognized in the statements of activities when expenditures are made for the purpose specified. Revenues are deferred if the Organization has received grants, but the funds have not yet been expended for the purpose specified. Contributions: Contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statements of activities as net assets released from restrictions. Program service fees: Program service fees are recognized as revenue in the period in which the related services are provided. Donated services: A substantial number of individuals donate their time to programs or as board members. Such donated services have not been quantified and recorded in the financial statements. 9

11 Allowance for receivables: Allowances for grants and pledges receivable are determined by management based on an assessment of their collectibility. Management considers past history, current economic conditions and overall viability of the third party. Receivables are written-off only when management believes amounts will not be collected. Receivables are considered past due based on the invoice or pledge date. As of August 31, 2012 and 2011, there were no allowances required. Expense allocation: The cost of providing various program and supporting services have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the program and supporting services benefited. Income taxes: The Organization is exempt from Federal income taxes under the provisions of Internal Revenue Code (the "Code") Section 501(c)(3). However, certain operations of the Organization may qualify as unrelated business taxable income and to the extent that these operations generate income, they will be subject to Federal and state taxes. The Organization has no unrecognized tax benefits at August 31, 2012 and The Organization's Federal and state information returns prior to fiscal year 2009 are closed and management continually evaluates expiring statutes of limitations, audits, proposed settlements, changes in tax law and new authoritative rulings. If the Organization had unrelated business income taxes, it would recognize interest and penalties associated with any tax matters as part of the income tax provision and include accrued interest and penalties with the related tax liability in the statements of financial position. 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: The Organization has evaluated subsequent events through January 23, 2013, which is the date the financial statements were available to be issued. Note 2 - Concentrations of credit risk: Depository accounts and investments: Financial instruments which potentially subject the Organization to concentrations of credit risk consist primarily of cash, cash equivalents and investments. The Organization maintains its cash and cash equivalents with high-credit quality financial institutions. At times, such amounts may exceed Federally insured limits. The Organization's mutual fund investments are spread over a diversified portfolio. This investment policy limits the Organization's exposure to concentrations of credit risk. 10

12 Funding sources: A large concentration of grants are received from Federal and state agencies. Because all grants are evidenced by signed contracts, management believes there is negligible credit risk associated with these amounts and, therefore, no allowance for doubtful accounts is considered necessary. However, any loss or reduction of major grants from these funding sources could have significant impact on the Organization's financial position and program services. The following grantor agencies provided a significant percentage of the Organization's total support and revenue for the years ended August 31, 2012 and 2011: 2012 Revenue 2012 Receivable 2011 Revenue 2011 Receivable Granting Agency State of Connecticut Department of Education $ 751,343 $ 115,861 $ 91,268 $ - Office of Policy and Management ,134 - United States Department of Education ,336 40,836 Note 3 - Fair value measurements: The Organization values its financial assets and liabilities based on the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. In order to increase consistency and comparability in fair value measurements, a fair value hierarchy was established that prioritizes observable and unobservable inputs used to measure fair value into three broad levels, which are described below: Level 1: Quoted prices (unadjusted) in active markets that are accessible at the measurement date for identical assets or liabilities. The fair value hierarchy gives the highest priority to Level 1 inputs. Level 2: Observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets or model-derived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3: Unobservable inputs are used when little or no market data is available. The fair value hierarchy gives the lowest priority to Level 3 inputs. In determining fair value, the Organization utilizes valuation techniques that maximize the use of observable inputs and minimize the use of unobservable inputs to the extent possible as well as considers counterparty credit risk in its assessment of fair value. 11

13 The Organization invests its endowment and certain temporarily restricted assets at CFGNH, a non-profit public foundation established for the pooling of endowment resources of local charitable organizations, trusts and individuals. The Organization has placed its investments with CFGNH in the amounts of $120,031 and $118,984 at August 31, 2012 and 2011, respectively. CFGNH provides professionally managed investment funds to meet the investment needs of not-for-profits in the greater New Haven area. The following is a summary of investments, by type, as of August 31: 2012 Level 1 Level 2 Level 3 Total CFGNH $ - $ 120,031 $ - $ 120,031 Certificate of deposit 324, ,846 $ - $ 444,877 $ - $ 444, Level 1 Level 2 Level 3 Total CFGNH $ - $ 118,984 $ - $ 118,984 Certificate of deposit 347, ,293 $ - $ 466,277 $ - $ 466,277 For the valuation of funds invested in CFGNH, the Organization used net asset value as a practical expedient to measure the fair value of its investments. There are no holding periods or restrictions on the redemption of the investment. The Organization can redeem all the investments on the measurement date at the net asset value and, therefore, has classified these investments as Level 2. There are also no unfunded commitments. The certificate of deposit is designated as a Level 2 instrument and the valuation was obtained from readily-available pricing sources for comparable instruments. There have been no changes in valuation techniques and related inputs used at August 31, 2012 and The Organization's policy is to recognize transfers in and transfers out of the various levels as of the actual date of the event or change in circumstance that caused the transfer. There were no transfers during the years ended August 31, 2012 and The preceding methods may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Organization believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. 12

14 The following summarizes the carrying value of investments as of August 31, 2012 and 2011: CFGNH: Mutual funds - permanently restricted $ 80,226 $ 80,176 Mutual funds - temporarily restricted 26,147 25,592 Mutual funds - temporarily restricted by operation of law 13,658 13,216 Certificates of deposit 324, ,293 $ 444,877 $ 466,277 The following schedule summarizes the investment return in the statements of activities for the years ended August 31, 2012 and 2011: Interest and dividend income $ 8,901 $ 9,587 Investment fee (1,430) (1,050) Realized gains (losses) on investments (1,056) 3,054 Unrealized gains on investments 6,440 8,274 Total return on investments $ 12,855 $ 19,865 Note 4 - Operating lease commitments: The Organization leases its facilities from the Housing Authority for the City of New Haven under a noncancelable lease that expires in October The lease is renewable for two additional five year periods. The annual lease cost is $1 and as it is not practicable to estimate the fair value rental of the facilities, no contributions or rental expense has been recorded for the excess of the fair value over the actual expense. The Organization leases office equipment under an operating lease expiring in May Monthly lease payments are $184. Total rental expense was $647 in fiscal year Future commitments under the lease in each of the years subsequent to August 31, 2012 are as follows: Year Ending August 31, Amount 2013 $ 2, , , , ,656 Total $ 10,488 13

15 Note 5 - Temporarily restricted net assets: As of August 31, 2012 and 2011, temporarily restricted net assets are available for the following purposes: LEAP for the Future Fund $ 113,075 $ 113,075 Bovilsky Scholarship 26,147 25,592 Unappropriated earnings on endowment 13,658 13,216 Athletics and Saturday building use 8,340 - $ 161,220 $ 151,883 Note 6 - Endowment: The Organization's Board of Directors has interpreted the Connecticut Uniform Prudent Management of Institutional Funds Acts ("CTUPMIFA") as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Board of Directors in a manner consistent with the standard of prudence prescribed by CTUPMIFA. In accordance with CTUPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: (1) the duration and preservation of the various funds, (2) the purposes of the Organization and donor-restricted endowment funds, (3) general economic conditions, (4) the possible effect of inflation and deflation, (5) the expected total return from income and the appreciation of investments, (6) other resources of the Organization and (7) the Organization's investment policies. Endowment net asset composition by type of fund as of August 31, 2012 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Donor-restricted endowment funds $ - $ 13,658 $ 80,226 $ 93,884 14

16 Changes in endowment net assets for the year ended August 31, 2012 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ - $ 13,216 $ 80,176 $ 93,392 Investment income - 2,258-2,258 Net realized and unrealized appreciation - 4,213-4,213 Contributions Amounts appropriated for expenditure - (5,041) - (5,041) Other changes - fees - (988) - (988) Endowment net assets, end of year $ - $ 13,658 $ 80,226 $ 93,884 Endowment net asset composition by type of fund as of August 31, 2011 was as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Donor-restricted endowment funds $ - $ 13,216 $ 80,176 $ 93,392 Changes in endowment net assets for the year ended August 31, 2011 was as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ - $ 6,905 $ 80,176 $ 87,081 Investment income - 3,021-3,021 Net realized and unrealized appreciation - 8,953-8,953 Amounts appropriated for expenditure - (5,007) - (5,007) Other changes - fees - (656) - (656) Endowment net assets, end of year $ - $ 13,216 $ 80,176 $ 93,392 Note 7 - Pension plan: The Organization maintains a 403(b) retirement plan that covers all employees who meet a minimum set of requirements. The plan allows the Organization to make a discretionary match of each employee's contributions to a maximum of 25% of the first $800 contributed. Total pension plan expense amounted to $600 and $400 in 2012 and 2011, respectively. 15

17 Note 8 - LEAP for the Future Funds: During the year ended August 31, 2006, the Board commenced the "LEAP for the Future Fund" campaign. The goal of the campaign is to raise a minimum of $1.5 million operating reserve to provide resources to: (1) fund ongoing capital improvements to the fifteen thousand square foot Roslyn Milstein Meyer LEAP Community Center, (2) manage operational cash flow and (3) stabilize and sustain the program during periods of uncertainty related to funding cutbacks. As of August 31, 2012 and 2011, the fund includes the following: Board Designated $ 1,250,000 $ 1,250,000 Donor Designated 113, ,075 $ 1,363,075 $ 1,363,075 Note 9 - Contingencies: Certain claims arising in the ordinary course of business have been filed or are pending against the Organization. In the opinion of management, all such matters are without merit or, if disposed of unfavorably, would not have material adverse effects on the Organization's financial position or results of operations. 16