Leadership, Education and Athletics in Partnership, Inc. Financial Statements and Independent Auditor's Report. August 31, 2013 and 2012

Transcription

1 Leadership, Education and Athletics in Partnership, Inc. Financial Statements and Independent Auditor's Report August 31, 2013 and 2012

2 Index Page Independent Auditor's Report 2-3 Statements of Financial Position 4 Statements of Activities 5 Statements of Functional Expenses 6 Statements of Cash Flows

3 Independent Auditor's Report To the Board of Directors Leadership, Education and Athletics in Partnership, Inc. Report on the Financial Statements We have audited the accompanying financial statements of Leadership, Education and Athletics in Partnership, Inc. (the "Organization"), which comprise the statements of financial position as of August 31, 2013 and 2012, and the related statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the financial statements. 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. Auditor's Responsibility 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 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 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. 2

4 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, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 3, 2014, 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 the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering Leadership, Education and Athletics in Partnership, Inc.'s internal control over financial reporting and compliance. C Glastonbury, Connecticut January 3,

5 Statements of Financial Position August 31, 2013 and 2012 Assets Current assets: Cash and cash equivalents $ 844,196 $ 1,021,759 Grants and pledges receivable 217, ,760 Prepaid insurance 34,253 23,468 Other current assets Total current assets 1,095,784 1,195,487 Property and equipment: Recreation field and improvements 35,865 35,865 Furniture and fixtures 116, ,235 Vehicles 110,927 89,327 Leasehold improvements 543, , , ,863 Less accumulated depreciation and amortization (485,503) (597,433) 321, ,430 Other assets: Deposits 1,265 1,200 Investments 522, , , ,077 Total assets $ 1,940,453 $ 1,962,994 Liabilities and Net Assets Current liabilities: Accounts payable and accrued expenses $ 33,443 $ 41,765 Deferred income 28,090 24,905 Total current liabilities 61,533 66,670 Commitments Net assets: Unrestricted: Designated for operating reserve 1,250,000 1,250,000 Undesignated 378, ,878 1,628,105 1,654,878 Temporarily restricted 170, ,220 Permanently restricted 80,226 80,226 Total net assets 1,878,920 1,896,324 Total liabilities and net assets $ 1,940,453 $ 1,962,994 See. 4

6 Statements of Activities Years Ended August 31, 2013 and Changes in unrestricted net assets: Support and revenues: Federal and state financial assistance $ 891,026 $ 882,345 Private foundation and other contributions 667, ,315 Interest and investment income 1,232 3,155 Program service fees 14,906 10,106 Total support and revenues 1,574,599 1,665,921 Net assets released from restrictions - satisfied by meeting restrictions 95, ,959 Total unrestricted support and revenues 1,670,582 1,785,880 Expenses and losses: Program services (1,219,348) (1,357,488) Management and general (235,290) (231,847) Fund development (234,536) (178,608) Loss on disposal of equipment (8,181) - Total expenses and losses (1,697,355) (1,767,943) (Decrease) increase in unrestricted net assets (26,773) 17,937 Changes in temporarily restricted net assets: Private foundation and other contributions 91, ,026 Interest and investment income 14,207 8,270 Net assets released from restrictions (95,983) (119,959) Increase in temporarily restricted net assets 9,369 9,337 Changes in permanently restricted net assets: Contributions - 50 Increase in permanently restricted net assets - 50 Change in net assets (17,404) 27,324 Net assets at beginning of year 1,896,324 1,869,000 Net assets at end of year $ 1,878,920 $ 1,896,324 See. 5

7 Statements of Functional Expenses Years Ended August 31, 2013 and Management Management Program and Fund Program and Fund Services General Development Total Services General Development Total Salaries and wages $ 779,571 $ 142,419 $ 177,909 $ 1,099,899 $ 940,241 $ 141,435 $ 127,703 $ 1,209,379 Benefits and taxes 103,424 28,936 17, , ,729 29,026 10, ,358 Travel and transportation 42, ,019 44, ,789 Contract services and professional fees 47,823 27,117 4,206 79,146 36,023 23,677 4,359 64,059 Materials, books and supplies 29,903 10,164 23,901 63,968 31,933 12,091 28,739 72,763 Educational activities and programs 60, ,779 50, ,801 Telephone and utilities 31,933 3,566 4,753 40,252 32,237 6,787 1,606 40,630 Insurance 41,736 14,283 5,896 61,915 37,229 10,573 5,471 53,273 Depreciation and amortization 29, ,421 39, ,911 Bank fees - 6,386-6,386-5,536-5,536 Building and pool maintenance 47, ,199 19, ,826 Other expenses 4,976 2,419-7,395 5,896 2,722-8,618 Totals $ 1,219,348 $ 235,290 $ 234,536 $ 1,689,174 $ 1,357,488 $ 231,847 $ 178,608 $ 1,767,943 See. 6

8 Statements of Cash Flows Years Ended August 31, 2013 and Operating activities: Change in net assets $ (17,404) $ 27,324 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities: Depreciation and amortization 29,421 39,911 Loss on disposal of equipment 8,181 - Realized and unrealized gains on investments (9,976) (5,384) Changes in operating assets and liabilities: Grants and pledges receivable (67,575) 2,844 Prepaid insurance (10,785) (5,459) Other current assets 500 (411) Deposits (65) 50 Accounts payable and accrued expenses (8,322) 921 Deferred income 3, Net cash (used in) provided by operating activities (72,840) 60,690 Investing activities: Purchase of property and equipment (37,516) (7,938) Proceeds from the sale of investments 340,161 1,013,194 Purchase of investments (407,368) (986,410) Net cash (used in) provided by investing activities (104,723) 18,846 (Decrease) increase in cash and cash equivalents (177,563) 79,536 Cash and cash equivalents at beginning of year 1,021, ,223 Cash and cash equivalents at end of year $ 844,196 $ 1,021,759 See. 7

9 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 or to those imposed by operation of law. 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, 2013 and 2012 were $698,349 and $726,578, respectively. 8

10 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 statements of activities. Expenditures in the nature of normal repairs and maintenance are charged to operations as incurred. 9

11 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, 2013 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. 10

12 Allowance for receivables: Allowances for grants and pledges receivable are determined by management based on an assessment of their collectability. 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, 2013 and 2012, 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 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, 2013 and The Organization's Federal and state information returns prior to fiscal year 2010 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. Reclassifications: Certain prior year information has been reclassified to confirm to the current year presentation. Subsequent events: The Organization has evaluated subsequent events through January 3, 2014, which is the date the financial statements were available to be issued. 11

13 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. 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 agency provided a significant percentage of the Organization's total support and revenue for the years ended August 31, 2013 and 2012: 2013 Revenue 2013 Receivable 2012 Revenue 2012 Receivable Granting Agency State of Connecticut Department of Education $ 753,989 $ 143,100 $ 751,343 $ 115,861 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. 12

14 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. 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 $128,078 and $120,031 at August 31, 2013 and 2012, 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: 2013 Level 1 Level 2 Level 3 Total CFGNH $ - $ 128,078 $ - $ 128,078 Certificate of deposit 393, ,982 $ - $ 522,060 $ - $ 522, Level 1 Level 2 Level 3 Total CFGNH $ - $ 120,031 $ - $ 120,031 Certificate of deposit 324, ,846 $ - $ 444,877 $ - $ 444,877 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 of 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, 2013 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, 2013 and

15 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. The following summarizes the carrying value of investments as of August 31, 2013 and 2012: CFGNH: Mutual funds - permanently restricted $ 80,226 $ 80,226 Mutual funds - temporarily restricted 27,967 26,147 Mutual funds - temporarily restricted by operation of law 19,885 13,658 Certificates of deposit 393, ,846 $ 522,060 $ 444,877 The following schedule summarizes the investment return in the statements of activities for the years ended August 31, 2013 and 2012: Interest and dividend income $ 7,317 $ 7,471 Investment fee (1,854) (1,430) Realized gains (losses) on investments 2,513 (1,056) Unrealized gains on investments 7,463 6,440 Total return on investments $ 15,439 $ 11,425 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 $3,707 and $647 in fiscal years 2013 and 2012, respectively. Future commitments under the lease in each of the years subsequent to August 31, 2013 are as follows: Year Ending August 31, Amount 2014 $ 2, , , ,656 Total $ 8,280 14

16 Note 5 - Temporarily restricted net assets: As of August 31, 2013 and 2012, temporarily restricted net assets are available for the following purposes: LEAP for the Future Fund $ 113,075 $ 113,075 Bovilsky Scholarship 27,967 26,147 Unappropriated earnings on endowment 19,885 13,658 Athletics and Saturday building use 6,135 8,340 College tour 3,527 - $ 170,589 $ 161,220 Note 6 - Endowment: The Organization's Board of Directors has interpreted the Connecticut Uniform Prudent Management of Institutional Funds Act ("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, 2013 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Donor-restricted endowment funds $ - $ 19,885 $ 80,226 $ 100,111 15

17 Changes in endowment net assets for the year ended August 31, 2013 is as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ - $ 13,658 $ 80,226 $ 93,884 Investment income, net - 3,429-3,429 Net realized and unrealized appreciation - 7,800-7,800 Amounts appropriated for expenditure - (5,002) - (5,002) Endowment net assets, end of year $ - $ 19,885 $ 80,226 $ 100,111 Endowment net asset composition by type of fund as of August 30, 2012 was as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Donor-restricted endowment funds $ - $ 13,658 $ 80,226 $ 93,884 Changes in endowment net assets for the year ended August 30, 2012 was as follows: Temporarily Restricted Permanently Restricted Unrestricted Total Endowment net assets, beginning of year $ - $ 13,216 $ 80,176 $ 93,392 Investment income, net - 1,270-1,270 Net realized and unrealized appreciation - 4,213-4,213 Contributions Amounts appropriated for expenditure - (5,041) - (5,041) Endowment net assets, end of year $ - $ 13,658 $ 80,226 $ 93,884 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 $800 and $600 in 2013 and 2012, respectively. 16

18 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, 2013 and 2012, the fund includes the following: Board Designated $ 1,250,000 $ 1,250,000 Donor Designated 113, ,075 $ 1,363,075 $ 1,363,075 17