WINTER PARK LIBRARY ASSOCIATION, INC. Winter Park, Florida FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended September 30, 2013

Transcription

1 Winter Park, Florida FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended

2 CONTENTS Independent Auditors Report 1 Financial Statements: Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6 Independent Auditors Report on the Supplementary Information 14 Supplementary Information: Schedule of Expenses 15

3 Independent Auditors Report To the Board of Trustees Winter Park Library Association, Inc. Winter Park, Florida We have audited the accompanying financial statements of Winter Park Library Association, Inc. (the Library ) (a nonprofit organization), which comprise the statement of financial position as of, and the related statements of activities 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 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. Auditors 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 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 auditors consider internal control relevant to the Library 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 Library 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 qualified audit opinion. 1

4 To the Board of Trustees Winter Park Library Association, Inc. Basis for Qualified Opinion Limited accounting controls are exercised over cash receipts prior to the initial entry of such receipts in the accounting records. We were unable to obtain sufficient appropriate audit evidence about the amounts recognized for cash receipts collected by the Library for the year ended. Consequently, we were unable to determine whether any adjustments to those amounts were necessary. Qualified Opinion In our opinion, except for the possible effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements referred to above present fairly, in all material respects, the financial position of Winter Park Library Association, Inc. as of, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. a Orlando, Florida January 9,

5 Statement of Financial Position Assets Cash $ 70,253 Investments (Notes 3 and 4) 5,061,166 Other Receivables 2,696 Prepaid Expenses 16,584 Property and Equipment, net (Note 5) 135,993 Collections of Materials (Notes 1 and 2) - Total assets $ 5,286,692 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses $ 117,263 Net Assets: Unrestricted 1,033,797 Temporarily restricted (Note 7) 16,142 Permanently restricted (Note 8) 4,119,490 Total net assets 5,169,429 Total liabilities and net assets $ 5,286,692 See accompanying notes. 3

6 Statement of Activities Year Ended Temporarily Permanently Unrestricted Restricted Restricted Total Support, Revenues, and Gains: Support: City of Winter Park $ 1,901,560 $ - $ - $ 1,901,560 Contributors, legacies, bequests, and grants 420,244 44,802 47, ,485 Special events, net 61, ,027 Revenues and gains: Non-resident registration 7, ,918 Overdue fines 58, ,249 Photocopy income 5, ,265 Community room rental 11, ,306 Institute of Life Long Learning 9, ,424 Boat decals 5, ,709 Miscellaneous income 12, ,620 Investment income 134, ,944 Realized gain on sale of investments 96, ,214 Unrealized gain on investments 315, ,595 Net assets released from restrictions: Satisfaction of purpose restrictions 78,376 (78,376) - - Total support, revenues, and gains 3,118,451 (33,574) 47,439 3,132,316 Expenses: Program services: Library services 2,116, ,116,186 Cost of materials 262, ,870 Supporting services: Management and general 333, ,495 Total expenses 2,712, ,712,551 Increase (Decrease) in Net Assets 405,900 (33,574) 47, ,765 Net Assets, beginning of year 627,897 49,716 4,072,051 4,749,664 Net Assets, end of year $ 1,033,797 $ 16,142 $ 4,119,490 $ 5,169,429 See accompanying notes. 4

7 Statement of Cash Flows Year Ended Cash Flows From Operating Activities: Cash received from supporters and customers $ 636,795 Cash received from City of Winter Park grant 1,901,560 Cash paid to suppliers and employees (2,464,644) Investment income received 90,390 Net cash provided by operating activities 164,101 Cash Flows From Investing Activities: Net decrease in money market funds 17,819 Proceeds from sale of investments 1,957,692 Purchases of investments (1,856,687) Purchases of property and equipment (93,646) Purchases of collections of materials (262,870) Net cash used in investing activities (237,692) Cash Flows From Financing Activities: Contributions received for endowments 47,439 Net Decrease in Cash (26,152) Cash, beginning of year 96,405 Cash, end of year $ 70,253 Reconciliation of Increase in Net Assets to Net Cash Provided by Operating Activities: Increase in net assets $ 419,765 Adjustments to reconcile increase in net assets to net cash provided by operating activities: Contributions received for endowments (47,439) Cost of collections of material 262,870 Depreciation 21,823 Loss on retirement of equipment 707 Dividend reinvestments (44,554) Realized gain on sale of investments (96,214) Unrealized gain on investments (315,595) Changes in assets and liabilities: Other receivables (476) Prepaid expenses (5,496) Accounts payable and accrued expenses (31,290) Total adjustments (255,664) Net cash provided by operating activities $ 164,101 See accompanying notes. 5

8 Notes to Financial Statements 1. Summary of Significant Accounting Policies: Nature of Operations Winter Park Library Association, Inc. (the Library ) operates a public library in Winter Park, Florida. The Library obtains its support primarily from grants provided by the City of Winter Park, Florida. Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Library and changes therein are classified and reported as follows: Unrestricted net assets Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Library and/or the passage of time. When a restriction is satisfied or expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Library. Use of Estimates In preparing the financial statements, management is required to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Investments Investments are carried at fair value. Fair value is 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. Property and Equipment Property and equipment is carried at cost less accumulated depreciation. Depreciation is recorded using the straightline method over estimated useful lives of 5 to 40 years. Contributed assets are recorded at their estimated fair value at the date of contribution. Such contributions are reported as unrestricted support unless the donor has restricted the asset to a specific purpose. Maintenance and repairs are charged to expenses as incurred. Betterments and renewals are charged to property and equipment accounts. The Library capitalizes applicable expenditures over $500. When items are replaced or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to income. 6

9 Notes to Financial Statements Continued 1. Summary of Significant Accounting Policies Continued: Collections of Materials The collections of materials, which were acquired through purchases and contributions since the Library s inception, are not recognized as assets on the statement of financial position. Purchases of materials are recorded as decreases in unrestricted net assets in the year in which the items are acquired, or as decreases in temporarily or permanently restricted net assets if the assets used to purchase the items are restricted by donors. Proceeds from deaccessions or insurance recoveries are reflected as increases in the appropriate net asset classes. Contributions Contributions, including unconditional promises to give, are recorded as made. All contributions are reported as an increase in unrestricted net assets unless specifically restricted by the donor. 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 is satisfied or expires, temporarily restricted net assets are reclassified to unrestricted net assets. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Unconditional promises to give due within one year are recorded at their net realizable value. Unconditional promises to give due after one year are reported at the present value of their net realizable value, using risk-free interest rates applicable to the years in which the promises are to be received. The Library recognizes contributions of services if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, which are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. For the year ended, no amounts have been reflected in the financial statements for donated services. The Library has paid for those services requiring specific expertise. Income Taxes The Library is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. Thus, the Library is not subject to corporate income taxes except for taxes on unrelated business income. Accounting principles generally accepted in the United States of America prescribe requirements for the recognition of income taxes in financial statements, and the amounts recognized are affected by income tax positions taken by the Library in its tax returns. The Library s status as an exempt organization is defined as an income tax position under these requirements. While management believes it has complied with the Internal Revenue Code, the sustainability of some income tax positions taken by the Library in its tax returns may be uncertain. There are minimum thresholds of likelihood that uncertain tax positions are required to meet before being recognized in the financial statements. Management does not believe that the Library has any material uncertain tax positions at. In the event interest and penalties were due relating to an unsustainable tax position, they would be treated as a component of income tax expense. The Library s federal income tax returns are subject to examination by the Internal Revenue Service. At, the fiscal years 2010 through 2013 federal tax returns are subject to examination. Subsequent Events: Management has evaluated subsequent events through January 9, 2014, the date which the financial statements were available to be issued. 7

10 Notes to Financial Statements Continued 2. Collections of Materials: The Library s collections of materials consist of books, microforms, audio/visual, and electronic materials that are held for educational and research purposes. Each of the items is cataloged, preserved, and cared for, and activities verifying their existence and assessing their condition are performed continuously. 3. Investments: Investments at, consists of the following: Cost Fair Value Money market funds $ 8,955 $ 8,955 Mutual funds: Fixed income funds 1,531,601 1,495,201 Equity income funds 1,727,096 2,183,534 Real estate investment trust fund 69,713 77,053 Equities 1,115,661 1,296,423 $ 4,453,026 $ 5,061, Fair Value Measurements: Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ) 820, Fair Value Measurement and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means. 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 Inputs to the valuation methodology are unobservable and significant to the fair value measurement (including the Library s own assumptions in determining the fair value of investments). The asset s or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. 8

11 Notes to Financial Statements Continued 4. Fair Value Measurements Continued: Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at. Money market funds: Valued at transaction price. Carrying value approximates fair value. Fixed income funds: Valued at the net asset value of shares held by the Library at year end. Equity income funds: Valued at the net asset value of shares held by the Library at year end. Equities: Valued at quoted market price of shares held by Library at year end. Real estate investment trust fund: Valued at the net asset value of shares held by the Library of comparable securities. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Library 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 table sets forth by level, within the fair value hierarchy, the Library s assets at fair value as of : Level 1 Level 2 Total Money market funds $ 8,955 $ - $ 8,955 Fixed income funds: Short term bond funds 581, ,824 Intermediate term bond funds 806, ,962 International bond funds 106, ,415 Equity income funds: Small cap blended funds 44,583-44,583 Medium cap blended funds 50,728-50,728 Large cap blended funds 884, ,340 Large cap growth funds 351, ,546 Large cap value funds 852, ,337 Equities: Basic materials 166, ,865 Consumer goods 155, ,295 Financial 129, ,657 Healthcare 184, ,758 Industrial goods 146, ,282 Technology 217, ,591 Services 211, ,698 Utilities 84,277-84,277 Real estate investment trust fund - 77,053 77,053 Total investments at fair value $ 4,984,113 $ 77,053 $ 5,061,166 9

12 Notes to Financial Statements Continued 5. Property and Equipment: A summary of property and equipment at, is as follows: Building improvements $ 103,915 Furniture and equipment 556, ,323 Less accumulated depreciation 524,330 $ 135, Building Lease: The Library conducts its operations from space leased from the City of Winter Park, Florida (the City ). The lease, which is classified as an operating lease, calls for lease payments of $1 per year and expires in August The Library s use of the space is conditioned upon limiting its activities in the space to uses that qualify under the lease agreement. The contract allows the City to charge rent of $550,000 if they provide sufficient funding to the Library to cover the rent. When such funding is not provided by the City, the premises can be used by the Library without charge. During the year ended, the City provided funding, and rent of $550,000 was paid by the Library. If the Library continues to meet the conditions of the lease, and the City does not provide rent funding, contributions to be recognized in the future for the free use of the Library premises would be as follows: Next year $ 550,000 Two to five years 2,200,000 More than five years 1,054,167 $ 3,804, Temporarily Restricted Net Assets: Temporarily restricted net assets at, consists of cash held for various purpose restrictions. 8. Permanently Restricted Net Assets: Permanently restricted net assets at, consists of investments held in perpetuity for endowments. Investment income on the endowments is temporarily restricted for acquisition of collections of materials. 10

13 Notes to Financial Statements Continued 9. Concentrations: The Library receives a substantial amount of its support from the City of Winter Park, Florida. A significant reduction in the level of this support, if this were to occur, may have an effect on the Library s programs and activities. Cash is maintained in one financial institution in amounts that at times exceed federally insured limits. Thus, at those times, the Library has a concentration of credit risk in regards to cash. See Note 3 for information on investments held. 10. Defined Contribution Plan: The Library sponsors a 401(k) plan which covers substantially all of its employees. Contributions to the 401(k) plan were based on a matching of participating employees compensation up to 4% and totaled $40,056 for the year ended. 11. Endowment: The Library s endowment consists of approximately 33 individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Board of Trustees of the Library has interpreted the Florida Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) as requiring the preservation of the original gift amount of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Library classifies as permanently restricted net assets (a) the original value of the 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 Library in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Library considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: a. The duration and preservation of the endowment fund; b. The purposes of the Library and the donor-restricted endowment fund; c. General economic conditions; d. The possible effect of inflation or deflation; e. The expected total return from income and the appreciation of investments; f. Other resources of the Library; and g. The investment policies of the Library. 11

14 Notes to Financial Statements Continued 11. Endowment Continued: Interpretation of Relevant Law Continued Endowment net assets composition by type of fund at, consists of the following: Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ - $ - $ 4,119,490 $ 4,119,490 Board-designated endowment funds 941, ,676 Total endowment net assets $ 941,676 $ - $ 4,119,490 $ 5,061,166 Changes in endowment net assets for the year ended, consist of the following: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ 651,576 $ - $ 4,072,051 $ 4,723,627 Investment income 147,940 83, ,158 Unrealized gains 201, , ,595 Contributions 10,285-47,439 57,724 Appropriation of endowment assets for expenditures (70,043) (196,895) - (266,938) Endowment net assets, end of year $ 941,676 $ - $ 4,119,490 $ 5,061,166 12

15 Notes to Financial Statements Continued 11. Endowment Continued: Interpretation of Relevant Law Continued Description of amounts classified as temporarily restricted net assets and permanently restricted net assets (endowment only) at, consists of the following: Temporarily Restricted Net Assets: Accumulated investment income not appropriated for expenditure $ - Permanently Restricted Net Assets: The portion of perpetual endowment funds that is required to be retained permanently by explicit donor stipulation $ 4,119,490 Return Objectives and Risk Parameters The Library has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowments while seeking to preserve the fair value of the original gift as of the gift date of the endowment assets. Endowment assets include those assets of donorrestricted funds that the Library must hold in perpetuity or for a donor-specified period(s) as well as boarddesignated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is conservative and assumes a minimal level of investment risk. The Library s goal is for its endowment fund to provide a rate of return over a market cycle to exceed the greater of 7.5% or the rate of inflation (as measured by the Consumer Price Index) plus 4%. Strategies Employed for Achieving Objectives To satisfy its investment and rate of return objectives, the Library relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Library targets a diversified asset allocation that places a greater emphasis on equitybased investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Library, at the discretion of the Board of Trustees, appropriates funds to support the various programs only from the investment earnings of the endowment fund. This is consistent with the Library s objective to preserve the fair value of the original gift as of the gift date of the endowment assets held in perpetuity or for a specified term, as applicable. 13

16 Independent Auditors Report on the Supplementary Information The Board of Trustees Winter Park Library Association, Inc. Winter Park, Florida We have audited the financial statements of Winter Park Library Association, Inc. (the Library ) as of and for the year ended, and our report thereon dated January 9, 2014, which appears on pages 1 and 2, was qualified for the effects of any adjustments that might have resulted had we been able to obtain sufficient appropriate audit evidence about the amounts recognized for cash receipts collected by the Library. Our audit was performed for the purpose of forming an opinion on the financial statements as a whole. The schedule of expenses is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, except for the effects, if any, of not being able to obtain sufficient appropriate audit evidence about the amounts recognized for cash receipts collected by the Library on the schedule of expenses, the information is fairly stated in all material respects in relation to the financial statements as a whole. We also have previously audited, in accordance with auditing standards generally accepted in the United States of America, the financial statements of the Library as of September 30, 2012, which include the statements of financial position, activities, and cash flows for the year ended September 30, 2012 (none of which is presented herein). We expressed a qualified opinion on those financial statements because we had not been able to obtain sufficient appropriate audit evidence about the amounts recognized for cash receipts collected by the Library. That audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of expenses is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the 2012 financial statements. The information has been subjected to the auditing procedures applied in the audit of those financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, except for the effects, if any, of not being able to obtain sufficient appropriate audit evidence about the amounts recognized for cash receipts collected by the Library, the schedule of expenses is fairly stated in all material respects in relation to the financial statements from which it has been derived. a Orlando, Florida January 9,

17 Schedule of Expenses Year Ended Total Comparative Library Cost of Management Expenses Totals Services Materials and General for 2013 for 2012 Salaries $ 969,786 $ - $ 258,900 $ 1,228,686 $ 1,206,727 Payroll Taxes 74,636-20,000 94,636 92,017 Group Insurance 119,134-33, , , (k) Employer Contribution 29,656-10,400 40,056 41,377 Workers Compensation 3, ,752 3,791 Unemployment Compensation 12, ,787 12,805 Service Charges 5, ,138 5,234 Other Professional Services 39, ,130 4,926 Accounting and Auditing - - 9,200 9,200 9,200 Other Contractual Services 62, ,442 64,478 Collection Fees 3, ,376 3,366 Training and Travel 4, , Auto Telephone 10, ,180 7,871 Postage 9, ,392 8,431 Water 3, ,542 3,919 Electric 50, ,231 51,652 Building Rentals 550, , ,000 Equipment Rentals 1, ,702 1,702 Other Insurance 1, ,401 1,469 Maintenance Contracts 49, ,463 57,202 Repairs Equipment Printing 4, ,465 4,547 Community Relations 30, ,476 22,155 Miscellaneous 1, , Office Equipment 2, ,716 11,531 Paper Products 2, ,958 3,214 Office Supplies - - 1,195 1, General Operating Supplies 50, ,325 52,133 Memberships 1, , Books and Periodicals - 165, , ,706 Software - 39,895-39,895 50,096 Audio Visual Material - 57,268-57,268 57,612 Depreciation 21, ,823 19,717 $ 2,116,186 $ 262,870 $ 333,495 $ 2,712,551 $ 2,657,233 15