Leadership, Education and Athletics in Partnership, Inc. Report on Financial Statements. Years Ended August 31, 2011 and 2010

Transcription

1 Leadership, Education and Athletics in Partnership, Inc. Report on Financial Statements Years Ended August 31, 2011 and 2010

2 Index Report of Independent Public Accountants 2 Statements of Financial Position August 31, 2011 and Statements of Activities Years Ended August 31, 2011 and Statements of Functional Expenses Years Ended August 31, 2011 and Statements of Cash Flows Years Ended August 31, 2011 and Page Notes to Financial Statements

3 Report of Independent Public Accountants 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. (a nonprofit organization) as of August 31, 2011 and 2010, 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, 2011 and 2010, 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 3, 2012 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, 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. J Glastonbury, Connecticut January 3,

4 STATEMENTS OF FINANCIAL POSITION AUGUST 31, 2011 AND 2010 ASSETS Current assets: Cash and cash equivalents $ 942,223 $ 961,877 Grants and pledges receivable 152, ,060 Prepaid insurance 18,009 13,974 Other current assets Total current assets 1,112,925 1,158,601 Property and equipment, at cost: Recreation field and improvements 35,865 35,865 Furniture and fixtures 233, ,340 Vehicles 89,327 89,327 Leasehold improvements 552, , , ,168 Less accumulated depreciation and amortization (557,522) (563,679) 353, ,489 Other assets: Deposits 1,250 5,358 Investments 466, , , ,484 Total assets $ 1,933,855 $ 1,911,574 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable and accrued expenses $ 40,844 $ 21,140 Deferred income 24,011 24,011 Total current liabilities 64,855 45,151 Commitments and contingencies Net assets: Unrestricted: Designated for operating reserve 1,250,000 1,250,000 Undesignated 386, ,599 1,636,941 1,632,599 Temporarily restricted 151, ,648 Permanently restricted 80,176 80,176 Total net assets 1,869,000 1,866,423 Total liabilities and net assets $ 1,933,855 $ 1,911,574 See Notes to Financial Statements. 3

5 STATEMENTS OF ACTIVITIES YEARS ENDED AUGUST 31, 2010 AND Changes in unrestricted net assets: Support and revenues: Federal and state financial assistance $ 1,017,686 $ 883,875 Private foundation and other contributions 614, ,446 Loss on disposal of equipment - (364) Interest and investment income 7,891 14,590 Program service fees 5, Total support and revenues 1,645,828 1,559,479 Net assets released from restrictions - satisfied by meeting restrictions 93, ,805 Total unrestricted support and revenues 1,739,204 1,736,284 Expenses: Program services (1,345,806) (1,256,333) Management and general (229,701) (246,441) Fund development (159,355) (191,756) Total expenses (1,734,862) (1,694,530) Increase in unrestricted net assets 4,342 41,754 Changes in temporarily restricted net assets: Private foundation and other contributions 79, ,094 Interest and investment income 11,974 6,771 Net assets released from restrictions (93,376) (176,805) Decrease in temporarily restricted net assets (1,765) (36,940) Change in net assets 2,577 4,814 Net assets at beginning of year 1,866,423 1,861,609 Net assets at end of year $ 1,869,000 $ 1,866,423 See Notes to Financial Statements. 4

6 STATEMENTS OF FUNCTIONAL EXPENSES YEARS ENDED AUGUST 31, 2011 AND Management Management Program and Fund Program and Fund Services General Development Total Services General Development Total Salaries and wages $ 906,264 $ 137,780 $ 121,370 $ 1,165,414 $ 804,463 $ 148,192 $ 131,326 $ 1,083,981 Benefits and taxes 104,755 42,406 11, ,927 90,423 47,580 31, ,685 Travel and transportation 45, ,153 42, ,613 Contract services and professional fees 34,210 23,186 1,478 58,874 52,044 17,818 2,099 71,961 Materials, books and supplies 41,023 6,085 17,704 64,812 37,096 11,363 17,414 65,873 Educational activities and programs 45, ,142 63, ,807 Telephone and utilities 41,907 5,570 3,516 50,993 46,434 5,519 3,864 55,817 Insurance 39,440 8,386 3,423 51,249 34,508 8,822 5,322 48,652 Depreciation and amortization 45, ,886 44, ,221 Bank fees - 5,813-5,813-5,075-5,075 Building and pool maintenance 35, ,603 34, ,578 Other expenses 6, ,996 6,195 2,072-8,267 Totals $ 1,345,806 $ 229,701 $ 159,355 $ 1,734,862 $ 1,256,333 $ 246,441 $ 191,756 $ 1,694,530 See Notes to Financial Statements. 5

7 STATEMENTS OF CASH FLOWS YEARS ENDED AUGUST 31, 2011 AND Operating activities: Change in net assets $ 2,577 $ 4,814 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation and amortization 45,886 44,221 Loss on disposal of equipment Realized and unrealized gains on investments (11,328) (3,895) Changes in operating assets and liabilities: Grants and pledges receivable 29,456 (144,050) Prepaid insurance (4,035) 2,196 Other current assets 601 (400) Deposits 4,108 (2,958) Accounts payable and accrued expenses 19,704 2,789 Net cash provided by (used in) operating activities 86,969 (96,919) Investing activities: Purchase of property and equipment (10,800) - Proceeds from the sale of securities 748,117 1,097,127 Purchase of investments (843,940) (799,438) Net cash (used in) provided by investing activities (106,623) 297,689 (Decrease) increase in cash and cash equivalents (19,654) 200,770 Cash and cash equivalents, beginning of year 961, ,107 Cash and cash equivalents, end of year $ 942,223 $ 961,877 See Notes to Financial Statements. 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. Temporarily Restricted - Net assets whose use by the Organization is subject to either explicit donor-imposed stipulations or by operation of law that can be fulfilled by actions of the Organization 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, 2011 and 2010 were $776,234 and $770,177, respectively. 7

9 Note 1 - Organization and summary of significant accounting policies (continued): 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. 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 donorrestricted 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 donorrestricted 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. 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. 8

10 Note 1 - Organization and summary of significant accounting policies (continued): Endowment and spending policy (concluded): 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. 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 Estimated Lives Recreation field and improvements 15 years Furniture and fixtures 3-7 years Vehicles 3 years Leasehold improvements 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 longlived assets during the years ended August 31, 2011 and

11 Note 1 - Organization and summary of significant accounting policies (continued): 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. 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, 2011 and 2010, 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. 10

12 Note 1 - Organization and summary of significant accounting policies (concluded): 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, 2011 and The Organization's U.S. Federal and state information returns prior to fiscal year 2008 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 events and transactions for potential recognition or disclosure through January 3, 2012, 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. 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. 11

13 Note 2 - Concentrations of credit risk (concluded): Funding sources (concluded): The following grantor agencies provided a significant percentage of the Organization's total support and revenue for the years ended August 31, 2011 and 2010: Granting Agency 2011 Revenue 2011 Receivable 2010 Revenue 2010 Receivable Office of Policy and Management $ 498,134 $ - $ 743,144 $ 140,588 United States Department of Education 296,336 40, 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; quoted prices in inactive markets or modelderived valuations in which all significant inputs are observable or can be derived principally from or corroborated with observable market data. 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 $118,984 and $110,165 at August 31, 2011 and 2010, respectively. CFGNH provides professionally managed investment funds to meet the investment needs of not-forprofits in the greater New Haven area. 12

14 Note 3 - Fair value measurements (continued): The following is a summary of investments, by type, as of August 31: 2011 Level 1 Level 2 Level 3 Total CFGNH $ - $ 118,984 $ - $ 118,984 Certificate of deposit 347, ,293 $ - $ 466,277 $ - $ 466, Level 1 Level 2 Level 3 Total CFGNH $ - $ 110,165 $ - $ 110,165 Certificate of deposit 248, ,961 $ - $ 359,126 $ - $ 359,126 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 30, 2011 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. The following summarizes the carrying value of investments as of August 31, 2011 and 2010: CFGNH: Mutual funds - permanently restricted $ 80,176 $ 80,176 Mutual funds - temporarily restricted 25,592 23,084 Mutual funds - temporarily restricted by operation of law 13,216 6,905 Certificates of deposit 347, ,961 $ 466,277 $ 359,126 13

15 Note 3 - Fair value measurements (concluded): The following schedule summarizes the investment return in the statements of activities for the years ended August 31, 2011 and 2010: Interest and dividend income $ 9,587 $ 18,391 Investment fee (1,050) (925) Realized gains (losses) on investments 3,054 (34) Unrealized gains on investments 8,274 3,929 Total return on investments $ 19,865 $ 21,361 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 three 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. Note 5 - Temporarily restricted net assets: As of August 31, 2011 and 2010, temporarily restricted net assets are available for the following purposes: LEAP for the Future Fund $ 113,075 $ 113,075 Bovilsky Scholarship 25,592 23,084 Unappropriated earnings on endowment 13,216 6,905 Roslyn M. Meyer Community Center - 10,584 $ 151,883 $ 153,648 Note 6 - Endowment: Endowment net asset composition by type of fund as of August 31, 2011 is as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ - $ 13,216 $ 80,176 $ 93,392 14

16 Note 6 - Endowment (concluded): Changes in endowment net assets for the year ended August 31, 2011 is 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 Endowment net asset composition by type of fund as of August 31, 2010 was as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Donor-restricted endowment funds $ - $ 6,905 $ 80,176 $ 87,081 Changes in endowment net assets for the year ended August 31, 2010 was as follows: Unrestricted Temporarily Restricted Permanently Restricted Total Endowment net assets, beginning of year $ - $ 5,775 $ 80,176 $ 85,951 Investment income - 3,692-3,692 Net realized and unrealized depreciation - 3,079-3,079 Amounts appropriated for expenditure - (5,137) - (5,137) Other changes - fees - (504) - (504) Endowment net assets, end of year $ - $ 6,905 $ 80,176 $ 87,081 15

17 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 $400 and $600 in 2011 and 2010, respectively. 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, 2011 and 2010, the Board has designated $1,250,000 of unrestricted net assets to the campaign. As of August 31, 2011 and 2010, designated and temporarily restricted amounts for this fund totaled $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