ALLENS LANE ART CENTER ASSOCIATION FINANCIAL STATEMENTS YEARS ENDED AUGUST 31, 2012 AND 2011

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1 FINANCIAL STATEMENTS

2 Contents Independent Auditor's Report 1 Page Financial Statements Statements of Financial Position 2 Statements of Activities 3 Statements of Functional Expenses 4-5 Statements of Cash Flows 6 Notes to Financial Statements 7-11

3 INDEPENDENT AUDITOR'S REPORT Board of Directors Allens Lane Art Center Association Philadelphia, Pennsylvania We have audited the accompanying statements of financial position of Allens Lane Art Center Association (the Association ) 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 Allens Lane Art Center Association s management. 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 audits 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 audit provides 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 Allens Lane Art Center Association 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. Gitomer & Berenholz, P.C. Certified Public Accountants Huntingdon Valley, Pennsylvania November 14,

4 STATEMENTS OF FINANCIAL POSITION AUGUST 31, 2012 AND 2011 ASSETS CURRENT ASSETS Cash $ 3,160 $ 3,174 Accounts receivable Prepaid expenses 28,194 23,432 Total current assets 32,274 26,606 Property, plant and equipment, net 1,137,124 1,228,700 $1,169,398 $1,255,306 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Note payable, bank $ 20,000 $ 15,000 Accounts payable and accrued expenses 12,743 13,105 Deferred revenue 8,725 8,800 Total current liabilities 41,468 36,905 NET ASSETS Unrestricted 1,127,930 1,218,401 $1,169,398 $1,255,306 See accompanying notes and independent auditor s report

5 STATEMENTS OF ACTIVITIES Support and Revenue Grants and donations Government - State $ 11,581 $ 11,581 Government - City 9,280 9,512 Corporate 10,300 1,025 Foundations 48,189 15,775 Individuals 6,718 12,136 Board 8,654 11,689 Program revenue Summer day camp 120, ,497 Theatre 33,067 31,509 Classes 57,574 57,038 Gallery commissions 1,445 1,618 Facility rental 3,460 2,370 Fundraising receptions 2,271 - In-kind rent donation 97,500 97,750 Total support and revenue 410, ,500 Expenses Program services 348, ,033 General and administrative 113, ,835 Fundraising 39,404 25,013 Total expenses 500, ,881 Change in net assets ( 90,471) ( 134,381) Net assets, beginning of year 1,218,401 1,352,782 Net assets, end of year $1,127,930 $1,218,401 See accompanying notes and independent auditor s report

6 STATEMENTS OF FUNCTIONAL EXPENSES YEAR ENDED AUGUST 31, 2012 Program General and Expenses Administrative Fundraising Total Salaries and other compensation $120,226 $ 39,387 $ 32,750 $192,363 Payroll taxes 7,029 6,608 1,799 15,436 Employee benefits - 6,601-6,601 Accounting and bookkeeping - 6,850-6,850 Advertising and promotion 3, ,250 Bank fees and credit card fees 5, ,133 Building maintenance and repairs 2,591 6,775-9,366 Depreciation 78,981 12,223 2,821 94,025 Educational trips 4, ,309 Equipment rental - 2,256-2,256 Insurance - 15,047-15,047 Interest expense Payroll service Postage and mailing 1, ,718 Printing 1, ,565 Production costs 10, ,245 Refreshments 2, ,257 Rent 89,820 9,980-99,800 Rights and royalties 3, ,460 Supplies and miscellaneous 5,787 3, ,081 Telephone - 1,711-1,711 Training 1, ,782 Transportation 9, ,038 $348,034 $113,306 $ 39,404 $500,

7 STATEMENTS OF FUNCTIONAL EXPENSES (CONTINUED) YEAR ENDED AUGUST 31, 2011 Program General and Expenses Administrative Fundraising Total Salaries and other compensation $111,019 $ 53,860 $ 19,411 $184,290 Payroll taxes 9,171 4,450 1,604 15,225 Employee benefits - 6,234-6,234 Accounting and bookkeeping - 7,618-7,618 Advertising and promotion 3, ,737 Bank fees and credit card fees 4, ,251 Building maintenance and repairs 820 4,373-5,193 Depreciation 86,412 13,373 3, ,871 Educational trips 5, ,624 Equipment rental - 2,709-2,709 Insurance - 13,262-13,262 Interest expense Payroll service - 1,078-1,078 Postage and mailing 1, ,211 Printing 2, ,120 Production costs 10, ,637 Refreshments 2, ,187 Rent 89,964 9,996-99,960 Rights and royalties 3, ,160 Supplies and miscellaneous 9,190 4,392-13,582 Telephone - 2,405-2,405 Transportation 9, ,375 $351,033 $125,835 $ 25,013 $501,881 See accompanying notes and independent auditor s report

8 STATEMENTS OF CASH FLOWS Cash flows from operating activities Changes in net assets ($ 90,471) ($134,381) Adjustments to reconcile changes in net assets to net cash used in operating activities Depreciation 94, ,871 Changes in assets and liabilities Increase in assets Accounts receivable ( 920) - Prepaid expenses ( 4,762) ( 1,901) Decrease in liabilities Accounts payable and accrued expenses ( 362) ( 2,414) Deferred revenue ( 75) ( 2,950) Net cash used in operating activities ( 2,565) ( 38,775) Cash provided by financing activities Note payable, bank 5,000 15,000 Cash used in investing activities Purchase of property, plant and equipment ( 2,449) ( 4,827) Decrease in cash ( 14) ( 28,602) Cash, beginning of year 3,174 31,776 Cash, end of year $ 3,160 $ 3,174 Supplemental disclosures of cash flow information Cash paid during the year for interest $ 511 $ 152 See accompanying notes and independent auditor s report

9 NOTES TO FINANCIAL STATEMENTS Note 1 Nature of Activities and Significant Accounting Policies Organization Allens Lane Art Center Association (the Association ) is a not-for-profit corporation located in the Mount Airy neighborhood of Philadelphia, Pennsylvania, whose mission is to provide cultural, athletic, educational and civic activities for the diverse inhabitants of Philadelphia and the surrounding communities. The Association provides art classes to a variety of age groups and skill levels, provides a summer day camp to children ages 5-12, and holds live theatre plays at its facility. For the years ended August 31, 2012 and 2011, program revenue from the summer day camp was $120,234 and $115,497, respectively. Basis of Presentation In accordance with the Financial Accounting Standards Board in its Accounting Standards Codification, Not-for-Profit Entities Presentation of Financial Statements, the Association reports information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Contributions Contributions, including unconditional promises to give, are recognized as revenue in the period the promise is received. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire within the fiscal year in which the contributions are received. All other donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets depending upon the nature of the restrictions. When a restriction expires (that is when a stipulated time restriction ends or the purpose of the restriction is accomplished), temporarily restricted net assets are transferred to unrestricted net assets. Conditional promises to give are contributions that will be received subject to the occurrence of a specified, future, uncertain event. Such contributions will be recognized and recorded in the financial statements when the conditions on which they depend are substantially met. Use of Estimates The preparation of the financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and reported amounts of revenues and expenses during the reported period. Actual results could differ from those estimates

10 NOTES TO FINANCIAL STATEMENTS Note 1 Nature of Activities and Significant Accounting Policies (Continued) Accounting Standards Codification In June 2009, the Financial Accounting Standards Board ( FASB ) issued the FASB Accounting Standards Codification ( Codification ) establishing the Codification as the source of authoritative U.S. Generally Accepted Accounting Principles ( GAAP ) recognized by the FASB to be applied by nongovernmental entities. On the effective date of this topic, the Codification superseded all existing accounting and reporting standards other than guidance issued by the SEC. All other non-grandfathered accounting literature not included in the Codification became non-authoritative. The Codification was effective for financial statements issued for interim and annual periods ending after September 15, The adoption of the Codification did not have a material impact on the Association s financial statements, although references to specific authoritative literature in financial statements were eliminated and discussion of accounting concepts was enhanced. Cash The Association maintains its cash in bank deposit accounts, which at times, may exceed federally insured limits. The Association has not experienced any losses in such accounts. The Association believes it is not exposed to any significant risk on its cash accounts. Property and Equipment Property and equipment are stated at cost. Expenditures for additions, renewal and betterments are capitalized; expenditures for maintenance and repairs are charged to expense as incurred. Upon retirement or disposal of assets, the cost and accumulated depreciation are eliminated from the accounts and the resulting gain or loss is credited or charged to operations. Depreciation is provided using the declining balance method over the estimated useful lives of the assets (ranging from five to twenty years). Acquisition of property and equipment with a useful life of greater than one year are capitalized. The costs of the assets are indicated in the statement of financial position. Grants and Donations In accordance with the Accounting Standards Codification, Contributions Received, grants and donations received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. However, grants and/or donations that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the reporting period in which the revenue is recognized

11 NOTES TO FINANCIAL STATEMENTS Note 1 Nature of Activities and Significant Accounting Policies (Continued) Grants and Donations (Continued) Unpaid volunteers have made significant contributions of their time in the furtherance of the Association s mission. The value of this contributed time is not included in these financial statements because the criteria for recognition under Accounting Standards Codification, Contributions Received, have not been satisfied. The Association s facilities are provided at a discounted charge by the Fairmount Park Commission. The fair rental value of the facilities is $100,000 for the years ended August 31, 2012 and Deferred Program Revenues Funds received in advance for certain programs, primarily subscriptions for the theatre program beginning in September of each year and related advertising revenues, are deferred and recognized as earned. Functional Allocation of Expenses The costs of providing the program and activities have been summarized on a functional basis in the statements of functional expenses. Accordingly, certain costs have been allocated among the program and supporting services benefitted. Advertising Costs Advertising costs are charged to expense the first time the advertising takes place. Total advertising costs charged to expense, included in operating expenses, were $4,250 and $3,737 for the years ended August 31, 2012 and 2011, respectively. Income Taxes The Association is exempt from federal income taxes under the provisions of the Internal Revenue Code Section 501(c)(3), and is exempt from state income taxes under the provisions of the Pennsylvania Nonprofit Corporation Law. The Association s Form 990, Return of Organization Exempt from Income Tax, for the years ended August 31, 2010, 2011 and 2012 are subject to examination by the Internal Revenue Service for three years after they were filed

12 NOTES TO FINANCIAL STATEMENTS Note 2 Property, Plant and Equipment Property, plant and equipment are as follows at August 31, Theatre fixtures and equipment $ 27,512 $ 25,063 Other fixtures and equipment 13,427 13,427 Leasehold improvements 1,678,668 1,678,668 1,719,607 1,717,158 Less accumulated depreciation ( 582,483) ( 488,458) $1,137,124 $1,228,700 Depreciation expense for the years ended August 31, 2012 and 2011 were $94,025 and $102,871, respectively. Note 3 Line of Credit The Association has a $50,000 unsecured line of credit with Valley Green Bank with an interest rate of 3.25%. At August 31, 2012 there was $20,000 outstanding. Note 4 Commitments and Contingencies The Association signed a twenty year lease with Fairmount Park Historical Preservation Trust in order to satisfy the long-term lease requirement for the Commonwealth of Pennsylvania renovation grant. The lease agreement required the Association to make a payment of $12,500 due January 2008 then $1,000 for each year thereafter until In-kind rent expense of $97,750 is not included in the future minimum rental payments schedule. The Association also has a five year lease for a copier machine, expiring November 30, The cost is $948 per year. The following is a schedule by years of future minimum rental payments required under operating leases that have initial or remaining noncancellable lease terms in excess of one year as of August 31, 2012: Years Ending August 31, Amount 2013 $ 1, , , , ,000 Thereafter 10,000 $ 15,

13 NOTES TO FINANCIAL STATEMENTS Note 4 Commitments and Contingencies (Continued) Rental expense for the years ended August 31, 2012 and 2011 were $102,056 and $102,669, respectively. Note 5 Concentration of Credit Risk The Association maintains its cash balances at one bank. Accounts at the institution are insured up to $250,000. As of August 31, 2012 and 2011 the Association did not exceed the insured threshold. Note 6 Evaluation of Subsequent Events The Association has evaluated subsequent events through November 14, 2012, the date which the financial statements were available to be issued