CHILDREN S LITERACY INITIATIVE (A Pennsylvania Non-Profit Corporation) FINANCIAL STATEMENTS JUNE 30, 2014

Transcription

1 (A Pennsylvania Non-Profit Corporation) FINANCIAL STATEMENTS (WITH SUMMARIZED FINANCIAL INFORMATION FOR JUNE 30, 2013)

2 C O N T E N T S PAGE INDEPENDENT AUDITOR'S REPORT 1-2 STATEMENT OF FINANCIAL POSITION 3 STATEMENT OF ACTIVITIES 4 STATEMENT OF CASH FLOWS 5 STATEMENT OF FUNCTIONAL EXPENSES 6 NOTES TO FINANCIAL STATEMENTS 7-11

3 INDEPENDENT AUDITOR S REPORT To the Board of Directors Children s Literacy Initiative Philadelphia, Pennsylvania Report on the Financial Statements We have audited the accompanying financial statements of Children s Literacy Initiative (a nonprofit organization), which comprise the statement of financial position as of June 30, 2014 and the related statements of activities, cash flows, and functional expenses 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. Auditor s 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 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. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Children s Literacy Initiative as of June 30, 2014, 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. -1-

4 To the Board of Directors Children s Literacy Initiative (Continued) Report on Summarized Comparative Information We have previously audited Children s Literacy Initiative s 2013 financial statements, and we expressed an unmodified audit opinion on those audited financial statements in our report dated September 24, In our opinion, the summarized comparative information presented herein as of and for the year ended June 30, 2013 is consistent, in all material respects, with the audited financial statements from which it has been derived. September 16,

5 STATEMENT OF FINANCIAL POSITION (WITH FINANCIAL INFORMATION FOR JUNE 30, 2013) ASSETS CURRENT ASSETS Cash and cash equivalents $ 3,189,231 $ 2,680,964 Accounts receivable 250, ,081 Grants receivable 2,245,528 1,278,288 Inventory 128, ,066 Prepaid expenses 81,799 92,373 5,896,212 4,650,772 GRANTS RECEIVABLE - long-term portion, net of discount 375, ,412 BUILDING AND EQUIPMENT, net of depreciation 309, ,207 TOTAL ASSETS $ 6,581,229 $ 5,590,391 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ 535,547 $ 529,679 Deferred revenue 35,140 3,105 TOTAL LIABILITIES 570, ,784 NET ASSETS UNRESTRICTED 2,867,119 2,352,854 TEMPORARILY RESTRICTED (see Notes 6 and 9 for additional disclosures regarding federal I3 grant) 3,143,423 2,704,753 TOTAL NET ASSETS 6,010,542 5,057,607 TOTAL LIABILITIES AND NET ASSETS $ 6,581,229 $ 5,590,391 The accompanying notes are an integral part of these financial statements. -3-

6 STATEMENT OF ACTIVITIES YEAR ENDED (WITH SUMMARIZED FINANCIAL INFORMATION FOR THE YEAR ENDED JUNE 30, 2013) 2014 Temporarily 2013 Unrestricted Restricted* Total Total SUPPORT AND REVENUES School district contracts $ 1,057,330 $ - $ 1,057,330 $ 1,201,568 Federal and foundation grants 4,936,590 2,362,447 7,299,037 9,372,442 Individual contributions 317, , , ,313 Investment income 4,930-4,930 8,529 Miscellaneous income In-kind contributions 13,373-13,373 61,194 6,330,162 2,764,887 9,095,049 10,964,261 NET ASSETS RELEASED FROM RESTRICTIONS Satisfaction of program restrictions 2,326,217 (2,326,217) - - TOTAL SUPPORT AND REVENUES 8,656, ,670 9,095,049 10,964,261 EXPENSES Program 6,934,001-6,934,001 9,759,399 Administrative 651, , ,191 Fundraising 556, , ,298 TOTAL EXPENSES 8,142,114-8,142,114 11,364,888 CHANGE IN NET ASSETS 514, , ,935 (400,627) NET ASSETS - BEGINNING OF YEAR 2,352,854 2,704,753 5,057,607 5,458,234 NET ASSETS - END OF YEAR $ 2,867,119 $ 3,143,423 $ 6,010,542 $ 5,057,607 *See Notes 6 and 9 for additional disclosures regarding federal I3 grant. The accompanying notes are an integral part of these financial statements. -4-

7 STATEMENT OF CASH FLOWS YEAR ENDED (WITH FINANCIAL INFORMATION FOR THE YEAR ENDED JUNE 30, 2013) CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 952,935 $ (400,627) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation 127, ,160 (Increase) decrease in assets Accounts receivable 23,095 3,693 Grants receivable (812,847) 278,300 Inventory 196, ,055 Prepaid expenses 10,574 (20,847) Increase (decrease) in liabilities Accounts payable and accrued expenses 5,868 (333,774) Deferred revenue 32, Net cash provided by (used in) operating activities 535,566 (253,146) CASH FLOWS FROM INVESTING ACTIVITIES Purchase of equipment (27,299) (166,497) NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS 508,267 (419,643) CASH AND CASH EQUIVALENTS - BEGINNING OF YEAR 2,680,964 3,100,607 CASH AND CASH EQUIVALENTS - END OF YEAR $ 3,189,231 $ 2,680,964 The accompanying notes are an integral part of these financial statements. -5-

8 STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED (WITH SUMMARIZED FINANCIAL INFORMATION FOR THE YEAR ENDED JUNE 30, 2013) Program Administrative Fundraising Total Total Payroll $ 1,853,381 $ 434,190 $ 368,341 $ 2,655,912 $ 3,403,437 Employee benefits 242,106 56,718 48, , ,459 Total payroll and related expenses 2,095, , ,457 3,002,852 3,966,896 Advertising 3, ,564 43,971 Bad debt expense ,433 Books 1,030, ,030,192 1,492,049 Depreciation 88,979 20,845 17, , ,160 Development ,917 Insurance 45,626 10,689 9,068 65,383 68,661 Legal and accounting 44,544 10,435 8,853 63, ,125 Maintenance 136,619 32,006 27, , ,080 Office 48,910 11,458 9,720 70, ,317 Professional fees 897,705 42,453 36, ,172 1,670,854 Program consultants 1,657, ,657,515 2,418,970 Program materials 667, , ,475 Public relations 10,238 2,398 2,035 14,671 16,747 Recruiting 6,981 1,635 1,387 10,003 16,077 Rent 146,205 18,276 18, , ,608 Travel 29,277 6,859 5,819 41, ,722 Utilities 24,021 3,002 3,002 30,025 28,826 TOTAL FUNCTIONAL EXPENSES $ 6,934,001 $ 651,874 $ 556,239 $ 8,142, TOTALS $ 9,759,399 $ 804,191 $ 801,298 $ 11,364,888 The accompanying notes are an integral part of these financial statements. -6-

9 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Operations Since 1988, Children s Literacy Initiative (the Organization) has worked with pre-kindergarten through third grade teachers to transform instruction so that children can become powerful readers, writers, and thinkers. The Organization s focus on improving literacy instruction in the early grades is grounded in research: we know that reading proficiently by the end of third grade is key for future success, and that teaching quality has a greater effect on student achievement than any other in-school factor. The Organization provides educators with training and coaching in effective literacy instruction, outfits classrooms with learning materials and children s books, and extends our in-school services through our online professional development portal. Basis of Presentation Financial statement presentation follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958, Not-for-Profit Entities. Under FASB ASC 958, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. The accompanying financial statements have been prepared in accordance with accounting principles generally accepted in the United States of America. In accordance with FASB ASC 958, grants and contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence or nature of any donor restrictions. Contributions are recorded when pledged and may include multi-year grants. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. All other 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 statement of activities as net assets released from restrictions. There were no permanently restricted net assets. Receivables and Allowance for Doubtful Accounts Accounts receivable are uncollateralized customer obligations due under normal trade terms requiring payment within 30 days from the invoice date. Grants receivable consist of current and multi-year grants that have not been received. Accounts receivable are stated at the amount billed to the customer. Account balances with invoices dated over 90 days old are considered delinquent. The carrying amount of grants and accounts receivable is reduced by an allowance that reflects management s best estimate of the amounts that will not be collected. Management individually reviews all grants and accounts receivable balances that exceed 90 days from invoice date and based on an assessment of current creditworthiness, estimates the portion, if any, of the balance that will not be collected. As of June 30, 2014 no allowance was considered necessary. Functional Allocation of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires the use of estimates based on management s knowledge and experience. Accordingly, actual results could differ from those estimates. -7-

10 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Grants and Contracts The Organization receives significant grant and contract revenue from the government, school districts, individuals, and corporate and foundation awards. A reduction in the level of this support could have an effect on the Organization s programs and activities. Revenue Recognition The Organization receives revenue from grants and fee-for-service contracts from the government and various school districts. Deferred revenues are recorded when the Organization bills for work not yet performed on fee-for-service contracts. In-Kind Contributions The Organization records the value of contributed goods when there is an objective basis available to measure their value and that value is reflected as revenue in the accompanying statements at its estimated value at the date of receipt. The Organization received $13,373 in contributed goods during the year ended June 30, Cash and Cash Equivalents The Organization considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. These investments are managed in accordance with a Board approved investment policy. Inventory Inventory consists of various books, literacy materials, and work in process and is stated at the lower of cost (determined by the first-in, first-out method) or market. Management provides an inventory allowance based on its historical experience with obsolescence and transitional items. Building and Equipment and Depreciation Assets are stated at cost. The cost of the building and equipment is depreciated over the estimated useful lives of the related assets on a straight-line basis. Computer equipment and software Office equipment Furniture Leasehold improvements 3 to 5 years 5 years 5 to 7 years 5 to 10 years Advertising Costs Advertising costs are expensed as incurred. Tax Status The Organization is incorporated in the Commonwealth of Pennsylvania and is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization is registered as required with the Pennsylvania Bureau of Charitable Organizations. The Organization follows FASB Accounting Standards Update No , Income Taxes (Topic 740), Implementation Guidance on Accounting for Uncertainty in Income Taxes and Disclosure Amendments for Nonpublic Entities Taxes. FASB ASC 740 prescribes guidance for the financial statement recognition, measurement and disclosure of uncertain tax positions. Tax positions must meet a more-likely-than-not recognition threshold. There were no tax positions for which it is reasonably possible that the total amounts of unrecognized tax benefits will significantly increase or decrease within the next year. Tax years from 2011 through 2014 remain subject to examination by major tax jurisdictions. -8-

11 NOTES TO FINANCIAL STATEMENTS NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued) Prior Period Information The financial statements include certain prior-year summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization s financial statements for the year ended June 30, 2013, from which the summarized information was derived. Subsequent Events FASB ASC establishes general standards of accounting and disclosure of events that occur after the statement of financial position date but before the date the financial statements are available to be issued. Subsequent events have been evaluated through September 16, 2014, the date that the financial statements were available to be issued. NOTE 2 CONCENTRATION OF CREDIT RISK INVOLVING CASH During the year, the Organization may have deposits with major financial institutions which exceed Federal Deposit Insurance Corporation limits. Management believes that the risk is not significant. NOTE 3 INVENTORY Inventory consists of the following: Books $ 91,463 Materials 58, ,529 Less: Inventory allowance (20,861) $ 128,668 NOTE 4 GRANTS RECEIVABLE As of June 30, 2014, the Organization recorded grants receivable of $2,620,547. The grants receivable are considered fully collectible and consist of the following: Gross Net Grants Grants Due Within Receivable *Discount Receivable 1 year $ 2,245,528 $ - $ 2,245, years 386,208 11, ,019 $ 2,631,736 $ 11,189 $ 2,620,547 *The gross grants receivable that are due in future periods are discounted to present value using an interest rate of 2%. -9-

12 NOTES TO FINANCIAL STATEMENTS NOTE 5 BUILDING AND EQUIPMENT Building and equipment consist of the following: Computer equipment and software $ 475,315 Office equipment 102,701 Furniture 81,741 Leasehold improvements 441,789 1,101,546 Less: Accumulated depreciation 791,548 $ 309,998 NOTE 6 TEMPORARILY RESTRICTED NET ASSETS At June 30, 2014, the temporarily restricted net assets are comprised of the following: Legacy program services after June 30, 2014 $ 2,398,434 Innovation I3 contribution match 744,989 $ 3,143,423 NOTE 7 LEASES The Organization conducts its operations from facilities that are leased under operating leases expiring through The Organization also has office equipment leases expiring through At June 30, 2014, the Organization was obligated under these lease arrangements as follows: YEARS ENDING JUNE 30, AMOUNT 2015 $ 174, , , , ,033 $ 660,158 The Organization maintains offices in Philadelphia, PA, Chicago, IL, and Newark, NJ. NOTE 8 RETIREMENT PLAN The Organization has a defined contribution plan where the Organization has the option to make a discretionary non-elective contribution based on the relationship of an employee s annual salary to the total compensation of all participants. There are no age or service requirements. All full-time employees and parttime employees with over 1,000 hours worked are eligible to make elective deferrals through payroll deductions up to the IRS limits. The Organization s contribution was $75,480 for the year ended June 30, Contributions are 100% vested in the defined contribution plan. -10-

13 NOTES TO FINANCIAL STATEMENTS NOTE 9 FEDERAL GRANT INVESTMENT IN INNOVATION (I3) In August 2010 the Organization was awarded a $21,726,293 five year grant from the United States Department of Education (DOE). The grant is being used to perform a five year validation study of the Organization s Model Classroom program in four existing geographic markets Philadelphia, PA, Camden, NJ, Newark, NJ, and Chicago, IL. For the year ended June 30, 2014 the Organization has recorded $3,641,894 (for a cumulative total of $18,006,156) of revenue under this DOE grant. The estimated amount to be received under this grant in the next year as services are performed is as follows: YEAR ENDING JUNE 30, AMOUNT 2015 $ 3,720,137 These amounts exclude initial grant match contributions of $4,345,249, which also fund the federal I3 grant. -11-