Audited Financial Statements. The Wooden Floor for Youth Movement (dba The Wooden Floor) August 31, 2015

Transcription

1 Audited Financial Statements The Wooden Floor for Youth Movement (dba The Wooden Floor) August 31, 2015

2 Table of Contents Page Independent Auditors Report Financial Statements Statement of Financial Position 3 Statement of Activities 4 Statement of Functional Expenses 5 Statement of Cash Flows 6 Notes to Financial Statements 7

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5 Statement of Financial Position As of August 31, 2015 (With summarized comparative information as of August 31, 2014) ASSETS Cash and cash equivalents $ 500,201 $ 567,577 Investments (Note 6) 3,977,728 3,997,322 Contributions receivable, net of discounts of $21,937 and $26,449, respectively (Note 5) 559, ,559 Prepaid expenses 4,337 6,751 Property and equipment, net (Note 7) 3,174,888 3,255,323 Total assets $ 8,216,999 $ 8,583,532 Liabilities Accounts payable $ 34,893 $ 44,913 Accrued expenses 101,967 95,310 Capital lease obligation (Note 7) 25,494 34,055 Total liabilities 162, ,278 Commitments (Note 8) LIABILITIES AND NET ASSETS Net assets (Notes 3 and 4) Unrestricted $ 4,364,367 $ 4,652,234 Temporarily restricted 1,210,516 1,327,258 Permanently restricted 2,479,762 2,429,762 Total net assets 8,054,645 8,409,254 Total liabilities and net assets $ 8,216,999 $ 8,583,532 See accompanying notes to the financial statements and independent auditors report. 3

6 Statement of Activities For The (With summarized comparative information for the year ended August 31, 2014) Temporarily Permanently Total Unrestricted Restricted Restricted 2015 Total 2014 Revenues and support Gifts and grants $ 1,492,278 $ 536,243 $ 50,000 $ 2,078,521 $ 2,541,952 Donated materials and services 75, ,642 67,521 Annual concerts 20, ,143 21,145 Interest and dividend income 37,876 50,663-88,539 88,913 Realized gain on investments 143, , ,882 Unrealized (loss) gain on investments (27,475) (160,129) - (187,604) 139,933 Other income 16, ,123 11,721 Total revenues 1,614, ,130 50,000 2,234,717 3,032,067 Net assets released from restriction 686,872 (686,872) Total revenues and support 2,301,459 (116,742) 50,000 2,234,717 3,032,067 Expenses Program services 1,809, ,809,957 1,863,866 Supporting activities 779, , ,218 Total expenses 2,589, ,589,326 2,616,084 Change in net assets (287,867) (116,742) 50,000 (354,609) 415,983 Net assets, beginning of year 4,652,234 1,327,258 2,429,762 8,409,254 7,993,271 Net assets, end of year $ 4,364,367 $ 1,210,516 $ 2,479,762 $ 8,054,645 $ 8,409,254 See accompanying notes to the financial statements and independent auditors report. 4

7 Statement of Functional Expenses For The (With summarized comparative information for the year ended August 31, 2014) Supporting Activities Community Fund- Total Outreach raising Sub-total 2015 Program Services Year-Round Spring Children & Dance Free Program Concert Families Weeks Academic Sub-total Management and General Total 2014 Academic tutoring $ - $ - $ - $ - $ 11,649 $ 11,649 $ - $ - $ - $ - $ 11,649 $ 14,414 Administration 30,811 14,825 10,574 1,149 14,029 71,388 8,434 13,859 19,218 41, , ,417 Auto and travel 2,746 34, ,321 41,521 4, ,388 6,170 47,691 50,758 Bad debt expenses , ,500 2,500 6,700 Community relations ,258-16,258 16,258 21,493 Costumes and t-shirts - 32, , ,060 28,596 Dancewear 11, , ,438 14,208 Depreciation 109, ,986 8, , , ,874 Employee benefits 42,768 13,875 11,900 1,292 15,788 85,623 6,875 6,095 21,627 34, , ,457 Instructors 154,025 31,843-8, , , ,451 Insurance - other 16, ,558 1, ,246 17,804 17,248 Interest expense , ,808 2,518 Miscellaneous 3, , ,583 7,212 Payroll taxes 28,890 10,973 9,915 1,077 13,154 64,009 5,728 5,078 18,019 28,825 92,834 92,522 Printing 12,494 22,894 2, ,909 40,727 1,267 8,789 11,650 21,706 62,433 69,521 Production - annual concert 2,367 66, , ,695 70,424 Professional fees 2,000-8, ,560 47,919-48,996 96, , ,667 Repairs and maintanance 63,545 6,395 5, ,667 84,014 6,854 2,960 10,502 20, ,330 96,093 Salaries and wages 359, , ,971 13, , ,229 71,455 63, , ,584 1,156,813 1,152,977 Special events , , , ,934 Student services ,885-77,500 99, , ,507 Utilities 59,161 1,340 1, ,606 63,448 4, ,200 7,707 71,155 67,267 Volunteer gifts ,175-4,175 4,175 3,826 Total expenses $ 899,656 $ 371,476 $ 196,265 $ 26,652 $ 315,908 $ 1,809,957 $ 169,947 $ 121,984 $ 487,438 $ 779,369 $ 2,589,326 $ 2,616,084 See accompanying notes to the financial statements and independent auditors report. 5

8 Statement of Cash Flows For The (With summarized comparative information for the year ended August 31, 2014) Cash flows from operating activities Change in net assets $ (354,609) $ 415,983 Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation expense 118, ,874 Realized gain on investments (143,353) (160,882) Unrealized loss (gain) on investments 187,604 (139,933) Amortization of discounts on contributions receivable (4,512) 10,898 (Increase) decrease in: Contributions receivable 201,226 (409,621) Prepaid expenses 2,414 (4,321) Increase (decrease) in: Accounts payable (10,020) 9,086 Accrued expenses 6,657 11,943 Net cash provided by (used in) operating activities 3,672 (147,973) Cash flows used in investing activities Acquisition of property and equipment (37,830) (24,350) Purchases of investments (1,768,455) (2,274,823) Proceeds from sales of investments 1,743,798 2,195,815 Net cash used in investing activities (62,487) (103,358) Cash flows used in financing activities Payments on capital lease obligation (8,561) (8,064) Net cash used in financing activities (8,561) (8,064) Net change in cash and cash equivalents (67,376) (259,395) Cash and cash equivalents, beginning of year 567, ,972 Cash and cash equivalents, end of year $ 500,201 $ 567,577 Supplemental disclosures of cash flow information: Cash paid during the year for interest and income taxes $ - $ - Discounts on contributions receivable $ 6,225 $ 29,560 Disposals of property and equipment $ 11,658 $ 17,644 See accompanying notes to the financial statements and independent auditors report. 6

9 Notes to Financial Statements 1. Mission The Wooden Floor for Youth Movement (dba The Wooden Floor) (the Organization ), a nonprofit corporation, was created in 1983 to provide underserved local youth with the tools to live fuller, healthier lives through a unique approach grounded in dance. The Organization engages its young artists in intensive dance education supported by academic and family services that change the way they make decisions, helping them to discover and pursue their potential. Since 2005, 100 percent of its students have graduated from high school on time and pursued higher education. The Organization fulfills its mission through the following programs: Year-round Program Activities related to year-round operations of the after school dance programs, tutoring and education center, and student and family support and enrichment programs. Spring Concert The annual spring concert allows students to collaborate with recognized choreographers to create unexpected and challenging works of contemporary dance. Children & Families Activities specifically for the benefit of the student and their family that include counseling sessions and crisis intervention, social service referrals, workshops, donated tickets to arts performances, field trip opportunities, and advanced dance training opportunities. Dance Free Weeks A three week-long dance training program provided free of charge to disadvantaged schools. Academic Activities designed to ensure students succeed in school, including free tutoring programs, pre-collegiate mentoring, SAT preparation courses and achievement scholarships. 2. Summary of Significant Accounting Policies Basis of Presentation The Organization s financial statements have been prepared on the accrual basis of accounting. Accordingly, the Organization recognizes revenues when earned, and contributions, including unconditional promises to give, when received. Expenses are recognized when the related obligation is incurred. 7

10 2. Summary of Significant Accounting Policies (continued) Basis of Presentation (continued) The Organization prepares its financial statements in accordance with accounting principles generally accepted in the United States of America, which require management to make estimates and assumptions that affect the reported amounts of assets and liabilities, and disclosures of contingent assets and liabilities at the date of the financial statements, and revenues and expenses during the reporting period. Actual results could differ from those estimates. The Organization reflects net assets and revenues, gains, expenses, and losses based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Organization and changes therein are classified and reported as unrestricted, temporarily restricted, and permanently restricted, as follows: Unrestricted net assets - net assets that are not subject to donor-imposed restrictions and are available to support general operations. Temporarily restricted net assets - net assets that are subject to donor-imposed restrictions that require the passage of time, or the occurrence of a specific event. Temporarily restricted contributions that are received and whose restrictions are satisfied in the same year as related funds are expended are reported as unrestricted contributions. Permanently restricted net assets - net assets that are subject to donor-imposed restrictions that the principal be maintained in perpetuity and invested for the purposes of producing present and future income for unrestricted use by the Organization. Income Taxes The Organization has qualified for tax-exempt status under Section 501(c)(3) of the United States Internal Revenue Code and Section 23701(d) of the California Code. Accordingly, no provision for income taxes has been made in the accompanying financial statements. The Organization s tax filings are subject to examination by federal and state taxing authorities for three and four years, respectively, after they are filed. 8

11 2. Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents The Organization considers cash equivalents to be highly liquid investments with maturities of three months or less when acquired. Concentration of Credit Risk The Organization deposits its funds in financial institutions that are considered by management to be of high-credit quality. At times, balances in cash accounts may exceed the Federal Deposit Insurance Corporation (FDIC) limit of $250,000. Additional insurance safeguards on the Organization s investments are afforded through the Securities Investor Protection Corporation (SIPC) up to $500,000 and the Customer Asset Protection Company (CAPCO). Investments Investments are stated at fair value and consist of debt and equity securities, mutual funds and brokered certificates of deposit (Note 6). Fair value is defined as the price that the Organization would receive to sell an asset in an orderly transaction between market participants at the measurement date. Inputs to the valuation of an asset or liability may be observable or unobservable and refer broadly to the assumptions that market participants would use in pricing the asset. Observable inputs reflect the assumptions market participants would use in pricing the asset based on market data obtained from sources independent of the reporting entity. Unobservable inputs reflect the reporting entity s own assumptions about the assumptions that market participants would use in pricing the asset developed based on the best information available under the circumstances. The Organization s investments are assigned a level based upon the observability of the inputs which are significant to the overall valuation. The three-tier hierarchy of inputs is summarized below. Level 1: inputs are quoted prices in active markets. Level 2: inputs are observable, directly or indirectly. Level 3: inputs are unobservable and reflect assumptions made by the reporting entity. 9

12 2. Summary of Significant Accounting Policies (continued) Investments (continued) The Organization s investments are summarized in Note 6, and based on the nature of the Organization s investments, the fair value of investments as of August 31, 2015 was based on quoted prices in active markets, which are considered Level 1 inputs. Contributions Unrestricted contributions and unconditional promises to give are recorded at their estimated fair value and recognized as revenue by net asset class when they are received. Conditional promises to give are recognized as revenues when all conditions on which they depend are substantially met. An allowance for estimated uncollectible contributions receivable is recorded based on management s judgment and analysis of the donor s creditworthiness, past collection experience and other relevant factors. Management has determined that no allowance for uncollectible contributions receivable is necessary as of August 31, Promises to give in future years are discounted to present value using risk-adjusted discount rates established in the years in which those promises are received. Amortization of such discounts is included in contributions. Property and Equipment Property and equipment are carried at cost. Depreciation is provided on the straight-line method over an estimated useful life of 40 years for the building, 15 years for land improvements, 7 years for furniture, and 3 to 5 years for vehicles and office equipment. Property and equipment are reviewed for impairment whenever management determines that events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. During the year ended August 31, 2015, management determined that no such events or changes in circumstances occurred. 10

13 2. Summary of Significant Accounting Policies (continued) Donated Materials and Services Donated non-cash assets and goods are recorded at their estimated fair values in the period received. Donated services that create or enhance non-financial assets, or require specialized skills, which would typically need to be purchased, are recorded at their estimated fair values in the period received. For the year ended August 31, 2015, donated materials and services aggregated $75,642. Functional Allocation of Expenses The cost of providing various programs and supporting activities has been summarized on a functional basis in the accompanying Statement of Functional Expenses. Accordingly, certain costs have been allocated among the programs and supporting activities based on actual usage and estimates made by management. Comparative Financial Information The accompanying financial statements include 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 accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Organization s August 31, 2014 financial statements, from which the summarized information was derived. Subsequent Events The Organization has evaluated subsequent events that occurred through November 9, 2015, the date the financial statements were issued. 3. Endowment Accounting Standards Codification ( ASC ) contains guidance on the net asset classification of donor restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act of 2006 ( UPMIFA ), as well as requires disclosures about an organization s endowment funds (both donor-restricted endowment funds and board-designated endowment funds) whether or not the organization is subject to UPMIFA. The State of California adopted UPMIFA effective January 1,

14 3. Endowment (continued) Endowment assets may include donor-restricted funds that the Organization must hold in perpetuity, donor-restricted funds that must be used for specified purposes, and funds designated by the Board of Directors to function as endowments. Under 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 donorrestricted 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 in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: 1) The duration and preservation of the fund 2) The purpose of the organization and the donor-restricted endowment fund 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 7) The investment policy of the organization Return Objectives and Risk Parameters The Organization has adopted investment and spending policies for endowment assets that attempt to preserve the real purchasing power of the endowment fund and to provide a relatively predictable and stable stream of current income for annual operational needs. To satisfy its long-term rate-of-return objectives, the Organization 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 Organization targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve its long-term return objectives within prudent risk constraints. The fair value of assets associated with endowment funds may fall below the level that the donor or UPMIFA requires the Organization to retain as a fund of perpetual duration. 12

15 3. Endowment (continued) Spending Policy and How the Investment Objectives Relate to Spending Policy Endowment assets are governed by a spending policy that may distribute up to seven percent (7%) (inclusive of broker fees) of the fair value of the investment portfolio as a whole. To protect the intrinsic value of the endowment assets against the unexpected impact of inflation, the Organization s Finance Committee sets a payout rate for the endowment assets earnings and income that provides a preset rate of real growth of the portfolio while also providing a relatively constant and predictable funding stream. The main objective is to maintain or grow the real (inflation-adjusted) value of the portfolio after accounting for the overall spending. To achieve this objective, the long-term total return of the portfolio should meet or exceed the spending rate plus inflation as measured by an appropriate benchmark, such as the Consumer Price Index. Earnings and income in excess of the payout rate shall be reinvested in the portfolio according the Organization s investment policy. If the payout rate exceeds the endowment yield, then previously reinvested income and accumulated realized gains shall be transferred to current funds to ensure the payout rate. In addition, the Organization s Finance Committee is authorized to pay reasonable fees and expenses, primarily management fees, of the endowment portfolio. The distribution of endowment spending must be incorporated into the Organization s annual budget and, consequently, reviewed and approved by the Organization s Board of Directors. The distribution may be timed to provide maximum benefit to overall cash flow needs. By special action and upon the recommendation of the Organization s Finance Committee, the Board of Directors may temporarily suspend distributions. Distributions may trigger an evaluation of the portfolio s asset allocation as established by the investment policy. Composition of Endowment Investment Assets The following tables show the composition of the Organization s endowment investment funds classified by restriction as of August 31, 2015, and the related activity of endowment investment funds for the year then ended. 13

16 3. Endowment (continued) Composition of Endowment Investment Assets (continued) Endowment Net Asset Composition by Type as of August 31, 2015: Temporarily Permanently Unrestricted Restricted Restricted Total Donor restricted endowment $ - $ 190,691 $ 2,479,762 $ 2,670,453 Included in Permanently Restricted Net Assets is an endowment contribution receivable of $35,000 as of August 31, Changes in Endowment Net Assets for the year ended August 31, 2015: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of the year $ - $ 335,313 $ 2,429,762 $ 2,765,075 Investment return: Interest and dividend income - 50,663-50,663 Net realized and unrealized investment loss - (16,776) - (16,776) Investment fees - (28,509) - (28,509) Total investment return - 5,378-5,378 Contributions ,000 50,000 Appropriations - (150,000) - (150,000) Net change in endowment assets - (144,622) 50,000 (94,622) Endowment net assets, end of the year $ - $ 190,691 $ 2,479,762 $ 2,670,453 14

17 4. Board Designated Net Assets The Board of Directors of the Organization has designated certain unrestricted net assets for the following purposes as of August 31, 2015: For use in subsequent periods $ 1,735,882 Building maintenance 291,689 2,027,571 Undesignated unrestricted net assets 2,336,796 Total unrestricted net assets $ 4,364, Contributions Receivable At August 31, 2015, the Organization had net contributions receivables totaling $559,845. The Organization has recorded these receivables at their net present value of future cash flows using a discount rate of 3.25%. These pledges are expected to be paid to the Organization as follows: Temporarily Permanently Unrestricted Restricted Restricted Total 2016 $ 192,282 $ 169,083 $ 5,833 $ 367, ,083 5,833 99, ,083 5,833 84, ,083 5,833 9, ,083 5,833 9,916 Thereafter - 4,085 5,835 9, , ,500 35, ,782 Less discount - (18,275) (3,662) (21,937) $ 192,282 $ 336,225 $ 31,338 $ 559,845 15

18 6. Investments Investments at August 31, 2015 consist of the following: Equity securities $ 1,566,477 Corporate debt securities 701,827 Government debt securities 887,507 Certificates of deposit 602,060 Mutual funds 219,857 $ 3,977,728 Investments are exposed to various risks, such as interest rate, market and credit risk. Risk is managed through frequent monitoring of macroeconomic conditions, investment valuations and communication with investment managers. It is at least reasonably possible that changes in the near term could materially affect the amounts reported in the financial statements. Based on the nature of the Organization s investments, the fair value of investments as of August 31, 2015 was based on quoted prices in active markets, which are considered Level 1 inputs. 7. Property and Equipment Property and equipment as of August 31, 2015 consist of the following: Land $ 800,229 Land improvements 16,874 Buildings 3,292,498 Building improvements 489,809 Property and equipment 508,439 5,107,849 Less accumulated depreciation (1,932,961) $ 3,174,888 16

19 7. Property and Equipment (continued) The Organization leases certain office equipment under a capital lease obligation, which requires a monthly payment of $864, net of a maintenance fee of $50 per month, for a period of 60 months at an imputed interest rate of 5.99%. The lease requires minimum payments as follows: Year Ending August 31: 2016 $ 10, , ,912 Total minimum lease payments 27,648 Less amount representing interest (2,154) Present value of minimum lease payments $ 25,494 At August 31, 2015, the related asset and accumulated depreciation under this capital lease obligation was $44,702 and $19,207, respectively. 8. Commitments Merit Based Scholarship Awards The Organization provides financial assistance to selected graduates pursuing a two-year community college or four-year college or university degree. The awards may be up to four years in length and range between $500 and $2,500 per year. The Organization may temporarily or permanently revoke awards based on the academic standing of the recipient, adherence to defined guidelines and other factors. As of August 31, 2015, the maximum amount of awards that may be required to be provided by the Organization over the next four years totaled $297,

20 8. Commitments (continued) Retirement Plan The Organization implemented a 403(b) Retirement Plan (the Plan ) during October The Plan covers all eligible employees with over one year of service. The Plan provides for partial vesting of the employer s contributions after two years of service and full vesting after five years of service. The participants contributions are automatically fully vested. The Organization s contribution to the Plan for the year ended August 31, 2015 was $45,