Financial Statements Years Ended June 30, 2012 and The American Civil War Center at Historic Tredegar

Transcription

1 Financial Statements Years Ended June 30, 2012 and 2011 The American Civil War Center at Historic Tredegar

2 The American Civil War Center at Historic Tredegar Contents Page Report of Independent Auditors 1 Financial Statements Statements of Financial Position 2 Statements of Activities 3 Statements of Cash Flows 4 Notes to Financial Statements 5-13

3 Report of Independent Auditors Board of Directors The American Civil War Center at Historic Tredegar We have audited the accompanying statements of financial position of The American Civil War Center at Historic Tredegar (a nonprofit organization) as of June 30, 2012 and 2011, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the management of The American Civil War Center at Historic Tredegar. 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. 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 consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the organization s internal control over financial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 The American Civil War Center at Historic Tredegar as of June 30, 2012 and 2011, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Richmond, Virginia March 28,

4 The American Civil War Center at Historic Tredegar Statements of Financial Position June 30, Assets Current assets Cash and cash equivalents (Note 2) $ 1,029,819 $ 101,155 Government grants and fees receivable 81, ,364 Contributions receivable - current portion (Note 5) 1,379, ,639 Inventory (Note 2) 42,318 35,715 Prepaid expenses 35,517 - Total current assets 2,568, ,873 Property and equipment - net (Note 6) 4,646,127 5,062,366 Collections (Note 2) - - Investments (Notes 3 and 4) 31,917 - Other assets Restricted cash (Note 13) 21,433 50,527 Beneficial interest in trust (Note 11) 18,130 18,130 Contributions receivable - less current portion (Note 5) 2,431,948 - Liabilities and Net Assets $ 9,717,865 $ 5,724,896 Current liabilities Accounts payable and accrued expenses $ 162,244 $ 165,960 Current portion of long-term debt (Note 8) 210, ,000 Total current liabilities 372, ,960 Long-term debt - less current portion (Note 8) 620, ,887 Total liabilities 993,131 1,156,847 Net assets Unrestricted 4,819,288 4,230,383 Temporarily restricted (Note 10) 3,852, ,139 Permanently restricted (Note 13) 53,350 50,527 Total net assets 8,724,734 4,568,049 $ 9,717,865 $ 5,724,896 The accompanying notes are an integral part of these financial statements. 2

5 The American Civil War Center at Historic Tredegar Statements of Activities Years Ended June 30, Changes in unrestricted net assets Revenue, support and other changes: Contributions $ 718,677 $ 731,897 National Park Service rental and maintenance (Note 7) 306, ,689 Federal financial assistance 64,000 43,198 Interest and dividend income 780 1,014 Donated facilities, materials and services (Note 7) 1,165,200 1,085,200 Admissions 133, ,084 Gift shop - net 48,233 29,257 Membership dues Other - net 110,681 82,081 2,547,878 2,395,970 Net assets released from restrictions 1,308, ,640 Total revenue, support and other changes 3,855,945 2,555,610 Expenses (Note 15): Program services: Museum/project development 2,285,602 1,930,965 Education 276, ,366 National Park Service operations 199, ,886 Supporting services: Management and general 236, ,148 Fundraising 267, ,661 Total expenses 3,267,040 3,110,026 Change in unrestricted net assets 588,905 (554,416) Change in temporarily restricted net assets Contributions 4,873, ,572 Net assets released from restrictions (1,308,067) (159,640) Change in temporarily restricted net assets 3,564, ,932 Change in permanently restricted net assets Unrealized gains 2,485 - Interest Change in permanently restricted net assets 2, Change in net assets 4,156,685 (392,358) Net assets - beginning of year 4,568,049 4,960,407 Net assets - end of year $ 8,724,734 $ 4,568,049 The accompanying notes are an integral part of these financial statements. 3

6 The American Civil War Center at Historic Tredegar Statements of Cash Flows Years Ended June 30, Cash flows from operating activities Change in net assets $ 4,156,685 $ (392,358) Adjustments to reconcile to net cash from operating activities Depreciation 480, ,087 Unrealized gain (2,485) - Restricted cash 29,094 (126) Change in: Government grants and fees receivable 143,211 (112,001) Contributions receivable (3,578,812) (107,432) Inventory (6,603) (343) Prepaid expenses (35,517) 7,493 Accounts payable and accrued expenses (3,716) 42,245 Net cash from operating activities 1,181,933 (96,435) Cash flows from investing activities Purchase of property and equipment (63,837) (131,432) Purchase of investments (29,432) - Net cash from investmenting activities (93,269) (131,432) Cash flows from financing activities Payments on long-term borrowings (160,000) (90,000) Net change in cash and cash equivalents 928,664 (317,867) Cash and cash equivalents - beginning of year 101, ,022 Cash and cash equivalents - end of year $ 1,029,819 $ 101,155 Supplemental disclosure of cash flow information Cash paid for interest $ 8,849 $ 11,061 The accompanying notes are an integral part of these financial statements. 4

7 The American Civil War Center at Historic Tredegar Notes to Financial Statements June 30, 2012 and Organization and Nature of Activities The American Civil War Center at Historic Tredegar (Center) is a not-for-profit organization which was incorporated under the laws of the Commonwealth of Virginia in Private contributions, earned revenues and government appropriations support operations. The Center is located on the site of the Tredegar Iron Works Company ( ) and is a National Historic Landmark which includes five original buildings, canal structures and industrial artifacts dating from the 19 th century. The Center s mission, to tell the whole story of the conflict which still shapes our nation, is realized through a series of public programs, events, lectures and exhibitions. When it opened its doors in October 2006, the Center was the first museum in the United States to explore the centrality of the American Civil War from three perspectives: Union, Confederate and African American. Its signature exhibit, In the Cause of Liberty, has been acclaimed by leading scholars and recognized by national media as a breakthrough in Civil War interpretation and presentation. The Center serves the public as a national institution that seeks to immerse its visitors in the causes, course and legacies of the war, and to promote engagement about the issues that gave rise to the Civil War, permeated the war years and emerged following the war s end. At its core, the Center s programs explore enduring legacies of this conflict on a national and global scale to a growing and diverse audience. Additionally, the Center manages the property and has an operating agreement with the Richmond National Battlefield Park of the National Park Service (NPS). Through this agreement, NPS operates its central visitors center to all its regional battlefield locations and museum exhibits. The Center and NPS partner on a number of educational, public and marketing initiatives and jointly operate the Civil War Gateway Visitors Center. In September 2010, the Historic Tredegar site was designated the official Gateway to the Civil War Sesquicentennial for Richmond and Virginia. This unique designation was made possible by a strategic partnership forged between the Center, NPS, and the Richmond Metropolitan Convention and Visitors Bureau. The goal of the partnership is to provide visitors a starting point to orient themselves to Civil War history, and plan their visits to 19 other historic sites and museums in the City of Richmond and others throughout the Richmond region. The Gateway opened to the public in July Summary of Significant Accounting Policies Basis of Presentation The Center reports 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 financial statements report amounts separately by class of net assets as follows: Unrestricted net assets currently available at the discretion of the Center s Board of Directors for use in the Center s operations and those resources invested in property or equipment. 5

8 Temporarily restricted net assets result from support and revenue whose use by the Center is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by actions of the Center pursuant to those donor-imposed stipulations. Permanently restricted net assets result from support and revenue whose use by the Center is limited by donor-imposed stipulations that neither expire by passage of time nor can be fulfilled or otherwise removed by actions of the Center. Cash Equivalents The Center considers all cash accounts, which are not subject to withdrawal restrictions or penalties, and all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Property and Equipment Property and equipment are reported at cost. Donated items are recorded at fair market value at the date of contribution. Depreciation and amortization are computed using the straight-line method over the estimated useful lives. Estimated useful lives for financial reporting purposes are as follows: Buildings and site improvements Exhibit design, equipment and media production Furniture, equipment and software Leasehold improvements Website development years 3 10 years 3 10 years 10 years 3 years Maintenance, repairs, and items deemed to have no extended useful life are expensed as incurred. Betterments and renewals in excess of $5,000 are capitalized. When property and equipment are sold or otherwise disposed of, the asset account and related accumulated depreciation account are relieved, and any gain or loss is included in current year s operations. Donor-Restricted Gifts Unconditional promises to give cash or other assets are reported at fair value at the date the promise is received. The gifts are reported as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor 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. Revenue Recognition Government support is recognized when the services have been provided and the related expenses have been incurred for which the government support has been provided. Income Taxes The Center is a qualifying nonprofit organization as defined in Section 501(c)(3) of the Internal Revenue Code and the tax statutes of the Commonwealth of Virginia. In addition, the Center qualifies for the charitable contribution deduction under Section 170(b)(1)(A). The Center has determined that it does not have any material unrecognized tax benefits or obligations as of June 30, Fiscal years ending on or after June 30, 2009 remain subject to examination by federal and state tax authorities. 6

9 Advertising Costs The Center expenses advertising costs as they are incurred. Advertising expense was $79,276 and $39,355 for 2012 and 2011, respectively. 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 the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements. Such estimates also affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates and assumptions. Concentration of Credit Risk Financial instruments which potentially subject the Center to concentrations of credit risk consist of cash and cash equivalents and contributions receivable. The Center places its cash with Wells Fargo Bank (formerly Wachovia Bank), Union First Market Bank, and Raymond James. The funds are insured by the Federal Deposit Insurance Corporation (FDIC). At June 30, 2012, approximately 62% of contributions receivable outstanding were provided by two major contributors who are also members of the Center s board of directors. Collections The Center does not capitalize donated collections of museum artifacts and exhibits. The collections are made up of artifacts of historical significance that are held for educational, research, and curatorial purposes. Each of the items is cataloged, preserved, and cared for, and activities verifying their existence and assessing their condition are performed continuously. No significant collection items were donated to the Center in 2012 or in Presentation of Sales Tax Certain of the Center s gift shop sales are subject to sales tax imposed by various jurisdictions. The Center collects that sales tax from customers and remits it to the applicable jurisdiction. The Center s accounting policy is to exclude the tax collected and remitted from revenues and cost of sales. Investments All securities are valued at their fair value as of June 30, Investment transactions are accounted for on the trade date. Realized gains and losses on investments sold are computed using the average historical cost of the investments sold as of the trade date. Inventory Inventory of merchandise purchased for resale is stated at the lower of cost or market determined by the average cost method. Subsequent Events In preparing these financial statements, the Center has evaluated events and transactions for potential recognition or disclosure through March 28, 2013, the date the financial statements were available to be issued. 7

10 3. Investments Investments are as follows at June 30, 2012: Cost Fair Value Mutual funds - domestic $ 29,505 $ 31, Fair Value Measurements Accounting standards establish 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 are described below: Level 1 Level 2 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Center has the ability to access. Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; 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. The asset 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. The following is a description of the valuation methodologies used for assets and liabilities measured at fair value. The methodologies used at June 30, 2012 are consistent with those used at June 30, Mutual funds - domestic: Valued using the level 1 inputs and measured at the net asset value (NAV) at yearend. Contributions receivable: Valued using the income approach based on discounted cash flows. 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 Center 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. 8

11 The following tables set forth by level, within the fair value hierarchy, the Center s assets and liabilities at fair value as of June 30, 2012 and 2011: Fair Value as of June 30, 2012 Level 1 Level 2 Level 3 Total Mutual funds - domestic $ 31,917 $ - $ - $ 31,917 Contributions receivable - - 3,811,451 3,811,451 Total assets at fair value $ 31,917 $ - $ 3,811,451 $ 3,843,368 Fair Value as of June 30, 2011 Level 1 Level 2 Level 3 Total Contributions receivable $ - $ - $ 232,639 $ 232,639 Level 3 Gains and Losses The tables below set forth a summary of changes in the fair value of the Center s level 3 assets and liabilities: Contributions receivable Balance June 30, 2010 $ 125,207 New pledge 505,750 Collections (398,318) Balance June 30, ,639 New pledges 5,023,087 Collections (1,244,212) Write-offs (75,000) Change in fair value discount (61,101) Change in allowance (63,962) Balance June 30, 2012 $ 3,811,451 9

12 5. Contributions Receivable The Center has recorded as assets and revenue unconditional promises to give (pledges). The related contributions receivable represent the unpaid balances due from the donors. A summary follows: Due within one year $ 1,453,725 $ 242,899 Due within two to five years 2,493,049-3,946, ,899 Less - allowance (74,222) (10,260) Less fair value discount (0.93%) (61,101) - $ 3,811,451 $ 232,639 The Center received $4 million in pledge commitments during 2011 of which $500,000 is an unconditional pledge with the remaining $3.5 million as dollar-for-dollar matching gifts. As of June 30, 2012, all of the unconditional pledge has been received. In addition, as of June 30, 2012, $2,562,588 of the matching gifts have been recognized in the statements of activities because the matching requirements were satisfied. 6. Property and Equipment Property and equipment consist of the following: Foundry Pavilion $ 3,087,549 $ 3,087,549 Exhibit 3,351,076 3,325,288 Building expansion in progress 678, ,523 Computer/technology equipment and software 52,054 51,109 Leasehold improvements 80,640 80,640 Land improvement 46,834 46,834 Web site development 44,500 44,500 Furniture and fixtures 75,430 38,326 7,416,606 7,352,769 Less accumulated depreciation (2,770,479) (2,290,403) $ 4,646,127 $ 5,062, License Agreements/Donated Facilities In October 2003, the Center entered into a license agreement with New Market Corporation (an entity associated with a member of the Board of Directors) to use, operate, maintain and improve the Tredegar property for the purposes of a museum and historical site. The initial term was for ten years. The license fee was payable in quarterly installments of $75,000. After the first quarter of 2007, the Center agreed to assume responsibility for the property s maintenance and utilities in lieu of the quarterly payment. New Market issued a letter of support to the Center in 2010 expressing its continued and ongoing commitment to the current terms of the arrangement for the foreseeable future. During 2012 and 2011, the Center recorded $1,165,200 and $1,085,200, respectively, as contributed revenue and expense relating to the use of the facilities. 10

13 Also effective October 2003, Center entered into a sublicense agreement with the National Park Service for their use of Tredegar s Pattern Storage Building and surrounding property for the purposes of providing and operating a Civil War visitors and reception center. The extended term of the sublicense agreement expired September 30, 2007 (per a federal fiscal year of October 1 to September 30). It was renewed through September 30, The annual fee for use of these facilities is payable in quarterly installments. Revenue derived from the sublicense agreement was $306,161 in 2012 and $298,689 in Long-Term Debt The Center had a revolving term loan arrangement with a bank to borrow a maximum of $3 million to provide funds for operations and construction. The loan arrangement was for a term of six years with an original maturity date of January 15, It was collateralized by the Center s contributions receivable and accounts receivable. The interest rate was London Interbank Offered Rate (LIBOR) Market Index Rate plus.79%. On March 18, 2011, the Center executed a loan modification agreement for the revolving term loan. The outstanding loan balance at that date was $1,020,887. The new repayment terms require monthly payments of principal plus accrued interest at LIBOR plus.79% (1.03% at June 30, 2012). The outstanding principal balance on June 30, 2012 was $830,887, of which $620,887 was included in long-term debt and $210,000 was included in current portion of long-term debt on the statement of financial position. The new loan agreement contains additional covenants, including guarantees by the Center not to incur further interest-bearing indebtedness and to have unrestricted cash and pledges in amounts sufficient to pay all outstanding amounts to the bank in fiscal years 2011 through Future repayments are as follows for the years ended June 30: 2013 $ 210, ,887 $ 830, Retirement Plan The Center has a defined contribution retirement plan with TIAA/CREF that covers substantially all employees. Employees contribute to the plan on a salary reduction basis. The Center does not make any contributions. 10. Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes: Pledge payments due in future years $ 3,811,451 $ 232,639 Education 10,000 10,000 Capital projects 30,645 43,000 Other - 1,500 $ 3,852,096 $ 287,139 11

14 Net assets were released from donor restrictions by incurring expenses satisfying the restricted purposes or by the occurrence of events specified by the donors were as follows: Expiration of time restrictions and collection of contributions receivable $ 1,244,212 $ 48,750 Satisfaction of program restrictions 63, ,890 Total restrictions released $ 1,308,067 $ 159, Beneficial Interest in Trust The Center has a beneficial interest in a split-interest gift. The contribution portion of an agreement is recognized as revenue when the Center has the unconditional right to receive benefits under the agreement and is measured at the expected future payments to be received. All present value calculations are made using federal discount rates and life expectancy tables. During the term of the agreement, any changes in actuarial assumptions are recognized in the statements of activities. The Center has one charitable remainder trust, which has an outside trustee, dated August The discount rate for this trust is 5.8% over one life. The payout rate is $1,250 annually. Subsequent to year-end, the trust was dissolved and the Center received approximately $20,000 in proceeds. 12. Related Party Transactions The Center had contributions receivable of $1,947,348 and $226,909 at June 30, 2012 and 2011, respectively, from certain members of the board. 13. Endowment Funds The Center s endowment consists of one fund received in 2008 that is restricted to maintain and enhance the value of endowment gifts and to secure the purchasing power of distributions in the future. The fund was $53,350 and $50,527 at June 30, 2012 and 2011, respectively, representing the original permanently restricted gift amount plus investment earnings. The Center has determined that all investment earnings will be permanently restricted until the endowment fund totals $1 million. There were no additions to the fund during 2012 or The fund is held in a temporary cash fund and mutual fund and these funds are restricted. The management of donor-restricted endowment funds is governed by state law under the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as adopted by the Virginia state legislature in The law gives guidance for investment and spending practices, giving consideration for donor-intent and the organization s overall resources and charitable purpose. Based on their interpretation of law and in compliance with donor intent, the Center classifies as permanently restricted net assets the original value of gifts donated to the permanent endowment. Currently, the Center has no formal spending or investing policy for this fund. No distributions will be made until the endowment fund totals $1 million, at which time a policy for distributions will be formulated. 12

15 14. Lease Commitments The Center leases office equipment under noncancellable operating leases. Minimum lease payments for future years ending June 30 are as follows: 2013 $ 6, , ,280 $ 17, Functional Expenses The costs of providing the various programs and activities have been summarized on a functional basis in the statements of activities. Accordingly, the following expenses have been allocated among the programs and supporting services benefited for the years ended June 30: In-kind rent $ 1,165,200 $ 1,085,200 Personnel 771, ,853 Occupancy and administration 610, ,295 Site expense 409, ,618 Travel, training and supplies 15,204 24,448 Consultants 94,807 51,664 Interest expense 8,849 11,061 Marketing/public relations 79,276 39,355 Printing, postage and supplies 22,405 33,609 Education 71,222 2,396 Project promotion and cultivation 18,109 1,337 Construction expenses $ 3,267,040 $ 3,110, Subsequent Events (Unaudited) Subsequent to year-end, the Center purchased a new HVAC system for one of their facilities at an approximate cost of $160,000. In July 2012, the Center entered into a contract for approximately $40,000 for electrical work in the museum s gallery. * * * * * 13