VIRGINIA DISCOVERY MUSEUM AUDITED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2014

Transcription

1 AUDITED FINANCIAL STATEMENTS YEAR ENDED JUNE 30, 2014

2 BOARD OF DIRECTORS Bob Stroh Chairman Suzannah Tobin Vice Chairman Eric Lamb Treasurer Janine Dozier Secretary Krista Davis Dave Ellis Erin English Bonnie Farone Jennifer Jennings Joanie Leibl Jessica Phillips Kennedy Prentiss Beth Solak Ames Winter OFFICIALS Amy Wicks-Horn, Executive Director

3 TABLE OF CONTENTS Page Independent Auditors Report 1-2 Basic Financial Statements Statement of Financial Position 3 Statement of Activities 4 Statement of Cash Flows 5 Notes to Financial Statements 6-13 Supplemental Information Statement of Functional Expenses 14

4 1 INDEPENDENT AUDITORS REPORT The Board of Directors Virginia Discovery Museum, Inc. We have audited the accompanying financial statements of the Virginia Discovery Museum, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2014, and the related statements of activities, and cash flows 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 of 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 organization 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 organization 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 the Virginia Discovery Museum, Inc. 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. Other Matter Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The statement of functional expenses on page 14 is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the

5 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. 2 December 18, 2014

6 BASIC FINANCIAL STATEMENTS

7 3 ASSETS Current Assets VIRGINIA DISCOVERY MUSEUM Statement of Financial Position As of June 30, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total Cash and cash equivalents $ 10,848 $ 5,000 $ 1,293 $ 17,141 Accounts receivable Pledges receivable - 2,090-2,090 Total Current Assets 11,440 7,090 1,293 19,823 Property and Equipment, Net 141, ,524 Other Assets Beneficial interest in assets transferred to Charlottesville Area Community Foundation ,510 11,510 Total Assets $ 152,964 $ 7,090 $ 12,803 $ 172,857 LIABILITIES AND NET ASSETS Current Liabilities Accounts payable $ 23,925 $ - $ - $ 23,925 Accrued payroll liabilities 15, ,470 Deferred revenue 35, ,472 Total Current Liabilities 74, ,867 Net Assets 78,097 7,090 12,803 97,990 Total liabilities and net assets $ 152,964 $ 7,090 $ 12,803 $ 172,857 The accompanying notes are an integral part of these financial statements

8 4 VIRGINIA DISCOVERY MUSEUM Statement of Activities Year Ended June 30, 2014 Temporarily Permanently Unrestricted Restricted Restricted Total OPERATING SUPPORT AND REVENUE Public Support Contributions $ 346,500 $ 13,750 $ - $ 360,250 Net assets released from restrictions 15,782 (15,782) - - Total Public Support 362,282 (2,032) - 360,250 Revenue Special events Revenue 27, ,471 Less: direct costs (20,491) - - (20,491) Net special events revenue 6, ,980 Program services Memberships 73, ,477 Admissions 71, ,740 Programs and performances 9, ,890 Total program services 155, ,107 Change in beneficial interest in assets transferred to Charlottesville Area Community Foundation 1, ,488 Total Revenue 163, ,575 Total Operating Support and Revenue 525,857 (2,032) - 523,825 OPERATING EXPENSES Program services 378, ,057 Support services 159, ,036 Total operating expenses 537, ,093 CHANGE IN NET ASSETS (11,236) (2,032) - (13,268) NET ASSETS AT BEGINNING OF YEAR 89,333 9,122 12, ,258 NET ASSETS AT END OF YEAR $ 78,097 $ 7,090 $ 12,803 $ 97,990 The accompanying notes are an integral part of these financial statements

9 5 VIRGINIA DISCOVERY MUSEUM, INC. Statements of Cash Flows Year Ended June 30, 2014 Cash Flows from Operating Activities Change in net assets $ (13,268) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 16,727 Beneficial interest in assets transferred from Charlottesville Area Community Foundation (1,488) Loss on disposal of property 97 In-Kind contribution of property & equipment (3,402) Decrease in accounts receivable 496 Decrease in prepaid expenses 1,274 Increase in pledges receivable (118) Increase in accounts payable 7,084 Decrease in payroll liabilities (1,741) Decrease in deferred revenues (5,651) Net Cash Provided by Operating Activities 10 Cash Flows from Investing Activities Withdrawal from Charlottesville Area Community Foundation 10,000 Purchase of property and equipment (16,383) Net Cash Used by Investing Activities (6,383) Net Decrease in Cash and Cash Equivalents (6,373) Cash and Cash Equivalents, Beginning of Year 23,515 Cash and Cash Equivalents, End of Year $ 17,142 Noncash Investing and Financing Activities: Noncash donation of property & equipment $ 3,402 The accompanying notes are an integral part of these financial statements

10 Notes to Financial Statements June 30, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Reporting Entity The Virginia Discovery Museum ( the Museum ) is a not-for-profit organization operated primarily for the benefit of citizens of Charlottesville and Albemarle County, Virginia. In addition to exhibits for children, the Museum s principal activities focus on artistic, recreational, scientific and educational programs. The Museum s operations are funded through grants, contributions, and various revenue-generating activities. In the year ended June 30, 2014, contributions provided 68.8% of total support and activities such as memberships, admissions, programs, and events provided 30.9% Operating expenses consisted primarily of salaries and wages for full-time and part-time staff members. In addition, museum personnel construct and renovate exhibits each year. When appropriate, certain costs associated with these activities are capitalized and depreciated over the related exhibit s estimated useful life. Basis of Accounting The financial statements of the Museum have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles. The bases of revenue recognition for the major sources of income are as follows: Financial Statement Presentation For the year ended June 30, 2014, the Museum has prepared its financial statements in accordance with generally accepted accounting principles for not-for-profit Organizations. Under this guidance, the Museum 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. Contributions Unrestricted net assets Net assets that are not subject to donor-imposed stipulations. Temporarily restricted net assets Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Museum and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Museum. Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Contributions received that are designated for future periods or restricted by the donor for specific purposes are reported as an increase in temporarily restricted or permanently restricted net assets, depending on the nature of the restriction, in the reporting period in which the support is recognized. Temporarily restricted net assets are reclassified to unrestricted net assets in the period for which the use restriction has been met or the time restriction lapses. The Museum reports gifts of Land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets must be used to acquire long-lived assets are reported as restricted support. In the absence of explicit donor stipulations the museum considers donor restrictions to have expired when the donated or acquired long-lived assets are placed in service.

11 Notes to Financial Statements June 30, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Donated Materials and Services The contributions of services are recognized if the services received (a) create or enhance non-financial assets or (b) require specialized skills that are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. A significant portion of the Museum s program activities is conducted by unpaid volunteers. The value of this contributed time is not reflected in the accompanying financial statements since the volunteers time does not meet the criteria necessary for recognition. Advertising Advertising costs are expensed as incurred. For the year ended June 30, 2014, advertising expense totaled $4,653. Cash and Equivalents For purposes of the Statement of Cash Flows, the Museum considers cash in bank, cash on hand, and all highly liquid investments purchased with a maturity date of three months or less to be cash and cash equivalents. Pledges Receivable The Museum records the annual pledges sponsored by the Commonwealth of Virginia Campaign as a receivable. All pledges are expected to be received in the next fiscal year. The Museum uses the allowance method to determine uncollectible pledges. The allowance is based on previous experience and management s analysis of specific pledges made. No allowance for uncollectible pledges was considered necessary at June 30, Investments The Museum has invested funds in investment pools with the Charlottesville Area Community Foundation (CACF). CACF invests the funds with third parties. The value of the museum s beneficial interest in this investment is subject to market and investment risks and the investment policies of CACF. The Museum s beneficial interest in these investments is carried at their fair market value based upon the values reported by CACF. Increases or decreases in fair market values are recorded as changes in unrestricted or temporarily restricted net assets in the year incurred based on the existence of any donor imposed restriction. Property and Equipment The Museum capitalizes all real and personal property acquired with a significant value and useful life greater than one year. Property and equipment are recorded at cost or, if contributed, the fair value at the date of gift. Depreciation is computed on the straight-line basis over the estimated useful lives, which range from five to forty years. Expenditures for maintenance and repairs are expensed as incurred. Use of Estimates The preparation of financial statements requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates.

12 Notes to Financial Statements June 30, NATURE OF OPERATIONS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONT D) Income Taxes The Museum is exempt from federal income taxes under 501(c)(3) of the Internal Revenue Code and has been classified as a Museum that is not a private foundation under 509(a) of the Internal Revenue Code. Accordingly, no provision is made for income tax in the financial statements. Generally, federal, state, and local authorities may examine the Museum s tax returns for three years from the date of filing or the due date of the return and the current and prior three years remain subject to examination as of June 30, Fair Value of Financial Instruments Generally accepted accounting principles establish guidelines for measuring fair value, establish a framework for measuring fair value, and require certain disclosures regarding fair value measurement. Under current accounting standards, the fair value framework requires the categorization of assets and liabilities into three levels based upon the assumptions (inputs) used to price the assets or liabilities. Level 1 provides the most objective measure of fair value, whereas level 3 generally requires significant management or fund manager judgment. The three levels are defined as follows: Credit Risk Level 1 - Unadjusted quoted prices in active market for identical assets and liabilities Level 2 - Observable inputs other than those included in Level 1. For example, quoted prices for similar assets or liabilities in active markets or quoted prices for identical assets or liabilities in inactive markets. Level 3 - Unobservable inputs reflecting management s own assumptions about the inputs used in pricing the asset or liabilities. Financial instruments that potentially subject the museum to concentrations of credit risk consist principally of cash, cash equivalents, and pledges receivable. The Museum places its cash and cash equivalents with financial institutions in amounts that from time to time may exceed federally-insured limits. The Museum holds a beneficial interest in assets transferred to the Charlottesville Area Community Foundation. This investment is exposed to various risks, such as interest rate, market, and credit. Due to the level of risk associated with certain investment securities and the level of uncertainty related to changes in the value of investment securities, it is at least reasonably possible that changes in risk in the near term would materially affect the amounts reported in the financial statements. 2. BENEFICIAL INTEREST IN ASSETS TRANSFERRED TO CHARLOTTESVILLE AREA COMMUNITY FOUNDATION (CACF) In 2006, the Museum Established an agency endowment fund with the Charlottesville Area Community Foundation (CACF) known as the Virginia Discovery Museum Fund (the Fund). Under the terms of the agreement, the fund is the property of the CACF and is used solely for the support of charitable or educational purposes of the Museum. Distributions are ordinarily made only out of income earned so that the principal of the Fund may be preserved for endowment. Under the terms of the agreement, the Museum granted variance power to CACF. This power provides that CACF s Board of Trustees may order variance from a Museum restriction or designation of the Board has determined that conditions or circumstances warrant such action. The agreement sets forth conditions by which the board is required to notify the Museum and consider the Museum s views if the Board proposes to exercise variance power.

13 Notes to Financial Statements June 30, BENEFICIAL INTEREST IN ASSETS TRANSFERRED TO CHARLOTTESVILLE AREA COMMUNITY FOUNDATION (CACF) (CONT D) CACF invests funds according to certain diversification parameters required by the museum s management. These investments include cash and cash equivalents, equity, fixed income, and alternative investments. Alternative investments, such as investments held by CACF, are not readily marketable and are carried at net asset value as provided by the investment manager. These investments are insured by the Federal Deposit Insurance Corporation (FDIC), and are subject to credit or investment risk. The Museum believes that carry amount of these investments is a reasonable estimate of fair value. The amounts the museum will ultimately realize could differ materially from the reported amounts, and significant fluctuations in fair values could occur from year to year. CACF has the ability to liquidate investments held on the Museum s behalf and distribute these funds upon request. The investment with CACF is reported at net realizable value. Due to the nature of this receivable, it is subject to both credit and investment risk. The Museum Made no contributions to the Fund during the year ended June 30, 2014 and there were no unfunded commitments to the Fund. The amount outstanding at June 30, 2014 was $11,510. During fiscal year 2014, CACF distributed $10,000 from the fund. Interpretation of Relevant Law The Museum has interpreted the Virginia State Prudent Management of Institutional Funds Act (SPMIFA) as requiring the preservation of the fair value of original gifts received and designated as endowments. As a result of this interpretation, the Museum classifies as permanently restricted net assets (a) the original value of gifts donated to the endowment, (b) the original value of subsequent gifts donated to the endowment, and (c) accumulations to the 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 funds not classified as permanently restricted net assets are classified as temporarily restricted net assets until those amounts appropriated for expenditure are disbursed in accordance with the donor restrictions in a manner consistent with the standard of prudence prescribed by SPMIFA. In accordance with SPMIFA, the Museum considers the following factors in making a determination to appropriate or accumulate funds in the endowment funds designated by the Board of Directors. The duration and preservation of the fund The purposes of the museum and a donor-restricted endowments fund General economic conditions The possible effect of inflation or deflation The expected total return from income and the appreciation of investments Other resources of the Museum The investment policies of the Museum Return Objectives and Risk Parameters The Museum has placed its endowment funds with CACF with the intention of keeping the principal amount and all related net income in the endowment for the foreseeable future. Endowment assets include Board-designated funds and assets of donor-restricted funds that the museum must hold in perpetuity or for a donor-specified period. Under the CACF policy, as approved by the Board of Directors, the endowment assets are invested with a long-term horizon, seeking growth of both income and principal so that the endowment s future purchasing power is greater than today s purchasing power. Some donor-restricted endowment funds could restrict annual distributions to net income. The Museum would use the same investment policies and intends to produce the same investment results as described above for any such donor-restricted endowment funds.

14 Notes to Financial Statements June 30, BENEFICIAL INTEREST IN ASSETS TRANSFERRED TO CHARLOTTESVILLE AREA COMMUNITY FOUNDATION (CACF) (CONT D) Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the museum 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 Museum 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. Spending Policy and How the Investment Objectives Relate to Spending Policy The Museum has a current spending policy of paying only the agency fees and leaving the total principal and net income within the endowment. Accordingly, over the long term, the Museum expects the current spending policy to allow the endowment fund to grow consistent with the Objective of maintaining the purchasing power of the endowment assets. Funds with Deficits From time to time, the fair value of assets associated with endowment funds may fall below the level that the donor or SPMIFA requires the Museum to retain as a fund of perpetual duration. At June 30, 2014, the fund had a deficiency of $1,293 which it held in cash. This deficit was replenished in July 2014 when the museum transferred this cash back to the fund. Net Assets composition for the endowment fund as of June 30, 2014 was as follows: Temporarily Permanently Unrestricted Restricted Restricted Total June 30, 2014 $ - $ - $11,510 $11,510 Changes in endowment net assets were as follows: Temporarily Permanently Unrestricted Restricted Restricted Total June 30, 2013 $3,669 $3,550 $12,803 $20,022 Investment Income Investment Expenses - - (177) (177) Unrealized Gain/(Loss) - - 1,496 1,496 Withdrawals (3,669) (3,550) (2,781) (10,000) June 30, 2014 $ - $ - $11,510 $11, FAIR VALUE MEASURMENTS The fair value of the Museum s assets is categorized in accordance with generally accepted accounting principles at June 30, 2014 as follows: Level 1 Level 2 Level 3 Total Beneficial interest in assets transferred to CACF $ - $ - $11,510 $11,510 Total financial assets at fair value $ - $ - $11,510 $11,510

15 Notes to Financial Statements June 30, FAIR VALUE MEASUREMENTS (CONT'D) The following table provides a reconciliation of activity for the year ended June 30, 2014 of the Museum's beneficial interest in assets transferred to CACF that are classified as Level 3 assets: Balance, beginning of year $20,022 Net unrealized gain 1,496 Net earnings (8) Withdrawal (10,000) Balance, end of year $11, OPERATING LEASES AND RELATED IN-KIND CONTRIBUTIONS Under the terms of a lease agreement with the City of Charlottesville (the City), the Museum leases a building as the site of its operations. This original lease term was from July 1, 2006 to June 30, 2011, and was extended to the period from July 1, 2011 to June 30, The new lease requires annual payments of $3,300. The estimated fair market value of the leased premises for the year ended June 30, 2014 was $107,688. Accordingly, an in-kind contribution by the City and additional rent expense of $106,308 has been recorded in the financial statements for the year ended June 30, This amount represents the difference between fair market value of the annual rent and the annual rent payments made by the Museum pursuant to the lease agreement. On June 14, 2006, the Museum entered into a second lease with the City to accommodate the Children s carousel donated to the museum in July of The fair market value for the space for fiscal year 2014 is $1,920, which is recognized in the museum s financial statements as an in-kind contribution and additional carousel expense. The museum renewed the lease agreement on June 8, 2011 for a period extending from July 1, 2011 to June 30, The Museum paid the City $1 for the five year lease period. Future minimum payments required under the agreements described above are as follows: Year ending Building Carousel June 30, Lease Lease 2015 $ 3,300 $ ,300 - Total $ 6,600 $ - The Museum pays the City $9,000 annually for the use of its parking facilities. The fair market value of the use of these facilities for the year ended June 30, 2014 was $79,104. Accordingly, an in-kind contribution by the City and additional parking expense of $70,104 has been recorded in the financial statements. This amount represents the difference between fair market value of the use of the parking facilities and the payments made by the Museum for the year ended June 30, 2014.

16 Notes to Financial Statements June 30, PROPERTY AND EQUIPMENT Property and Equipment at June 30, 2014 consisted of the following: 6. DEFERRED REVENUE Exhibits $ 152,385 Office equipment 24,341 Building improvements 90,798 Carousel 25, ,393 Less: Accumulated Depreciation (151,859) $ 141,524 The Museum sells annual membership at various levels that give the members certain rights and benefits for one year from the month of purchase. The unexpired amount of membership fees at June 30, 2014 was $35, RETIREMENT PLAN The Museum has a 403(b) tax deferred savings plan under which eligible employees may contribute funds within the limits specified under the Internal Revenue Code. The Museum does not match these employee contributions. 8. CONTINGENCIES In accordance with the terms of the real estate agreement, the Museum generally agrees to indemnify the lessor from certain liabilities arising as a result of the use of the leased premises. The Museum is responsible for all routine and non-structural repairs and maintenance of the premises. The Museum also leases equipment and is responsible for all damages to the equipment while in its possession. As permitted or required by Virginia corporation law, the Museum has certain obligations to indemnify its current and former officers and directors for certain events or occurrences while the officer or director is, or was, serving at the Museum s request in such capacities. The maximum liability under these obligations is unlimited; however the Museum insurance policies serve to limit its exposure. 9. NET ASSETS RELEASED FROM RESTRICTIONS Promises to give in future periods are recorded as temporarily restricted net assets. The expiration of those restrictions is recognized as the donor makes the future payments. Net assets released from restrictions include amounts received in the current year relating to pledges made in prior years. Net assets released from restrictions also include amounts released by incurring expenses satisfying the restricted purposes specified by the donors. Pledge payments received in 2014 $ 3,632 Purpose restrictions accomplished 12,150 Total net assets released from restrictions $ 15,782

17 Notes to Financial Statements June 30, ALLOCATION OF FUNCTIONAL EXPENSES The costs of providing the Museum s program and administrative services have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated between the program and support services benefited. 11. SUBSEQUENT EVENTS In October 2014, the Museum s executive director resigned. The Museum s Director of Operations has been charged with running the day to day operations of the Museum and reports directly to the executive committee of the Board of Directors. Management has evaluated subsequent events through December 18, 2014, the financial statement issuance date, and no other subsequent events were found requiring recording or disclosure in the financial statements for the year ended June 30, 2014.

18 SUPPLEMENTAL INFORMATION

19 , INC. Statements of Functional Expenses Year Ended June 30, Program Services Supporting Services Management and General Fundraising Total Expenses Salaries and wages $ 109,566 $ 50,725 $ 42,608 $ 202,899 Rent 93,167 10,961 5, ,608 Parking 75,149 3,955-79,104 Employee benefits 17,150 7,940 6,669 31,759 Depreciation 11,709 3,345 1,673 16,727 Payroll taxes 8,361 3,871 3,251 15,483 Utilities 9,653 1, ,357 Building maintenance 10, ,034 Legal and professional fees - 10,150-10,150 Programs and performances 8, ,841 Office supplies and equipment 6, ,114 Calendar expense 5, ,551 Insurance 4, ,182 Advertising 4, ,653 Dues and memberships 3, ,801 Bank and investment fees 3, ,715 Fundraising - - 2,880 2,880 Cleaning Supplies 2, ,784 Other expenses 1, ,628 Volunteers 1, ,312 Staff education Postage and mailings Board expense $ 378,057 $ 95,187 $ 63,849 $ 537,093 The accompanying notes are an integral part of these financial statements.