TUPELO CHRISTIAN PREPARATORY SCHOOL, INC FINANCIAL STATEMENTS. Year Ended June 30, 2014

Transcription

1 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC FINANCIAL STATEMENTS Year Ended June 30, 2014 FRANKS, FRANKS, JARRELL & WILEMON, P.A. Certified Public Accountants

2 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC TABLE OF CONTENTS June 30, 2014 FINANCIAL AUDIT REPORT: Independent Auditors' Report on Financial Statements... 1 FINANCIAL STATEMENTS: Statement of Financial Position... 3 Statement of Activities... 4 Statement of Cash Flows... 5 Notes to Financial Statements... 6

3 P.O. Box 731 Tupelo, MS (662) P.O. Box 355 Fulton, MS (662) FRANKS I FRANKS I JARRELL I WILEMON Partners Gary Franks, CPA Greg Jarrell, CPA Bryon Wilemon, CPA Jonathan Hagood, CPA Rudolph Franks, CPA (emeritus) INDEPENDENT AUDITORS' REPORT Board of Trustees Tupelo Christian Preparatory School, Inc. Belden, Mississippi We have audited the accompanying financial statements of Tupelo Christian Preparatory School, 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. Auditors' 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. -1-

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Tupelo Christian Preparatory School, 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. FRANKS, FRANKS, JARRELL & WILEMON, P.A. September 26,

5 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC. STATEMENT OF FINANCIAL POSITION June 30, 2014 ASSETS Cash and cash equivalents Accounts receivable Prepaid expenses Inventory- concessions Endowment investments Property, plant, and equipment Total assets $ 1 '118,575 28,676 30, ,313 5,223,912 $ ===6='=42=8=, 1=5=6= LIABILITIES Accounts payable Accrued expenses Custodian accounts Deferred revenue Notes payable Total liabilities $ 80,586 47,841 23, ,521 3,849,984 4,733,751 NET ASSETS Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets 1,548, ,479 24,813 1,694,405 $ ===6='=42=8=, 1=5=6= See accompanying notes to financial statements. -3-

6 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC. STATEMENT OF ACTIVITIES For the year ended June 30, 2014 REVENUES AND OTHER SUPPORT 2014 Temporarily Permanently Unrestricted restricted restricted Total Tuition and educational fees, net $ 3,310,400 $ $ $ 3,310,400 Contributions 16,525 90, ,358 Investment income '142 Net realized and unrealized (losses) gains on investments 1, ,897 Auxiliary enterprises: Extended care 28,362 28,362 Athletic fees 32,046 32,046 Summer camps 16,645 16,645 Other sources 6,152 6,152 PTF and booster club, net 44,212 44,212 Net assets released from restrictions 59,054 (59,054) 0 EXPENSES Total revenues and other support 3,513,760 33,279 1 '175 3,548,214 Salaries and wages 1,938,717 1,938,717 Fringe benefits 385, ,204 Administrative support 112, ,259 Technology 17,008 17,008 Secondary education support 34,331 34,331 Elementary education support 92,488 92,488 Facilities operations 200, ,426 Other 39,227 39,227 Interest on capital asset related debt 179, ,385 Depreciation 260, ,046 Total expenses 3,259, ,259,091 Total increase in net assets 254,669 33,279 1 ' ,123 NET ASSETS, Beginning of year 1,293,444 88,200 23,638 1,405,282 NET ASSETS, End of year $ 1,548,113 $ 121,479 $ 24,813 $ 1,694,405 See accompanying notes to financial statements. -4-

7 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC. STATEMENT OF CASH FLOWS For the year ended June 30, 2014 CASH FLOWS FROM OPERATING ACTIVITIES Increase in net assets Adjustments to reconcile increase in net assets to net cash provided by operating activities: Net realized and unrealized losses (gains) on investments Depreciation (Increase) decrease in operating assets: Accounts receivable Prepaid expenses Inventory- concessions Increase (decrease) in operating liabilities: Accounts payable Accrued expenses Custodian accounts Deferred revenue Net cash provided by operating activities CASH FLOWS FROM INVESTING ACTIVITIES Payments for property, plant, and equipment Purchase of endowment investments Net cash used by investment activities CASH FLOWS FROM FINANCING ACTIVITIES Payments on notes payable Net cash used by financing activities Net increase in cash and cash equivalents Cash and cash equivalents at beginning of year Cash and cash equivalents at end of year $ $ 289,123 (1,897) 260,046 (8,350) (28,880) , (7,763) 75, ,928 (135,059) (778) (135,837) (89,311) (89,311) 400, ,795 1 '118,575 SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION Cash paid for: Interest $ ==1=80='=27=6= See accompanying notes to financial statements. -5-

8 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of the Organization Tupelo Christian Preparatory School, Inc, (the "TCPS") is a nonprofit, charitable organization which exists to provide young people with the development of character and academic excellence from a Christian perspective in a Christian environment. TCPS operates a private Christian School for grades K4 through the 12 1 h grade. The school is located in Belden, Mississippi, and grants credit for tuition and fees to the parents of enrolled children which consist primarily of individuals residing in Northeast Mississippi. TCPS also solicits charitable contributions from donors located primarily in Northeast Mississippi. Basis of Presentation The financial statements of TCPS have been prepared on the accrual basis in accordance with U.S. generally accepted accounting principles. Based on the existence or absence of donor-imposed restrictions, TCPS classifies resources into three categories: unrestricted, temporarily restricted, and permanently restricted net assets. Unrestricted net assets are free of donor-imposed restrictions. All revenues, gains, and losses that are not temporarily or permanently restricted by donors are included in this classification. All expenditures are reported in the unrestricted class of net assets, since the use of restricted contributions in accordance with donors' stipulations results in the release of the restriction. Temporarily restricted net assets are limited as to use by donor-imposed stipulations that expire with the passage of time or that can be satisfied by action of TCPS. Permanently restricted net assets are amounts required by donors to be held in perpetuity. These net assets may include unconditional pledges or donor-restricted endowments (at historical value). Generally, the donors of these assets permit TCPS to use a portion of the income earned on related investments for specific purposes. Expirations of temporary restrictions on net assets, i.e., the passage of time along with the concomitant of the Board of Directors approval of the endowment spending rate, and/or fulfilling donor-imposed stipulations, are reported as net assets released from restrictions between the applicable classes of net assets in the consolidated statements of activities. Fair Value Measurements The Fair Value Measurements and Disclosures topic of the FASB Accounting Standards Codification establishes a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. This hierarchy consists of three board levels: Level 1 inputs consist of unadjusted quoted prices in active markets for identical assets and have the highest priority, Level 2 inputs consist of observable inputs other than quoted prices for identical assets, and Level 3 inputs have the lowest priority. TCPS uses appropriate valuation techniques based on the available inputs to measure the fair value of its investments. When available, TCPS measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs would be used only when Level 1 or Level 2 inputs were not available. -6-

9 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30,2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Cash and Cash Equivalents For purposes of the statement of cash flows, TCPS considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. Investments Investments are reported at fair value using the three-level hierarchy established under ASC 820. Purchases and sales of securities are recorded on the trade dates, and realized gains and losses are determined on the basis of the average historical cost of the securities sold. Unrealized gains and losses are included in the change in net assets. Property. Plant. and Equipment Purchased property, plant, and equipment are recorded at cost. Donated assets are recorded at fair value at the date of donation. Repairs and maintenance are expensed as incurred. Depreciation is calculated using the straight-line method to allocate the cost of various classes of assets over their estimated useful lives. Property, plant, and equipment are removed from the accounting records at the time of disposal. The land, upon which the existing facilities are located, was donated to TCPS in 1997 and recorded at the estimated fair market value at that date of $250,000. The donors maintain a reversionary interest in the property such that the title would revert back to the donors in the event the property ceases to be used for Christian education. Revenue Recognition Tuition and educational fees, net- Student tuition and educational fees are recorded during the year the related academic services are rendered. Student tuition and educational fees received in advance of services to be rendered are recorded as deferred revenue. Financial aid provided by TCPS for tuition and educational fees is reflected as a reduction of tuition and educational fees. Contributions Annual campaign contributions are generally available for unrestricted use in the related campaign year unless specifically restricted by the donor. Unconditional promises to give are recorded as received. Other contributions of cash and other assets are reported as temporarily restricted support if they are not 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. Contributions received with donor-imposed restrictions that are met in the same year in which the contributions are received are classified as unrestricted contributions. -7-

10 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30,2014 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Contributions - Continued Contributions of donated non-cash assets are recorded at their fair values in the period they are received. Contributions or donated services that create or enhance non-financial assets or that require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation, are recorded at their fair values in the period received. Use of Estimates The preparation of financial statements requires the use of estimates and assumptions that affect the reported amounts of assets, liabilities, revenues, and expenses during the reporting period as well as the disclosure of contingent assets and liabilities. Actual results ultimately could differ from management's estimates. Income Taxes TCPS is a not-for-profit organization that is exempt from income taxes under Section 501 (c)(3) of the Internal Revenue Code and classified by the Internal Revenue Service as other than a private foundation. Spending Policy The Board of Directors has adopted a spending policy for endowment assets. The policy defines the total funds available from the Endowment Fund in a given year (the distributable income) as up to 75% of the prior year annual earnings, not to exceed $1,500, can be disbursed. The Endowment Fund is to have returns greater than the proposed distribution plus management fees. If the market value of the Endowment Fund falls to or below the amount of the fund's donor restricted gifts, then the spending policy will be amending accordance with the guidelines not to exceed the actual earnings of the funds. The Board of Directors may amend this policy. Advertising TCPS expenses advertising costs as they are incurred. Advertising expenses were $9,724 for the year ended June 30, NOTE 2- ACCOUNTS RECEIVABLE Accounts receivable are recorded as tuition and fees for the current or proceeding school years are billed, and consist of amounts TCPS expects to collect on balances outstanding at year-end. Management determines an allowance for doubtful accounts based on historical losses and current economical conditions. Management has determined that the allowance for doubtful accounts is $4,000 at June 30, On a continuing basis, management analyzes delinquent receivables and, once these receivables are determined to be uncollectable, they are written off through a charge against an existing allowance account or against earnings. -8-

11 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE 3- ENDOWMENT INVESTMENTS AND PERMANENTLY RESTRICTED NET ASSETS Permanently restricted net assets at June 30, 2014 consist of an endowment fund established to support the TCPS scholarship program. Contributions to the endowment fund are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested by TCPS indefinitely and up to 75% of the prior year annual earnings may be expended for scholarship purposes. The historic dollar value of any contributions to the fund must be maintained inviolate. Endowment assets are invested in a well diversified asset mix, which includes equity and debt securities, that is intended to result in a consistent inflation-protected rate of return that has sufficient liquidity, while growing the funds if possible. Investment risk is measured in terms of the total endowment fund; investment assets and allocation between asset classes and strategies are managed to not expose the fund to unacceptable levels of risk. The composition of endowment net assets and changes in endowment net assets can be found in the financial statements. Investments at June 30, 2014 are comprised of the following: Money market funds Mutual funds Total Cost $ 10,397 10,000 $ 20,397 Fair Value (Level1) $ 10,397 15,916 $ 26,313 Level1: Money market funds and mutual funds are valued at the closing price reported in the active market on which the individual securities or funds are traded. The following schedule summarizes the investment return for the endowment investments and its classification in the statement of activities for the year ended June 30, Investment expenses for 2014 were $0. Investment Temporarily Permanently activity Unrestricted restricted restricted Total Interest & dividends $ $ $ 778 $ 778 Net realized and unrealized gains 1, ,897 Total investment return $ 0 $ 1,500 $ 1 '175 $ 2,675-9-

12 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE 4 - PROPERTY, PLANT, AND EQUIPMENT Land, buildings and equipment consisted of the following at June 30, 2014: Land Buildings and improvements Furniture and fixtures Vehicles Machinery and equipment Property, plant, and equipment Less: Accumulated depreciation Property, plant, and equipment, net $ 312,000 6,359, , , ,596,244 (2,372,332) $ TCPS recognized $260,046 of depreciation expense for the year ended June 30, NOTE 5 - LONG-TERM DEBT Long-term debt consisted of the following at June 30, 2014: Note payable to a bank, bearing interest at 4.50%, payable in quarterly installments of $67,386, including interest through July 15, 2022, secured by real estate Total debt Less current maturities Non current maturities $ ,849,984 (98, 140) $ Approximate maturities of new combined note payable during the next five years ending June 30, are as follows: 2015 $ 98, , , , ,377 Thereafter 3,312,265 $ 3,849,984 Interest expense under all borrowings amounted to $179,385 for the year ended June 30, 2014 and is reflected on the statement of activities. -10-

13 TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30, 2014 NOTE 6- EXPENSES BY FUNCTIONAL CLASSIFICATION Expenses by functional classification for the year ended June 30, 2014 are as follows: Program Administrative Fundraising Total expenses $2,553, ,127 62,575 $3,259,091 NOTE 7- RESTRICTIONS ON NET ASSETS Temporarily restricted net assets are available for the following purposes at June 30, 2014: 500 Club Baseball lights Advertising Uniform assistance Curriculum Tuition assistance Operating deficiencies Total temporarily restricted net assets $ 3,536 32,008 9,000 4,700 20,000 24,535 27,700 $ Permanently restricted net assets consist of endowment fund cash and investments to be held indefinitely, a portion of the income from which is expendable to support the school's scholarship programs. NOTE 8- CONCENTRATIONS OF CREDIT RISK At June 30, 2014, TCPS had cash deposits at financial institutions in excess of insurable limits of $573,373. NOTE 9- EMPLOYEE BENEFIT PLAN TCPS provides a tax-deferred annuity program to full time employees with one year of service. The Organization contributes 3% of employee's salary to the plan. Retirement contributions paid in the year ended June 30, 2014 were $41,668. NOTE 10- OPERATING LEASE TCPS is not committed under operating lease arrangements with non-cancelable lease terms in excess of one year as of June 30, Rental expense from operating leases amounted to $13,

14 NOTE11-SUBSEQUENTEVENTS Date of Management Evaluation TUPELO CHRISTIAN PREPARATORY SCHOOL, INC NOTES TO FINANCIAL STATEMENTS June 30, 2014 Management has evaluated subsequent events through September 26, 2014, the date on which the financial statements were available to be issued. -12-