United Arts of Central Florida, Inc.

Transcription

1 Financial Statements Years Ended June 30, 2014 and 2013

2 Contents Independent Auditor s Report 3 Financial Statements Statements of Financial Position 4 Statements of Activities 5 Statements of Cash Flows 6 Statements of Functional Expenses

3 Independent Auditor s Report Board of Directors United Arts of We have audited the accompanying financial statements of United Arts of, which comprise the statements of financial position as of June 30, 2014 and 2013, and the related statements of activities, cash flows and functional expenses for the years 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 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 from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of United Arts of as of June 30, 2014 and 2013, and the results of its operations and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. September 23, 2014 Certified Public Accountants 201 S. Orange Avenue, Suite 800 Orlando, FL Fax: Lakeland Tampa Winter Haven

4 Statements of Financial Position June 30, Assets Cash and cash equivalents $ 2,617,558 $ 2,592,815 Restricted cash equivalents and receivables (Note 3) 1,877,260 1,607,674 Pledges and grants receivable, net (Note 4) 1,464, ,374 Prepaid expenses and other assets 69,059 37,268 Property and equipment, net of accumulated depreciation of $115,650 and $192,079 78,698 39,422 Board designated endowments (Note 8) 25,209 22,913 Liabilities and Net Assets $ 6,132,063 $ 5,060,466 Liabilities: Accounts payable and accrued expenses $ 340,610 $ 152,615 Deferred services revenue (Note 2) 138, ,895 Amounts held for others (Note 3) 1,877,260 1,607,674 Designations payable, less allowance for uncollectible pledges of $13,240 and $9,891 1,927,367 1,903,635 Total liabilities 4,283,523 3,812,819 Commitments and contingencies (Notes 6 and 7) Net assets: Unrestricted (Notes 5 and 8) 614, ,634 Temporarily restricted (Note 5) 1,233, ,013 Total net assets 1,848,540 1,247,647 $ 6,132,063 $ 5,060,466 See accompanying notes to financial statements. 4

5 Statements of Activities Year Ended June 30, Unrestricted Temporarily Temporarily Restricted Total Unrestricted Restricted Total Support and other revenue Contributions: Corporations $ 107,439 $ 475,628 $ 583,067 $ 167,571 $ 475,552 $ 643,123 Government 1,954,322 1,954,322 1,915,764 1,150 1,916,914 Foundations 491, , , , ,750 Individuals 11,424 1,383,993 1,395,417 14,586 1,402,883 1,417,469 Workplace giving 9, , ,300 1, , ,208 power2give 68,814 68, , ,713 Total contributions 2,151,898 2,701,870 4,853,768 2,343,822 2,723,355 5,067,177 Less: Donor designations, net of provision for losses (298,585) (1,893,150) (2,191,735) (424,066) (1,805,382) (2,229,448) power2give project designations (68,814) (68,814) (90,713) (90,713) Net contributions 1,784, ,720 2,593,219 1,829, ,973 2,747,016 Support and other revenue: Contract and services revenue 763, , , ,621 Grants and other gifts 177, , , , ,066 Gifts-in-kind 35,483 35,483 46,002 46,002 Interest income 5,314 5,314 4,415 4,415 Net assets released from restriction (Note 5) 917,967 (917,967) 721,532 (721,532) Total support and other revenue 3,684, ,753 3,874,843 3,377, ,441 3,574,120 Support grants and functional expenses: Support grants to arts organizations 2,206,164 2,206,164 2,275,699 2,275,699 Functional expenses: Program 651, , , ,908 Fundraising 564, , , ,532 Management and general 151, ,181 87,569 87,569 Total functional expenses 1,367,970 1,367,970 1,211,009 1,211,009 Total support grants and functional expenses 3,574,134 3,574,134 3,486,708 3,486,708 Recovery (write-off) of uncollectible pledges (Note 1) 150, ,000 (247,541) (247,541) Contribution of net assets (Note 5) 25, , ,184 Change in net assets 284, , ,893 (356,570) 196,441 (160,129) Net assets, beginning of year 329, ,013 1,247, , ,572 1,407,776 Net assets, end of year $ 614,590 $1,233,950 $1,848,540 $ 329,634 $ 918,013 $1,247,647 See accompanying notes to financial statements. 5

6 Statements of Cash Flows Year Ended June 30, Cash flows from operating activities: Change in net assets $ 600,893 $ (160,129) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 31,606 9,629 Net gains and investment fees on board designated endowments (2,296) (2,290) Write-off of uncollectible pledges 17, ,541 Cash provided by (used for): Restricted cash (872,179) 779,662 Restricted receivables 602,593 (930,912) Pledges and grants receivable, net (721,466) 29,533 Prepaid expenses and other assets (31,791) (6,533) Accounts payable and accrued expenses 187,995 60,258 Deferred services revenue (10,609) 23,636 Amounts held for others 269, ,250 Designations payable, net 23, ,019 Net cash provided by operating activities 95, ,664 Cash flows from investing activities: Purchase of property and equipment (70,882) (33,580) Net increase in cash and cash equivalents 24, ,084 Cash and cash equivalents, beginning of year 2,592,815 2,097,731 Cash and cash equivalents, end of year $ 2,617,558 $ 2,592,815 See accompanying notes to financial statements. 6

7 Statements of Functional Expenses Year Ended June 30, Program Fundraising 2014 Management and General Total Salaries, taxes and benefits $431,588 $334,840 $102,691 $ 869,119 Advertising and promotion 8,061 47, ,585 Consulting and contracted services 35,521 63,122 22, ,564 Rents and utilities 63,080 40,959 14, ,926 Supplies 5,661 7,755 2,747 16,163 Printing and publication 54,456 23, ,289 Hospitality, meals and awards 10,228 8,374 1,234 19,836 Depreciation 17,845 11,986 1,775 31,606 Dues and subscriptions 4,672 3,542 1,056 9,270 Postage , ,411 Corporate insurance 4,333 1, ,148 Telecommunication 7,125 4, ,575 Travel, conferences and education 9,061 5, ,478 Total functional expenses $651,847 $564,942 $151,181 $1,367,970 Year Ended June 30, Program Fundraising 2013 Management and General Total Salaries, taxes and benefits $364,750 $299,543 $66,910 $ 731,203 Advertising and promotion ,549 49,744 Consulting and contracted services 76,488 60,454 7, ,450 Rents and utilities 56,561 48,481 6, ,102 Supplies 4,755 5,428 1,686 11,869 Printing and publication 54,703 24, ,971 Hospitality, meals and awards 8,431 2, ,170 Depreciation 4,902 4, ,629 Dues and subscriptions 5,208 5, ,086 Postage ,187 2,344 15,817 Corporate insurance 4,902 2, ,288 Telecommunication 5,668 3, ,390 Travel, conferences and education 9,059 8, ,290 Total functional expenses $595,908 $527,532 $87,569 $1,211,009 See accompanying notes to financial statements. 7

8 1. Summary of Significant Accounting Policies Nature of Operations United Arts of ( United Arts or the Organization ) is a not-forprofit corporation organized and operated exclusively for cultural and educational purposes in order to further programs in arts and culture. Monies raised by United Arts are spent on direct programs and granted to various arts and cultural organizations throughout Lake, Orange, Osceola and Seminole counties. Liquidity Assets are presented in the accompanying statement of financial position according to their nearness of conversion to cash and liabilities according to the nearness of their maturity and resulting use of cash. Cash and Cash Equivalents For purposes of the statement of cash flows, the Organization considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents. Pledges and Grants Receivable Pledges and grants receivable are unconditional promises to give and are recorded when the promises to give are made. Pledges and grants receivable which are expected to be collected in more than one year are stated at the present value of estimated future receipts. The Organization provides an allowance for uncollectible pledges at the time revenues are recorded based on historical write-offs. Property and Equipment Property and equipment consists of furniture, office equipment and software and are recorded at cost, if purchased, and at fair market value on the date received, if donated. Depreciation is computed using the straight-line method over the estimated useful lives of the assets of three to seven years. Contributions and Designations Unconditional promises to give, including pledges and grants receivable, are recognized in the period received. Conditional promises to give are not recognized until they become unconditional, that is when the conditions on which they depend are substantially met. Contributions and pledges received which are designated to a specified organization by the donor are recorded as designations payable when the related promise to give is received, net of an allowance for uncollectible pledges. Donor designations are included 8

9 in total contributions but are deducted to arrive at net contributions for presentation purposes on the statements of activities. Donor Restricted Contributions Contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or are restricted by the donor for specific purposes are reported as temporarily restricted support that increases that net asset class. United Arts operates on a forward funding basis, therefore, contributions toward the current annual campaign are time restricted to fund supporting grants and operations in the next fiscal year. When a donor restriction expires, which is when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statement of activities as net assets released from restriction. If a restriction is fulfilled in the same time period in which the contribution is received, the Organization reports the support as unrestricted. power2give power2give is an online giving portal for nonprofit arts and cultural organizations. Its purpose is to provide a site where nonprofit art, science and history organizations can post projects and encourage donors to support those projects through designated project donations. power2give is owned and licensed by the Arts & Sciences Council Charlotte/Mecklenburg, Inc. United Arts acquired the Central Florida license and launched power2give in the region in May Donor project support and corporate matches are recorded as designations payable when the gift is made. During the year ended June 30, 2014 and 2013, $66,314 and $43,213 in donor designated gifts and $2,500 and $72,500 in corporate matching and sponsorship donations were received, respectively, and recorded as power2give revenue on the statement of activities. In 2013, $25,000 of the total sponsorship funds received were used to cover the cost of the power2give license which is included in property and equipment, net on the statement of financial position. United Arts collects a 12% administrative fee on all project funding to offset marketing, licensing and credit card fees associated with the site. United Arts recorded $8,258 and $10,886 in transaction fee revenue, which is recorded as contract and services revenue in the statements of activities for the year ended June 30, 2014 and 2013, respectively. The Organization recorded expenses totaling $4,645 and $4,347 for licensing and credit card fees related to this project. 9

10 Deferred Services Revenue Deferred services revenue represents administrative fees received for grants awarded by Orange County (see Note 2) and restricted program revenue which have not yet been earned. Contributed Services and Goods Contributed services are recognized and recorded at fair market value only to the extent they create or enhance nonfinancial assets or require specialized skills, are provided by individuals possessing those skills and would typically need to be purchased if not provided by donations. Contributed goods are recognized at fair market value on the date received. Specialized services related to marketing, legal services and goods in the form of event tickets and gift cards were received and recognized in the statements of activities as gifts-in-kind support and the statements of functional expenses as promotional expenses, legal services and consulting of $35,483 and $46,002 during the years ended June 30, 2014 and 2013, respectively. Functional Expenses Salaries and related benefits are allocated among functional categories based upon the estimated proportion of time spent for each function. All other expenses are either directly allocated or distributed based upon management s estimate of the relative functional activity. Use of 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 at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. Income Taxes The Organization is exempt from Federal income tax under provisions of Section 501(c)(3) of the Internal Revenue Code and from state income taxes under similar provisions of the Florida Income Tax Code. The Organization identifies and evaluates uncertain tax positions, if any, and recognizes the impact of uncertain tax positions for which there is a less than more-likely-than-not probability of the position being upheld when reviewed by the relevant taxing authority. Such positions are deemed to be unrecognized tax benefits and a corresponding liability 10

11 is established on the statement of financial position. The Organization has not recognized a liability for uncertain tax positions. If there were an unrecognized tax benefit, the Organization would recognize interest accrued related to unrecognized tax benefits in interest expense and penalties in operating expenses. The Organization s remaining open tax years subject to examination by the Internal Revenue Service generally remain open for three years from the date of filing. Fair Value of Financial Instruments The Organization reports its financial instruments at fair value using a three-tier hierarchy, which prioritizes the inputs used in measuring 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 Valuation based on unadjusted quoted prices in active markets for identical assets or liabilities. Level 2 Valuation based on observable quoted prices for similar assets and liabilities in active markets. Level 3 Valuation based on inputs that are unobservable and are supported by little or no market activity, therefore requiring management s best estimate of what market participants would use as fair value. A financial instrument s level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Fair value estimates discussed herein are based upon certain market assumptions and pertinent information available to management. The respective carrying value of certain financial instruments approximate their fair values due to the short-term nature of these instruments. These financial instruments include cash and cash equivalents, restricted receivables, pledges and grants receivable due within one year, accounts payable and accrued expenses and designations payable. Pledges and grants receivable due beyond one year are recorded at their net present value using a risk-free interest rate available on U.S. Treasury issues at the date the pledge was made with an equivalent term approximately equal to the number of years the pledge will be paid. 11

12 The Organization has no Level 1 or 2 financial assets or liabilities at June 30, 2014 and The Organization s Level 3 financial assets consist of board designated endowment investments as described in Note 8 and are valued based on third-party information since their values are not readily determinable. Impairment of Long-Lived Assets The Organization reviews its long-lived assets for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of assets to be held and used is measured by a comparison of the carrying amount of an asset to future undiscounted cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the fair value of the assets. Assets to be disposed of are reported at the lower of the carrying amount or fair value less costs to sell. Concentration of Credit Risk The Organization s financial instruments that are exposed to concentrations of credit risk consist of cash and cash equivalents, which include checking and money market accounts placed with federally insured financial institutions. Such accounts may at times exceed federally insured limits. The Organization has not experienced any losses on such accounts. In addition, the Organization receives substantial support from individuals, businesses and governmental entities in the Central Florida area. The financial strength of the Organization is therefore contingent upon the economy of Central Florida. During the year ended June 30, 2013, the Organization wrote off three undesignated pledges from one Trustee totaling $250,000 that were deemed to be uncollectible and were included in write-off of uncollectible pledges in the statement of activities. During the year ended June 30, 2014, the Organization collected $150,000 toward these written off pledges. There are currently no additional concentrations of unpaid undesignated pledge risk with one donor or grantee. 12

13 Subsequent Events The Organization has evaluated events and transactions occurring subsequent to June 30, 2014 as of September 23, 2014, which is the date the financial statements were available to be issued. Subsequent events occurring after September 23, 2014 have not been evaluated by management. 2. Deferred Services Revenue United Arts provides grants administration services for Orange County, Florida (see Note 3). Service fees are set at 8% of the first $2,000,000 in grants awarded and 5% thereafter. Administrative fee revenue is earned ratably over the term of the grant of months and is recorded as contract and services revenue in the statement of activities. Total administrative fees earned during the years ended June 30, 2014 and 2013 were $186,396 and $167,427, respectively. Total deferred service fee revenue for the year ended June 30, 2014 and 2013 was $138,286 and $138,342, respectively. 3. Amounts Held for Others Orange County The Organization holds funds on behalf of Orange County for arts and cultural grants to be funded by the tourist development tax at the discretion of Orange County. Funds are held in a separate interest-bearing account and interest earned is remitted back to Orange County twice per year. During the years ended June 30, 2014 and 2013, the Organization received $3,769,341 and $2,400,553, in funding for grants awarded for Cultural Tourism and/or Cultural Facilities grants and disbursed $2,868,141 and $3,277,105, respectively, in funding for those grants which were recorded as amounts held for others in the statement of financial position. Since the Organization acts as an intermediary or agent for these funds, these grants and related interest are not considered revenues of the Organization. As of June 30, 2014 and 2013, interest earned on funds held for Orange County yet to be disbursed to the County was $435 and $287, respectively. During the years ended June 30, 2014 and 2013, the Organization received $36,000 and $150,000 from Orange County, respectively, designated to be spent on arts education at the discretion of the Orange County Arts & Cultural Affairs Office. 13

14 The Organization receives donations to facilitate the purchase of artwork by Orange County Arts & Cultural Affairs and to facilitate Orange County National Arts Program events. Amounts held for Orange County, including interest, consist of the following: June 30, Cultural Facilities Grants $ 786,003 $ 26,435 Cultural Tourism Grants 515, ,521 Arts Education 239, ,382 Arts & Cultural Affairs 7,468 4,593 Funds held for Orange County 1,547, ,931 Receivable from Orange County 328, ,912 Interest held for Orange County Amounts held for Orange County $ 1,876,716 $ 1,607,130 Mount Dora Public Art Commission During the year ended June 30, 2011, United Arts entered into a fiscal agency agreement with the City of Mount Dora to sponsor their Art in Public Places program. As such, United Arts accepts donations on behalf of the program and makes disbursements as approved by the City of Mount Dora Public Art Commission. In fiscal year 2013, the agreement was renewed for an additional 24 months. At June 30, 2014 and 2013, the Organization held $544 for the program. 4. Pledges and Grants Receivable Pledges and grants receivable consist of the following: June 30, Less than one year $ 1,351,519 $ 768,898 One to five years 126,000 2,000 1,477, ,898 Less: allowance for doubtful accounts (13,240) (10,524) $ 1,464,279 $ 760,374 14

15 5. Net Assets Unrestricted net assets consist of the following: June 30, Available for operations $ 589,381 $ 306,721 Board designated endowment investments (see Note 8) 25,209 22,913 Temporarily restricted net assets consist of the following: $ 614,590 $ 329,634 June 30, Campaign funds restricted for future years $ 808,766 $ 918,013 Purpose restricted events website 125,184 Time and purpose restricted creative industries vocational program 300,000 $ 1,233,950 $ 918,013 In November 2013, the Organization took over the programming of the Arts and Cultural Alliance of Central Florida (the Alliance ). Net assets (mainly cash) of the Alliance have been purpose restricted to support the maintenance and growth of the events website, OrlandoAtPlay.com. This is shown as contribution of net assets on the statement of activities. In June 2014, the Organization was a awarded a two-year grant in the amount of $300,000 from a financial institution. The grant is funding a creative industries vocational program at Evans High School in Orange County, Florida. The program is a collaboration among the Organization, Evans High School, University of Central Florida, Valencia College and the Children s Home Society. Students participating will be trained in back of house creative skills preparing them for careers in the arts or entertainment industries. Funding is time and purpose restricted with $175,000 and $125,000 allocated to fiscal years 2015 and 2016, respectively, and is included in temporarily restricted grants and other gifts on the statement of activities. 15

16 Temporarily restricted net assets during the years ended June 30, 2014 and 2013 of $917,967 and $721,532, respectively, were released from donor restrictions to support grants and operations in the current period. 6. Commitments and Contingencies The Organization leases office space and office equipment under operating leases which expire on various dates from 2016 through Future minimum lease payments due under operating leases having an initial or remaining non-cancelable term of more than one year at June 30, 2014 are approximated as follows: Year ending June 30, Amount 2015 $ 121, , ,200 $ 198,900 Total rent expense for the years ended June 30, 2014 and 2013 was approximately $110,100 and $102,500, respectively, and is included in rent and utilities in the statement of functional expenses. 7. Employee Benefit Plan The Organization provides its employees with defined contribution plans under the provisions of Section 403(b) and 401(k) of the Internal Revenue Code. All employees are eligible to participate immediately upon hire. After one year of employment, participating employees have their contribution matched 100% up to 5% of eligible compensation and are 100% vested immediately. The Organization contributed $30,459 and $18,103 to the plans during the years ended June 30, 2014 and 2013, respectively. 16

17 8. Board Designated Endowments The Organization maintains two board designated endowment funds with the Central Florida Foundation ( CFF ). Each fund was seeded with $10,000, which was taken from board designated assets that had been set aside for this purpose. CFF s spending policy requires that funds must be invested for at least 12 months before being distributed. The first date a distribution could have been made from either of these funds was January 31, During fiscal years 2014 and 2013, the Board of Directors approved all amounts available for distribution to be reinvested. The two endowment funds are as follows: June 30, Fund Name United Arts of Central Florida Endowment Fund $ 12,639 $ 11,487 Orange County Arts and Education Endowment Fund 12,570 11,426 $ 25,209 $ 22,913 In accordance with accounting standards on the reporting of endowment funds, these funds are classified as unrestricted net assets on the statements of financial position. The Board of Directors oversees the funds management with the primary objective to provide long-term growth and capital preservation of all endowment funds. The Organization s changes in the board designated endowments for the years ended June 30, 2014 and 2013 are as follows: Year Ended June 30, Board designated endowment net assets, beginning of period $ 22,913 $ 20,623 Net investment gain 2,648 2,570 Investment fees (352) (280) Change in board designated endowment net assets 2,296 2,290 Board designated endowment net assets, end of period $ 25,209 $ 22,913 The Board of Directors of the Organization has interpreted the Florida Uniform Prudent Management of Institutional Funds Act ( FUPMIFA ) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this interpretation, the Organization classifies as permanently restricted net assets: (a) the original value of 17

18 the gift 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 donor-restricted 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 by the Organization in a manner consistent with the standard of prudence prescribed by FUPMIFA. In accordance with FUPMIFA, 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 purposes 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 policies of the Organization. 18