THE VISUAL ARTS CENTER OF RICHMOND FINANCIAL STATEMENTS

Transcription

1 THE VISUAL ARTS CENTER OF RICHMOND FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2013 AND 2012

2 CONTENTS INDEPENDENT AUDITOR S REPORT... Page 1-2 FINANCIAL STATEMENTS STATEMENTS OF FINANCIAL POSITION... 3 STATEMENTS OF ACTIVITIES STATEMENTS OF CASH FLOWS... 6 NOTES TO FINANCIAL STATEMENTS SUPPLEMENTARY INFORMATION SCHEDULE OF FUNCTIONAL EXPENSES

3 HARRIS, HARDY & JOHNSTONE, P.C. CE I-iTIFIED PUBL.IC f.,ccquntants INDEPENDENT AUDITOR'S REPORT To the Board of Directors The Visual Arts Center of Richmond Richmond, Virginia Report on the Financial Statements We have audited the accompanying financial statements of The Visual Arts Center of Richmond (the "Center") (a nonprofit organization), which comprise the statements of financial position as of June 30, 2013 and 2012, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements The Center' s 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 Arboretum Place, Suite 660, Richmond, Virginia Tel: Fax: hhjcpa.com

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of The Visual Arts Center of Richmond as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years 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 schedule of functional expenses on pages 13 and 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 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. Richmond, Virginia November 11,

5 STATEMENTS OF FINANCIAL POSITION JUNE 30, 2013 AND ASSETS CURRENT ASSETS Cash $ 139,314 $ 174,143 Accounts receivable 945 6,415 Unconditional promises to give - current 23,875 56,176 Prepaid expenses 11, TOTAL CURRENT ASSETS 175, ,334 PROPERTY AND EQUIPMENT Land 513, ,744 Building and improvements 4,802,472 4,802,247 Office furniture 200, ,081 Machinery and equipment 172, ,764 5,688,792 5,680,836 Less: accumulated depreciation 1,246,195 1,104,388 NET PROPERTY AND EQUIPMENT 4,442,597 4,576,448 OTHER ASSETS Unconditional promises to give - noncurrent 27,000 33,000 Investments 148, ,022 Beneficial interest in assets held at The Community Foundation 611, ,181 TOTAL OTHER ASSETS 787, ,203 LIABILITIES AND NET ASSETS TOTAL ASSETS $ 5,405,187 $ 5,536,985 CURRENT LIABILITIES Line of credit $ 75,000 $ 100,000 Accounts payable 46,161 30,360 Tuition and fees collected in advance 151, ,367 TOTAL CURRENT LIABILITIES 273, ,727 NET ASSETS Unrestricted 4,336,467 4,536,112 Temporarily restricted 142, ,000 Permanently restricted 653, ,146 TOTAL NET ASSETS 5,132,070 5,290,258 TOTAL LIABILITIES AND NET ASSETS $ 5,405,187 $ 5,536,985 See Independent Auditor's Report and Notes to Financial Statements - 3 -

6 STATEMENTS OF ACTIVITIES YEARS ENDED JUNE 30, 2013 AND 2012 Unrestricted SUPPORT AND REVENUE Support Public support - contributions 515,725 Temporarily Restricted 2013 Permanently Restricted $ $ 142,328 $ 2,000 $ 660,053 Fees and grants from governmental agencies 64, ,200 TOTAL SUPPORT 579, ,328 2, ,253 Revenue Class tuition and supplies 708, ,269 Special programs 187, ,898 Facility rental 43, ,120 Interest 5, ,812 Other 4, ,656 Unrealized gain (loss) on beneficial interest in assets held at The Community Foundation ,885 54,885 Unrealized gain (loss) on investments 12, ,378 TOTAL REVENUE 962,133-54,885 1,017,018 Net assets released from restrictions 157,756 (128,000) (29,756) - TOTAL SUPPORT AND REVENUE 1,699,814 14,328 27,129 1,741,271 EXPENSES Program services Outreach 177, ,290 Education 918, ,546 Exhibitions 215, ,835 Special events 283, ,073 Facility rental TOTAL PROGRAM SERVICES 1,594, ,594,744 Supporting Services Management and general 129, ,893 Fundraising 174, ,822 TOTAL SUPPORTING SERVICES 304, ,715 TOTAL EXPENSES 1,899, ,899,459 CHANGE IN NET ASSETS (199,645) 14,328 27,129 (158,188) Net assets, beginning of year 4,536, , ,146 5,290,258 NET ASSETS, END OF YEAR $ 4,336,467 $ 142,328 $ 653,275 $ 5,132,070 Total See Independent Auditor's Report and Notes to Financial Statements - 4 -

7 Unrestricted Temporarily Restricted 2012 Permanently Restricted Total $ 227,662 $ 221,984 $ 95,100 $ 544,746 76, , , ,984 95, , , , , ,781 36, ,368 13, ,528 12, , ,055 8,055 (5,835) - - (5,835) 983,419-8, , ,274 (143,184) (20,090) - 1,451,217 78,800 83,065 1,613, , , , , , , , ,470 26, ,031 1,357, ,357, , , , , , ,385 1,762, ,762,095 (310,878) 78,800 83,065 (149,013) 4,846,990 49, ,081 5,439,271 $ 4,536,112 $ 128,000 $ 626,146 $ 5,290,258 See Independent Auditor's Report and Notes to Financial Statements - 5 -

8 STATEMENTS OF CASH FLOWS YEARS ENDED JUNE 30, 2013 AND CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ (158,188) $ (149,013) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities Depreciation 141, ,311 Unrealized (gain) loss on investments (12,378) 5,835 Unrealized (gain) loss on beneficial interest in assets held at The Community Foundation (54,885) (8,055) Changes in assets and liabilities: Accounts receivable 5,470 (1,665) Unconditional promises to give 38,301 32,005 Prepaid expenses (10,709) 1,474 Accounts payable 15,801 (9,116) Tuition and fees collected in advance 35,589 (18,352) NET CASH PROVIDED BY (USED IN) OPERATING ACTIVITIES 808 (3,576) CASH FLOWS FROM INVESTING ACTIVITIES Proceeds from sale of investments - 67,282 Purchase of investments (5,347) - Purchase of beneficial interest in assets held at The Community Foundation 2,666 (55,985) Capital expenditures (7,956) (1,918) NET CASH PROVIDED BY (USED IN) INVESTING ACTIVITIES (10,637) 9,379 CASH FLOWS FROM FINANCING ACTIVITIES Borrowings (repayment) on line of credit (25,000) 100,000 INCREASE (DECREASE) IN CASH (34,829) 105,803 Cash, beginning of year 174,143 68,340 CASH, END OF YEAR $ 139,314 $ 174,143 See Independent Auditor's Report and Notes to Financial Statements - 6 -

9 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2013 AND 2012 NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Nature of Business The Visual Arts Center of Richmond (the Center ) was organized in 1962 as a tax-exempt art education center. Its mission is to engage the community in the creative process through the visual arts. Funds are obtained through tuition charged to students, admission fees to special events, contributions from the community and corporations, government agencies and grants from foundations. Summary of Significant Accounting Policies Basis of Accounting The financial statements of the Center have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net Assets The Center classifies its net assets into three categories: unrestricted, temporarily restricted and permanently restricted. Unrestricted net assets include funds for which no restrictions have been imposed on the Center as to their use or purpose. Such funds are expended for purposes deemed appropriate by the Board of the Directors and for operating purposes. Temporarily restricted net assets are contributions with donor-imposed time or purpose restrictions. As the activities are conducted, the restrictions to these net assets are released and amounts are subsequently reclassified to unrestricted net assets. Permanently restricted net assets consist of an endowment fund. Income earned from the fund is restricted for use as designated by the donors. In-Kind Contributions In-kind contributions are recorded at fair market value and recognized as revenue in the accounting period when they are received. In addition, many individuals volunteer their time and perform a variety of tasks that assist the Center. No amounts have been reflected in the financial statements for those services since they do not meet the criteria for recognition under the recommendations of Financial Accounting Standards Board (FASB) ASC 958, Not-for-Profit Entities. Credit Risk The Center maintains its cash and cash equivalent balances in financial institutions. The balances in the financial institutions are insured by the Federal Deposit Insurance Corporation up to $250,

10 NOTES TO FINANCIAL STATEMENTS - Continued JUNE 30, 2013 AND 2012 NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Property and Equipment Property and equipment are stated at cost at the date of acquisition. Donated property and equipment are stated at fair market value at the date of donation. Depreciation of machinery, furniture, equipment, building and building improvements is computed by the straight-line method over the estimated useful lives of the assets, ranging from 7 to 40 years. Maintenance and repairs are charged to expense as incurred. Major renovations and improvements are capitalized. Depreciation totaled $141,807 and $143,311 for the years ended June 30, 2013 and 2012, respectively. Unconditional Promises to Give Unconditional promises to give represent promises to give which have been made by donors but have not yet been received by the Center. Unconditional promises to give which will not be received in the subsequent year have been discounted using an estimated rate of return which could be earned if such contributions had been made in the current year. The Center reviews unconditional promises to give individually and considers unconditional promises to give at June 30, 2013 and 2012 fully collectible; accordingly, no allowance for uncollectible promises to give has been provided. Income Tax Status The Center is a Virginia not-for-profit corporation which is not classified as a private foundation by the Internal Revenue Service and is exempt from income tax under Section 501(c)(3) of the Internal Revenue Code. The Center applies FASB guidance related to accounting for uncertainty in income taxes, which clarifies the accounting for income taxes by prescribing the minimum recognition threshold that a tax position is required to meet before being recognized in the financial statements. The standard also provides guidance on penalties and interest, classification, and disclosure. The Center has not identified any uncertain tax positions. The Center s income tax returns for years since 2010 remain open for examination by tax authorities. 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 and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Accordingly, actual results could vary from the estimates that were used. Expense Allocation The costs of providing various programs and other activities have been summarized on a functional basis in the accompanying statement of activities and in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited

11 NOTES TO FINANCIAL STATEMENTS - Continued JUNE 30, 2013 AND 2012 NOTE A - NATURE OF BUSINESS AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Fair Value Measurements The Center applies FASB ASC 820, Fair Value Measurements and Disclosures. FASB ASC 820 defines fair value, establishes a framework for measuring fair value in accordance with generally accepted accounting principles, and expands disclosures about fair value measurements. FASB ASC 820 uses the following prioritized input levels to measure fair value. The input levels used for valuing investments are not necessarily an indication of risk. Level 1 - Level 2 - Level 3 - Quoted prices in active markets for identical assets or liabilities at the measurement date Directly or indirectly observable valuations in the marketplace at the measurement date other than Level 1 inputs Valuations unobservable in the marketplace at the measurement date NOTE B - INVESTMENTS The Center measures the fair value of investments on a recurring basis using level 1 inputs as follows: Cost Fair Value Cost Fair Value Cash equivalents $ 34,485 $ 34,485 $ 33,150 $ 33,150 Stocks and options 93, ,262 88,485 97,872 $ 128,150 $ 148,747 $ 121,635 $ 131,022 NOTE C - LINE OF CREDIT The Center has an unsecured line of credit for $200,000 with a financial institution. The outstanding borrowings accrued interest at the bank s prime rate with a floor of 4.25%. The Center had $75,000 and $100,000 of outstanding borrowings on the line at June 30, 2013 and 2012, respectively. NOTE D - RENTAL INCOME The Center subleased space in its building to the general public and to local artists to use as studios during the years ended June 30, 2013 and Total facility rental income under these subleases totaled $43,120 and $36,368 during 2013 and 2012, respectively

12 NOTES TO FINANCIAL STATEMENTS - Continued JUNE 30, 2013 AND 2012 NOTE E - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets at June 30, 2012 and 2013 relate to the following: Balance at June 30, 2011 $ 49,200 Public support - contributions 221,984 Net assets released from restrictions (143,184) Balance at June 30, ,000 Public support - contributions 142,328 Net assets released from restrictions (128,000) Balance at June 30, 2013 $ 142,328 NOTE F - RETIREMENT PLAN The Center has a 403(b) tax deferred annuity plan covering all eligible employees. The plan allows for discretionary contributions by the Center. The Center did not make any contributions for 2013 or NOTE G - BENEFICIAL INTEREST IN ASSETS HELD BY THE COMMUNITY FOUNDATION On March 17, 2010, the Center s Board of Directors entered into an agreement with The Community Foundation (TCF) to create agency funds as described under FASB ASC 958, Not-for-Profit Entities (formerly FASB Standard No. 136, Transfers of Assets to a Not-for-Profit Center or Charitable Trust That Raises or Holds Contributions for Others). The funds were titled the Imagine Fund for The Visual Arts Center of Richmond, the Jo Bowman Kennedy Endowment Fund, the Carole Weinstein Endowment for Creative Writing Fund, and the Leslie Shiel Scholarship in Creative Writing Fund. The Jo Bowman Kennedy Endowment Fund is a permanently restricted endowment created to honor Jo Bowman Kennedy, the Center s former President and Chief Executive Officer. The Carole Weinstein Endowment for Creative Writing Fund and the Leslie Shiel Scholarship in Creative Writing Fund were temporarily restricted funds set aside for future donor stipulated purposes and the Imagine Fund consists of funds with no donor imposed restrictions. On July 15, 2011 a gift was received to set up an additional fund called the Shelly Shepherd Master Teacher Award Endowment. Due to the terms of the agreement with TCF all of these funds are designated as permanently restricted. Under the terms of the agreement with TCF, variance power was granted to TCF, including the power for TCF s Board of Governors to modify any restrictions or conditions on the distribution of the Funds for any specified charitable purpose or to specified Centers, if in their sole judgment, such restriction or condition becomes incapable of fulfillment

13 NOTES TO FINANCIAL STATEMENTS - Continued JUNE 30, 2013 AND 2012 NOTE G - BENEFICIAL INTEREST IN ASSETS HELD BY THE COMMUNITY FOUNDATION - Continued Fund income shall be available at least annually to the Board of Governors of The Community Foundation for the benefit of the Center. Spendable income shall be determined each year to be not more than 5% of the Fund s balance averaged over the past twelve quarters, exclusive of compensation to The Community Foundation. In addition to the aforementioned spendable income, upon a vote of 75% of all members of the Center s Board of Directors, and not more than once in any three-year period, up to 10% of the prior year-ending Fund balance may be requested for capital or emergency purposes. Any spendable income not requested by the Board of Directors within a given calendar year will be added to the Fund s principal balance. The following table represents the activity in the Fund for the years ended June 30, 2012 and 2013: Beneficial interest in assets held by The Community Foundation, June 30, 2011 $ 495,141 Donations received by The Community Foundation 76,075 Net investment return 8,055 Release of restrictions on assets held by The Community Foundation (20,090) Beneficial interest in assets held by The Community Foundation, June 30, ,181 Endowment Fund unconditional promises to give at June 30, ,965 Endowment Fund balance, June 30, 2012 $ 626,146 Beneficial interest in assets held by The Community Foundation, June 30, 2012 $ 559,181 Donations received by The Community Foundation 19,800 Net investment return 54,885 Release of restrictions on assets held by The Community Foundation (22,466) Beneficial interest in assets held by The Community Foundation, June 30, ,400 Endowment Fund unconditional promises to give at June 30, ,875 Endowment Fund balance, June 30, 2013 $ 653,275 The Center measures the fair value of its beneficial interest in assets held by The Community Foundation under the market approach using level 2 inputs

14 NOTES TO FINANCIAL STATEMENTS - Continued JUNE 30, 2013 AND 2012 NOTE H - DONATED GOODS AND SERVICES The value of donated goods and services (In-kind donations) included in the accompanying financial statements and the corresponding expenses for the years ended June 30, 2013 and 2012 are as follows: Advertising $ 5,000 $ - Collector s Night event 6,791 - Professional services 17,250 1,662 $ 29,041 $ 1,662 NOTE I - SUBSEQUENT EVENTS In the preparation of its financial statements, The Visual Arts Center of Richmond considered subsequent events through November 11, 2013, which was the date the financial statements were available to be issued

15 SUPPLEMENTARY INFORMATION

16 SCHEDULE OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2013 Program Services Special Outreach Education Exhibitions Events Salaries and benefits $ 100,573 $ 561,071 $ 110,784 $ 124,365 Infrastructure 25, ,082 28,943 20,793 Marketing ,052 10,079 28,469 Professional fees 30,235 24,343 23,643 24,439 Program supplies 9,478 53,716 10,891 1,400 Other supplies and services 8,314 25,603 11,604 15,079 Meals and entertainment 1, ,406 48,374 In-kind expenses ,791 Printing and postage ,387 8,363 Staff development Subscriptions and publications Licenses and fees Other $ 177,290 $ 918,546 $ 215,835 $ 283,073 See Independent Auditor's Report and Notes to Financial Statements

17 Program Services Management Total and General Fundraising Total $ 896,793 $ 74,558 $ 164,373 $ 1,135, ,654 5,168 2, ,406 98,200 11, , , ,660 75, ,714 60,600 9,252 2,270 72,122 56,919 1,497 1,666 60,082 11,791 17,250-29,041 21,961 4,019 2,391 28, , , , ,546-2,007-2, $ 1,594,744 $ 129,893 $ 174,822 $ 1,899,459 See Independent Auditor's Report and Notes to Financial Statements