READING PARTNERS (A California Nonprofit Public Benefit Corporation) *** FINANCIAL STATEMENTS Year Ended July 31, 2010 with Comparative Totals for

Transcription

1 *** FINANCIAL STATEMENTS Year Ended July 31, 2010 with Comparative Totals for the Year Ended July 31, 2009

2 TABLE OF CONTENTS Pages INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS: Statement of Financial Position 2 Statement of Activities 3 Statement of Functional Expenses 4 Statement of Cash Flows 5 Notes to Financial Statements 6-16

3

4 STATEMENT OF FINANCIAL POSITION July 31, 2010 with Comparative Totals as of July 31, 2009 ASSETS 2010 (Restated) 2009 CURRENT ASSETS: Cash and Cash Equivalents $ 336,555 $ 98,382 Investments 19,761 5,565 Accounts Receivable - 8,845 Current Portion of Grants and Pledges Receivable 127, ,742 Prepaid Expenses 17,048 11,821 Total Current Assets 501, ,355 PROPERTY AND EQUIPMENT, NET 280, ,293 OTHER ASSETS: Grants and Pledges Receivable, Net of Current Portion 80, ,731 Deposits 1,715 1,500 Total Other Assets 82, ,231 TOTAL ASSETS $ 863,558 $ 799,879 LIABILITIES AND NET ASSETS CURRENT LIABILITIES: Accounts Payable $ 45,460 $ 19,931 Accrued Liabilities 27,181 31,562 Total Current Liabilities 72,641 51,493 NET ASSETS: Unrestricted Net Assets: Undesignated 237, ,011 Board Designated for Operating Reserve Fund 20,000 50,000 Total Unrestricted Net Assets 257, ,011 Temporarily Restricted Net Assets 533, ,375 Total Net Assets 790, ,386 TOTAL LIABILITIES AND NET ASSETS $ 863,558 $ 799,879 The Accompanying Notes are an Integral Part of these Financial Statements

5 STATEMENT OF ACTIVITIES Year Ended July 31, 2010 with Comparative Totals for the Year Ended July 31, (Restated) 2009 Unrestricted Temporarily Restricted TOTAL TOTAL SUPPORT AND REVENUE: Grants and Contributions $ 303,333 $ 1,118,318 $ 1,421,651 $ 1,484,771 Contributions In-Kind 493, , ,936 Tutoring Service Fees 101, ,367 13,000 Interest and Dividends ,325 Realized and Unrealized Gain (Loss) on Investments (5,990) Total Support and Revenue 898,855 1,118,318 2,017,173 1,786,042 Net Assets Released from Restrictions 1,085,152 (1,085,152) - - Total Support, Revenue and Net Assets Released from Restrictions 1,984,007 33,166 2,017,173 1,786,042 EXPENSES: Program Services 1,676,333-1,676,333 1,539,201 Supporting Services: Management and General 145, , ,358 Fundraising 152, , ,903 Total Supporting Services 298, , ,261 Total Expenses 1,974,642-1,974,642 1,888,462 CHANGE IN NET ASSETS 9,365 33,166 42,531 (102,420) NET ASSETS, Beginning of Year, as Restated 248, , , ,806 NET ASSETS, End of Year $ 257,376 $ 533,541 $ 790,917 $ 748,386 The Accompanying Notes are an Integral Part of these Financial Statements

6 STATEMENT OF FUNCTIONAL EXPENSES Year Ended July 31, 2010 with Comparative Totals for the Year Ended July 31, 2009 PROGRAM SERVICES SUPPORTING SERVICES TOTAL Management and General Fundraising Total EXPENSES: Salaries and Wages $ 928,583 $ 72,936 $ 104,458 $ 177,394 $ 1,105,977 $ 1,105,597 Employee Benefits 68,201 6,284 5,768 12,052 80, ,730 Payroll Taxes 62,646 7,426 9,258 16,684 79,330 87,879 Total Salaries and Related Expenses 1,059,430 86, , ,130 1,265,560 1,304,206 Occupancy, Including In- Kind 424,358 5,071 4,729 9, , ,591 Outside Services, Including In-Kind 24,357 34,875 3,525 38,400 62, ,192 Travel 37,045 3,802 2,199 6,001 43,046 34,074 Supplies, Including In- Kind 24,484 2,650 1,347 3,997 28,481 16,169 Printing and Publication 10, ,048 6,022 16,478 13,071 Telephone 11,890 1,954 1,522 3,476 15,366 16,788 Recruiting 14, , Marketing and Advertising 3, ,215 2,771 6,574 6,028 Postage and Shipping 1, ,620 3,379 5,247 4,656 Dues and Subscriptions 2,285 1, ,836 4,121 2,870 Equipment Rental 3, , Conferences, Conventions and Meetings 1, , Bank Charges - 2,232-2,232 2,232 1,461 Insurance 1, ,081 3,085 Training 1, ,905 3,371 Utilities 1, ,302 2,006 Repairs and Maintenance Other Operating Expenses Miscellaneous ,046 Interest ,541 Small Equipment Expenses ,698 Total Expenses Before Depreciation 1,623, , , ,068 1,911,624 1,838,443 Depreciation 52,777 2,770 7,471 10,241 63,018 50,019 Total Functional Expenses $ 1,676,333 $ 145,978 $ 152,331 $ 298,309 $ 1,974,642 $ 1,888,462 Percentage of Total 84.9 % 7.4 % 7.7 % 15.1 % % The Accompanying Notes are an Integral Part of these Financial Statements

7 STATEMENT OF CASH FLOWS Year Ended July 31, 2010 with Comparative Totals for the Year Ended July 31, (Restated) 2009 CASH FLOWS FROM OPERATING ACTIVITIES: Change in Net Assets $ 42,531 $ (102,420) Adjustments to Reconcile Change in Net Assets to Net Cash Provided (Used) by Operating Activities: Depreciation 63,018 50,019 Donated Stock (23,078) - Donated Books (61,890) (42,303) Donated Furniture and Equipment (6,384) - Realized and Unrealized (Gain) Loss on Investments (155) 5,990 Loss on Sales/Disposal of Property and Equipment Change in Present Value Discount on Grants and Pledges Receivable (5,684) 10,269 (Increase) Decrease in Assets: Accounts Receivable 8,845 (8,845) Grants and Pledges Receivable 270,094 (104,240) Prepaid Expenses (5,227) 16,303 Deposits (215) 3,422 Increase (Decrease) in Liabilities: Accounts Payable 25,529 (32,611) Accrued Liabilities (4,381) 3,052 Net Cash Provided (Used) by Operating Activities 303,003 (200,934) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Investments (84) (1,000) Proceeds from Sale of Investments 9, ,881 Purchase of Property and Equipment (73,867) (56,516) Proceeds from Sales of Property and Equipment - 5,900 Net Cash Provided (Used) by Investing Activities (64,830) 247,265 NET INCREASE IN CASH AND CASH EQUIVALENTS 238,173 46,331 CASH AND CASH EQUIVALENTS, Beginning of Year 98,382 52,051 CASH AND CASH EQUIVALENTS, End of Year $ 336,555 $ 98,382 SUPPLEMENTAL DISCLOSURE OF CASH FLOWS INFORMATION: Cash Paid for Interest $ 15 $ 1,541 The Accompanying Notes are an Integral Part of these Financial Statements

8 NOTE 1 - ORGANIZATION: Reading Partners (formerly YES Reading) (the "Organization"), is a non-profit organization that provides free literacy intervention services to elementary schools in under-resourced communities. The Organization partners with schools to provide one-on-one literacy tutoring to students who have fallen behind through an in-school pullout model. Reading Partners has grown rapidly over the past year, expanding from 24 program sites in California in the school year to 36 program sites nationwide in the school year. The Organization projects serving approximately 1,750 students by the end of the school year. The year marks the expansion of Reading Partners outside of California into the Washington D.C. area with the opening of 4 program sites. NOTE 2 - PROGRAM SERVICES: In its core program, Reading Partners recruits and trains community volunteers to provide one-on-one tutoring for students both during the school day and after school. The Organization will take on a dedicated space at the school, transform it into a Reading Center, and place a full time staff member who will supervise all program services and serve as the liaison to classroom teachers. A typical Reading Center will serve between 30 and 90 students. The primary program component, one-on-one tutoring, is supplemented with parent and family involvement. Students enrolled in the Reading Partners program are seen twice per week for 45- minute one-on-one tutoring sessions with trained community volunteers. The session is comprised of a highly structured, research-based curriculum which allows volunteers with little background in education to be effective tutors. In the school year, 89% of Reading Partners students successfully accelerated their progress in reading, with the average student gaining an entire grade level in reading skills for every 25 hours of tutoring received. NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Basis of Accounting - The financial statements of Reading Partners have been prepared on the accrual basis of accounting. Basis of Presentation - The Organization follows standards of accounting and financial reporting for voluntary health and welfare organizations as prescribed by the American Institute of Certified Public Accountants. In accordance with accounting principles generally accepted in the United States of America, the Organization reports its financial position and operating activities in three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets

9 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : Unrestricted net assets include those assets over which the Board of Directors has discretionary control in carrying out the operations of the Organization. Under this category, the Organization maintains an operating fund, property and equipment fund plus any net assets designated by the Board for specific purposes. Temporarily restricted net assets include those assets which are subject to donor restriction and for which the applicable restriction was not met as of the year end of the current reporting period. Permanently restricted net assets include those assets which are subject to a nonexpiring donor restriction, such as endowments. There are currently no permanently restricted net assets. Comparative Financial Information - The financial statements include certain prior-year summarized comparative information in total but not by net asset class or functional expense categories. Such information does not include sufficient detail to constitute a presentation in conformity with generally accepted accounting principles. Accordingly, such information should be read in conjunction with the Organization's financial statements for the year ended July 31, 2009, from which the summarized information was derived. 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 support, revenue and expenses during the period. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents - Cash and cash equivalents include highly liquid investments and investments with a maturity of three months or less, and exclude donor restricted receipts and amounts designated for long-term purposes. The Organization maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. The Organization has not experienced any losses in such accounts. Management believes it is not exposed to any significant risk on cash accounts. Investments - Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized. Fair Value Measurement - Fair value is defined as "the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date." - 7 -

10 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : A hierarchy has been established to prioritize the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest ranking to fair values determined using unadjusted quoted prices in active markets for identical assets (Level 1) and the lowest ranking to fair values determined using methodologies and models with unobservable inputs (Level 3). Observable inputs are those that market participants would use in pricing the asset based on market data obtained from sources independent of the Organization. Unobservable inputs reflect the Organization s assumption about the inputs market participants would use in pricing the asset or liability developed based on the best information available in the circumstances. The fair value hierarchy is categorized into three levels based on the inputs as follows: Level 1 - Values are unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date. Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted prices from those willing to trade in markets that are not active, or other inputs that are observable or can be corroborated by market data for the term of the instrument. Such inputs include market interest rates and volatilities, spreads and yield curves. Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant to the fair value measurement. Unobservable inputs reflect the Organization s best estimate of what hypothetical market participants would use to determine a transaction price for the asset or liability at the reporting date. Grants and Pledges Receivable - Unconditional promises to give are recognized as contribution support in the period received and as assets, decrease in liabilities, or expenses depending on the form of the benefits received. Promises are recorded at net realizable value if expected to be collected in one year and at present value if expected to be collected in more than one year. Conditional promises to give, if any, are recognized only when the conditions on which they depend are substantially met and the promises become unconditional. Present value is measured using a risk-adjusted discount rate of return at initial recognition and is not revised later. Property and Equipment - Property and equipment are recorded at cost or estimated fair value for donated items. Equipment purchases over $500 are capitalized. The cost of repairs and maintenance which do not improve or extend the lives of the respective assets are expensed currently. Depreciation is computed on the straight-line method based on the estimated useful lives of the assets, which range from 3 to 10 years. Depreciation is charged to the activity benefiting from the use of the property or equipment. Accrued Vacation - Accrued vacation represents vacation earned, but not taken as of July 31, 2010 and 2009, and is included in "accrued liabilities" in the statement of financial position. The accrued vacation balance as of July 31, 2010 and 2009 was $27,181 and $31,562, respectively

11 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : Revenue Recognition - The Organization recognizes support and revenue on the accrual basis of accounting. Revenue from grants which have been classified as "exchange transactions" and program fees are recognized as revenue in the period in which the service is provided. Contributions - Contributions are recognized when the donor makes a pledge to give that is, in substance, an unconditional promise. Contributions are recorded as unrestricted, temporarily restricted, or permanently restricted depending on the nature of donor restrictions. Temporarily restricted contributions are reported as increases in restricted net assets. When the restriction is met the amount is shown as a reclassification of restricted net assets to unrestricted net assets. Contributions In-Kind - Donated equipment and other donated goods are recorded at their estimated fair value as of the date of the donation. Contributed services, which require a specialized skill and which the Organization would have paid for if not donated, are recorded at the estimated fair value at the time the services are rendered. The Organization also receives donated services that do not require specific expertise but which are nonetheless central to the Organization's operations. While these contributed services are not reflected in the financial statements the estimated value of these services is disclosed in Note 12. Expense Allocation - The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities and in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Management's estimate of indirect salary expense allocation is based on individual employee estimated time spent by function. Management's estimate of other indirect costs are based on salary expense and/or estimated usage. Income Taxes - Reading Partners is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and exempt from state income taxes under various state codes and statues of California and Washington, D.C. Accordingly, no provision for income taxes has been made in the accompanying statements. In addition, the Organization qualifies for the charitable contribution deduction under Section 170(b)(1)(A) of the Internal Revenue Code and has been classified as an organization that is not a private foundation under Section 509(a)(1) of the Internal Revenue Code. Uncertainty in Income Taxes - Effective August 1, 2009 the Organization implemented the new accounting requirements associated with uncertainty in income taxes. Accordingly, an entity shall initially recognize the financial statement effects of a tax position when it is more-likely-than-not, based on the technical merits, that the position will be sustained upon examination. It also provides guidance for derecognition, classification, interest and penalties, accounting in interim periods, disclosure and transition. The Organization believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. Marketing and Advertising - The Organization's policy is to expense advertising costs as the costs are incurred. Marketing and advertising expenses for the years ended July 31, 2010 and 2009 was $6,574 and $6,028, respectively

12 NOTE 3 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES : Reclassifications - Certain amounts in the prior year have been reclassified in order to be consistent with the current year presentation. The reclassification of $30,000 was between unrestricted and temporarily restricted net assets and had no effect on previously reported total change in net assets. Subsequent Events - Management of the Organization has evaluated events and transactions subsequent to July 31, 2010 for potential recognition or disclosure in the financial statements. The Organization has one subsequent events that required recognition or disclosure in the financial statements for the fiscal year ended July 31, 2010, see Note 16. Subsequent events have been evaluated through the date the financial statements became available to be issued, March 8, NOTE 4 - INVESTMENTS: Fair value of assets measured on a recurring basis as of July 31, 2010 was as follows: Fair Value Quoted Prices in Active Markets for Identical Assets (Level 1) Significant Other Observable Inputs (Level 2) Significant Unobservable Inputs (Level 3) Equity $ 17,963 $ 14,630 $ - $ 3,333 Short Term Bond Fund 1,798 1, Total Investments in Securities $ 19,761 $ 16,428 $ - $ 3,333 Assets measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs): Equity Balance as of July 31, 2009 $ 3,899 Unrealized Loss (566) Balance as of July 31, 2010 $ 3,

13 NOTE 4 - INVESTMENTS : The fair value of investments as of July 31, was as follows: Investments at Fair Value: Equity $ 17,963 $ 3,899 Short Term Bond Fund 1,798 1,666 Total Investments at Fair Value $ 19,761 $ 5, Net Investment Income (Loss): Interest and Dividends $ 686 $ 3,325 Realized and Unrealized Gain (Loss) 155 (5,990) Total Net Investment Income (Loss) $ 841 $ (2,665) NOTE 5 - GRANTS AND PLEDGES RECEIVABLE: Grants and pledges receivable consist of unconditional promises to give by several donors. The Organization records pledges expected to be collected in more than one year at the present value of the assets to be received in the future. The discount rates used as of July 31, 2010 ranged from 3.01% to 3.66%. Grants and Pledges receivable as of July 31, consisted of the following: 2010 (Restated) 2009 Total Grants and Pledges Receivable $ 212,648 $ 482,742 Present Value Discount (4,585) (10,269) 208, ,473 Less: Current Portion (127,648) (312,742) Total Grants and Pledges Receivable, Net of Current Portion $ 80,415 $ 159,

14 NOTE 5 - GRANTS AND PLEDGES RECEIVABLE : The grant and pledges receivable are expected to be collected as follows: Year Ending July 31, Amount 2011 $ 127, , ,648 Less: Present Value Discount (4,585) Total Grants and Pledges Receivable $ 208,063 NOTE 6 - PROPERTY AND EQUIPMENT: The cost and related accumulated depreciation of the property and equipment as of July 31, consisted of the following: Books $ 167,131 $ 105,241 Curriculum 104,155 65,629 Computer Equipment 70,494 35,153 Furniture and Equipment 68,131 61,747 Improvements 24,883 24,883 Website 16,281 16,281 Domain Names 5,520 5, , ,454 Less: Accumulated Depreciation (176,179) (113,161) Property and Equipment, Net $ 280,416 $ 201,293 Depreciation expense for the years ended July 31, 2010 and 2009 was $63,018 and $50,019, respectively. NOTE 7 - LINE OF CREDIT: In September 2009, the Organization obtained a $200,000 unsecured line of credit with Union Bank of California. The line of credit bears interest at the Wall Street Journal prime rate plus 1.75% per annum. The line of credit was renewed in September As of July 31, 2010 the amount outstanding was $

15 NOTE 8 - BOARD DESIGNATED NET ASSETS: Operating Reserve - The Organization maintains a reserve to cover unexpected expense or revenue needs such as responding to a natural disaster or a significant decrease in donations. The reserve target represents approximately three months of operating expenses. NOTE 9 - TEMPORARILY RESTRICTED NET ASSETS: The Organization's temporarily restricted net assets as of July 31, consisted of the following: 2010 (Restated) 2009 California Programs $ 295,220 $ 392,875 Afterschool Program - Castro 79,329 - Washington D.C. School Programs 73,992 - General Support for Future Period 65, ,000 Mission Learning Center 15,000 - Expansion - Multi-Year Grant 5,000 7,500 Total Temporarily Restricted Net Assets $ 533,541 $ 500, TOTAL California Programs $ 195,220 $ - $ 195,220 Afterschool Program - Castro 79,329-79,329 Washington D.C. School Programs 73,992-73,992 Los Angeles Programs - Multi-Year Grant 50,000 50, ,000 General Support for Future Period 32,500 32,500 65,000 Mission Learning Center 15,000-15,000 Expansion - Multi-Year Grant 2,500 2,500 5,000 Total Temporarily Restricted Net Assets $ 448,541 $ 85,000 $ 533,

16 NOTE 10 - NET ASSETS RELEASED FROM RESTRICTION: Net assets were released from restrictions during the year by incurring expenses satisfying the restricted purpose or the occurrence of other events by the expiration of time as follows: 2010 California Programs $ 828,234 Expansion/Research and Development 99,148 Development 88,591 General Support from Prior Periods 35,000 Washington D.C. School Programs 26,008 Afterschool Program - Castro 5,671 Expansion - Multi-Year Grant 2,500 Total Net Assets Released from Restrictions $ 1,085,152 NOTE 11 - GOVERNMENT GRANT: During the year ended July 31, 2010 the Organization was awarded a grant from AmeriCorp totaling $1.55 million. The term of the grant is July 2010 through July The Organization has determined this government grant to be an exchange transaction and therefore recognize it as unrestricted revenue when allowable expenditures have been incurred. NOTE 12 - CONTRIBUTIONS IN-KIND: The estimated fair value of donated books, expert services, equipment and facilities are recorded as contributions. During the years ended July 31, the following in-kind contributions were received by the Organization: Facilities $ 405,040 $ 228,758 Books 61,890 42,303 Legal Services 20,000 9,582 Furniture and Equipment 6,384 - Professional Services - 10,000 Supplies Total Contributions In-Kind $ 493,314 $ 290,

17 NOTE 12 - CONTRIBUTIONS IN-KIND : During the years ended July 31, 2010 and 2009, the Organization also received donated services from volunteers that do not require specific expertise but which are nonetheless central to the Organization's operations. During the years ended July 31, 2010 and 2009, volunteers dedicated approximately 29,000 and 19,000 hours, respectively to tutoring services. The estimated value of tutoring services based on the nature of the service and the amount of time donated is estimated to be approximately $1,015,000 and $665,000, respectively. The value of these services is not reflected in the financial statements. NOTE 13 - OPERATING LEASE COMMITMENTS: The Organization leased office space in Milpitas and Oakland. The leases expire at various periods through October 14, Rent expense for the years ended July 31, 2010 and 2009 was $434,158 (including $405,040 of in-kind, see Note 12), and $270,591 (including $228,758 of in-kind, see Note 12), respectively. Future minimum lease payments (without adjustment for changes in the Consumer Price Index) are as follows: Year Ending July 31, Amount 2011 $ 38, , ,063 Total Future Minimum Lease Payments $ 96,611 NOTE 14 - EMPLOYEE BENEFIT PLAN: The Organization sponsors a defined contribution plan for eligible employees under Section 403(b) of the Internal Revenue Code. All full time employees are eligible for the plan. All of the costs of the plan's administration were paid for by the participants. No contributions were made to this plan by the Organization for the years ended July 31, 2010 and

18 NOTE 15 - CHANGE IN ACCOUNTING METHOD / PRIOR PERIOD ADJUSTMENT: Due to the expectation of significant future expansion of tutoring services paid for by schools and school districts the Organization has reviewed and amended its policies pertaining to accounting for these services. The Organization had previously accounted for tutoring services paid for by schools and school districts as restricted contributions in accordance with ASC 958 (formerly SFAS No. 116, Accounting for Contributions Received and Contributions Made). During the year ended July 31, 2010 the Organization revised its policy to account for tutoring services paid for by schools and school districts as exchange transactions and recognize the services as revenue in the period in which the service is provided. Management believes the revised policy better reflects the income of the Organization on an annual basis. The accounting change has been retrospectively applied to prior periods presented resulting in a decrease in temporarily restricted contributions and temporarily restricted net assets as of and for the year ended July 31, 2009 in the amount of $80,000. This revenue is now recognized instead in the fiscal year ended July 31, NOTE 16 - SUBSEQUENT EVENTS: Per the action of the Board of Directors at the January 2011 meeting, Reading Partners increased the balance of its Board Designated Reserve Fund to $100,000 effective February 1,