SWTC REAL ESTATE FOUNDATION, INC. FINANCIAL STATEMENTS. June 30, 2017

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1 FINANCIAL STATEMENTS June 30, 2017

2 C O N T E N T S Independent Auditor s Report... 1 Statement of Financial Position... 2 Statement of Activities... 3 Statement of Functional Expenses... 4 Statement of Cash Flows... 5 Notes to Financial Statements... 6

3 To the Board of Directors SWTC Real Estate Foundation, Inc. Fennimore, Wisconsin INDEPENDENT AUDITOR S REPORT We have audited the accompanying financial statements of SWTC Real Estate Foundation, Inc., which comprise the statement of financial position as of June 30, 2017, and the related statements of activities, functional expenses, 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 the financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free 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 SWTC Real Estate Foundation, Inc. as of June 30, 2017, 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. Wegner CPAs, LLP Madison, Wisconsin December 7, 2017 Janesville Office: 101 E. Milwaukee Street Suite 425 Janesville, WI P: (608) Baraboo Office: 123 Second Street P.O. Box 150 Baraboo, WI P: (608) F: (608) Milwaukee Office: W229 N1433 Westwood Drive Suite 105 Waukesha, WI P: (262) F: (262) Madison Office: 2110 Luann Lane Madison, WI P: (608) F: (608) info@wegnercpas.com (888)

4 STATEMENT OF FINANCIAL POSITION June 30, 2017 ASSETS Cash $ 66,607 Accounts receivable 33,860 Rent receivable 38,184 Other assets 1,007 Property and equipment net 2,221,106 Total assets $ 2,360,764 LIABILITIES Accounts payable and accrued expenses $ 9,360 Security deposits 2,100 Funds held for others 31,033 Mortgage payable 1,850,173 Total liabilities 1,892,666 NET ASSETS Unrestricted 468,098 Total liabilities and net assets $ 2,360,764 See accompanying notes. 2

5 STATEMENT OF ACTIVITIES Year Ended June 30, 2017 REVENUE AND GAINS Contributions $ 150,914 Rental income 439,489 Investment return 3 Other revenue 2,870 Total revenue and gains 593,276 EXPENSES Program Services Student housing 416,069 Management and general 16,138 Total expenses 432,207 Change in net assets 161,069 Net assets beginning of year 307,029 Net assets end of year $ 468,098 See accompanying notes. 3

6 STATEMENT OF FUNCTIONAL EXPENSES Year ended June 30, 2017 Student Management Housing and General Fundraising Total Personnel $ 144,851 $ 6,063 $ - $ 150,914 Professional fees 9, ,409 Advertising and promotion Supplies 3,322 3,979-7,301 Postage and shipping Occupancy 178, ,369 Printing and publications Travel - 2,187-2,187 Conferences and meetings - 3,346-3,346 Depreciation 77, ,230 Miscellaneous 2, ,545 Office expenses $ 416,069 $ 16,138 $ - $ 432,207 See accompanying notes. 4

7 STATEMENT OF CASH FLOWS Year ended June 30, 2017 CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 161,069 Adjustments to reconcile change in net assets to net cash cash flows from operating activities Depreciation 77,230 (Increase) decrease in assets Accounts receivable (33,860) Rent receivable 186,412 Other assets (1,007) Increase (decrease) in liabilities Accounts payable and accrued expenses (551,191) Security deposits (8,196) Funds held for others 17,033 Net cash flows from operating activities (152,510) CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment (181,935) CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on mortgage payable (1,512,638) Proceeds from mortgage payable 1,899,000 Net cash flows from financing activities 386,362 Net change in cash 51,917 Cash beginning of year 14,690 Cash end of year $ 66,607 SUPPLEMENTAL INFORMATION Cash paid for interest $ 67,233 See accompanying notes. 5

8 NOTES TO FINANCIAL STATEMENTS June 30, 2017 SWTC Real Estate Foundation, Inc. (REF) was formed for the purpose of acquiring, developing, and holding real estate for the benefit of the Southwest Wisconsin Technical College (located in Fennimore, Wisconsin). The REF supports the College by holding and managing real estate that is integral to the College s mission. NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Financial Statement Presentation These financial statements only include information of the REF. Combined financial statements of Southwest Wisconsin Technical College Foundation, Inc. and the REF are presented separately. Basis of Presentation The REF is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Property and Equipment All acquisitions of property and equipment in excess of $1,000 and all costs for repairs, maintenance, renewals, and betterments that materially prolong the useful lives of assets are capitalized. Property and equipment are carried at cost or, if donated, at the approximate fair value at the date of donation. Depreciation is computed using primarily the straight-line method. Income Tax Status The REF is exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code. In addition, the REF qualifies for the charitable contribution deduction under Section 170(b)(1)(A) and has been classified as a supporting organization under Section 509(a)(3). Contributions Contributions received are recorded as increases in unrestricted, temporarily restricted, or permanently restricted net assets, depending on the existence and/or nature of any donor restrictions. When a 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 statements of activities as net assets released from restrictions. Expense Allocation The costs of providing 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 program services and supporting activities benefited. The following program services and supporting activities are included in the accompanying financial statements: Student housing On-campus apartment style units that provide students with a place to reside while attending Southwest Wisconsin Technical College. Management and general Management and general expenses include the costs necessary to ensure proper administrative functioning of the board of directors, manage the financial and budgetary responsibilities of the REF, inform the public about the REF s stewardship, and perform other activities related to the overall direction of the REF. 6

9 NOTES TO FINANCIAL STATEMENTS June 30, 2017 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Estimates Management uses estimates and assumptions in preparing financial statements. Those estimates and assumptions affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities, and the reported revenues and expenses. Actual results could differ from those estimates. Date of Management s Review Management has evaluated subsequent events through December 7, 2017, the date which the financial statements were available to be issued. NOTE 2 PROPERTY AND EQUIPMENT Property and equipment consist of the following: Land $ 80,000 Construction in progress 156,539 Buildings and improvements 2,676,240 Equipment 43,171 Property and equipment 2,955,950 Accumulated depreciation (734,844) Property and equipment - net $ 2,221,106 NOTE 3 MORTGAGE PAYABLE The REF has a 3.63% mortgage payable to a local financial institution in monthly installments of $9,950, including interest, through September 27, The mortgage is secured by the REF s student housing units and assignments of its leases and rents. The future scheduled maturities of this mortgage are as follows for the years ending June 30: 2018 $ 66, , , , ,319 Thereafter 1,491,813 $ 1,850,173 7

10 NOTES TO FINANCIAL STATEMENTS June 30, 2017 NOTE 4 LEASING ARRANGEMENTS The REF leases housing units to students of the College. Lease terms are typically for one college academic year and may be extended through the summer months if requested by the student and units are available. The REF collects a security deposit from each tenant that may be retained due to damages to the leased premises that exceed ordinary wear and tear, waste and neglect of the premises, and nonpayment of rent and amounts owed for utilities. NOTE 5 NET ASSETS For the year ended June 30, 2017, the REF s board of directors has chosen to place the following limitations on unrestricted net assets: Property and equipment held for leasing (net of accumulated depreciation and related debt) $ 370,933 Undesignated 97,165 Unrestricted net assets $ 468,098 NOTE 6 RELATED PARTY TRANSACTIONS The REF has an agreement with the College for services and facilities. The College employed all of the REF s employees. During the year ended June 30, 2017, the REF recorded donated services of $150,914 for the personnel-related costs. The College also provided payroll, human resources, and maintenance services, internet and mailing services, office space, and office equipment without charge. Services received from the College are measured at the College's estimate of the costs it incurred in providing those services. Facilities and office equipment are measured at the fair value rental for similar facilities. During the year ended June 30, 2017, the REF paid $11,532 for expenses incurred by the College. 8