SPOKANE PUBLIC RADIO, INC. FINANCIAL STATEMENTS for the years ended June 30, 2013 and 2012

Transcription

1 FINANCIAL STATEMENTS for the years ended June 30, 2013 and 2012

2 TABLE OF CONTENTS June 30, 2013 and 2012 Independent Auditor's Report 1-2 Financial Statements: Statement of Financial Position Statement of Activities Statement of Functional Expenses Statement of Cash Flows Notes to Financial Statements

3 James K. McDirmid Chris D. Mikkelsen Kennerh E. Secrest Will iam A. Simer Andrew J. McDirmid Marcie M. Harper Keirh A. Schmidt McDIRMID, MIKKELSEN & SECREST, P.S. Certified Public Accountants INDEPENDENT AUDITOR'S REPORT 926 W. Sprague. Suire.300 Spokane. WA FAX Board of Directors Spokane Public Radio, Inc. Spokane, Washington Report on the Financial Statements We have audited the accompanying statements of Spokane Public Radio, Inc. (a nonprofit organization), which comprise the statement of financial position as of June 30, 2013 and 2012, and the related statements of activities, functional expenses, and cash flows 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; 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. 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 perforn1ing 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.

4 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 Spokane Public Radio, Inc. as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States. November 21, 2013 Spokane, Washington

5 STATEMENT OF FINANCIAL POSITION June 30, 2013 and 2012 ASSETS Current assets: Cash Certificates of deposit Pledges receivable, net of allowance for uncollectible pledges of $39,518 and $40,264 Underwriting receivable Capital campaign receivable Other receivable Prepaid expenses Total current assets $ 361,805 10,033 63,216 41,378 91,719 12,034 1, ,215 $ 304,012 72,397 73,908 35, ,950 12,142 1, ,738 Property and equipment 803, ,031 Other assets: Trust investment Capital campaign receivable, net of discounts Total other assets 327,895 72, , , , ,315 $ 1,786,097 $ 2,022,084 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable Accrued expenses Total current liabilities Net assets: Unrestricted Temporarily restricted Permanently restricted $ 3,676 52,263 55,939 1,324, ,890 5,200 1,730,158 $ 1,786,097 $ 5,311 48,261 53,572 1,525, ,315 5,200 1,968,512 $ 2,022,084 The accompany ing notes are an integral part of the financial statements. -3-

6 STATEMENT OF ACTIVITIES for the years ended June 30, 2013 and 2012 Changes in unrestricted net assets: Support and revenue: Grants: Corporation for Public Broadcasting Community Service Grant (CSG) Corporation for Public Broadcasting Digital Conversion Fund Foundation grants National Telecommunications and Information Administration Grants Total grants Contributions and other revenue: Subscriptions and memberships Underwriting and services Capital campaign Fundraising events In-kind professional services and contributions Interest and royalty income Trust investment earnings Other income Total contributions and other revenue Net assets released from restrictions Total unrestricted support and revenue Expenses: Program services Supporting services: Management and general Membership development and fund raising Total supporting services Total expenses Decrease in unrestricted net assets $ 225,119 5,000 6, , , ,852 88,151 71, ,460 5,859 15,577 56,016 1,711,488 46,273 1,994,695 1,568, , , ,515 2,196,624 (201,929) $ 267,006 45,866 15,000 22, , , , ,291 89, ,754 4,129 14,986 67,470 1,719,926 25,601 2,096,243 1,413, , , ,926 2,104,148 {7,905) Continued -4-

7 STATEMENT OF ACTIVITIES, Continued for the years ended June 30, 2013 and Changes in temporarily restricted net assets: Revenue and other gains (losses): Realized gain on investments 16,406 Unrealized loss on investments {6,558) Total revenue and other gains (losses) 9,848 Net assets released from restrictions (46,273) Pledges where donor provisions were not met Decrease in temporarily restricted net assets {36,425) Decrease in net assets (238,354) Net assets at beginning of year 1,968,512 Net assets at end of year $ 1,730, ,1 95 (24,252) (17,057) (25,601) (25,000) (67,658) (75,563) 2,044,075 $ 1,968,512 The accompanying notes are an integral part of the financial statements. -5-

8 STATEMENT OF FUNCTIONAL EXPENSES for the years ended June 30, 2013 and 2012 Programming Public Relations & Program Guide Program Services 2013 Membership New Engineering & Development Facili!): Equipment Total & Fundraising SuEEorting Services Management Total & General Total Expenses Payroll and employee expenses $ 442,716 Professional services 61,703 $ Office supplies 1,205 Postage and shipping 3,279 Utilities and telephone 25,252 Rental space 36,298 Repairs and maintenance 1,094 Network programming fees 447,640 Meetings and travel 6,507 Advertising and development 26,393 Insurance 16,695 Bank fees Miscellaneous 2,251 Printing 3,974 Depreciation 28,939 Direct fundraising costs $ 1,103,946 $ $ 68,775 $ 511,491 $ 235,836 3,859 24,511 90,073 4, ,027 5,382 2, ,752 11,039 8,300 36,453 70,005 7,201 82,778 34, ,313 4, ,509 14, ,640 3,207 9,714 3, ,478 1,250 1,280 17,975 11,337 72, ,101 1, ,304 12,705 I 09, ,618 3,102 32, ,157 $ 294,006 $ 1,568,109 $ 330,246 $ 200,543 $ 436,379 $ 947,870 53,747 57, ,885 4,807 7,221 12,603 1,245 12,284 16,036 3,600 10,801 80,806 5,310 9, ,942 1,031 1,031 15, ,640 4,445 7,569 17,283 12,744 13,994 40,472 5,305 5,305 23,280 11,337 11,337 5,176 6,583 81, ,893 17, , ,848 32,447 32,447 $ 298,269 $ 628,515 $ 2,196,624 Continued -6-

9 STATEMENT OF FUNCTIONAL EXPENSES, Continued for the years ended June 30, 2013 and 2012 Programming Public Relations & Program Guide Payroll and employee expenses $ 430,415 Professional services 60,801 $ Office supplies 3,068 Postage and shipping 4,601 Utilities and telephone 22,737 Rental space 31,050 Repairs and maintenance 2,424 Network programming fees 369,983 Meetings and travel 3,963 Advertising and development 23,916 Insurance 18,856 Bank fees Miscellaneous 2,700 Printing 4,858 Depreciation 29,542 Direct fundraising costs Interest $ 1,008,914 $ Program Services 2012 Membership New Engineering & Development Facilit~ EguiEment Total & Fundraising $ 78,684 $ 509,099 $ 293,214 7,580 27,006 95,387 25, ,682 5,815 3,669 1,087 5,688 11,435 9,485 35,243 67,465 7,651 82,777 31, ,719 4,483 1,578 12,248 16, ,983 3,609 7,572 8,714 23,916 1, ,642 9,965 1, , ,920 11, , ,801 4,480 27,758 3,659 3, ,087 $ 297,221 $ 1,413,222 $ 410,712 SUQQOrting Services Management Total & General Total Expenses $ 183,873 $ 477,087 $ 986,186 68,061 93, ,135 3,984 7,653 13,468 1,571 13,006 18,694 2,161 9,812 77,277 5,322 9, , , ,983 1,295 10,009 17,581 2,152 3,545 27,461 5,318 5,318 24,960 9,965 9,965 5,770 6,447 10, ,000 16, , ,547 27,758 27,758 3,659 $ 280,214 $ 690,926 $ 2,104,148 The accompanying notes are an integral part of the financial statements. -7-

10 STATEMENT OF CASH FLOWS for the years ended June 30, 2013 and Cash flows from operating activities: Decrease in net assets $ ~238,354) $ {75,563) Adjustments to reconcile changes in net assets to net cash provided by operating activities: Donated equipment (10,345) (4,119) Depreciation 141, ,547 Preacquisition costs previously capitalized 69,828 Unrealized loss on investments 6,558 24,252 Realized gain on investments (16,406) (7,195) Changes in assets and liabilities: Accrued interest on certificates of deposit (203) (1,215) Pledges receivable 10,692 4,372 Underwriting receivable (6,074) 5,862 Capital campaign receivable 58,504 (14,634) Other receivable 108 1,146 Prepaid expense (5) (456) Restricted cash capital campaign 25,000 Accounts payable (1,635) 1,766 Accrued expenses 4,002 (6,928) Total adjustments 256, ,398 Net cash provided by operating activities 18,518 90,835 Cash flows from investing activities: Maturity of certificate of deposit 62,567 15,828 Purchase of certificate of deposit (10,000) Proceeds from redemption of bonds 2,004 Purchase of property and equipment ~23,292) (118,585) Net cash provided by (used in) investing activities 39,275 (110,753) Cash flows from financing activities: Principal payments on note payable (65,000) Continued -8-

11 SPOKANE PUBLIC RADIO, INC. STATEMENT OF CASH FLOWS, Continued Net increase (decrease) in cash Cash at beginning of year Cash at end of year $ Supplemental disclosure of cash paid during the year for interest: Supplemental disclosure of non cash investing and financing activities: Donated equipment $ , , ,805 10, (84,918) 388,930 $ 304,012 $ 3,659 $ 4,119 The accompanying notes are an integral part of the financial statements. -9-

12 SPOKANE PUBLIC RADIO, INC. NOTES TO FINANCIAL STATEMENTS 1. Nature of Activities and Summary of Significant Accounting Policies: Nature o[activities Spokane Public Radio, Inc. operates three noncommercial public radio stations in Spokane, Washington (KPBZ-FM 90.3, KPBX-FM 91.1 and KSFC-FM 91.9). The stations serve parts of Eastern Washington, Northern Idaho, Western Montana, Eastern Oregon, and British Columbia, Canada, through ten full power radio repeater stations and three translator stations. Management estimates that the stations reach between sixty and seventy thousand listeners, based upon published radio listener surveys. Spokane Public Radio, Inc. (the Organization) offers a variety of classical music, jazz, and blues, as well as current news and public affairs programming. The Organization is supported primarily by listener contributions, local business underwriting, foundation grants, and grants from the Corporation of Public Broadcasting for program activities. Cash and Cash Equivalents For purposes of the statement of financial position and the statement of cash flows, the Organization considers demand deposit accounts and interest bearing accounts with a maturity of three months or less to be cash equivalents. The Organization' s policy is to invest cash in excess of operating requirements, in income producing money market investments with high credit quality financial institutions. At times, such investments may be in excess of FDIC insurance limits. Management does not believe excess cash investments are exposed to any significant credit risk. Certificates of deposit are recorded at cost, which approximates fair market value. Interest rates on the certificates vary from.15% to.30% and will mature during Investments Investments in marketable secunt1es with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position (see Note 7). 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. The Organization has significant exposure to a number of risks including interest, market and credit risks for marketable securities. Due to the level of risk exposure, it is possible that near-term valuation changes may occur to an extent that could materially affect the amounts reported in the financial statements. -10-

13 SPOKANE PUBLIC RADIO, INC. NOTES TO FINANCIAL STATEMENTS 1. Nature of Activities and Summary of Significant Accounting Policies, continued: Promises to Give Pledges for membership contributions are recorded as revenue when the promise to give is made. Program underwriting revenue is recorded on a pro-rata basis over the period of the related underwriting agreement. An allowance for estimated uncollectible pledges receivable is provided based on a history of past collection experience. Property and Equipment Property and equipment are stated at cost when purchased. The Organization capitalizes property and equipment expenditures over $250. Property and equipment are depreciated using the straight-line method, over their estimated useful lives. Contributed Services The value of contributed services meeting the requirements for recognition in the financial statements are recorded as revenue and expense when received. Contributed professional services and advertising are valued according to estimates provided by the donor and totaled $96,786 and $114,076 for the years ended June 30, 2013 and 2012, respectively. Specialized services donated by volunteers are valued at the estimated fair value of those services. Specialized services provided for programming and production programs totaled $31,329 and $33,559 for the years ended June 30, 2013 and 2012, respectively. In-kind services and contributions include donated equipment of $10,345 and $4,119 for the years ended June 30, 2013 and 2012, respectively. The Organization received approximately 2,200 and 2,400 hours of non-specified volunteer hours for the years ended June 30, 2013 and 2012, respectively, for which the value has not been recorded. Contributions The Organization reports 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. Donor-restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets. Donor restricted contributions, whose restrictions are met in the same reporting period, are reported as unrestricted net assets. -11-

14 NOTES TO FINANCIAL STATEMENTS 1. Nature of Activities and Summary of Significant Accounting Policies, continued: Contributed equipment is capitalized in the year received and valued according to estimates provided by the donor and by reference to fair market values for similar assets. If donors stipulate how long the asset must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of equipment are recorded as unrestricted support. Advertising The Organization's policy is to expense advertising costs when incurred. Income Taxes The Organization has received a determination letter from the U.S. Department of the Treasury, concluding that the Organization is a nonprofit organization which is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code. The Organization is no longer subject to examination by the Internal Revenue Service for fiscal years ended prior to June 30, Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. 2. Restrictions on Net Assets: Investments - Trust Assets On February 13, 1997 the Organization was notified by Washington Trust Bank that they were the beneficiary of an anonymous trust donation, which became effective on May 2, According to the terms of the trust, the Organization will receive the trust's annual net income for twenty years and will then receive the trust assets on May 2,

15 SPOKANE PUBLIC RADIO, INC. NOTES TO FINANCIAL STATEMENTS 2. Restrictions on Net Assets, continued: The trust investment at June 30, 2013 and 2012 is summarized as follows: Fair Fair Value Cost Value Cost Cash $ 5,542 $ 5,542 $ 5,436 $ 5,436 Fixed income 103, , , ,866 Equities 219: : ,826 $ $ $318!047 $288)28 Trust assets are recognized as a temporarily restricted donation. Trust earnings of $15,577 and $14,986 for years ended June 30, 2013 and 2012, respectively have been recognized as unrestricted revenue. The net change in temporarily restricted net assets includes $6,558 and $24,252 of unrealized losses and $16,406 and $7,195 of realized gain in market value for the years ended June 30, 2013 and 2012, respectively. Permanently Restricted Net Assets Permanently restricted net assets of $5,200 represent money specifically designated by the donor as working capital to be used during periods of cash shortages. Pledges Where Donor Provisions Were Not Met During the year ended June 30, 2012, a $25,000 donation was returned to the donor. The donation was restricted by the donor to be a match for a grant. The conditions of the match were not met. -13-

16 NOTES TO FINANCIAL STATEMENTS 3. Unconditional Promises to Give: Capital Campaign Receivable Unconditional promises to give towards the capital campaign that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give towards the capital campaign that are expected to be collected in future years are recorded at the present value of their future cash flows. The discounts on those amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Amortization of the discount is included in contribution revenue. The following unconditional promises to give towards the capital campaign were received as of June 30, 2013 and 2012: Receivable due in less than one year Receivable due in one to five years Total unconditional promises to give Less unamortized discount Net unconditional promises to give 2013 $ 91,719 82, ,922 9,208 $ $103, L ,745 12,527 $ Unconditional promise to give due in more than one year are reflected at the present value of estimated future cash flows using a discount rate of 4%. Temporarily restricted net assets at June 30, 2013 and 2012 includes capital campaign receivables due in one to five years of $72,995 and $119,268, respectively. -14-

17 NOTES TO FINANCIAL STATEMENTS 4. Fundraising Events: Revenue and direct expenses for the three largest fundraising events during the years ended June 30, 2013 and 2012 are as follows: Year ended June 30l 2013 Fall Record Evening Special and Video Under Event Sales the Stars Other Total Revenue $18,660 $32,038 $ 8,081 $13,039 $71,818 Direct fundraising costs 12l270 8l023 4l561 lll043 35l897 Fundraising, net $ $ $ $ $ Year ended June Spring Record Evening Special and Video Under Event Sales the Stars Other Total Revenue $21,473 $34,266 $14,332 $19,885 $89,956 Direct fundraising costs ,023 8,570 6,369 31,455 Fundraising, net $1 L980 $ $ $ $ Direct fundraising costs above include printing costs and bank fees which are not included in direct fundraising costs as disclosed on the statement of functional expenses. -15-

18 NOTES TO FINANCIAL STATEMENTS 5. Property and Equipment: Property and equipment at June 30, 2013 and 2012 is summarized as follows: Transmitter buildings and other Leasehold improvements Furniture and fixtures Broadcast and production equipment Land Vehicles Preacquisition costs - Momoe property (A) Preacquisition costs -Pacific property Less accumulated depreciation 2013 $ 32,134 16, ,953 1,608, ,718 6,614 10,450 1,970,311 1,166, $ 32,134 16, ,724 1,599, ,718 6,614 69,828 2,006,502 L024,471 $ $ Depreciation expense for the years ended June 30, 2013 and 2012 was $141,848 and $138,547, respectively. (A) During the year ended June 30, 2013, the Organization's management decided not to exercise the purchase option on the Pacific property. The preacquisiton costs of $69,828 previously capitalized were expensed and are included in miscellaneous expense on the statement of functional expenses (see Note 9). 6. Notes Payable to Bank: The Organization has an unsecured operating line of credit agreement with Washington Trust Bank that was renewed through July The agreement provides for borrowings up to $100,000 with interest due monthly at 1.0% over the bank's prime rate (4.25% at June 30, 2013). There was no balance outstanding at June 30, 2013 and

19 NOTES TO FINANCIAL STATEMENTS 7. Fair Value Measurement: The framework for measuring fair value provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3 ). The three levels of the fair value hierarchy under F ASB ASC 820 are described as follows: Level 1 Level2 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Organization has the ability to access. Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. The trust investments are based on quoted market prices in which the individual securities are traded. All of the investments are considered Level 1 measurements. There have been no changes in the methodologies used at June 30, 2013 and

20 NOTES TO FINANCIAL STATEMENTS 8. Retirement Plans: The Organization adopted a 403(b) pension plan for substantially all employees. Generally, employees can defer up to 20% of their annual compensation into their plan accounts. In addition, the Organization adopted a Simplified Employee Pension Plan (SEP) for all employees who have attained the age of 21. The Board of Directors contributed 2% of eligible participants' compensation, with a minimum of $25 per eligible participant for the years ended June 30, 2013 and Employer contributions were $14,784 and $15,419 for the years ended June 30, 2013 and 2012, respectively. 9. Commitments and Contingencies: The Organization conducts its operations from leased facilities for general, administrative and broadcasting offices and transmitting facilities. The lease on the general, administrative and broadcasting offices provides for monthly payments of $3,750 which includes storage and meeting room space of $1,000, monthly. The lease expires December 31, The Organization has also entered into a sublease agreement and acquired an assignment of a purchase option for new facility space with monthly payments of $6,891 commencing October 1, through August 31, The sublease is a triple net lease, requiring the Organization pay in addition to the monthly rent, all property taxes, utilities and insurance costs. As consideration for the assignment of an option to purchase the real estate, the Organization paid $10,000 on September 2, 2010 with a balance of $90,000 due and payable upon the exercise of the purchase option. The Organization does not intend to exercise the purchase option (see Note 5). A transmitter site and various translator sites are rented on either monthly, annual, or a three year term basis through December 31, Total rental for these sites was $30,028 and $23,771 for the years ended June 30, 2013 and 2012, respectively. This annual cost may vary if sites are added or deleted in the future. Total rent expense was $162,942 and $155,524 and for the years ended June 30, 2013 and 2012, respectively. This includes donated rental space of $7,781 and $4,922 for 2013 and 2012, respectively. -18-

21 NOTES TO FINANCIAL STATEMENTS 9. Commitments and Contingencies, continued: Liens are held by the U.S. Government on generators and broadcasting and studio equipment purchased with certain grant funds in the amount of $246,156 which includes a lien applied for in August The liens cover a ten-year period following the purchase of the equipment and expire between 2018 and Future minimum lease payments under the above non-cancelable lease and sublease agreements are as follows: Years ending June 30: $114, $ Subsequent Events: The Organization evaluated subsequent events and transactions for potential recognition or disclosure in the financial statements through November 21, 2013, the date the financial statements were available to be issued and, except for the information disclosed below, determined there were no events that required disclosure. On October 31, 2013 the Organization purchased a new facility at a total cost of$575,000. The purchase was financed with long-term debt for the same amount and is secured by the new facility. The note calls for interest free quarterly payments of $9,426, however interest will be imputed at 4% under terms of the note. Imputed interest will be deemed a charitable contribution to the Organization. The first payment is due October The holder of the note has first right of refusal should the Organization choose to sell the facility