KUVO/DENVER EDUCATIONAL BROADCASTING INC. Financial Statements and Independent Auditors' Report June 30, 2013

Transcription

1 Financial Statements and Independent Auditors' Report June 30, 2013

2 Table of Contents Page Independent Auditors' Report...1 Financial Statements Statement of Financial Position...3 Statement of Activities...4 Statement of Cash Flows...5 Notes to Financial Statements...6 Supplemental Information Statement of Functional Expenses...14

3 INDEPENDENT AUDITORS' REPORT To the Board of Directors KUVO/Denver Educational Broadcasting Inc. Denver, Colorado We have audited the accompanying financial statements of KUVO/Denver Educational Broadcasting Inc., which are comprised of the statement of financial position as of June 30, 2013, and the related statements of activities and cash flows for the period from November 1, 2012 through June 30, 2013, 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. AUDITORS' 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 auditors' 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 auditors consider 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 To the Board of Directors KUVO/Denver Educational Broadcasting Inc. Page Two 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 KUVO/Denver Educational Broadcasting Inc. as of June 30, 2013, and the changes in its net assets and its cash flows for the period from November 1, 2012 through June 30, 2013, 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 statement of functional expenses 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. December 17, 2013 Denver, Colorado EKS&H LLLP

5 Statement of Financial Position June 30, 2013 Assets Current assets Cash and cash equivalents $ 138,728 Underwriting receivables 62,114 Current portion of note receivable 5,000 Other assets 23,522 Total current assets 229,364 Property and equipment, net 1,142,792 Operating license 53,017 Note receivable, net of current portion 60,000 1,255,809 Total assets $ 1,485,173 Liabilities and Net Assets Current liabilities Accounts payable $ 88,146 Accrued liabilities 42,616 Current obligation under capital leases 9,362 Current portion of notes payable 8,238 Other payable 478,244 Total current liabilities 626,606 Obligation under capital leases 24,191 Notes payable 92,505 Total liabilities 743,302 Net assets Unrestricted - designated 364,330 Unrestricted and undesignated net assets 280,869 Temporarily restricted funds 96,672 Total net assets 741,871 Total liabilities and net assets $ 1,485,173 See notes to financial statements

6 Statement of Activities For the Period from November 1, 2012 through June 30, 2013 Temporarily Permanently Unrestricted Restricted Restricted Total Support and revenue Membership and fundraising $ 425,492 $ - $ - $ 425,492 Community service grant 88,125 30, ,977 Other gifts 5, ,849 Underwriting 170, ,493 Special events 1, ,073 In-kind contributions 477, ,122 Other revenue 51,460 6,695-58,155 Total support and revenue 1,219,614 37,547-1,257,161 Net assets released from restrictions 30,852 (30,852) - - Total revenues, gains, and other support 1,250,466 6,695-1,257,161 Expenses Program services Programming and production 435, ,859 Support services General administration 193, ,415 Fundraising and membership development 196, ,153 Underwriting 546, ,458 Total supporting services 936, ,026 Total expenses 1,371, ,371,885 Change in net assets (121,419) 6,695 - (114,724) Net assets at beginning of year 766,618 89, ,595 Net assets at end of year $ 645,199 $ 96,672 $ - $ 741,871 See notes to financial statements

7 Statement of Cash Flows For the Period from November 1, 2012 through June 30, 2013 Cash flows from operating activities Change in net assets $ (114,724) Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation and amortization 91,393 Changes in assets and liabilities Increase in underwriting receivable (50,342) Decrease in other receivables 85,263 Decrease in other assets 11,337 Decrease in accounts payable (9,282) Increase in accrued liabilities 17,001 Decrease in other liabilities (40,697) Increase in other payable 28, ,917 Net cash provided by operating activities 18,193 Cash flows from investing activities Payment received on note receivable 5,000 Net cash provided by investing activities 5,000 Cash flows from financing activities Payments on notes payable (5,314) Payments on capital leases (5,332) Net cash (used in) financing activities (10,646) Net increase in cash and cash equivalents 12,547 Cash and cash equivalents at beginning of year 126,181 Cash and cash equivalents at end of year $ 138,728 Supplemental disclosure of cash flow information: Interest paid was $14,051 for the period ended June 30, Supplemental disclosure of non-cash activity: During the period from November 1, 2012 through June 30, 2013, $450,000 of a note payable was assumed by Rocky Mountain Public Broadcasting Network, Inc. and is included in other payables (Note 1). See notes to financial statements

8 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies Nature of Organization KUVO/Denver Educational Broadcasting Inc. ("KUVO") is a non-profit educational public broadcasting radio station providing jazz, news and information, and culturally diverse specialty programs to the Colorado Front Range and Breckenridge. The mission of KUVO is to provide alternative educational, informational, and entertainment opportunities that enrich, maintain, reflect, and institutionalize a multilingual, multicultural perspective and foster appreciation for cultural diversity with an emphasis on Chicano/Hispanic experience. Revenues are derived primarily from contributions from members of the station, underwriting, and federal grants. Method of Accounting The financial statements of KUVO have been prepared on the accrual basis of accounting. Basis of Presentation The financial statements are presented pursuant to Public Telecommunications Audit Guide and Requirements, published in May 1989 by the Corporation for Public Broadcasting, and significant accounting policies conform to the Supplemental Guide published in 1996 by the Corporation for Public Broadcasting. KUVO 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. Unrestricted amounts are those currently available at the discretion of the Board of Directors ("Board") for use in KUVO's operations and those resources invested in property and equipment. The Board-designated unrestricted amounts are $275,000 for an operating reserve, $25,000 for an emergency reserve, and the remaining $64,330 for scholarship funds. Temporarily restricted amounts are monies restricted by donors specifically for certain time periods, purposes, or programs. Permanently restricted amounts are assets that must be maintained permanently by KUVO as required by the donor, but KUVO is permitted to use or expend part or all of any income derived from those assets in accordance with the donor's restrictions. As of June 30, 2013, KUVO does not have any permanently restricted net assets. Use of Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, disclosures of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue, expenses, gains, losses, and other changes in net assets during the reported period. Actual results could differ from those estimates

9 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Cash and Cash Equivalents KUVO considers all highly liquid investments with a maturity of three months or less, and that are not held by investment managers as part of an investment portfolio, to be cash equivalents. KUVO continually monitors its positions with, and the credit quality of, the financial institutions with which it invests. Cash in the amount of $41,633 at June 30, 2013 is held in escrow to be used for building maintenance and shared antenna use. Concentrations of Risk Financial instruments that potentially subject KUVO to concentrations of risk are cash and underwriting receivables. KUVO places its cash accounts with creditworthy, high-quality financial institutions. Risk with respect to underwriting receivables is limited due to the number and creditworthiness of the corporations, foundations, and individuals who comprise the underwriting base. Underwriting Receivables Underwriting receivables represent amounts due resulting from the performance of services provided to other organizations and individuals. The allowance for doubtful accounts is based on past experience and on analysis of the collectibility of current underwriting receivables. Accounts deemed uncollectible are charged to the allowance in the year they are deemed uncollectible. There was no allowance for uncollectible underwriting receivables at June 30, Fair Value Measurements The carrying amount reported in the statement of financial position for cash and cash equivalents, underwriting receivables, accounts payable, accrued liabilities, and other payable approximate fair value because of the immediate or short-term maturities of these financial instruments. Management evaluates the fair value of the capital lease payable and notes payable based on the current interest rate environment and current pricing of debt instruments with comparable terms. The carrying values of such financial instruments are considered to approximate fair value. Notes receivable have not been discounted as such discount would not be material to the financial statements. Donated Services A number of volunteers donate time to KUVO's program services, administration, and development activities. Although the value of these services is significant, KUVO does not record such value in its financial statements because it does not meet the recognition criteria established. Donated materials are recorded at fair value at the date of donation

10 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Property and Equipment KUVO capitalizes all expenditures for property and equipment in excess of $500 and with a useful life exceeding one year. Property and equipment, if purchased, are recorded at cost. Donated fixed assets are also capitalized at fair value at the date of donation. Depreciation is provided on the straight-line method based upon the estimated useful lives of the assets, ranging from 5 to 30 years, and the related lease terms for equipment under capital leases. Operating Licenses KUVO has long-lived assets consisting of FCC broadcasting licenses, which are renewable every eight years. These licenses were recorded at cost and are reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of the asset may not be recovered. KUVO looks primarily to undiscounted future cash flows in its assessment of whether or not its licenses have been impaired. There was no impairment as of June 30, Contributions and Grants KUVO reports gifts of cash and other assets as restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction is met and time restriction expires, the amount is then reported in the statement of activities as net assets released from restrictions. Program Underwriting Program underwriting is recorded from signed agreements. Program underwriting related to purchased programs is recognized as unrestricted net assets. Underwriting receivables are recorded for the full amount of the signed underwriting agreement. Advertising KUVO uses advertising to promote its programs among the audiences it serves. The costs of advertising are expensed as incurred. During the period from November 1, 2012 through June 30, 2013, advertising expense was $510. Income Taxes KUVO is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code ("IRC"). However, the income from activities not directly related to its tax-exempt purpose is subject to taxation as unrelated business income as defined in the IRC and regulations thereunder. KUVO applies a more-likely-than-not measurement methodology to reflect the financial statement impact of uncertain tax positions taken or expected to be taken in a tax return. After evaluating the tax positions taken, none are considered to be uncertain; therefore, no amounts have been recognized as of June 30, If incurred, interest and penalties associated with tax positions would be recorded in the period assessed as miscellaneous administrative expense. No interest or penalties have been assessed as of June 30, Tax years that remain subject to examination include 2010 through

11 Notes to Financial Statements Note 1 - Organization and Summary of Significant Accounting Policies (continued) Functional Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the supplemental statement of functional expenses. Accordingly, certain costs have been allocated among the appropriate programs and supporting services benefited. Subsequent Events On January 17, 2013, KUVO entered into an assignment and assumption agreement with Rocky Mountain Public Broadcasting Network, Inc. (the "Network"), a non-profit corporation, to merge the entities. Effective July 1, 2013, the Network and KUVO merged operations. Using both public radio and public television media platforms, the Network enriches the lives of Coloradoans through engaging and essential programs, services, and community partnerships that inform, enlighten, and entertain. In consideration of the merger, a note payable to Public Radio Fund, LLC in the amount of $450,000 was assigned, in full, to the Network during the period ended June 30, 2013 and is included in the other payable balance due to the Network at June 30, The balance was fully assumed by the Network effective July 1, KUVO has evaluated all other subsequent events through the auditors' report date, which is the date the financial statements were available for issuance, noting no other subsequent events requiring disclosure. Note 2 - Property and Equipment Property and equipment consist of the following as of June 30, 2013: Broadcasting equipment $ 1,130,643 Office equipment 164,214 Buildings 968,644 2,263,501 Less accumulated depreciation (1,120,709) $ 1,142,792 Equipment under capital lease and included in broadcasting and office equipment amounted to $48,016 for 2013, with accumulated amortization of $14,177 as of June 30,

12 Notes to Financial Statements Note 3 - Note Receivable In February 2006, KUVO and KBDI, a public television broadcaster, jointly purchased an office condominium. In August 2006, KUVO sold a portion of its interest in the condominium to KBDI for $100,000. KUVO provided financing to KBDI to purchase the condominium office space. The note is due in installment payments of $5,000 per year through December 31, The remaining $50,000 is due as a lump-sum payment on December 31, The amounts reflected in the statement of financial position do not reflect the present value of an imputed interest rate due to the immateriality of the discount. Amounts Due During the Year Ended June 30, 2014 $ 5, , , ,000 $ 65,000 Note 4 - Capital Lease Obligations The following represents obligations under capital leases for furniture and equipment as of June 30, 2013: Due in quarterly installments of principal and interest of $864 through May 2015, secured by equipment. $ 7,609 Due in monthly installments of principal and interest of $1,028 through June 2016, secured by equipment. 28,894 36,503 Less interest (2,950) Present value of future minimum lease payments 33,553 Less current portion (9,362) Total long-term portion $ 24,191 Future annual maturities of capital lease obligations outstanding are as follows: For the Year Ending June 30, 2014 $ 9, , , $ 33,553

13 Notes to Financial Statements Note 5 - Note Payable The following represents the obligation under a note payable for property as of June 30, 2013: Mortgage payable to Five Points Media Center in monthly installments of principal and interest of $1,004 through May 2023, interest rate of 4%, secured by a first deed of trust on an office condominium. $ 100,743 Less current portion (8,238) Total long-term portion $ 92,505 Future annual maturities of note payable obligations outstanding are as follows: For the Year Ending June 30, 2014 $ 8, , , , ,665 Thereafter 56,057 $ 100,743 Note 6 - Restrictions on Net Assets Temporarily restricted net assets as of June 30, 2013 are available for the following purposes: Performance Studio $ 16,997 Capital Reserve 35,928 Capital Campaign 26,847 Flo's Fund 16,900 $ 96,672 Note 7 - Commitments and Contingencies KUVO has received various federal grants in prior years for the acquisition and construction of certain transmitter facilities and equipment. The grants were made contingent upon the continued use of the transmitter facilities and equipment for their stated purpose for a period of ten years. If the facility and equipment are sold or not used for their stated purpose, KUVO must repay a portion of the grant awarded. KUVO's annual commitment under these agreements for the use of transmitter facilities and equipment is $16,000. The contingencies are scheduled to expire at varying times through It is the intent of management to utilize the facilities and equipment for its public broadcasting at least through the date these contingencies expire

14 Notes to Financial Statements Note 8 - Retirement Plan KUVO offers employees participation in a voluntary 403(b) Simple IRA retirement plan. KUVO, at its discretion, matches up to 3% of the participant's gross salary for participants with over $5,000 in compensation. Retirement plan expense was $1,686 for the period from November 1, 2012 through June 30, Note 9 - Donated Services Underwriting Trade KUVO provides underwriting services in exchange for cross promotion, event access, and other items. Underwriting trade revenues and corresponding expenses for the period from November 1, 2012 through June 30, 2013 were $477,

15 SUPPLEMENTAL INFORMATION

16 Statement of Functional Expenses For the Period from November 1, 2012 through June 30, 2013 Programming and Production Management and General Fundraising and Development Underwriting Total Salaries and benefits $ 167,744 $ 46,892 $ 107,818 $ 40,139 $ 362,593 Professional services 85,174 51, ,010 Advertising and promotion Programs and production 76, ,654 In-kind , ,122 Scholarships - 27, ,128 Occupancy 33,277 9,309 21,403 7,968 71,957 Other operating expenses 30,730 46,675 39,001 11, ,518 Total expenses before depreciation and amortization 393, , , ,341 1,280,492 Depreciation and amortization 42,280 11,820 27,176 10,117 91,393 Total expenses $ 435,859 $ 193,415 $ 196,153 $ 546,458 $ 1,371,