BEITER BASICS, INC. (A NONPROFIT ORGANIZATION) FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015

Transcription

1 BEITER BASICS, INC. (A NONPROFIT ORGANIZATION) FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015

2 Better Basics, Inc. Table of Contents June 30, 2016 and 2015 Page INDEPENDENT AUDITORS' REPORT 1-2 FINANCIAL STATEMENTS Statements of financial position Statements of activities Statements of cash flows Statements of functional expenses Notes to financial statements

3 Ha)':nes IIIDownard LLP Certified Public Accountants and Business Advisors INDEPENDENT AUDITORS' REPORT To the Board of Directors Better Basics, Inc. Birmingham, Alabama We have audited the accompanying financial statements of Better Basics, Inc. (a nonprofit organization), which comprise the statements of financial position as of June 30, 2016 and 2015, and the related statements of activities, cash flows and functional expenses 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 of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation 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 of 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 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. BIRMINGHAM nd Avenne North. Suite 400 Birmingham, Alabama PI...",,,,/ F...c,,,:,/25" JASPER th Avenue.Jasper, Alabama PI,..., 20,;/ F..x, 20:./ T.II, """/ wwwhaynesdownarl1.com

4 Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Better Basics, Inc. as of June 30, 2016 and 2015, 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. J::L~ Haynes Downard LLP Birmingham, Alabama ~~_ro~,;th September 27,2016 2

5 STATEMENTS OF FINANCIAL POSITION JUNE 30, 2016 AND 2015 ASSETS Current Assets Cash and cash equivalents $ 1,670,530 $ 1,598,317 Accounts receivable 19,780 24,500 Contributions and grants receivable 348, ,197 Investments 163, ,450 Prepaid expenses 40,201 45,778 Total current assets 2,242,720 2,054,242 Property and Equipment, net 147, ,719 Other Assets 8,311 8,571 Total Assets $ ,186 $ 2,189,532 LIABILITIES AND NET ASSETS Current Liabilities Accounts payable $ 17,226 $ 3,169 Accrued payroll 15,873 54,718 Vacation payable 9,715 15,981 other liabilities 1, Total current liabilities 44,139 74,809 Net Assets Unrestricted 1,689,016 1,353,393 Temporarily restricted 665, ,330 Total net assets 2,354,047 2,114,723 Total Liabilities and Net Assets $ 2,398,186 $ 2,189,532 See accompanying notes. 3

6 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2016 Temporarily Unrestricted Restricted Total Revenues, Support, and Other Income Special events $ 102,779 $ $ 102,779 Less: direct expenses (37,162) (37,162) Total special event revenue 65,617 65,617 Contributions and grants 968, ,482 1,413,523 Program service fees 225, ,625 United Way annual allocation 81,537 81, ,074 In-kind contributions 94,657 94,657 Interest and dividend income 13,497 13,497 Unrealized losses on investments (5,347) (5,347) Other income 1,076 1,076 1,444, ,019 1,971,722 Net assets released from restrictions 623,318 (623,318) Total revenues and support 2,068,021 (96,299) 1,971,722 Expenses Program 1,498,404 1,498,404 Management and general 113, ,270 fundraising 120, ,724 Total expenses 1,732,398 1,732,398 Change in Net Assets 335,623 (96,299) 239,324 Net assets, beginning of year 1,353, ,330 2,114,723 Net assets, end of year $ 1,689,016 $ 665,031 $ 2,354,047 See accompanying notes. 4

7 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED JUNE 30, 2015 Temporarily Unrestricted Restricted Total Revenues, Support, and Other Income Special events $ 80,662 $ $ 80,662 Less: direct expenses (27,211) (27,211) Total special event revenue 53,451 53,451 Contributions and grants 741, ,427 1,291,401 Program service fees 223, ,613 United Way annual allocation 80,733 80, ,465 In-kind contributions 85,804 85,804 Interest and dividend income 7,830 7,830 Unrealized losses on investments (1,518) (1,518) Loss on disposal of equipment (1,344) (1,344) Other income 2,363 2,363 1,192, ,159 1,823,065 Net assets released from restrictions 905,437 (905,437) Total revenues and support 2,098,343 (275,278) 1,823,065 Expenses Program 1,407,114 1,407,114 Management and general 128, ,984 Fundraising 122, ,732 Total expenses 1,658,830 1,658,830 Change in Net Assets 439,513 (275,278) 164,235 Net assets, beginning of year 913,880 1,036,608 1,950,488 Net assets, end of year $ 1,353,393 $ 761,330 $ 2,114,723 See accompanying notes. 5

8 STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED JUNE 30, 2016 AND 2015 Cash Flows from Operating Activities Increase in net assets $ 239,324 $ 164,235 Adjustments to reconcile changes in net assets to net cash provided by operating activities: Change in discount on contributions and grants receivable Depreciation 32,777 26,251 Unrealized losses on investments 5,347 1,518 Loss on disposal of equipment 1,344 Changes in assets and liabilities that provided (used) cash: Accounts receivable 4,720 (15,000) Contributions and grants receivable (122,241) 145,121 Prepaid expenses 5,577 (6,193) Other assets 260 (1,200) Accounts payable 14,057 (542) Vacation payable (6,266) 11,929 Accrued payroll (38,845) 6,174 Deferred revenue (3,000) Other liabilities Net cash provided by operating activities 135, ,970 Cash Flows from Investing Activities Purchase of property and equipment (53,213) (42,699) Purchase of investments (9,668) (104,586) Net cash used in investing activities (62,881) (147,285) Net Change in Cash 72, ,685 Cash, beginning of year 1,598,317 1,414,632 cash, end of year $ 1,670,530 $ 1,598,317 See accompanying notes. 6

9 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED JUNE 30, 2016 Management Program and General Fundraising Total Salaries $ 856,654 $ 47,137 $ 55,142 $ 958,933 Enrichment activities 159, ,330 Distribution of books and materials 150, ,893 Rent and utilities 73,459 16,800 5,264 95,523 Payroll taxes 70,072 3,840 4,480 78,392 Supplies and equipment 68,618 1,756 3,768 74,142 Depreciation 28,113 4,664 32,777 Consulting 30,000 30,000 Travel 18, ,657 Contracted services 16, ,600 19,026 Printing and reproduction 8, ,851 16,953 Insurance 14,756 14,756 Moving expenses 10,580 3,526 14,106 Employee benefits 9,427 1, ,976 Donated services 8,054 3,194 11,248 Professional fees 7,970 7,970 Miscellaneous 3,969 1,011 2,625 7,605 Repairs and maintenance 3, ,336 6,141 Payroll processing 6,063 6,063 Telephone and internet 4,037 1, ,565 Events and seminars 3, ,338 Postage 1, ,473 3,254 Background checks 2, ,819 Advertising $ 1,498,404 $ 113,270 $ 120,724 $ 1,732,398 See accompanying notes. 7

10 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED JUNE 30, 2015 Management Program and General Fundraising Total Salaries $ 847,709 $ 62,868 $ 60,289 $ 970,866 Enrichment activities 126, ,788 Distribution of books and materials 121, ,532 Rent and utililities 69,913 18,313 2,174 90,400 Payroll taxes 71,627 4,976 5,210 81,813 Supplies and equipment 49, ,765 51,906 Depreciation 25,219 1,032 26,251 Consulting 30,000 30,000 Travel 21, ,372 23,996 Contracted services 10, ,925 Printing and reproduction 8, ,850 16,298 Insurance 13,635 13,635 Moving expenses Employee benefits 18,420 2,495 2,936 23,851 Donated services 13,483 3,153 5,464 22,100 Professional fees 7,895 7,895 Miscellaneous 3,065 1,145 4,210 Repairs and maintenance 6,023 2,108 1,777 9,908 Payroll processing 6,284 6,284 Telephone and internet 3,456 1, ,327 Events and seminars 4, ,126 7,091 Postage 1, ,068 2,728 Background checks 3, ,277 Advertising $ 1,407,114 $ 128,984 $ 122,732 $ 1,658,830 See accompanying notes. 8

11 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Organization Better Basics, Inc. (the "Organization") is a non-profit corporation whose mission is to make a positive difference in the lives of children and their families by advancing literacy through enrichment and intervention programs. Basis of Accounting The accounting and reporting policies of the Organization and the methods of applying those policies that materially affect the accompanying financial statements conform with accounting principles generally accepted in the United States ("GAAp l ). In preparing the financial statements, management is required to make estimates and assumptions that affect the reported amounts of assets and liabilities as of the statement of financial position date and revenues and expenses for the period shown. Actual results could differ from the estimates used in the financial statements. Basis of Presentation The Organization reports information regarding its financial position and activities according to three classes of net assets: Unrestricted net assets represent revenues and expenses related to the operation and management of the Organization's primary programs and supporting services. Temporarily restricted net assets represent resources available for use, but expendable only for the purposes specifically stated by the donor. Permanently restricted net assets must be maintained in perpetuity. In accordance with donor instructions, the Organization may use the investment income earned on permanently restricted net assets for specified purposes. Unconditional promises to give are recognized as contributions at the net present value of the amounts expected to be collected. Contributions are considered available for unrestricted use unless specifically restricted by the donor. Amounts received that are restricted for future periods or by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increase those net asset classes. 9

12 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Basis of Presentation - Continued When a donor 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 and changes in net assets as net assets released from restrictions. Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. If an expense is incurred for a purpose for which both unrestricted and temporary restricted net assets are available the Organization considers the donor-imposed restriction fulfilled unless the expense is for a purpose that is directly attributable to another specific external source of revenue. Revenue generated from programs is recognized upon the provision of the service. Cash and Cash Equivalents The Organization considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. The carrying amount of the Organization's cash and cash equivalents approximates fair value due to the short maturity of these investments. Contributions and Grants Receivable Contributions and grants receivable consist of unconditional promises to give in the form of grants and pledges. Unconditional promises to give are recognized as revenues at their fair values in the period they are received. Unconditional promises to give with payments due in future periods are discounted at a rate commensurate with the scheduled timing of receipt. All amounts outstanding as of June 30, 2016 are expected to be collected within the next year. The methodology for calculating an allowance for uncollectible promises to give is based upon management's analysis of the aging of payment schedules for all outstanding pledges and historical experience with donors. The Organization has not recorded an allowance, as management believes that all pledges are fully collectible. Prepaid Expenses Prepaid expenses consist primarily of books and materials and are recorded at cost. Books and materials are expensed as they are distributed by the Organization. Prepaid expenses also include certain future period operating expenses paid in advance. 10

13 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016, AND 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Property and Equipment Property and equipment are stated at cost less accumulated depreciation, and consist of office furniture, office equipment, and a resource library containing books and materials used year after year in Better Basics programs. Donations of property and equipment are recorded as support at their estimated fair value. Such donations are reported as unrestricted support unless the donor has restricted the donated asset to a specific purpose. All acquisitions of property and equipment in excess of $1,000 and all expenditures for repairs, maintenance, renewals, and betterments that materially prolong the useful lives of assets are capitalized. Depreciation expense is computed using the straight-line method over the estimated useful lives of the assets. Furniture and equipment are generally depreciated over 3-7 years. Library books and materials are being depreciated over 5 years. Leasehold improvements are depreciated over 10 years. Investments Investments are carried at fair value based upon quoted market prices. Donated Goods and Services Donations of goods and services are recorded at their fair value at the date of donation. If donors stipulate restrictions in the usage of donated goods and services, the contributions are recorded as restricted support. In absence of such stipulation, contributions of goods and services are recorded as unrestricted support. In addition, the Organization received donated goods and services from other contributors and volunteers which are not measurable and, therefore, have been excluded from the financial statements. Functional Allocation of Expenses The costs of providing the various programs and activities have been summarized on a functional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among programs and supporting services benefited based on management's estimate. Income Taxes The Organization is a tax-exempt entity under Section 501(c)(3) of the Internal Revenue Code. 11

14 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Concentration of Credit Risk The Organization has financial instruments, namely cash and cash equivalents that potentially subject it to a concentration of credit risk. The Organization places its cash with high credit-quality financial institutions. 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 disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Fair Value Measurements FASB ASC 820, Fair Value Measurements and Disclosures, establishes a framework for measuring fair value. That framework 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 (Levell measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of fair value hierarchy under FASB ASC 820 are described below. Level 1 - 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. Level 2 - 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 which are derived principally from or corroborated by observable market data by correlation or other means. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. 12

15 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - Continued Fair Value Measurements - Continued 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. Uncertain Tax Positions As of June 30, 2016, the Organization has no uncertain tax positions that qualify for recognition or disclosure in the financial statements. Subsequent Events The Organization evaluated subsequent events through September 27, 2016, which is the date the financial statements were available to be issued. NOTE 2. CONCENTRATIONS Revenue received under contracts or grant agreements with the State of Alabama comprised approximately 27% and 29% of total revenue received for the years ended June 30, 2016 and 2015, respectively. NOTE 3. PROPERTY AND EQUIPMENT Property and equipment consists of the following as of June 30: Resource library $ 146,746 $ 130,434 Office equipment 138, ,033 Leasehold improvements 11,147 Office furniture 31,141 5, , ,854 Less: accumulated depreciation (180,046) (167,135) Property and equipment, net $ 147,155..J 126,719 13

16 NOTES TO FINANCIAL STATEMENTS BElTER BASICS, INC. JUNE 30, 2016 AND 2015 NOTE 4. IN-KIND CONTRIBUTIONS During the years ended June 30, 2016 and 2015 the Organization recorded the following in-kind contributions as revenue and expenses in the accompanying statements of activities: Books $ 18,196 $ 19,315 Supplies and equipment 50,384 44,389 Donated event items 14,829 Professional services 11,248 22,100 Total in-kind contributions -$ 94,657 $ 85,804 NOTE 5. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes at June 30, 2016 and 2015 Programs/Future operations 2016 $ 665, $ 761,330 Net assets were released from restrictions during the years ended June 30, 2016 and 2015 in satisfaction of the following purposes: Satisfaction of time and program restrictions 2016 ~ 623, $ 905,437 14

17 NOTES TO FINANCIAL STATEMENTS JUNE 30, 2016 AND 2015 NOTE 6. FAIR VALUE MEASUREMENTS The Organization determines the fair value of its investments through application of FASB ASC 820. The following table presents the financial instruments carried at fair value as of June 30, 2016 and 2015: June 30, 2016 Levell Level 2 Level 3 Total Money market account Stock mutual funds $ 8, ,585 $ $ $ 8, ,585 Investments $ 163,771 $ $ $ 163,771 June 30, 2015 Levell Level 2 Level 3 Total Money market account Stock mutual funds $ 8, ,265 $ $ $ 8, ,265 Investments $ 159,450 $ $ $ 159,450 NOTE 7. COMMITMENTS The Organization entered a new ten year lease agreement for its facility under an operating lease agreement. The lease term began on June 27, The Organization has the opportunity to terminate the lease during the sixth year by delivering a written notice to the lessor within the first six months of the sixth year along with a payment of $45,000 to the lessor. In this case, the lease would terminate at the end of the sixth year. Future rental payments to be made under this lease for each of the next five years and therafter are as follows: Years ending June 30, Thereafter $ 73,731 75,204 76,704 78,240 79, ,636 15