Financial Statements and Report of Independent Certified Public Accountants

Transcription

1 Financial Statements and Report of Independent Certified Public Accountants STOCKTON AFFILIATED SERVICES, INC. (A COMPONENT UNIT OF STOCKTON UNIVERSITY) Years Ended June 30, 2015 and 2014

2 TABLE OF CONTENTS Report of Independent Certified Public Accountants 1-2 Page Financial Statements Statements of Financial Position at June 30, 2015 and Statements of Activities for the years ended June 30, 2015 and Statements of Cash Flows for the years ended June 30, 2015 and Notes to Financial Statements 6-10

3 Grant Thornton LLP 757 Third Avenue, 9th Floor New York, NY T F GrantThornton.com linkd.in/grantthorntonus twitter.com/grantthorntonus REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Stockton Affiliated Services, Inc. We have audited the accompanying financial statements of Stockton Affiliated Services, Inc. ( SASI ), a component unit of Stockton University, which comprise the statement of financial position as of June 30, 2015, and the related statements of activities 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 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. 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. Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd

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 Stockton Affiliated Services, Inc. as of June 30, 2015, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Other Matter 2014 Financial Statements The financial statements of Stockton Affiliated Services, Inc. as of and for the year ended June 30, 2014 were audited by other auditors. Those auditors expressed an unmodified opinion on those 2014 financial statements in their report dated October 31, New York, New York January 8,

5 Statements of Financial Positon June 30, 2015 and ASSETS CURRENT ASSETS Cash and cash equivalents $ 2,115,267 $ 2,487,739 Accounts receivable 197, ,021 Due from the University 295,074 96,869 Due from SARTP 375,000 - Prepaid expenses and other current assets 73,021 38,364 Total current assets 3,055,670 2,756,993 Property and equipment, net 1,898,193 1,911,700 Total assets $ 4,953,863 $ 4,668,693 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses $ 513,833 $ 277,736 Due to the University 805, ,215 Deferred revenues 40,379 46,096 Other liabilities 108, ,400 Total current liabilities 1,467,642 1,345,447 Long-term notes payable 1,314,683 1,314,683 Total liabilities 2,782,325 2,660,130 UNRESTRICTED NET ASSETS 2,171,538 2,008,563 Total liabilities and net assets $ 4,953,863 $ 4,668,693 The accompanying notes are an integral part of these statements

6 Statements of Activities Years ended June 30, 2015 and 2014 The accompanying notes are an integral part of these statements REVENUES AND OTHER ADDITIONS Program revenues Food service $ 9,418,024 $ 8,463,551 Transportation and safety 1,486,574 1,343,921 Vendor service 158, ,333 Bookstore 420, ,255 Rental properties 204, ,866 Interest 5,733 - Other income 41,772 38,103 Azeez museum 4,450 11,860 Total program revenues 11,740,115 10,658,889 Institutional support provided by the University Support for SASI functions (Azeez Museum) 443, ,307 Total revenues and other additions 12,183,914 11,041,196 EXPENSES Program expenses Food service 8,418,594 7,463,436 Transportation and safety 438, ,555 Rental properties 91,106 79,241 Rental properties managed for the University 3,406 3,203 Azeez museum 448, ,167 Total program expenses 9,400,075 8,377,602 Institutional support Support of the University mission 1,686,300 1,700,345 Support of the Foundation fundraising 57,500 57,500 Total institutional support 1,743,800 1,757,845 Supporting expenses University reimbursements 497, ,430 General and administrative 179, ,873 Depreciation 138, ,041 Interest 60,616 67,545 Total supporting expenses 877, ,889 Total expenses 12,020,939 10,898,336 Change in net assets before income tax expense 162, ,860 Income tax expense - (28,696) Change in net assets 162, ,164 Net assets - beginning of year 2,008,563 1,894,399 Net assets - end of year $ 2,171,538 $ 2,008,563

7 (A Component Unit Stockton University) Statements of Cash Flows Years ended June 30, 2015 AND CASH FLOWS FROM OPERATING ACTIVITIES Change in net assets $ 162,975 $ 114,164 Adjustments to reconcile change in net assets to net cash (used in) provided by operating activities Depreciation 138, ,041 Effect of changes in operating assets and liabilities (Increase) decrease in assets Accounts receivable (63,287) 59,332 Prepaid expenses and other current assets (34,657) (12,137) Due from SARTP (375,000) - Increase (decrease) in liabilities Accounts payable and accrued expenses 236,097 (159,392) Due to/from University, net (283,191) 245,012 Deferred revenues (5,717) 5,521 Other liabilities (23,199) (24,953) Net cash (used in) provided by operating activities (247,084) 363,588 CASH FLOWS FROM INVESTING ACTIVITIES Purchase of property and equipment (125,388) - Proceeds from sales of investments 5,518,241 - Purchase of investments (5,518,241) - Net cash used in investing activities (125,388) - CASH FLOWS FROM FINANCING ACTIVITIES Principal payments on long-term note payable - (150,000) Net (decrease) increase in cash (372,472) 213,588 CASH AND CASH EQUIVALENTS Beginning of year 2,487,739 2,274,151 End of year $ 2,115,267 $ 2,487,739 Supplementary cash flow information: Interest paid $ 60,616 $ 67,545 The accompanying notes are an integral part of these statements

8 Notes to Financial statements June 30, 2015 and DESCRIPTION OF THE ORGANIZATION Stockton Affiliated Services, Inc. ( SASI ) was formed and incorporated in the State of New Jersey in July 2008 to manage services that support the goals of Stockton University (the University ). The services provided to the University include off campus housing rentals, transportation and safety services, dining services and the campus bookstore. SASI is a self-supporting enterprise established to increase, expand and improve service levels at the University by providing effective, efficient and innovative business solutions that help the University achieve its teaching, scholarship and public service missions while improving operating results and the financial position of the University. SASI is considered a component unit of the University for financial reporting purposes, as its purpose or operations is entirely or almost entirely for the direct benefit of the University. Accordingly, SASI s financial statements are discretely presented in the University s basic financial statements. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting SASI s financial statements have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ( US GAAP ). US GAAP also requires that net assets, revenues, gains, expenses, and losses be classified as unrestricted, temporarily restricted, or permanently restricted based on the existence or absence of donor-imposed restrictions. Income Taxes The Internal Revenue Service ( IRS ) has classified SASI as a not-for-profit organization exempt from federal income tax under Section 501(c)(3) of the Internal Revenue Code (the Code ) and a public charity under Section 509(a)(3) of the Code. The State of New Jersey Division of Taxation has determined SASI to be exempt from New Jersey income tax, as well as, Sales and Use Tax for purchases directly related to the purposes for which SASI was formed and purchased with SASI s funds. SASI follows the Financial Accounting Standards Board ( FASB ) guidance that requires a tax position to be recognized or derecognized based on a more likely than not threshold to be sustained if the position were to be challenged by a taxing authority. The assessment of the tax position is based solely on the technical merits of the position, without regard to the likelihood that the tax position may be challenged. SASI does not believe its financial statements include any uncertain tax positions for which recognition or disclosure is warranted. SASI s policy is to recognize interest related to unrecognized tax benefits in interest expense and penalties in operating expense. No interest or penalties were recognized in SASI is exempt from federal income taxation, nevertheless, it may be subject to tax on income unrelated to its exempt purpose, unless that income is otherwise excluded by the Code. The tax years ended June 30, 2015, 2014 and 2013 remain open to audit for both federal and state purposes

9 Notes to Financial statements June 30, 2015 and 2014 Net Assets SASI reports its resources in accordance with accounting guidance governing Financial Statements for not-for-profit organizations, as follows: Unrestricted Net Assets - Net assets that are not subject to externally imposed stipulations, unrestricted net assets, may be designated for specific purposes by action of the board of directors or may otherwise be limited by contractual agreements with outside parties. Cash and Cash Equivalents Cash equivalents are short-term, highly liquid investments that are readily convertible to known amounts of cash and mature in three months or less from date of purchase. Property and Equipment Property and equipment are carried at historical cost if purchased or constructed less accumulated depreciation and amortization. SASI provides for depreciation and amortization of its property and equipment using the straight-line method over the estimated useful lives of its respective assets. The estimated useful lives used in computing the depreciation and the related capitalization thresholds, follows: Capitalization Asset Category Useful Life Threshold Buildings 40 years $ 100,000 Infrastructure 20 to 40 years 10,000 Land improvements 10 to 25 years 10,000 Equipment 3 to 15 years 5,000 Use of Estimates The preparation of financial statements in conformity with US GAAP 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Advertising Advertising is expensed as incurred and is not considered material to the accompanying statements. Subsequent Events SASI evaluated subsequent events through January 8, 2016, the date the financial statements were available to be issued

10 Notes to Financial statements June 30, 2015 and PROPERTY AND EQUIPMENT Property and equipment consisted of the following at June 30, 2015 and 2014: Land $ 575,875 $ 575,875 Land improvements 56,498 56,498 Building 1,284,260 1,284,260 Equipment 637, ,751 Total assets 2,553,772 2,428,384 Less accumulated depreciation 655, ,684 Net property and equipment $ 1,898,193 $ 1,911,700 Depreciation expense for the years ended June 30, 2015 and 2014 is $138,895 and $136,041, respectively. 4. LONG-TERM NOTES PAYABLE SASI obtained a $2,000,000 Commercial Line Note (the Loan ) from the University on September 8, Under the terms of the Loan, SASI pays interest to the University on the outstanding and unpaid principal amount of the Loan at an adjustable interest rate of the thirty year U.S. Treasury Note rate plus one hundred and fifty basis points. The rate as of June 30, 2015 and 2014 was 4.25% and 4.97%, respectively. Under the terms of the agreement, payment of any portion of the principal is not required until September The Loan is secured by the assets of SASI. As of June 30, 2015 and 2014, the Loan balance due by SASI to the University was $1,314,683. Interest expense on the Loan is $60,616 and $67,545 for the years ended June 30, 2015 and 2014, respectively. 5. COMMITMENTS SASI has entered into a partnership enabling the University to utilize the historic landmark commonly known as Dante Hall for the purposes of performing arts and other similar community activities in an effort to re-establish the facility as a vital piece of Atlantic City s arts district. The agreement is effective from June 1, 2011 through May 31, 2015, and requires annual lease payments in the amount of $1,200 per year. The lease terms have been extended for one year commencing June 1, SASI recorded a liability for compensated absences in the amount of $14,167 and $9,358 as of June 30, 2015 and 2014, respectively, which is included in accounts payable and accrued expenses in the accompanying statements of financial position. The liability is calculated based upon employees accrued vacation leave as of year end, as well as an estimated vested amount for accrued sick leave

11 Notes to Financial statements June 30, 2015 and 2014 Payments for unused sick leave balances are made to retiring employees upon regular retirement. The payment is based on 50% of the employee s sick leave accumulation at the pay rate in effect at the time of retirement up to a maximum of $15,000. Employees separating from SASI prior to retirement are not entitled to payments for accumulated sick leave balances. 6. CONCENTRATIONS OF CREDIT RISK SASI maintains its cash in bank deposits, which at times may exceed federally insured limits. SASI has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents. 7. RELATED PARTY TRANSACTIONS SASI is not under the common control of the University Board of Trustees (the Trustees ). A separate Board of Director s (the Board ) has oversight responsibility for SASI and acts independently of the University. The Board includes members from the University community. The Board has twelve members, including two faculty members of the University, two students of the University, one member of the Trustees and two administrators from the University. The remaining members of the Board are leaders from the local community. The University owns the buildings that are utilized as office space by SASI for conducting business and employs the personnel that support its administrative, financial and operating activities. SASI reimburses the University for use of space and personnel through payment of an overhead charge. Reimbursements made to the University for the years ended June 30, 2015 and 2014 were $497,704 and $404,430, respectively. SASI entered into a master management agreement with the University to provide for management services with respect to certain auxiliary services of the University with a term that commenced on February 5, 2009 and remains in effect until terminated by either party. These auxiliary services include transportation services, bookstore operations, beverage vending services, snack vending services and dining services. SASI will manage existing contracts for these services and negotiate new contracts upon expiration of existing agreements. This agreement includes transportation services under a contract with South Jersey Transportation Authority renewable each academic year, bookstore operations under a contract with Follett that expires June 30, 2024, beverage vending services under a contract with Pepsi Cola Bottling Group that expires June 30, 2024, snack vending services under a contract with Globe Vending that expires July 31, 2015, and Tedco Vending for the Hammonton campus, which expires October 14, 2015, dining services under a contract with Chartwell s that expires June 30, 2026, a DVD rental kiosk with DVD Empire, LLC that expires September 5, 2015, the rental of two parking spaces to Zipcar, Inc that expires September 13, 2015 and management services for the Stockton Hotel & Golf Club ( Seaview ) and Stockton Island Campus. The contracts with Globe Vending and Tedco has been extended to June 30, 2016 and the contract with Zipcar has been extended to October 23, The contract with DVD Empire will not been renewed. On June 1, 2013, SASI and the University entered into a management fee agreement whereby the University compensates SASI $10,000 for agency services for the management of the Seaview. The fee may be adjusted from time to time by mutual agreement of the parties

12 Notes to Financial statements June 30, 2015 and 2014 On March 1, 2015, SASI and the University entered into a management fee agreement whereby the University compensates SASI $10,000 for agency services for the management of the Stockton Island Campus. The fee may be adjusted from time to time by mutual agreement of the parties. On May 27, 2015, SASI entered into an agreement with Stockton Aviation Research and Technology Park of New Jersey ( SARTP ) to provide SARTP with a short term, non-interest bearing advance in the amount of $375,000. The funds were used for the purchase of architectural plans and design services from South Jersey Economic Development District ( SJEDD ) for the construction of the Aviation Research and Technology Park. The advance has subsequently been repaid on July 30, The following balances as of June 30, 2015 and 2014 are expected to be settled during the normal course of operations: Due from the University Food service $ 187,097 $ 78,744 Miscellaneous 107,977 18,125 Total due from the University $ 295,074 $ 96,869 Advance to SARTP $ 375,000 $ - Due to the University Institutional support $ 22,225 $ 32,009 Seaview operations 759, ,391 Overhead charge 22,929 65,162 Miscellaneous 110 2,653 Total due to the University $ 805,229 $ 890,