LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION, INC. Audited Financial Statements

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1 LAND GRANT UNIVERSITY TAX EDUCATION FOUNDATION, INC. Audited Financial Statements For the Years Ended

2 Jake Jacobs, CPA INDEPENDENT AUDITOR'S REPORT Susan J. Marks, CPA Mark A. Clift, CPA Karin S. Wandtke, CPA Sang Ahn, CPA Jill Oswald Principal Dennis C. Johnson, CPA of counsel James R. McDonald, CPA of counsel The Board of Directors Land Grant University Tax Education Foundation, Inc. Kelso, Washington We have audited the accompanying statements of financial position of Land Grant University Tax Education Foundation, Inc. (a nonprofit corporation) as of December 31, 2011 and 2010, and the related statements of activities and cash flows for the years then ended. These financial statements are the responsibility of the Organization's management. 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 includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the Organization s internal control over financial reporting. Accordingly, we express no such opinion. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Land Grant University Tax Education Foundation, Inc. as of, 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 of America. April 27, 2012 Strength in Numbers ACCOUNTANTS & CONSULTANTS McDonald Jacobs, PC 520 SW Yamhill Suite 500 Portland, Oregon P: F: mail@mcdonaldjacobs.com

3 STATEMENTS OF FINANCIAL POSITION ASSETS Cash and cash equivalents $ 223,988 $ 180,616 Certificates of deposit 349, ,000 Accounts receivable 159, ,081 TOTAL ASSETS $ 732,111 $ 637,697 LIABILITIES AND NET ASSETS Liabilities: Accounts payable $ 209,757 $ 96,566 Advance on government grant - 18,623 Total liabilities 209, ,189 Unrestricted net assets 522, ,508 TOTAL LIABILITIES AND NET ASSETS $ 732,111 $ 637,697 See notes to financial statements

4 STATEMENTS OF ACTIVITIES For the years ended Revenue: Sales - Tax Workbooks $ 578,023 $ 571,908 Sales - handbooks and subscriptions 128, ,364 Shipping and handling costs 39,129 39,566 Total sales 745, ,838 Cost of sales: Editorial services 282, ,397 Prepress services 35,695 86,577 Printing 184, ,210 Purchases - handbooks and subscriptions 122, ,762 Postage and shipping 39,429 34,848 Total cost of sales 664, ,794 Gross profit 81,471 93,044 Grant revenue 137,623 4,977 Interest income 9,677 11,797 Total revenue 228, ,818 Expenses: USDA publication 130,799 4,977 Administration 50,000 50,000 Meeting expenses 29,449 19,490 Office and other expenses 8,335 6,808 Professional fees 9,121 2,068 Insurance 1,221 1,544 Total expenses 228,925 84,887 Change in net assets (154) 24,931 Unrestricted net assets: Beginning of year 522, ,577 End of year $ 522,354 $ 522,508 See notes to financial statements

5 STATEMENTS OF CASH FLOWS For the years ended Cash flows from operating activities: Change in net assets $ (154) $ 24,931 Adjustments to reconcile change in net assets to net cash provided by operating activities: (Increase) decrease in: Accounts receivable (51,042) 10,796 Increase (decrease) in: Accounts payable 113,191 (25,703) Advance on government grant (18,623) 18,623 Net cash provided by operating activities 43,372 28,647 Cash flows from investing activities: Proceeds from certificate of deposit 170,000 49,000 Additions to certificates of deposit (170,000) (49,000) Net cash used in investing activities - - Net increase in cash and cash equivalents 43,372 28,647 Cash and cash equivalents - beginning of year 180, ,969 Cash and cash equivalents - end of year $ 223,988 $ 180,616 See notes to financial statements

6 NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Description of Organization Land Grant University Tax Education Foundation, Inc. (the Organization or LGUTEF) is a nonprofit organization organized by representatives of land grant universities that teach tax education programs for professional tax practitioners. Annually LGUTEF plans, writes, develops and publishes the "National Income Tax Workbook" which is used to teach workshops, institutes, seminars, and forums in more than 25 states for over 25,000 tax professionals. The Organization's mission statement is to coordinate the development of educational materials to support the tax educational programs of land grant universities; to provide a vehicle to share educational materials; to provide a method for giving professional recognition to faculty and staff who have developed tax education material; and to support members in acquiring teaching material and skills and other professional development activities. The Organization is governed by a board of directors made up of representatives of participating land grant universities. A summary of significant accounting policies is as follows: Basis of Presentation Net assets and all balances and transactions are presented based on the existence or absence of donor-imposed restrictions. Accordingly, the net assets of the Organization and changes therein are classified and reported as unrestricted or restricted net assets. Unrestricted net assets are those that are not subject to donor-imposed stipulations. Temporarily restricted net assets are subject to donor-imposed stipulations that will be met, either by actions of the Organization and/or the passage of time. At, the Organization had only unrestricted net assets. Cash and Cash Equivalents For purposes of the statements of cash flows, the Organization considers all highly liquid investments available for current use with maturities of three months or less at the time of purchase to be cash equivalents. Accounts Receivable Accounts receivable are reported at the amount management expects to collect on balances outstanding at year-end. Based on an assessment of the credit history with those having outstanding balances and current relationships with them, management has concluded that realization losses on balances outstanding at year-end will be immaterial

7 NOTES TO FINANCIAL STATEMENTS, CONTINUED 1. DESCRIPTION OF ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, Continued Income Tax Status Land Grant University Tax Education Foundation, Inc. is a nonprofit corporation exempt from federal and state income tax under section 501(c)(3) of the Internal Revenue Code and applicable state law. No provision for income taxes is made in the accompanying financial statements, as the Organization has no activities subject to unrelated business income tax. The Organization is not a private foundation. The Organization s information returns for years ended December 31, 2007 and prior are generally no longer subject to examination by taxing authorities in its major tax jurisdictions. Revenue Recognition Revenue is recognized when services are performed. Government grant monies received in advance of services performed and expenses incurred are reflected as advance on government grant. Shipping and Handling Costs The Organization classifies shipping and handling costs billed to customers as revenue. Use of 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 revenues and expenses during the reporting period. Actual results could differ from those estimates. Subsequent Events The Organization has evaluated all subsequent events through April 27, 2012, the date the financial statements were available to be issued. Reclassifications Certain amounts in the prior year financial statements were reclassified to conform to the current year presentation

8 NOTES TO FINANCIAL STATEMENTS, CONTINUED 2. CERTIFICATES OF DEPOSIT Certificates of deposit are with various financial institutions, earning interest at rates ranging from 1.15% to 4.40%. Certificates held as of December 31, 2011 mature in May and July 2012, February and May 2013 and June ACCOUNTS RECEIVABLE Accounts receivable are unsecured and consist of amounts due from various land grant universities and educational institutions for costs associated with the Tax Workbook. 4. GRANT REVENUE During 2010, the Organization was awarded a $250,000 grant from the U.S. Department of Agriculture to create an online book for farm managers on federal taxation. Grant payments are distributed based on services performed and expenses incurred. The book was completed during 2011 and $142,600 was earned and collected to date. Remaining grant funds are available for book revisions and updates. 5. CONCENTRATIONS OF CREDIT RISK The Organization maintains its cash balances in several financial institutions. Balances in each institution are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The balances, at times, may exceed the federally insured limit. Cash balances at were fully insured. Revenue from the sale of the Tax Workbooks, handbooks and subscriptions are to various universities and institutions around the United States. During the year ended December 31, 2011, no sales to any one institution exceeded 10% of total revenue. During the year ended December 31, 2010, sales to one institution represented 11% total revenue for the year. Grant revenue from one government agency represented 15% of total revenue for the year ended December 31, At December 31, 2011, approximately 40% of total accounts receivable is from three universities and at December 31, 2010, approximately 68% of total accounts receivable is from four universities

9 NOTES TO FINANCIAL STATEMENTS, CONTINUED 6. RELATED PARTY DISCLOSURES During the years ended, the Organization incurred fees totaling approximately $188,500 and $98,600, respectively, to officers and directors for editorial services and grant administration. Sales of books to universities and institutions where board members are employed approximated $283,100 and $299,000 for years ended, respectively, with related accounts receivable balances at of approximately $42,700 and $48,000, respectively. Accounts payable at include $92,500, for each year, payable to a director for editorial services