Sonnenberg & Company, CPAs

Transcription

1 Sonnenberg & Company, CPAs & Company II A Professional Corporation ~ & Company 1 (~onnenber~ I CPA L~SERVES~LJ I~ Governor Drive, Suite 201. San Diego, CalifornIa Phone: (858) (800) 464-4HOA Fax: (858) (800) 303-4FAX 35 Leonard C. Sonnenberg. CPA The New Children s Museum Audited Financial Statements Contents Page No. INDEPENDENT AUDITOR S REPORT 1 FINANCIAL STATEMENTS Statement of Financial Position 2 Statement of Activities 3 Statement of Functional Expenses 4 Statement of Cash Flows 5 Notes to the Financial Statements 6-11 Member: The American Institute of Certified Public Accountants and California Society of Certified PubJic Accountants

2 ~nenber~ Sonnenberg & Company, CPAs & Company j A Professional Corporation II & Company II l~ (~% 5190 Governor Drive, Suite 201, San Diego, California I~ 4LPESEKVESTODIE~1 Phone: (858) (800) A Fax: (858) (800) 303-4FAX 35 Leonard C. Sonnenberg. CPA INDEPENDENT AUDITOR S REPORT Board of Directors and Members The New Children s Museum We have audited the accompanying statement of financial position of The New Children s Museum as of, and the related statements of activities, of functional expenses, and of cash flows for the year then ended. These financial statements are the responsibility of the Museum s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year summarized comparative information has been derived from the Museum s December 31, 2007 financial statements and, in our report dated May 2, 2008, we expressed an unqualified opinion on those financial statements. We conducted our audit in accordance with U.S. generally accepted auditing standards. 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 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 audit provides 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 The New Children s Museum as of, and the results of its operations and its cash flows for the year then ended in conformity with U.S. generally accepted accounting principles. November 12, 2009 (except as to Note 9, which is as of November 19, 2009) Sonnenberg & Company, CPAs Member: The American Institute of Certified Public Accountrts and California Society of Certified Public Accountants

3 Statement of Financiai Position (With Summarized Comparative Totals for 2007) ASSETS Operating Assets: Cash and cash equivalents $ 2,498,617 $ 3,898,546 Donated stock - 4,711 Pledges receivable, net of discount 800, ,007 Other receivables 42, ,306 Prepaid expenses and deposits 22,978 69,011 Total Operating Assets 3,364,301 4,697,581 Property and Equipment, at Cost: Museum land 2,232,286 2,232,286 Museum building 18,592,177 17,370,529 Museum parking 1,200,000 1,200,000 Park design 421,775 - Furniture, fixtures, vehicles 410, ,140 Exhibits 80,398 44,843 Less: accumulated depreciation (457,041) (17,946) Total Property and Equipment, Net 22,480,150 20,967,852 Total Assets $ 25,844,451 $ 25,665,433 LL&BILITIES AND NET ASSETS Liabilities: Accounts payable and accrued expenses $ 72,763 $ 54,442 Construction loan payable 5,969,144 7,664,421 Total Liabilities 6,041,907 7,718,863 Net Assets Unrestricted 19,692,544 17,766,570 Temporarily restricted 110, ,000 Total Net Assets 19,802,544 17,946,570 Total Liabilities and Net Assets $ 25,844,451 $ 25,665,433 The Accompanying Notes are an Integral Part of the Financial Statements 2

4 Statement of Activities For the Year Ended December31, 2008 (With Summarized Comparative Totals for 2007) Temporarily Unrestricted Restricted Total Total SUPPORT AND REVENUE: Contributions - public $ 504,221 $ 110,000 $ 614,221 $ 1,280,067 Contributions capital campaign, net of discount 3,603,304-3,603,304 3,304,957 Contributions - in-kind 37,837-37,837 7,055 Fundraising - gala (net of $403,709 direct expense) 275, ,191 - Admissions 356, ,707 - Memberships 663, ,265 - Fee for services 34,063-34,063 - Facility events 153, ,422 5,000 Parking revenue 91,745-91,745 - Miscellaneous income 96,052-96,052 43,876 Interest income 62,632-62,632 96,357 Released from restriction 180,000 (180,000) - - Total Support and Revenue 6,058,439 (70,000) 5,988,439 4,737,312 EXPENSES: Program 3,143,530-3,143, ,498 Management and general 389, ,562 1,162,579 Fundraising 599, , ,466 Total Expenses 4,132,465-4,132,465 1,617,543 CHANGE IN NET ASSETS 1,925,974 (70,000) 1,855,974 3,119,769 NET ASSETS AT BEGINNING OF YEAR 17,766, ,000 17,946,570 14,826,801 END OF YEAR $ 19,692,544 $ 110,000 $ 19,802,544 $ 17,946,570 The Accompanying Notes are an Integral Part of the Financial Statements 3

5 Statement of Functional Expenses For the Year Ended (With Summarized Comparative Totals for 2007) EXPENSES: Management Fund Programs & General Raising Total Total Personnel Payroll $ 908,803 $ 151,766 $ 280,618 $ 1,341,187 $ 671,979 Payroll taxes 72,572 12,701 17, ,117 53,615 Employee benefits 65,742 14,614 22, ,803 47,705 Sutbotal Personnel 1,047, , ,910 1,547, ,299 Non-Personnel Accounting and auditing 14,450 11,365-25,815 8,275 Advertising and promotion 16, ,120 24,234 1,967 Artist Honorarium 72, ,665 3,000 Bank expenses 28,973 2, ,698 21,578 Conferences and meetings 1, ,244 16,448 Consultants and contract services 417,778 68, , , ,820 Dues and subscriptions 1, ,633 3,199 Equipment 45,351 6,433 5,437 57,220 16,773 Events 7,837 1,433 87,940 97,210 2,450 Exhibitions 23, ,755 - In-kind expenses 28,378-9,459 37,837 7,055 Insurance 30,235 3,360-33,595 18,698 Interest 363,901 40, , ,042 Occupancy 105,559 11, ,288 64,272 Other expenses 54,831 8,113 5,408 68,352 1,596 Legal fees 32,302 3,589-35,891 68,726 Licenses, permits and fees 23, ,424 23,615 Postage and shipping 9, ,444 12,961 4,377 Printing 64, ,489 89,585 32,383 Professional development 5, ,502 8,303 - Rent - museum school 96, ,000 78,656 Supplies and materials 206, , ,438 17,678 Telephone,internet,website 24,742 4,366-29,108 25,412 Travel, meals and entertainment 24,193 1,664 1,708 27,565 8,083 Subtotal Non-Personnel 1,701, , ,462 2,146, ,103 Depreciation 395,186 43, ,095 8,141 TOTAL EXPENSES $ 3,143,530 $ 389,562 $ 599,373 S 4,132,465 S 1,617,543 TOTAL EXPENSE S 286, ,162, , ,617,543 The Accompanying Notes are an Integral Part of the Financial Statements 4

6 Statement of Cash Flows For the Year Ended December31, 2008 (With Summarized Comparative Totals for 2007) CASH FLOWS FROM: Operating Activities: ChangeinNetAssets $ 1,855,974 $ 3,119,769 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 439,095 8,141 Donated stock 4,711 (4,711) (Increase) / Decrease in: Pledges receivable, net of discount (368,222) (182,007) Other receivables 250,829 (293,306) Prepaid expenses and deposits 46,033 (44,380) Increase! (Decrease) in: Accounts payable and accrued expenses 18,321 21,694 Net Cash provided (used) by operating activities 2,246,741 2,625,200 Investment Activities: Additions to construction in progress (1,221,648) (9,836,064) Park design (421,775) - Purchase of fixed assets (307,970) (160,026) Net Cash provided (used) by investing activities (1,951,393) (9,996,090) Financing Activities: Loan proceeds 2,022,196 7,664,421 Loan payments (3,717,473) - Net Cash provided (used) by financing activities (1,695,277) 7,664,421 Net Cash provided (used) by all activities (1,399,929) 293,531 Cash and Cash Equivalents at: Beginning of Year 3,898,546 3,605,015 End of Year $ 2,498,617 $ 3,898,546 Supplemental Disclosures of Cash Flow Information: Interest Paid S 613, ,137 In-Kind Donations 5 92,137 S 7,055 The Accompanying Notes are an Integral Part of the Financial Statements 5

7 Notes to the Financial Statements Note 1. Organization: The New Children s Museum (herein referred to as the Museum ) was incorporated on March 12, 1981 as a California not-for-profit corporation as The Children s Museum. On March 26, 2008, the Museum changed its name to The New Children s Museum. The Museum is a cultural institution with a multinational audience, enriching the lives of children, teens, families, and the community through creative, experiential exhibitions and programs, and is located at 200 West Island Avenue in San Diego, California. Note 2. Summary of Significant Accounting Policies: Accounting Method: The Museum s accounting records are maintained on the accrual basis in accordance with U.S. generally accepted accounting principles whereby all revenues are recognized when earned and expenses are recognized when incurred. The Museum accounts for contributions in accordance with the requirements of the Financial Accounting Standards Board in SFAS No. 116, Accounting for Contributions Received and Contributions Made. Accordingly, any contributions received would be recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence and/or nature of any donor restrictions. The Museum s contributions have been reported as unrestricted when they were not restricted by the donor. Basis of Presentation: The Museum has also adopted Statements of Financial Accounting Standards SFAS No. 117, Financial Statements of Not-For-Profit Organizations which requires the organization 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. Cash: Per the provisions of FASB Statement No. 96, regarding Statement of Cash Flows, cash equivalents consist primarily of certificates of deposits and other securities with original maturities of 90 days or less. Securities with original maturities of over 90 days are generally classified as short-term investments. Museum funds in checking, savings and certificate of deposit accounts are all classified as cash for financial presentation purposes. Fixed Assets and Depreciation: Fixed assets have been recorded at cost, if purchased, and at fair market value if donated. It was the Museum s policy in 2008 to capitalize expenditures for these items in excess of $250. Lesser amounts are expensed. Contributed Services: The value of contributed services has not been recorded in these financial statements since theft value is not susceptible to objective measurement or valuation. However, a substantial number of volunteers have donated significant amounts of their time in fbrtherance of the Museum s fhnding raising and program activities. 6

8 Notes to the Financial Statements Note 2. Summary of Si2nifieant Accounting Policies: (Continued) Estimates: The preparation of financial statements in conformity with U.S. generally accepted accounting principles 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. Restricted Funds: Restricted finds are monies contributed by donors and grantors to be used for a specific purpose. Note 3. Income Tax Status: The Museum is exempt from federal income taxation as an organization described in Section 501(c) (3) of the Internal Revenue Code. Contributions to the Museum are tax-deductible by the donors. The Museum is required to pay income tax on unrelated business income only, if any. Note 4. Pled2es Receivable: Pledges are recognized when the donor makes an unconditional pledge to the Museum. Pledges that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in which the pledges are recognized. All other donor-restricted pledges 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. Pledges Receivable over the next 4 years is listed as follows, using a present value discount rate of 1.5%: Year Pledge Discount Net 2009 $ 385,000 $ - $ 385, ,000 (4,507) 300, ,000 (3,667) 121, ,000 (1,966) 43,034 Total $ 860,000 $ (10,140) $ 849,860 Note 5. Prepaid Expenses and Deposits: The museum had the following in prepaid expenses and deposits at : Prepaid Common Area Dues S 2,403 Prepaid Insurance 10,050 Prepaid Rent 8,000 Prepaid Program Expense 400 Gas Meter Deposit 2,125 Total Prepaid Expenses and Deposits $ 22,978 7

9 Notes to the Financial Statements Note 6. Museum Building and Parking Structure: In April 2003, the Museum partnered with Pinnacle Market Development (US), LLC, for the construction of the parking structure adjacent to the Museum building. The parking structure was completed in 2005 with a total cost to the Museum of $1,200,000. The Museum has rights to a total of 70 parking spaces in the common area and in the parking structure itself. Total construction costs for the Museum building through was $18,592,177. The hard cost portion incurred through was $13,278,853. Consulting and financing costs (soft costs) for the Museum building were $5,313,324. The construction contract (hard cost) for the Museum building was finalized in 2008 at $18,592,177. The Museum building received a temporary certificate of occupancy (TCOP) in November 2007 and administrative offices were able to move in as of that date. The building was in pre-operation mode through April Accordingly, depreciation on the building has commenced in During the year ending, while in pre-operation mode, building financing costs of $209,622 were capitalized. Note 7. Property and Equipment / Depreciation: The Museum Building is depreciated over estimated useful lives of 50 years using a straight-line method. All other capitalized property and equipment (with the exception of land and the park), are being depreciated over estimated useful lives of 3 to 10 years using a straight-line method. At, the Museum had the following property and equipment: Museum Building $ 18,592,177 Museum Land 2,232,286 Museum Parking 1,200,000 Park Design 421,775 Equipment 126,866 Furniture and Fixtures 244,568 Studio Furniture 28,015 Vehicles 11,106 Exhibits 80,398 Total Property and Equipment 22,937,191 Less: Depreciation (457,041) Net Book Value $ 22,480,150 Note 8. Exhibits: Exhibits are capitalized at cost and depreciated over the useful life of the exhibits, generally not more than 5 years. Any exhibit with a useful life of 12 months or less is expensed in the year the cost is incurred. 8

10 Notes to the Financial Statements Note 9. Construction Loan: On June 21, 2006, the Museum entered into a Construction Loan Agreement with Torrey Pines Bank. This agreement provides for a loan for construction of the new Museum located at 200 W. Island Avenue, San Diego, California. The maximum loan amount is $10,000,000 with a maturity date of June 21,2013. The interest rate is 7.58% and repayment is interest only, payable monthly for the first 24 months from an established interest reserve account, with interest and amortized principal payments payable monthly thereafter. In addition, on or before the end of the third year (June 2009) and annually thereafter, the Museum shall pay additional annual principal payments of $250,000. On August 20, 2008, the Museum had a change in terms agreement whereby the maximum loan amount was reduced to $7,000,000. This agreement also removed the requirement of annual principal payments of $250,000. Monthly principal and interest payments of $52, at an interest rate of 7.58% are to be paid through the maturity date of June 21, These principal and interest payments are to be re amortized after a principal reduction of 30% or more. During 2007 and 2008, the Museum had used $9,224,858 for construction costs plus $461,759 in capitalized interest. The Museum also made loan payments of $3,717,473, for a total liability at of $5,969,144, with a remaining line of credit of $1,030,856. Based upon the loan amount of $5,969,144 as of, ifiture minimum principal payments are as follows: Amount 2009 $ 185, , , , ,137,155 Total Principal Payments $ 5,969,144 Note 10. Advertising: The Museum uses advertising to promote its programs among the audiences it serves. The production costs of advertising are expensed as incurred. During 2008, advertising costs totaled $24,234. Note 11. Functional Classification of Expenses: Expenses by fimction for the year ended were as follows: Program $ 3,143,530 Management and general 389,562 Fundraising 599,373 Total Expenses S 4,132,465 9

11 Notes to the Financial Statements Note 12. Temporarily Restricted Funds: At, the Museum held $110,000 in temporarily restricted funds, which are prepayments made by the Capital Campaign Challenger Partners ($50,000 from Betlach and $60,000 from Colestock) in anticipation of future capital campaign revenue. Note 13. Permanently Restricted Funds: At, the Museum did not have any permanently restricted funds. Note 14. Landscape Maintenance Commitment: On June 21, 2003, the Museum entered into a Landscape Maintenance Agreement with the City of San Diego. This agreement provides that the City of San Diego pay for the construction of a children s park adjacent to the Museum. This agreement also provides that the Museum pay for the cost of drafting the park design, as well as the cost of maintaining the park and its facilities upon completion. This maintenance agreement extends for 30 years after completion of construction, and is renewable for another 30 years. The park was completed in the year ending December31, Note 15. Museum School Commitment: The Museum has a lease obligation from its previous location. The lease was $8,000 per month through July The lease currently houses the Museum School, a separate unrelated entity. The Museum has agreed to pay the lease on these facilities on behalf of the Museum School, as well as all utility costs. The utility costs are reimbursed to the Museum by the Museum School. Upon lease expiration in July 2008, the Museum agreed to reimburse the Museum School the lower of $8,000 or actual costs for rent expense for an additional 12 months, through July Note 16. Common Area and Parking Commitments: The Museum has a common interest in the adjacent common area and parking structure with Pinnacle Market Development (US), LLC. The Covenants, Conditions, and Restrictions (CC&Rs) for Children s Museum & Pinnacle Museum Tower Development require contributions for operating and replacement funding. Total contributions during 2008 were $25,563. Note 17. Operating Lease Commitment: The Museum entered into a lease in October 2008 for a copier with Xerox Corporation. Future payments under this lease are as follows: Year Amount 2009 $ 4, , , ,646 Total Payments S 18,232 10

12 Notes to the Financial Statements Note 18. Pension Plan 403(b): The Museum has a 403(b) plan covering all regular employees. Under the plan, employees can contribute and defer taxes on compensation contributed. The Museum does not make any contributions on the employee s behalf Note 19. Related Party: The Museum s Governance Committee Chair is an employee of the law firm which has been the principal provider of legal services to the Museum. The Board of Directors considers this arrangement to be financially advantageous and in the best interest of the Museum with respect to routine legal services. Independent counsel would be engaged in any situation where a disqualif~ring conflict might exist. Note 20. Donor Concentrations: In 2007, the Museum relied on contributions from individuals, foundations, and corporations located primarily in the San Diego area. The Museum has completed construction of its new building in 2008, but has continued to rely on these contributions. In 2008, these contributions were about 66% of total revenue. However, the Museum has increased its revenue from other sources such as admissions, membership and other income, and is expecting this amount to grow in future years. 11