III Harrington GrOll P

Transcription

1 III Harrington GrOll P CE RT IF I ED PUBLIC ACCOU NTANTS, LLP 1. Joseph Harrington Emeritus.Job M. Quesada Sean E.Cain Tonetta L. Conner BAY AREA COUNCIL, INC. CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, Mission Street Suite 200 San Marino California Phone: Fax: Francisco Street Suite 160 San Francisco California Phone: Fax:

2 CONTENTS Pages Independent Auditors' Report... 1 Consolidated Statement of Financial Position Consolidated Statement of Activities... 3 Consolidated Statement of Functional Expenses...,...4 Consolidated Statement of Cash Flows Notes to Consolidated Financial Statements

3 III Harrington Groll P CERTlF I E D PUBLIC ACCOUNTANTS. LLP J. Joseph HalTington Emeritus Job M. Quesada Sean E. Cain Tonetta L. Conner INDEPENDENT AUDITORS' REPORT To the Board of Directors Bay Area Council, Inc. Subsidiaries We have audited the accompanying Consolidated Statements of Financial Position of Bay Area Council, Inc. Subsidiaries (nonprofit organizations) as of December 31, the related Consolidated Statements of Activities, Functional Expenses, Cash Flows for the years then ended. These consolidated financial statements are the responsibility of the organization's management. Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with auditing stards generally accepted in the United States of America. Those stards require that we plan perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit includes consideration of internal control over fmancial 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 Bay Area Council, Inc. Subsidiaries internal control over fulancial reporting. Accordingly, we express no such opinion. An audit also includes examining, on a test basis, evidence supporting the amounts disclosures in the consolidated financial statements, assessing the accounting principles used significant estimates made by management, as well as evaluating the overall consolidated fulancial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated fulancial position of Bay Area Council, Inc. Subsidiaries as of December 31, the changes in their net assets their cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. San Francisco, California March 15, Mission Street Suite 200 San Marino California Phone: 626, Fax: Francisco Street Suite 160 San Francisco California Phone: l.3131 Fax:

4 CONSOLIDATED STATEMENT OF FINANCIAL POSITION December 31, Assets Cash cash equivalents $ 1,361,319 Accounts receivable (net of allowance of $44,100 $163,199, respectively) 529,941 Prepaid expenses 48,732 Property equipment (Note 3) 86, $ 1,910, ,490 71, ,165 Total assets $ 2,026,315 $ 2,427,632 Liabilities net assets Liabilities Accounts payable $ 180,607 Accrued liabilities (Note 4) 515,532 Deferred revenue 367,000 $ 114, , ,225 Total liabilities 1,063,139 1,224,604 Net assets Unrestricted 33,723 Unrestricted - board designated (Note 2) Bay Area Family of Funds 655,563 Political Action Committee (182) Temporarily restricted (Note 6) 274, , ,793 (156) 217,527 Total net assets 963,176 1,203,028 Total liabilities net assets $ 2,026,315 $ 2,427,632 The accompanying notes are an integral part of these consolidated financial statements. 2

5 CONSOLIDATED STATEMENT OF ACTIVITIES For the years ended December 31, Year Ended December 31, 2009 Year Ended December 31,2008 Revenue support Temporarily Unrestricted Restricted Total Unrestricted Temporarily Restricted Total Membership subscriptions Special events Contributions (Note 2) Support from Bay Area Family of Funds (Note 7) In-kind contribution (Note 2) Publications Interest Net assets released from program restrictions $ 2,103,450 $ $ 2,103,450 1,305,175 1,305, , ,035 1,307, , ,412 80,000 80,000 20,500 20,500 2,099 2, ,490 (441,490) $ 2,274,042 $ $ 1,749, , , , ,284 34,500 10,445 40,367 (40,367) 2,274,042 1,749, , , ,284 34,500 10,445 Total revenue support 5,508,818 56,545 5,565,363 5,588, ,633 5,723,931 Expenses Program services Management general Fundraising annual events 3,452,650 3,452,650 1,125,818 1,125,818 1,226,747 1,226,747 3,380,552 1,016,523 1,317,953 3,380,552 1,016,523 1,317,953 Total expenses 5,805,215 5,805,215 5,715,028 5,715,028 Change in net assets before merger (296,397) 56,545 (239,852) (126,730) 135,633 8,903 Net effect of merger of Bay Area Economic Forum Bay Area Economic Forum Foundation 239, ,718 Change in net assets (296,397) 56,545 (239,852) 112, , ,621 Net assets, beginning of period 985, ,527 1,203, ,513 81, ,407 Net assets, end of period $ 689,104 $ 274,072 $ 963,176 $ 985,501 $ 217,527 $ 1,203,028 The accompanying notes are an integral part of these consolidated financial statements. 3

6 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES For the years ended December 31, Year ended December, Year ended December 31, 2008 Program Services Support Services Fundraising Total Management Support Total Program General Annual Events Services Expenses Services SUEE0rt Services Fundraising Total Management Support Total General Annual Events Services Expenses Salaries 1,488,228 Employee benefits 288,686 Payroll taxes 117,703 Total personnel costs 1,894, , , ,028 2,343,256 $ 1,604,763 67,039 52, , , ,273 28,200 34,431 62, , , , ,475 1,036,974 2,931,591 1,995,050 $ 398,964 $ 371, ,883 2,375, ,077 49, , ,811 8,340 24,821 33, , , , ,582 2,973,632 Professional fees 584,773 Events direct expenses Contributions to other organizations (Note 10) 406,330 Pro, ision for bad debt Occupancy 186,252 Travel 83,101 IT expense 80,421 Trade expense 20,000 Printing. publications, media 47,449 BAC programs general management meeting 40,529 Depreciation 29,307 Rental maintenance of equipment 17,412 Supplies 17,045 Postage shipping 15,074 Office expense 14,182 Payroll processing bank charges 3,868 Insurance 5,671 Membership, books, subscriptions 1,674 Advertising 4,945 Political contributions (Note 9) Other expenses 73,953 57, , , , , , , , , , , ,242 33,913 47,555 81, , ,412 50,743 5,752 56, , ,964 18,280 16,801 35, ,502 87,259 22,500 37,500 60,000 80,000 3,299 20,442 23,741 71,190 62,465 17,872 17,872 58,401 8,987 2,793 3,588 6,381 35,688 22,862 3,479 5,069 8,548 25,960 15,832 5,720 2,898 8,618 25,663 12,863 1,946 2,534 4,480 19,554 24,262 1, ,347 15,529 7,516 8, ,178 13, ,465 1,891 7,562 5,206 3, ,833 5,507 2,633 4,945 45,000 42, , , , , , , , , , ,000 17,997 48,527 66, ,936 21,097 4,808 25, ,869 12,522 19,245 31, ,026 65,350 75, , ,284 2,245 32,321 34,566 97,031 6,246 6,246 15,233 2,785 5,508 8,293 31,155 3,862 3,729 7,591 23,423 4,645 2,272 6,917 19,780 1,150 2,802 3,952 28,214 3,413 1,795 5,208 12,724 11,301 11,301 11, ,222 2,097 7,303 1,776 1,776 4,409 12,913 12,913 12,913 45,000 3,287 3,287 3,287 Total functional expenses 3,452,650 1,125,818 $ 1,226,747 2,352,565 5,805,215 3,380,552 1,016,523 1,31 7,953 $ 2,334,476 5,715,028 The accompanying notes are an integral part of these consolidated financial statements.

7 CONSOLIDATED STATEMENT OF CASH FLOWS For the years ended December 31, Cash flows from operating activities: Change in net assets $ Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation Change in allowance for doubtful accounts receivable Changes in operating assets liabilities: (Increase) in accounts receivable (Increase) decrease in prepaid expenses Increase (decrease) in accounts payable Increase (decrease) in accrued liabilities Increase (decrease) in deferred revenue 2009 (239,852) 35,688 (119,099) (79,352) 22,348 65,801 (25,041) (202,225) 2008 $ 248,621 31,155 56,199 (58,703) (54,501) (156,840) 160, ,060 Net cash provided (used) by operating activities (541,732) 475,285 Cash flows from investing activities: Purchase of property equipment (7,846) (13,966) Net cash (used) by investing activities (7,846) (13,966) Net increase (decrease) in cash cash equivalents (549,578) 461,319 Cash cash equivalents, beginning of period 1,910,897 1,449,578 Cash cash equivalents, end of period $ 1,361,319 $ 1,910,897 The accompanying notes are an integral part of these consolidated financial statements. 5

8 1. Organization Bay Area Council, Inc. is a 501 (c)(4) business sponsored public policy advocacy organization for the nine counties in the Bay Area. Bay Area Council, Inc. engages public civic leaders in making the Bay Area the most innovative, globally competitive sustainable region in the world. Bay Area Council, Inc. was founded in 1945 as a way for the region's business community likeminded individuals to concentrate coordinate their efforts. Bay Area Council, Inc. comms respect widely among elected officials, policy makers, other civic leaders as the regional voice of businesses in the Bay Area. Bay Area Council, Inc. is led by a president CEO, assisted by a COO several vice presidents, directors, managers. Bay Area Council, Inc.'s primary source of revenue is derived from membership subscription fees, foundation grants, special fund raising events, support from the Bay Area Family of Funds. Bay Area Council Foundation ("BACF") is a 501 (c) (3) organization which was formed in October 2004 by the Bay Area Council, Inc. to enable it to perform its educational public benefit activities as well as research study programs. Effective January 1, 2008, the former Bay Area Economic Forum organizations were merged into the BACF as a chartered program, the Economic Institute. BACF is able to receive tax exempt donations, contributions, grants to support these program activities. During its 2006 fiscal year, Bay Area Council, Inc. established an Issues Political Action Committee (''BACPAC'') for the sole purpose of funding campaign activities in support of or opposed to, local statewide ballot measures proposition. Separate fmancial records are maintained for this Bay Area Council, Inc. program. The BACP AC activities are consolidated herein for the purpose of financial statement presentation (see Note,9). During its 2009 fiscal year, Bay Area Council, Inc. established the Bay Area Council LLC, a California Limited Liability Company ("BAC LLC") for the purpose of furthering global initiative programs benefiting its global partners the Bay Area Region. BAC LLC is 100% owned by the Bay Area Council, Inc. 501(c)(4) is considered a disregarded entity for United States tax purposes. BAC LLC's activity is consolidated herein for the purpose of financial statement presentation. BAC LLC will include the formation of a China Wholly Foreign Owned Enterprise ("WFOE") that is 100% owned by BAC LLC. The WFOE is being established in 2010 to enable BAC LLC to open a foreign office in the Yangpu District of Shanghai for the purpose of promoting economic development for the Yangpu District the Bay Area Region. WFOE will be registered in accordance with Chinese government regulations as the Bay Area Investment Consultancy (Shanghai) Co. Ltd. (see Note 11). continued 6

9 1. Organization, continued In September 1994, the Accounting Stards Division of the American Institute of Certified Public Accountants issued a Statement of Position ("SOP") 94-3, "Reporting of Related Entities by Notfor-Profit Organizations." This statement provides guidance for the reporting disclosure of financially interrelated not-for-profit organizations. Based upon the nature of the relationship between Bay Area Council, Inc. Bay Area Council Foundation consolidated financial statements are presented. The three organizations (Bay Area Council, Inc., BACF, BAC LLC) together are collectively referred to as ("BAC") in these consolidated fmancial statements. 2. Summary of Significant Accounting Policies A summary of the significant accounting policies applied in the preparation of the accompanying consolidated fmancial statements is as follows: Principles of Consolidation The consolidated financial statements include the accounts of Bay Area Council Inc., BACF, BAC LLC; BACF BAC LLC are consolidated since Bay Area Council, Inc. has both an economic interest control of both the organizations through a majority voting interest in its governing board. All interorganization transactions have been eliminated. Basis of Presentation The accompanying consolidated financial statements have been prepared on the accrual basis of accounting to include the three legal entities. Accounting To ensure observance of certain constraints restrictions placed on the use of resources, the accounts of BAC are maintained in accordance with the principles of net asset accounting. This is the procedure by which resources for various purposes are classified for accounting reporting purposes into net asset classes that are in accordance with specified activities or objectives. Accordingly, all financial transactions have been recorded reported by net asset class as follows: Unrestricted. These generally result from revenue generated by receiving unrestricted contributions, providing services, receiving interest from investments less expenses incurred in providing program-related services, raising contributions, performing administrative functions. continued 7

10 2. Summary of Significant Accounting Policies, continued Unrestricted-Board Designated. These are comprised of resources that the Board of Directors has designated for the Bay Area Family of Funds the Political Action Committee. For purposes of complying with net asset accounting, these funds are included in unrestricted net assets at December 31, Temporarily Restricted. BAC reports gifts of cash other assets as temporarily restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, that is, when a stipulated time restriction ends or the purpose of the restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets reported in the consolidated Statement of Activities as net assets released from program or capital restrictions. Permanently Restricted. These net assets are restricted by donors who stipulate that resources are to be maintained permanently, but permit BAC to expend all of the income (or other economic benefits) derived from the donated assets. BAC has no permanently restricted net assets at December 31, Cash Cash Equivalents BAC considers all highly liquid investments, with maturity of three months or less, to be cash cash equivalents. Accounts Receivable BAC uses the allowance method in order to reserve for potential uncollectible accounts receivable. Revenue Recognition Membership subscriptions are voluntary related revenues are recognized when invoiced for the annual subscription cycle. Income from special events is recognized as earned at the time of the events. Contributions Pledges Receivable Unconditional promises to give that are expected to be collected within one year are recorded as net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at fair value, which is measured as the present value of their future cash flows. The discounts on those amounts are computed using risk-adjusted interest rates applicable to the years in which the promises are received. Amortization of the discount is included in contribution revenue. Conditional promises to give are not included as support until the conditions are substantially met. continued 8

11 2. Summary of Significant Accounting Policies, continued Contributions consist of major funding support received from individual corporate donors, corporate foundation grants pledged support from our program partners. During 2009, BACF secured $585,000 in foundation grants of which $425,000 were specific to BACF education programs. A Hewlett Foundation education grant of $900,000 was awarded over a three year period beginning in Most grants are applied for, awarded on an annual basis. Property Equipment Property equipment are recorded at cost if purchased or at fair value at the date of donation if donated. Depreciation is computed on the straight-line basis over the estimated useful lives of the related assets. Maintenance repair costs are charged to expense as incurred. Property equipment are capitalized if the cost of an asset is greater than or equal to one thous dollars the useful life is greater than one year. Donated Materials Services Contributions of donated non-cash assets are recorded at fair value in the period received. Contributions of donated services that create or enhance non-financial assets or that require specialized skills are recorded at fair value in the period received. A number of unpaid volunteers have made significant contributions of their time to BAC. However, the value of these services is not reflected in these statements because the criteria for recognition have not been satisfied or there was no reliable method of tracking these services. Concentration of Credit Risks BAC places its temporary cash investments with high credit, quality fmancial institutions. Investments placed during the year were within the limits covered by the Federal Deposit Insurance Corporation. Income Taxes Bay Area Council Inc, is exempt from taxation under Internal Revenue Code Section 501(c)(4) BACF is exempt as a 501 (c) (3). BAC LLC is subject to both Federal State taxation. For the 2009 financial year, BAC LLC had reported net income of zero. There was no Federal or State tax liability due. continued 9

12 2. Summary of Significant Accounting Policies, continued Generally accepted accounting principles provide accounting disclosure guidance about positions taken by an organization in its tax returns that might be uncertain. Management has considered its tax positions believes that all of the positions taken by BAC in its federal state exempt organization tax returns are more likely than not to be sustained upon examination. BAC returns for years ended December 31, 2006, 2007, 2008, are subject to examination by federal state taxing authorities, generally for three years after they are filed. Functional Allocation of Expenses Costs of providing BAC's programs other activities have been presented in the consolidated Statement of Functional Expenses. During the year, such costs are accumulated into separate groupings as either program services or supporting services. Supporting services or shared costs are allocated among program support services by a method that best measures the relative degree of benefit. BAC uses total payroll cost to allocate indirect costs. Use of Estimates The preparation of the consolidated fmancial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates assumptions that affect reported amounts of assets, liabilities, revenues, expenses as of the date for the period presented. Subsequent Events Management has evaluated subsequent events through March 15,2010, the date which the financial statements were available. 3. Property Equipment Property equipment at December 31, consist of the following: Furniture equipment Leasehold improvements Less: accumulated depreciation 2009 $208,670 61,186 (183533) $ $200,825 61,186 (147846) $ continued 10

13 4. Accrued Liabilities Accrued liabilities at December 31, consist of the following: Accrued incentive payable Accrued vacation Accrued rent credit Other 2009 $207, ,946 85, $ $265, ,055 82, $ Commitments Contingencies Obligations Under Operating Leases BAC leases various facilities under operating leases with various terms. Future minimum payments by year in the aggregate, under these leases with initial or remaining terms of one year or more, consist of the following: Year ended December $260, , , $ Rent expense under operating leases for the years ended December 31, was $257,046 $262,386, respectively. 6. Temporarily Restricted Net Assets Funds that are restricted by the donor for particular purposes are deemed to be earned reported as temporarily restricted revenue when pledged. As the funds are spent, the assets are released from restriction transferred to unrestricted net assets. At December 31, temporarily restricted net assets are available for the following purposes: Early education K-12 education Better Housing Program 2009 $123, , $ $124, S continued 11

14 7. Support from Bay Area Family of Funds The Bay Area Family of Funds focuses on reducing poverty encouraging smart growth in Bay Area low moderate-income ("LMI") neighborhoods. The Bay Area Family of Funds is organized into three separate fund-building efforts in real estate business equity to attract private capital into LMI communities. Investments through three separate funds aim to produce double bottomline returns: market rate financial returns (the first bottom-line) significant social! environmental returns to reduce poverty promote smart growth (the second bottom-line). BAC does not control the Bay Area Family of Funds, nor is an investment manager. BAC's management considers its support from Bay Area Family of Funds as not taxable they have engaged a national law firm to obtain a tax opinion on the subject matter of unrelated business income tax ("DBIT"). The conclusion of the tax research opinion on UBIT is favorable to BAC where any net proceeds derived from the Bay Area Family of Funds is not a taxable event therefore, no income tax provision will need to be accrued. Total amount of support from the Bay Area Family of Funds for the years ended December 31, was $746,412 $742,459, respectively. 8. Employee Benefit Plan BAC maintains a retirement savings plan trust (the "Plan") for the benefit of its employees. It is a tax qualified 401 (k) plan administered by Fidelity Investments; all employees are eligible to participate except those classified as "temporary or part-time." There are no restrictions of age or service conditions on the start of participation for eligible employees. Effective July 1, 2009, the plan was amended to include a Safe Harbor Provision. BAC now provides employer safe harbor contributions to the plan up to a maximum 6%, combined with an employer discretionary match up to a maximum of 4%. A participating employee can receive a contribution allocation amount of up to 10% of their earned salary. The Safe Harbor Provision provides for immediate vesting by employees in the employer safe harbor contributions, while the discretionary employer match is still subject to a three year cliff vesting period where an employee becomes fully vested upon completion of three years of service. Employer contributions under this plan for the years ended December 31, were $198,116 $194,868, respectively. continued 12

15 BAY AREACQUNCIL, INC. 9. Political Action Committee During its 2006 fiscal year, BAC established an Issues Political Action Committee ("BACPAC") for the sole purpose of funding campaign activities in support of, or opposed to, local statewide ballot measures propositions. Contributions to ballot initiatives propositions were made in accordance with BACPAC Board approval the regulations required by federal state laws governing such activity. For the year ended December 31, 2009, the BACPAC statement of activity reflects excess expenses over income of $26. Donor contributions received totaled $1,000, while BACPAC expenses totaled $1,026 including $875 in legal fees. There were no political contributions made during the year ended December 31, For the year ended December 31, 2008, the BACPAC statement of activity reflects excess expenses over income of $23,465. Donor contributions received totaled $25,000, while BACPAC political contributions made totaled $45,000. BACP AC expenses other than political contributions totaled $3,465, including $3,441 in legal fees. 10. Contributions to Other Organizations During 2009, BAC's Executive Committee approved support for the Repair California Campaign. The Campaign was officially registered with the California Fair Political Practices Commission established as a separate campaign organization. BAC remained at "arm's length" from the Campaign billed for both direct costs staff time dedicated to the Campaign. It was anticipated that as Campaign fundraising grew, BAC was to be reimbursed for these billings. In February 2010, the Campaign announced that it was being suspended for lack of fundraising success. As a result, BAC's $182,023 receivable was written off as a 2009 contribution expense. Contributions to other organizations for the years ended December 31, were $406,330 $154,326, respectively. 11. Subsequent Events On February 10, 2010, BAC LLC signed a joint operating agreement with the Yangpu District Government to establish a BAC China WFOE organization open a local BAC office in the Knowledge Information Center of the Yangpu District. The operating agreement specifics that BAC llc WFOE will receive $450,000 in annual funding over a three year period to promote economic development growth in both the Yangpu District Bay Area Region. During 2009, BAC LLC incurred $20,000 in direct indirect expenses related to start up costs that will be reimbursed from the China WFOE thru Yangpu District funding. At the time of this fmancial statement report, the BAC LLC was still in the process of finalizing the WFOE registration with PRC regulatory authorities securing the no cost lease space agreement with its China partners. 13