HANDS ON SCIENCE CENTER, INC. FINANCIAL STATEMENTS DECEMBER 31, 2013 TABLE OF CONTENTS. Page. INTRODUCTORY SECTION Title Page 1 Table of Contents 2

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1 HANDS ON SCIENCE CENTER, INC FINANCIAL STATEMENTS DECEMBER 31, 2013

2 HANDS ON SCIENCE CENTER, INC. FINANCIAL STATEMENTS DECEMBER 31, 2013 TABLE OF CONTENTS Page INTRODUCTORY SECTION Title Page 1 Table of Contents 2 FINANCIAL SECTION Report of Independent Auditor 3-4 Basic Financial Statements Statement of Financial Position 5 Statement of Activities 6 Statement of Functional Expense 7 Statement of Cash Flows 8 Notes to Financial Statements 9-15

3 Allen, McGee and Associates Certified Public Accountants INDEPENDENT AUDITORS REPORT Hands on Science Center, Inc. We have audited the accompanying statement of financial position of Hands on Science Center, Inc. (a nonprofit organization), which comprise the statement of financial position as of December 31, 2013, and the related statements of activities, functional expenses, 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 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 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. 110 North Jackson Street, Tullahoma, TN Phone: (931) , Fax: (931) , Web Page: AllenMcGeeCPA.com Page 3

4 Allen, McGee and Associates Certified Public Accountants Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of Hands on Science Center, Inc. as of December 31, 2013, 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. Allen, McGee and Associates, LLC Certified Public Accountants Tullahoma, TN May 15, North Jackson Street, Tullahoma, TN Phone: (931) , Fax: (931) , Web Page: AllenMcGeeCPA.com Page 4

5 STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2013 ASSETS Current assets: Cash and cash equivalents $ 57,004 Investments 57,270 Inventory 4,540 Total Current Assets 118,814 Investment in The Community Foundation Of Middle Tennessee 24,650 Property and Equipment, Net 277,346 TOTAL ASSETS $ 420,810 LIABILITIES AND NET ASSETS Current Liabilities: Sales Tax Payable $ 1,645 Payroll Liabilities 6,139 TOTAL LIABILITIES $ 7,784 NET ASSETS Unrestricted $ 380,590 Temporarily Restricted 32,436 TOTAL NET ASSETS $ 413,026 TOTAL LIABILITIES AND NET ASSETS $ 420,810 The accompanying notes are an integral part of the financial statements. Page 5

6 STATEMENT OF ACTIVITIES FOR THE YEAR ENDED DECEMBER 31, 2013 Public Support, Revenues, Gains and Reclassifications TEMPORARILY UNRESTRICTED RESTRICTED TOTAL Admissions $ 50,869 $ - $ 50,869 Grants 1,500 11,276 12,776 Contributions 64,749 4,590 69,339 Memberships 16,950-16,950 Events and Programs 8,387 5,928 14,315 Rentals 14,339-14,339 Gift Shop 17,346-17,346 Interest Income 1,140 1,140 Miscellaneous (32) - (32) Realized Gains on Investments - 1,475 1,475 Unrealized Gains on Investments - 1,501 1,501 Net Assets Released from Restrictions: Satisfaction of Purpose Restrictions 26,650 (26,650) - Total Public Support, Revenues, Gains and Reclassifications $ 201,898 $ (1,880) $ 200,018 Expenses Programs $ 176,757 $ - $ 176,757 Fundraising 12,195-12,195 Management and General 43,230-43,230 Total Expenses $ 232,182 $ - $ 232,182 CHANGE IN NET ASSETS $ (30,284) $ (1,880) $ (32,164) NET ASSETS, BEGINNING OF YEAR 410,874 34, ,190 NET ASSETS, END OF YEAR $ 380,590 $ 32,436 $ 413,026 The accompanying notes are an integral part of the financial statements. Page 6

7 STATEMENT OF FUNCTIONAL EXPENSES FOR THE YEAR ENDED DECEMBER 31, 2013 Program Services Fundraising Management & General TOTAL Administrative $ 10,320 $ 262 $ 1,564 $ 12,146 Birthday Party Supplies Building 15, ,907 Depreciation 12, ,639 Event & Program 681 6,321-7,002 Exhibits 2, ,332 Gift Shop 10, ,558 Grant Expense 8, ,961 Miscellaneous (48) Payroll Expenses 79,330 5,062 39, ,130 Professional Fees - - 1,125 1,125 Promotional 9, ,284 Science Programs 3, ,387 Staff & Volunteer 22, ,588 TOTAL $ 176,757 $ 12,195 $ 43,230 $ 232,182 The accompanying notes are an integral part of the financial statements. Page 7

8 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED DECEMBER 31, 2013 Operating activities Change in Net Assets $ (32,164) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation and amortization 12,639 (Increase) decrease in inventories 2,654 Increase (decrease) in sales tax payable 85 Increase (decrease) in payroll liabilities 974 Unrealized gains on endowment fund investments (1,410) Realized gains on sale of endowment fund investments 1,501 Net cash used by operating activities (15,721) Investing activities Purchases of investments (7,860) Withdrawal from investments for management fee (90) Net cash used by investing activities (7,950) Net decrease in cash and cash equivalents (23,671) Cash and cash equivalents as of beginning of year 80,675 Cash and cash equivalents as of end of year $ 57,004 The accompanying notes are an integral part of the financial statements. Page 8

9 Notes to Financial Statements December 31, 2013 NOTE 1: ORGANIZATION AND GENERAL Hands-On Science Center, Inc. (the Center) is a not-for-profit organization incorporated in Tullahoma, Tennessee in May Its stated purpose is to promote the interest and understanding of scientific and mathematical principles through hands-on experience for area school children within the community and surrounding area. The Center is supported primarily through admission fees, donor contributions, and memberships. The Center is a nonprofit organization as described in Section 501(c) (3) of the Internal Revenue Code and is exempt from federal and state income taxes. NOTE 2: SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation The accompanying financial statements present the financial position and changes in net assets of the Organization on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America ( GAAP ). Resources are classified as unrestricted, temporarily restricted or permanently restricted net assets, based on the existence or absence of donor-imposed restrictions, as follows: Unrestricted net assets are free of donor-imposed restrictions. All revenues, gains and losses that are not temporarily or permanently restricted by donors are included in this classification. All expenditures are reported in the unrestricted class of net assets, since the use of restricted contributions in accordance with the donors stipulations results in the release of the restriction. Temporarily restricted net assets are limited as to use by donor-imposed restriction that expire with the passage of time or that can be satisfied by use for the specific purpose. Permanently restricted net assets are amounts required by donors to be held in perpetuity, including gifts requiring that the principal be invested and the income or specific portions thereof be used for operations. Page 9

10 Notes to Financial Statements (Cont.) 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. Cash and Cash Equivalents The Center considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Cash and cash equivalents for purposes of the statement of cash flows exclude permanently restricted cash and cash equivalents. Inventory Valuation Inventories are valued at the lower of cost or market determined by the first-in, first-out method. Investments Investments consist of money market, equity securities, fixed income mutual funds and a commodity fund and are carried at the quoted fair market value on the last business day of the reporting period. The changes in unrealized gains and losses are recognized currently in the statement of activities. The Organization classifies its investments based on a hierarchy consisting of level 1 (securities valued using quoted prices from active markets for identical assets), level 2 (securities not traded on an active market but for which observable market inputs are readily available), and level 3 (securities valued based on significant unobservable inputs). An asset s 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 maximize the use of observable inputs and minimize the use of unobservable inputs. The following is a description of the valuation methodologies used for asset measured at fair value on a recurring basis: Investments Fair values for investments are determined by reference to quoted market prices and other relevant information generated by market transactions. Fair values for Page 10

11 Notes to Financial Statements (Cont.) Investments (continued) investments in US Treasury securities, debt obligations and mortgage-backed securities are based primarily on other observable values, such as interest rates and yield curves. No changes in the valuation methodologies have been made since the prior year. The methods described above may produce a fair value calculation that may not be indicative of the net realizable value or reflective of future fair values. Furthermore, while the Organization believes its valuation methodologies are appropriate and consistent with that of other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in different fair value measurements at the reporting date. Fair Value Measurements The following table sets forth the Organization s major categories of assets measured at fair value on a recurring basis, by level with the fair value hierarchy as of December 31: Investments: Level 1 Level 2 Level 3 Equity Securities $57,270 $ 0 $ 0 Cash and Money Market 8, $66,073 $ 0 $ 0 The reported fair value amounts above have not been comprehensively revalued since the presentation dates and, estimates of fair values after the statement of financial position dates may differ significantly from the amounts presented herein. The fair value of these investments at May 12, 2014 was $57,108. The fair values and related costs of investments are summarized as follows at December 31: Cost Fair Value Lord Abbett $54,176 $57,270 Edward Jones 8,803 8,803 Total $62,979 $66,073 Page 11

12 Notes to Financial Statements (Cont.) Investments (continued) Return (loss) on investments is reported in the statements of activities as follows for the year ended December 31, 2013 Return on investments: Interest and dividend income $1,140 Investment fees (90) Gain (loss) on Investments: Realized gain on sale of investments 1,475 Increase (decrease) in accumulated unrealized gain 1,501 Total return (loss) $4,026 Property and Equipment Purchased property and equipment are capitalized at cost. Donations of property and equipment are recorded as contributions at their estimated fair value. Such donations are reported as unrestricted contributions unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire property and equipment are reported as restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, the Center reports expirations of donor restrictions when the donated or acquired assets are placed in service as instructed by the donor. The Center reclassifies temporarily restricted net assets to unrestricted net assets at that time. Property and equipment are depreciated using the method prescribed for tax reporting. The difference in depreciation using generally accepted accounting methods and the tax method is not material to the financial statements. Donated Goods and Services and In-kind Contributions Donated goods and materials are recorded as gifts in the period received at fair value, if there is an objective and measurable basis for determining such value. Donated services are recognized if they create or enhance nonfinancial assets or the donated service requires specialized skills, was performed by a donor who possesses such skills, and would have been purchased by the Center if not donated. Such services are recognized at fair value as support and expense in the period the services are performed. Page 12

13 Notes to Financial Statements (Cont.) Donated Goods and Services and In-kind Contributions (Continued) A number of unpaid volunteers have made significant contribution of their time to assist the Center in implementing various programs. The value of contributed time is not reflected in these statements since it is not susceptible to objective measurement or valuations. NOTE 3: THE COMMUNITY FOUNDATION OF MIDDLE TENNESSEE INVESTMENT POOL Investments consist of an interest in donated assets of The Community Foundation of Middle Tennessee. The Community Foundation of Middle Tennessee pools its assets for investment purposes. Investment activity is allocated to funds based on the fund s percentage share of the total portfolio. The Hands-On-Science Center, Inc. Endowment Fund is invested in the foundation s pooled fund and the center held units of the portfolio as of December 31, The total of the foundation s pool fund portfolio consists of 380, units and is valued at $138,522, as of December 31, For further information regarding the Community Foundation of Middle Tennessee the Financial Statements and Report of Independent Certified Public Accountants can be obtained from the foundation at 3833 Cleghorn Avenue, #400, Nashville, TN Due to the restrictions of the Community Foundation of Middle Tennessee all investment activity is show in Temporarily Restricted Net Assets. NOTE 4: PROPERTY AND EQUIPMENT The following is a summary of property and equipment as of December 31, 2013: Land and Buildings $ 427,150 Building Improvements 14,479 Furniture and Fixtures 22,615 Equipment 50,577 Total Property and Equipment 514,821 Less accumulated depreciation (237,475) Total $ 277,346 The Center uses the Straight Line Depreciation Method when depreciating assets and uses useful lives of thirty-nine years for Building and Improvements for furniture and equipment three to seven years are used, respectfully. Page 13

14 NOTE 5: EXHIBITS ON LOAN HANDS-ON SCIENCE CENTER, INC. Notes to Financial Statements (Cont.) Several exhibits maintained at the center are on loan from private individuals, companies and the federal government. These items are on loan on a month to month basis and the item or items loaned can be returned to the owner at anytime upon their request. The values of these exhibits are not reflected in the financial statements of this report. NOTE 6: TEMPORARILY RESTRICTED NET ASSETS During the year ended December 31, 2004, the Hands-On Science Center Endowment Fund for Exhibits was established with the Community Foundation of Middle Tennessee. The purpose of the endowment is to provide financial support for the Hands-On Science Center. Expenditures from this endowment must be approved by the Community Foundation of Middle Tennessee s board of directors after request for funding has been received from the Center. As of December 31, 2013 the restriction for this purpose was $24,650. The remainder of this reserve is for unexpended grant funds. NOTE 7: GROSS PROFIT FROM GIFT STORE SALES During the year the Center operated a gift store. The following is the gross profit from store sales: Gross Sales from Gift Store $ 17,346 Beginning Inventory $ 7,194 Purchases 7,904 Total Available Inventory For Sale 15,098 Inventory 12/31/2013 ( 4,540) Cost of Goods Sold 10,558 Gross Profit from Gift Store Sales $ 6,788 NOTE 8: FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing the various programs and activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Page 14

15 Notes to Financial Statements (Cont.) NOTE 9: DONATED GOODS AND SERVICES The Center received donated items and professional services with an estimated fair value of $36,756 for the year ending December 31, The items donated are as follows items for programs totaling $30,089, management $6,381 and fundraising totaling $286. NOTE 10: VACATION LEAVE POLICY The Center provides five vacation days to salaried employees after a ninety day probationary period. Vacation days are increased to ten days after three years of continuous employment with the exception of the executive director who is entitled to ten days of paid vacation annually after one year of continuous service. Part time employees are entitled to accrue two and one half days of paid vacation annually at the end of their first year of continuous employment and will be increased to five days annually after three years. At December 31, 2013 accrued vacation was valued at $2,323. NOTE 11: ADVERTISING AND PROMOTION The organization s policy is to expense advertising and promotion costs as incurred. The amount expensed during the year ended December 31, 2013 was $9,284. NOTE 12: EVALUATION OF SUBSEQUENT EVENTS The Organization has evaluated subsequent events through May 15, 2014, the date which the financial statements were available to be issued and no subsequent events were identified. Page 15