WINTER PARK LIBRARY ASSOCIATION, INC. Winter Park, Florida FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended September 30, 2011

Transcription

1 Winter Park, Florida FINANCIAL STATEMENTS AND SUPPLEMENTARY INFORMATION Year Ended

2 CONTENTS Independent Auditors Report 1 Financial Statements: Statement of Financial Position 2 Statement of Activities 3 Statement of Cash Flows 4 Notes to Financial Statements 5 Independent Auditors Report on the Supplementary Information 14 Supplementary Information: Schedule of Expenses 15

3 Independent Auditors Report The Board of Trustees Winter Park Library Association, Inc. Winter Park, Florida We have audited the accompanying statement of financial position of the Winter Park Library Association, Inc. (the Library ) as of, and the related statements of activities and cash flows for the year then ended. These financial statements are the responsibility of the Library s management. Our responsibility is to express an opinion on these financial statements based on our audit. Except as discussed in the following paragraph, 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 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 accordance with the terms of our engagement, we did not extend our audit procedures with respect to cash receipts beyond that of recorded receipts. In our opinion, except for the effects of any adjustments that might have resulted had we extended our audit procedures beyond that of recorded receipts, the financial statements referred to in the first paragraph present fairly, in all material respects, the financial position of the Winter Park Library Association, Inc. as of, and the changes in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. A Orlando, Florida January 4,

4 Statement of Financial Position Assets Cash $ 50,067 Investments (Notes 3 and 4) 4,148,084 Other Receivables 279 Prepaid Expenses 7,011 Property and Equipment, net (Note 5) 60,355 Collections of Materials (Notes 1 and 2) - Total assets $ 4,265,796 Liabilities and Net Assets Liabilities: Accounts payable and accrued expenses $ 155,364 Net Assets (Deficiency): Unrestricted (44,772) Temporarily restricted (Note 7) 17,038 Permanently restricted (Note 8) 4,138,166 Total net assets 4,110,432 Total liabilities and net assets $ 4,265,796 See accompanying notes. 2

5 Statement of Activities Year Ended Temporarily Permanently Unrestricted Restricted Restricted Total Support, Revenues, and Gains: Support: City of Winter Park $ 1,886,212 $ - $ - $ 1,886,212 Contributors, legacies, bequests, and grants 296, ,616 6, ,853 Special events, net 18, ,358 Revenues: Non-resident registration 8, ,788 Overdue fines 61, ,923 Photocopy income 6, ,728 Community room rental 13, ,327 Institute of Life Long Learning 14, ,245 Boat decals 5, ,299 Miscellaneous income 11, ,929 Investment income 75, ,491 Realized gain on sale of investments 362, ,777 Unrealized loss on investments (445,085) - - (445,085) Net assets released from restrictions: Satisfaction of purpose restrictions 99,765 (99,765) - - Total support, revenues, and gains 2,416,287 2,851 6,707 2,425,845 Expenses: Program services: Library services 1,974, ,974,416 Cost of materials 255, ,706 Supporting services: Management and general 382, ,609 Total expenses 2,612, ,612,731 Increase (Decrease) in Net Assets (196,444) 2,851 6,707 (186,886) Net Assets, beginning of year 151,672 14,187 4,131,459 4,297,318 Net Assets, end of year $ (44,772) $ 17,038 $ 4,138,166 $ 4,110,432 See accompanying notes. 3

6 Statement of Cash Flows Year Ended Cash Flows From Operating Activities: Cash received from supporters and customers $ 564,108 Cash received from City of Winter Park grant 1,886,212 Cash paid to suppliers and employees (2,374,824) Investment income received 15,853 Net cash provided by operating activities 91,349 Cash Flows From Investing Activities: Net increase in money market funds 26,987 Proceeds from sale of investments 2,711,342 Purchases of investments (2,574,025) Purchases of property and equipment (5,188) Purchases of collections of materials (255,706) Net cash used in investing activities (96,590) Cash Flows From Financing Activities: Contributions received for endowments 6,707 Net Increase in Cash 1,466 Cash, beginning of year 48,601 Cash, end of year $ 50,067 Reconciliation of Decrease in Net Assets to Net Cash Provided by Operating Activities: Decrease in net assets $ (186,886) Adjustments to reconcile decrease in net assets to net cash provided by operating activities: Contributions received for endowments (6,707) Cost of collections of material 255,706 Depreciation 22,468 Loss on disposal of equipment 1,215 Dividend reinvestments (59,637) Realized gain on sale of investments (362,777) Unrealized loss on investments 445,085 Changes in assets and liabilities: Other receivables 560 Prepaid expenses 7,614 Accounts payable and accrued expenses (25,292) Total adjustments 278,235 Net cash provided by operating activities $ 91,349 See accompanying notes. 4

7 Notes to Financial Statements 1. Summary of Significant Accounting Policies: Nature of Operations Winter Park Library Association, Inc. (the Library ) operates a public library in Winter Park, Florida. The Library obtains its support primarily from grants provided by the City of Winter Park, Florida. Basis of Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Library and changes therein are classified and reported as follows: Unrestricted Net Assets Net assets that are not subject to donor-imposed stipulations. Temporarily Restricted Net Assets Net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Library and/or the passage of time. When a restriction is satisfied or expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently Restricted Net Assets Net assets subject to donor-imposed stipulations that they be maintained permanently by the Library. Use of Estimates In preparing the financial statements, management is required to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates. Investments Investments are carried at fair value. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. Property and Equipment Property and equipment is carried at cost less accumulated depreciation. Depreciation is recorded using the straightline method over estimated useful lives of 5 to 40 years. Contributed assets are recorded at their estimated fair value at the date of contribution. Such contributions are reported as unrestricted support unless the donor has restricted the asset to a specific purpose. Maintenance and repairs are charged to expenses as incurred. Betterments and renewals are charged to property and equipment accounts. The Library capitalizes applicable expenditures over $500. When items are replaced or retired, the related cost and accumulated depreciation are removed from the accounts, and any gain or loss is credited or charged to income. 5

8 Notes to Financial Statements Continued 1. Summary of Significant Accounting Policies Continued: Collections of Materials The collections of materials, which were acquired through purchases and contributions since the Library s inception, are not recognized as assets on the statement of financial position. Purchases of materials are recorded as decreases in unrestricted net assets in the year in which the items are acquired, or as decreases in temporarily or permanently restricted net assets if the assets used to purchase the items are restricted by donors. Proceeds from deaccessions or insurance recoveries are reflected as increases in the appropriate net asset classes. Contributions Contributions, including unconditional promises to give, are recorded as made. All contributions are reported as an increase in unrestricted net assets unless specifically restricted by the donor. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction is satisfied or expires, temporarily restricted net assets are reclassified to unrestricted net assets. Conditional promises to give are recognized when the conditions on which they depend are substantially met. Unconditional promises to give due within one year are recorded at their net realizable value. Unconditional promises to give due after one year are reported at the present value of their net realizable value, using risk-free interest rates applicable to the years in which the promises are to be received. The Library recognizes contributions of services if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided by donation. For the year ended, no amounts have been reflected in the financial statements for donated services. The Library has paid for those services requiring specific expertise. Income Taxes The Library is a tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code. Thus, the Library is not subject to corporate income taxes except for taxes on unrelated business income. Accounting principles generally accepted in the United States of America prescribe requirements for the recognition of income taxes in financial statements, and the amounts recognized are affected by income tax positions taken by the Library in its tax returns. The Library s status as an exempt organization is defined as an income tax position under these requirements. While management believes it has complied with the Internal Revenue Code, the sustainability of some income tax positions taken by the Library in its tax returns may be uncertain. There are minimum thresholds of likelihood that uncertain tax positions are required to meet before being recognized in the financial statements. Management does not believe that the Library has any material uncertain tax positions at. In the event interest and penalties were due relating to an unsustainable tax position, they would be treated as a component of income tax expense. The Library s federal income tax returns are subject to examination by the Internal Revenue Service. At, the 2010 through 2008 federal tax returns are subject to examination. 6

9 Notes to Financial Statements Continued 2. Collections of Materials: The Library s collections of materials consist of books, microforms, audio/visual, and electronic materials that are held for educational and research purposes. Each of the items is cataloged, preserved, and cared for, and activities verifying their existence and assessing their condition are performed continuously. 3. Investments: Investments at, consists of the following: Cost Fair Value Money market funds $ 24,243 $ 24,243 Mutual funds: Fixed income funds 1,251,291 1,348,245 Equity income funds 3,044,253 2,716,332 Real estate investment trust fund 70,564 59,264 $ 4,390,351 $ 4,148, Fair Value Measurements: Financial Accounting Standards Board ( FASB ) Accounting Standards Codification (ASC) 820, Fair Value Measurement and Disclosures, provides the framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (Level 1 measurements) and the lowest priority to unobservable inputs (Level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows: Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets. Level 2 Inputs to the valuation methodology include quoted prices for similar assets or liabilities in active markets, quoted prices for identical or similar assets or liabilities in inactive markets, inputs other than quoted prices that are observable for asset or liability, or inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the Level 2 input must be observable for substantially the full term of the asset or liability. Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement (including the Library s own assumptions in determining the fair value of investments). 7

10 Notes to Financial Statements Continued 4. Fair Value Measurements Continued: The asset 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 need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at. Money market funds: Valued at transaction price. Carrying value approximates fair value. Fixed income funds: Valued at the net asset value ( NAV ) of shares held by the Library at year end. Equity income funds: Valued at the net asset value ( NAV ) of shares held by the Library at year end. Real estate investment trust fund: Valued at the net asset value ( NAV ) of shares held by the Library of comparable securities. The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Library believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, the Library s assets at fair value as of : Level 1 Level 2 Total Money market funds $ 24,243 $ - $ 24,243 Fixed income funds: Short term bond funds 590, ,295 Intermediate term bond funds 665, ,988 International bond funds 91,962-91,962 Equity income funds: Small blended cap funds 177, ,973 Medium blended cap funds 233, ,709 Large blended cap funds 1,277,463-1,277,463 Large growth cap funds 422, ,044 Large value cap funds 605, ,143 Real estate investment trust fund - 59,264 59,264 $ 4,088,820 $ 59,264 $ 4,148,084 8

11 Notes to Financial Statements Continued 5. Property and Equipment: A summary of property and equipment at, is as follows: Building improvements $ 103,915 Furniture and equipment 538, ,551 Less accumulated depreciation 582,196 $ 60, Building Lease: The Library conducts its operations from space leased from the City of Winter Park, Florida (the City ). The lease, which is classified as an operating lease, calls for lease payments of $1 per year and expires in August The Library s use of the space is conditioned upon limiting its activities in the space to uses that qualify under the lease agreement. The contract allows the City to charge rent of $550,000 if they provide sufficient funding to the Library to cover the rent. When such funding is not provided by the City, the premises can be used by the Library without charge. During the year ended, the City provided funding, and rent of $550,000 was paid by the Library. If the Library continues to meet the conditions of the lease, and the City does not provide rent funding, contributions to be recognized in the future for the free use of the Library premises would be as follows: Next year $ 550,000 Two to five years 2,200,000 More than five years 2,154,167 $ 4,904, Temporarily Restricted Net Assets: Temporarily restricted net assets at, consists of cash held for various purpose restrictions. 8. Permanently Restricted Net Assets: Permanently restricted net assets at, consists of cash and investments held in perpetuity for endowments. Investment income on the endowments is temporarily restricted for acquisition of collections of materials. 9

12 Notes to Financial Statements Continued 9. Concentrations: The Library receives a substantial amount of its support from the City of Winter Park, Florida. A significant reduction in the level of this support, if this were to occur, may have an effect on the Library s programs and activities. Cash is maintained in one financial institution in amounts that at times exceed federally insured limits. Thus, at those times, the Library has a concentration of credit risk in regards to cash. See Note 3 for information on investments held. 10. Defined Contribution Plan: The Library sponsors a 401(k) plan which covers substantially all of its employees. Contributions to the 401(k) plan were based on a matching of participating employees compensation up to 4% and totaled $42,979 for the year ended. 11. Endowment: The Library s endowment consists of approximately 30 individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Board of Trustees to function as endowments. As required by accounting principles generally accepted in the United States of America, net assets associated with endowment funds, including funds designated by the Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law At, the state of Florida has not adopted the Uniform Prudent Management of Institutional Funds Act of 2006 ( UPMIFA ) and only addresses the financial responsibility regarding endowment funds in the Florida Uniform Management of Institutional Funds Act ( FUMIFA ). Only educational institutions and governmental entities holding funds exclusively for educational purposes are subject to FUMIFA. The Library does not operate exclusively for educational purposes as it also provides other services, activities, and enjoyment for the community. Therefore, by definition, the Library is not subject to FUMIFA. As such, the Board of Trustees of the Library instituted the policy of using the historic dollar-value threshold for the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this policy, the Library classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment and (b) the original value of subsequent gifts to the permanent endowment. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets, if applicable, until those amounts are appropriated for expenditure by the Library in a prudent manner. The Library considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: a. The purposes of the Library; b. The intent of the donors of the endowment fund; c. The terms of the applicable instrument; d. The long-term and short-term needs of the Library in carrying out its purposes; 10

13 Notes to Financial Statements Continued 11. Endowment Continued: Interpretation of Relevant Law Continued e. The general economic conditions; f. The possible effect of inflation or deflation; g. The other resources of the Library; and h. Perpetuation of the endowment. Endowment net assets composition by type of fund at : Temporarily Permanently Unrestricted Restricted Restricted Total Donor-restricted endowment funds $ - $ - $ 4,138,166 $ 4,138,166 Board-designated endowment funds 915, ,972 Total funds $ 915,972 $ - $ 4,138,166 $ 5,054,138 Changes in endowment net assets for the year ended : Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, beginning of year $ 911,172 $ - $ 4,131,459 $ 5,042,631 Investment income Contributions 4,800-6,707 11,507 Endowment net assets, end of year $ 915,972 $ - $ 4,138,166 $ 5,054,138 11

14 Notes to Financial Statements Continued 11. Endowment Continued: Interpretation of Relevant Law Continued Description of amounts classified as temporarily restricted net assets and permanently restricted net assets (endowment only): Temporarily Restricted Net Assets: The portion of perpetual endowment funds subject to purpose restrictions $ - Permanently Restricted Net Assets: The portion of perpetual endowment funds that is required to be retained permanently by explicit donor stipulation $ 4,138,166 Return Objectives and Risk Parameters The Library has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowments while seeking to preserve the fair value of the original gift as of the gift date of the endowment assets. Endowment assets include those assets of donorrestricted funds that the Library must hold in perpetuity or for a donor-specified period(s) as well as boarddesignated funds. Under this policy, as approved by the Board of Trustees, the endowment assets are invested in a manner that is conservative and assumes a minimal level of investment risk. The Library s goal is for its endowment fund to provide a rate of return over a market cycle to exceed the greater of 7.5% or the rate of inflation (as measured by the Consumer Price Index) plus 4%. Strategies Employed for Achieving Objectives To satisfy its investment and rate of return objectives, the Library relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Library targets a diversified asset allocation that places a greater emphasis on equitybased investments to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Library, at the discretion of the Board of Trustees, appropriates funds to support the various programs only from the investment earnings of the endowment fund. This is consistent with the Library s objective to preserve the fair value of the original gift as of the gift date of the endowment assets held in perpetuity or for a specified term, as applicable. 12

15 Notes to Financial Statements Continued 11. Endowment Continued: Future Changes in Florida Law The state of Florida has adopted its version of the Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) to be effective July 1, As of such effective date, accounting principles generally accepted in the United States of America will require accumulated investment income attributable to permanently restricted net assets originally classified as unrestricted net assets in the absence of donor-imposed restrictions to be reclassified as temporarily restricted net assets until appropriated for expenditure by the Trustees. The Trustees of the Library will consider their interpretation of relevant law and the endowment spending policy under the provisions of UPMIFA. Management will determine the effect of these changes on net assets in the financial statements when the law becomes effective. 12. Subsequent Events: Management has evaluated subsequent events through January 4, 2012, the date which the financial statements were available to be issued. 13

16 Independent Auditors Report on the Supplementary Information The Board of Trustees Winter Park Library Association, Inc. Winter Park, Florida Our audit was performed for the purpose of forming an opinion on the basic financial statements taken as a whole. The supplementary information on page 15 is presented for purposes of additional analysis and is not a required part of the basic financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. A Orlando, Florida January 4,

17 Schedule of Expenses Year Ended Library Cost of Management Total Services Materials and General Expenses Salaries $ 934,894 $ - $ 300,900 $ 1,235,794 Payroll taxes 71,134-23,000 94,134 Group insurance 74,588-37, , (k) employer contribution 30,979-12,000 42,979 Workers compensation 3, ,488 Unemployment compensation 9, ,037 Service charges 4, ,866 Other professional services Accounting and auditing - - 9,000 9,000 Other contractual services 52, ,961 Collection fees 3, ,498 Training and travel Auto Telephone 7, ,048 Postage 9, ,806 Water 4, ,973 Electric 66, ,672 Building rentals 550, ,000 Equipment rentals 1, ,702 Other insurance 1, ,469 Maintenance contracts 48, ,744 Repairs equipment Printing 5, ,211 Community relations 21, ,289 Miscellaneous 1, ,199 Office equipment 3, ,972 Paper products 2, ,869 Office supplies General operating supplies 38, ,429 Memberships 1, ,196 Books and periodicals - 152, ,327 Software - 46,631-46,631 Audio visual material - 56,748-56,748 Depreciation 22, ,468 $ 1,974,416 $ 255,706 $ 382,609 $ 2,612,731 15