THE CONNECTICUT PLAYERS FOUNDATION, INC. D/B/A LONG WHARF THEATRE AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION

Transcription

1 THE CONNECTICUT PLAYERS FOUNDATION, INC. D/B/A LONG WHARF THEATRE AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS AND SUPPLEMENTAL INFORMATION JUNE 30, 2017 AND 2016 WITH INDEPENDENT AUDITOR S REPORT

2 THE CONNECTICUT PLAYERS FOUNDATION, INC. June 25, 2017 TABLE OF CONTENTS Page Independent Auditor's Report.. 1 Consolidated Financial Statements Consolidated Statements of Financial Position 2 Consolidated Statements of Activities 3 Consolidated Statements of Cash Flows Consolidated Supplemental Information Independent Auditor s Report on Consolidated Supplemental Information Consolidated Schedule of Functional Expenses. 20

3 INDEPENDENT AUDITOR S REPORT To the Board of Trustees of The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre and Subsidiary We have audited the accompanying consolidated financial statements of The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre (a not-for-profit corporation) (the "Organization") and Something Growing Limited Liability Company (the Subsidiary ), which comprise the consolidated statements of financial position as of and the related consolidated statements of activities and cash flows for the years then ended and the related notes to the consolidated financial statements. Management s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated 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 consolidated financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the Organization and Subsidiary s preparation and fair presentation of the consolidated 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 Organization and Subsidiary 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre and Subsidiary as of, and the changes in its consolidated net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. October 24, 2017

4 Consolidated Statements of Financial Position TEMPORARILY PERMANENTLY TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL UNRESTRICTED RESTRICTED RESTRICTED TOTAL Assets Current Assets Cash and cash equivalents $ - $ 58,248 $ - $ 58,248 $ 108,737 $ 87,530 $ 15,000 $ 211,267 Accounts receivable 202, ,961 24, ,212 Unconditional promises to give 78,810 67, ,710 35, , , ,823 Interfund borrowing (537,485) 35, ,158 - (502,158) - 502,158 - Prepaid expenses and other current assets 314, , , ,207 Total Current Assets 58, , , ,342 (172,179) 477, ,158 1,197,509 Investments - 995,841 12,571,209 13,567,050 (76,363) - 12,178,709 12,102,346 Unconditional promises to give - 45,350-45, Property and equipment, at cost, net of accumulated depreciation 2,248, ,248,505 2,518, ,518,200 Security deposits 10, ,407 11, ,567 Total Assets $ 2,317,621 $ 1,202,666 $ 13,073,367 $ 16,593,654 $ 2,281,225 $ 477,530 $ 13,070,867 $ 15,829,622 Liabilities and Net Assets Liabilities Current Liabilities Lines of credit and loan payable $ 1,605,775 $ - $ - $ 1,605,775 $ 241,000 $ - $ - $ 241,000 Accounts payable and accrued expenses 129, , , ,608 Advance subscription revenue 1,038, ,038,314 1,037, ,037,873 Unredeemed gift certificates 33, ,606 25, ,455 Total Liabilities 2,806, ,806,842 1,422, ,422,936 Commitments and contingencies Net Assets Property and equipment, net 2,248, ,248,505 2,518, ,518,200 Accumulated deficit (2,737,726) - - (2,737,726) (1,659,911) - - (1,659,911) Total Unrestricted Net Assets (Accumulated Deficit) (489,221) - - (489,221) 858, ,289 Temporarily Restricted Net Assets - 1,202,666-1,202, , ,530 Permanently Restricted Net Assets ,073,367 13,073, ,070,867 13,070,867 Total Net Assets (Accumulated Deficit) (489,221) 1,202,666 13,073,367 13,786, , ,530 13,070,867 14,406,686 Total Liabilities and Net Assets $ 2,317,621 $ 1,202,666 $ 13,073,367 $ 16,593,654 $ 2,281,225 $ 477,530 $ 13,070,867 $ 15,829,622 The notes to consolidated financial statements are an integral part of these statements. 2

5 Consolidated Statements of Activities For the Years Ended TEMPORARILY PERMANENTLY TEMPORARILY PERMANENTLY UNRESTRICTED RESTRICTED RESTRICTED TOTAL UNRESTRICTED RESTRICTED RESTRICTED TOTAL Public Support and Other Revenue Public Support Governments $ 43,325 $ 15,000 $ - $ 58,325 $ 93,387 $ - $ - $ 93,387 Foundations 691, , , , ,000 48,985 1,236,927 Corporations 127,694 5,000 2, , ,484 2, ,984 Individuals and family foundations 975,599 2, , , ,030 15, ,078 Fundraising benefits 277, , , ,975 Less: direct costs of fundraising benefits (125,460) - - (125,460) (93,796) - - (93,796) Spending policy distribution 655,403 (655,403) ,835 (621,835) - - Special distribution ,150,000 (2,400,000) 250,000 - Donated services and materials 83, , , ,186 Net assets released from restrictions Foundations 375,000 (375,000) ,500 (36,500) - - Individuals and family foundations 92,516 (92,516) Corporations 2,500 (2,500) Governments ,274 (6,274) - - Total Public Support 3,199,185 (926,108) 2,500 2,275,577 4,656,835 (2,597,079) 313,985 2,373,741 Other Revenue Box office revenue 2,372, ,372,148 2,223, ,223,146 Enhancements and co-productions 262, , , ,003 Rental income 38, ,919 52, ,170 Workshops and tuition income 35, ,282 27, ,039 Concession income, net of expenses 27, ,723 15, ,475 Investment income (loss), net 75,643 1,651,244-1,726,887 (77,442) (462,726) - (540,168) Insurance claim reimbursement (damaged property) 81, , Miscellaneous income 14, ,030 19, ,866 Total Other Revenue 2,907,917 1,651,244-4,559,161 2,666,257 (462,726) - 2,203,531 Total Public Support and Other Revenue 6,107, ,136 2,500 6,834,738 7,323,092 (3,059,805) 313,985 4,577,272 Expenses Program Services 6,012, ,012,731 5,557, ,557,978 Supporting Services Management and General 945, , , ,115 Fundraising 495, , , ,986 Total Supporting Services 1,441, ,441,881 1,414, ,414,101 Total Expenses 7,454, ,454,612 6,972, ,972,079 Increase (decrease) in net assets (1,347,510) * 725,136 2,500 (619,874) 351,013 * (3,059,805) 313,985 (2,394,807) Net assets, beginning of year 858, ,530 13,070,867 14,406, ,276 3,537,335 12,756,882 16,801,493 Net Assets (Accumulated Deficit), End of Year $ (489,221) $ 1,202,666 $ 13,073,367 $ 13,786,812 $ 858,289 $ 477,530 $ 13,070,867 $ 14,406,686 * Includes depreciation expense of $443,430 (2017) and $453,552 (2016). Increase (Decrease) in net assets before depreciation expense $ (904,080) $ 804,565 The notes to consolidated financial statements are an integral part of these statements. 3

6 Consolidated Statements of Cash Flows For the Years Ended Cash Flows From Operating Activities Decrease in net assets $ (619,874) $ (2,394,807) Adjustments to reconcile decrease in net assets to net cash used by operating activities: Depreciation expense 443, ,552 Donated securities (48,269) (51,490) Realized loss on sale of donated securities 720 1,079 Bad debt expense - 3,695 Change in discount for present value of unconditional promises 4,650 (46,485) Community Foundation's activities: Realized gain on sale of investments (584,157) (2,494,997) Reinvested interest and dividends (114,781) (125,949) Unrealized (gain) loss on investments (1,180,924) 3,025,057 Investment management fees 152, ,978 (Increase) Decrease in: Accounts receivable (178,749) 4,019 Unconditional promises to give 604, ,247 Prepaid expenses and other current assets (153,216) (34,759) Security deposits 1,160 - Increase (Decrease) in: Accounts payable and accrued expenses 10,539 (41,215) Advance subscription revenue ,298 Unredeemed gift certificates 8,151 6,064 Net Cash Used By Operating Activities (1,654,511) (1,052,713) Cash Flows From Investing Activities Purchases of leasehold improvements and equipment (173,735) (29,210) Proceeds from sale of donated securities 47,549 50,411 Transfers to Community Foundation (392,500) (379,000) Community Foundation distribution 655, ,835 Community Foundation special distribution - 2,150,000 Net Cash Provided By Investing Activities 136,717 2,414,036 Cash Flows From Financing Activities Draw downs under lines of credit and loan 1,564, ,000 Repayments under lines of credit and loan (200,000) (1,895,917) Net Cash Provided (Used) By Financing Activities 1,364,775 (1,264,917) Net increase (decrease) in cash and cash equivalents (153,019) 96,406 Cash and cash equivalents, beginning of year 211, ,861 Cash and Cash Equivalents, End of Year $ 58,248 $ 211,267 Supplemental Disclosure Interest paid $ 35,112 $ 39,392 The notes to consolidated financial statements are an integral part of these statements. 4

7 1. ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES a) Organization The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre (the Organization ) is a not-forprofit corporation located in New Haven, Connecticut. Founded in 1965, Long Wharf Theatre s mission is to create theatre of the highest quality that inspires discourse and reflection about each of us and the world in which we live. An internationally renowned organization and a leader in American theatre, Long Wharf produces fresh and imaginative revivals of classic and modern plays and musicals, rediscoveries of neglected works, and a variety of world and American premieres, which have resulted in the transfer of over thirty productions to Broadway and Off-Broadway. Honored with the Tony Award for Outstanding Regional Theatre, Long Wharf produces an annual season of six plays on two stages, along with new play workshops, extensive education programs and special events. The accompanying consolidated financial statements include the accounts of The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre and its wholly owned subsidiary, Something Growing Limited Liability Company (the Subsidiary ). The Subsidiary was formed in 2017 as a New York State limited liability company. The Subsidiary was formed to explore expanding production opportunities. All intercompany balances and transactions have been eliminated upon consolidation. During year ended June 30, 2017, the Subsidiary entered into a partnership agreement to create Table Development Limited Liability Company (the LLC ) and the Subsidiary is a General partner of the LLC. The LLC was formed to provide enhancement funds for a production of Table (the Production ). As of June 30, 2017, the LLC raised $221,500 and spent over $828,000 on the Production. b) Basis of Accounting The consolidated financial statements of the Organization have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. c) Cash and Cash Equivalents For the purposes of the consolidated statements of cash flows, cash and cash equivalents include time deposits, certificates of deposit, and all highly liquid debt instruments with original maturities of three months or less. d) Fair Value Measurements The Organization's investments are managed by The Community Foundation for Greater New Haven (the "Community Foundation"). The Community Foundation is required to measure the fair value of its assets and liabilities under a three-level hierarchy. In addition, The Community Foundation has decided to adopt in fiscal year 2015, on an early basis, ASU Topic 820, Disclosures for Investments in Certain Entities that Calculate Net Asset Value per Share (or Its Equivalent), as issued by the Financial Accounting Standards Board. In summary, ASU Topic 820 is a practical expedient to measure the fair value of certain investments that utilize a net asset value rather than categorized under the fair value hierarchy. For those investments that do not utilize a net asset value methodology (or its equivalent), The Community Foundation will continue to measure the fair value under the three-level hierarchy, as follows: Level 1: Observable inputs from quoted market prices for identical assets or liabilities to which the Community Foundation has independent access at the measurement date. Level 2: Observable inputs based on direct quoted market prices or indices for the asset or liability, either directly or indirectly, or can be corroborated by observable inputs and market data, and the Community Foundation has the ability to redeem the asset in the near term (within 90 days) subsequent to the measurement date 5

8 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) d) Fair Value Measurements (continued) Level 3: Prices, which may be based on an underlying quoted market price, observable input and/or market data contained in Level 1 and Level 2, which also requires significant judgment on observable inputs by the investee as to the net asset value per share or unit of the Community Foundation s ownership interest in the partners capital, and where redemption would be available in a period of more than 90 days from the measurement date. Valuation methodologies include, but are not limited to, discounted cash flow analysis, comparable asset analysis, thirdparty appraisals, third-party pricing services and other applicable indices. Where: Observable inputs reflect the market data that is readily available, regularly distributed or updated, reliable and verifiable, not proprietary, and from independent sources that are actively involved in the relevant markets, and include assumptions made in pricing and valuations of the asset or liability that are developed from sources independent of the Community Foundation; and Unobservable inputs reflect the Community Foundation s own assumptions about the fair value assumptions made by investees use in pricing the asset or liability developed based on the best information available. The Community Foundation does not use unobservable inputs for determining fair value of its investments. e) Investments Investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the consolidated statements of financial position. ASC : Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds, sets forth the net asset classifications of donor-restricted endowment funds in accordance with the State of Connecticut s enacted version of the Uniform Prudent Management of Institutional Funds Act (CUPMIFA). The Community Foundation's investments include alternative investments, which are principally absolute return and hedge strategies, and real assets such as private equity, hedged equity and real estate. Because most alternative investments are not immediately marketable given the nature of the underlying strategies and the terms of the investment s governing agreement, the estimated fair value is subject to uncertainty and, therefore, may differ from the value that may be received if a ready market for the investments had been in existence, and the difference could be material. Fair value of alternative investments in limited partnerships are determined by the general partner to be at fair value pursuant to GAAP s standard referred to as Fair Value Measurements after it considers certain pertinent factors that are reviewed and discussed by management and its investment committee, in consultation with its independent advisory firm. Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of time or by use) in the reporting period in which the income and gains are recognized. 6

9 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) f) Inventory Concession inventory is stated at the lower of cost or market. The Organization also maintains scenery and costume inventories of past productions. The Organization is unable to determine future use of the scenery and costumes, and therefore they are expensed over the run of the public performances of the original show. g) Contributions and Promises to Give Contributions are recognized when cash is received or when the donor makes a promise to give that is, in substance, unconditional. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donor-restricted contributions 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. The Organization uses the allowance method to determine uncollectible promises receivable. The allowance is based on prior years experience and management s analysis of specific promises made. h) Revenue Recognition and Deferred Revenue Box office revenue is recognized as income in the period the show has taken place. Enhancements and co-production revenue are recognized in the year that the related production occurs. Workshops and tuition income are recognized in the year that the student programs and performances take place. Concession income is recognized when the sale occurs. Royalty income is recognized when received. Rental income is recognized when the lease terms are complete. Deferred revenue consists of advance subscription revenue, single ticket sales, deferred tuition and unredeemed gift certificates are all recognized in the period the performance takes place or the period to which the fees relate. i) Property and Equipment Property and equipment acquired are recorded at cost. It is the Organization s policy to capitalize expenditures for these items in excess of $1,500. Lesser amounts are expensed. Furniture and equipment are being depreciated over the useful life of the related asset using the straight-line method and a monthly convention in the year of acquisition and disposition. Leasehold improvements are amortized over the shorter of the useful life or periods including options, if any, specified in the related lease agreements. 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 Organization reports expiration of donor restrictions when the donated or acquired assets are placed in service. The Organization reclassifies temporarily restricted net assets to unrestricted net assets at that time. j) Advertising Costs Advertising costs are charged to operations when the advertising first takes place. Advertising expense for the years ended was $268,028 and $326,266, respectively. k) Production Costs Production costs are capitalized at cost and are amortized over the estimated life of the theatrical production. Since all productions closed prior to the issuance of the consolidated financial statements, all production costs have been expensed. 7

10 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) l) Estimates The preparation of consolidated financial statements in accordance with generally accepted accounting principles in the United States of America requires management to make estimates and assumptions that affect the reported amounts and disclosures. Actual results could differ from those estimates. m) Financial Statement Presentation The Organization presents its consolidated financial statements according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Permanently restricted net assets are subject to donor-imposed stipulations that they be maintained permanently. Temporarily restricted net assets are subject to donor-imposed stipulations that will be met by actions or by the passage of time. Unrestricted net assets are not subject to donor-imposed stipulations. n) Tax Status and Uncertain Tax Positions The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code and has been designated as an organization which is not a private foundation. The Organization is obligated for unrelated business income tax on net income from playbill advertising. The Organization has incurred net losses from this activity; therefore, there is no tax liability on this unrelated business activity. As of June 30, 2017, the Organization had approximately $30,000 in net operating losses carried forward. The carried forward losses have been fully reserved for since management is unable to determine the actual utilization of these losses. The Organization s Form 990, Return of Organization Exempt from Income Tax and Form 990-T, Exempt Organization Business Income Tax Return, for the years ended June 30, 2016, 2015 and 2014 are subject to examination by the IRS, generally for three years after they were filed. The Subsidiary is a single-member LLC and did not elect to be treated as a corporation; therefore, it is consolidated within the Organization's informational returns. The Organization believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the consolidated financial statements. There are no income tax related penalties and interest included in the accompanying consolidated financial statements. o) Reclassification Certain amounts for the year ended June 30, 2016 financial statements have been reclassified for comparative purposes to conform to the presentation of the year ended June 30, 2017 consolidated financial statements. 2. RESTRICTION ON NET ASSETS a) Temporarily Restricted Net Assets Temporarily restricted net assets are designated for the following at June 30: Excess investment income (Note 2b) $ 995,841 $ - Future programs and periods 206, ,530 Temporarily Restricted Net Assets $ 1,202,666 $ 477,530 8

11 2. RESTRICTION ON NET ASSETS (CONTINUED) b) Permanently Restricted Net Assets The Organization's endowment consists of several donor-restricted endowment funds established for specific purposes. As required by generally accepted accounting principles generally accepted in the United States of America, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. Permanently restricted net assets are managed by the Community Foundation. The corpus of permanently restricted net assets are designated for the following purposes as of June 30: Name of the Fund Seedlings Endowment $ 3,245,990 $ 2,986,479 Milstein/Meyer Endowment 2,498,372 2,298,194 Green Grass Fund 2,297,975 2,116,845 Doris Duke Fund 1,850,488 1,707,852 Long Wharf Theatre Future Fund 1,849,290 1,705,778 Lord/Kubler Fund for New Work 1,183, ,255 Jerry Meyer Education Fund 267, ,226 Robert Evans Fund 243, ,989 Artistic Excellence Fund 121,761 98,772 Mary L. Pepe Endowment Fund 8,658 7,956 Total Investments Managed by the Foundation (Note 4b) 13,567,050 12,102,346 Lord/Kubler Fund for New Work receivable - 375,000 Lord/Kubler Fund for New Work to be transferred to the Foundation - 15,000 Working Capital Reserve 502, ,158 Less: excess investment income (Note 2a) (995,841) - Underwater corpus funded by unrestricted - 76,363 Permanently Restricted Net Assets $ 13,073,367 $ 13,070,867 The Board of Trustees of the Organization has interpreted the Uniform Prudent Management of Institutional Funds Act ( UPMIFA ) as requiring the preservation of 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, the Organization classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations and decrements to the permanent endowment made in accordance with the direction of the applicable donor gift instrument. 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 until those amounts are appropriated for expenditure by the Organization in a manner consistent with the standard of prudence prescribed by UPMIFA. 9

12 2. RESTRICTION ON NET ASSETS (CONTINUED) b) Permanently Restricted Net Assets (continued) In accordance with UPMIFA, the Organization considers the following facts in making a determination to appropriate or accumulate donor-restricted endowment funds: a. The duration and preservation of the fund; b. The purposes of the Organization and the donor-restricted endowment fund; c. General economic conditions; d. The possible effect of inflation and deflation; e. The expected total return from income and the appreciation of investments; f. Other resources of the Organization; and g. The investment policy of the Organization. Return Objectives and Risk Parameters The Organization has adopted an investment policy for endowment assets with the primary goal of maintaining the original value of the endowment principal, while providing funding to programs supported by its endowment. Under this policy, the endowment assets are invested in a manner that is intended to produce income and preserve principal while assuming a very low level of investment risk. Because the funds are invested in a manner in which principal preservation is parament, the Organization allows the spending of all current and accumulated income from the endowment. Spending Policy All of the permanently restricted net assets follow the spending rule policy dictated by the Community Foundation except for the Doris Duke Fund. The Doris Duke Fund's spending rule is outlined within the grant agreement with the Doris Duke Charitable Foundation. The percentage allowed to be spent towards the Organization's annual operations is based on the Investment Committee's recommendation and approval of the Board of Trustees. The earnings on the permanently restricted net assets are to be used for the various program initiatives as stipulated by the donors. Any excess in investment earnings above the corpus is to be reflected within temporarily restricted net assets, with any losses first reducing the temporarily restricted net assets and any excess losses over corpus reflected within unrestricted net assets. During the year ended June 30, 2016, the Board approved a special distribution of excess investment income totaling $2,150,000 to operations to be used to reduce the Organization s deficit. Working Capital Reserve The Organization's working capital reserve fund was established with a grant of $500,000 from the Greater New Haven Arts Stabilization Project in The funds can be borrowed by the Organization and must be repaid fully for a minimum of thirty consecutive days within each fiscal year. The Organization complied with the terms of the grant by repaying the borrowed funds for a period of thirty days during the year ended June 30,

13 2. RESTRICTION ON NET ASSETS (CONTINUED) b) Permanently Restricted Net Assets (continued) Working capital reserve fund consists of the following as of June 30: Greater New Haven Arts Stabilization Project $ 500,000 $ 500,000 Accumulated interest income 2,158 2,158 Working Capital Reserve Fund $ 502,158 $ 502, CONCENTRATION OF CREDIT RISK The Organization its maintains cash, cash equivalents and money market balances at various financial institutions. Certain balances are insured by the Federal Deposit Insurance Corporation ( FDIC ) up to $250,000 per institution. At June 30, 2017, the Organization s cash and cash equivalents balances were fully insured. The Community Foundation maintains deposits which may, at times, be in excess of the financial institution s insurance limits. The Community Foundation invests available cash and cash equivalents with high-credit quality institutions and believes that such deposits are not subject to significant credit risk. 4. CASH, CASH EQUIVALENTS AND INVESTMENTS a) Fair Value of Financial Instruments The fair value and carrying amount of the Organization s cash and short-term investments as of June 30, 2017 and 2016 was $58,248 and $211,267, respectively. Cash and short-term investments carrying amount approximates fair value because of the short maturities of those investments. b) Fair Value of Measured on Recurring Basis Per the Community Foundation's December 31, 2016 and 2015 audited financial statements, the fair value of assets measured on a recurring consists of short-term investments, equities (domestic and foreign), fixed income funds and alternative investments. The investments classified within Level 1 include short-term investments, fixed income funds, domestic equities; Level 2 include fixed income funds, domestic and international equities and Level 3 include alternative investments. The alternative investments represent hedged equity, absolute return, real assets and investment in private equity. The Community Foundation assesses and reports on the liquidity of all investments on a quarterly basis to ensure that it has access to sufficient resources necessary for its current and future operational activities. Overall, the Community Foundation has access to approximately forty percent (40.6%) of the fair value of its investments on a monthly basis, and over sixty percent (60.4%) of the fair value of its investments on a quarterly basis. The Community Foundation does not use derivatives for speculative purposes within the parameters provided to the underlying manager under a written agreement, but rather these instruments are used with the objectives of reducing overall portfolio risk. 11

14 4. CASH, CASH EQUIVALENTS AND INVESTMENTS (CONTINUED) b) Fair Value of Measured on Recurring Basic (continued) There were no transfers between levels of investments during the years ended December 31, 2016 and The table below presents the Organization's allocated share in the Community Foundation's fair value of their investments as of June 30, The investment categories are allocated based on the Community Foundation's audited financial statements as of December 31, 2016 since the Community Foundation does not provide the detailed categories during interim periods. As of June 30, 2017: Level 1 NAV Total Short-term investments $ 367,494 $ - $ 367,494 Fixed income 2,437, ,671 3,097,284 Equities: International - 1,741,494 1,741,494 Domestic 347,396 4,009,834 4,357,230 Alternatives: Hedged equity - 2,013,979 2,013,979 Absolute return - 243, ,503 Real assets - 1,195,496 1,195,496 Private equity - 550, ,570 $ 3,152,503 $ 10,414,547 $ 13,567,050 The table below presents the Organization's allocated share in the Community Foundation's fair value of their investments as of June 30, The investment categories are allocated based on the Community Foundation's audited financial statements as of December 31, 2015 since the Community Foundation does not provide the detailed categories during interim periods. As of June 30, 2016: Level 1 NAV Total Short-term investments $ 436,040 $ - $ 436,040 Fixed income 2,185, ,493 2,766,383 Equities: International - 1,166,805 1,166,805 Domestic 1,030,229 3,117,347 4,147,576 Alternatives: Hedged equity - 1,739,105 1,739,105 Absolute return - 220, ,429 Real assets - 1,171,471 1,171,471 Private equity - 454, ,537 $ 3,652,159 $ 8,450,187 $ 12,102,346 12

15 4. CASH, CASH EQUIVALENTS AND INVESTMENTS (CONTINUED) c) Investment Income (Loss) Investment income (loss) consists of the following for the years ended June 30: Unrealized gain (loss) on investments $ 1,180,924 $ (3,025,057) Realized gain on sale of investments 584,157 2,494,997 Reinvested interest and dividend income 114, ,949 Realized loss on sale of donated securities (720) (1,079) Investment management fees (152,255) (134,978) Total Investment Income (Loss), Net $ 1,726,887 $ (540,168) 5. UNCONDITIONAL PROMISES TO GIVE When estimating fair value of unconditional promises to give, the relationships with the donor, the donor s past history of making timely payments, and the donor s overall creditworthiness are considered and incorporated into a fair value measurement computed using present value techniques. The interest element resulting from amortization of the discount for the time value of money, computed using the effective interest rate method, is reported as contribution revenue. Uncollectible promises are expected to be insignificant. Unconditional promises to give to be received after one year are discounted at a rate of 5%. The table below presents information about unconditional promises to give at June 30: Less Than Over One Less Than One Year Year Total One Year Unrestricted $ 78,810 $ - $ 78,810 $ 35,823 Restricted for future programs 67,900 50, , ,000 Restricted for Lord/Kubler Fund for New Work ,000 Less: discount for present value - (4,650) (4,650) - $ 146,710 $ 45,350 $ 192,060 $ 800, PROPERTY AND EQUIPMENT Property and equipment consist of the following at June 30: Life/Years Leasehold improvements Life of lease $ 5,089,580 $ 5,063,671 Furniture and equipment ,543,096 2,395,270 7,632,676 7,458,941 Less: accumulated depreciation (5,384,171) (4,940,741) $ 2,248,505 $ 2,518,200 13

16 6. PROPERTY AND EQUIPMENT (CONTINUED) Depreciation expense for the years ended was $443,430 and $453,552, respectively. 7. LINES OF CREDIT AND LOAN PAYABLE The Organization has a working capital revolving line of credit with a financial institution with a maximum availability of $1,750,000 ($1,705,775 plus $44,225 under the obligation with Actors Equity Association). The interest is due monthly at the thirty-day London Interbank Offered Rate (LIBOR) plus 2.0%. The balance due under the line of credit as of was $1,605,775 and $241,000, respectively. The bank has filed a secured interest in all of the Organization s unrestricted assets. The line contains certain administrative and restrictive financial covenants which provide for, among other things, minimum debt service coverage ratio. As of, the Organization was not in compliance with these covenants. As of June 30, 2016, the Organization obtained a waiver from the bank. In July 2017, the Organization entered into an agreement with another financial institution for a revolving line of credit with a maximum availability of $2,250,000. As part of agreement, a working capital revolving line of credit was fully repaid. The interest is due monthly at prime rate (3.25% as of June 30, 2017) starting August 1, 2017 and the principal due on demand. The bank has filed a secured interest in all of the Organization s assets. The Organization had a renovation line of credit with a maximum availability of $1,000,000, which was fully repaid as of June 30, In October 2013, the Organization entered into loan agreement with a financial institution. The loan was due on October 16, 2018 and payable in monthly installments. The bank had filed a secured interest in all of the Organization s unrestricted assets. The loan contained certain administrative and restrictive financial covenants which provided for, among other things, minimum debt service coverage ratio. The loan was fully repaid as of June 30, Interest expense for the years ended was $39,675 and $36,928, respectively. The Organization has obtained a letter of credit in the amount of $44,225 as part of an obligation to post a bond under a collective bargaining agreement with Actors Equity Association. The amount of the letter of credit will fluctuate based on current production s payroll. 8. COMMITMENTS AND CONTINGENCIES a) Government supported programs are subject to audit by the granting agency. b) The Organization has entered into various contracts with playwrights in order to develop, produce, and present plays on the stage in the presence of an audience. The Organization is obligated to pay royalties to authors and/or composers for productions that they have produced. If a play produced by the Organization generates royalties to the author and/or composer, then the Organization will generally be entitled to a certain percentage of the net proceeds received by the author and/or composer. 14

17 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) c) The Organization has two employment agreements which extend through June 30, The aggregated commitment under these agreements was approximately $1,360,000 at June 30, d) The Organization has been named by Actors Equity Association as a LORT theatre that allowed actors to perform in extraordinary conditions without supplemental worker s compensation coverage. Per the Organization s collective bargaining agreement with Actors Equity Association, the Organization is not required to hold this coverage. The Organization anticipates a favorable outcome. e) The Organization has entered into several operating lease agreements for its premises. New Haven Food Terminal, Inc. (theatre and office space) - for the period through June 30, The agreement allows the Organization to terminate the lease no earlier than June 30, 2017; however, there is a penalty if terminated prior to June 30, Madison Tower apartments (artists housing) - for the period from August 1, 2013 through July 31, 2018 with the option to extend. Paint shop - for the period from July 1, 2017 through June 30, 2020 with the option to extend. Apartment to provide additional housing, as well as other production space and storage - expiring on various dates through October 31, One of the Organization s board members owned one of the buildings the Organization rented. Rent expense for this apartment for the years ended was $4,775 and $11,335, respectively. The minimum annual rental payments under the non-cancelable leases are as follows: Year ending June 30, 2018 $ 417,530 June 30, ,975 June 30, ,338 June 30, ,763 June 30, ,282 $ 1,394,888 Rent expense under the above leases for the years ended was $455,395 and $486,174, respectively. f) The Organization contributes to four multiemployer pension plans under collective bargaining agreements covering union-represented employees, entirely in the entertainment industry. The vast majority of employers participating in these multiemployer plans are primarily engaged in the entertainment industry. These plans generally provide retirement benefits to vested participants based on their service to contributing employers, of which the Organization is one. In general, these plans are managed by a Board of Trustees with the unions appointing certain trustees and contributing employers of the plan appointing certain members. The Organization does not participate in any plan where it considers its contributions to be individually significant to the overall plan. 15

18 8. COMMITMENTS AND CONTINGENCIES (CONTINUED) f) Multiemployer Pension Plans (continued) Based on information available to the Organization, the vast majority of the multiemployer plans to which it contributes are adequately funded under the applicable provisions of the Pension Protection Act enacted in 2006 (PPA). Two of the funds are in either "critical" or "endangered" status as those terms are defined in the PPA. The PPA requires all underfunded pension plans to improve their funding ratios within prescribed intervals based on their level of underfunding. Until the plan trustees develop the funding improvement plans or rehabilitation plans as required by the PPA, we are unable to determine the amount of assessments the Organization may be subject to, if any. Under applicable law upon its ceasing to make contributions to, or other withdrawal from an underfunded multiemployer pension plan, the affected funds could seek contributions from the Organization for the Organization s proportionate share of the plan's unfunded vested liabilities. The Organization believes that under such circumstances, if a fund were to seek to assess such contribution obligation upon the Organization s alleged withdrawal, the Organization would have significant defenses against such assessment under applicable law. Approximately 22% (2017) and 18% (2016) of the Organization's employees and contractors are participants in multiemployer plans. Pension and welfare expense for multiemployer plans was $184,710 and $131,521, for the years ended, respectively. g) The Organization has been named in three workers compensation and general liability claims for personal injuries sustained at the Organization s premises. The Organization s insurance company is currently handling all claims. The Organization believes that the insurance coverage is sufficient to cover any claims which may be realized. h) During the year ended June 30, 2017, the Subsidiary entered into a partnership agreement to create Table Development Limited Liability Company and the Subsidiary is a General partner of the LLC. The LLC was formed to provide enhancement funds for a production of Table. The Organization has made no investment in the LLC. As of June 30, 2017, the LLC raised $221,500 and spent over $828,000 on the Production. 9. EMPLOYEE BENEFIT PLAN The Organization has a 403(b) retirement plan, which is not eligible for employer contributions. Employees may contribute through payroll deduction up to the annual limits as prescribed by law. 10. DONATED SERVICES AND MATERIALS The Organization received donated services and materials during the years ended in support of its programs and operations. The fair market value has been recorded in the accompanying consolidated financial statements. Donated services and materials consist of the following for the years ended June 30: Advertising $ 53,480 $ 39,540 Professional services 16,705 35,203 Equipment, rentals and other 13,511 47,443 $ 83,696 $ 122,186 16

19 11. FUNCTIONAL ALLOCATION OF EXPENSES The cost of providing the various programs and supporting services has been summarized on a functional basis in the consolidated statements of activities. Accordingly, certain costs have been allocated among the program and supporting services benefited. 12. EVALUATION OF SUBSEQUENT EVENTS The Organization has evaluated subsequent events through October 24, 2017, the date which the consolidated financial statements were available to be issued. Management has determined that there are no subsequent events that require disclosure in the consolidated financial statements, except Note OTHER MATTER As indicated in the accompanying consolidated financial statements, the Organization had a decrease in unrestricted net assets for the year ended June 30, 2017 of $(1,347,510) and an accumulated operating deficit of $(2,737,726). The Organization restructured its debt (Note 7) to borrow $2,250,000 to cover the accumulated deficit. To deal with the aforementioned accumulated deficit, management is working closely with the Board of Trustees to revise their strategic plan and revamp their business model to make the organization cash positive. In addition, the Finance Committee is considering options to eliminate the accumulated deficit within the next five years. 17

20 CONSOLIDATED SUPPLEMENTAL INFORMATION

21 INDEPENDENT AUDITOR S REPORT To the Board of Trustees The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre and Subsidiary We have audited the consolidated financial statements of The Connecticut Players Foundation, Inc. d/b/a Long Wharf Theatre and Subsidiary as of and for the years ended, and have issued our report thereon dated October 24, 2017, which contained an unmodified opinion on those consolidated financial statements. Our audits were performed for the purpose of forming an opinion on the consolidated financial statements as a whole. The Consolidated Schedule of Functional Expenses for the year ended June 30, 2017 with comparative totals for 2016 is presented for the purposes of additional analysis and is not a required part of the consolidated 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 consolidated financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated 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 consolidated financial statements as a whole. October 24, 2017

22 Consolidated Schedule of Functional Expenses For the Year Ended June 30, 2017 with Comparative Totals for 2016 Program Services Salaries and fees 3,061,611 Supporting Services Total Expenses Management and General Fundraising Total $ $ 240, ,040 Total Expenses $ 428,037 $ $ 3,729,651 $ 3,301,365 Benefits and payroll taxes 644,219 90,067 50, , , ,541 Supplies and other costs 332,364 1, , , ,249 Royalties 135, , ,042 Advertising and marketing 266,574 1, , , ,266 Credit card fees 62,641 1,096 6,058 7,154 69,795 69,088 Legal, accounting and consulting 84,124 67,776 25,620 93, , ,176 Hospitality, food and entertainment 55,680 8,270 20,561 28,831 84, ,368 Insurance 57,276 8,008 4,490 12,498 69,774 71,385 Interest expense - 39,675-39,675 39,675 36,928 Office expenses 8,857 30,149 4,263 34,412 43,269 31,247 Telephone 11,046 18,237-18,237 29,283 28,950 Equipment rental and repairs 78,043 43,575 3,000 46, , ,514 Occupancy costs 671,002 78,942 39, , , ,031 Travel 41,559 15, ,783 57,342 56,395 Postage 70,057 3,802 4,514 8,316 78,373 84,444 Printing and copying 84, ,112 4,898 89,064 77,706 Dues, memberships and other fees 37,098 36,407 25,535 61,942 99, ,416 Miscellaneous 282 6,781-6,781 7,063 15,721 Bad debt expense ,695 Total expenses before depreciation 5,702, , ,407 1,308,851 7,011,182 6,518,527 Depreciation 310,400 66,515 66, , , ,552 Total Expenses, 2017 $ 6,012,731 $ 945,959 $ 495,922 $ 1,441,881 $ 7,454,612 Total Expenses, 2016 $ 5,557,978 $ 778,115 $ 635,986 $ 1,414,101 $ 6,972,079 See independent auditor's report on consolidated supplemental information. 20