THE JAMES BEARD FOUNDATION, INC. FINANCIAL STATEMENTS MARCH 31, 2007

Transcription

1 FINANCIAL STATEMENTS MARCH 31, 2007

2 CONTENTS Independent Auditor's Report 1 Financial Statements: Statement of Financial Position 2 Statement of Activities 3 Statement of Functional Expenses 4 Statement of Cash Flows 5 Notes to Financial Statements 6-12

3 GOLDSTEIN GOLUB KESSLER LLP Certified Public Accountants and Consultants INDEPENDENT AUDITOR'S REPORT To the Board of Directors The James Beard Foundation, Inc. We have audited the accompanying statement of financial position of The James Beard Foundation, Inc. (the "Foundation") as of, and the related statements of activities, functional expenses, and cash flows for the year then ended. These financial statements are the responsibility of the Foundation's management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior-year summarized comparative information has been derived from the Foundation's 2006 financial statements and, in our report dated June 9, 2006, except for Note 13, as to which the date is December 21, 2006, we expressed an unqualified opinion on those statements. 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 our opinion, the financial statements referred to above presents fairly, in all material respects, the financial position of The James Beard Foundation, 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. GOLDSTEIN GOLUB KESSLER LLP October 2, Avenue of the Americas Suite 500 New York, NY TEL FAX

4 2006 ASSETS Cash and Cash Equivalents $ 676,426 $ 8,716 Restricted Cash and Cash Equivalents 15, ,333 Grants and Other Receivables 111,457 19,499 Restricted Investments, at fair value 713, ,461 Prepaid Expenses and Other Assets 944, ,217 Property and Equipment, net 1,147,053 1,074,428 Total Assets $ 3,608,108 $ 2,298,654 LIABILITIES AND NET ASSETS (DEFICIENCY) STATEMENT OF FINANCIAL POSITION Liabilities: Accounts payable and accrued expenses $ 519,775 $ 652,707 Line of credit 498,333 Mortgage note payable 2,000,000 Deferred revenue 1,327, ,792 Grants payable ,250 Funds received on behalf of others ,817 Total liabilities 3,847,452 2,180,899 Net Assets (Deficiency): Unrestricted (1,506,452) (1,172,641) Temporarily restricted 1,267,108 1,290,396 Net assets (deficiency) (239,344) 117,755 Total Liabilities and Net Assets (Deficiency) $ 3,608,108 $ 2,298,654 See Notes to Financial Statements 2

5 STATEMENT OF ACTIVITIES (with summarized comparative financial information for the year ended March 31, 2006) Year ended 2006 Temporarily Unrestricted Restricted Total Total Support and revenue: Contributions $ 538,394 $ 108,974 $ 647,368 $ 374,131 Membership fees 674, , ,385 In-house events 1,583,303 1,583,303 1,553,465 Gala event sponsorships and ticket sales 1,097,466 12,500 1,109, ,850 Out-of-house events and auctions 1,071,577 1,071, ,317 Newsletter advertising and directories income 45,613 45,613 83,219 Miscellaneous income 24,695 24, Dividend and interest income 12,181 15,622 27,803 26,802 Educational program fee 13,742 13,742 9,271 Unrealized and realized net gains on investments 4,864 4,864 Net assets released from restrictions - - satisfaction of program and time restrictions 165,248 (165,248) Total support and revenue 5,226,474 (23,288) 5,203,186 3,954,654 Expenses: Program services: Scholarship and education 285, , ,344 Member services 119, , ,958 In-house events 1,905,160 1,905,160 1,505,895 Awards 1,189,632 1,189, ,618 Out-of-house events 258, , ,830 Publications and communications 513, , ,918 Total program services 4,271,128 4,271,128 3,746,563 Supporting services: Management and general 908, ,229 1,181,264 Fund-raising 380, , ,230 Total supporting services 1,289,157 1,289,157 1,598,494 Total expenses 5,560,285 5,560,285 5,345,057 Change in net assets (333,811) (23,288) (357,099) (1,390,403) Net assets (deficiency) at beginning of year (1,172,641) 1,290, ,755 1,508,158 Net assets (deficiency) at end of year $ (1,506,452) $ 1,267,108 $ (239,344) $ 117,755 See Notes to Financial Statements 3

6 STATEMENT OF FUNCTIONAL EXPENSES (with summarized comparative financial information for the year ended March 31, 2006) Year ended 2006 Program Services Supporting Services Publications Scholarship Out-of- and Total Management Total and Member In-house house Communi- Program and Fund- Supporting Education Services Events Awards Events cations Services General raising Services Total Total Salaries $ 37,695 $ 56,542 $ 1,243,920 $ 94,236 $ 75,389 $ 113,084 $ 1,620,866 $ 226,167 $ 37,695 $ 263,862 $ 1,884,728 $ 1,745,199 Payroll taxes and employees benefits 6,984 10, ,481 17,461 13,969 20, ,324 41,906 6,984 48, , ,201 Scholarship grants 154, , , ,884 Grants to other organizations 30,000 30,000 30,000 53,633 Accounting and legal fees 1,770 3, , , , , ,589 Consultants and other professional fees 51,329 5,025 54, ,215 49,738 17, ,924 75,439 71, , , ,435 Office expense 720 2,592 6,935 5,349 1,749 6,007 23,352 15, ,324 38,676 37,927 Postage and shipping 508 4,767 5,051 15,286 1,699 31,049 58,360 10,687 6,991 17,678 76, ,470 Printing 119 5,535 4,002 32,401 11, , ,071 17,860 3,058 20, , ,870 Equipment rental and computer maintenance 2,489 12,055 17,132 6,578 13,450 16,557 68,261 20,623 55,217 75, , ,120 Maintenance , ,968 26,351 38, ,969 65,320 97,365 Advertising and newsletter 537 7, ,507 22, ,253 24,245 83,893 Event and kitchen supplies ,522 18,910 11, ,915 4,657 9,997 14, , ,307 Design and layout 71,736 19,320 58, , ,435 89,688 Event and meeting space rental 2, ,757 9, , , , , ,580 Event production 216,074 21, , , ,351 Invitations and programs 13,111 13,111 13,111 41,162 Award items and decorations 17,406 5,584 22,990 5,944 25,219 31,163 54,153 36,942 Rent 7,058 3,387 21,375 7,660 41,001 80,481 1, ,361 82, ,625 Telephone 1,541 3,113 7,729 1,955 2,426 8,461 25,225 4, ,024 30,249 32,009 Utilities 388 1,042 30, ,944 34,454 11,035 11,035 45,489 50,292 Insurance 43,594 43,594 43,594 39,013 Travel and entertainment 10,786 1,108 6, ,307 9,171 1, ,033 23,756 29,295 53, , ,119 Real estate taxes 17,448 17,448 17,448 22,789 Photography 600 4, , ,250 1,360 6,845 5,623 Library ,069 1,069 8,097 Auction items 2,075 2,075 2,075 2,175 Web site and Internet fees 2,368 1,524 3,475 4, ,528 52,645 1,767 1,767 54,412 46,297 Interest 85,834 85,834 85,834 28,295 Amortization of deferred financing charges 37,725 37,725 37,725 Bank charge and credit card and other processing fees 275 7,714 37,812 7,072 2, ,647 11,043 10,167 21,210 76,857 59,121 Miscellaneous ,714 11,714 12,084 2, , ,927 1,885,164 1,185, , ,968 4,211, , ,096 1,264,994 5,476,967 5,275,871 Depreciation 4,166 6,665 19,996 4,166 5,832 18,330 59,155 18,331 5,832 24,163 83,318 69,186 Total expenses $ 285,193 $ 119,592 $ 1,905,160 $ 1,189,632 $ 258,253 $ 513,298 $ 4,271,128 $ 908,229 $ 380,928 $ 1,289,157 $ 5,560,285 $ 5,345,057 See Notes to Financial Statements 4

7 STATEMENT OF CASH FLOWS Year ended 2006 Cash flows from operating activities: Change in net assets $ (357,099) $ (1,390,403) Adjustments to reconcile change in net assets to net cash provided by (used in) operating activities: Depreciation 83,318 69,186 Amortization of deferred financing costs 37,725 Unrealized and realized net gains on investments (4,864) (9,271) Donated securities (1,440) Donated goods (87,186) Changes in operating assets and liabilities: Decrease in restricted cash and cash equivalents 583, ,064 (Decrease) increase in grants and other receivables (91,958) 133,751 Increase in prepaid expenses and other assets (213,222) (408,034) (Increase) decrease in accounts payable and accrued expenses (132,932) 191,447 Increase in deferred revenue 345, ,861 (Increase) decrease in grants payable (21,000) 30,000 Decrease in funds received on behalf of others (26,817) (3,183) Net cash provided by (used in) operating activities 113,386 (689,582) Cash flows from investing activities: Purchase of property and equipment (68,757) (89,262) Purchase of securities (706,751) Proceeds from sale of securities 109,076 Net cash used in investing activities (666,432) (89,262) Cash flows from financing activities: (Repayment of) proceeds from the line of credit, net (498,333) 184,971 Proceeds from mortgage note payable 2,000,000 Funding of mortgage escrow account (130,013) Financing costs of mortgage note payable (150,898) Net cash provided by financing activities 1,220, ,971 Net increase (decrease) in cash and cash equivalents 667,710 (593,873) Cash and cash equivalents at beginning of year 8, ,589 Cash and cash equivalents at end of year $ 676,426 $ 8,716 Supplemental disclosure of cash flow information: Cash paid during the year for interest $ 85,834 $ 28,295 See Notes to Financial Statements 5

8 NOTES TO FINANCIAL STATEMENTS 1. DESCRIPTION OF ORGANIZATION: The James Beard Foundation, Inc. (the "Foundation") was incorporated under the Not-for-Profit Corporation law of the State of New York on September 19, The Foundation is a not-for-profit organization and is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code (the "Code"). The charitable and educational purposes for which the Foundation was established are to preserve and promulgate America's culinary heritage and the legacy of James Beard, maintain the Beard house as a historical culinary center, maintain the Beard house as a showcase for educational programs relating to food, and maintain the Beard house as a performance space, gallery, research library and meeting center for those interested in the advancement of the culinary arts in America. Additionally, the Foundation was established to support other not-forprofit culinary organizations, provide scholarships to individuals pursuing a career in the culinary arts and recognize and promote excellence in all aspects of the culinary arts. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: The Foundation reports all gifts of cash and other assets as unrestricted support unless they are received with donor stipulations that limit the use of the donated assets or are designated for future periods. When a purpose restriction is accomplished or a stipulated time restriction ends, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Contributions of assets other than cash are recorded at their estimated fair value. Donated services are recognized as contributions if the services (a) create or enhance nonfinancial assets or (b) require specialized skills, are performed by people with those skills and would otherwise be purchased by the Foundation. Donated legal services amounted to $59,138 for the year ended and is included in contributions and supporting services expenses in the accompanying statement of activities. The value of sanitation services contributed by a corporate sponsor amounted to $15,000 for the year ended March 31, 2006 and is included in contributions and inhouse program service expenses in the accompanying statement of activities. The Foundation received donated bathroom fixtures, furniture, chairs, lighting fixtures, carpeting, paint and construction supplies with a value amounting to $87,186 used in connection with making improvements to the Beard house during the year ended. Such amounts have been included in contributions and property and equipment in the accompanying financial statements. The Foundation received food, wine, Perrier water, coffee, tea, countertop appliances, utensils, room accommodations, delivery services and gift bags in connection with its in-house and out-of-house events. Additionally, the Foundation received goods, services and other prizes for its auctions held in conjunction with its fund-raising events. No amounts have been recognized as revenue in the accompanying statement of activities since they do not meet the criteria for recognition under Statement of Financial Accounting Standards No. 116, Accounting for Contributions Received and Contributions Made. The 6

9 NOTES TO FINANCIAL STATEMENTS Foundation estimates the fair value of these contributed goods, services and facilities to be approximately $142,000 (unaudited) and $155,000 (unaudited) for the years ended and 2006, respectively. A number of volunteers have made a contribution of their time to the Foundation to develop its programs and to serve on the Foundation's board of directors. The value of this contributed time is not reflected in these financial statements. Membership fees are recorded in the applicable membership period. The unexpired portion of payments made by members is reflected as deferred revenue. Revenue from the in-house, out-of-house and awards gala events are recognized upon completion of the activity. Prepayments in connection with inhouse, out-of-house and awards gala events are expensed in the period in which such events occur. The payments received for the May 2007 awards gala event and fiscal 2008 in-house and out-of-house events are reflected as deferred revenue. The Foundation maintains cash in bank deposit accounts which, at times, may exceed federally insured limits. The Foundation has not experienced any losses in these accounts. The Foundation considers all highly liquid instruments purchased with a maturity of three months or less to be cash equivalents. Cash equivalents consist of money market account balances. Investments are stated at fair value, which is the prevailing market value, with the resulting change in unrealized gains or losses included in the statement of activities. The Foundation's policy for capitalization of building improvements and office equipment is limited to purchases of $1,000 or more. Building, building improvements and office equipment are recorded at cost. Depreciation of building, building improvements and office equipment is being provided for by the straight-line method over their estimated useful lives. Deferred financing charges represent mortgage closing costs incurred in connection with the refinancing of the Foundation's former line of credit with a mortgage note payable from another financial institution. The Foundation has capitalized the mortgage closing costs and these costs are being amortized on a straight-line basis over the term of the mortgage note payable. Accumulated amortization on these deferred financing charges amounted to approximately $113,000 as of. Advertising costs are expensed as incurred. For the years ended and 2006, advertising and newsletter costs amounted to $24,245 and $83,893, respectively. Expenses are classified according to the categories for which they were incurred and are summarized on a functional basis in the accompanying statement of activities. Program services include costs directly associated with the publication of membership newsletters, regular brunch and dinner meetings, and luncheons held to promote and encourage the development of the culinary arts in America, 7

10 NOTES TO FINANCIAL STATEMENTS special events to promote innovations in American cuisine and encourage the careers of aspiring chefs and granting scholarships to culinary students to assist with funding culinary education tuition costs. The statements of activities and functional expenses include certain prior-year summarized comparative information in total but not by net asset or functional classification. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with the Foundation's financial statements for the year ended March 31, 2006 from which this summarized information was derived. The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires the use of estimates by management. Actual results could differ from those estimates. 3. RESTRICTED CASH AND CASH EQUIVALENTS: The Foundation closed out all the separate money market accounts for The Alberto Bello Scholarship Fund, The Arthur Cutler Scholarship Fund, Dana Campbell Scholarship Fund, Friends of James Beard Scholarship Fund, Gene Hovis Scholarship Fund, Peter Cameron Scholarship Fund and Peter Kump Scholarship Fund and House Preservation Fund during fiscal The Foundation only maintains funds in a separate money market for the general scholarship fund to fund scholarship grants. The House Preservation Fund's cash and cash equivalents are maintained for the preservation of the Foundation and to fund renovations made to the Beard house. The restricted cash and cash equivalents consist of the following: 2006 Scholarship funds $ 958 $ 2,136 House Preservation Fund 14, ,197 $15,107 $598, GRANTS AND OTHER RECEIVABLES: Grants and other receivables include unconditional promises to give due in less than one year amounting to $111,457 and $19,499 as of and 2006, respectively. Management believes that the entire amount of grants and other receivables are fully collectible and, accordingly, has not provided an allowance on such receivables. 8

11 NOTES TO FINANCIAL STATEMENTS 5. RESTRICTED INVESTMENTS: The Foundation maintains funds in a separate brokerage account for its House Preservation Fund for the preservation of the Foundation and to fund renovations made to the Beard house. The restricted investments consist of the following: 2006 Common stock $ 1,440 $ 38,054 U.S. Treasury securities 712,000 71,407 $713,440 $109, PROPERTY AND EQUIPMENT, NET: Property and equipment, net, at cost, consists of the following: Estimated 2006 Useful Life Land $ 418,869 $ 418,869 Office equipment 339, ,444 7 years Building and building improvements 1,059, , years 1,817,722 1,661,779 Less accumulated depreciation (670,669) (587,351) $1,147,053 $1,074, LINE OF CREDIT/ MORTGAGE NOTE PAYABLE: The Foundation maintained a line of credit facility providing for maximum borrowings up to $650,000. The line of credit bears interest at the bank's prime rate rounded up to the nearest 1/8th of one percentage point. The outstanding principal balance and any unpaid interest was due on October 1, Additionally, the line of credit agreement was collateralized by the Foundation's House Preservation Fund's restricted cash and cash equivalents and investments. The line of credit agreement provided, among other things, that the Foundation maintain minimum compensating balances of its House Preservation Fund's restricted cash and cash equivalents and investments in accounts with this financial institution. On December 21, 2006, the Foundation entered into a mortgage with a new financial institution in the amount of $2,000,000, requiring monthly installments of interest only to be paid commencing on February 1, 2007 at an interest rate of 11% per annum. The entire outstanding principal balance and any unpaid interest is due on January 1, 2008 and the Foundation has the right to extend the maturity date further to January 1, The proceeds from this new credit facility were used to repay outstanding vendor balances and on January 11, 2007, the Foundation also used a portion of the proceeds from this credit facility to repay its line of credit facility's outstanding principal and interest amounting to $635,308. Additionally, six months of interest payments and initial property taxes and 9

12 NOTES TO FINANCIAL STATEMENTS insurance were required to be set aside in a mortgage reserve escrow account to be maintained by the new financial institution out of the original mortgage note proceeds which amounted to $130,013. The Foundation is then responsible for funding this escrow account on a monthly basis for the current period's property taxes and insurance charges. As of, the mortgage reserve escrow amounted to $136,734 and has been included in prepaid expenses and other assets in the accompanying statement of financial position. Mortgage closing costs in the amount of $150,898 was also funded out of the original mortgage note proceeds and capitalized. Such deferred financing charges are being amortized over the term of the mortgage note payable and are included in prepaid expenses and other assets in the accompanying statement of financial position. The mortgage note payable is secured by the Foundation's land, building and office equipment used in connection with its real estate. 8. TEMPORARILY RESTRICTED NET ASSETS: Temporarily restricted net assets are available for the following purposes or periods: 2006 Scholarship funds $ 458,958 $ 502,174 House Preservation Fund 790, ,723 World Food Conference 5,000 Time restricted for future periods 12,500 19,499 $1,267,108 $1,290,396 During the year ended, net assets were released from donor restrictions by incurring expenses satisfying the following temporarily restricted purposes or by passage of time: Scholarships $145,749 Time restrictions 19,499 $165, PENDING LEGAL MATTERS AND INTERNAL REVENUE SERVICE EXAM STATUS: In the fall of 2004, the Charities Bureau of the New York State Attorney General's Office ("Charities Bureau") opened an investigation into allegations of financial improprieties by the then president/chief executive officer. The allegations were made by the then board of directors. Forensic auditors, retained by then counsel to the Foundation, concluded in their report that the total loss to the Foundation for the immediately prior three fiscal years due to the president/chief executive officer's alleged misuse of funds amounted to at least $1,030,073. The Foundation's former president/chief executive officer pleaded guilty to grand larceny in the second degree in New York State Supreme Court in Manhattan on January 24, 2005 and was sentenced to one to three years in prison for this offense. The Foundation explored the 10

13 NOTES TO FINANCIAL STATEMENTS possibility for suing the former president/chief executive officer for restitution, but determined that this individual's assets were insufficient to make a claim worthwhile and the Charities Bureau agreed with that conclusion. The Charities Bureau investigation also included issues pertaining to governance and internal controls practices, has pursued settlement agreements with several former members of the board of directors and the Foundation has cooperated with the Charities Bureau. To date, four members of the former board of directors have entered into settlements with the Charities Bureau and one settlement is pending. In connection with the above investigation, the Foundation has incurred approximately an additional $7,000 for legal and other professional fees during fiscal Cumulative expenses for legal and other professional fees incurred with the above investigation during fiscal 2005, 2006 and 2007 amounted to approximately $788,000. On September 29, 2005, the Internal Revenue Service ("IRS") notified the Foundation that it was conducting an examination of the Foundation's annual information return (Form 990) for the fiscal year ended March 31, 2003, stemming from the newspaper reports of the former president/chief executive officer's wrongdoing. The Foundation's management and legal counsel are cooperating fully with the examination and provided any necessary supporting documentation. 10. EMPLOYEE BENEFIT PLAN: The Foundation maintains a defined contribution plan under Section 403(b) of the Code covering all eligible employees. Contributions by the Foundation to the plan are at the discretion of the board of directors. No contributions were made on behalf of the employees to the plan for the years ended and COMMITMENTS: The Foundation leases office space under a noncancelable operating lease expiring on November 30, The lease is subject to escalations for the Foundation's proportionate share of increases in real estate taxes and other operating expenses. The Foundation is obligated under operating leases for office equipment expiring through September 16, At, the aggregate minimum annual rental commitments under the above noncancelable leases are as follows: Year ending March 31, 2008 $ 96, , , ,000 $222,000 11

14 NOTES TO FINANCIAL STATEMENTS 12. OPERATING DEFICITS: Through the year ended, the Foundation has experienced significant operating deficits, primarily as a result of unsubstantiated expenditures incurred by the Foundation's former president/chief executive officer described in Note 9, expenses being incurred in connection with the investigation, and the hiring of new management personnel. Management is attempting to reduce such operating deficits by 1) evaluating alternative financing options at a lower interest rate to replace its current mortgage note payable, 2) seeking additional corporate sponsorships for its events, 3) increasing the fees currently being charged to attend in-house events and 4) reevaluating current vendor and consultant relationships in connection with publications and printing costs being incurred. However, there is no assurance that management will be successful in its efforts. 12