Financial Statements. The Churchwardens of the Church of Trinity East in the Diocese of Toronto ( Little Trinity ) December 31, 2018

Transcription

1 Financial Statements The Churchwardens of the Church of Trinity East in the

2 Contents Page Independent Auditor s Report 1-2 Statement of Operations 3 Statement of Financial Position 4 Statement of Cash Flows 5 Notes to the Financial Statements 7 12

3 Independent auditor s report Grant Thornton LLP 11 th Flloor 200 King Street West, Box 11 Toronto, ON M5H 3T4 T F To the Members of Diocese of Toronto, Little Trinity Qualified Opinion We have audited the accompanying financial statements of The Churchwardens of the Church of Trinity East in the, which comprise the statement of financial position as at, the statements of operations and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of Little Trinity as at, and the results of its operations and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Basis for Qualified Opinion In common with many charitable organizations, Little Trinity derives revenue from offerings, the completeness of which is not susceptible to satisfactory audit verification. Accordingly, our verification of these revenue was limited to the amounts recorded in the records of Little Trinity. Therefore, we were not able to determine whether any adjustments might be necessary to offerings, excess of revenue over expenses and cash flows from operations for the years ended and December 31, 2017, current assets as at and 2017, and net assets as at January 1, 2018 and 2017 and, and Our audit opinion on the financial statements for the period ended December 31, 2017 was modified accordingly because of possible effects of this limitation in scope. We conducted our audit in accordance with Canadian generally accepted auditing standards. Our responsibilities under those standards are further described in the Auditor's Responsibilities for the Audit of the Financial Statements section of our report. We are independent of Little Trinity in accordance with the ethical requirements that are relevant to our audit of the financial statements in Canada, and we have fulfilled our other ethical responsibilities in accordance with these requirements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion. Responsibilities of Management and Those Charged with Governance for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation of financial statements that are free from material misstatement, whether due to fraud or error. In preparing the financial statements, management is responsible for assessing Little Trinity s ability to continue as a going concern, disclosing, as applicable, matters related to a going concern and using the going concern basis of accounting unless management either intends to liquidate Little Trinity or to cease operations, or has no realistic alternative to do so. Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 1

4 Those charged with governance are responsible for overseeing the Little Trinity s financial reporting process. Auditor s Responsibilities for the Audit of the Financial Statements Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue and auditor s report that includes our opinion. Reasonable assurance is a high level of assurance, but is not a guarantee that an audit conducted in accordance with Canadian generally accepted auditing standards will always detect a material misstatement when it exists. Misstatements can arise from fraud or error and are considered material if, individually or in the aggregate, they could reasonably be expected to influence the economic decisions of users taken on the basis of these financial statements. As part of an audit in accordance with Canadian generally accepted auditing standards, we exercise professional judgment and maintain professional skepticism throughout the audit. We also: Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, design and perform audit procedures responsive to those risks, and obtain audit evidence that is sufficient and appropriate to provide a basis for our opinion. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Obtain an understanding of internal control relevant to the audit 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 Little Trinity's internal control. Evaluate the appropriateness of accounting policies used and the reasonableness of accounting estimates and related disclosures made by management. Conclude on the appropriateness of management's use of the going concern basis of accounting and, based on the audit evidence obtained, whether a material uncertainty exists related to events or conditions that may cast significant doubt on Little Trinity's ability to continue as a going concern. If we conclude that a material uncertainty exists, we are required to draw attention in our auditor's report to the related disclosures in the financial statements or, if such disclosures are inadequate, to modify our opinion. Our conclusions are based on the audit evidence obtained up to the date of our auditor's report. However, future events or conditions may cause Little Trinity to cease to continue as a going concern. Evaluate the overall presentation, structure and content of the financial statements, including the disclosures, and whether the financial statements represent the underlying transactions and events in a manner that achieves fair presentation. We communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audit and significant audit findings, including any significant deficiencies in internal control that we identify during our audit. Toronto, Canada February 15, 2019 Chartered Professional Accountants Licensed Public Accountants Audit Tax Advisory Grant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 2

5 Statement of Operations Year ended Operating Capital Restricted Total Total Fund Asset Fund Funds Revenue Offerings $ 898,644 $ - $ - $ 898,644 $ 867,661 Property renewal (Note 8) , , ,969 Other 29, , , , , ,674 1,501,017 1,258,754 Expenses Personnel 475, , ,971 Specific programs ,714 52,714 78,501 Office and Property 147, , ,829 Serving our World 55, ,753 75,434 Growing Together 38, ,691 35,516 Loving God 10, ,372 5,142 Diocesan assessment 84, ,581 79,537 Professional fees 12, ,296 12,188 Amortization - 420, , , , ,997 52,714 1,298,133 1,279,268 Excess (deficiency) of revenues over expenses 103,921 (420,997) 519, ,884 (20,514) Interfund transfers (Note 2) Purchase of capital assets (49,011) 64,149 (15,138) - - Repayment of promissory note payable (Note 7) - 1,250,000 (1,250,000) - - Transfer to Restoration fund (32,597) - 32, Transfer to other funds (100) - - (81,508) 1,314,149 (1,232,641) - - Fund activity during the year 22, ,152 (712,681) 202,884 (20,514) Fund balances, beginning of year 98,157 1,903,841 1,302,640 3,304,638 3,325,152 Fund balances, end of year $ 120,570 $ 2,796,993 $ 589,959 $3,507,522 $ 3,304,638 3

6 Statement of Financial Position Year ended December 31 Operating Capital Restricted Total Total Fund Asset Fund Funds Assets Current Cash $ 79,141 $ - $ 518,709 $ 597,850 $ 348,730 Investments ,000,000 Receivables (Note 5) 54,545-71, ,795 54,631 Prepaids 19, ,762 17, , , ,407 1,420,394 Property and equipment (Note 6) - 3,046,993-3,046,993 3,403,841 $ 153,448 $ 3,046,993 $ 589,959 $3,790,400 $ 4,824,235 Liabilities Current Payables and accruals $ 32,878 $ - $ - $ 32,878 $ 19,597 Promissory note payable (Note 7) - 250, ,000 1,500,000 32, , ,878 1,519,597 Fund balances Operating fund 120, ,570 98,157 Invested in property and equipment - 2,796,993-2,796,993 1,903,841 Externally restricted (Note 9) Property renewal , ,417 1,227,091 Memorial and bequest - - 2,334 2,334 2,334 Internally restricted (Note 9) Specific purpose , ,781 63,215 Memorial and bequest , ,427 10, ,570 2,796, ,959 3,507,522 3,304,638 $ 153,448 $ 3,046,993 $ 589,959 $3,790,400 $ 4,824,235 Approved by the Churchwardens Rector s Churchwarden People s Churchwarden 4

7 Statement of Cash Flows Year ended December Increase (decrease) in cash Operating activities Excess (deficiency) of revenues over expenses $ 202,884 $ (20,514) Amortization 420, , , ,636 Changes in non-cash operating working capital Receivables (71,164) (21,224) Prepaids (2,729) (1,674) Payables and accruals 13, , ,243 Investing activities Purchase of property and equipment (64,149) (106,764) Redemption (purchase) of investments, net 1,000,000 (500,000) 935,851 (606,764) Financing activities Repayment of promissory note (Note 7) (1,250,000) - Net increase (decrease) in cash 249,120 (228,521) Cash, beginning of year 348, ,251 Cash, end of year $ 597,850 $ 348,730 5

8 Notes to the Financial Statements 1. Purpose of the organization is a corporation under The Church Temporalities Act of 1841, and is a not-for-profit organization and a registered charity under the Income Tax Act. Its purpose since 1842 has been to share the love, power and truth of Jesus Christ. 2. Summary of significant accounting policies Basis of presentation These financial statements have been prepared in accordance with Canadian accounting standards for not for profit organizations (ASNPO) and include the following significant accounting policies: Fund accounting Little Trinity's accounts follow the principles of fund accounting, under which resources for particular purposes are classified for accounting and reporting into funds corresponding to those purposes. These financial statements present the following funds and fund classifications. Unrestricted operating fund The operating fund accounts for Little Trinity s program delivery and administrative activities. Operating fund expenses are allocated by program (function). Excluded from these allocations are salaries and benefits, which are recorded in the personnel category, professional fees and amortization. These expenses are excluded because they are not directly attributable to any particular function. The operating fund programs are: Office and Property The support of the Vestry members regarding the operational costs of the church office and our buildings. Serving our World Ministry designed to help connect the church to the immediate community located close to Little Trinity as well as provide support to mission partners through their appropriate Mission Agencies. Loving God Ministry supporting the Sunday and other liturgical services provided regularly throughout the year. Growing Together Ministry designed to build up the Parishioners in the Christian Faith. Diocesan assessment Amount calculated by the Anglican Diocese of Toronto based on the nature of the Parish's income and expenses. This amount is used to help pay the Diocese's operating expenses. Invested in property and equipment The capital asset fund balance reflects the property, equipment, debt and capital costs related to the Little Trinity campus. 6

9 Notes to Financial Statements 2. Summary of significant accounting policies - continued Fund accounting (continued) Restricted funds The property renewal fund was initially funded with the proceeds from the sale of 65 Clifton Road and has now also been funded with the proceeds from the sale of 250 Sutherland Drive, donations and grants from private foundations. This fund is restricted to expenditures related to the up-keep of buildings and property. Amounts given for specific purposes are held in individual funds until expended for the purpose for which they were collected. The specific purpose restriction is documented in the fund title. Transfers from these specific purposes funds reflect capital expenditures or operating fund expenditures which satisfy these restrictions. The memorial funds have been received in memory of individuals from the congregation. The funds listed as available for distribution are unrestricted and can be spent as directed by the board. The externally restricted funds have been designated as follows: Brendan McNaughton fund, to be used for the youth room in 399 to 403 King Street East Cathy King fund, to be used for the children s ministry or for additional pastoral needs Interfund transfers Transfers between funds are authorized when resources of one fund are to be used to finance activities and acquisitions in another fund. Transfers are authorized by the Churchwardens and are consistent with the obligations of the fund from which the resources are transferred. Revenue recognition Little Trinity follows the restricted fund method of accounting for contributions. Unrestricted contributions are recognized as revenue of the operating fund in the year received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. All contributions received for property renewal, specific programs, and memorial and bequests are recognized as revenue of the appropriate restricted fund. Financial instruments Little Trinity considers any contract creating a financial asset, liability or equity instrument as a financial instrument. Little Trinity s financial instruments are comprised of cash, investments, receivables, payables and promissory note payable. Financial assets and liabilities obtained in arm s length transactions are initially recorded at their fair value and financial assets and liabilities obtained in related party transactions are initially measured at their exchange amount. The Church subsequently measures all of its financial assets and liabilities at amortized cost, except for cash and investments, which are measured at fair value. 7

10 Notes to Financial Statements 2. Summary of significant accounting policies - continued Contributed goods and services Contributed goods are recorded at fair market value at the date of contribution. Volunteers contribute many hours at Little Trinity in carrying out its service delivery activities. Due to the difficulty determining the fair value of this activity, the value of contributed services are not recognized in these financial statements. Investments Investments include guaranteed investment certificates with original maturities of greater than three months. Property and equipment Capital assets are recorded at cost. Amortization is provided on a straight line basis over the assets useful lives as follows: Major building improvements Furniture and fixtures Computer equipment Over 15 years Over 5 years Over 3 years Amortization expense is charged to the capital asset fund. Use of estimates Management reviews the carrying amounts of items in the financial statements at each statement of financial position date to assess the need for revision or any possibility of impairment. Certain items in the preparation of these financial statements require management s best estimate. Management determines these estimates based on assumptions that reflect the most probable set of economic conditions and planned courses of action. These estimates are reviewed periodically and adjustments are made to the excess (deficiency) of revenue over expenses as appropriate in the year they become known. 8

11 Notes to Financial Statements 3. Insurance coverage Little Trinity owns real properties at which are insured as follows: Church King Street East $ 4,527,937 $ 4,458,580 Little Trinity House King Street East 1,242,047 1,219, Trinity Street 669, ,662 Annex King Street East 3,786,066 3,712,320 $ 10,225,845 $ 10,046, Related party transactions The Diocese of Toronto is a related party of Little Trinity. Little Trinity pays an annual Diocesan assessment from the operating fund. This fee covers Little Trinity s share of Diocese support services. Little Trinity paid $1,250,000 of the promissory note payable to the Diocese of Toronto in This payment is consistent with the promissory note repayment schedule and agreement terms documented in Note Receivables Contributions receivable $ 112,408 $ 38,971 HST rebate receivable 13,387 15,660 $ 125,795 $ 54,631 Contributions receivable are cash or share donations that were provided by the donor to the Church before year end but not deposited into a Church bank account until after year end. 6. Property and equipment Accumulated Net Net Cost Amortization Book Value Book Value Major building improvements $ 6,203,891 $ 3,169,058 $ 3,034,833 $ 3,374,588 Furniture and fixtures 257, ,360 9,672 26,472 Computer equipment 19,080 16,592 2,488 2,781 $ 6,480,003 $ 3,433,010 $ 3,046,993 $ 3,403,841 9

12 Notes to Financial Statements 7. Promissory note payable Little Trinity employed advances totaling $1.5 million received from the Diocese of Toronto as bridge financing for the property renewal of 403 King Street East. The total advance is non-revolving and bears interest at prime until, subsequently prime plus 2%. The accrued interest on the advance will be waived if the agreed adjusted repayment schedule is met. The adjusted repayment schedule requires Little Trinity to repay $1.25 million before and the remaining $0.25 million before December 31, The adjusted repayment schedule also includes a clause to permit earlier repayment at the option of Little Trinity. Little Trinity repaid the $1.25 million required before. On the basis that there is a reasonable probability that all payments will be made in accordance with the adjusted repayment schedule, no interest related to the advances has been accrued in the financial statements. In January 2019, the remaining $0.25 million due before December 31, 2019 was repaid by Little Trinity. 8. Property renewal Little Trinity commenced its property renewal campaign in September 2008 with the vision of restoring and revitalizing the three buildings on the Little Trinity campus: the church, Little Trinity House and 403 King Street East. Little Trinity s property renewal campaign has raised the following funds: Donations received from congregational pledges $ 2,345,972 Grants received from the Diocese of Toronto 1,050,000 Other donations and revenue 884,168 Proceeds from the sale of 250 Sutherland 810,142 Total resources received to date $ 5,090,282 Disbursements to date Project cost for 403 King Street $ 4,598,029 Church basement renovation 467,190 Previous costs allocated to the project 38,413 Total costs incurred to date $ 5,103,632 Additional funds to be raised to fund the property renewal project $ 13,350 The Property renewal project construction was completed in As documented in Note 7, the Diocese of Toronto provided a promissory note to finance $1.5 million of the costs of construction. The remaining pledges made to Little Trinity s property renewal campaign will cover the remaining funds to be raised for the project. The remaining pledges are expected to be received in

13 Notes to Financial Statements 9. Restricted funds 2017 Interfund 2018 Total Revenues Expenses Transfers Total Property renewal (Note 8) $ 1,227,091 $ 247,665 $ 1,339 $ (1,250,000) $ 223,417 Specific purpose funds Rector s discretionary 25, ,822 17, ,821 Refugee Fund 17,678 13,425 18,932-12,171 Restoration 11,100 19,955 4,062 17,459 44,452 Youth Missions 3, ,710 Sunday school Library Faithworks 75 2,455 2, Other 4, ,260-3,160 63, ,077 43,970 17, ,781 Memorial and bequest funds Externally restricted Cathy King 2, ,046 Brendan McNaughten , ,334 Internally restricted Frances Nix - 151, (100) 151,201 Peter Turcot - 3, ,614 Jo-Anne Gooderham 5,000-1,388-3,612 Lucy Upton 5,000 1,000 6, , ,932 7,405 (100) 158,427 $ 1,302,640 $ 572,674 $ 52,714 $ (1,232,641) $ 589, Financial instruments Transactions in financial instruments may result in an entity assuming or transferring to another party one or more of the financial risks described below. The required disclosures provide information that assists users of financial statements in assessing the extent of risk related to financial instruments. Liquidity Risk Liquidity risk is the risk that Little Trinity may encounter difficulty in meeting its obligations associated with its financial liabilities as they become due. Little Trinity is exposed to liquidity risk mainly in respect to its payables and promissory note payable. Little Trinity manages its liquidity risk by forecasting cash flows from operations, investing and financing activities to ensure that it has sufficient funds available to meet current and foreseeable financial obligations. It is management s opinion that the Church is not exposed to significant liquidity risk arising from its financial instruments. 11. Comparative figures Comparative figures have been adjusted to conform to changes in the current year presentation. 11