DE ETTE HOLDEN CUMMER MUSEUM FOUNDATION, INC. FINANCIAL STATEMENTS. Years Ended September 30, 2014 and 2013

Transcription

1 DE ETTE HOLDEN CUMMER MUSEUM FOUNDATION, INC. FINANCIAL STATEMENTS Years Ended September 30, 2014 and 2013

2 TABLE OF CONTENTS September 30,2014 and 2013 INDEPENDENT AUDITORS' REPORT 1-2 FINANCIAL STATEMENTS Statements of Financial Position as of September 30, 2014 and Statement of Activities for the Year Ended September 30, Statement of Activities for the Year Ended September 30, Statements of Cash Flows for the Years Ended September 30, 2014 and Notes to Financial Statements 7-19 REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION 22 ADDITIONAL INFORMATION: Schedules of the Source and Status of Funds Received from the City of Jacksonville, Florida 23-25

3 James V. Knutzen, C.P A., M.B.A., Emeritus M. Todd Middlemas, C.P.A., M.B.A. Margaret R. Dodson, C.P.A. Barbara L. Towle, C.P.A Christina E. Gibson, C.P.A. Michael J. Connelly, C.P.A. Gregory A. Kom, C.P.A., 5150 Belfort Road, Bldg. 300 JACKSONVILLE, FLORIDA (904) FAX (904) INDEPENDENT AUDITORS' REPORT Board of Trustees DeEtte Holden Cummer Museum Foundation, Inc. Jacksonville, Florida Report on the Financial Statements MEMBER OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS We have audited the accompanying financial statements of DeEtte Holden Cummer Museum Foundation, Inc. (a non-profit organization), which comprise the statements offinancial position as of September 30, 2014 and 2013 and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financial statements that are free from material misstatement, whether due to fraud or error. Auditors' Responsibility Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America, and the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditor's judgment, including the assessment of the risks of material misstatement of the fmancial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity's preparation and fair presentation of the financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

4 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 financial statements referred to above present fairly, in all material respects, the financial position of DeEtte Holden Cummer Museum Foundation, Inc. as of September 30, 2014 and 2013, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated January 16, 2015, on our consideration of DeEtte Holden Cummer Museum Foundation, Inc.'s internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements, and other matters. The purpose of that report is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on the internal control over financial reporting or on compliance. That report is an integral part of an audit performed in accordance with Government Auditing Standards in considering DeEtte Holden Cummer Museum Foundation, Inc.' s internal control over financial reporting and compliance. James Knutzen & Associates, C.P.A.' s. P.A. Jacksonville, Florida January 16,2015 2

5 STATEMENTS OF FINANCIAL POSITION September 30, 2014 and 2013 ASSETS 2014 Current assets: Cash (Note 2) 352,551 Pledges receivable (Note 6) 999,951 Inventory (Note 2) 71,370 Prepaid expenses and other 248,880 Total current assets 1,672,752 Land, buildings and equipment, net (Notes 2 and 4) 22,564,018 Investments (Notes 2 and 5) 26,802,702 Pledges receivable (Note 6) 515,379 Total assets 51,554, , ,024 60, ,050 1,036,877 22,858,247 26,437, ,178 51,212,084 LIABILITIES AND NET ASSETS Current liabilities: Accounts payable 401,292 Accrued salaries and benefits 82,785 Note payable (Note 17) 254,094 Deferred revenue (Note 2) 175,571 Total current liabilities 913, ,364 75, , ,654 Long-term liabilities: Trust Agreement (Note 20) 90,832 Total liabilities 1,004,574 Net assets: Unrestricted 22,179,406 Temporarily restricted (Notes 7 and 22) 8,896,300 Permanently restricted (Notes 8 and 22) 19,474,571 Total net assets 50,550,277 Total liabilities and net assets 51,554,851 87, ,653 21,999,700 10,189,160 18,324,571 50,513,431 51,212,084 3

6 STATEMENT OF ACTIVITIES Year Ended September 30,2014 SUPPORT AND REVENUE Temporarily Permanently Unrestricted Restricted Restricted Total Gifts and contributions 1,174, ,992 1,810,528 Grants (Note 12) 444, ,068 Memberships 174, ,579 School Board support (Note 11) 89,652 89,652 Admissions 486, ,438 Interest and dividends 567, ,713 Net realized gains 559, ,864 Capital gain distributions 71,657 71,657 Change in net unrealized gains 605, ,305 Contributions in-kind (Note 2) 136, ,278 Other income 55,604 55,604 Net assets released from restrictions (Note 9) 1,829,695 {1,829,695} Total support and revenue 4,390, ,836 5,001,686 EXPENSES Salaries and benefits 1,554,144 1,554,144 Communications 16,015 16,015 Depreciation 998, ,749 Exhibitions 216, ,323 Insurance 126, ,836 Maintenance and repairs 396, ,979 Professional and consulting fees 347, ,096 Printing 89,191 89,191 Promotion 277, ,774 Postage and freight 13,081 13,081 Supplies 124, ,923 Travel 13,775 13,775 Utilities 315, ,429 Other 90, , ,579 Total operating expenses 4,581, ,696 4,734,894 Change in net assets before collection items purchased not capitalized (190,348) 457, ,792 Collection items purchased not capitalized 229, ,946 Change in net assets (420,294) 457,140 36,846 Net assets, beginning of year 21,999,700 10,189,160 18,324,571 50,513,431 Net Asset Reclassifications (Note 22) 600,000 0,750,000) 1,150,000 Net assets, end of year 22,179,406 8,896,300 19,474,571 50,550,277 The accompanying notes are an integral part of these financial statements. 4

7 STATEMENT OF ACTIVITIES Year Ended September 30, 2013 SUPPORT AND REVENUE Temporarily Permanently Unrestricted Restricted Restricted Total Gifts and contributions 1,023,678 1,432,509 2,456,187 Grants (Note 12) 399, , ,486 Memberships 173, ,725 School Board support (Note 11) 23,375 23,375 Admissions 579, ,004 Interest and dividends 656, ,833 Net realized gains 505, ,011 Capital gain distributions Change in net unrealized gains 1,506,766 1,506,766 Contributions in-kind (Note 2) 153, ,760 Other income 76,578 76,578 Interfund transfers, net (Note 22) (1,287) 1,287 Net assets released from restrictions (Note 9) 4,147,254!4,147,254} Total support and revenue 6,575, ,152 6,780,725 EXPENSES Salaries and benefits 1,532,060 1,532,060 Communications 16,883 16,883 Depreciation 963, ,072 Exhibitions 167, ,309 Insurance 111, ,461 Maintenance and repairs 281, ,231 Professional and consulting fees 329, ,218 Printing 71,435 71,435 Promotion 257, ,646 Postage and freight 15,545 15,545 Supplies 117, ,736 Travel 13,808 13,808 Utilities 332, ,386 Other 87, , ,832 Total operating expenses 4,297, ,392 4,444,622 Change in net assets before collection items purchased not capitalized 2,278,343 57,760 2,336,103 and losses Loss on disposal of equipment 35,926 35,926 Collection items purchased not capitalized 85,000 85,000 Change in net assets 2,157,283 57,760 2,215,177 Net assets, beginning of year 19,842,283 10,131,400 18,324,571 48,298,254 Net assets, end of year 21,999,700 10,189,160 18,324,571 50,513,431 The accompanying notes are an integral part of these fmancial statements. 5

8 c.p.a. 's, P.A. Cash flows from operating activities DeETIE HOLDEN CUMMER MUSEUM FOUNDATION, INC. STATEMENTS OF CASH FLOWS Years Ended September and Change in net assets before collection items 266,792 2,336,103 purchased not capitalized and losses Adjustments to reconcile change in net assets before collection items purchased not capitalized to net cash provided by operating activities Depreciation 998, ,072 Net unrealized and realized (gain) loss on investments (1,236,827) (2,011,777) Interest and dividends restricted for long-term investments (567,713) (656,833) Change in allowance for doubtful accounts 174,452 98,287 In-Kind art acquisitions (2,000) (40,000) Changes in assets and liabilities: Inventory (10,518) 21,741 Prepaid expenses and other (129,829) 9,827 Pledges receivable (17,580) 691,245 Accounts payable and accrued salaries and benefits 91, ,338 Deferred compensation (33,012) Deferred revenue (42,133) 98,611 Other liabilities 2,833 6,729 Net cash provided (used) by operating activities (472,647) 1,603,331 Cash flows from investing activities Purchases of works of art (227,946) (45,000) Additions to capital improvements, net (704,520) (3,114,178) Net decrease investments ,566,198 Net cash provided (used) in investing activities 507,153 (1,592,980) Cash flows from financing activities Proceeds from demand note 254,094 Net cash provided by financing activities 254,094 Net increase in cash 288,600 10,351 Cash, beginning of year 63,951 53,600 Cash, end of year 352,551 63,951 The accompanying notes are an integral part of these financial statements. 6

9 NOTES TO FINANCIAL STATEMENTS September and DESCRIPTION OF THE ORGANIZATION The DeEtte Holden Cummer Museum Foundation, Inc. (the Foundation) is a non-profit Florida corporation organized for the purpose of the operation and maintenance of the Cummer Museum of Art and Gardens (the Museum) and Art Connections, the Museum's art educational center. The Museum is the largest fine arts museum in North Florida with a permanent collection of 5,000 objects. The Foundation's major sources of revenue are contributions and grants. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting The financial statements of the Foundation have been prepared on the accrual basis of accounting and accordingly reflect all significant receivables, payables, and other liabilities. Basis of Presentation Financial statement presentation follows the recommendations of the Financial Accounting Standards Board (FASB) in its Accounting Standards Codification 958. Under this standard, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets: Unrestricted Net Assets - Net assets that are not subject to donor-imposed stipulations. Temporarily Restricted Net Assets - Net assets subject to donor-imposed stipulations that mayor will be met either by actions of the Foundation and/or the passage of time. Permanently Restricted Net Assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Foundation. Generally, the donors of these assets permit the Foundation to use all or part of the income earned on related investments for general or specific purposes. Unused income in endowment funds is treated as temporarily restricted until utilized for the purpose for which it is intended. 7

10 NOTES TO FINANCIAL STATEMENTS September and continued- Fund Accounting The accounts of the Foundation are maintained in accordance with the principles of fund accounting. Under fund accounting, resources for various purposes are classified for accounting and reporting purposes into funds established according to their nature and purpose. In accordance with Financial Accounting Standards Board (F ASB) Accounting Standards Codification 958, fund balances are classified on the Statement of Financial Position as unrestricted, temporarily restricted, or permanently restricted net assets based on the absence or existence and type of donor-imposed restrictions. Investments Investments in equity securities with readily determinable fair values and all investments in debt securities are stated at fair value. Donated investments are recorded at fair value on the date received. Realized and unrealized gains and losses on investments are reported in the statement of activities as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or by law. Dividends, interest and other investment income are reported in the period earned as increases in unrestricted net assets unless the use of the assets received is limited by donor restrictions. Donor restricted investment income is reported as an increase in temporarily restricted net assets or permanently restricted net assets, depending upon the type of restriction. A common custodial investment account is maintained with a corporate trust company. However, the Foundation maintains separate records for each fund and income from the custodial account is allocated between the funds based on their respective account balances. Other investments are maintained in separate accounts. Pledges Receivable Pledges receivable are stated at unpaid balances, less applicable discounts and allowances for doubtful accounts. The Foundation provides for losses on pledges receivable using the allowance method, based on experience and other circumstances. It is the Foundation's policy to charge off uncollectible pledges when management determines the pledge will not be collected. Inventory Gift shop inventory is stated at the average cost of items available for sale. Reclassifications Certain accounts in the prior-year financial statements may have been reclassified for comparative purposes to conform with the presentation in the current-year financial statements. 8

11 NOTES TO FINANCIAL STATEMENTS September and continued- Donated Collection Items In accordance with the provisions of Financial Accounting Standards Board (F ASB) in its Accounting Standards Codification 958, the Foundation does not capitalize donated works of art or recognize them as revenues or gains. That Statement provides that such donations need not be recognized if they are added to collections that are held for public exhibition, education, or research in furtherance of public service rather than financial gain; are protected, kept unencumbered, cared for, and preserved; and are subject to a policy that requires the proceeds from sales of collection items to be used to acquire other items for collections. Land. Buildings and Equipment Land, buildings and equipment are recorded at cost, less accumulated depreciation. Items with a cost of less than 1,000 are expensed. Donated property and equipment is valued at estimated fair value at the date of donation. Depreciation is recorded using the straight-line method, half-year convention, over the estimated useful lives of the related assets. Maintenance and repairs are expensed as incurred. Art Collection The art collection, acquired through purchases and contributions since the Foundation's inception, is not recognized as an asset in the Statement of Financial Position. Purchases of collection items are recorded as decreases in unrestricted net assets in the year in which the items are acquired or as temporarily or permanently restricted net assets if the assets used to purchase the items are restricted by donors. Public Support and Revenue Recognition The Foundation recognizes contributions received, including unconditional promises to give, as assets and revenue in the period received at their fair values. All contributions are considered to be available for unrestricted use unless specifically restricted by the donor. Amounts received that are designated for future periods or restricted by the donor for specific purposes are reported as temporarily restricted or permanently restricted support that increases those net asset classes. Gifts of cash and investments are reported as restricted support if they are received with donor stipulations that limit the use of such assets. When donor restrictions expire, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the Statement of Activities as net assets released from restrictions. 9

12 NOTES TO FINANCIAL STATEMENTS September and continued- Deferred Revenue Deferred revenue may represent Museum membership dues, trustee support, exhibit underwriting, facility rental fees, school tour fees and fees for classes paid in advance. Such dues, fees and support will be recognized as income in the period in which they are earned. Deferred revenue also includes grant funds received but not yet spent for the purpose specified by the grant agreement. Contributions In-Kind The Foundation has a substantial number of volunteers who donate time for the Foundation's programs and services. Services requiring specialized skills such as electricians or carpenters have been reflected as income and expenses at the fair value of those services. Cash For purposes of the statements of cash flows, the Foundation considers all cash and interest earning deposits as cash or cash equivalents. Cash paid for interest expense was 993 and 0 for the years ending September 30, 2014 and 2013 respectively. No amounts were paid for income taxes. Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. Actual results could differ from those estimates. 3. Income Tax Status The Foundation was organized as a not-for-profit corporation as described in Section 501 (c )(3) of the Internal Revenue Code ("Code") and is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. The Foundation is also exempt from state income taxes on related income pursuant to Chapter 220 of the Florida Statutes. The Code provides for taxation of unrelated business income under certain circumstances. The foundation has no material unrelated business income; however, such status is subject to final determination upon examination of the related income tax returns by the appropriate taxing authorities. Management evaluated the Organization's tax positions and concluded that the Organization had maintained its exempt status and had taken no uncertain tax positions that require adjustment to the fmancial statements. Therefore, no provision or liability for income taxes has been included in the financial statements. The Organization'S Forms 990, Return of Organization Exempt from Income Tax are subject to examination by the IRS, generally for 3 years after they were filed. 10

13 NOTES TO FINANCIAL STATEMENTS September and continued- 4. Land. Buildings and Equipment The estimated useful lives and carrying value of land, buildings and equipment are as follows at September 30: Estimated Useful Lives Land 3,155,097 3,155,097 Grounds improvements ,738,057 4,559,607 Buildings and improvements ,074,949 19,772,938 Furnishings, equipment, and technology , ,107 Art activity center ,351,425 1,373,511 29,991,966 29,788,260 Less: Accumulated depreciation (7,427,948) (6,930,013) Land, buildings, and equipment, net 22,564,018 22,858, Investments Investments in debt and equity securities have readily determinable quoted prices in active markets and are stated at fair value in the statements of financial position. These fair value measures are Level 1 Inputs as defined by the Financial Accounting Standards Board (F ASB) in its Accounting Standards Codification 820. Increases and decreases in fair values are included in the statements of activities. As of September 30, investments consisted of: U.S. government securities 1,479,799 2,351,319 Corporate bonds 3,862,403 2,750,964 Common stock 12,095,058 10,421,487 Mutual funds 7,081,848 8,113,623 Money market funds 2,283,594 2,800,389 26,802,702 26,437,782 11

14 C.P.A. 's, P.A. NOTES TO FINANCIAL STATEMENTS September 30, 2014 and continued- 5. Investments, (continued) The Foundation adopted a revised Statement of Investment Policies & Objectives on May 26, In that Statement, the Board recognized the use of Alternative Investments as a strategy to potentially reduce the risk and/or enhance the expected return of the investment portfolio, and authorized the use of Alternative Investments. The Board acknowledges that the use of Alternative Investments can introduce unique types of risks due to the inherent structure and characteristics of many Alternative Investments which could include leverage, short sales, illiquidity and lack of transparency and regulation. The Board limits the use of Alternative Investments to 25% of the total investment assets and the allocation to any individual investment manager may not exceed 5% of the total investment assets. 6. Pledges Receivable, Net Pledges receivable represent unconditional promises to give and are due as follows at September 30: Due in less than one year 999, ,024 Due between one and five years 418, ,628 Due in greater than five years 111, ,001 1,530,329 1,861,653 Less: Discounts to present value at 2.16% and 2.85% for 2014 and 2013, respectively (14,999) (29,472) Less: Allowance for uncollectible pledges (159,979) 1,515,330 1,672,202 Current Portion 999, ,024 Long-term Portion 515, ,178 On September 27, 2014, a beneficiary of a particular trust passed away, prompting a payout due from the trust to the Museum. At September 30, the final value of the payout was estimated at 332,577, which is included above in receivables due in less than one year. The remainder of the trust is expected in greater than five years and is conservatively discounted to 111,433. In 2012, the Museum received a conditional pledge for 140,000 that would terminate upon the death of the donor. This conditional pledge has not been recognized and is not reflected on the accompanying financial statements or notes. 12

15 NOTES TO FINANCIAL STATEMENTS September 30, 2014 and continued- 7. Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes or periods at September 30: Art and Art Acquisitions 1,206,756 2,829,251 Museum Operations 1,839,352 1,947,438 Exhibitions 355,702 Music 569, ,990 Gardens 1,041, ,589 Education 23,367 (452,086) Restricted Custody 1,959,912 2,295,635 Restricted Receivables and Other 1,900,053 2,207,343 8,896,300 10,189, Permanently Restricted Net Assets At September 30, permanently restricted net assets are restricted to investment in perpetuity, the income from which is expendable to support the following programs: Museum Operations 12,357,378 12,357,378 Florida Cultural Endowment 1,200,000 1,200,000 Exhibitions 750,000 Music 1,000,000 1,000,000 Gardens 1,159, ,693 Education 3,007,500 2,807,500 19,474,571 18,324,571 13

16 NOTES TO FINANCIAL STATEMENTS September 30, 2014 and continued- 9. Net Assets Released from Restrictions Net assets were released from donor restrictions during each year by incurring expenses satisfying the restricted purposes during the years ended September 30. Museum operations Art acquisitions Capital expenditures 1,173, , , , ,508 3,062,937 Total net assets released from donor restrictions 1,829,695 4,147, Pension Plan The Foundation has a 403(b) Thrift Plan to enable employees to accumulate long-term savings for their retirement while benefiting from favorable tax treatment. The plan provides eligible employees a matching contribution up to 3 %. Total expenses for 2014 and 2013 were 21,890 and 27,082 respectively. 11. School Board Support Total support and expenses, including the value of donated services and supplies, related to the Duval County School Board contract included in the accompanying statement of activities for the years ended September 30, are as follows: Support and revenue Donated art supplies 1,500 1,500 Cash support Expenses Supplies 35,861 9,350 Professional and consulting fees

17 12. Grant Revenue NOTES TO FINANCIAL STATEMENTS September 30, 2014 and continued- Included in grant revenue for the years ended September 30 are the following: 2013 Cultural Council of Greater Jacksonville Anonymous Florida Division of Cultural Affairs Florida Historic Preservation Energy Efficiency & Conservation National Endowment for the Arts Kennedy Center for the Performing Arts Miscellaneous Grants City of Jacksonville Florida Humanities Council 322,218 68,750 37,000 11,100 5, , ,000 50,000 38,952 6,667 8,137 4, , , Functional Expenses The Foundation provides educational and cultural benefits to residents of and visitors to Jacksonville. Expenses incurred in providing these benefits for the year ended September 30 were as follows: Program Services Management & General Fundraising 3,412, , ,685 3,118,111 1,074, ,372 4,734,894 4,444,622 15

18 NOTES TO FINANCIAL STATEMENTS September 30,2014 and continued- 14. Florida Cultural Endowment Under the agreement with the State of Florida, the Foundation is required to disclose the composition of investments held for the Florida Cultural Endowment. A summary of the investment account that holds the Florida Cultural Endowment at September 30 is as follows: U. S. Government Bonds 240,284 1,184,153 Corporate Bonds 931,135 Money Market Funds 42,662 55,481 Total Cultural Endowment 1121~I The Florida Cultural Endowment consists of a 1.2 million corpus which was established with 720,000 in local funds and 480,000 in state matching funds. The State of Florida has a lien on the endowment that protects the State's investment in the event that the DeEtte Holden Cummer Museum Foundation, Inc. should declare bankruptcy. Earnings from the State of Florida Program Support Grant were used for various cultural program services and related expenses. 15. Concentrations The Foundation maintains its cash balances in three financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to 250,000 at September 30, 2014 and At September 30, 2014 and 2013 the Foundation's uninsured cash balances total 0 and 0, respectively. 16. Collections The Museum's collections are made up of paintings and art objects that are held for educational, research and curatorial purposes. Each of the items is cataloged, preserved, and cared for, and activities assessing their condition are performed continuously. The collections are subject to a policy that requires proceeds from their sales to be used to acquire other items for collections. 16

19 NOTES TO FINANCIAL STATEMENTS September 30, 2014 and continued- 17. Note Payable During the fiscal year ending September 30, 2014, the Foundation entered into an agreement for a 500,000 demand note, of which 254,094 was outstanding at September 30, The note is due and payable in consecutive monthly payments of accrued interest only, commencing on August 18, 2014, and continuing on the same day of each month thereafter until fully paid. The interest rate was the BBA LIBOR Daily Floating Rate plus 0.65% per annum. The purpose of the loan was to bridge cash flow pending receipt of pledge proceeds for renovations and equipment replacements. The demand note was secured by the Foundation's Restricted Custody account, which contained 1,959,912 as of September 30, State Grants During 2008, a 500,000 State of Florida Cultural Facilities Grant was received for renovations of the Lane Building. The grant agreement required filing of a restrictive covenant which specifies that the Foundation own and maintain the building as a cultural facility for ten years. Violation of the restrictive covenant would result in the Foundation repaying grant funds to the state according to an amortization schedule in the covenant documents. The Foundation also received a State of Florida Division of Cultural Affairs General Program Support Grant of 68,750 in 2014 and a State of Florida Historic Preservation Grant of 50,000 in Matching Requirements The State of Florida Grants of 68,750 and 50,000 for the years ended September 30, 2014 and 2013, respectively, have a requirement for local match of 68,750 and 50,000, respectively. Match requirements were met through cash and in-kind contributions. The City of Jacksonville Cultural Council, National Endowment for the Arts, and Florida Humanities Council grants also had matching requirements, which were met. 17

20 NOTES TO FINANCIAL STATEMENTS September 30,2014 and continued- 20. Trust Agreement In 2007 the Foundation entered into an agreement whereby the Foundation received funds to be held in the Foundation endowment and to be used for expenses related to a condominium property. Upon termination of the life estate interest of the resident of the condominium property, the property will be sold and the proceeds and the remaining money in the fund are to be used for the purchase of an American painting dated between 1800 and Each year five percent of the fund is to be used to pay expenses related to the property. As of September 30, 2014 and 2013 the fund held 90,832 and 87,999, respectively. 21. Endowment Funds The goals of the Foundation's investment policies are to: 1) provide funding for the operation and support of the Museum, 2) maintain purchasing power of the investment assets, 3) prudently manage the investment assets to provide additional funding for future operation and support, 4) pay all investment related expenses, 5) minimize risk and preserve capital, and 6) achieve a competitive rate of return. The investment objectives include matching or exceeding the rate ofretum determined by the sum of: 1) spending policy, 2) inflation as measured by the consumer price index, 3) investment related expenses. The operating spending policy allows up to 5.0% of the trailing twelve-quarter average of the endowment asset value, to be withdrawn annually. The Foundation's endowment funds are classified as temporarily or permanently restricted net assets, depending on the donor intent. Restricted endowment funds are as follows: Beginning balance, endowment funds Interest and dividends Unrealized gains/(loss) Realized gains/(loss) Investment fees Contributions and grants Appropriated for expenditure 24,142, , , ,588 (141,729) 461,135 (1,413,544) 22,254, ,885 1,510, ,011 (143,104) 333,973 (966,766) Ending balance, endowment funds 24,842,790 ================ 24,142,147 As of September 30, 2014, one endowment fund is below the amount of the original gift, with a deficiency of 67,500. As of September 30, 2013 two endowment funds were below the amount of the original gift. The aggregate amount of the deficiencies was 452,

21 NOTES TO FINANCIAL STATEMENTS September and continued- 22. Net Asset Reclassifications Net assets in the amount of 1,150,000 were reclassified from permanently restricted to temporarily restricted during the year ended September 30, This change was the result of two donors updating their previous gift agreements, and an internal examination of supporting documents of one older gift agreement. In addition, net assets in the amount of 600,000 were reclassified to unrestricted from temporarily restricted to resolve an historic inter-fund borrowing item. 23. Related party Transactions One board member is Chairman and CEO of a construction company which provided services in the amounts of 263,349 and 2,410,791 during the years ended September 30,2014 and 2013, respectively. Of these totals, 102,319 and 167,510 were payable as of September 30, 2014 and 2013, respectively. Additionally, one other board member is the owner of a construction company which provided services in the amount of 211,152 during the year ended September 30, Of this total, 16,630 was payable as of September 30, Subsequent Events In preparing these financial statements, the Foundation has evaluated events and transactions for potential recognition or disclosure through January 16, 2015, the date the financial statements were available to be issued. Subsequent events occurring after January 16, 2015 have not been evaluated by management. No material events have occurred since September 30, 2014 that require recognition or disclosure in the financial statements. 19

22 James V. Knutzen, C.P.A., M.B.A., Emeritus M. Todd Middlemas, C.P.A., M.B.A. Margaret R. Dodson, C.P.A. Barbara L. Towle, C.P.A. Christina E. Gibson, C.P.A. Michael J. Connelly, C.P.A. Gregory A. Korn, C.P.A., 5150 Belfort Road, Bldg. 300 JACKSONVILLE, FLORIDA (904) FAX (904) MEMBER OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS'REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS To the Board of Trustees DeEtte Holden Cummer Museum Foundation, Inc. Jacksonville, Florida We have audited, in accordance with the auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of DeEtte Holden Cummer Museum Foundation, Inc. (a nonprofit organization), which comprise the statement of financial position as of September 30, 2014, and the related statements of activities and cash flows for the year then ended, and the related notes to the fmancial statements, and have issued our report thereon dated January 16,2015. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered DeEtte Holden Cummer Museum Foundation, Inc.' s internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of DeEtte Holden Cummer Museum Foundation, Inc.'s internal control. Accordingly, we do not express an opinion on the effectiveness of the organization's internal control. A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance. 20

23 Our consideration of internal control was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit we did not identify any deficiencies in internal control that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified. Compliance and Other Matters As part of obtaining reasonable assurance about whether DeEtte Holden Cummer Museum Foundation, Inc.'s financial statements are free of material misstatement, we performed tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts. However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordingly, we do not express such an opinion. The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards. Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an opinion on the effectiveness of the entity's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the entity's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ~~~~... ~~~ James Knutzen & Associates, Jacksonville, Florida January 16,

24 James V. Knutzen, C.P.A., M.B.A., Emeritus M. Todd Middlemas, C.P.A., M.B.A. Margaret R. Dodson, C.P.A. Barbara L. Towle, C.P.A. Christina E. Gibson, C.P.A. Michael J. Connelly, C.P.A. Gregory A. Kom, C.P.A., 5150 Belfort Road, Bldg. 300 JACKSONVILLE, FLORIDA (904) FAX (904) MEMBER OF AMERICAN AND FLORIDA INSTITUTES OF CERTIFIED PUBLIC ACCOUNTANTS INDEPENDENT AUDITORS' REPORT ON SUPPLEMENTARY INFORMATION To the Board of Trustees ofdeette Holden Cummer Museum Foundation, Inc. Jacksonville, Florida We have audited the financial statements of DeEtte Holden Cummer Museum Foundation, Inc., as of and for the years ended September 30, 2014 and 2013, and have issued our report thereon dated January 16, 2015, which expressed an unmodified opinion on the fmancial statements as a whole. The information on pages is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been SUbjected to the auditing procedures applied in the audit of the fmancial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the fmancial statements or to the fmancial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the financial statements as a whole. James Knutzen & Associates, Jacksonville, Florida January 16,

25 C.P.A. '5, P.A. SUPPLEMENTARY INFORMATION SCHEDULES OF THE SOURCE AND STATUS OF FUNDS RECEIVED FROM THE CITY OF JACKSONVILLE, FLORIDA For the Years Ended September and 2013 City of Jacksonville - Cultural Services Operating Grant Contract Period: 10/1/13-9/30/14 Amount of Award: 322,218 Award 2014 Budget Actual Budget Remaining Cash receipts 322, ,218 Cash disbursements Administrative Salaries 202, ,997 Artistic Salaries 93,443 93,433 Administrative Payroll Taxes, Benefits 9,667 9,667 Artistic Payroll Taxes, Benefits 16, III 16,111 Cash receipts in excess of cash disbursements City of Jacksonville - Environmental Protection Board Contract Period: 8/9/14 Amount of Award: 5,000 Award 2014 Budget Actual Budget Remaining Cash receipts 5,000 5,000 Cash disbursements Envirofest Support 5,000 5,000 Cash receipts in excess of cash disbursements Read Independent Auditors' Report on Supplementary Information 23

26 SUPPLEMENTARY INFORMATION SCHEDULES OF THE SOURCE AND STATUS OF FUNDS RECEIVED FROM THE CITY OF JACKSONVILLE, FLORIDA For the Years Ended September and 2013 City of Jacksonville - Cultural Services Operating Grant Contract Period: 10/ /13 Amount of Award: 341,730 Award Budget 2013 Actual Budget Remaining Cash receipts 341, ,730 Cash disbursements Administrative Salaries Artistic Salaries Administrative Payroll Taxes, Benefits Artistic Payroll Taxes, Benefits 212,752 96,074 16,248 16, ,752 96,074 16,248 16,656 Cash receipts in excess of cash disbursements City of Jacksonville - Energy Efficiency Conservation Block Grant Contract Period: 8/22/12-7/25/13 Amount of Award: 38,952 Federal Grant DE-EE Award Budget 2013 Actual Budget Remaining Cash receipts 38,952 38,952 Cash disbursements Lighting upgrade 38,952 38,952 Cash receipts in excess of cash disbursements Read Independent Auditors' Report on Supplementary Information 24

27 SUPPLEMENTARY INFORMATION SCHEDULES OF THE SOURCE AND STATUS OF FUNDS RECEIVED FROM THE CITY OF JACKSONVILLE, FLORIDA For the Years Ended September 30,2014 and continued - At September 30, 2014 and 2013 no receivables were due from the City. City funds are held in a separate bank account. On October 2, 2003, the DeEtte Holden Cummer Museum Foundation, Inc. signed a restrictive covenant agreement with the City of Jacksonville. The agreement states that the Foundation agrees to operate the Art Connection Education Center as a cultural facility as defmed by the agreement guidelines for a period of ten years. If the Foundation fails to operate the facility during the frrst five years of the agreement, the City of Jacksonville is entitled to a return of a 200,149 grant for facility construction, which the Foundation received in the 2003 fiscal year. If the Foundation fails to operate the facility during the sixth through tenth years, a prorated amount of the grant must be returned to the City. 25