FINANCIAL STATEMENTS

Transcription

1 FINANCIAL STATEMENTS PAGE NO. INDEPENDENT AUDITOR S REPORT... 1 STATEMENTS OF FINANCIAL POSITION... 2 STATEMENTS OF ACTIVITIES... 3 STATEMENTS OF FUNCTIONAL EXPENSES... 4 STATEMENTS OF CASH FLOWS

2 1 INDEPENDENT AUDITOR S REPORT To the Board of Directors of The Community Partnership for Arts and Culture We have audited the accompanying financial statements of The Community Partnership for Arts and Culture (CPAC), which comprise the statement of financial position as of June 30, 2016, and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements. The prior-year summarized information has been derived from CPAC s 2015 financial statements and, in our report dated December 11, 2015, we expressed an unmodified opinion on those 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. Auditor s Responsibility Our responsibility is to express an opinion on these financial statements based on our audit. 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 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 financial 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. 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 The Community Partnership for Arts and Culture as of June 30, 2016, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America. Cleveland, Ohio December 16, 2016

3 2 STATEMENTS OF FINANCIAL POSITION JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015) TEMPORARILY RESTRICTED UNRESTRICTED TOTAL TOTAL ASSETS: Cash & Cash Equivalents $ 211,205 $ 893,010 $ 1,104,215 $ 903,568 Cash - Collateralized 37,829 37,829 37,734 Accounts Receivable 2,592 2,592 8,766 Grants Receivable 436,258 29, , ,552 Prepaid Expenses & Deposits 32,794 32,794 8,535 Investments 563, , ,715 Property & Equipment 37,640 37,640 41,730 TOTAL ASSETS $ 647,463 $ 1,596,833 $ 2,244,296 $ 2,409,600 LIABILITIES: Accounts Payable $ - $ 32,646 $ 32,646 $ 28,457 Accrued Vacation 16,230 16,230 12,790 Grants Payable 25,100 25,100 - TOTAL LIABILITIES - 73,976 73,976 41,247 NET ASSETS: Unrestricted: Undesignated 959, , ,163 Board-Designated 563, , ,715-1,522,857 1,522,857 1,381,878 Temporarily Restricted 647, , , ,463 1,522,857 2,170,320 2,368,353 TOTAL LIABILITIES & NET ASSETS $ 647,463 $ 1,596,833 $ 2,244,296 $ 2,409,600 See accompanying notes.

4 3 STATEMENTS OF ACTIVITIES YEAR ENDED JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015) TEMPORARILY RESTRICTED UNRESTRICTED TOTAL TOTAL SUPPORT Grants $ 802,515 $ 355,622 $ 1,158,137 $ 717,809 Contributions 12,425 12,425 34,704 CAC/CWF - 800,000 Total Support 802, ,047 1,170,562 1,552,513 REVENUE Fees 13,794 13, ,011 Interest Income 1,250 1, Total Revenue - 15,044 15, ,958 NET ASSETS RELEASED FROM RESTRICTIONS (1,141,527) 1,141, TOTAL SUPPORT & REVENUE (339,012) 1,524,618 1,185,606 1,656,471 EXPENSES Program Services 1,176,270 1,176, ,857 Management & General 128, , ,566 Fund Raising 33,374 33,374 31,119 Ballot Initiatives 36,000 36,000 25,000 TOTAL EXPENSES - 1,374,520 1,374,520 1,121,542 Change in Net Assets from Operating Activities (339,012) 150,098 (188,914) 534,929 NON-OPERATING ACTIVITIES Investment Income(Loss) - Board-Designated (9,119) (9,119) 2,750 Change in Net Assets (339,012) 140,979 (198,033) 537,679 Net Assets Beginning 986,475 1,381,878 2,368,353 1,830,674 Net Assets Ending $ 647,463 $ 1,522,857 $ 2,170,320 $ 2,368,353 See accompanying notes.

5 4 STATEMENTS OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015) MANAGEMENT PROGRAM AND FUND SERVICES GENERAL RAISING TOTAL TOTAL EXPENSES Personnel Costs $ 506,132 $ 71,083 $ 25,180 $ 602,395 $ 629,241 Grant Awards 472, , Professional Fees - Consulting 31,197 11,226 5,674 48, ,370 Professional Fees - Contract 34,280 34,280 17,233 Occupancy 24,621 3,054 1,082 28,757 32,385 Accounting, Audit & Banking Fees 21,833 21,833 20,600 Honoraria 21,500 21,500 13,103 Depreciation and Amortization 14,204 1, ,906 36,194 Web Hosting 10,514 2,009 12,523 14,363 Catering and Hospitality 10,904 1, ,436 18,888 Advertising and Marketing 12,136 12,136 9,518 Printing 9,734 1,490 11,224 24,357 Office Supplies and Miscellaneous 4,071 4,261 8,332 12,860 Equipment Rental 5, ,446 8,959 Investment Fees 5,245 5,245 5,508 Lodging and Travel 4,101 1, ,224 7,529 Telephone Services 4, ,062 6,948 Insurance 2,002 2,001 4,003 3,874 Legal Fees 3,831 3,831 9,099 Professional Development 3,450 3, Postage and Shipping 1, ,061 9,572 Professional Fees - Research - 67,525 Return of Unused Grant Awards - 25,776 TOTAL OPERATING EXPENSES 1,176, ,876 33,374 1,338,520 1,096,542 Ballot Initiative Contributions 36,000 36,000 25,000 TOTAL EXPENSES $ 1,212,270 $ 128,876 $ 33,374 $ 1,374,520 $ 1,121,542 See accompanying notes.

6 5 STATEMENTS OF CASH FLOWS YEAR ENDED JUNE 30, 2016 (WITH COMPARATIVE TOTALS FOR 2015) CASH FLOWS FROM OPERATING ACTIVITIES: TEMPORARILY RESTRICTED UNRESTRICTED TOTAL TOTAL Change in Net Assets $ (339,012) $ 140,979 $ (198,033) $ 537,679 Adjustments to Reconcile Change in Net Assets to Cash Provided by(used by) by Operating Activities: Unrealized Loss on Investments 21,745 21,745 23,791 Reinvested Gains and Income (12,626) (12,626) (26,541) Depreciation 16,906 16,906 8,346 Amortization - 27,848 Impact on Cash and Cash Equivalents: Accounts Receivable 6,174 6,174 2,782 Grants Receivable 360,000 10, ,922 (527,462) Prepaid Expenses & Deposits (24,259) (24,259) 11,000 Accounts Payable 4,189 4,189 13,448 Accrued Vacation 3,440 3,440 (5,983) Grants Payable 25,100 25,100 (129,440) Deferred Revenue - - (27,796) Total Adjustments 360,000 51, ,591 (630,007) Cash Provided by(used by) Operating Activities 20, , ,558 (92,328) CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of Fixed Assets (12,816) (12,816) (50,076) Cash Used by Investing Activities - (12,816) (12,816) (50,076) CASH FLOWS FROM FINANCING ACTIVITIES: Collaterized Deposits (95) (95) (94) Cash Used by Investing Activities - (95) (95) (94) NET INCREASE(DECREASE) IN CASH & CASH EQUIVALENTS 20, , ,647 (142,498) CASH & CASH EQUIVALENTS Beginning of Year 190, , ,568 1,046,066 CASH & CASH EQUIVALENTS End of Year $ 211,205 $ 893,010 $ 1,104,215 $ 903,568 See accompanying notes.

7 6 NOTES: 1. NATURE OF BUSINESS The Community Partnership for Arts and Culture (CPAC) was founded in 1997 and incorporated as a not-for-profit organization in the State of Ohio on July 12, MISSION To strengthen, unify and connect greater Cleveland s arts and culture sector. VISION Greater Cleveland s diverse arts and culture sector will be a leading partner in contributing to our community s vitality and enlivening the human experience. CPAC s website address is cultureforward.org. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES BASIS OF ACCOUNTING The financial statements of the Organization have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America ( GAAP ). BASIS OF PRESENTATION CPAC is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted, and permanently restricted. COMPARATIVE TOTALS The financial statements include certain prior year summarized comparative in total but not by class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States. Accordingly, such amounts should be read in conjunction with CPAC s financial statements for the year ended June 30, 2015, from which the comparative total amounts were derived. FUNCTIONAL ALLOCATION OF EXPENSES The costs of providing the various programs and activities have been summarized on a functional basis in the Statement of Activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

8 7 INCOME TAXES The Organization is exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code (the Code ) as a charitable organization whereby only unrelated business income, as defined by Section 509(a)(1) of the Code, is subject to federal income tax. The Organization currently has no unrelated business income. Accordingly, no provision for income taxes has been recorded. COMPENSATED ABSENCES Employees of CPAC are entitled to paid vacation, sick days, and personal days off depending on job classification, length of service, and other factors. CPAC s policy is to recognize the costs of these compensated absences as incurred. ADVERTISING Advertising costs are charged to operations in the period in which the advertisement is placed. Advertising expense was approximately $10,000 for 2016 and $6,000 for RECOGNITION OF CONTRIBUTION REVENUE Contributions received are recorded as unrestricted, temporarily restricted, and permanently restricted support depending on the existence and/or nature of any donor restrictions. Temporarily restricted net assets are reclassified to unrestricted net assets upon satisfaction of time or purpose restrictions. Permanently restricted net assets, if any, represent endowment funds which are subject to donor restrictions that the contributed principal be invested in perpetuity and only the income be utilized. CPAC considers all contributions to be unrestricted unless specifically restricted by the donor. Unconditional promises to give that are expected to be collected within one year are recorded at net realizable value. Unconditional promises to give that are expected to be collected in future years are recorded at the net present value of their estimated future cash flows. The discounts on those amounts are computed using the risk-free interest rates applicable for the years in which the promises are received. Amortization of the discounts is included in contribution revenue. Conditional promises to give are not included as support until the conditions are substantially met. Contributions of cash or other assets restricted to the acquisition of long-lived assets are recorded as temporarily restricted contributions. If there are no donor restrictions on the longlived asset s use, the donor restrictions are considered met once the long-lived assets are acquired and the temporarily restricted net assets are reclassified to the unrestricted net asset class.

9 8 RECOGNITION OF FEES FOR SERVICES Revenue from fees for services is earned as services are provided and is reported at estimated net realizable amounts due from clients, third-party payers, and others for services rendered. ACCOUNTS RECEIVABLE Accounts receivable are stated at the amount management expects to collect from outstanding balances. Management provides for probable collectible amounts through a provision for bad debt expense based on its assessment of the current status of individual receivables. Balances that are still outstanding after management has used reasonable collection efforts are written off through a charge to the allowance for doubtful accounts. The allowance for doubtful accounts at June 30, 2016 and 2015 was $-0-. PROPERTY AND EQUIPMENT Costs of property and equipment are charged against income over their estimated useful lives using straight line methods for both federal and financial reporting purposes. The policy of CPAC is to capitalize personal property purchases over $5,000 and real property purchases over $10,000. The estimated useful lives are from five to seven years using the straight-line method. Leasehold improvements are amortized over the life of the lease. Repairs and maintenance, which are not considered betterments and do not extend the useful life of property, are charged to expense as incurred. When property and equipment are retired or otherwise disposed of, the asset and accumulated depreciation are removed from the accounts and the resulting profit or loss is reflected in income. CONTRIBUTIONS All contributions are considered unrestricted unless specifically restricted by the donor. Donated items are reflected as contributions at their estimated fair market value at the time of donation. CONTRIBUTED GOODS AND SERVICES Contributed goods and services are reflected as both contribution revenue and expenses if they meet the criteria defined in accordance with Financial Accounting Standards Board ( FASB ) Accounting Standards Codification ( ASC ), Not-for-Profit Entities, in the accompanying statement of activities at their estimated fair value at date of receipt. The contributions of services are recognized if (a) the services received create or enhance non-financial assets or (b) require specialized skills that are provided by individuals possessing those assets and would typically need to be purchased if not provided. Generally, such services include speakers and trainers.

10 9 In addition, CPAC receives services from volunteers who give significant amounts of their time to CPAC s programs, fund raising campaigns, and management. No amounts have been reflected for these types of donated services as they do not meet the criteria for recognition. CASH AND CASH EQUIVALENTS For financial statement purposes, CPAC includes cash accounts and short-term investments held outside of investment portfolios to be cash and cash equivalents. At June 30, 2016 and 2015, cash and cash equivalents were comprised of bank deposits and money market funds. CONCENTRATIONS At times during the year, cash balances may exceed the related amount of federal depository insurance. CPAC has cash balances in its banks in excess of amounts federally insured. The uninsured balances totaled approximately $485,000 at June 30, CPAC maintains its cash with high quality financial institutions which CPAC believes limit these risks. CPAC also invests funds in a professionally managed portfolio that contains various securities detailed in Note 6. Such investments are exposed to various risks, such as fluctuations in market value and credit risk. The investment balances reported in the accompanying financial statements may not be reflective of the portfolio s value during subsequent periods. USE OF ESTIMATES The preparation of financial statements in conformity with accounting principles generally accepted in the United States requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure 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. MAJOR FUNDERS Major funders, defined by CPAC as annual grants or gifts amounting to $5,000 and above, consist of the following: Cleveland Foundation Cuyahoga Arts and Culture The Gund Foundation The Kresge Foundation Kulas Foundation John P. Murphy Foundation Ohio Arts Council (OAC) WEBSITE DEVELOPMENT CPAC completed a website enhancement project in Costs incurred have been capitalized on the Statement of Financial Position in accordance with FASB Topic Intangibles - Goodwill and Other and was fully amortized in 2015.

11 10 FAIR VALUE OF FINANCIAL INSTRUMENTS FASB ASC Topic Fair Value Measurements and Disclosures defines fair value and establishes a framework for measuring fair value for those assets and liabilities that are measured at fair value on a recurring basis. In accordance with the Fair Value Measurements and Disclosures Topic, CPAC has categorized its applicable financial instruments into a required fair value hierarchy. The fair value hierarchy gives the highest priority to quoted prices in active markets for identical assets or liabilities (Level 1) and the lowest priority to unobservable inputs (Level 3). For CPAC, the financial assets and liabilities reported at fair value are based upon quoted prices for identical assets or liabilities in an active market that CPAC has the ability to access (Level 1). As of and for the years ended June 30, 2016 and 2015, only CPAC s investments were measured at fair value on a recurring basis and are subject to the Fair Value Measurements and Disclosures Topic of FASB ASC. SUBSEQUENT EVENTS CPAC has evaluated its subsequent events for potential recognition and/or disclosure in the June 30, 2016 financial statements through December 16, 2016, the date that the financial statements were available to be issued. 3. PROPERTY & EQUIPMENT At June 30, the major classes of property and equipment are as follows: Leasehold Improvements $ 50,076 $ 50,076 Computer Equipment 12,816 17,859 Furniture, Fixtures, & Office Equipment 6,505 6,505 69,397 74,440 Less Accumulated Depreciation (31,757) (32,710) Property, Plant & Equipment Net $ 37,640 $ 41,730 Depreciation expense amounted to $16,906 and $8,346 in 2016 and 2015, respectively. 4. GRANTS PAYABLE As of June 30, 2016 and 2015, CPAC had grants payable to multiple awardees in the amount of $25,100 and $-0-, respectively. Of the $600,000 in fellowship grants awarded in 2016 ($15,000 per 40 awardees), $472,779 has been expensed as reflected in the Statement of Activities. The balance of the total grant award as of June 30, 2016 in the amount of $127,221 will be paid to the awardees upon monthly presentation of eligible reimbursable expenses under the Creative Workforce Fellowship Agreement. Monthly reimbursements to each awardee is capped at $3,000.

12 11 5. RETIREMENT PLAN CPAC has a 403(b) defined contribution retirement plan. CPAC s contribution to the plan was approximately $45,000 (2016) and $46,000 (2015). 6. DESCRIPTION OF PROGRAM SERVICES The following program services are included in the accompanying financial statements: Provide counsel and resources to individual artists, arts and cultural organizations and others engaged in arts and cultural programming. License entrepreneurial training (Artist as an Entrepreneur Institute) for presentation locally, regionally and nationally; develop online program. Conduct research analysis of the arts and culture industry, e.g. economic, marketing, and programming (Culture Pulse) Conduct series of events (Creative Intersections) focused on the connection of arts and culture to public safety Facilitate public forums (Arts & Culture Roundtable) and present public presentations regarding the arts and culture sector Conduct outreach and provide counsel and resources regarding the intersection of arts and culture with other industries Implement and evaluate grantsmaking program for Cuyahoga County individual artists (Creative Workforce Fellowship) Implement and update organizational website (Cultureforward.org) and online clearinghouse of resources and information for artists (MyCreativeCompass.org) Conduct public officials breakfast for arts and culture sector 7. WEBSITE DEVELOPMENT COSTS Website development costs are being amortized on a straight-line basis over thirty-six (36) months. Amortization expense amounted to $ -0- (2016) and $27,848 (2015).

13 12 8. INVESTMENTS Investments consist of the following as of June 30: Equities $ 300,272 $ 378,543 Fixed Income 147, ,080 Other Assets 90,559 45,677 Cash Equivalents 25,102 2,415 $ 563,596 $ 572,715 Investment fees amounting to $5,245 (2016) and $5,508 (2015) and are included in the Statement of Functional Expenses. 9. ARTISTS IN RESIDENCE LOAN COLLATERAL In 2012, CPAC set up a two-year pilot program to establish an artist s residency within a neighborhood of Cleveland, Ohio. As part of the program, CPAC agreed with a local bank to collateralize 25% of any loans originated by the bank, with a maximum collateralization of $37,500. At June 30, 2016 and 2015, the amount of collateralized deposits with the bank, including accumulated interest, amounted to $37,829 and $37,734, respectively. 10. OPERATING LEASE COMMITMENTS CPAC operates at its office in The Tower Press Building, Cleveland, Ohio, providing easy access for clients located in an arts and cultural district. Lease terms call for monthly rent of $2,059 through December 31, CPAC also leases certain office equipment through August Rent expense amounted to approximately $31,000 (2016) and $30,000 (2015). Minimum annual lease payments are as follows: 2017 $ 24, ,356 $ 37, TEMPORARILY RESTRICTED NET ASSETS When a donor restriction expires, that is when a stipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statement of activities as assets released from restriction. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted.

14 13 Temporarily restricted assets and related activity consist of the following: 2016 NET ASSETS BEGINNING RELEASED FROM ENDING Purpose Funder NET ASSETS CONTRIBUTIONS RESTRICTION NET ASSETS Operations The Kresge Foundation $ - $ 500,000 $ (250,000) $ 250,000 Operations The Gund Foundation 105, ,000 (210,000) 105,000 Creative Workforce Fellowship IV Cuyahoga Arts and Culture 765,850 (589,005) 176,845 Creative Communities LINC 68,367 68,367 Organizational Infrastructure Cuyahoga Arts and Culture 46,258 92,515 (92,522) 46,251 Public Opinion Research The Gund Foundation 1,000 1,000 $ 986,475 $ 802,515 $ (1,141,527) $ 647, NET ASSETS BEGINNING RELEASED FROM ENDING NET ASSETS CONTRIBUTIONS RESTRICTION NET ASSETS Purpose Operations The Gund Foundation $ 105,000 $ 210,000 $ (210,000) $ 105,000 Operations The Kresge Foundation 208,000 (208,000) - Creative Workforce Fellowship IV Cuyahoga Arts and Culture 69, ,000 (103,362) 765,850 Creative Communities LINC 68,367 68,367 Organizational Infrastructure Cuyahoga Arts and Culture 44,348 92,515 (90,605) 46,258 Arts & Health Surdna Foundation 40,000 (40,000) - Space Guide Dominion Foundation 5,000 (5,000) - Artists in Residence Key Foundation 2,027 (2,027) - Public Opinion Research The Gund Foundation - 50,000 (49,000) 1,000 $ 541,954 $ 1,152,515 $ (707,994) $ 986,475 For the year ended June 30, 2016, CPAC realized a total decrease in net assets of $198,033. The total decrease is comprised of 1) a decrease in temporarily restricted net assets of $339,012 (reflected in the above table) resulting from the application of generally accepted principles to grants pledged or received with donor-imposed restrictions, and 2) an unrestricted net asset increase of $150,098. For the year ended June 30, 2015, CPAC realized a total increase in net assets of $537,679. The total increase is comprised of 1) an increase in temporarily restricted net assets of $444,521 (reflected in the above table) resulting from the application of generally accepted principles to grants pledged or received with donor-imposed restrictions, and 2) an unrestricted net asset increase of $93,158.

15 BOARD-DESIGNATED NET ASSETS In September, 2006, the Board approved a Projects and Budget Stabilization Fund to create asset balances to allow for shortfalls from economic fluctuations, single or multi-year project opportunities, or capital expenditures. All withdrawals from the account require Board approval. Interest, gains and earnings from investments accrue to the Fund. All investment fees/expenses and fund-related investment losses, to the extent of cumulative board-designations, are borne by operating assets. Changes in the designated fund are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Board-Designated Net Assets - July 1, 2014 $ 569,965 $ - $ - $ 569,965 Investment Return: Interest and Dividend Income 26,541 26,541 Unrealized and Realized Gains (23,791) (23,791) Total Investment Return 2, ,750 Board-Designation of Net Assets - Board-Designated Net Assets - June 30, , ,715 Investment Return: Interest and Dividend Income 12,626 12,626 Unrealized and Realized Losses (21,745) (21,745) Total Investment Return (9,119) - - (9,119) Board-Designation of Net Assets - Board-Designated Net Assets - June 30, 2016 $ 563,596 $ - $ - $ 563,596