(A Public Telecommunications Entity Operated by the University of Maryland Eastern Shore) FINANCIAL STATEMENTS, REQUIRED SUPPLEMENTARY INFORMATION, AND OTHER SUPPLEMENTARY INFORMATION Years Ended June 30, 2013 and 2012
C O N T E N T S INDEPENDENT AUDITOR S REPORT 1 INDEPENDENT AUDITOR S 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 4 REQUIRED SUPPLEMENTARY INFORMATION: Management discussion and analysis 7 BASIC FINANCIAL STATEMENTS: Statements of net assets 10 Statements of revenues, expenses and changes in net assets 11 Statements of cash flows 12 Notes to financial statements 13 OTHER SUPPLEMENTARY INFORMATION: Schedule of functional expenses 18 Page
MHM ~ m 1111 Mayer Hoffman McCann P.C. An Independent CPA Firm 28614 Marlboro Ave nue, SUite 103 PO Box 1187 Easton, Maryl and 21601 410-822-6950 ph 410-820-904 2 fx www.mhmcpa.com INDEPENDENT AUDITOR'S REPORT To the University President and Vice President for Student Affairs and Enrollment Management, University of Maryland Eastern Shore, and the Station General Manager WESM 91.3 FM Report on the Financial Statements We have audited the accompanying financial statements of WESM 91.3 FM as of and for the years ended June 30, 2013 and 2012, and the related notes to the financial statements, which collectively comprise WESM 91.3 FM 's basic financial statements as listed in the foregoing table of contents. 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 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 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. ~'I,"/l1b e r d 1'''_",lOn I delljarional a global 'lei>',ol k o( indep end,~n l accolmcing firms
To the University President and Vice President for Student Affairs and Enrollment Management, University of Maryland Eastern Shore, and the Station General Manager WESM 91.3 FM Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of WESM 91.3 FM, as of June 30, 2013 and 2012, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.. Other Matters Required Supplementary Information Accounting principles generally accepted in the United States of America require that the management s discussion and analysis on pages 7 through 9 be presented to supplement the basic financial statements. Such information, although not a part of the basic financial statements, is required by the Governmental Accounting Standards Board, who considers it to be an essential part of financial reporting for placing the basic financial statements in an appropriate operational, economic, or historical context. We have applied certain limited procedures to the required supplementary information in accordance with auditing standards generally accepted in the United States of America, which consisted of inquiries of management about the methods of preparing the information and comparing the information for consistency with management s responses to our inquiries, the basic financial statements, and other knowledge we obtained during our audits of the basic financial statements. We do not express an opinion or provide any assurance on the information because the limited procedures do not provide us with sufficient evidence to express an opinion or provide any assurance. Other Information Our audits were conducted for the purpose of forming an opinion on the financial statements as a whole. The schedule of functional expenses on page 18 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 audits of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the schedule of functional expenses is fairly stated in all material respects in relation to the financial statements as a whole. -2-
To the University President and Vice President for Student Affairs and Enrollment Management, University of Maryland Eastern Shore, and the Station General Manager WESM 91.3 FM Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our report dated February 25,2014 on our consideration of WESM 91.3 FM'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 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 the WESM's internal control over financial reporting and compliance. 1'~ ;&tp,ii4~,vt /? f/ Easton, Maryland February 25, 2014-3-
-_.. I Mayer Hoffman McCann P.C. An Independent CPA Firm I 28614 Marlboro Avenue, Suite 103 PO Box 1187 Easton, Maryland 21601 410-822-6950 ph 410-820-9042 fx ww w. mhmcpa. com INDEPENDENT AUDITOR'S 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 University President and Vice President for Student Affairs and Enrollment Management, University of Maryland Eastern Shore, and the Station General Manager WESM 91.3 FM 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 WESM 91.3 FM, as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the WESM 91.3 FM's basic financial statements and have issued our report thereon dated February 25, 2014. Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered WESM 91.3 FM'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 WESM 91.3 FM 's internal control. Accordingly, we do not express an opinion on the effectiveness of WESM 91.3 FM's internal control. Our consideration of internal control was for the limited purpose described in the preceding paragraph and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies and therefore, material weaknesses or significant deficiencies may exist that were not identified. However, we identified certain deficiencies in internal control that we consider to be material weaknesses. 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 WESM 91.3 FM '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. We consider the following deficiency in WESIVI 91.3 FM's internal control to be a material weakness. -4- Member r.f('t ston Jnt rndt/o'lal a gloodl networl< nf Ind"pendenl dccountmg film
To the University President and Vice President for Student Affairs and Enrollment Management, University of Maryland Eastern Shore, and the Station General Manager Preparation of Financial Statements and Year-End Accounting Records Management is responsible for establishing and maintaining internal controls and for the fair presentation of its financial position, results of operations, cash flows, and disclosures in the financial statements, in conformity with U.S. generally accepted accounting principles (GAAP). The Station does not have a system of internal controls that would enable management to conclude the financial statements and related disclosures are complete and presented in accordance with GAAP. As such, management requested us to prepare a draft of the financial statements, including the related footnote disclosures. The preparation of this draft included material audit adjustments to properly record prepaid expenses, capital assets, deferred revenue, revenue and in-kind support from UMES. The outsourcing of the financial statement preparation is not unusual in a small organization and is a result of management s cost benefit decision to rely on our accounting expertise rather than incurring this internal resource cost; however, we believe there are improvements that need to be made to minimize the number of year-end audit adjustments. It is our understanding the Station s complete financial records are not easily accessible by Station personnel. We recommend the Station work with UMES finance personnel to prepare an adjusted trial balance prior to the audit fieldwork. Specifically, prior to the audit start date, the Station should analyze all grant accounts that were active during the year for prepaid expenses. Also, the performance of the year-end fixed asset inventory should be completed in conjunction with UMES personnel to ensure UMES records have been updated as of year-end. In addition, a detailed review of all Station related expense accounts should be reviewed for accuracy of classification and completeness. It is recommended the review of the expense accounts be performed on a periodic basis, preferably monthly and no later than quarterly, and that any adjustments be made at that time by UMES finance personnel. Views of responsible officials: WESM 91.3 FM does not have the financial resources or individuals available within the department to perform the accounting functions listed previously. In addition, the new Kuali Financial System does not currently provide a readily accessible overview of the station s financial position (i.e. account balance inquiries, month end reports, etc.). Because WESM 91.3 FM has unique accounting needs, separate from most other departments within the University, the Station Management recommends that the Comptroller s office provide monthly statements of balances for each grant account and gift account, so the station can compare these totals against our own independent financial monitoring. WESM 91.3 FM s response to the findings identified in our audit is described above. WESM 91.3 FM s response was not subjected to the auditing procedures applied in the audit of the financial statements and, accordingly, we express no opinion on it. We noted certain matters we reported to management of WESM 91.3 FM in a separate letter dated February 25, 2014-5-
To the University President and Vice President for Student Affairs and Enrollment Management, University of Maryland Eastern Shore, and the Station General Manager Compliance and Other Matters As part of obtaining reasonable assurance about whether WESM 91.3 FM's financial statements are free from 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 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 WESM 91.3 FM's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering WESM 91.3 FM's internal control and compliance. Accordingly, this communication is not suitable for any other purpose. ~~~~~//~. February 25, 2014-6-
Management s Discussion and Analysis (MD&A) June 30, 2013 The following discussion and analysis is an overview of the financial position and activities of WESM 91.3 FM (WESM) for the year ended June 30, 2013. Please read this document in conjunction with the information contained in the WESM financial statements which follow this section. FINANCIAL HIGHLIGHTS WESM s assets exceeded liabilities at the close of fiscal year 2013 by $63,103, which represents a decrease of $6,192,(or 9%) from the last fiscal year. This decrease is due to depreciation expense reducing WESM s net investment in capital assets. WESM s operating revenues increased $20,542 (or 13%) while operating expenses decreased $7,123 (or 2%). These changes result from the fact WESM deferred a large portion of its 2012 Corporation for Public Broadcasting grant revenue at the end of prior year, and nearly all of that grant revenue was recognized in 2013. OVERVIEW OF THE FINANCIAL STATEMENTS These financial statements consist of two sections: 1. Management s Discussion and Analysis (this section). 2. The basic financial statements (including the notes to the financial statements). These statements are prepared in conformity with Governmental Accounting Standards Board Statement No. 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. This report also contains other supplementary information to the basic financial statements themselves. BASIC FINANCIAL STATEMENTS The basic financial statements present information for WESM as a whole, in a format designed to make the statements easier for the reader to understand. The statements in this section include the Statements of Net Assets, the Statements of Revenues, Expenses and Changes in Net Assets, and the Statements of Cash Flows. The Statements of Net Assets present the current and long-term portions of assets and liabilities separately. The difference between total assets and total liabilities is net assets and may provide a useful indicator of whether the financial position of WESM is improving or deteriorating. The Statements of Revenues, Expenses and Changes in Net Assets present information showing how WESM s assets changed as a result of current year operations. Regardless of when cash is affected, all changes in net assets are reported when the underlying transactions occur. As a result, there are transactions included that will not affect cash until future fiscal periods. -Continued- -7-
Management s Discussion and Analysis (MD&A) June 30, 2013 The Statements of Cash Flows present information showing how WESM s cash changed as result of current year operations. The cash flow statement is prepared using the direct method and includes the reconciliation of operating income (loss) to net cash provided (used) by operating activities. The notes to the financial statements provide additional information that is essential to a full understanding of the data provided in the financial statements. FINANCIAL ANALYSIS OF THE STATION Statements of Net Assets as of June 30, 2013 and 2012 2013 2012 Current assets $ 219,959 $ 179,771 Capital assets 26,639 35,595 Total assets 246,598 215,366 Current liabilities 183,495 146,071 Net assets: Invested in capital assets 26,639 35,595 Unrestricted 36,464 33,700 Total net assets $ 63,103 $ 69,295 Statements of Revenues, Expenses and Changes in Net Assets as of June 30, 2013 and 2012 2013 2012 Operating revenues $ 175,954 $ 155,412 Operating expenses 471,880 479,003 Operating loss (295,926) (323,591) Non-operating revenues 289,734 296,112 Change in net assets (6,192) (27,479) Net assets, beginning of year 69,295 96,774 Net assets, end of year $ 63,103 $ 69,295 -Continued- -8-
Management s Discussion and Analysis (MD&A) June 30, 2013 CAPITAL ASSETS As of June 30, 2013, WESM had invested $288,940 in capital assets, and had incurred accumulated depreciation of $262,301. Capital assets consist of the Station s building and equipment. ECONOMIC FACTORS AND NEXT YEAR S OPERATIONS WESM s management considered the following factors and indicators when planning next year s operations: 1. The Station is engaged in a major strategic analysis and assessment, with assistance from a third-party public radio consulting firm, designed to assist the station in reorienting its mission, programming and operations. Additionally, the consultation is designed to research and address declining listenership and membership revenues. 2. As part of the above consultation, the station is pursuing options for signal expansion and potentially partnering with other media organizations, which should complement the efforts outlined above. Management strongly believes that signal expansion is the station s most critical need for sustained revenue growth, and is actively seeking ways to move forward on this goal. 3. Management continues to propose a master budget plan for each fiscal year, which is presented to station governance (the Vice-President for Student Affairs and Enrollment Management). The annual budget proposal is used for strategic planning purposes, and additionally helps station management develop a consistent monitoring baseline for its nonsalary operating budget. 4. One challenge the station will be facing is the recent conversion by the University to a new financial records system, called Kuali. Kuali does not provide any way of easily querying current account balances for any of the station s grant accounts. Monitoring station spending across all accounts, which has been challenging previously under the former financial records system, will continue to pose difficulties for station management. 5. The Station foresees hiring a Development position in the near future, which we believe will considerably improve opportunities to increase underwriting and membership support from the community. CONTACTING WESM MANAGEMENT This financial report is designed to provide our financial supporters and listeners with a general overview of WESM s finances and to show WESM s accountability for the money it receives. If you have any questions about this report or need additional financial information, contact Stephen Williams, General Manager, WESM 91.3 FM, University of Maryland Eastern Shore, College Backbone Road, Princess Anne, Maryland 21853. -9-
STATEMENTS OF NET ASSETS Years Ended June 30, 2013 and 2012 2013 2012 A S S E T S CURRENT ASSETS Cash and cash equivalents $ 190,262 $ 155,167 Donor premium inventory 3,979 3,189 Prepaid expenses 25,718 21,415 TOTAL CURRENT ASSETS 219,959 179,771 MUSIC COLLECTION (NOTE 1) - - CAPITAL ASSETS, NET 26,639 35,595 TOTAL ASSETS 246,598 215,366 L I A B I L I T I E S CURRENT LIABILITIES Accounts payable 3,492 1,758 Deferred revenue 180,003 144,313 TOTAL CURRENT LIABILITIES 183,495 146,071 N E T P O S I T I O N NET INVESTMENT IN CAPITAL ASSETS 26,639 35,595 UNRESTRICTED 36,464 33,700 TOTAL NET POSITION $ 63,103 $ 69,295 See Notes to Financial Statements -10-
STATEMENTS OF REVENUES, EXPENSES AND CHANGES IN NET ASSETS Years Ended June 30, 2013 and 2012 2013 2012 OPERATING REVENUES Grants from Corporation for Public Broadcasting $ 133,160 $ 113,127 Corporate and public donations 32,088 29,706 Underwriting fees 10,706 12,579 TOTAL OPERATING REVENUES 175,954 155,412 OPERATING EXPENSES Program expenses: Programming and production 259,219 269,463 Broadcasting and engineering 43,279 33,356 Program information and promotion 38,817 40,159 Management and general 86,759 93,344 Fundraising 43,806 42,681 TOTAL OPERATING EXPENSES 471,880 479,003 OPERATING LOSS (295,926) (323,591) NON-OPERATING REVENUES (EXPENSES) University support of operating expenses 289,734 318,595 Loss on fixed asset disposal - (22,483) NET NONOPERATING REVENUES 289,734 296,112 CHANGE IN NET ASSETS (6,192) (27,479) NET ASSETS, BEGINNING OF YEAR 69,295 96,774 NET ASSETS, END OF YEAR $ 63,103 $ 69,295 See Notes to Financial Statements -11-
STATEMENTS OF CASH FLOWS Years Ended June 30, 2013 and 2012 2013 2012 CASH FLOWS FROM OPERATING ACTIVITIES Receipts from the Corporation For Public Broadcasting grant $ 168,850 $ 214,356 Corporate and public donations 32,088 29,706 Underwriting support 10,706 12,579 Payments to suppliers (148,510) (168,133) Payments to/for employees (292,042) (279,845) NET CASH USED BY OPERATING ACTIVITIES (228,908) (191,337) CASH FLOWS FROM NONCAPITAL FINANCING ACTIVITIES General appropriation from the University of Maryland Eastern Shore 264,696 293,044 CASH FLOWS FROM CAPITAL AND RELATED FINANCING ACTIVITIES Acquisition of capital assets (693) (1,123) NET INCREASE IN CASH 35,095 100,584 CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR 155,167 54,583 CASH AND CASH EQUIVALENTS, END OF YEAR $ 190,262 $ 155,167 RECONCILIATION OF OPERATING LOSS TO NET CASH FLOWS FROM OPERATING ACTIVITIES Operating loss $ (295,926) $ (323,591) Adjustments to reconcile operating loss to net cash used by operating activities Depreciation 9,649 15,762 In-kind facilities and administrative support from the University of Maryland Eastern Shore 25,037 25,550 Changes in assets and liabilities Decrease (increase) in grants receivable - 31,443 Decrease (increase) in donor premium inventory (790) 225 Increase in prepaid expenses (4,301) (1,581) Increase (decrease) in accounts payable 1,733 (8,931) Increase in deferred revenue 35,690 69,786 NET CASH USED BY OPERATING ACTIVITIES $ (228,908) $ (191,337) See Notes to Financial Statements -12-
NOTES TO FINANCIAL STATEMENTS (1) Basis of presentation and summary of significant accounting policies Nature of operations WESM 91.3 FM (the Station) is a public radio station owned and operated by the University of Maryland Eastern Shore (UMES) in Princess Anne, Maryland, under a license granted by the Federal Communications Commission (FCC). The University System of Maryland (USM), and its component institutions which include UMES, is governed by a Board of Regents appointed by the Governor of the State of Maryland. The Station s programming of music, news, and cultural information is intended for a general audience in the tri-state area of Maryland, Virginia, and Delaware on the Delmarva Peninsula, as well as portions of Maryland and Virginia located across the Chesapeake Bay. Basis of presentation For financial reporting purposes, WESM is considered a specialpurpose government engaged only in business-type activities. Accordingly, the Station's financial statements have been presented using the economic resources measurement focus and the accrual basis of accounting. Financial statement presentation The Station follows Governmental Accounting Standards Board (GASB) Statement 35, Basic Financial Statements and Management s Discussion and Analysis for Public Colleges and Universities. Under the provisions of GASB 35, resources are classified for accounting and reporting purposes into the following four net assets categories: Invested in capital assets, net of related debt Capital assets, net of accumulated depreciation, outstanding principal balances of debt attributable to the acquisition, construction or improvement of those assets and unspent borrowings. Restricted nonexpendable Net assets subject to externally imposed stipulations that they be maintained permanently by the Station. Such assets include permanent endowment funds. Restricted expendable Net assets whose use by the Station is subject to externally imposed stipulations that can be fulfilled by actions of the Station pursuant to those stipulations or that expire by the passage of time. Unrestricted Net assets that are not subject to externally imposed stipulations. Unrestricted net assets may be designated for specific purposes by action of management, Board of Trustees, Board of Regents or may otherwise be limited by contractual agreements with outside parties. When an expenditure is incurred for purposes for which both restricted and unrestricted funds are available, the Station considers restricted funds to have been spent first. There were no restricted net assets as of June 30, 2013 and 2012. The Station has the option to apply all Financial Accounting Standards Board (FASB) pronouncements issued after November 30, 1989, unless FASB conflicts with GASB. The Station has elected not to apply FASB pronouncements issued after the applicable date. -Continued- -13-
NOTES TO FINANCIAL STATEMENTS (1) Basis of presentation and summary of significant accounting policies continued Cash and Cash equivalents For the purpose of the statement of cash flows, funds held by the Maryland state treasurer on behalf of the Station have been treated as a cash equivalent. Inventory Inventory, which consists of premium gifts on hand provided to donors, is stated at cost. Cost is determined on the first-in, first-out method. Inexhaustible music collection The value of the extensive music collection, including compact disc library, is not readily determinable. Therefore, the Station has not recorded a cost for the collection. Property and equipment Property and equipment are carried at original cost and depreciated on a straight-line basis over the estimated lives of the assets. The cost of maintenance and repairs is charged to expense as incurred and significant renewals and betterments are capitalized. The estimated depreciable lives of property and equipment are as follows at June 30, 2013 and 2012: Building Computers, electronic equipment, and station furniture Broadcast equipment 39 years 5 10 years 15 years Revenue Grant funding received from the Corporation for Public Broadcasting (CPB) is recorded as unrestricted or restricted expendable support depending upon the existence and/or nature of any restrictions. Grant funding is recorded as deferred revenue in accordance with the terms of the grant until such time as the funds are expended. Operating revenues are those revenues generated from the primary operations of the Station. All other revenues are reported as non-operating revenues. Operating expenses are those expenses that are essential to the primary operations of the Station. All other expenses are reported as non-operating expenses. Contributed services Two volunteers donate time to the Station and its programs; however, these donated services are not reflected in the financial statements since they do not meet the criteria for recognition as contributed services. Management estimates that approximately 140 hours are donated annually. Use of estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. -14-
NOTES TO FINANCIAL STATEMENTS (2) Property and equipment Property and equipment consists of assets held by the University System of Maryland on behalf of the Station. Following are the changes in capital assets for the years ended June 30, 2013 and 2012: 2013 Balance Balance July 1, 2012 Additions Disposals June 30, 2013 Capital assets Building $ 41,306 $ - $ - $ 41,306 Office equipment 95,121 693 (18,251) 77,563 Broadcasting equipment 170,071 - - 170,071 Total capital assets 306,498 693 (18,251) 288,940 Less accumulated depreciation Building (27,537) (1,059) - (28,596) Office equipment (89,471) (2,182) 18,251 (73,402) Broadcasting equipment (153,895) (6,408) - (160,303) Total accumulated depreciation (270,903) (9,649) 18,251 (262,301) Capital assets, net $ 35,595 $ (8,956) $ - $ 26,639 2012 Balance July 1, 2011 Additions Disposals Balance June 30, 2012 Capital assets Building $ 41,306 $ - $ - $ 41,306 Office equipment 170,328 1,123 (76,330) 95,121 Broadcasting equipment 309,584 - (139,513) 170,071 Total capital assets 521,218 1,123 (215,843) 306,498 Less accumulated depreciation Building (26,478) (1,059) - (27,537) Office equipment (168,353) (3,629) 82,511 (89,471) Broadcasting equipment (253,671) (11,074) 110,850 (153,895) Total accumulated depreciation (448,502) (15,762) 193,361 (270,903) Capital assets, net $ 72,716 $ (14,639) $ (22,482) $ 35,595 Depreciation expense for the years ended June 30, 2013 and 2012 was $9,649 and $15,762, respectively. -15-
NOTES TO FINANCIAL STATEMENTS (3) Federal taxes The Station is tax exempt under Internal Revenue Code Section 115 as a quasigovernmental organization due to its affiliation with UMES and the State of Maryland. As a result, the Station is not required to file federal income tax returns, except on unrelated business taxable income. The Station does not have any uncertain tax positions requiring disclosure. (4) Reconciliation to federal report The Station uses different categories for reporting revenues to CPB. These categories and related amounts are as follows for June 30, 2013: Non-federal financial support $ 307,491 CPB grants 133,160 Indirect administrative support 25,037 Total support and revenue $ 465,688 (5) Related party transactions The property for the installation of towers and broadcast equipment is provided by UMES. The Station is also subsidized by UMES in the form of personnel, professional services, and occupancy costs. During the years ended June 30, 2013 and 2012, the Station received $264,696 and $293,044, respectively, in direct support from the University. This support comprised 55% and 61%, respectively, of total Station expenditures. In addition to direct support, UMES supplies indirect administrative support, plant operations and utilities. During the years ended June 30, 2013 and 2012, indirect support totaled $25,037 and $25,551, respectively. (6) Concentrations The Station is supported by a grant from CPB, public support, and underwriting. In addition, UMES provides personnel, administrative support and facilities. For the year ended June 30, 2013, 62% and 29% of the Station s support was provided by UMES and CPB, respectively. For the year ended June 30, 2012, 67% and 24% of the Station s support was provided by UMES and CPB, respectively. In addition, the Station purchases a significant amount of programming through National Public Radio (NPR). During the years ended June 30, 2013 and 2012, purchases from NPR comprised 50% and 52%, respectively, of programming purchased. -16-
NOTES TO FINANCIAL STATEMENTS (7) Advertising costs The Station uses advertising to promote its programs among the audiences it serves. Advertising costs are expensed as incurred. Advertising expense for the years ended June 30, 2013 and 2012 was $9,612 and $10,175, respectively. (8) Subsequent events The Station has evaluated subsequent events through February 25, 2014, which is the date the financial statements were available to be issued. -17-
SUPPLEMENTARY SCHEDULE
SCHEDULE OF FUNCTIONAL EXPENSES Year Ended June 30, 2013 With Comparative Totals For June 30, 2012 Program Services Support Services Total Management Total Public Program and Support 2013 2012 Programming Engineering Information Services General Fundraising Services Total Total Personnel costs Salaries and wages $ 104,058 10,406 20,812 135,276 $ 41,623 $ 31,217 72,840 $ 208,116 $ 200,367 Payroll tax 4,899 490 980 6,369 1,959 1,470 3,429 9,798 10,394 Health insurance 31,106 3,111 6,221 40,438 12,442 9,332 21,774 62,212 58,243 Retirement programs 5,958 596 1,192 7,746 2,383 1,787 4,170 11,916 10,841 Total personnel costs 146,021 14,603 29,205 189,829 58,407 43,806 102,213 292,042 279,845 University administrative support 14,578 - - 14,578 10,459-10,459 25,037 25,551 Operating expenses Contract services 73,146 - - 73,146 - - - 73,146 81,014 Equipment maintenance and repair - 28,676-28,676 - - - 28,676 18,340 Association dues 14,624 - - 14,624 - - - 14,624 13,692 Office expenses 198 - - 198 3,077-3,077 3,275 3,920 Equipment and technology 760-760 4,066-4,066 4,826 2,528 Accounting and legal - - - - 10,750-10,750 10,750 22,461 Advertising - - 9,612 9,612 - - - 9,612 10,175 Fines - - - - - - - - 2,000 Travel 205 - - 205 - - - 205 1,923 Other supplies 38 - - 38 - - - 38 1,792 Total operating expenses 88,971 28,676 9,612 127,259 17,893-17,893 145,152 157,845 Depreciation 9,649 - - 9,649 - - - 9,649 15,762 TOTAL EXPENSES $ 259,219 $ 43,279 $ 38,817 $ 341,315 $ 86,759 $ 43,806 130,565 $ 471,880 $ 479,003-18-