Financial Statements Modified Cash Basis and Report of Independent Certified Public Accountants Leadership Oklahoma City, Inc.
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Leadership Oklahoma City, Inc. Grant Thornton LLP 211 N Robinson, Suite 1200 Oklahoma City, OK 73102-7148 T 405.218.2800 F 405.218.2801 www.grantthornton.com We have audited the accompanying financial statements of Leadership Oklahoma City, Inc. (an Oklahoma not-for-profit corporation), which comprise the statement of assets, liabilities and net assets modified cash basis as of, and the related statements of revenues collected, expenses paid and changes in net assets modified cash basis 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 the modified cash basis of accounting described in Note A, this includes determining that the modified cash basis of accounting is an acceptable basis for the preparation of the financial statements in the circumstances. Management is also responsible for 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. 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. Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd
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 assets, liabilities and net assets modified cash basis of Leadership Oklahoma City, Inc. as of, and its revenues collected, expenses paid and changes in net assets modified cash basis for the years then ended in accordance with the modified cash basis of accounting described in Note A. Basis of Accounting We draw attention to Note A of the financial statements, which describes the basis of accounting. The financial statements are prepared on the modified cash basis of accounting, which is a basis of accounting other than accounting principles generally accepted in the United States of America. Our opinion is not modified with respect to this matter. Oklahoma City, Oklahoma November 13, 2015 Grant Thornton LLP U.S. member firm of Grant Thornton International Ltd
STATEMENTS OF ASSETS, LIABILITIES AND NET ASSETS (prepared on a modified cash basis) May 31, ASSETS 2015 2014 Cash and cash equivalents $ 96,489 $ 71,328 Certificate of deposit 200,000 200,000 Property and equipment, less accumulated depreciation 5,595 8,247 Endowed funds held by community foundation 930,804 918,443 Total assets $ 1,232,888 $ 1,198,018 LIABILITIES AND NET ASSETS NET ASSETS Unrestricted $ 1,232,888 $ 1,198,018 Total liabilities and net assets $ 1,232,888 $ 1,198,018 The accompanying notes are an integral part of these statements.
STATEMENTS OF REVENUES COLLECTED, EXPENSES PAID AND CHANGES IN NET ASSETS (Prepared on a modified cash basis) Year ended May 31, 2015 2014 UNRESTRICTED NET ASSETS Revenues Contributions $ 145,110 $ 87,015 Alumni dues 94,265 92,635 Interest 1,315 1,115 Tuition 129,730 130,133 Event income 35,455 28,049 Realized and unrealized gains on investments 67,238 102,184 Other 9,756 8,510 Net assets released from restrictions 30,184 24,647 Total revenues 513,053 474,288 Expenses Program services Youth leadership programs 120,959 120,198 Alumni programs 105,138 100,863 Adult programs 141,274 140,460 Community programs and grants 77,757 55,037 General and administrative 33,055 33,294 Total expenses 478,183 449,852 Increase in unrestricted net assets 34,870 24,436 TEMPORARILY RESTRICTED NET ASSETS Grants and contributions 30,184 17,647 Restrictions satisfied by payments (30,184) (24,647) Increase (decrease) in temporarily restricted net assets - (7,000) INCREASE IN NET ASSETS 34,870 17,436 NET ASSETS AT BEGINNING OF YEAR 1,198,018 1,180,582 NET ASSETS AT END OF YEAR $ 1,232,888 $ 1,198,018 The accompanying notes are an integral part of these statements.
NOTES TO FINANCIAL STATEMENTS NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES Leadership Oklahoma City, Inc. (Leadership OKC) is incorporated under the laws of the State of Oklahoma as a nonprofit organization. Leadership OKC s primary operations are to develop leaders for the community through adult and youth programs. A summary of the significant accounting policies consistently applied in the preparation of the accompanying financial statements follows. 1. Basis of Presentation Leadership OKC uses the modified cash basis of accounting. Such basis is another comprehensive basis of accounting and, therefore, is not in accordance with accounting principles generally accepted in the United States of America (US GAAP). Under the modified cash basis of accounting, revenues are recorded when received and expenses are recorded when paid. Non-cash transactions except depreciation and unrealized gains on endowed funds are not recognized. Under US GAAP, the accrual basis of accounting would be used, whereby revenues would be recognized when earned and expenses would be recognized when the obligation was incurred. Financial statement presentation follows the recommendations of the Financial Accounting Standards Board (the FASB) Accounting Standards Codification (ASC) 958-205 Not-for-Profit Entities Presentation of Financial Statements. Leadership OKC is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted net assets. Leadership OKC does not have any permanently restricted net assets. 2. Temporarily Restricted Net Assets Temporarily restricted net assets represent contributions that are donor restricted, and contain donor stipulations that expire with the passage of time or are fulfilled by the actions of Leadership OKC. Net assets are released from donor restrictions by incurring expenses satisfying the restriction purposes or by the occurrence of other events specified by donors. 3. Unrestricted Net Assets Unrestricted net assets represent funds over which management and the Board of Directors retain full control to use in achieving Leadership OKC s objectives. 4. Cash and Cash Equivalents Leadership OKC considers all highly liquid debt instruments purchased with a maturity of three months or less and money market mutual funds to be cash equivalents. Leadership OKC maintains its cash and cash equivalents in accounts which may exceed federally insured limits. Leadership OKC has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk.
NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE A - NATURE OF OPERATIONS AND SUMMARY OF ACCOUNTING POLICIES - CONTINUED 5. Revenues Contributions are recognized as either temporarily or permanently restricted support if they are received with donor stipulations that limit the use of the donated assets. When a donor restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of revenues collected, expenses paid and changes in net assets as net assets released from restrictions. Alumni dues and tuition are recognized as revenue when received. 6. Property and Equipment Property and equipment are recorded at cost; donated equipment is recorded at fair value at the date of receipt. Depreciation is provided on the straight-line basis over the estimated useful lives of the assets ranging from three years for leasehold improvements to five years for equipment. 7. Income Taxes Leadership OKC qualifies as an organization exempt from income taxes under section 501(c)(3) of the Internal Revenue Code except for amounts relating to unrelated business income. There were no unrealized business income taxes incurred in either fiscal year 2015 or 2014. As such, no provision has been made for federal or state income taxes. Management has reviewed Leadership OKC s tax positions and concluded that there are no uncertain tax positions that require accrual in the financial statements or disclosure in the footnotes to be in compliance with authoritative literature. Generally, Leadership OKC is no longer subject to income tax examination by federal, state or local tax authorities for years prior to May 31, 2012. 8. Functional Expenses Functional expense categories, as defined in FASB s ASC 958-205, are program services and general and administrative. All expenses described in the accompanying statement of revenues collected, expenses paid and changes in net assets are directly related to the conduct of program services, except approximately $33,000 relating to general and administrative activities during each fiscal years 2015 and 2014. 9. Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts in the financial statements. Actual results could differ from those estimates.
NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE B - PROPERTY AND EQUIPMENT Property and equipment are summarized as follows at May 31: 2015 2014 Leasehold improvements $ 20,650 $ 20,650 Equipment 18,420 18,420 Furniture 4,005 4,005 43,075 43,075 Less accumulated depreciation 37,480 34,828 Property and equipment, net of accumulated depreciation $ 5,595 $ 8,247 Depreciation expense for the years ended was $2,652 and $3,559, respectively. NOTE C - ENDOWED FUNDS HELD BY COMMUNITY FOUNDATION Leadership OKC participates in endowment funds through Oklahoma City Community Foundation (OCCF), the Leadership OKC Affiliated Fund and the Youth Leadership Exchange Fund. OCCF is a not-for-profit entity that provides for endowed contributions to be pooled to maximize return on investments for the benefit of area not-for-profit organizations. Contributions into the endowment fund are permitted by the not-forprofit entities, as well as individual donors in the community who designate the beneficiary of their contributions. Earnings on these endowed funds are paid annually to the beneficiary organization for unrestricted use. The endowed funds contributed by Leadership OKC and the earnings thereon, net of distributions received, are reflected as endowed funds held by community foundation and are recorded at approximately $931,000 and $918,000 at, respectively. The endowed funds contributed by third-party donors held by OCCF designated for the benefit of Leadership OKC were approximately $274,000 and $269,000 at, respectively, and are not reflected in Leadership OKC s statement of assets, liabilities and net assets. NOTE D - COMMITMENTS Leadership OKC leases equipment and conducts its operations in leased facilities under lease agreements classified as operating leases expiring through 2019. Future minimum rental payments at May 31, 2015 under these operating leases are as follows: Year ending May 31: 2016 $ 20,337 2017 21,349 2018 20,969 2019 2,581 $ 65,236 Rental expense for the years ended was approximately $19,000 and $20,000, respectively.
NOTES TO FINANCIAL STATEMENTS - CONTINUED NOTE E - FAIR VALUE MEASUREMENT OF FINANCIAL INSTRUMENTS Fair Value Measurements ASC 820, Fair Value Measurements and Disclosures, defines fair value as the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date and establishes a three level hierarchy for measuring fair value. The statement requires fair value measurements be classified and disclosed in one of three categories. Fair Value Measurements - Continued The guidance establishes a fair value hierarchy for valuation inputs that gives the highest priority to quoted prices in active markets for identical assets or liabilities and the lowest priority to unobservable inputs. The fair value hierarchy is as follows: Level 1 - Inputs to the valuation methodology are quoted prices (unadjusted) for identical assets or liabilities in active markets. Level 2 - Inputs to the valuation methodology include quoted prices for similar assets and liabilities in active markets, and inputs that are observable for the asset and liability, either directly or indirectly, for substantially the full term of the financial instrument. Level 3 - Unobservable inputs for determining the fair values of assets or liabilities that reflect an entity s own assumptions about the assumptions that market participants would use in pricing the assets or liabilities. Funds held by community foundation are valued at net asset value based on the fair value of the underlying assets of the community foundation s investment pool. The following table summarizes financial assets measured at fair value on a recurring basis, segregated by the level of the valuation inputs within the fair value hierarchy utilized to measure fair value as of May 31: 2015 Level 1 Level 2 Level 3 Total Inputs Inputs Inputs Fair Value Funds held by community foundation $ - $ 930,804 $ - $ 930,804 2014 Level 1 Level 2 Level 3 Total Inputs Inputs Inputs Fair Value Funds held by community foundation $ - $ 918,443 $ - $ 918,443 NOTE F - SUBSEQUENT EVENTS Leadership OKC evaluated its May 31, 2015 financial statements for subsequent events through November 13, 2015 the date the financial statements were available to be issued. Leadership OKC is not aware of any subsequent events which would require recognition or disclosure in the financial statements.