FINANCIAL STATEMENTS
CONTENTS INDEPENDENT AUDITOR S REPORT 1 FINANCIAL STATEMENTS Exhibit A - Statement of Financial Position 3 Exhibit B - Statement of Activities 4 Exhibit C - Statement of Cash Flows 5 NOTES TO FINANCIAL STATEMENTS 6 PAGE
CARL L. NICHOLSON, JR., CPA RICHARD D. HALBERT, CPA RICHARD G. TOPP, CPA FRANK H. McWHORTER, JR., CPA T. JOHN HARVEY, CPA WILLIAM T. KELLY, CPA/ABV, CVA SUSAN A. RILEY, CPA DAWN T. JONES, CPA MICHAEL W. DAVIS, CPA GREGORY L. FAIREY, CPA JEFFREY M. ALLEN, CPA JOHN S. HEATH, CPA PAIGE M. JOHNSON, CPA JANICE M. BATES, CPA JOE C. TRAVIS, CPA, CFF, Certified Forensic Accountant STEPHEN W. GRAY, CPA ANNETTE P. HERRIN, CPA/ABV, CVA, CFE, CFF, MAFF LEIGH F. AGNEW, CPA SHELBY H. LOTT, CPA RENEE MOORE, CPA LACEY J. MILLER, CPA MICHAEL BRADLEY WOOD, CPA LESLIE C. BILANCIA, CPA/ABV, CVA ADAM K. SMITH, CPA MARY M. DENNIS, JD, CPA D. WHITNEY BRANCH, CPA WILLIAM JABE MILLS, CPA, CFE JEANA O. RICH, CPA JODY D. THORNTON, CPA CRAIG T. TAYLOR, CPA, CGMA REBECCA KING BAKER, CPA JASON T. BABINGTON, CPA NICHOLSON & COMPANY, PLLC CERTIFIED PUBLIC ACCOUNTANTS 2019 23 rd AVENUE GULFPORT, MISSISSIPPI 39501 POST OFFICE BOX 1842 GULFPORT, MISSISSIPPI 39502 TELEPHONE 228-864-1779 FAX 228-864-3850 www.nicholsoncpas.com INDEPENDENT AUDITOR S REPORT MEMBERS AMERICAN INSTITUTE OF CERTIFIED PUBLIC ACCOUNTANTS MISSISSIPPI SOCIETY OF CERTIFIED PUBLIC ACCOUNTANTS OTHER OFFICES: 150 OLD HWY 98 EAST POST OFFICE BOX 609 COLUMBIA, MISSISSIPPI 39429 TELEPHONE: 601-736-3449 FAX 601-736-0501 #2 SOUTHERN POINTE PARKWAY, STE 100 HATTIESBURG, MISSISSIPPI 39401-8025 POST OFFICE DRAWER 15099 HATTIESBURG, MISSISSIPPI 39404-5099 TELEPHONE: 601-264-3519 FAX 601-264-3642 To the Board of Directors The Gulfside Association of the United Methodist Church, Inc. Waveland, Mississippi We have audited the accompanying financial statements of The Gulfside Association of the United Methodist Church, Inc. (a nonprofit Organization), which comprise the statement of financial position as of December 31, 2013, and the related statements of activities and cash flows for the year 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. 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 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 Association 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
- 2 - To the Board of Directors The Gulfside Association of the United Methodist Church, Inc. purpose of expressing an opinion on the effectiveness of the Association 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 Gulfside Association of the United Methodist Church, Inc as of December 31, 2013, 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. Emphasis-of-Matter Regarding Going Concern The accompanying financial statements have been prepared assuming that the Association will continue as a going concern. As discussed in Note 10 to the financial statements, the Association has suffered recurring significant reductions in revenues which raise substantial doubts about its ability to continue as a going concern. Management s plans regarding those matters also are described in Note 10. The financial statements do not include any adjustments that might result from the outcome of this uncertainty. Our opinion is not modified with respect to this matter. Hattiesburg, Mississippi July 16, 2015
- 3 - EXHIBIT A STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2013 ASSETS Cash and cash equivalents, unrestricted $ 17,816 Cash and cash equivalents, temporarily restricted 5,764 Certificate of deposit, temporarily restricted 16,313 Receivable from conferences 40,747 Investments, unrestricted 5,126 Investments, temporarily restricted 82 Property and equipment, net 384,411 Certificate of deposit, permanently restricted 25,477 Total Assets $ 495,736 LIABILITIES Accounts payable $ 1,407 Accrued expenses 2,376 Total liabilities 3,783 NET ASSETS Unrestricted 444,317 Temporarily restricted 22,159 Permanently restricted 25,477 Total net assets 491,953 Total liabilities and net assets $ 495,736 See accompanying notes to financial statements.
- 4 - EXHIBIT B STATEMENT OF ACTIVITIES Temporarily Permanently Unrestricted Restricted Restricted Total SUPPORT AND REVENUE Apportionments $ 39,146 $ - $ - $ 39,146 Contributions 70,690 7,750-78,440 Interest income 63 80-143 Other revenue 10,000 - - 10,000 Realized capital (losses) (2,786) - - (2,786) Unrealized capital gains 750 - - 750 Rental income 4,801 - - 4,801 Net assets released from restriction 13,685 (13,685) - - Total support and revenue 136,349 (5,855) - 130,494 EXPENSES Program services: Advertising 1,352 - - 1,352 Sea Song 10,085 - - 10,085 Total program services 11,437 - - 11,437 Supporting services: Accounting 959 - - 959 Administrative 1,236 - - 1,236 Bank fees 42 - - 42 Depreciation expense 24,150 - - 24,150 Insurance 8,522 - - 8,522 Other expense 2,493 - - 2,493 Postage 563 - - 563 Printing and publications 487 - - 487 Programs 1,683 - - 1,683 Repairs and maintenance 5,692 - - 5,692 Salaries and taxes 51,717 - - 51,717 Supplies 2,457 - - 2,457 Property taxes 183 - - 183 Telephone 6,741-6,741 Travel and meeting expense 1,523 - - 1,523 Utilities 6,352 - - 6,352 Vehicle expense 116 - - 116 Total supporting services 114,916 - - 114,916 Total expenses 126,353 - - 126,353 CHANGE IN NET ASSETS 9,996 (5,855) - 4,141 NET ASSETS Beginning of year 434,321 28,014 25,477 487,812 End of year $ 444,317 $ 22,159 $ 25,477 $ 491,953 See accompanying notes to financial statements.
- 5 - EXHIBIT C STATEMENT OF CASH FLOWS RECONCILIATION OF CHANGE IN NET ASSETS TO NET CASH PROVIDED BY OPERATING ACTVITIES: Change in net assets $ 4,141 Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 24,150 Realized loss on sale of investments 2,786 Unrealized gain on sale of investments (750) Net (increase) in operating assets: Receivable from conferences (21,853) Increase (decrease) in operating liabilities: Accounts payable 593 Accrued liabilities (415) Net cash provided by operating activities 8,652 CASH FLOWS FROM INVESTING ACTIVITIES Proceed from investments 5,796 Purchase of certificate of deposit (52) Purchase of investments (16) Net cash provided by investing activities 5,728 INCREASE IN CASH 14,380 CASH AND CASH EQUIVALENTS Beginning of the year 9,200 End of the year $ 23,580 See accompanying notes to the financial statements.
NOTES TO FINANCIAL STATEMENTS
- 6 - NOTES TO FINANCIAL STATEMENTS NOTE 1 - ORGANIZATION The Gulfside Association of the United Methodist Church, Inc. ( the Association ) is a nonprofit Association formed as an official part of the organizational structure of the United Methodist Church. The Association was incorporated under the laws of the State of Mississippi on January 28, 1924. The Association provides retreat and meeting facilities, located in Waveland, Mississippi, to foster, promote and develop Christian fellowship, evangelism and education consistent with the doctrines and discipline of the United Methodist Church. A summary of the Association s significant accounting policies consistently applied in the preparation of the accompanying financial statements follows: NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Presentation - The financial statements of the Association have been prepared on the accrual basis of accounting in conformity with accounting principles generally accepted in the United States of America. The Association has adopted FASB ASC 958-205, Financial Statements of Not-for- Profit Organizations. FASB ASC 958-205 requires the reporting of total assets, liabilities and net assets in a statement of financial position; reporting the change in net assets in a statement of activities; and reporting the sources and uses of cash and cash equivalents in a statement of cash flows. FASB ASC 958-205 also requires that net assets, revenues, gains, expenses and losses be classified as unrestricted, temporarily restricted, or permanently restricted based on the existence or absence of donor-imposed restrictions. A description of the three net asset categories follows: Unrestricted - These net assets are available for general obligations and activities of the Association. Temporarily Restricted - These net assets are restricted by donors to be used for a specific purpose. Permanently Restricted - Net assets subject to donor-imposed restrictions that the assets be maintained permanently by the Association. Permanently restricted assets are comprised of a certificate of deposit. Contributions - The Association follows FASB ASC 958-605, Accounting for Contributions Received and Contributions Paid. In accordance with FASB ASC 958-605, contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. Donor restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a 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 reported in the statement of activities as net assets released from restrictions.
- 7 - NOTES TO FINANCIAL STATEMENTS PAGE TWO NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) Donations of property, equipment, marketable securities, and other non-cash donations are recorded as contributions at their estimated fair values at the date of donation. Such donations are reported as unrestricted support unless the donor has restricted the donated assets to a specific purpose. 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 certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Cash and Cash Equivalents - The Association considers available bank balances and other highly liquid investments with original maturities of three months or less as cash or cash equivalents. Investments - The Association accounts for investments in accordance with FASB ASC 958-320 Accounting for Investments Held by Not-for-Profit Entities. Under ASC 958-320, investments in marketable securities with readily determinable fair values and all investments in debt securities are reported at their fair values in the statement of financial position. Fair value is 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. See Note 4 for discussion of fair value measurements. Property and Equipment - Property and equipment is stated at cost at date of acquisition or fair value at date of donation in the case of gifts. If donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. FASB ASC 958-360, Recognition of Depreciation by Not-for-Profit Associations as promulgated by the FASB, requires the Association to recognize the cost of using the future economic benefits of its long-lived assets by recording depreciation. FASB ASC 958-360 allowed the Association to establish net asset lives based on the useful life to date of adoption plus an estimate of the remaining useful life of the asset. Depreciation expense has been computed over the following estimated useful lives of the assets utilizing the straight-line method. Buildings Furniture and equipment Vehicles 27 years 5 years 5 years Maintenance and repairs are expensed as incurred. Betterments are capitalized. The costs and related accumulated depreciation of assets sold or retired are removed from the accounts and any resulting gain or loss is reflected in the accompanying statements of activities.
- 8 - NOTES TO FINANCIAL STATEMENTS PAGE THREE NOTE 2 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Cont.) Income Taxes - FASB ASC 740, Accounting for Uncertainty in Income Taxes, clarifies the accounting for uncertainty in tax positions and recognition of such income tax positions taken or expected to be taken in the Association s income tax return. The Association s income tax returns are subject to examination by taxing authorities, generally for three years after they are filed. The Association s open tax periods are 2011 2013. The Association believes their estimates are appropriate based on current facts and circumstances and that no uncertain tax positions were taken Advertising Costs - Costs for advertising are expensed as incurred. Total advertising costs for the year ended December 31, 2013 were $1,352. NOTE 3 - INVESTMENTS At December 31, 2013, investments are comprised of the following: Market Unrealized Unrealized Other than December 31, 2013 Cost Value Gain* Loss* Temporary Loss Equity securities $ 4,066 $ 4,801 $ 1,058 $ (323) $ - Pooled marketable securities 407 407 - - - Total $ 4,473 $ 5,208 $ 1,058 $ (323) $ - * Unrealized gains and losses are shown net. The following schedule summarizes the investment return and its classification in the statement of activities for the year ended December 31, 2013: Unrestricted Temporarily Restricted Permanently Restricted Total Interest income $ 63 $ 80 $ - $ 143 Realized (losses) gains (2,786) - - (2,786) Unrealized (losses) gains 750 - - 750 Net investment return $ (1,973) $ 80 $ - $ (1,893)
- 9 - NOTES TO FINANCIAL STATEMENTS PAGE FOUR NOTE 4 - FAIR VALUE MEASUREMENTS Financial Accounting Standards Board issued FASB ASC 820-10, Fair Value Measurements and Disclosures, which establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurements) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820-10 are described as follows: Level 1 - Inputs to the valuation methodology are unadjusted quoted prices for identical assets or liabilities in active markets that the Association has the ability to access. Level 2 - Inputs to the valuation methodology include: quoted prices for similar assets or liabilities in active markets; quoted prices for identical or similar assets or liabilities in inactive markets; inputs other than quoted prices that are observable for the asset or liability; inputs that are derived principally from or corroborated by observable market data by correlation or other means. If the asset or liability has a specified (contractual) term, the level 2 input must be observable for substantially the full term of the asset or liability. Level 3 - Inputs to the valuation methodology are unobservable and significant to the fair value measurement. The asset or liability s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs. Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2013. Investments whose values are based on quoted market prices in active markets, and are therefore classified within Level 1, include Pooled Marketable Securities and Equity Securities.
- 10 - NOTES TO FINANCIAL STATEMENTS PAGE FIVE NOTE 4 - FAIR VALUE MEASUREMENTS The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although the Association believes its valuation methods are appropriate and consistent with other market participants, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date. The following table sets forth by level, within the fair value hierarchy, the Association s assets at fair value as of December 31, 2013: Level 1 Level 2 Level 3 Total Equity securities $ 4,801 $ - $ - $ 4,801 Pooled marketable securities 407 - - 407 Total assets at fair value $ 5,208 $ - $ - $ 5,208 NOTE 5 - PROPERTY AND EQUIPMENT Land $ 151,211 Buildings 288,327 Furniture and equipment 84,109 Vehicles 28,491 552,138 Accumulated depreciation (167,727) Total property and equpiment $ 384,411
- 11 - NOTES TO FINANCIAL STATEMENTS PAGE SIX NOTE 6 - TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets are available for the following purposes at December 31, 2013: Capital fund $ 16,313 Special needs ministry 82 Open air chapel 5,251 Capital campaign 513 Total $ 22,159 NOTE 7 - PERMANENTLY RESTRICTED NET ASSETS The Association maintains a certificate of deposit for the support of women s retreats. These funds are donor-restricted and perpetual in nature. Net assets were permanently restricted for the following purposes at December 31, 2013: Women's retreats $ 25,477 Totals $ 25,477 NOTE 8 - RELATED PARTY TRANSACTIONS Members of the Association s board of directors agree to contribute operating funds to the Association each year. Contributions from board members totaled $22,137 in December 31, 2013. NOTE 9 - CONCENTRATIONS OF CREDIT RISK The Association maintains its cash balances in financial institutions that are insured by the Federal Deposit Insurance Corporation (FDIC) up to $250,000. The Association had $-0- over the FDIC federally insured limits as of December 31, 2013.
- 12 - NOTES TO FINANCIAL STATEMENTS PAGE SEVEN NOTE 10 - GOING CONCERN The Association s financial statements have been presented on the basis that it is a going concern, which contemplates the realization of assets and satisfaction of liabilities in the normal course of its activities. The Association has incurred significant losses in transitioning to its post-katrina mission. The Association s ability to continue as a going concern is dependent upon its success at raising additional contributions to cover its annual expenditures. NOTE 11 - SUBSEQUENT EVENTS The Association s tax exempt status was revoked on May 15, 2014 due to failure to file the annual information return. On October 3, 2014 the Association s tax exempt status was retroactively reinstated. Management has evaluated subsequent events through July 16, 2015, which is the date the financial statements were available to be issued.