Financial statements of Sport Nova Scotia March 31, 2017
March 31, 2017 Table of contents Independent Auditor s Report..1 Statement of financial position..2 Statement of revenues and expenses.3 Statement of changes in net assets 4 Statement of cash flows. 5 Notes to the financial statements 6-9 Schedule of revenues - Schedule 1..10 Schedule of operating expenses - Schedule 2....11 Schedule of programs expenses - Schedule 3...12
Deloitte LLP 1969 Upper Water Street Suite 1500 Purdy's Wharf Tower II Halifax NS B3J 3R7 Canada Tel: 902-422-8541 Fax: 902-423-5820 www.deloitte.ca Independent Auditor s Report To the Board of Directors of Sport Nova Scotia We have audited the accompanying financial statements of Sport Nova Scotia, which comprise the statement of financial position as at March 31, 2017, and the statements of revenues and expenses, and changes in net assets and cash flows for the year then ended, and a summary of significant accounting policies and other explanatory information. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with Canadian accounting standards for not-for-profit organizations, and for such internal control as management determines is necessary to enable the preparation 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 Canadian generally accepted auditing standards. Those standards require that we comply with ethical requirements and 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 organization'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 organization's internal control. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of 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 in our audit is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of Sport Nova Scotia as at March 31, 2017, and the results of its operations, and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Chartered Professional Accountants June 9, 2017 Page 1
Statement of financial position as at March 31, 2017 2017 2016 $ $ Assets Current assets Cash and cash equivalents (Note 4) 2,483,299 4,152,271 Short-term investments (Note 5) 9,839,258 7,783,324 Accounts receivable 755,163 794,552 Deferred rent receivable 62,853 48,978 Prepaid expenses and inventory 46,215 47,324 13,186,788 12,826,449 Capital assets (Note 6) 974,978 1,026,386 14,161,766 13,852,835 Liabilities Current liabilities Accounts payable and accrued liabilities 216,756 286,141 Government remittances payable 161,075 153,896 Deferred revenue (Note 14) 10,510,996 10,106,546 10,888,827 10,546,583 Net assets Unrestricted 844,056 820,083 Internally restricted (Note 3) 1,453,908 1,459,786 Net investment in capital assets 974,975 1,026,383 3,272,939 3,306,252 14,161,766 13,852,835 Commitments (Note 8) Contingencies (Note 12) On behalf of the Board Director Page 2
Statement of revenue and expenses year ended March 31, 2017 2017 2016 $ $ Revenues Operating ( Schedule 1) 1,241,995 1,244,219 Programs ( Schedule 1) 5,858,460 5,864,591 7,100,455 7,108,810 Expenses Operating ( Schedule 2) 1,185,604 1,210,308 Programs ( Schedule 3) 5,826,982 5,678,897 7,012,586 6,889,205 Excess of revenues over expenses before amortization 87,869 219,605 Amortization 121,182 116,080 (Deficiency) excess of revenues over expenses (33,313) 103,525 Page 3
Statement of changes in net assets year ended March 31, 2017 Net investment in Internally 2017 2016 capital assets restricted Unrestricted Total Total $ $ $ $ $ Beginning balance 1,026,383 1,459,786 820,083 3,306,252 3,202,727 (Deficiency) excess of revenues over expenses (121,182) 202,031 (114,162) (33,313) 103,525 Investment in capital assets 69,774 (66,524) (3,250) - - Interfund transfers Transfer Building Fund to General Fund - (310,000) 310,000 - - Rental revenue paid from General Fund to Building Fund - 191,860 (191,860) - - Building management fee - (23,245) 23,245 - - Closing balance 974,975 1,453,908 844,056 3,272,939 3,306,252 Page 4
Statement of cash flows year ended March 31, 2017 2017 2016 $ $ Operating activities (Deficiency) excess of revenues over expenses (33,313) 103,525 Item not affecting cash Amortization 121,182 116,080 Changes in non-cash working capital items (Note 10) 368,867 837,227 456,736 1,056,832 Investing activities Acquisition of capital assets (69,774) (77,770) Acquisition of short-term investments (2,055,934) (126,701) (2,125,708) (204,471) Net cash (outflow) inflow (1,668,972) 852,361 Cash, beginning of year 4,152,271 3,299,910 Cash, end of year 2,483,299 4,152,271 Page 5
Notes to the financial statements March 31, 2017 1. Basis of presentation Sport Nova Scotia (the Organization ) is a non-profit organization incorporated to assist and promote amateur sport in Nova Scotia. 2. Accounting policies The financial statements were prepared in accordance with Canadian accounting standards for not-for-profit organizations in Part III of the CPA Canada Handbook and include the following significant accounting policies: Fund accounting The Organization maintains its accounts in accordance with the fund accounting method. This method observes limitations, if any, on the use of organization resources by maintaining separate accounts for each fund. Fund accounts are further classified as either unrestricted or restricted funds. Unrestricted funds are available to be used in their entirety at the discretion of the Organization. Restricted funds consist of those for which a specified application has been defined or upon which expenditure conditions have been set. The Sport Fund, KidSport Fund, the Building Fund and Canada Games Fund were segregated as separate funds with their own bank accounts and reported as internally restricted funds. Revenue recognition Revenue is recognized in accordance with the deferral method. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue when they are received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Cash and cash equivalents Cash and cash equivalents comprise of cash and short-term investments with a term to maturity of three months or less at the date of acquisition. Capital assets Capital assets are recorded at cost and donated equipment is recorded at fair value. Capital assets are being amortized on the straight-line basis over their estimated useful lives as follows: Building 25 years Furniture and fixtures 10 years Medical equipment 5 years Computer hardware and software 3 years Use of estimates The preparation of financial statements in accordance with Canadian accounting standards for not-for-profit organizations 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 reporting date and the reported amounts of revenues and expenses for the reporting period. Actual results could differ from these estimates. Significant financial statement items that require the use of estimates are as follows: amortization of capital assets, deferred revenue and accrued liabilities. These estimates are reviewed periodically and adjustments are made, as appropriate, in the statement of operations in the year they become known. Impairment of long-lived assets Long-lived assets are tested for recoverability whenever events or changes in circumstances indicate that their carrying amount may not be recoverable. An impairment loss is recognized when their carrying value exceeds the total undiscounted cash flows expected from their use and eventual disposition. The amount of the impairment loss is determined as the excess of the carrying value of the asset over its fair value. Financial instruments The Organization initially measures its financial assets and financial liabilities at fair value. It subsequently measures all its financial assets and financial liabilities at amortized cost. Page 6
Notes to the financial statements March 31, 2017 3. Internally restricted net assets 2017 2016 $ $ Building Fund 365,868 325,526 KidSport Fund 143,055 274,739 Sport Fund 917,892 832,428 Capital Asset Replacement Fund 27,093 27,093 1,453,908 1,459,786 Internally restricted funds represent board of directors approved appropriations from unrestricted net assets. The Organization may not use these internally restricted amounts for any other purpose without the approval of the board of directors. 4. Cash and cash equivalents The Organization administers bank accounts for KidSport Canada (Nova Scotia Chapter) and Sports & Recreation payroll. These bank accounts are held in the name of Sport Nova Scotia, but do not belong to the Organization and, therefore, these accounts are not included in these financial statements. 5. Short-term investments Short-term investments consist of GIC s with a combined value of $9,839,258 (2016 - $7,783,324). Current year GIC s consist of $8,094,889 earning interest between 1.35% and 1.47% maturing on January 17, 2018, $26,949 earning interest at.90% maturing on April 16, 2017, $ 1,013,770 earning interest at 1.4% maturing April 6, 2017 and $ 703,650 earning interest at 1.35% maturing November 10, 2017. Investment income for each of the funds is reported within the total revenue of the respective funds on schedule 1. 6. Capital assets 2017 2016 Accumulated Net book Net book Cost amotization value value $ $ $ $ Land 300,000 300,000 300,000 Building 1,858,732 1,567,308 291,424 334,499 Furniture and Fixtures 1,117,700 741,467 376,233 383,956 Medical Equipment 1,534 920 614 920 Computer Hardware and Software 275,390 268,683 6,707 7,011 3,553,356 2,578,378 974,978 1,026,386 7. Income taxes The Organization is registered under the Societies Act of the Province of Nova Scotia and is exempt from income tax on its operations. 8. Commitments The Organization entered into an office equipment lease agreement in March 2017 that replaced the existing agreement with a term ending June 2017. Future lease payments aggregate $54,400 and are payable over the next 48 months. Page 7
Notes to the financial statements March 31, 2017 9. Contributed goods and services During the year, the Organization recorded $281,093 (2016 - $375,860) in donated goods and services. The majority of these contributions relate to public awareness campaigns, program promotion, Canada Games and fundraising. These contributions have been recorded at their fair value on the date of contribution. 10. Changes in non-cash working capital items 2017 2016 $ $ Decrease / (increase) in accounts receivable 39,389 (90,186) (Increase) in deferred rent receivable (13,875) (31,666) Decrease / (increase) in prepaid expences and inventory 1,109 (4,680) (Decrease) in accounts payable and accrued liabilities (69,385) (52,551) Increase in government remittances payable 7,179 41,336 Increase in deferred revenue 404,450 974,974 368,867 837,227 11. Related party transactions The Organization is a member of the Canadian Council of Provincial and Territorial Sport Federations Inc. As such, the Organization administers the Nova Scotia Amateur Sport Fund, a provincial fund established under the National Sport Trust Fund. Sport Nova Scotia is a licensee of KidSport Canada and as such administers a provincial fund. 12. Contingencies NPO status review The Organization is currently being reviewed by the Canada Revenue Agency to assess its eligibility to continue to have its earnings from its real estate property held under the Building Fund considered to be non-taxable. The outcome of this review remains uncertain as at the date of the financial statements, and as such was not provided for as at March 31, 2017. Harmonized Sales Tax audit The Organization was reassessed by Revenue Canada for the HST input tax credits for the period January, 2010 to March, 2011 in the amount of $100,874. After applying interest, penalties and a public service body rebate the Organization paid $62,549 in March, 2014. The Organization filed a notice of objection with Revenue Canada on June 13, 2014 appealing the reassessment. The net potential gain is $62,549 should the Organization be successful with the appeal. Page 8
Notes to the financial statements March 31, 2017 13. Financial instruments The Organization is exposed to various risks through its financial instruments. Liquidity risk Liquidity risk is the risk that an Organization will not be able to meet its financial obligations as they become due. The Organization is exposed to liquidity risk in its ability to finance its working capital requirements and meet its cash flow needs. Given the Organization s currently available liquid resources, from both financial assets and on-going operations, as compared to its contractual obligations, management assesses the Organization s liquidity risk to be low. Credit risk Credit risk arises with uncertainties of predicting financial difficulties tenants may experience which could cause them to be unable to fulfil their lease requirements. The Organization mitigates this risk by having a diversified mix of tenants thereby limiting the exposure to a single tenant. Interest rate risk The Organization is exposed to interest rate risk on its fixed and floating interest rate financial instruments. Fixedrate instruments subject the Organization to a fair value risk while the floating rate instruments subject it to a cash flow risk. The Organization is exposed to this type of risk as a result of investments in GIC s. However, the risk associated with investments is reduced to a minimum since these assets are invested in low interest instruments. 14. Deferred revenue Sport Canada General Kidsport Fund Games Building Total $ $ $ $ $ $ Balance, beginning of year 497,104 26,940 9,273,750 264,063 44,688 10,106,545 Less: amount recognized as revenue in the year (2,084,587) (667,506) (3,732,299) (18,345) (597,718) (7,100,455) Plus: amount received 2,144,455 704,547 3,892,005 158,503 605,396 7,504,906 Balance, end of year 556,972 63,981 9,433,456 404,221 52,366 10,510,996 15. Budget figures The Company s annual budget is approved by the Board of Directors and membership. The budget figures are not subject to audit procedures. Page 9
Schedule of revenues - Schedule 1 year ended March 31, 2017 Programs and Administrative Budget management centre Total (unaudited) $ $ $ $ Operating Grant - Province of Nova Scotia 227,000 330,000 557,000 557,000 Building 597,718-597,718 620,815 Membership 9,000 9,200 18,200 18,450 Rent income 20,598 33,002 53,600 53,597 Amortization of deferred capital grant - 102 102 - Interest 15,375-15,375 14,000 869,691 372,304 1,241,995 1,263,862 Programs Sport fund 3,732,299-3,732,299 3,980,460 KidSport 667,506-667,506 752,160 Canada games 18,345-18,345 195,000 Advocacy sponsorship 117,294-117,294 113,479 Provincial government funding - sport fair 20,000-20,000 20,000 Sport fairs 82,328-82,328 85,407 Sportsweep (Spring/Summer) 118,452-118,452 88,326 Sportsweep (Fall/Winter) 100,957-100,957 128,826 Sport awards 76,656-76,656 82,555 Provincial government funding - sport futures 490,107-490,107 491,600 Provincial government funding - multisport campaign 19,049-19,049 - NSTF (RBC Grant) - multisport campaign 25,000-25,000 - Postage/courier - 22,501 22,501 28,000 Printing/supplies - 22,583 22,583 21,000 PSO contribution administrative support 54,538-54,538 48,000 Network services 840 43,619 44,459 42,840 Telecommunications - 16,489 16,489 18,000 Sponsorship 14,354-14,354 15,850 Dragon boat 10,000-10,000 10,000 PSO sponsor program 5,000-5,000 5,000 Athlete & volunteer recognition 3,223-3,223 5,300 Prov. Gov't funding - PSO professional development - - - - PSO Professional Development Day 2,727-2,727 - Merchandise sales 1,524-1,524 - Prov. Gov't funding - PSO development initiatives 30,325-30,325 35,000 Contracted services 36,866 48,656 85,522 86,445 Corporate games 77,222-77,222 91,687 5,704,612 153,848 5,858,460 6,344,935 Page 10
Schedule of operating expenses Schedule 2 year ended March 31, 2017 Programs and Administrative Budget management centre Total (unaudited) $ $ $ $ Salaries 482,259 180,674 662,933 669,185 Benefits 67,407 32,571 99,978 106,485 Building 353,092-353,092 387,750 Office supplies 6,158 2,406 8,564 9,650 Professional fees 6,957 3,500 10,457 12,700 Advertising and public relations (2,679) - (2,679) 1,950 Annual meeting/reports 6,211-6,211 6,000 Professional development 699-699 7,000 Board travel/meetings 4,275-4,275 7,000 Travel/meetings 3,141 204 3,345 7,700 Telecommunications 4,212-4,212 5,200 Parking 2,291-2,291 2,291 Postage/courier 443 366 809 1,850 Temporary help 3,280 74 3,354 4,080 Printing 1,446 818 2,264 2,750 Interest and bank charges 1,116-1,116 1,850 Membership fees 1,798-1,798 2,800 PSO meetings 462-462 750 CCPTSF administrative expenses 863-863 - Donations 50-50 300 Insurance 1,600-1,600 1,000 Unrecoverable HST - Apr. 2016 to Mar. 2017 15,827 4,083 19,910 5,000 960,908 224,696 1,185,604 1,243,291 Page 11
Schedule of programs expenses Schedule 3 year ended March 31, 2017 Programs and Administrative Budget Management Centre Total (unaudited) $ $ $ $ Sport fund 3,643,210-3,643,210 3,893,460 KidSport 799,190-799,190 751,800 Canada Games 18,345-18,345 195,000 Advocacy 106,943-106,943 113,400 Sport futures 490,357-490,357 491,600 LTAD multisport campaign 44,049-44,049 - Sport fairs 83,609-83,609 91,874 PSO administrative staff support 54,538-54,538 48,000 PSO Professional Development 2,752-2,752 500 Sportsweep ( Spring /Summer) 104,439-104,439 79,969 Sportsweep ( Fall /Winter) 92,047-92,047 114,891 Sport awards 77,165-77,165 84,823 Sport quarterly 57,993-57,993 58,760 Printing/supplies - 45,069 45,069 46,500 Postage/courier - 22,500 22,500 28,000 Management information system 1,342 41,674 43,016 44,540 Telecommunications (1) 15,732 15,731 18,000 Sponsor/member servicing 12,064-12,064 13,350 Dragonboat 10,000-10,000 10,000 PSO sponsor program 3,500-3,500 5,500 East coast classic 1-1 - Athlete recognition 1,871-1,871 4,000 Merchandise cost of sales 1,591-1,591 - Volunteer recognition awards - - - 900 PSO development initiatives 30,325-30,325 35,000 Health and safety program 16-16 200 Corporate games 66,661-66,661 67,220 5,702,007 124,975 5,826,982 6,197,287 Page 12