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Audit - 2007 .. I certified public C H ART ERE 0 accountants November 15, 2007 Salina Arts and Humanities Foundation Salina, Kansas 67401 ladies and Gentlemen: In planning and performing our audit,of the financial statements of the Sl)1oky Hill River Festival for the year ended September 30, 2007, we considered the Organization's internal control in order to determine our auditing procedures for the purpose of expressing an opinion on the financial statements and not to provide assurance on internal control. '. However, during our audit, we became aware of matters that are opportunities for strengthening' internal controls and operating efficienc'y, . . We will review the status of these comments during our next audit engagement. We have already. discussed many of these comments and suggestions with various Organization personnel, and' we will be pleased to discuss these comments in further detail. at Your convenience, to perform any additional' study of these matters, or to assist you in implementing the recommendations, Our comments are summarized as follows: Cash at the Festival Through inquiry, the auditor noted that cash collected at the Festival is not always counted by two people and appropriately documented as such, We would suggest that at all times two people should count the money and document their work. . One of those people should be someone independent of the accounting/recording functions. We believe this would be a good procedure to protect the person counting the money as well as the Festival. In addition, through our analytical review, we found that gate receipts increased considerably from prior years. . We inquired of staff and management and they represented that the Festival had hired security to, stand by the gates. We' also realize through our own attendance at the Festival that the great weather could also have been a factor for the increase., ' . We suggest that you continue to hire security at the gates for the Festival, which may help prevent opportunities for theft due to the amount of cash that is being handled, and may decrease the opportunity for people to "sneak in" . We look at this idea as an opportunity to gain additional control over an area that is difficult to substantiate. '. We wiSh to thank the Executive Director and his department for their support and assistance during our audit. . ' . 1619 E. Iron Avenue. P.O. Box 1516 . Salina, Kansas 67402-1516 . Phone 785-825-5494' Fax 785-825-4450'. www.woodsanddurham.com . .. ~, .. .., . This report is intended solely for the information and use of the Board of Directors, . management, and others within the organization .isnot intended to be and should not be used by anyone other than these specified parties. . . Sincerely yours, WOODS & DU~HA~ ... a~0'~~ Bonhie S. Sanderson . .~- ) , THE SMOKY HILL RIVER FESTIVAL Salina, Kansas AUDITED FINANCIAL STATEMENTS September 30, 2007 WOODS & DURHAM, CHARTERED Certified Public Accountants Salina, Kansas THE SMOKY HILL RIVER FESTIVAL Salina, Kansas TABLE OF CONTENTS Page Number Independent Auditor's Report .................................................. 1 Statement of Assets, Liabilities, and Net Assets - 2 Modified Cash Basis . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . .. . . . . . . Statement of Support, Revenue and Expenses, and Changes in Net Assets - Modified Cash Basis 3 Notes to Financial Statements ... .... ..... ......... ... .... .... ..... ........... 4-5 ,'" .', , ',' :',-' I'. ~, '"," .' ,. ,'; ,: ./ ,", '." " , " 1'_. ;;,- . ' , '. .:"0'-,._- , ~: " " '" " 'certified. '.' ' .:pitblic" , ' C H A.R T E R.E D,accountants ;\ ,. - '. ; - .": ',,' .-. ',.,,', j . " ' ',.' , , ~ co' ."-. ".:: . .' r ,/; -"- . .-",' . ~, .....,-, .]' ," .' ,. , / 'r' , .r ,_ ." ., ,'., :'" " ." , ;" ;,<, 'I'. '::." ",,;" .' -,.....\' ", . . , : INDEPENDENT AUDITOR'S REPORT ~... ' '.. i " , . . ':, 'd. , , '. ", ,. ,", . , .,'". -, ".' ., .' The Snio'ky Hill River Festival, ' .. :' Salina Kansas .. ; , ,"', ' ; - ' '. ',' . \' -..- ,. ',:Y<, , ' ... ., -' ,,' ",' ,we~aye auditedihe accor,;pa~~if1gst~tem~~t ~i ass~ts,li~bi;itiei,'imd'.netasiet~:modified~a~hb~SiS ,of The Smoky Hill River Festival (a 'nonprofit organiza~on)as of:Septeri;1ber ,30, 209,7, and the rel~ted . statement of support,: revenue a'ridexpensescmcidified cash basis, for the year then ended, ,These' 'financial statements are the responsibilitY of Salina Art~ and,Huma'niiies Foundation"Our responsiblliiy is" " to expre,ss anopinionon these fincHlcial statements b~s~ci oflouraudit"" , " ' " "'/ , , . , " ',.,', ., . . ,:'( , ,We'conducted our audit in accordanc:ewith auditing standards generally acceptediin iheUnitedStates of ' , America:"T>hO,sestandard;'reqUiie that we plan'ai)d ~erform the audit tCl obt!3in' reasonable assurance, . about whetherthe'fihancial'statements are free ,of material misstatement 'An audit,includ.es examining,' . .or a test basis: evidt)nce supporting ttie amounts 'and disclosure~ in the,financi,\l ,statem,ents, An audit: , also includes as~essingthe,' accOunting principles used and significanfestimates made by management, . aswell as evaluating the' overall, financia/:statement presentation, 'We believe that our audit provides a , - ,...\, . . .' ~ " . .' .; ,. '. ';:, " . "".. ", . " ,-' , ' '. reasonable basis for our opiniOn:" '" .. ' ' . ' . , ' .. .-'. ' '" ~';.. ," , t. " "'., .' , ~;. " ' . .' . , I ,"' , '. , , ",'" ,< '<.. ; '. As described in Note 1, these financial ,statements were' prepared'on the ,modified 'cash basis of, " ,', accounting, 'which 'is a compcehensive 'basi's"ot' accountingcither than generally accepteel-acc6unting . . pnnqiples~" C ,:" ",,' ;", ",': ' . " ^'.' ,; ). " f ,..' - ," ~,"",.' . . I ' ',In our opinion, 'the financial statemehtsreferred to above, p'cesenf fairly; in all material respects, the, assets, liabilities, :and'net assets of The 'Smoky, Hill RiveiFe,stival,'i3s'of Septerriber3q,2007,:and'its' support, revenue'arid 'expenses for the year then ended,:on:the'basis'of accounting described in Note 1 : ,.' \' :-" ; .. ',,' "'''. .~, "- . ~:': :: <.' . . ,'" , ... ,'" ',. ;<, ",,, ~ ,.,."" ',' , .'.l, . Y ~;';" ; ,": ,'; , :U'ooas' e:liJju~11i,cfitl! '.', . , ,. .,-1 . ,', :;.' , ' WOODS & DURHAM,CHTD, "Y ;Certified,PublicAccountants . , , , , ,e" .\,....., "..,', - ..,. ; November 15, 2007 '>, .. ....',. ',' " ,"" .... 'l,/' ' r . r;,',' ., -" . 1-. '.',' ,'-. ", ,~" " "',' >, , t '. ~ " "', . .,.' - ',,' , , '- ,-: \' . ~-. 0' '\' \,}. '. ~ ..::: .,.- ~.' .... ~:' , .', " . '. ~ '.-,' ''I ._' ,n' "'f. , , > :~. .", '.' .,' " .'\, , " "", "., "':A ';'; ..'-,' .... " 1 " . '. 'Zl, " , ,e, "",'. . .: ..' ~ ,',"'" .:J' ':". ", . . ~ ". '- ' 1619 E:I~i:m AV~hue'..'P,Q:Bci~i51~, . '," ,,: . ',' ,Fax,78,5:825~4450' :.1" "",, ,'" . , . '. ',; . ,'Salina,. Kansas 67402'15,i6' ~ :Phone 7,85-825-5494 '. .www..wocidsanddurham.com ' ~:.:. ' ... . \ .' - , ::' ;,. THE SMOKY HILL RIVER FESTIVAL Salina, Kansas STATEMENT OF ASSETS, LIABILITIES, AND NET ASSETS MODIFIED CASH BASIS September 30, 2007 ASSETS Current Assets Cash $ 7,342 Investments 141,502 Total Current Assets 148,844 Equipment 12,774 TOTAL ASSETS $ 161,618 LIABILITIES AND NET ASSETS Net Assets Unrestricted $ 161,618 TOTAL LIABILITIES AND NET ASSETS $ 161,618 See Independent Auditor's Report and Notes to Financial Statements. 2 THE SMOKY HILL RIVER FESTIVAL Salina,Kansas STATEMENT OF SUPPORT, REVENUE AND EXPENSES, AND CHANGES IN NET ASSETS - MODIFIED CASH BASIS September 30, 2007 SUPPORT AND REVENUE Public Support Private Charitable Contributions Individual donations Business donations Sponsorships Professional fund campaign Foundation support Total Public Support $ 28,631 4,676 71,195 12,250 10,000 Revenue Program Revenue Admissions Fees Merchandise income Investment income Miscellaneous income Total Revenue 168,311 97,009 8,565 5,767 2,460 TOTAL SUPPORT AND REVENUE EXPENSES Program Services Special Projects Arts programs Marketing Technical Merchandise expense Total Program Services 221,031 74,670 74,204 8,325 Supporting Services General administration Sales tax Miscellaneous Total Supporting Services 27,619 457 2,207 TOTAL EXPENSES INCREASE IN UNRESTRICTED NET ASSETS NET ASSETS BEGINNING OF YEAR - October 1, 2006 NET ASSETS END OF YEAR - September 30, 2007 See Independent Auditor's Report and Notes to Financial Statements. 3 $ 126,752 282,112 408,864 378,230 30,283 408,513 351 161,267 $ 161,618 THE SMOKY HILL RIVER FESTIVAL Salina, Kansas NOTES TO FINANCIAL STATEMENTS September 30, 2007 NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of Accounting - The organization prepares its financial statements on the modified cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. Under this basis, revenue is recognized when received and expenses are recorded as disbursed. Transactions considered as modifications could include the recording of non-cash expenses such as depreciation, and amounts reflecting certain timing issues related to payments made to the Festival for periods after the period under audit. The Smoky Hill River Festival is a program of the Salina Arts and Humanities Foundation. Separate accounting records are maintained by the two entities, and separate audit reports have been issued. Property and Equipment- The amount recorded as equipment represents equipment purchased at cost by the Smoky Hill River Festival. Depreciation has not been provided on this equipment. Tax Exempt Status - The Smoky Hill River Festival, as a program of the Salina Arts and Humanities Foundation, is exempt from federal income tax under Section 501 (c)(3) of the Internal Revenue Code, and is not identified as a private foundation within the Code. Cash and Cash Equivalents - Cash and cash equivalents include all monies in banks and highly liquid investments with maturity dates of three months or less. Fair market value equals carrying amounts. Revenue Recognition - The Foundation has adopted SFAS No. 116, "Accounting for Contributions Received and Contributions Made." In accordance with SFAS No. 116, contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support depending on the existence or nature of any donor restrictions. They are then reclassified to unrestricted net assets upon expiration of time restrictions or upon meeting program requirements. As of September 30, 2007, there were no donor-imposed restrictions on contributions received. Basis of Presentation - Financial statement presentation follows the recommendations of the Financial Accounting Standards Board in its Statement of Financial Accounting Standards (SFAS) No. 117, Financial Statements of Not-for-Profit Organizations. Under SFAS No. 117, the Organization is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanentiy restricted net assets. As of September 30, 2007, there were no donor-imposed restrictions on net assets. Estimates - The preparation of financial statements requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Accordingly, actual results could differ from those estimates. Advertising - For the year ended September 30,2007, advertising expense amounted to $19,070. 4 THE SMOKY HILL RIVER FESTIVAL Salina,Kansas NOTES TO FINANCIAL STATEMENTS September 30, 2007 NOTE 2 - CONTRIBUTED SERVICES The Festival utilizes the donated services of literally hundreds of volunteers to produce the Festival. Although these volunteer services are an integral part of the organization, there is no clearly measurable basis for determining the value of such services. Accordingly, these financial statements do not reflect financial data pertaining to these services. NOTE 3 - DEPOSITS AND INVESTMENTS Deposits As of September 30, 2007, and for the year then ended, the cash balances of the Festival were adequateiy secured by FDIC insurance of the respective banking institutions. Investments As of September 30,2007, the balance of investments of the Festival was $151,542. All but one investment has been made In institutions insured by the FDIC, and all but one investment balance during the year was fully insured. Of the $151,542 balance, $10,738 is not covered by insurance provided by the federal government, but are Insured with SIPC. The following is a listing of investments as of September 30, 2007: Total Fair Market Basis Value $ 38,892 $ 38,892 28,427 28,427 10,738 10,738 1,031 1,031 22,240 22,240 40,175 40,175 $ 141,503 $ 141,503 Certificate of Deposit - UMB Certificate of Deposit - Capitol Federal Money Market Account - A.G. Edwards Money Market Account - First Bank Certificate of Deposit - Security Savings Money Market Account - Security Savings Investment return is summarized as follows: Interest Income $ 5,767 NOTE 4 - OPERATING LEASE The Commission entered into a three-year operating lease for office equipment November 27, 2006, requiring monthly payments of $391 plus expenses. This lease allows the Commission to renew monthly after the three-year term is met. Payments for the equipment are made from various programs of the Foundation. Under this agreement, rent expense for 2007 was $808. 5