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Audit - 2003 .. ~ ~dfWd LJU1.. public C H ART ERE 0 accountants r?..,./- /}Z ~~ ) January 22, 2004 Salina Arts and Humanities Commission P.O. Box 2181 Salina, KS 67402-2181 Ladies and Gentlemen: In planning and performing our audit of the financial statements of Salina Arts and Humanities Commission for the year ended December 31 , 2003, we considered the Commission's internal control in order to determine our auditing procedures for the purpose of expressing our opinion on the financial statements and not to provide assurance on internal control. A material weakness is a reportable condition in which the design or operation of one or more of the internal control components does not reduce to a relatively low level the risk that errors or fraud in amounts that would be material in relation to the financial statements being audited may occur and not be detected within a timely period by employees in the normal course of performing their assigned functions. However, during our audit we became aware of matters that are opportunities for strengthening internal controls. This letter does not affect our report dated January 22, 2004, on the financial statements of Salina Arts and Humanities Commission. We will review the status of these comments during our next audit engagement. Our comments are summarized as follows: Cash Disbursement Testing When testing disbursements we found two instances where checks had only one signature. It is the policy of the Commission that checks require two signatures. We would suggest that you change your policy so that the Director could sign checks up to some specified amount without requiring a second signature. We also noted that payments made to artists do not always have the contract signed by either party. We would suggest that the signed contract be attached to the voucher request before payment is made. OrGanizational Structure The size of the Organization's accounting and administrative staff precludes certain internal controls that would be preferred if the office staff were large enough to provide optimum segregation of duties. This situation dictates that the Board remain involved in the financial affairs of the Organization to provide oversight and independent review functions. We do recognize the efforts that have been made to segregate duties in the cash receipts and cash disbursements area. 1619 E. Iron Avenue. P.O. Box 1516 . Salina, Kansas 67402-1516 . Phone 785-825-5494 Fax 785-825-4450 . www.woodsanddurham.com .. <' We would like to thank Barbara and the staff for your hospitality and cooperation during the audit. Should you have any questions or comments, please do not hesitate to contact us. This report is intended solely for the information and use of management and others within the organization, and is not intended to be and should not be used by anyone other than these specified parties. Sincerely yours, JATljw WOODS & DURHAM, CHTD. Q:::r~e~ ALL PROGRAMS OF THE SALINA ARTS AND HUMANITIES COMMISSION Salina, Kansas COMPILED FINANCIAL STATEMENTS December 31, 2003 WOODS & DURHAM Certified Public Accountants Salina, Kansas ~~;f;'d L.JLU. ImbUe C H ART ERE D ùeemmtants To The Board of Directors Salina Arts and Humanities Commission Salina, Kansas We have compiled the accompanying statement of assets, liabilities and net assets - cash basis, of All Programs of the Salina Arts and Humanities Commission (a nonprofit organization) as of December 31, 2003, and the related statement of support, revenue and expenses - cash basis, for the year then ended, in accordance with Statements on Standards for Accounting and Review Services issued by the American Institute of Certified Public Accountants. These financial statements were prepared on the cash basis of accounting, which is a comprehensive basis of accounting other than generally accepted accounting principles. A compilation is limited to presenting in the form of financial statements information that is the representation of management. We have not audited or reviewed the accompanying financial statements and, accordingly, do not express an opinion or any other form of assurance on them. 'WoodS ~ l])urJíam, ClitL WOODS & DUHHAM Certified Public Accountants January 22, 2004 1619 E. Iron Avenue. P.O. Box 1516 . Salina, Kansas h7402-1516 . Phone 785-825-5494 Fax 785-825-4450 . www.woodsanddurhall1.com ALL PROGRAMS OF THE SALINA ARTS AND HUMANITIES COMMISSION Salina, Kansas STATEMENT OF ASSETS, LIABILITIES, AND NET ASSETS CASH BASIS December 31,2003 ASSETS Current Assets Unrestricted Cash Investments Total Unrestricted Restricted Investments Total Current Assets Other Asset Beneficial interest in Community Foundation Equipment TOTAL ASSETS LIABILITIES AND NET ASSETS Investment in Equipment Net Assets Restricted Unrestricted Total Net Assets TOTAL LIABILITIES AND NET ASSETS See accompanying accountant's compilation report and notes to financial statements. $ 61,057 428,726 489,783 :$ 4,223 494,006 9,982 16,749 $ 520,737 $ 16,749 42,394 461,594 503,988 $ 520,737 ALL PROGRAMS OF THE SALINA ARTS AND HUMANITIES COMMISSION Salina, Kansas STATEMENT OF SUPPORT, REVENUE AND EXPENSES CASH BASIS Year Ended December 31,2003 PUBLIC SUPPORT AND REVENUE Public Support Government grants Contracted revenue Contributions Total Public Support $ 312,511 34,275 139,429 Revenue Program revenue Investment return Miscellaneous Total Revenue 274,566 23,946 4,746 TOTAL PUBLIC SUPPORT AND REVENUE EXPENSES Program Services Arts programs Arts services Total Program Services 559,719 79,842 Supporting Services General administration Fund raising Total Supporting Services 90,686 39,071 TOTAL EXPENSES TOTAL PUBLIC SUPPORT AND REVENUE OVER EXPENSES Unrealized Gain - Restricted Asset Total Increase in Net Assets NET ASSETS - January 1, 2003 NET ASSETS - December 31,2003 See accompanying accountant's compilation report and notes to financial statements. $ 486,215 303,258 789,473 639,561 129,757 769,318 20,155 1,944 22,099 481,889 $ 503,988 ALL PROGRAMS OF THE SALINA ARTS AND HUMANITIES COMMISSION Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31,2003 This report combines all of the activities of the Salina Arts and Humanities Commission, which are a part of the Arts and Humanities Department of the City of Salina and financially housed in the Salina Arts and Humanities Foundation, as of and for the year ended December 31, 200~i, including the work of the Salina Arts and Humanities Commission and it's programs - Horizons Program, Smoky Hill River Festival, Community Cultural Development, and Community Art & Design. The combined financial entity, the Foundation, is exempt from federal income taxes under Section 501 of the Internal Revenue Code and is not classified as a private foundation. NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES A. Basis of Presentation The accompanying financial statements are prepared on the cash basis; consequently, revenue is recorded when received and expenses are recognized when disbursed. However, programs of the Commission do not necessarily happen within one calendar year. Therefore!, revenue received during a fiscal year is often not expended until the next fiscal year. B. Property and Equioment The amount recorded as property and equipment represents equipment purchased. Such assets are recorded at cost. Depreciation has not been provided on these assets. C. The Commission considers all highly liquid investments available for current use with an initial maturity of three months or less to be cash equivalents. D. Investments The organization has adopted SFAS No. 124, "Accounting for Certain Investments Held by Not-for- Profit Organizations." Under SFAS No. 124, 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. Unrealized gains and losses are included in the change in net assets. Investment income and gains restricted by a donor are reported as increases in unrestricted net assets if the restrictions are met (either by passage of timE~ or by use) in the reporting period in which the income and gains are recognized. E. 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 permanently restricted net assets. F. Employee salaries and fringe benefits are paid by the City of Salina under a third party reimbursement program; iherefore, ihey are covered by Kansas Public Empioyees Retirement System through the City. Accordingly, no disclosures pertaining to the City's retirement plan is included in these financial statements. Salaries have been allocated to the Arts Programs and Arts Services based upon an estimate by management of the time spent by the employees of the particular activities. ALL PROGRAMS OF THE SALINA ARTS AND HUMANITIES COMMISSION Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31, 2003 NOTE 1 - SUMMARY OF ACCOUNTING POLICIES (Cont'd.) G. No amounts have been reported in the financial statements for donated services because no objective basis is available to measure the value of such services. I. H. Assets Transferred to a Recioient Organization The Organization permanently transferred $10,000 to the Greater Salina Community Foundation for its benefit. The Foundation has variance power and legal ownership over all property in the fund and the income derived from it. The Foundation may make annual distributions to Salina Arts and Humanities Commission of an amount up to but not to exceed five percent of the fund's net fair market value. The Organization has recognized $10,000 as an Other Asset in the accompanying Statement of Assets, Liabilities, and Net Assets, including an adjustment to market value as a decrease to this asset. 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 these estimates. NOTE 2 - RESTRICTED NET ASSETS The restricted net assets are comprised of programs receiving funding and commitments during 2003 that will not be paid for until the 2004 fiscal year. NOTE 3 -INVESTMENTS Investments are stated at fair value and consist of: Money Market Certificates of Deposit Mutual Funds Total $ Cost 24,046 305,622 103,209 432,877 Fair Market VaLu..e $ 24,046 305,622 103,2B1 $ 432,949 $ Investment return is summarized as follows: Interest and Dividend Income Realized Loss on Investments Unrealized Gain on Investments Investment Return $ $ 9,907 (1,911) 15,95,0 23,946 $ NOTE 4 - CONCENTRATION OF CREDIT RISK Financial instruments which potentially subject the Commission to concentrations of credit risk include cash deposits with commercial banks and a brokerage firm. Cash on deposit with financial institutions exceeded the insured limits by $3,841. The Commission's investments at the brokerage firm are not collateralized. It is the opinion of management that the solvency of the referenced financial institution is not of concern at this time. ALL PROGRAMS OF THE SALINA ARTS AND HUMANITIES COMMISSION Salina, Kansas NOTES TO FINANCIAL STATEMENTS December 31,2003 NOTE 5 - OPERATING LEASE The Commission entered into a three-year operating lease for office equipment in December 2003, requiring monthly payments of $378. This lease allows the Commission to renew monthly after the three-year term is met. Payments will be made from the following programs: No. of Monthly Program Payments Payment Salina Arts and Humanities Commission 4 $378 Horizons 4 $378 Smoky Hill River Festival 4 $378 Total Amount $1,512 1512 1512 $4,536 Under this agreement, rent expense for 2003 was $378. NOTE 6 - CONTINGENCIES In the past, the State of Kansas required non-profit organizations to charge sales tax on admission buttons to events and festivals such as the Smoky Hill River Festival. During 2003, it was noted that this law had changed and the Festival had historically paid sales tax on button sétles in error. The Festival has retained legal counsel in an attempt to recoup these funds. Refund claims for three preceding years totaling $27,276.90 have been filed. As of this date, no refunds have been received; however, the Festival received correspondence from the State that there would be a delay of six months before reimbursement will occur. This anticipated revenue has not been reflected in these financial statements. The Festival is hopeful to receive the refund in June 2004.