Audit - 2004
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C H ART ERE D accountants
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October 12, 2004
Salina Arts and Humanities Foundation
Smoky Hill River Festival
P.O. Box 2181
Salina, KS 67402-2181
ladies and Gentlemen:
In planning and performing our audit of the financial statements of Smoky Hill River Festival for
the year ended September 30, 2004, we considered its 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. However, we noted certain matters involving
internal control and its operation that we consider to be reportable conditions under standards
established by the American Institute of Certified Public Accountants. Reportable conditions
involve matters coming to our attention relating to significant deficiencies in the design or
operation of internal control that, in our judgment, could adversely affect Smoky Hill River
Festival's ability to initiate, record, process, and report financial data consistent with the
assertions of management in the financial statements.
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.
Our consideration of internal control would not necessarily disclose all matters in internal control
that might be reportable conditions and, accordingly, would not necessarily disclose all
reportable conditions that are also considered to be material weaknesses as defined above.
However, we noted the following reportable conditions that we believe to be material
weaknesses.
During the audit fieldwork, 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 the Festival does not have a policy regarding the capitalization of purchased
assets. We recommend that the Festival consider a policy of capitalizing equipment purchases
greater than $500, or some similar amount as determined by management.
As we have previously discussed with you, your small accounting department with minimal
segregation of duties results in less than an ideal internal control structure. Essentially, two
people in your organization control most every financial transaction from initial recording to entry
into the computer and the preparation of financial statements. While not uncommon in small
organizations, there is a risk that errors or omissions could occur and not timely be discovered
and corrected.
1619 E. Iron Avenue. P.O. Box 1516 . Salina, Kansas 67402-1516 . Phone 785-825-5494
Fax 785-825-4450 . www.woodsanddurham.com
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We realize that your management and board play important oversight roles in the financial
reporting function, and encourage you to continue that level of involvement to help mitigate the
aforementioned exposure.
We would like to thank John 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,
WOODS & DURHAM, CHTD.
~tUxJ /f Vttbu------
,,~es A. Trower
JAT/jw
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THE SMOKY HILL RIVER FESTIVAL
Salina, Kansas
AUDITED FINANCIAL STATEMENTS
September 30, 2004
WOODS & DURHAM, CHARTERED
Certified Public Accountants
Salina, Kansas
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THE SMOKY HILL RIVER FESTIVAL
Salina, Kansas
TABLE OF CONTENTS
IndependentAuditor'sReport ..........................................
Statement of Assets, Liabilities, and Net Assets -
ModifiedCashBasis ...............................................
Statement of Support, Revenue and Expenses,
and Changes in Net Assets - Modified Cash Basis
. . . . . . . . . . . . . . . . . . . . . . .
Notes to Financial Statements .........................................
Page
Number
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~ ~ifi'd
L.}UJ.. public
C H ART ERE D accountants
INDEPENDENT AUDITOR'S REPORT
The Smoky Hill River Festival
Salina, Kansas
We have audited the accompanying statement of assets, liabilities, and net assets - modified
cash basis of The Smoky Hill River Festival (a nonprofit organization) as of September 30,
2004, and the related statement of support, revenue and expenses, and changes in net assets
- modified cash basis, for the year then ended. These financial statements are the
responsibility of Salina Arts and Humanities Foundation. 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 of material
misstatement. An audit includes examining, on a test basis, evidence supporting the amounts
and disclosures in the financial statements. An audit also includes assessing the accounting
principles used and significant estimates made by management, as well as evaluating the
overall financial statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
As described in Note 1, these financial statements were prepared on the modified cash basis
of accounting, which is a comprehensive basis of accounting other than generally accepted
accounting principles.
In our opinion, the financial statements referred to above present fairly, in all material respects,
the assets, liabilities, and net assets of The Smoky Hill River Festival as of September 30,
2004, and its support, revenue and expenses, and other changes in net assets for the year
then ended, on the basis of accounting described in Note 1.
Woods e:t (j)UrÑtm, Clitl.
October 12, 2004
WOODS & DURHAM, CHTD.
Certified Public Accountants
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1619 E. Iron Avenue. P.o. Box 1516 . Salina, Kansas 67402-1516 . Phone 785-825-5494
Fax 785-825-4450 . www.woodsanddurham.com
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THE SMOKY HILL RIVER FESTIVAL
Salina, Kansas
STATEMENT OF ASSETS, LIABILITIES, AND NET ASSETS
MODIFIED CASH BASIS
September 30, 2004
ASSETS
Current Assets
Cash
Investments
$ 27,741
175,002
202,743
12,774
$ 215,517
Total Current Assets
Equipment
TOTAL ASSETS
LIABILITIES AND NET ASSETS
Net Assets
Unrestricted
$
215,517
TOTAL LIABILITIES AND NET ASSETS
$
215,517
See Independent Auditor's Report and Notes to Financial Statements.
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THE SMOKY HILL RIVER FESTIVAL
Salina,Kansas
STATEMENT OF SUPPORT, REVENUE AND EXPENSES,
AND CHANGES IN NET ASSETS - MODIFIED CASH BASIS
September 30, 2004
SUPPORT AND REVENUE
Public Support
Private Charitable Contributions
Individual donations
Business donations
Sponsorships
Professional fund campaign
Total Public Support
$
24,439
4,665
68,625
13,675
$
111,404
Grants
Kansas Arts Commissions
4,800
Revenue
Program Revenue
Admissions
Fees
Merchandise income
Investment income
Miscellaneous income
Total Revenue
144,124
95,353
10,229
8,058
28,341
286,105
402,309
TOTAL SUPPORT AND REVENUE
EXPENSES
Program Services
Special Projects
Arts programs
Marketing
Technical
Merchandise expense
Total Program Services
208,213
76,770
63,287
7,361
355,631
28,385
492
2,045
30,922
386,553
15,756
7,280
2,500
9,780
189,981
$ 215,517
Supporting Services
General administration
Sales tax
Miscellaneous
Total Supporting Services
TOTAL EXPENSES
CHANGE IN NET ASSETS
TRANSFERS FROM OTHER PROGRAMS
Salina Arts and Humanities Commission
Community Art and Design
NET ASSETS BEGINNING OF YEAR - October 1, 2003
NET ASSETS END OF YEAR - September 30, 2004
See Independent Auditor's Report and Notes to Financial Statements.
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THE SMOKY HILL RIVER FESTIVAL
Salina, Kansas
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of Accounting - The organization maintains its books on the modified cash basis of
accounting. Consequently, revenue is generally recorded as received and expenditures 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.
Accordingly, the accompanying financial statements are not intended to present financial
position and changes in net assets in conformity accounting principles generally accepted in
the United States of America.
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.
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, 2004, and for the year then ended, the cash balances of the Festival
were adequately secured by FDIC insurance of the respective banking institutions.
Investments
As of September 30,2004, the balance of investments of the Festival was $175,002. 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 $175,002 balance, $4,434 is money that is
not covered by insurance provided by the federal government. It is the opinion of
management that the solvency of the referenced financial institution is not of concern at this
time.
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THE SMOKY HILL RIVER FESTIVAL
Salina, Kansas
NOTES TO FINANCIAL STATEMENTS
September 30, 2004
NOTE 3 . DEPOSITS AND INVESTMENTS (CONT'D.)
Investments (Cont'd.)
The following is a listing of investments as of September 30, 2004:
Basis
$ 35,963
30,000
11,551
25,526
25,377
4,434
10,151
32,000
Certificate of Deposit - UMB
Certificate of Deposit - Sunflower Bank
Certificate of Deposit - Capitol Federal
Certificate of Deposit - Capitol Federal
Certificate of Deposit - Bennington State Bank
Money Market Accounts - AG. Edwards
Money Market Accounts - First Bank
Certificate of Deposit - Security Savings
Total
$ 175,002
NOTE 4 . CONTINGENCIES
Market
$ 35,963
30,000
11,551
25,526
25,377
4,434
10,151
32,000
$ 175,002
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
sales in error. The Festival retained legal counsel in an attempt to recoup these funds. Refund
claims for three preceding years totaling $27,276.90 were filed. As of September 30, 2004, the
Festival received a refund in the amount of $32,492.11, which include interest of $5,215.21.
NOTE 5. OPERATING LEASE
The Commission entered into a three-year operating lease for office equipment in December
2003. 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 Commission. Under this
agreement, rent expense for 2004 was $1 J 156. Future payments will be made as follows:
Total
Amount
$ 1,512
1,512
Year
2005
2006
$
Total
3,024
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