FIRST BAPTIST CHURCH, REGINA INC. FINANCIAL STATEMENTS December 31, 2013

Transcription

1 FIRST BAPTIST CHURCH, REGINA INC. FINANCIAL STATEMENTS December 31, 2013

2 MANAGEMENT S RESPONSIBILITY FOR FINANCIAL STATEMENTS The financial statements are the responsibility of management and have been prepared in conformity with Canadian accounting standards for not-for-profit organizations. In the opinion of management, the financial statements fairly reflect the financial position, results of operations and cash flows of First Baptist Church, Regina Inc. (the Church) within reasonable limits of materiality. Preparation of financial information is an integral part of management s broader responsibilities for the ongoing operations of the Church. Management maintains a system of internal accounting controls to ensure that transactions are accurately recorded on a timely basis, are properly approved and result in reliable financial statements. In this regard, an annual statement of management responsibility is provided on the following page. The financial statements have been examined and approved by the Board of Directors. An Audit Committee comprised of members of the Board of Directors meets periodically with the financial officers of the Church and the external auditor. The external auditor has free access to the Committee, without management present, to discuss the results of their audit work and their opinion on whether the financial statements present fairly, in all material respects, the financial position and results of operations of the Church. Robert D. Szautner, Chartered Accountant Prof. Corp. has been appointed external auditor. Their responsibility is to report to the members of the Church regarding the fairness of the presentation of the Church's financial position and the results of its operations as shown in the financial statements. The Independent Auditor s Report outlines the scope of their examination and their opinion. March 15, 2014 March 15, 2014

3 Robert D. Szautner, Chartered Accountant Prof. Corp. To the Members of First Baptist Church, Regina Inc. INDEPENDENT AUDITORS REPORT I have audited the accompanying financial statements of First Baptist Church, Regina Inc., which comprise the statement of financial position as at December 31, 2013, and the statements of operations and changes in net assets and cash flow 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. Auditors Responsibility My responsibility is to express an opinion on these financial statements based on my audit. I conducted my audit in accordance with Canadian generally accepted auditing standards. Those standards require that I 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 entity 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 entity 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. I believe that the audit evidence I have obtained is sufficient and appropriate to provide a basis for my audit opinion. Opinion In my opinion, the financial statements present fairly, in all material aspects, the financial position of First Baptist Church, Regina Inc. as at December 31, 2013, 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. Comparative Information The prior year comparative figures were audited by another accountant who expressed an audit opinion without reservation on March 13, March 15, 2014 Regina, Saskatchewan Robert D. Szautner Chartered Accountant 3707 Kew Place, Regina SK, S4V 2V9 T: F: rds.ca@sasktel.net

4 STATEMENT OF FINANCIAL POSITION December ASSETS CURRENT Operating account $ 6,980 $ 2,641 Bond retirement account 16,804 19,650 Capital account (building fund) 56,079 59,013 Designated contributions accounts 35,642 14,191 GST receivable 881 1,174 Prepaid expenses 5,145 4, , ,561 CAPITAL Property, plant and equipment (Note 2) 3,363,421 3,375,479 OTHER Equity Contribution (Note 3) 54,700 54,700 $ 3,539,652 $ 3,531,740 APPROVED BY: See Accompanying Notes 1

5 STATEMENT OF FINANCIAL POSITION December LIABILITIES AND NET ASSETS CURRENT LIABILITIES Operating account - outstanding cheques $ 27,950 $ 8,588 Line of credit - operating (Note 4) - 45,000 Accounts payable 7,007 7,634 Government remittances payable 4,031 3,903 Current portion of bonds payable (Note 6) 607, , , ,025 OTHER LIABILITIES Deferred contributions (Note 7) 119, , , ,225 NET ASSETS Unrestricted net assets 105,663 62,862 Capital fund net assets 2,668,267 2,668,653 2,773,930 2,731,515 $ 3,539,652 $ 3,531,740 See Accompanying Notes 2

6 STATEMENT OF OPERATIONS AND CHANGES IN NET ASSETS For the Year Ended December 31 Operating Fund Capital Operating Fund Total Fund Capital Fund Total REVENUE Church operations 458, , , ,351 Chaplain services 7,200-7,200 7,200-7,200 Bond retirement fund - 12,500 12,500-15,515 15,515 Designated contributions 16,851 5,294 22,145 1,009 42,603 43,612 First Karen 27,383-27,383 27,245-27,245 Rental 44,699-44,699 41,016-41, ,742 17, , ,821 58, ,939 EXPENSES Christian education 1,706-1,706 1,056-1,056 Worship 5,186-5,186 6,490-6,490 Congregational care ,035-1,035 Missions 35,605-35,605 52,608-52,608 First Karen 27,383-27,383 27,245-27,245 Designated expenses 16,752 5,294 22,046 20,634-20,634 Personnel 317, , , ,692 Repairs and utilities 29, ,635 29,984 3,413 33,397 Administrative 54,295-54,295 41,442-41,442 Interest bonds 19,396-19,396 22,077-22,077 Interest bank fees 3,463-3,463 3,877-3,877 Amortization - 12,058 12,058-13,939 13, ,941 18, , ,140 17, ,492 Excess (deficiency) of revenues over expenses 42,801 (386) 42,415 (29,319) 40,766 11,447 Net assets, beginning 62,862 2,668,653 2,731,515 92,181 2,627,887 2,720,068 Net assets, ending 105,663 2,668,267 2,773,927 62,862 2,668,653 2,731,515 See Accompanying Notes 3

7 STATEMENT OF CASH FLOW For the Year Ended December OPERATING ACTIVITIES Operating Capital Fund Fund Total Total Cash receipts $ 562,568 $ 14,396 $ 576,964 $ 555,780 Cash paid (493,297) (6,122) (499,419) (453,430) Interest paid (19,396) - (19,396) (22,077) Cash flow from operating activities 49,875 8,274 58,149 80,273 FINANCING ACTIVITIES Repayment of line of credit (45,000) - (45,000) - (Redemption) of bonds - (12,500) (12,500) (45,000) Cash flow from financing activities (45,000) (12,500) (57,500) (45,000) INCREASE IN CASH $ 4,875 $ (4,226) ,273 CASH AND SHORT TERM DEPOSITS, beginning of year 86,906 51,633 CASH AND SHORT TERM DEPOSITS, end of year $ 87,555 $ 86,906 CASH AND SHORT TERM DEPOSITS includes the following: Operating account $ 6,980 $ 2,310 Operating account - outstanding cheques (27,950) (8,257) Net operating cash (bank indebtedness) (20,970) (5,947) Bond retirement account 16,804 19,650 Capital account 56,079 59,013 Designated contributions account 35,642 14,191 Total Cash and Short Term Deposits $ 87,555 $ 86,907 See Accompanying Notes 4

8 NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, 2013 GENERAL First Baptist Church, Regina Inc. (Church) is incorporated under the laws of Saskatchewan. Its principal activity is to provide spiritual services and to provide a place of worship to the surrounding community. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (a) Amortization Property, plant and equipment are stated at the following values less accumulated amortization: Church building - estimated value as of 1992 Church land - appraised value as of 1996 Youth centre - cost plus estimated value of contributed labour and materials Youth centre land - estimated market value as of 1994 Furniture, equipment - estimated value as of 1992 for assets acquired before 1990 and actual cost for those acquired after 1989 The original cost amounts have not been used for these assets, as this financial information is not reasonably determinable. Property, plant and equipment are amortized using the straight line basis over assets' estimated useful lives based on the following: Wood furniture Organ and pianos Computers - hardware Computers - software Furniture and equipment Youth Centre 100 years 100 years 3 years 1 year 10 years 50 years The Church building, hand bells, and painting have not been amortized as they are considered of historical value and a work of art respectively, and therefore do not need to be amortized according to Section 4431 of the CICA Handbook. Their values are as follows: Church building $2,300,000 Baptistery painting 3,745 Hand bells 22,343 (c) Accrual Basis of Accounting Revenues and expenses are recorded on the accrual basis, whereby they are reflected in the accounts in the period to which they pertain. (d) Revenue Recognition The Church follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. 5

9 NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, 2013 (e) Measurement Uncertainty The preparation of the financial statements in accordance with generally accepted accounting standards in Canada requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. By nature, asset valuations are subjective and do not necessarily result in precise determinations. Estimates in these financial statements include, but are not limited to, the carrying value of assets. Should underlying assumptions change, the estimated net recoverable value could change by a material amount. (f) (g) (h) Funds Operating Fund - This fund consists of monies received for the general operations and maintenance of the Church. Designated Funds - These funds consist of monies received upon which donors have designated the monies for use in the management of capital assets of the Church. Income Taxes First Baptist Church is exempt from income tax as it is incorporated as a non-profit organization. Leases Leases are classified as either capital or operating. A lease that transfers substantially all the benefits and risk incidental to the ownership of property is classified as a capital lease. All other leases are accounted for as operating leases wherein rental payments are expensed as incurred. At the inception of a capital lease, an asset and an obligation are recorded at an amount equal to the lesser of the present value of the minimum lease payments and the property's fair value at the beginning of the lease. (i) Financial Instruments The Church initially measures its financial assets and financial liabilities at fair value adjusted by, in the case of a financial instrument that will not be measured subsequently at fair value, the amount of transaction costs directly attributable to the instrument. The Church subsequently measures all its financial assets and financial liabilities at amortized cost. Transaction costs are recognized in income in the period incurred, except for financial instruments that will be subsequently measured at amortized cost. Transaction costs associated with the acquisition and disposal of fixed income investments are capitalized and are included in the acquisition costs or reduce proceeds on disposal. Investment management fees associated with the index pooled funds are expensed as incurred. Financial assets measured at amortized cost include cash and amounts receivable. Financial liabilities measured at amortized cost include accounts payable and accrued liabilities. 6

10 NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, 2013 (i) Financial Instruments (continued) At the end of each reporting period, the Church assesses whether there are any indications that a financial asset measured at amortized cost may be impaired. If there is an indication of impairment, the Church determines whether a significant adverse change has occurred during the period in the expected timing or amount of future cash flows from the financial asset. If the Church identifies a significant adverse change in the expected timing or amount of future cash flows from a financial asset, it reduces the carrying amount of the asset to the higher of the present value of the expected cash flows or the amount that could be realized from selling the financial asset. Any impairment of the financial asset is charged to income in the period in which the impairment is determined. When the extent of impairment of a previously written-down asset decreases and the decrease can be related to an event occurring after the impairment was recognized, the previously recognized impairment loss is reversed to the extent of the improvement, but not in excess of the impairment loss. The amount of the reversal is recognized in income in the period the reversal occurs. 2. PROPERTY, PLANT AND EQUIPMENT Property, plant and equipment consist of the following: Accumulated N. B. V. N. B. V. Cost Amortization Church building $ 2,300,000 $ - $ 2,300,000 $ 2,300,000 Church land 470, , ,000 Youth centre 355, , , ,593 Youth centre land 71,690-71,690 71,690 Furniture and fixtures 464, , , , EQUITY CONTRIBUTION $ 3,661,566 $ 298,145 $ 3,363,421 $ 3,375,479 The equity contribution relates to the value of the land contributed by the Church to First Baptist Place Inc. through a donation from members with the expressed intent that the money be used for the purchase of land at the time First Baptist Place Inc. was built and incorporated. 4. LINE OF CREDIT - OPERATING The Church has a operating revolving line of credit that bears interest at the rate of the bank's prime interest rate, is due on demand and is not to exceed $50,000 ( $65,000). The line of credit - operating is secured by a general security agreement. As at December 31, 2013, the Church was indebted $0 ( $45,000) on this line of credit. 5. LINE OF CREDIT BOND RETIREMENT The Church has a revolving line of credit for the use of bond retirement that bears interest at the rate of the bank's prime interest rate, is due on demand and is not to exceed $25,000. The line of credit bond retirement is secured by a general security agreement. As at December 31, 2013, the Church was indebted $0 ( $0) on this line of credit. 7

11 NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, BONDS PAYABLE First Baptist Church issues mortgage-backed, floating interest bearing and non-interest bearing bonds as its primary source of raising capital. The interest rate on interest bearing bonds is 3.65%. Bonds are redeemable at the option of the holder on the last day of the month following the month when the notice is given and therefore are classified as a current liability Interest bearing bonds $ 527,400 $ 539,900 Non-interest bearing bonds 80,000 80,000 $ 607,400 $ 619,900 Bonds held by members of the church represent $443,000 of the total amount of bonds payable at December 31, DEFERRED CONTRIBUTIONS Deferred contributions represent funds restricted for use in subsequent periods. Changes in the deferred contributions balance are as follows: Beginning balance $ 115,200 $ 76,461 Amount recognized as revenue (62,028) (66,625) Amount received for future use 66, ,364 Ending balance $ 119,334 $ 115,200 This balance includes the following funds: Audio & Video $ 3,862 $ 3,660 Immigrant Sponsorship Double Up Legacy Fund 7,134 - MYM 8,282 7,325 Organ Repair 8,831 8,932 Benevolent 3,009 5,850 First Karen Baptist Church 16,734 14,413 Bond redemption fund 14,989 15,295 Building fund 56,493 59,625 Total deferred contributions 119, ,200 Funds in bank accounts held for designated contributions 108,525 92,854 Variance 10,809 22, DEFINED CONTRIBUTION PENSION PLAN The Church contributes monthly to a defined contribution pension plan on behalf of certain employees. The employees remit 6.0% of their gross wage to the plan which is matched by the Church. Included in personnel expense is the current service portion of the pension plan in the amount of $13,030 ( $12,402). 8

12 NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, OPERATING LEASE The Church has entered into a lease agreement for office equipment which expires on January 31, The annual minimum payment for the balance of the lease is $3,263 for an aggregate commitment of $13,327. The Church has entered into a lease agreement for office equipment which expires on September 25, The annual minimum payment for the balance of the lease is $425 for an aggregate commitment of $1,594. The Church's total obligations under various operating leases for office equipment for the next five years are estimated as follows: 2014 $ 3, , , FINANCIAL INSTRUMENTS AND RISKS MANAGEMENT The Church's financial instruments consist of bank accounts, accounts receivable, accounts payable, bonds payable and line of credit. The fair value of these financial instruments approximate their carrying values, unless otherwise noted. Unless otherwise noted, it is management s opinion that the Church is not exposed to significant interest rate, currency, liquidity or credit risk arising from these financial instruments. Interest Rate Risk The Church's financial instruments that are exposed to concentrations of interest rate risk consist primarily of the line of credits which bear interest at floating rates and the bonds payable which bear interest at fixed rates. Market Risk Market risk refers to the risk that the fair value of financial instruments will fluctuate because of changes in the market price whether those changes are caused by factors specific to the individual instrument or its issuer or factors affecting all instruments traded in the market. Liquidity Risk Liquidity risk is the risk that The Church will not be able to meet its financial obligations as they come due. The Church manages liquidity by maintaining adequate cash on hand to provide for the ongoing management and operations of The Church. In addition, The Church continuously monitors and reviews both actual and forecasted cash flows. The Church is exposed to this risk mainly in respect of its bonds payable. 9

13 NOTES TO THE FINANCIAL STATEMENTS For the Year Ended December 31, FIRST BAPTIST PLACE INC. TRANSACTIONS The relationship between the Church and First Baptist Place Inc. (FBP) is such that any member or pastor of the Church is eligible to serve as a member of the FBP Board. All directors of FBP are required to be members of the Church. In the event that FBP is wound up or dissolved the remaining assets, after payment of all debts and liabilities, shall be distributed to another recognized charitable or non-profit organization having similar objectives in Saskatchewan or Canada. By way of a resolution, FBP may designate the Church as the receiving organization. During the year $385 ( $385) was paid to FBP as interest on the $10,000 of bonds held by FBP and received $7,200 ( $7,200) in chaplaincy revenue from FBP. 12. GOING CONCERN CONSIDERATIONS These financial statements have been prepared on the basis of Canadian accounting standards for not-for-profit organization applicable to a going concern which assumes that the Church will continue operating for the foreseeable future and will be able to realize its assets and discharge its liabilities in the normal course of operations. As at December 31, 2013, the Church had bonds payable of $607,400 that mature December 31, However, the bonds are redeemable at any time before the maturity date on the last day of the month following the month when the notice is given by the holder. The Church's continued existence is dependent upon its ability to renew the bonds as they are redeemed or arrange other suitable financing. It is management's policy to set aside funds approximately equal to the historical amount of annual bond redemptions and is taking steps to ensure adequate funds exist to retire the bonds on their stated maturity date. However, if a substantial portion of the bonds were to be redeemed prior to the stated maturity date, the Church may be unable to meet that commitment, if alternate financing is unavailable. These financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate, because management believes that the measures noted above will mitigate any concerns regarding the Church's ability to continue its operations for the foreseeable future. 13. COMPARATIVE FIGURES Certain comparative figures have been reclassified to conform to the current year financial statement presentation. The prior year comparative figures were audited by another professional accountant. 10