PRINCE GEORGE REGIONAL ART GALLERY ASSOCIATION FINANCIAL STATEMENTS

Transcription

1 PRINCE GEORGE REGIONAL ART GALLERY ASSOCIATION FINANCIAL STATEMENTS December 31, 2012 and 2011

2 Partners 1116 Sixth Avenue Lynn Ross CA Prince George, BC, V2L 3M6 Norm Hildebrandt BBA, CA Tel. (250) Allison Beswick BComm, CA Fax (250) Denotes professional corporation INDEPENDENT AUDITORS REPORT To the Board Members of the Prince George Regional Art Gallery Association We have audited the accompanying financial statements of the Prince George Regional Art Gallery Association, which comprise the statement of financial position as at December 31, 2012, December 31, 2011 and January 1, 2011 and the statements of operations, changes in net assets and of cash flow for the years ended December 31, 2012 and December 31, 2011 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 generally accepted accounting standards, 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 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 judgement, 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified opinion. Basis for Qualified Opinion In common with many not-for-profit organizations, the Association derives a portion of its revenue from the general public in the form of fundraising and donations, the completeness of which is not susceptible of satisfactory audit verification. Accordingly, our verification of these revenues was limited to the amount recorded in the records of the Association and we were not able to determine whether any adjustments might be necessary to revenue, excess revenue, assets and net assets.

3 Partners 1116 Sixth Avenue Lynn Ross CA Prince George, BC, V2L 3M6 Norm Hildebrandt BBA, CA Tel. (250) Allison Beswick BComm, CA Fax (250) Denotes professional corporation INDEPENDENT AUDITORS REPORT, continued Qualified Opinion In our opinion, except for the effects of the matter described in the Basis for Qualified Opinion paragraph, the financial statements present fairly, in all material respects, the financial position of the Prince George Regional Art Gallery Association as at December 31, 2012, December 31, 2011 and January 1, 2011, and its financial performance and its cash flow for the years ended December 31, 2012 and December 31, 2011 in accordance with Canadian generally accepted accounting standards for not-for-profit organizations. Other Matter Our audit was made for the purpose of forming an opinion on the financial statements taken as a whole. The supplementary information included in the schedules is presented for additional analysis and is not a required part of the financial statements. Such supplementary information has been subjected to the auditing procedures applied in the audit of the financial statements and, in our opinion, is fairly stated in all material respects in relation to the financial statements taken as a whole. February 21, 2013 Prince George, BC CHARTERED ACCOUNTANTS

4 STATEMENT OF OPERATIONS For the years ended December 31, 2012 and Budget Actual Actual (Note 13) (restated) REVENUES GRANT REVENUES Regional District of Fraser-Fort George $ 385,000 $ 385,000 $ 385,000 BC Arts Council 52,000 53,000 52,000 Other grants , , , ,389 EARNED REVENUES Development (Schedule 1) 146, , ,942 Art Rental (Schedule 2) 11,548 7,647 5,958 Gallery Shop (Schedule 3) 82,253 58,822 48,987 Education Programming (Schedule 4) 161, , ,856 Exhibitions (Schedule 5) 66,700 81, , , , ,950 Amortization of deferred contributions related to equipment (Note 8) - 1,864 1, ,573 1,029, ,155 EXPENSES Development (Schedule 1) 21,250 50,070 30,790 Art Rental (Schedule 2) 5,145 2,230 1,257 Gallery Shop - cost of sales (Schedule 3) 55,688 43,103 38,893 Gallery Shop - general and administrative (Schedule 3) 25,691 25,852 34,921 Education Programming (Schedule 4) 126, , ,730 Exhibitions (Schedule 5) 114, , ,966 Administrative Expenses (Schedule 6) 246, , ,422 Marketing 20,944 18,192 18,519 Wages and benefits 296, , , ,003 1,011, ,155 EXCESS REVENUES (EXPENSES) $ (8,430) $ 17,808 $ - See notes to the financial statements.

5 STATEMENT OF CHANGES IN NET ASSETS For the years ended December 31, 2012 and Invested in Equipment Unrestricted Total Total (Note 11) BALANCE AT BEGINNING OF THE YEAR $ 25,177 $ 105,123 $ 130,300 $ 130,300 EXCESS REVENUES (EXPENSES) (9,858) 27,666 17,808 - INVESTMENT IN EQUIPMENT 29,242 (29,242) - - BALANCE AT END OF THE YEAR $ 44,561 $ 103,547 $ 148,108 $ 130,300 See notes to the financial statements.

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7 LIABILITIES December 31, December 31, January 1, CURRENT LIABILITIES Accounts payable and accrued liabilities $ 60,513 $ 33,799 $ 54,695 Unearned revenue (Note 10) 171,618 58,015 12,725 Endowment fund payable (Note 6) Deferred contributions (Note 7) 3,575 2,775 15, ,806 94,689 83,265 DEFERRED CONTRIBUTIONS RELATED TO EQUIPMENT (Note 8) 4,430 6,294 8,110 COMMITMENTS (Note 9) 240, ,983 91,375 NET ASSETS NET ASSETS INVESTED IN EQUIPMENT (Note 11) 44,561 25,177 16,019 UNRESTRICTED NET ASSETS 103, , , , , ,300 $ 388,344 $ 231,283 $ 221,675 See notes to the financial statements.

8 STATEMENT OF CASH FLOW For the years ended December 31, 2012 and OPERATING ACTIVITIES Excess revenues $ 17,808 $ - Items not affecting cash Amortization of deferred contributions related to equipment (1,864) (1,816) Amortization of equipment 11,723 6,650 27,667 4,834 Changes in non-cash operating working capital items: Accounts receivable 31,547 (13,665) Inventory 3,051 10,783 Prepaid expenses 2,535 (351) Accounts payable and accrued liabilities 26,714 (20,896) Unearned revenue 113,603 45, ,117 25,995 FINANCING AND INVESTING ACTIVITIES Increase in temporary investments (30) (43) Acquisition of equipment (29,242) (13,992) Deferred contributions 800 (12,970) (28,472) (27,005) INCREASE (DECREASE) IN CASH DURING THE YEAR 176,645 (1,010) CASH AT BEGINNING OF THE YEAR 133, ,045 CASH AT END OF THE YEAR $ 309,680 $ 133,035 See notes to the financial statements.

9 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and PURPOSE OF THE ASSOCIATION The Prince George Regional Art Gallery Association ( the Association ) is a not-for-profit organization incorporated in January 1971 under the Society Act (British Columbia). The Prince George Regional Art Gallery Association, operating as Two Rivers Art Gallery, contributes to the quality of life of the residents of Prince George and the Central Interior of British Columbia by collecting, exhibiting and interpreting visual art. Its objectives are to establish and maintain an art gallery for the perpetual benefit of the Regional District of Fraser Fort-George and its citizens. It is a registered Canadian charity pursuant to Section 149(a)(f) of the Income Tax Act. 2. SIGNIFICANT ACCOUNTING POLICIES Adoption of Accounting Standards for Not-For-Profit Organizations Effective January 1, 2012, the Association adopted the requirements of the Canadian Institute of (CICA) Handbook Accounting, electing to adopt the new accounting framework: Canadian accounting standards for not-for-profit organizations (ASNFPO). These are the Association s first financial statements prepared in accordance with ASNFPO and the transitional provisions of Section 1501, First-time Adoption have been applied. Section 1501 requires retrospective application of the accounting standards with certain elective exemptions and limited retrospective exceptions. The accounting policies set out in the this note have been applied in preparing the financial statements for December 31, 2012, the comparative information presented in these financial statements for the year ended December 31, 2011 and in the preparation of an opening ASNFPO statement of financial position as of January 1, 2011 (the Association s date of transition). The Association issued financial statements for the year ended December 31, 2011 using Canadian generally accepted accounting principles prescribed by CICA Handbook Accounting Part V. The adoption of ASNFPO had no impact on the previously reported assets, liabilities and equity of the Association, and accordingly, no adjustments have been recorded in the comparative statements of financial position, statements of operations, changes in net assets, and the statement of cash flow. Certain of the Association s disclosures included in these financial statements reflect the new disclosure requirement of ASNFPO. Revenue Recognition The Association 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. Unearned revenue represents memberships and other revenue that have been paid but not yet used and classes that have been paid for but not occurred yet. Inventory Inventory is valued at the lower of cost and net realizable value.

10 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and SIGNIFICANT ACCOUNTING POLICIES, continued Equipment, Deferred Contributions Related to Equipment and Amortization Equipment is recorded at cost. Contributed equipment is recorded at fair value at the date of contribution. Equipment and deferred contributions related to equipment are amortized using the diminishing-balance method at the following annual rates: Permanent Collection Computer equipment 30% Data base 20% Exhibition equipment 20% Furniture 20% Maintenance equipment 20% Office equipment 20% Shop fixtures 20% The permanent collection of the Association comprises paintings, drawings, sculptures and other visual art materials primarily of a contemporary nature. The Association is responsible for the management of the Prince George Regional Art Gallery collection. The collection is shown as an asset at nominal value of $1 due to the practical difficulties of determining a meaningful value for the assets. Items purchased for the collection are recorded as an expense in the year of acquisition. Contributed collection items are not recorded in the books of account. All preservation costs are expensed in the period incurred. The permanent collection is not amortized as these assets are works of art, which are rare and unique and have cultural and historical significance. Contributed Materials, Supplies and Services Donors and volunteers contribute materials, supplies and services to assist the Association in carrying out its service delivery activities. Contributed materials, supplies and services are recognized in the financial statements only if their fair value can be determined. Statement of Cash Flow The statement of cash flow is prepared using the indirect method. Under this method, net earnings is adjusted for the effect of non-cash items, changes during the year in operating items, other deferrals or accruals of past or future operating receipts or payments, and revenues, expenses, gains or losses associated with investing or financing cash flow. The Association considers currency on hand, demand deposits with financial institutions and all highly liquid investments purchased with a maturity of three months or less to be cash and cash equivalents. Financial Instruments Financial instruments are classified as held for trading, measured at fair value and all gains and losses are included in net income in the period in which they arise.

11 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and SIGNIFICANT ACCOUNTING POLICIES, continued 3. CASH Use of Estimates The preparation of the financial statements in conformity with Canadian generally accepted accounting principles 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 reporting period. By their nature, these estimates are subject to measurement uncertainty and the effect on the financial statements of changes in such estimates in future periods could be significant. December 31, December 31, January 1, Cash subject to external restriction $ 100 $ 100 $ 100 Unrestricted cash 309, , ,945 $ 309,680 $ 133,035 $ 134,045 The cash subject to external restriction includes the Endowment Fund Payable (Note 6). 4. EQUIPMENT December 31, 2012 Accumulated Net Book Cost Amortization Value Computer equipment $ 68,553 $ 55,873 $ 12,680 Data base 5,766 5,765 1 Exhibition equipment 41,285 29,114 12,171 Furniture 43,152 37,764 5,388 Maintenance equipment 3,689 2, Office equipment 12,368 6,213 6,155 Shop fixtures 19,299 7,446 11,853 $ 194,112 $ 145,123 $ 48,989

12 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and EQUIPMENT, continued December 31, 2011 Accumulated Net Book Cost Amortization Value Computer equipment $ 60,807 $ 51,075 $ 9,732 Data base 5,766 5, Exhibition equipment 36,558 27,095 9,463 Furniture 43,152 36,417 6,735 Maintenance equipment 3,689 2, Office equipment 5,941 5, Shop fixtures 8,957 5,337 3,620 $ 164,870 $ 133,400 $ 31,470 January 1, 2011 Accumulated Net Book Cost Amortization Value Computer equipment $ 56,267 $ 48,202 $ 8,065 Data base 5,766 5, Exhibition equipment 32,180 25,550 6,630 Furniture 41,284 34,885 6,399 Maintenance equipment 3,689 2,531 1,158 Office equipment 5,941 5, Shop fixtures 5,751 5, $ 150,878 $ 126,750 $ 24, PERMANENT COLLECTION The Association maintains an extensive collection of visual arts, particularly art featuring the Central Interior and life in Northwestern Canada. The permanent collection comprises of 306 ( ) works of art. The Association acquires works of art by purchase, gift and bequest. There were eight acquisitions during the year from gifts or bequests. The fair value of these pieces totalled $11,575 (2011 $93,700).

13 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and ENDOWMENT FUND PAYABLE The Association has partnered with the Prince George Community Foundation (the Foundation ) to create an endowment fund to improve the long-term sustainability of the Association. Any revenues earned in the fund will be kept in the fund. This fund is subject to the control of the Foundation, and as such any monies specifically donated for the endowment fund which are received by the Association are to be transferred in a timely manner to the Foundation. 7. DEFERRED CONTRIBUTIONS Deferred contributions represent unspent resources received in the current period that are related to subsequent periods and are externally restricted for specific program expenditures. The changes in the deferred contributions for the year are as follows: December 31, December 31, January 1, Fundraising revenue - Permanent collection $ 3,575 $ 2,775 $ 2,775 Canada Council - - 6,745 Fundraising revenue - - 6,225 $ 3,575 $ 2,775 $ 15, DEFERRED CONTRIBUTIONS RELATED TO EQUIPMENT Deferred contributions related to equipment represent restricted contributions with which equipment has or will be purchased. The changes in the deferred contributions related to equipment balance for the year are as follows: December 31, December 31, January 1, Balance at beginning of the year $ 6,294 $ 8,110 $ 10,485 Amounts amortized to revenue (1,864) (1,816) (2,375) Balance at end of the year $ 4,430 $ 6,294 $ 8, COMMITMENTS The Association leases its current premises from the city of Prince George for a period of twenty years ending 2028 for annual payments of $1,000. The fair value of the lease payments cannot be reasonably determined.

14 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and UNEARNED REVENUE December 31, December 31, January 1, Memberships and programs $ 9,868 $ 9,340 $ 12,725 University Hospital of Northern B.C. 18,750 33,750 - Gaming 100,000 14,925 - City of Prince George 13, British Columbia Arts Council 30, $ 171,618 $ 58,015 $ 12, NET ASSETS INVESTED IN EQUIPMENT Net assets invested in equipment is calculated as follows: December 31, December 31, January 1, Equipment $ 48,989 $ 31,470 $ 24,128 Permanent collection ,990 31,471 24,129 Financed by: Deferred contributions related to equipment 4,430 6,294 8,110 The change in net assets invested in equipment is calculated as follows: $ 44,560 $ 25,177 $ 16,019 Deficiency of revenue over expenses: Amortization of deferred contributions related to equipment $ 1,864 $ 1,816 $ 2,375 Amortization of equipment (11,722) (6,650) (6,634) $ (9,858) $ (4,834) $ (4,259) Investment in equipment Acquisition of equipment $ 29,242 $ 13,992 $ 4,816

15 NOTES TO THE FINANCIAL STATEMENTS For the year ended December 31, 2012 and FINANCIAL INSTRUMENTS Financial instruments of the Association are comprised of cash, temporary investments, accounts receivable, accounts payable and accrued liabilities. Fair Value The carrying values of the Association s financial instruments approximate their fair values due to their immediate or short-term maturity. Credit Risk The Gallery is exposed to credit risk on the accounts receivable from its members. In order to reduce its credit risk, the Gallery has adopted credit policies which include the analysis of the financial position of its members and the regular review of their credit limits. In some cases, the Gallery requires bank letters of credit. Bad debts expense for the year ended December 31, 2012 is nil ( nil). 13. BUDGETS Budgets have been prepared by management, approved by the board, but were not subject to audit or review. 14. MANAGEMENT S ASSESSMENT OF GOING CONCERN Management has made its assessment of going concern and concluded there is no issue regarding the Association's ability to continue as a going concern based on the assumption that the current funding levels are maintained and any committed additional future funding is received. If there are significant declines in funding, expenditures will be adjusted to match committed funding. 15. CAPITAL DISCLOSURES The Association receives its principal source of capital through admissions, memberships, store sales, sponsorships, grants and gifts. The Association defines capital to be net assets which include amounts held in the unrestricted fund and invested in equipment fund. The Association is not subject to any other external capital requirements or restrictions. 16. CORRECTION OF ACCOUNTING ESTIMATE During the year, management determined that an addition to the permanent collection was overvalued during the December 31, 2011 fiscal year. As a result, the statement of operations has been restated, as both revenues and expenses have been decreased by $20,450.

16 Schedule 1 SCHEDULE OF DEVELOPMENT For the years ended December 31, 2012 and Budget Actual Actual (Note 13) REVENUES Admissions $ 5,675 $ 2,922 $ 3,516 Annual campaign 3,600 2,733 5,310 Endowment 1, ,163 Fundraising 24,000 42,560 39,652 Gaming 66, ,325 43,475 Memberships 16,800 12,715 15,394 Miscellaneous 4,695 16,974 11,543 Spring fundraiser 15,000 13,156 11,889 Development 8,892 6, , , ,942 EXPENSES Annual campaign Fundraising 12,250 37,962 22,449 Memberships 400 1, Spring fundraiser 8,000 10,623 8,265 21,250 50,070 30,790. EXCESS REVENUES $ 124,812 $ 212,437 $ 101,152 See notes to the financial statements.

17 Schedule 2 SCHEDULE OF ART RENTAL For the years ended December 31, 2012 and Budget Actual Actual (Note 13) REVENUES Art Rental fees $ 4,258 $ 2,643 $ 2,598 Art Rental sales 1, Facility rental 6,090 4,654 3,360 11,548 7,647 5,958 EXPENSES Advertising and other 2, Artist payments - rental 2,129 1,257 1,375 Artist payments - sales (414) 5,145 2,230 1,257 EXCESS REVENUES $ 6,403 $ 5,417 $ 4,701 See notes to the financial statements.

18 Schedule 3 SCHEDULE OF GALLERY SHOP For the years ended December 31, 2012 and Budget Actual Actual (Note 13) REVENUES $ 82,253 $ 58,822 $ 48,987 COST OF SALES 55,688 43,103 38,893 GROSS PROFIT ( %; %) 26,565 15,719 10,094 GENERAL AND ADMINISTRATIVE EXPENSES Advertising and promotion 1,300 2,083 1,654 Bank charges and interest 2,194 1,370 2,628 Cash shortages - - (100) Shop supplies 1,100 1, Wages and benefits 21,097 20,683 30,368 25,691 25,852 34,921 EXCESS EXPENSES $ 874 $ (10,133) $ (24,827) See notes to the financial statements.

19 Schedule 4 SCHEDULE OF EDUCATION PROGRAMMING For the years ended December 31, 2012 and Budget Actual Actual (Note 13) REVENUES $ 161,010 $ 178,265 $ 167,856 EXPENSES Children and youth events 12,480 10,627 11,551 Classes and workshops 57,874 72,726 50,544 Exhibition interpretation 3,732 2,248 3,566 Family Sundays 7,062 4,730 5,053 Hospital program 12,000 9,272 9,732 Other 3,200 1,021 3,408 Outreach programs 27,394 32,896 25,602 Tours 2,990 2,611 3, , , ,730 EXCESS REVENUES $ 34,278 $ 42,134 $ 55,126 See notes to the financial statements.

20 Schedule 5 SCHEDULE OF EXHIBITIONS For the years ended December 31, 2012 and Budget Actual Actual (Note 13) REVENUES $ 66,700 $ 81,190 $ 167,207 EXPENSES Advertising 2,800 1,018 - Artist exhibition fees 19,711 21,507 15,048 Catalogues and overviews 17,000 18,042 14,497 Curatorial travel and mileage 4,300 1,416 3,592 Donations to permanent collection (Note 5) - 11,575 93,700 Exhibition production 17,960 15,656 19,470 Galleria 3,200 2,679 2,762 Insurance 1,200 1,203 1,163 Lectures and talks 1,500 2,182 1,700 Permanent collection expenses 5,400 4,134 4,252 Publicity 4,710 2,586 5,420 Receptions and hospitality 4,200 5,391 4,611 Travelling exhibitions 24,987 21,252 26,678 Visiting artist expense 7,600 6,200 9, , , ,966 EXCESS EXPENSES $ (47,868) $ (33,651) $ (34,759) See notes to the financial statements.

21 Schedule 6 SCHEDULE OF ADMINISTRATIVE EXPENSES For the years ended December 31, 2012 and Budget Actual Actual (Note 13) EXPENSES Amortization $ 8,040 $ 11,723 $ 6,650 Bank charges and interest 3,600 5,097 4,241 Board development 1,392 1, Bookkeeping 18,259 22,086 19,556 Equipment rental, repairs and maintenance 15,440 10,049 5,740 Insurance 6,293 5,788 5,454 Library Licences and dues 3,300 3,184 2,562 Meetings 3,300 3,003 1,583 Occupancy costs 146, , ,642 Office and miscellaneous 9,600 12,866 8,954 Postage 7,400 5,275 7,462 Professional fees 6,900 7,334 7,175 Recruitment 360 1, Security Telephone and fax 3,120 3,067 2,554 Training and professional development 4,000 5,862 5,321 Travel and mileage 8,354 6,261 4,978 $ 246,982 $ 275,113 $ 227,422 See notes to the financial statements.