THE TORONTO WALDORF SCHOOL FINANCIAL STATEMENTS JUNE 30, 2014

Transcription

1 FINANCIAL STATEMENTS JUNE 30, 2014

2 INDEPENDENT AUDITOR'S REPORT December 3, 2014 To the Members of The Toronto Waldorf School Report on the Financial Statements We have audited the accompanying financial statements of The Toronto Waldorf School, which comprise the statement of financial position as at June 30, 2014, statement of operations and changes in fund balances and statement of cash flows 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. Auditor's 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 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. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion. Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of The Toronto Waldorf School as at June 30, 2014, and its financial performance and its cash flow for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations. Emphasis of Matter Without qualifying our report, we draw attention to Note 2 in the financial statements which indicates the Organization's ability to continue as a going concern is dependent upon its ability to return to profitable operations. It is not possible to predict at this time whether the Organization will attain profitable levels of operations. These conditions indicate the existence of material uncertainty. Chartered Accountants Licensed Public Accountants

3 STATEMENT OF FINANCIAL POSITION AS AT JUNE 30, 2014 (See Basis of Presentation, Note 2) ASSETS General Capital Asset Fund Fund Total Total CURRENT Cash 731, , ,056 Accounts receivable, note 6 126, , ,672 Government remittances recoverable 85,572-85,572 91,933 Prepaid expenses 56,917-56,917 32,622 Land held for sale, note 7-250, ,535-1,000, ,535 1,250, ,283 ACCOUNTS RECEIVABLE - LONG TERM, note 6 23,472-23,472 23,473 CAPITAL ASSETS, note 8-2,697,382 2,697,382 2,905,129 1,023,739 2,947,917 3,971,656 3,387,885 LIABILITIES AND NET ASSETS CURRENT Notes payable, note 9 475, ,000 - Accounts payable and accrued liabilities 380, , ,278 Fee deposits, note 10 1,666,432-1,666,432 1,895,177 Deferred contributions, note 11 14,895-14,895 7,652 Deposit on land held for sale, note 7-3,200,000 3,200,000 - Current portion of sabbatical accrual, note , ,000 93,000 Current portion of capital leases, note 13-8,411 8,411 10,444 Mortgage payable, note ,282,750 2,711,423 3,208,411 5,919,834 4,588,301 SABBATICAL ACCRUAL, note , , ,308 CAPITAL LEASE OBLIGATIONS, note 13-16,985 16,985 25,396 DEFERRED CONTRIBUTIONS RELATED TO CAPITAL ASSETS, note , , ,511 3,010,215 3,424,068 6,434,283 5,203,516 NET ASSETS (DEFICIENCY) Invested in capital assets - (476,151) (476,151) 387,028 Internally restricted, bursary General (1,986,476) - (1,986,476) (2,202,659) (1,986,476) (476,151) (2,462,627) (1,815,631) 1,023,739 2,947,917 3,971,656 3,387,885 APPROVED ON BEHALF OF THE BOARD Director "See Accompanying Notes"

4 STATEMENT OF OPERATIONS AND CHANGES IN FUND BALANCES FOR THE YEAR ENDED JUNE 30, General Capital Asset Bursary Fund Fund Fund Total Total REVENUE Tuition fees 5,156, ,156,393 5,146,352 Donations and fundraising 169, , ,760 Children's camp 117, ,603 88,655 Amortization of deferred contributions related to capital assets - 17,875-17,875 15,003 Other income 212, , ,716 5,655,654 17,875-5,673,529 5,588,486 EXPENSES Salaries and benefits, note 12 4,232, ,232,427 4,128,773 Discounts, note 17 78, ,211 84,335 Tuition adjustment, note , , ,519 Other teaching costs 166, , ,587 Marketing and development programs 233, , ,177 Children's camp 89, ,144 77,306 Property and building 262, , ,315 General operations 305, , ,680 Amortization of capital assets, note 4-170, , ,204 Interest 23, , , ,521 5,391, , ,750 6,320,526 6,038,417 EXCESS (DEFICIENCY) OF REVENUES OVER EXPENSES 264,494 (338,741) (572,750) (646,997) (449,931) NET ASSETS (DEFICIENCY), BEGINNING OF YEAR (2,202,659) 387,029 - (1,815,630) (1,365,700) Interfund transfers, note 16 (48,311) (524,439) 572, NET ASSETS (DEFICIENCY), END OF YEAR (1,986,476) (476,151) - (2,462,627) (1,815,631) "See Accompanying Notes"

5 STATEMENT OF CASH FLOWS FOR THE YEAR ENDED JUNE 30, OPERATING ACTIVITIES Deficiency of revenues over expenses (646,997) (449,931) Items not requiring the use of cash Amortization of capital assets 170, ,204 Amortization of deferred contributions related to capital assets (17,875) (15,003) Amortization of deferred finance charges 17,250 35,113 Amortization of deposit on mortgage interest - 88,286 (477,555) (179,331) Net change in non-cash working capital balances related to operations, note 20 3,019,961 63,269 Cash from (used in) operations 2,542,406 (116,062) FINANCING ACTIVITIES Proceeds from notes payable 475,000 - Mortgage principal repaid (2,300,000) - Deferred finance charges - (28,751) Deferred contributions related to capital assets 17,036 33,437 Proceeds from capital leases - 9,761 Principal repaid on capital leases (10,444) (25,084) (1,818,408) (10,637) INVESTING ACTIVITIES Purchase of capital assets (96,261) (348,627) Proceeds from disposal of capital assets Increase in assets held for sale (116,592) - (212,853) (348,131) INCREASE (DECREASE) IN CASH 511,145 (474,830) CASH, BEGINNING OF YEAR 220, ,886 CASH, END OF YEAR 731, ,056 "See Accompanying Notes"

6 1. Status and Nature of Activities The Toronto Waldorf School was incorporated, January 26, 1970, under the laws of the Province of Ontario as a not-for-profit corporation. The purpose of the Organization is to establish, operate and maintain a school based on the work and indications of Rudolf Steiner. The Organization is a registered Charity under the Income Tax Act. 2. Basis of Presentation These financial statements have been prepared on a going concern basis which contemplates the realization of assets and the payment of liabilities in the ordinary course of operations. Should the Organization be unable to continue as a going concern, it may be unable to realize the carrying value of its assets and to meet its liabilities as they become due. The Organization's ability to continue as a going concern is dependent upon its ability to return to profitable operations. It is not possible to predict at this time whether the Organization will attain profitable levels of operations. 3. Accounting Policies (a) Basis of Presentation These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations. (b) Revenue Recognition The Organization uses the deferral method for reporting revenue and net assets wherein capital assets are recorded as long-term assets and their cost is amortized over the periods of use. (i) Tuition fees and other revenue are recorded as revenue in the statement of operations in the period the services have been provided. (ii) Contributions received for designated purposes are deferred and recognized as revenue in the year in which the designated expenditures occur. Contributions in respect of capital projects undertaken and other restricted contributions to fund the purchase of capital assets are recorded as deferred contributions. Deferred contributions are amortized and recorded in revenue in the statement of operations at the same rate as the amortization expense on the related assets. (iii)revenue from donations is recorded when received. Pledges outstanding at year end are not recorded in the accounts since they are not legally enforceable claims. Pledges will be collected over terms ranging from one to three years and are estimated to amount to $nil as at June 30, 2014 ( $111,524).

7 3. Accounting Policies (continued) (c) Fund Accounting The accounts of the Organization have been segregated into the following funds for reporting purposes. The funds and the purpose of each are as follows: (i) General Fund Revenue and expenses related to program delivery and administrative activities are reported in the General Fund. (ii) Capital Asset Fund The Capital Asset Fund reports the assets, liabilities, revenues and expenses related to the Organization's capital assets. (iii)bursary Fund The Bursary Fund consists of the following: - A percentage of annual tuition revenues as determined by the Board of Directors. - Donations specifically for the purpose of tuition adjustment programs. - Annual fund raising allocations as determined by the Board of Directors. - Interest and other invested income earned on Bursary Fund assets. (d) Capital Assets Purchased capital assets are stated at cost which includes significant improvements thereto. Contributed capital assets are recorded at the fair market value at the date of contribution. Maintenance and repairs, which do not improve or extend the useful life of these assets, are expensed annually. Amortization is provided as follows: Building Parking lot School, office and computer equipment Furniture and fixtures Automotive equipment Website Development 25 years straight line 20 years straight line 5 years straight line 3 years straight line 3 years straight line 4 years straight line (e) Contributed Services Volunteers contribute substantial time to assist The Toronto Waldorf School in carrying out its program activities. Because of the difficulty of determining the fair value, contributed services are not recognized in the financial statements. (f) Gifts in Kind Gifts in kind received by the Organization are recorded at their estimated fair market value.

8 3. Accounting Policies (continued) (g) Use of Estimates The preparation of the Organization's financial statements, in accordance with Canadian accounting standards for not-for-profit organizations, requires management to make estimates and assumptions which affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses for the year. Significant items subject to estimates and assumptions include the estimated useful lives of capital assets and the allowance for doubtful accounts. Due to the inherent uncertainty involved with making such estimates, actual results could differ from those reported. These estimates are reviewed periodically and adjustments are made to income as appropriate in the year they become known. (h) Financial Instruments (i) Measurement of Financial Instruments The Organization 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 Organization subsequently measures all of its financial assets and financial liabilities at amortized cost. Financial assets measured at amortized cost include cash, accounts receivable and government remittances recoverable. Financial liabilities measured at amortized cost include notes payable, accounts payable and accrued liabilities, sabbatical accrual and capital lease obligation. (ii) Impairment At the end of each reporting period, the Organization assesses whether there are any indications that a financial asset measured at amortized cost may be impaired. The carrying amount of the asset is reduced directly or through the use of an allowance account. The amount of the reduction is recognized as an impairment loss in the statement of operations. 4. Change in Accounting Policy Previously, the Organization provided for amortization of capital assets on a declining balance basis. On July 1, 2013, the Organization elected to change its accounting policy for amortization on capital assets to a straight line basis. The Organization believes the straight line method provides a more accurate measurement of the useful lives of the capital assets. This change has been applied prospectively as the information required for retrospective application is not readily available.

9 5. Financial Instrument Risk It is management's opinion that the Organization is not exposed to significant currency, interest, foreign exchange or other price risks arising from its financial instruments. Other identified risks are as follows: (i) Credit Risk Credit risk refers to the risk that the fair value of financial instruments or future cash flows associated with the instruments will fluctuate due to the changes in the collectability of receivables. Cash is exposed to credit risk as the amounts on deposit exceed the federally insured limits. The Organization minimizes its exposure by depositing cash at TD Canada Trust, a major financial institution. The Organization is also exposed to credit risk on its accounts receivable. The credit risk associated with accounts receivable is minimized by the Organization's large and diverse enrolment base. The Organization continually monitors the aging of its receivables and does not have a history of significant bad debt write-offs due to its monitoring procedures. (ii) Liquidity Risk Liquidity risk is the risk that the Organization will not be able to meet a demand for cash or fund its obligations as they come due. The Organization meets its liquidity requirements by preparing and monitoring detailed budgets and holding assets that can be readily converted into cash. 6. Accounts Receivable Accounts receivable are comprised of the following: Accounts receivable 197, ,172 Less: Allowance for doubtful accounts 47,290 32, , ,145 Less: Amounts due within one year 126, ,672 Accounts receivable - long term 23,472 23, Land Held for Sale The Organization entered into an agreement of purchase and sale on March 31, 2014, to sell a parcel of land. Closing is conditional on registration of the subdivision and land severance by the purchaser. Should the purchase and sale not close, the deposit may be refundable with accrued interest. Proceeds from the land sale are expected to be between $8,395,200 and $9,622,400 resulting in a gain on disposal between $8,154,100 and $9,371,900. The Board is currently in the process of developing a plan for the use of the proceeds, after the discharge of the mortgage as disclosed in note 14. The proceeds from the land sale will be received through a vendor take back mortgage at a value of the purchase price, less the $3,200,000 deposit received in the 2014 fiscal year. The mortgage will have a 3 year term and be subject to quarterly interest only payments calculated at 6% annually.

10 8. Capital Assets Accumulated Cost Amortization Net Net Land 304, , ,494 Building 4,042,718 2,237,309 1,805,409 1,870,561 Parking lot 338,497 83, , ,832 School, office and computer equipment 893, , , ,850 Furniture, fixtures and maintenance equipment 216, ,472 28,044 25,324 Automotive equipment 24,421 18,724 5,697 8,545 Website development 90,148 69,328 20,820 27,760 Trademark 4,431 1,944 2,487 2,763 5,914,373 3,216,991 2,697,382 2,905,129 During the year, capital assets were acquired at an aggregate cost of $96,261 ( $348,627), of which $nil ( $9,761) was financed by capital lease, and $96,261 ( $338,866) by cash payments. 9. Notes Payable Four lenders loaned, on a short term basis, funds totaling $475,000, with interest at 8%, secured by a general security agreement. 10. Fee deposits Fee deposits represent amounts for tuition which relate to and will be included in revenue in the school year. 11. Deferred Contributions Deferred contributions are donations received to fund designated operating expenditures of future periods. 12. Sabbatical Leave After eight years of continual service full-time faculty are permitted to take an annual sabbatical leave. One half of their current salary will be paid during the leave. The Organization accrues sabbatical costs as earned by the faculty over the eight-year period. The total estimated liability for sabbatical leave for both full-time and pro-rated faculty at June 30, 2014 is $473,792 ( $483,308).

11 13. Capital Lease Obligations Computer lease due September ,224 Equipment lease, interest at 3.00% repayable in quarterly blended principal and interest installments of $1,661, due November ,576 24,221 Equipment lease, interest at 11.50% repayable in monthly blended principal and interest installments of $215, due March ,820 9,395 25,396 35,840 Current portion of capital leases 8,411 10,444 16,985 25,396 Approximate principal repayments required are as follows: , , , ,852 25, Mortgage Payable Mortgage payable due April ,300,000 Less: Unamortized financing fees and transaction costs - (17,250) - 2,282,750 The mortgage was discharged in May Deferred Contributions Related to Capital Assets Deferred contributions related to capital assets represent the unamortized amount of restricted donations received for renovations to the building and the purchase of furniture and fixtures Balance at beginning of year 199, ,077 Contributions received 17,036 33,437 Less: Amounts amortized to revenue (17,875) (15,003) 198, , Interfund Transfers and Restricted Fund Balances The Board of Directors annually transfer resources to be used for tuition adjustments, bursary awards and to fund the Capital Asset Fund. 17. Discounts Discounts consist of the following: Return discount 3,750 3,750 Full payment discount 74,461 80,585 78,211 84,335

12 18. Tuition Adjustment Tuition adjustment consists of the following: Families 572, ,542 Administrative costs 510 1, , ,519 The gross and net tuition amounts associated with the tuition adjustment are as follows: Gross tuition 1,324,950 1,298,750 Tuition adjustment 572, ,542 Net tuition 752, , Banking Facility The Organization has arranged a revolving operating loan which permits borrowing to a maximum of $350,000, repayable on demand with interest at prime plus 4.15%. The indebtedness is collateralized by a general security agreement over the assets of the Organization. 20. Net Change in Working Capital Balances Related to Operations Accounts receivable (11,905) 3,115 Government remittances recoverable 6,361 (7,331) Prepaid expenses (24,295) (1,764) Accounts payable and accrued liabilities 80,818 79,172 Fee deposits (228,745) (61,938) Deferred contributions 7,243 (1,850) Deposit on land 3,200,000 - Sabbatical accrual (9,516) 53,865 3,019,961 63, Reclassification The comparative figures for 2013 have been reclassified where necessary to conform with the 2014 financial statement presentation.