WORLD BUSINESS CHICAGO YEARS ENDED DECEMBER 31, 2014 AND 2013

Transcription

1 YEARS ENDED DECEMBER 31, 2014 AND 2013

2 YEARS ENDED DECEMBER 31, 2014 AND 2013 CONTENTS Page Independent auditor s report 1-2 Financial statements: Statement of financial position 3-4 Statement of activities 5 Statement of changes in net assets 6 Statement of cash flows 7 Notes to financial statements 8-15

3 Independent Auditor s Report Board of Directors World Business Chicago Chicago, Illinois We have audited the accompanying financial statements of World Business Chicago (WBC), a nonprofit organization, which comprise the statement of financial position as of December 31, 2014 and 2013 and the related statements of activities, changes in net assets and cash flows for the years then ended and the related notes to the financial statements. Management s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation and maintenance of internal control relevant to the preparation and fair presentation 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 audits. We conducted our audits 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 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. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements. 1 NBC Tower - Suite N. Cityfront Plaza Dr. Chicago, IL P: F: Independent Affiliate of BKR International

4 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 referred to above present fairly, in all material respects, the financial position of World Business Chicago as of December 31, 2014 and 2013 and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. April 14,

5 STATEMENT OF FINANCIAL POSITION December 31, 2014 Temporarily 2013 Temporarily Unrestricted restricted Total Unrestricted restricted Total ASSETS Current assets: Cash and cash equivalents (Note 4) $ 2,303,106 $ 3,656,124 $ 5,959,230 $ 3,377,573 $ 3,936,309 $ 7,313,882 Accounts receivable 15,192 15,192 22,130 22,130 Contributions receivable 467, ,000 1,177,186 10, , ,000 Grant receivable 1,028, ,000 1,428, , ,000 Rent receivable Prepaid expenses 47,698 47,698 46,522 46,522 Total current assets 3,861,825 4,766,124 8,627,949 4,306,325 4,476,309 8,782,634 Property and equipment: Equipment 453, , , ,108 Furniture and fixtures 420, , , ,916 Website 348, , , ,348 Artwork 20,018 20,018 20,018 20,018 Leasehold improvements 58,667 58,667 10,270 10,270 1,300,847 1,300,847 1,004,660 1,004,660 Less accumulated depreciation and amortization (958,860) (958,860) (892,493) (892,493) Property and equipment, net 341, , , ,167 Total assets $ 4,203,812 $ 4,766,124 $ 8,969,936 $ 4,418,492 $ 4,476,309 $ 8,894,801 See notes to financial statements. 3

6 STATEMENT OF FINANCIAL POSITION (CONTINUED) December 31, 2014 Temporarily 2013 Temporarily Unrestricted restricted Total Unrestricted restricted Total LIABILITIES AND NET ASSETS Current liabilities: Accounts payable $ 264,033 $ 200,000 $ 464,033 $ 161,092 $ 161,092 Accrued payroll 95,994 95,994 60,137 60,137 Accrued expenses 27,582 27,582 48,650 48,650 Deferred rent (Note 7) ,051 5,051 Total current liabilities 387, , , , ,930 Long-term liability: Deferred rent (Note 7) 92,760 92,760 83,023 83,023 Total liabilities 480, , , , ,953 Net assets: Unrestricted 3,723,078 3,723,078 4,060,539 4,060,539 Temporarily restricted (Note 5) 4,566,124 4,566,124 $ 4,476,309 4,476,309 Total net assets 3,723,078 4,566,124 8,289,202 4,060,539 4,476,309 8,536,848 Total liabilities and net assets $ 4,203,812 $ 4,766,124 $ 8,969,936 $ 4,418,492 $ 4,476,309 $ 8,894,801 See notes to financial statements. 4

7 STATEMENT OF ACTIVITIES Years ended December 31, Temporarily Temporarily Unrestricted restricted Total Unrestricted restricted Total Public support, revenue and net assets released from restrictions: Public support and net assets released from restrictions: Government agency grants (Note 6) $ 1,528,643 $ 1,528,643 $ 1,000,000 $ 1,000,000 Private grants and contributions 3,382,488 $ 1,610,000 4,992,488 2,150,323 $ 690,000 2,840,323 CASE revenue 300, ,000 Special event revenue: Gross revenue 883, , , ,500 Less direct expenditures for event (93,450) (93,450) (36,150) (36,150) Net assets released from restrictions (Note 5) 1,520,185 (1,520,185) 9,447,911 (9,447,911) Total public support and net assets released from restrictions 7,521,766 89,815 7,611,581 12,872,584 (8,757,911) 4,114,673 Revenue: Contributed goods and services (Note 2) 1,379,999 1,379, , ,500 Chicago Sister Cities International committee income 222, , , ,948 Chicago Sister Cities International other income 1,504 1, Interest income Other income 186, , , ,468 Total revenue 1,790,280 1,790,280 1,236,028 1,236,028 Total public support, revenue and net assets released from restrictions 9,312,046 89,815 9,401,861 14,108,612 (8,757,911) 5,350,701 Expenses: Program 7,714,980 7,714,980 14,119,426 14,119,426 Management and general 1,472,108 1,472, , ,359 Fundraising 462, , , ,008 Total expenses 9,649,507 9,649,507 14,967,793 14,967,793 Change in net assets $ (337,461) $ 89,815 $ (247,646) $ (859,181) $ (8,757,911) $ (9,617,092) See notes to financial statements. 5

8 STATEMENT OF CHANGES IN NET ASSETS Temporarily Unrestricted restricted Total Net assets, December 31, 2012 $ 4,241,056 $ 13,234,220 $ 17,475,276 Change in net assets for the year ended December 31, 2013 (859,181) (8,757,911) (9,617,092) Transfer of assets as of March 31, 2013 (Note 10) 678, ,664 Net assets, December 31, ,060,539 4,476,309 8,536,848 Change in net assets for the year ended December 31, 2014 (337,461) 89,815 (247,646) Net assets, December 31, 2014 $ 3,723,078 $ 4,566,124 $ 8,289,202 See notes to financial statements. 6

9 STATEMENT OF CASH FLOWS Years ended December 31, Operating activities: Change in net assets $ (247,646) $ (9,617,092) Adjustments to reconcile above to cash used in operating activities: Depreciation and amortization 66,367 47,711 (Increase) decrease in operating assets: Accounts receivable 6,938 (8,380) Contributions receivable (627,186) 104,192 Grant receivable (578,643) 75,000 Grant receivable for Chicago Career Tech 421,455 Interest receivable 302 Rent receivable 100 1,439 Prepaid expenses (1,176) 2,701 Increase (decrease) in operating liabilities: Accounts payable 302,941 (395,056) Accrued expenses 14,789 37,048 Deferred rent 5,051 7,692 Cash used in operating activities (1,058,465) (9,322,988) Investing activity: Purchase of property and equipment (296,187) (11,116) Cash used in investing activity (296,187) (11,116) Financing activity: Transfer of assets 676,963 Cash provided by financing activity 676,963 Decrease in cash and cash equivalents (1,354,652) (8,657,141) Cash and cash equivalents, beginning of year 7,313,882 15,971,023 Cash and cash equivalents, end of year $ 5,959,230 $ 7,313,882 See notes to financial statements. 7

10 NOTES TO FINANCIAL STATEMENTS 1. Organization Chaired by the Mayor of Chicago, World Business Chicago (WBC) drives regional economic growth. WBC collaborates to create jobs, cultivate talent and put Chicago at the forefront of the global economy. A unique public-private partnership, WBC engages business and community leaders to advance Chicago s Plan for Economic Growth and Jobs (the Plan). The Plan is a coordinated effort to assess and expand Chicago s economy. The Plan provides a set of goals, a framework for research and analysis and strategies which are currently being implemented to foster regional growth. Chicago Sister Cities International (CSCI) merged with WBC on March 31, CSCI promotes Chicago as a global city, develops international partnerships and networks and shares best practices with its 28 Sister Cities, located in almost every region of the world. WBC was responsible for the organization and production of certain events in connection with meetings conducted by the North Atlantic Treaty Organization (NATO) held in Chicago in May The conference was a one-time event for WBC and all substantial program services were completed and reported during There are remaining unused funds that are to be donated to various local entities under WBC s program called The NATO Legacy. For the years ended December 31, 2014 and 2013, the total donations were approximately $700,000 and $8,800,000, respectively. 2. Summary of significant accounting policies The significant accounting policies of WBC are summarized below: Basis of accounting: WBC s financial statements are prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Cash and cash equivalents: WBC considers all highly liquid investments with a maturity of three months or less when purchased to be cash equivalents. Expense allocation: The costs of providing various programs and other activities have been summarized on a functional basis in the statement of activities. 8

11 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Summary of significant accounting policies (continued) Basis of presentation: Financial statement presentation follows Financial Accounting Standards Board (FASB) Accounting Standards Codification (the Codification) for Financial Statements of Not-for-Profit Organizations. Under the Codification, WBC is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted, temporarily restricted and permanently restricted. Unrestricted - Unrestricted net assets are available to finance the general operations of WBC. The only limits on the use of unrestricted net assets are the broad limits resulting from the nature of WBC, the environment in which it operates and the purposes specified in its articles of incorporation. Temporarily restricted - Temporarily restricted net assets result (a) from contributions and other inflows of assets, the use of which by WBC is limited by donor-imposed stipulations that either expire by passage of time or can be fulfilled and removed by action of WBC pursuant to those stipulations, (b) from other asset enhancements and diminishments subject to the same kinds of stipulations and (c) from reclassifications to (or from) other classes of net assets as a consequence of donor-imposed stipulations, their expiration by passage of time or their fulfillment and removal by actions of WBC pursuant to those stipulations. Permanently restricted - Permanently restricted net assets (generally referred to as Endowment funds) are assets that have donor-imposed restrictions that stipulate that the contributed resources be maintained permanently, but permit WBC to use up all of the income or other economic benefits derived from the donated assets. WBC has no permanently restricted net assets. Unrestricted and restricted revenue and support: In accordance with the requirements of the Codification for Accounting for Contributions Received and Contributions Made, contributions received are recorded as unrestricted, temporarily restricted or permanently restricted support depending on the existence and/or nature of any donor restrictions. Donor-restricted support is reported as an increase in temporarily or permanently restricted net assets depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or the purpose of the restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. 9

12 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Summary of significant accounting policies (continued) Accounts and contributions receivable: Accounts and contributions receivable include unconditional promises to give. An allowance for uncollectible accounts is considered unnecessary and is not provided. Property and equipment and related depreciation and amortization: Property and equipment are stated at cost if purchased or fair value at date of donation, if donated. Leasehold improvements are amortized ratably over the lesser of their useful life or term of the lease. Depreciation is provided using the straight-line method over the estimated useful lives of depreciable assets. Additions over $500 are capitalized while replacements, maintenance and repairs, which do not improve or extend the lives of the respective assets, are expensed as incurred. Contributed goods and services: As required by the Codification, WBC recognizes the fair value of contributed (donated) goods and services when the contributed goods and services (a) create or enhance nonfinancial assets or (b) require specialized skills, are provided by individuals possessing those skills and would need to be purchased if not provided by donation. The amounts shown as contributed services revenue represents the estimated fair value of the goods received or services performed by WBC s outside legal counsel, consultants and advertising executives. The amounts of such contributed goods or services revenue were determined by the amount of costs for such services which would otherwise have to be paid to obtain them. Accordingly, significant contributed goods and services are included as both support revenue and corresponding management, fundraising or program expense, with the specific costs detailed by the amount of expense which was donated. For the years ended December 31, 2014 and 2013, WBC has included as revenue and expense for the donation of marketing, public relations, airfare, legal, consulting, website maintenance, software implementation and customization services, audio visual services, travel services, freight services, equipment, salaries and benefits, payroll taxes, hospitality services and fellows for various initiatives valued at $1,379,999 and $831,500, respectively. Advertising: WBC expenses all costs of advertising as they are incurred. Advertising expense was approximately $415,000 and $345,000 for the years ended December 31, 2014 and 2013, respectively. 10

13 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 2. Summary of significant accounting policies (continued) Use of estimates: 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 those estimates. Reclassifications: Certain accounts in the prior year financial statements have been reclassified for comparative purposes to conform with the presentation in the current year financial statements. The prior year revenue related to WBC s annual gala was reclassified as special event revenue on the statement of activities. This revenue was also reduced by the direct expenditures related to that event. This reclassification had no effect on the statements related to WBC s financial position or changes in net assets. 3. Tax status WBC is a tax-exempt organization as described in Section 501(c)(3) of the Internal Revenue Code (the Code) and is exempt from federal income taxes on related income pursuant to Section 501(a) of the Code. In addition, the Internal Revenue Service has determined that WBC is not a private foundation within the meaning of Section 509(a) of the Code. However, exempt organizations may be subject to income tax on any unrelated business income. During 2014 and 2013, WBC did not have any unrelated business income. WBC has adopted the requirements for accounting for uncertain tax positions and management has determined that WBC was not required to record a liability related to uncertain tax positions as of December 31, 2014 and Federal and state tax and/or information returns of WBC are subject to examinations by the Internal Revenue Service and state taxing authorities, generally for three years after the returns were filed. Management believes that WBC is no longer subject to income tax examinations by taxing authorities for years ended prior to December 31, Cash WBC maintains its cash in bank accounts which, at times, may exceed federally-insured limits. As of December 31, 2014 and 2013, WBC held cash in federally-insured noninterest-bearing accounts totaling $5,586,457 and $6,083,029, respectively. As of December 31, 2014 and 2013, cash in excess of federally-insured limits totaled $5,050,961 and $5,353,712, respectively. WBC has not experienced any losses in such accounts. Management believes that WBC is not exposed to any significant credit risk on cash. 11

14 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 5. Temporarily restricted net assets Temporarily restricted net assets are unspent contributions restricted as to use for specific programs or operations to ensure that the expenditures satisfy the restriction or the passage of time. Temporarily restricted net assets were $4,566,124 and $4,476,309 at December 31, 2014 and 2013, respectively. December 31, Time-restricted fund: World Business Chicago $ 710,000 $ 790,000 Purpose-restricted fund: Metro Chicago Exports 869,815 Time and purpose-restricted fund: Chicago NATO Host Committee 2,986,309 3,686,309 Total temporarily restricted net assets $ 4,566,124 $ 4,476,309 Net assets were released from temporary donor restrictions by the passage of time or by incurring expenses satisfying the restricted purpose specified by the donor. The amount released in satisfaction of program restrictions was $730,185 and $8,801,812 for the years ended December 31, 2014 and 2013, respectively. The amount released in satisfaction of time restrictions was $790,000 and $646,099 for the years ended December 31, 2014 and 2013, respectively. 6. Major donors The City of Chicago donated $1,528,643 and $1,000,000 to WBC for the years ended December 31, 2014 and 2013, respectively. WBC and CSCI each have separate grant agreements with the City of Chicago. In 2013, CSCI received these grant funds prior to its merge with WBC, therefore the funds that resulted from the 2013 grant agreement are not reflected in WBC s financial statements. WBC was owed $1,028,643 and $250,000 from the City of Chicago as of December 31, 2014 and 2013, respectively. 12

15 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 7. Lease commitment WBC leases office space under the terms of a lease expiring on April 30, The lease requires monthly minimum payments of $8,121 increasing annually and ending on April 30, In accordance with the Codification for Accounting for Leases, WBC recognized rent expense on a straight-line basis of $116,943 and $114,164 for the years ended December 31, 2014 and 2013, respectively. The following is a schedule of future minimum rental payments required under the above operating lease as of December 31, 2014: Year ending December 31: Amount 2015 $ 117, , , , ,956 Thereafter 193,104 Total $ 833, Profit-sharing plan WBC maintains a profit-sharing plan which qualifies under Section 401(k) of the Code. The plan allows eligible employees to contribute up to 100% of their compensation as salary deferral, subject to the maximum limitation under the Code. WBC is required to match the employee contributions equal to 3% of the participants salary deferral. The total 401(k) match expense for the years ended December 31, 2014 and 2013 was $50,337 and $45,532, respectively. 9. Related parties During 2014, WBC received $100,000 in grant revenue from the Chicago Metropolitan Agency for Planning (CMAP). A member of the board of directors at WBC is also a voting member on the board of CMAP. This board member was appointed to the position on CMAP s board by the City of Chicago. This appointment was not related to her affiliation with WBC. In 2014, a board member provided consulting services to WBC and was paid $60,000. These consulting services entailed marketing, implementation of the Metro Chicago Exports initiative and assistance with Chicago Sister Cities International s strategic plan. 13

16 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 10. Business combination On March 31, 2013, World Business Chicago and Chicago Sister Cities International Program, Inc. completed a merger of their operations. Chicago Sister Cities International Program, Inc. is an Illinois not-for-profit corporation committed to promoting Chicago as a global city, developing international partnerships and networks and sharing best practices through citizen-tocitizen connections. As of March 31, 2013, the major classes of assets and liabilities of Chicago Sister Cities International Program, Inc. are as follows: March 31, 2013 Chicago World Sister Cities Business International Chicago Program, Inc. Total ASSETS Cash $ 2,931,174 $ 676,138 $ 3,607,312 Accounts receivable 1,244,345 13,750 1,258,095 Property and equipment, net 139,164 9, ,762 Other current assets 548, ,027 Total assets $ 4,862,885 $ 700,311 $ 5,563,196 LIABILITIES AND NET ASSETS Liabilities: Accounts payable and accrued payroll $ 345,566 $ 21,647 $ 367,213 Other current liabilities 80,382 80,382 Total liabilities 425,948 21, ,595 Net assets: Net assets 4,351, ,717 4,730,116 Net income - January 1 through March 31, , , ,485 Total net assets 4,436, ,664 5,115,601 Total liabilities and net assets $ 4,862,885 $ 700,311 $ 5,563,196 14

17 NOTES TO FINANCIAL STATEMENTS (CONTINUED) 11. Subsequent events In January 2015, WBC entered into a lease for additional office space. Since this additional space is in the same building and under the same landlord as their existing space, their original lease was amended. WBC received an abatement of rent for the first five months of the lease and will not start paying rent on the additional space until June 1, The lease requires monthly minimum payments of $16,098 increasing annually and ending on April 30, The following is a schedule of future minimum rental payments required under the amendment to the operating lease that is reported in Note 7. Year ending December 31: Amount 2015 $ 160, , , , ,468 Thereafter 309,888 Total $ 1,315,147 Management of WBC has reviewed and evaluated subsequent events from December 31, 2014, the financial statement date, through April 14, 2015, the date the financial statements were available to be issued. Other than as noted above, no events have occurred in this period that would be required to be recognized and/or disclosed in these financial statements as required by generally accepted accounting principles. 15