Draft for discussion purposes. April 14, 2014 FINANCIAL STATEMENTS DRAFT EXCELLENCE CANADA. December 31, 2013

Transcription

1 Draft for discussion purposes April 14, 2014 FINANCIAL STATEMENTS EXCELLENCE CANADA

2 CONTENTS Page INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Balance sheet 3 Statement of changes in net assets (deficiency) 4 Statement of operations 5 Statement of cash flows 6 Notes to financial statements 7-12

3 To the members of Excellence Canada: INDEPENDENT AUDITOR'S REPORT We have audited the accompanying financial statements of Excellence Canada, which comprise the balance sheet as at and the statements of changes in net assets (deficiency), operations and cash flows for then year 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 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 an 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....continued

4 INDEPENDENT AUDITOR'S REPORT (continued) 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 Excellence Canada as at and its financial performance and its cash flows for then year ended in accordance with Canadian accounting standards for not-forprofit organizations. Emphasis of matter Without modifying our opinion, we draw attention to note 11 to the financial statements which addresses certain conditions underlying the organization's current financial position. Toronto, Ontario Date Professional Corporation, Chartered Accountants Authorized to practise public accounting by The Institute of Chartered Accountants of Ontario

5 BALANCE SHEET December $ $ ASSETS Current Cash 29,632 3,735 Accounts receivable 144, ,473 Prepaid expenses 11,909 51, , ,717 Restricted guaranteed investment certificate [note 6] 103, ,982 Property and equipment [note 3] 152,320 25,596 Trademarks and standards development [note 4] 182, ,109 Website development [note 5] 54,534 91, , ,448 LIABILITIES Current Bank demand loan [note 6] 130, ,000 Accounts payable and accrued liabilities 317, ,408 Government remittances payable 16,859 8,870 Deferred partnership revenue 613, ,333 Deferred lease inducement - current portion 9,828 1,065 Deferred lease inducement 84,357 1,087,715 1,062,676 1,172,072 1,062,676 NET ASSETS (DEFICIENCY) Unrestricted deficit (492,961) (376,228) 679, ,448 see accompanying notes On behalf of the Board: Governor Governor 3

6 STATEMENT OF CHANGES IN NET ASSETS (DEFICIENCY) Year ended December $ $ Balance, beginning of year (376,228) (384,184) Excess (deficiency) of revenue over expenses for the year (116,733) 7,956 Balance, end of year (492,961) (376,228) see accompanying notes 4

7 STATEMENT OF OPERATIONS Year ended December $ $ Revenue Partnerships 1,292,821 1,196,178 Facilitation 678, ,154 Events 527, ,330 Certification 198, ,135 Accessibility programs 196, ,647 Product sales 25,805 37,124 Interest 1,117 1,495 Grants 21,600 2,920,646 2,940,663 Expenses Compensation 1,229,597 1,243,718 Partnership discounts 709, ,745 Events 228, ,429 Accessibility programs 131, ,175 Rent 126, ,002 Office 125, ,644 Facilitation 110, ,493 Partnership commissions 92,793 41,142 Marketing and media relations 28,277 49,313 Certification 26,516 40,624 Travel 18,951 20,431 Professional fees 16,500 12,000 Product costs 732 1,112 Accessibility for Ontarians with Disabilities Program 21,600 2,845,055 2,851,428 Excess of revenue over expenses before non-recurring costs and amortization 75,591 89,235 Non-recurring costs [note 7] 110,099 - Amortization Website development 38,512 38,111 Trademarks and standards development 28,517 33,985 Equipment 15,196 9,183 82,225 81,279 Excess (deficiency) of revenue over expenses for the year (116,733) 7,956 see accompanying notes 5

8 STATEMENT OF CASH FLOWS Year ended December $ $ OPERATING ACTIVITIES Excess (deficiency) of revenue over expenses for the year (116,733) 7,956 Adjustments for items not affecting cash - Amortization of equipment 15,196 9,183 Amortization of trademarks and standards development 28,517 33,985 Amortization of website development 38,512 38,111 Net non-monetary partnership expenses (revenue) (25,000) 25,000 (59,508) 114,235 Changes in non-cash working capital items - (Increase) decrease in accounts receivable 137,887 15,327 (Increase) decrease in prepaid expenses 39,600 (32,812) Increase (decrease) in accounts payable and accrued liabilities (92,133) 3,830 Increase (decrease) in government remittances payable 7,989 (11,966) Increase (decrease) in deferred partnership revenue 170,417 (88,473) Increase (decrease) in deferred revenue (5,870) Increase (decrease) in deferred rent inducement 93,120 (9,000) 297,372 (14,729) FINANCING ACTIVITIES Bank demand loan advances (repayments) (45,000) 175,000 INVESTING ACTIVITIES Purchase of trademarks and standards development (82,555) (112,001) Purchase of property and equipment (141,920) (4,492) Website development (2,000) (28,511) (226,475) (145,004) Change in cash (bank indebtedness) during the year 25,897 15,267 Cash (bank indebtedness), beginning of year 3,735 (11,532) Cash (bank indebtedness), end of year 29,632 3,735 see accompanying notes 6

9 NOTES TO FINANCIAL STATEMENTS 1. NATURE OF ORGANIZATION Excellence Canada was formed to assist organizations in Canada achieve excellence through a strategic approach and application of quality and healthy workplace principles, practices and certification as embodied in Excellence Canada's criteria. The mission includes recognizing outstanding achievement through the Canada Awards for Excellence. Excellence Canada commenced activities on September 1, 1992 and was incorporated on February 15, 1993 under Part II of the Canada Business Corporations Act. Funds are derived through membership fees, private and government sponsorships and the sale of products and services. Excellence Canada is a non-profit organization and, as such, is exempt from income taxes under paragraph 149(1)(l) of the Income Tax Act. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Revenue recognition The organization follows the deferral method of accounting for contributions. Partnership contributions are recognized as revenue over the partnership period from the date of commencement of the partnership. Basic partnerrship contributions are recorded as revenue at the commencement of the partnership period. Revenue and expenses relating to events and services are recorded in the period the events occur or the services are provided. Sponsorships and advertising revenue not related to a particular service or event are recorded when received. Grants are recognized as revenue in the year in which the related expenses are incurred in accordance with the terms and conditions of the funding agreements. Interest income is recognized on an accrual basis. Property and equipment Property and equipment are recorded at cost. Amortization is provided at the following annual rates which are designed to charge operations with the cost of the assets over their estimated useful lives. Leasehold improvements Furniture and fixtures Computer Office equipment straight-line over term of lease 20% declining balance 33% declining balance 20% declining balance 7

10 NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Trademark and standards development Trademark and standards development costs are amortized on a straight-line basis over the years of expected economic benefit upon the commencement of the related programs. The time period of expected economic benefit of 5 years was determined by management based on projected revenues. Actual results may differ from management estimates. Website development Website development costs relating to the site application and infrastructure development stage and graphics development are capitalized and amortized on a straight-line basis over 5 years. Deferred lease inducement As an inducement for the Association to enter into a new premises lease, the landlord provided an allowance. The total benefit, recorded as deferred lease inducement on the balance sheet, is being amortized straight-line over the term of the lease. Allocation of expenses Certain expenses, principally compensation, are allocated among the organization's programs on a basis determined by management. Financial instruments The organization initially measures its financial assets and liabilities at fair value. organization subsequently measures all its financial assets and liabilities at amortized cost. Financial assets and liabilities measured at amortized cost include cash, accounts receivable, restricted guaranteed investment certificate, bank demand loan and accounts payable and accrued liabilities. The Impairment Financial assets measured at amortized cost are assessed for indicators of impairment. When there is indication of an impairment, the carrying amount of the asset is reduced directly or through the use of an allowance account. The amount of the reduction is recognized in the statement of operations. A previously recognized impairment loss may be reversed to the extent of the improvement, directly or by adjusting the allowance account, provided it is no greater than the amount that would have been reported at the date of the reversal had the impairment not been recognized previously. The amount of the reversal is recognized in the statement of operations. 8

11 NOTES TO FINANCIAL STATEMENTS 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued) Use of estimates The preparation of the organization's financial statements in conformity with Canadian accounting standards for not-for-profit organizations requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosures of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reporting period. The significant items subject to such management estimates and assumptions include the valuation allowance for accounts receivable and the estimated useful lives of property and equipment, trademarks and standards development, and website development. Actual results may differ from those estimates. 3. PROPERTY AND EQUIPMENT Accumulated Net book value Cost amortization $ $ $ $ Leasehold improvements 114,088 5, ,384 Furniture and fixtures 302, ,606 26,294 10,210 Office equipment 101,197 93,196 8,001 4,603 Computers 234, ,862 9,641 10, , , ,320 25, TRADEMARKS AND STANDARDS DEVELOPMENT Accumulated Net book value Cost amortization $ $ $ $ Standards development 188,984 21, , ,630 Trademarks 48,063 33,383 14,680 24, ,047 54, , ,109 9

12 NOTES TO FINANCIAL STATEMENTS 5. WEBSITE DEVELOPMENT Accumulated Net book value Cost amortization $ $ $ $ Website development 229, ,538 54,534 91, BANK DEMAND LOAN The organization has a credit facility with a Canadian chartered bank consisting of a revolving demand facility in the amount of $300,000, $130,000 of which was in use at year end ($175,000 in 2012). The demand facility is revolved by the bank in increments of $5,000 and bears interest at prime plus 1.5% which is payable monthly. The credit facility is secured by a general security agreement covering all assets other than real property and assignment of a guaranteed investment certificate in the amount of $103, NON-RECURRING COSTS Non-recurring costs are comprised of the following: Premises relocation 58,064 Staff restructuring 38,000 Professional services 14,035 $ 110,099 10

13 NOTES TO FINANCIAL STATEMENTS 8. COMMITMENTS The organization is committed under operating leases to minimum annual payments as follows: $ , , , , ,530 Thereafter 379, ,489 The organization is also committed to its share of building operating and maintenance costs, including property taxes. 9. FINANCIAL INSTRUMENT RISK EXPOSURE The organization is exposed to various risks through its financial instruments including liquidity risk, credit risk and market risk. Liquidity risk Liquidity risk is the risk that the organization will encounter difficulty in meeting obligations associated with financial liabilities. The organization is exposed to significant liquidity risk primarily arising from its working capital deficiency. The organization expects to meet its obligations as they come due by generating sufficient cash flow from operations. Credit risk Credit risk is the risk that one party to a financial instrument will cause a financial loss for the other party by failing to discharge an obligation. The organization's financial assets that are exposed to credit risk consist primarily of cash, accounts receivable and a guaranteed investment certificate. Cash and guaranteed investment certificate are invested in financial obligations of Canadian chartered banks. The organization in its normal course of business is exposed to credit risk from its members. The organization has recorded a valuation allowance for accounts receivable of $20,000 (2012 -$30,000) for potential credit losses. 11

14 NOTES TO FINANCIAL STATEMENTS 10. FINANCIAL INSTRUMENT RISK EXPOSURE (continued) Market risk The organization is exposed to market risk, which is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market prices. Market risk comprises three types of risk: currency risk, other price risk and interest rate risk. The organization is mainly exposed to interest rate risk. Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate because of changes in market interest rates. The organization is exposed to interest rate risk on its bank demand loan. Specifically, the organization's bank demand loan bears interest at the bank's prime lending rate plus 1.5%. Changes in the bank's prime lending rate can create fluctuations in interest payments and cash flows. The organization does not use derivative instruments to mitigate this risk. 11. CONTINUANCE OF OPERATIONS These financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations applicable to a going concern, which assumes that the organization will be able to realize its assets and discharge its liabilities in the normal course of operations in the foreseeable future. The organization has a significant working capital deficiency which creates uncertainty about the organization's ability to realize its assets and discharge its liabilities. Management has adopted a plan to restore and maintain profitable operations by increasing revenues and reducing expenses. These financial statements do not reflect adjustments that would be necessary if the going concern assumption were not appropriate. Management is confident that the measure described above will mitigate the effect of the conditions and facts that could affect the appropriateness of this assumption. 12