AND SUBSIDIARY CONSOLIDATED FINANCIAL STATEMENTS WITH SUPPLEMENTARY INFORMATION DECEMBER 31, 2014 AND 2013
DECEMBER 31, 2014 AND 2013 Table of Contents Page Independent Auditors' Report 1 Consolidated Financial Statements Statements of Financial Position 3 Statements of Activities 4 Statements of Cash Flows 5 Notes to Consolidated Financial Statements 6 Independent Auditors' Report on Consolidating Supplementary Information 12 Consolidating Supplementary Information Statement of Functional Expenses 13 Statement of Financial Position 14 Statement of Activities 15
INDEPENDENT AUDITORS' REPORT To the Board of Directors of University City Children s Center and Subsidiary We have audited the accompanying consolidated financial statements of University City Children s Center and Subsidiary (a nonprofit organization), which comprise the consolidated statements of financial position as of December 31, 2014 and 2013, and the related consolidated statements of activities 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 consolidated 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 consolidated 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 consolidated 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 consolidated financial statements are free of material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditors judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditors consider internal control relevant to the entity s preparation and fair presentation of the consolidated 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 consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
KIEFER BONFANTI & CO. LLP INDEPENDENT AUDITORS' REPORT (CONTINUED) Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of University City Children s Center and Subsidiary as of December 31, 2014 and 2013, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. Kiefer Bonfanti & Co. LLP St. Louis, Missouri April 21, 2015 Page 2
CONSOLIDATED STATEMENTS OF FINANCIAL POSITION Assets December 31, 2014 2013 Current Assets Cash and cash equivalents $ 1,279,411 $ 1,162,134 Receivable from United Way of Greater St. Louis, Inc. 155,000 170,588 Pledges and grants receivable 74,588 90,618 Accounts receivable, net of allowance of $21,892 and $38,366 in 2014 and 2013, respectively 139,741 126,366 Other current assets 20,682 25,984 Total Current Assets 1,669,422 1,575,690 Pledges and Grants Receivable - Non Current 20,000 70,000 Property and Equipment, Net 1,538,363 1,715,668 Cash Surrender Value of Life Insurance 42,257 36,269 Total Assets $ 3,270,042 $ 3,397,627 Liabilities and Net Assets Current Liabilities Accounts payable and accrued expenses $ 77,704 $ 75,567 Accrued salaries 65,192 57,362 Current portion of note payable 41,287 38,793 Accrued and withheld taxes 13,042 11,650 Deferred revenue 25,105 11,678 Total Current Liabilities 222,330 195,050 Other Liabilities Note payable, net of current portion 115,214 156,501 Deferred rent liability 105,858 100,894 Total Other Liabilities 221,072 257,395 Net Assets Unrestricted 2,383,798 2,447,568 Temporarily restricted 442,842 497,614 Total Net Assets 2,826,640 2,945,182 Total Liabilities and Net Assets $ 3,270,042 $ 3,397,627 See accompanying notes to financial statements. Page 3
CONSOLIDATED STATEMENTS OF ACTIVITIES Years Ended December 31, 2014 2013 Unrestricted Activity Support, Revenue, and Gains Program service fees - private $ 1,886,160 $ 1,868,723 Program service fees - government programs 283,954 306,980 Less tuition assistance (361,847) (333,957) Program service fees, net of tuition assistance 1,808,267 1,841,746 Contributions 284,428 339,710 Grants 44,885 68,436 Special events 133,640 139,304 Consulting fees 423,215 270,204 Other unrestricted revenue 25,963 19,908 2,720,398 2,679,308 Net assets released from restrictions 274,558 366,693 Total Unrestricted Support, Revenue, and Gains 2,994,956 3,046,001 Expenses Program services 2,511,696 2,388,106 Management and general 317,609 310,288 Fundraising 229,421 236,132 Total Expenses 3,058,726 2,934,526 Increase (Decrease) in Unrestricted Net Assets (63,770) 111,475 Temporarily Restricted Activity United Way of Greater St. Louis, Inc. 155,000 170,588 Other restricted contributions 64,786 109,322 Net assets released from restrictions (274,558) (366,693) Decrease in Temporarily Restricted Net Assets (54,772) (86,783) Increase (Decrease) in Net Assets (118,542) 24,692 Net Assets, Beginning of Year 2,945,182 2,920,490 Net Assets, End of Year $ 2,826,640 $ 2,945,182 See accompanying notes to financial statements. Page 4
CONSOLIDATED STATEMENTS OF CASH FLOWS Years Ended December 31, 2014 2013 Cash Flows from Operating Activities Increase (decrease) in net assets $ (118,542) $ 24,692 Adjustments: Depreciation and amortization 182,000 183,651 (Increase) decrease in operating assets Receivable from United Way of Greater St. Louis, Inc. 15,588 - Pledges and grants receivable 66,030 82,941 Accounts receivable (13,375) (30,879) Other current assets 5,302 (16,274) Cash surrender value of life insurance (5,988) (5,695) Increase (decrease) in operating liabilities Accounts payable and accrued expenses 2,137 (18,563) Accrued salaries 7,830 1,826 Accrued and withheld taxes 1,392 2,134 Deferred revenue 13,427 3,444 Deferred rent liability 4,964 4,963 Net Cash Provided by Operating Activities 160,765 232,240 Cash Flows from Investing Activities Purchase of property and equipment (4,695) (28,766) Net Cash Used by Investing Activities (4,695) (28,766) Cash Flows from Financing Activities Principal payments on note payable (38,793) (36,447) Net Cash Used by Financing Activities (38,793) (36,447) Net Increase in Cash and Cash Equivalents 117,277 167,027 Cash and cash equivalents, beginning of year 1,162,134 995,107 Cash and Cash Equivalents, End of Year $ 1,279,411 $ 1,162,134 See accompanying notes to financial statements. Page 5
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 2014 AND 2013 Business Description and Principles of Consolidation University City Children s Center is a not-for-profit organization whose two programs are its innovative early childhood education center (the Center) and LUME Institute, LLC (LUME). LUME s sole member is University City Children s Center. Accordingly, the accompanying financial statements consolidate the financial position, activities, and cash flows of the Center and LUME (collectively, UCCC). All intercompany transactions have been eliminated in the consolidation. The Center is committed to providing innovative, quality care and education to a racially, culturally, developmentally, and socio-economically diverse population of children between the ages of six weeks and six years in a nurturing environment that provides supportive services to families. The Center serves children from over 30 zip codes in the St. Louis metropolitan area and is supported primarily through private and government program service fees, contributions, and grants from private foundations, state government agencies, and the United Way of Greater St. Louis, Inc. LUME seeks to elevate the quality of early childhood education by deepening understandings of how children learn and grow. LUME offers systemic and comprehensive approaches to early childhood education that engage, impact, and transform communities. 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Method of Accounting The consolidated financial statements of UCCC are presented on the accrual basis of accounting. Financial Statement Presentation UCCC reports its information regarding financial position and activities according to three classes of net assets depending upon the existence or nature of any donorimposed restrictions. The following is a description of these classes of net assets: Unrestricted Net Assets Those resources over which the Board of Directors has discretionary control. Designated amounts represent those resources that the Board has set aside for a particular purpose. Unrestricted net assets are available for operations including program services and management expenses. Temporarily Restricted Net Assets Those resources subject to donor-imposed restrictions that will be satisfied by actions of UCCC or the passage of time. Permanently Restricted Net Assets Those resources subject to donor-imposed restrictions that will be maintained permanently by UCCC. At December 31, 2014 and 2013, UCCC had no permanently restricted net assets. Page 6
Notes to Financial Statements (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Cash and Cash Equivalents For purposes of the statement of cash flows, UCCC considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. Accounts Receivable Accounts receivable arise in the normal course of operations of providing services. UCCC actively pursues past due accounts and believes the risk associated with carrying the receivables is mitigated by the nature of its customers, and its policies on attendance. UCCC does not charge interest on any accounts receivable. UCCC provides an allowance for doubtful accounts based on historical experience and management s analysis of the current status of existing receivables. UCCC considers any accounts receivable older than 30 days to be past due, and charges off accounts receivable when all collection efforts have been unsuccessful and management believes there is no chance for collection. Accounts receivable older than 90 days at December 31, 2014 and 2013 were $30,586 and $47,772, respectively. Bad debt expense for the years ended December 31, 2014 and 2013 was $10,908 and $10,000, respectively. Property and Equipment Property and equipment are stated at cost, or fair market value if donated, less accumulated depreciation and amortization computed on the straight-line method over-estimated useful lives of 3 to 20 years. Functional Expenses The costs of UCCC's programs and supporting services have been reported on a functional basis. This requires allocation of certain costs among the various programs and supporting services based on estimates made by management. Income Tax Status UCCC is exempt from income tax pursuant to Section 501(c)(3) of the Internal Revenue Code. Therefore, no provision for income taxes is made in the accompanying financial statements. Financial accounting standards for uncertain tax positions prohibit financial statement recognition of the impact of a tax position if the position is not more likely than not to be sustained on audit, based on the technical merits of the position. The Federal Forms 990 of UCCC for the years ended December 31, 2013, 2012, and 2011 are subject to examination by the Internal Revenue Service, generally for three years after they have been filed. As of December 31, 2014, no returns have been selected for examination. Page 7
Notes to Financial Statements (Continued) 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) 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. Donated Services During the year ended December 31, 2014, UCCC did not recognize any amount of donated services, as the criteria for recognition was not met. During the year ended December 31, 2013, UCCC recognized $12,750 of donated services related to the installation of certain building improvements. UCCC pays for most services requiring specific expertise. In addition, many individuals volunteer their time and perform a variety of tasks that assist UCCC with specific assistance programs, campaign solicitations, and various committee assignments. Subsequent Events Management has evaluated subsequent events through April 21, 2015, the date which the financial statements were available to be issued, for possible recognition or disclosure. 2. CONCENTRATIONS OF CREDIT AND MARKET RISK Financial instruments that potentially subject UCCC to credit and market risk consist principally of temporary cash investments and receivables. UCCC places all cash and cash equivalents with major financial institutions and, by policy, attempts to limit the amount of credit exposure at any one financial institution. UCCC s cash deposits in financial institutions are insured by FDIC insurance, which is subject to certain limitations and conditions. At December 31, 2014, cash balances did not exceed FDIC limitations. Concentrations of credit risk with respect to receivables are limited due to the nature of these receivables. UCCC also receives donations of marketable securities that are subject to market risk. Market risk is the possibility that future changes in market price may make a financial instrument less valuable. Market risk on donated securities is limited by UCCC s policy to promptly sell the securities. Page 8
Notes to Financial Statements (Continued) 3. PROPERTY AND EQUIPMENT December 31, 2014 2013 Building and improvements $ 2,994,432 $ 2,994,432 Playground equipment 61,715 61,715 Classroom equipment 7,619 7,619 Office and kitchen equipment 74,886 70,191 Software 10,000 10,000 Garden project 45,704 45,704 Property and equipment, at cost 3,194,356 3,189,661 Less accumulated depreciation and amortization (1,655,993) (1,473,993) Property and Equipment, Net $ 1,538,363 $ 1,715,668 Depreciation and amortization expense was $182,000 and $183,651 for the years ended December 31, 2014 and 2013, respectively. 4. NOTE PAYABLE December 31, 2014 2013 Note payable to Washington University for playground equipment, computers, and facility equipment. The original amount of the loan was $432,119, maturing in June 2018, payable in monthly installments of $4,158. Interest rate on the loan is 6.25%. $ 156,501 $ 195,294 Less current portion (41,287) (38,793) Note Payable, Net of Current Portion $ 115,214 $ 156,501 The following is a schedule of principal amounts due in future years: Years Ending December 31, Amount 2015 $ 41,287 2016 43,943 2017 46,770 2018 $ 24,501 156,501 Page 9
Notes to Financial Statements (Continued) 5. LEASE AGREEMENTS UCCC leases its building from Washington University (landlord). Under the terms of the lease, the children of graduate students and employees of the landlord have a priority right to fill a certain number of positions at the facility, and the landlord has representation on the governing board of UCCC. The term of the lease is for a period of 20 years ending on January 31, 2024, with an option to purchase. The lease may be extended for an indefinite number of renewal periods of 10 years each. The purchase option must occur no sooner than the 10 year anniversary. The purchase price will be based on the fair market value at the option date less the unamortized balance of improvements made to the building. Base rent is $1 per square foot per year through January 2019, and $2 per square foot per year thereafter. Accordingly, deferred rent liability is reflected on the statement of financial position. The base rent will be renegotiated for each renewal period. Rent expense was $35,153 for the each of the years ended December 31, 2014 and 2013. 6. LIFE INSURANCE UCCC is the named beneficiary of $200,000 in life insurance carried on the life of the Executive Director. The cash value accumulated on this policy was $42,257 and $36,269 at December 31, 2014 and 2013, respectively. 7. EMPLOYEE BENEFIT PLAN UCCC sponsors a defined contribution retirement plan which covers all employees who have at least 90 days of service and are age twenty-one or older. The plan allows for discretionary employer matching contributions in amounts determined by the Board of Directors on an annual basis. UCCC accrued $13,200 and $11,850 as contributions to the Plan for the years ended December 31, 2014 and 2013, respectively. Page 10
Notes to Financial Statements (Continued) 8. TEMPORARILY RESTRICTED NET ASSETS Temporarily restricted net assets consist of the following: December 31, 2014 2013 Contributions Restricted for Purpose Program restrictions $ 147,824 $ 128,325 Adventure Playground & Garden 40,068 38,443 Restricted for scholarships 24,663 28,560 Family Organization 5,287 11,698 Contributions Restricted for Time United Way of Greater St. Louis, Inc. 155,000 170,588 Multi-year pledges 70,000 120,000 Total $ 442,842 $ 497,614 Page 11
SUPPLEMENTARY INFORMATION
INDEPENDENT AUDITORS' REPORT ON CONSOLIDATING SUPPLEMENTARY INFORMATION To the Board of Directors of University City Children s Center and Subsidiary We have audited the consolidated financial statements of University City Children s Center and Subsidiary as of and for years ended December 31, 2014 and 2013 and have issued our report thereon dated April 21, 2015, which contained an unmodified opinion on those consolidated financial statements. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The consolidating statement of functional expenses, consolidating statement of financial position and consolidating statement of activities, as of and for the year ended December 31, 2014 are presented for purposes of additional analysis and are not required parts of the consolidated financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the consolidated financial statements. The information has been subjected to the auditing procedures applied in the audit of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Kiefer Bonfanti & Co. LLP St. Louis, Missouri April 21, 2015 Page 12
CONSOLIDATING STATEMENT OF FUNCTIONAL EXPENSES Year Ended December 31, 2014 Program Services Supporting Services The Center LUME Institute Total Program Services Management and General Fundraising Total Supporting Services Total University City Children's Center 2013 Total Salaries $ 1,322,361 $ 115,872 $ 1,438,233 $ 206,467 $ 98,827 $ 305,294 $ 1,743,527 $ 1,676,595 Employee health and retirement benefits 185,300 14,156 199,456 14,267 12,381 26,648 226,104 233,261 Payroll taxes 105,957 8,655 114,612 15,044 7,740 22,784 137,396 134,305 Total salaries and related expenses 1,613,618 138,683 1,752,301 235,778 118,948 354,726 2,107,027 2,044,161 Supplies 193,847 7,322 201,169 10,413 5,428 15,841 217,010 183,951 Occupancy 136,036 12,913 148,949 16,630 16,706 33,336 182,285 170,990 Professional fees and contract service payments 50,033 46,812 96,845 2,141 22,481 24,622 121,467 98,752 Advertising and marketing 13,996 14,462 28,458 760 9,251 10,011 38,469 39,220 Special events 2,807 5,037 7,844 164 20,858 21,022 28,866 44,435 Bank and merchant card services 21,713 435 22,148-1,381 1,381 23,529 22,159 Travel 597 12,849 13,446 1,739 3,753 5,492 18,938 16,028 Information technology 10,830 2,993 13,823 3,285 1,498 4,783 18,606 13,786 Telephone 11,070 2,209 13,279 2,566 2,278 4,844 18,123 20,269 Insurance 10,798 2,382 13,180 1,791 1,791 3,582 16,762 15,689 Printing and publications 1,247 4,084 5,331 2,178 6,212 8,390 13,721 10,691 Professional fees - accounting and audit 2,500-2,500 11,000-11,000 13,500 10,545 Interest 8,882-8,882 1,110 1,110 2,220 11,102 13,449 Bad debt expense 10,908-10,908 - - - 10,908 10,000 Conferences and professional development 5,421 3,041 8,462 1,937 450 2,387 10,849 11,308 Miscellaneous 5,643 916 6,559 2,098 1,694 3,792 10,351 7,331 Rental and maintenance equipment 6,269 994 7,263 766 766 1,532 8,795 10,048 Postage and shipping 281 1,279 1,560 806 2,191 2,997 4,557 2,848 Membership dues 151 1,644 1,795 33 33 66 1,861 3,356 Family organization events - - - - - - - 1,859 Total Expenses Before Depreciation 2,106,647 258,055 2,364,702 295,195 216,829 512,024 2,876,726 2,750,875 Depreciation and amortization 146,054 940 146,994 22,414 12,592 35,006 182,000 183,651 Total Expenses $ 2,252,701 $ 258,995 $ 2,511,696 $ 317,609 $ 229,421 $ 547,030 $ 3,058,726 $ 2,934,526 % of Total Expenses 73.6% 8.5% 82.1% 10.4% 7.5% 17.9% 100.0% See accompanying independent auditors report on supplementary information. Page 13
CONSOLIDATING STATEMENT OF FINANCIAL POSITION DECEMBER 31, 2014 Total University The Center LUME Institute Eliminations City Children's Center Current Assets Cash and cash equivalents $ 1,129,167 $ 150,244 $ - $ 1,279,411 Receivable from United Way of Greater St. Louis, Inc. 155,000 - - 155,000 Pledges and grants receivable 17,588 57,000-74,588 Accounts receivable, net of allowance of $21,892 and $38,366 in 2014 and 2013, respectively 71,556 68,185-139,741 Other current assets 20,090 592-20,682 Due from The Center 21,134 - (21,134) - Total Current Assets 1,414,535 276,021 (21,134) 1,669,422 Pledges and Grants Receivable - Noncurrent 20,000 - - 20,000 Property and Equipment, Net 1,538,363 - - 1,538,363 Cash Surrender Value of Life Insurance 42,257 - - 42,257 Total Assets $ 3,015,155 $ 276,021 $ (21,134) $ 3,270,042 Liabilities and Net Assets Current Liabilities Accounts payable and accrued expenses $ 75,614 $ 2,090 $ - $ 77,704 Accrued salaries 59,995 5,197-65,192 Current portion of note payable 41,287 - - 41,287 Accrued and withheld taxes 12,271 771-13,042 Deferred revenue 18,505 6,600-25,105 Due to LUME Institute - 21,134 (21,134) - Total Current Liabilities 207,672 35,792 (21,134) 222,330 Other Liabilities Note payable, net of current portion 115,214 - - 115,214 Deferred rent liability 105,858 - - 105,858 Total Other Liabilities 221,072 - - 221,072 Net Assets Unrestricted 2,308,296 75,502-2,383,798 Temporarily restricted 278,115 164,727-442,842 Total Net Assets 2,586,411 240,229-2,826,640 Total Liabilities and Net Assets $ 3,015,155 $ 276,021 $ (21,134) $ 3,270,042 See accompanying independent auditors report on supplementary information. Page 14
CONSOLIDATING STATEMENT OF ACTIVITIES YEAR ENDED DECEMBER 31, 2014 The Center LUME Institute Eliminations Total University City Children's Center Unrestricted Activity Support, Revenue, and Gains Program service fees - private $ 1,886,160 $ - $ - $ 1,886,160 Program service fees - government programs 283,954 - - 283,954 Less tuition assistance (361,847) - - (361,847) Program service fees, net of tuition assistance 1,808,267 - - 1,808,267 Contributions 284,428-284,428 Grants 43,115 1,770-44,885 Special events 133,640 - - 133,640 Consulting fees 185,275 424,193 (186,253) 423,215 Other unrestricted revenue 14,910 19,008 (7,955) 25,963 2,469,635 444,971 (194,208) 2,720,398 Net assets released from restriction 232,234 42,324-274,558 Total Unrestricted Support, Revenue, and Gains 2,701,869 487,295 (194,208) 2,994,956 Expenses Program services 2,253,679 452,225 (194,208) 2,511,696 Management & general 317,609 - - 317,609 Fundraising 229,421 - - 229,421 Total Expenses 2,800,709 452,225 (194,208) 3,058,726 Increase (Decrease) in Unrestricted Net Assets (98,840) 35,070 - (63,770) Temporarily Restricted Activity United Way of Greater St. Louis, Inc. 155,000 - - 155,000 Other restricted contributions 19,786 45,000-64,786 Net assets released from restriction (232,234) (42,324) - (274,558) Increase (Decrease) in Temporarily Restricted Net Assets (57,448) 2,676 - (54,772) Increase (Decrease) in Net Assets (156,288) 37,746 - (118,542) Net Assets, Beginning of Year 2,742,699 202,483-2,945,182 Net Assets, End of Year $ 2,586,411 $ 240,229 $ - $ 2,826,640 See accompanying independent auditors report on supplementary information. Page 15