FINANCIAL STATEMENTS MARCH 31, 2011
MARCH 31, 2011 CONTENTS Page AUDITOR'S REPORT 1 FINANCIAL STATEMENTS STATEMENT OF FINANCIAL POSITION 2 STATEMENT OF CHANGES IN NET ASSETS 3 STATEMENT OF OPERATIONS 4 STATEMENT OF CASH FLOWS 5 NOTES TO THE FINANCIAL STATEMENTS 5 SCHEDULES: SCHEDULE OF MARKETABLE SECURITIES 9 SCHEDULE OF PROGRAM AND OPERATING EXPENSES 10
SHARP EDMONDS SHARP LLP CHARTERED ACCOUNTANTS PARTNERS John A. Sharp, CA Joseph A. Edmonds, CA P. Donald Sharp, CA INDEPENDENT AUDITOR'S REPORT To the Officers and Directors of: World Literacy Of Canada We have audited the accompanying financial statements of World Literacy Of Canada which comprise the balance sheet as at March 31, 2011 and the statements of income, and 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 generally accepted accounting principles 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 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 of 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 World Literacy Of Canada as at March 31, 2011, and its financial performance and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Toronto, Ontario September 7, 2011 SHARP EDMONDS SHARP LLP (signed) CHARTERED ACCOUNTANTS LICENSED PUBLIC ACCOUNTANTS 111 Railside Road, Suite 201, Don Mills, Ontario, M3A 1B2. Tel. 416-441-6357 Fax 416-441-3156 www.sharpaccountants.com 1
STATEMENT OF FINANCIAL POSITION AS AT MARCH 31, 2011 ASSETS 2011 2010 Current Cash $ 274,862 $ 163,327 Marketable securities, see Schedule A 177,749 90,494 Accounts receivable 7,120 8,401 Accrued interest receivable 555 3,989 Goods and services tax recoverable 5,302 3,435 Prepaid expenses 2,917 3,649 468,505 273,295 Plant, property and equipment (Note 3.) 10,663 13,586 $ 479,168 $ 286,881 LIABILITIES Current Payables and accrued liabilities $ 13,376 $ 16,926 Deferred foreign program contributions (Note 1.) 108,048 1,250 Deferred local program contributions (Note 1.) - 20,158 Deferred revenue related to fundraising (Note 1.) 1,250 - NET ASSETS 122,674 38,334 Net assets invested in plant, property and equipment 10,663 13,586 Unrestricted assets 345,831 234,961 356,494 248,547 $ 479,168 $ 286,881 APPROVED ON BEHALF OF THE BOARD: Director Director The accompanying notes form an integral part of these financial statements. 2.
STATEMENT OF CHANGES IN NET ASSETS FOR THE YEAR ENDED MARCH 31, 2011 NET ASSETS Invested in Capital Assets Externally restricted for Programs Internally restricted for Programs Unrestricted Total Balance, March 30, 2009 $ 9,551 $ - $ - $ 263,816 $ 273,367 Excess of revenues over expenses 4,035 - - (28,855) (24,820) Balance, March 30, 2010 13,586 - - 234,961 248,547 Excess of revenues over expenses (2,923) - - 110,870 107,947 Balance, March 31, 2011 $ 10,663 $ - $ - $ 345,831 $ 356,494 The accompanying notes form an integral part of these financial statements. 3.
STATEMENT OF OPERATIONS FOR THE YEAR ENDED MARCH 31, 2011 2011 2010 Revenue Contributions - individuals and organizations $ 205,657 $ 170,719 Contributions - corporations 85,109 115,590 Contributions - foundation 50,600 53,386 Canadian International Development Agency 366,721 276,484 Trillium Foundation 74,400 79,900 Pearson Foundation 103,091 15,000 Other program contributions 10,857 - Rotman School of Management 10,000 20,000 Investment income 39 3,369 Special events - gross 64,687 87,669 971,161 822,117 Expenses Direct program payments 795,638 755,978 Special events expenses 21,876 39,308 Program and operating expenses 45,700 51,651 863,214 846,937 Excess of revenue over expenses $ 107,947 $ (24,820) The accompanying notes form an integral part of these financial statements. 4.
STATEMENT OF CASH FLOWS FOR THE YEAR ENDED MARCH 31, 2011 2011 2010 Cash provided by operating activities Excess of revenue over expenses $ 107,947 $ (24,820) Items not requiring an outlay of cash: Amortization 2,923 2,914 Decrease (increase) on market value of investments 1,490-112,360 (21,906) Changes in non-cash working capital: Decrease in accrued interest receivable 3,434 203 Increase in goods and services recoverable (1,867) (427) Decrease in accounts receivable 1,282 3,596 Decrease (increase) in accounts payable and accrued liabilities (3,550) 13,177 Decrease (increase) in prepaid expenses 732 (475) Increase (decrease) in deferred revenue 87,890 (33,592) Cash provided by (used in) operating activities 200,281 (39,424) Cash flows from investing activities Purchase of plant, property and equipment - (6,949) Purchase of investments (26,095) (6,446) Proceeds on sale of investments 46,747 70,000 Donated investments (109,398) - Cash flows from (used in) investing activities (88,746) 56,605 Increase (decrease) in cash 111,535 17,181 Cash, beginning of year 163,327 146,146 Cash, end of year $ 274,862 $ 163,327 The accompanying notes form an integral part of these financial statements. 5.
NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2011 1. Accounting Policies (a) World Literacy of Canada is incorporated in Ontario as a non share capital corporation. It promotes literacy in Canada and Asia through support of local literacy programs. It is a charitable organization as defined by the Income Tax Act (Canada) and may issue charitable receipts for donations received. (b) Property, plant and equipment Plant, property and equipment are recorded at cost. Amortization is calculated on the declining balance basis at rates based on the estimated useful lives of the assets as disclosed in note 3. Leasehold improvements are amortized over the term of the lease, plus one renewal, on a straight line basis. Half the indicated rate is used in the year of acquisition. (c) Revenue recognition and deferred revenue The organization is using the deferral method of accounting for contributions. Under the deferral method of accounting for contributions, restricted contributions related to expenses of future periods are deferred and recognized as revenue in the period in which the related expenses are incurred. Endowment contributions are reported as direct increases in the net assets. All other contributions are reported as revenue in the current period. The organization does not set up donation pledges as accounts receivable. In Kind donations of goods and services are not reflected in these financial statements (d) Program costs Program costs are reported as paid. The amount committed to programs is shown as an internally restricted amount in net assets. A portion of salaries and operating costs are allocated from the organization's schedule of program and operating expenses to the appropriate program. (e) Use of Estimates The preparation of 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 revenue and expenses during the period. Actual results could differ from these estimates. (f) Investments Investments consist of marketable securities. The investments are classified as available for sale and are recorded at fair value as it is not management's primary objective to generate trading profits from shortterm fluctuations in price. Fair values are determined by reference to published price quotations in an active market at year-end. Transaction costs associated with the acquisition and disposal of investments are capitalized and are included in the acquisition cost or reduce the proceeds on disposal. The purchase and sale of investments are accounted for using trade-date accounting. 6.
NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2011 2. Accounting changes The following accounting changes to Generally Accepted Accounting Principles have been announced by the Canadian Institute of Chartered Accountants but have not yet been implemented by the organization: International Financial Reporting Standards (IFRS) This change is effective for year ends commencing on or after January 1, 2011 and will affect many areas of accounting and financial statement disclosure. The organization has not yet determined how it will be impacted by these changes. 3. Plant, property and equipment Rate Cost Accumulated Amortization Net Book Value 2011 Net Book Value 2010 Furniture and fixtures 20% $ 10,404 $ 6,613 $ 3,791 $ 4,738 Leasehold improvements 20% 6,172 2,469 3,703 4,321 Computer equipment 30% 15,943 12,774 3,169 4,527 $ 32,519 $ 21,856 $ 10,663 $ 13,586 4. Commitments The organization rents office space under a lease which expires on August 31, 2011. The following payments are required: 2012 $ 14,277 5. Financial instruments The organization's financial instruments consist of cash, marketable securities, accounts receivable and accounts payable. It is management's opinion that the organization is not exposed to significant market, currency or credit risk arising from these financial instruments. It is management's opinion that the fair value of the financial instruments, other than marketable securities, is equal to the carrying value. The organization is exposed to interest risk on its marketable securities. Interest risk is the potential loss the organization may incur as a result of changes in the bank prime rate and the effect it may have on the cash flows from securities. See Schedule A for details of marketable securities. 7.
NOTES TO THE FINANCIAL STATEMENTS MARCH 31, 2011 6. Capital disclosure The Organization's objectives when managing capital are to safeguard the organization's ability to continue operations so that it can continue to provide service and benefits to the beneficiaries of it programs and meet its commitments under its funding agreement with CIDA. The Organization sets the amount of capital required based on services and programs to be provided. The Organization tries to invest capital in excess of 6 months of funding for its CIDA program. 7. Contingency The Organization is committed to funding a foreign charity for $75,000 over three years, if the foreign charity receives necessary approval from the government in its home country. The funds are currently committed to an existing program operated by the Organization. With the approval for foreign funding, the operation of this program would be transferred to the foreign charity. 8. Comparative figures The 2010 comparative figures have been reclassified to agree with the 2011 classifications. 8.
SCHEDULE OF MARKETABLE SECURITIES MARCH 31, 2011 Schedule A 2011 2010 Cost Fair Value Cost Fair Value Bank of Nova Scotia US$ GIC.05% due April 1, 2011 Bank of Nova Scotia Cashable GIC 0.6%, due October 22, 2010 1,187 shares of Crescent Point Energy Corp $ 25,000 $ 24,347 $ - $ - - - 3,000 3,000 56,881 55,848 - - 891.623 units of Sprott Canadian Equity Fund 47,417 47,423 - - 197.062 units of Fidelity Canadian Asset 5,100 5,290 - - Allocation Fund State Bank of India GIC, 1.6%, due April 18, 2011 (2010-2.5%, due April 18, 2010) 44,841 44,841 87,494 87,494 $ 179,239 $ 177,749 $ 90,494 $ 90,494 9.
SCHEDULE OF PROGRAM AND OPERATING EXPENSES FOR THE YEAR ENDED MARCH 31, 2011 Schedule B 2011 2010 Amortization $ 2,923 2,914 Bank charges 4,268 4,168 Communications 2,533 2,423 Fundraising expenses 10,533 10,905 Insurance 2,954 2,883 Legal and accounting 3,182 2,396 Office 15,846 12,126 Rent and utilities 40,031 37,685 Salaries and benefits 240,664 260,169 322,934 335,669 Less: operating expenses allocated to CIDA programs (221,184) (174,973) Less: operating expenses allocated to other programs (56,050) (109,045) $ 45,700 $ 51,651 10.