RED DEER AND DISTRICT MUSEUM SOCIETY Independent Auditors' Report and Financial Statements December 31, 2011
INDEPENDENT AUDITORS' REPORT
To the Members of Red Deer and District Museum Society We have audited the accompanying financial statements of Red Deer and District Museum Society, which comprise the statement of financial position as at December 31, 2011, and the statements of changes in net assets, operations 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. Auditors' 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 auditors' 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, we consider internal control relevant to the Society'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 Society'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. Except as noted in the following paragraph, we believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.
INDEPENDENT AUDITORS' REPORT, continued
Basis for Qualified Opinion Red Deer and District Museum Society derives a material amount of revenue from donations and programs, the completeness of which are not susceptible to satisfactory audit verification. Accordingly, our verification of these revenues was limited to amounts recorded in the records of the organization and we were not able to determine whether any adjustments might be necessary to donations and programs revenue, excess of revenues over expenditures, assets and net assets. Qualified Opinion Except as noted in the above paragraph, in our opinion, these financial statements present fairly, in all material respects, the financial position of the Society as at December 31, 2011 and the results of its operations and its cash flows for the year then ended in accordance with Canadian generally accepted accounting principles. Red Deer, Alberta March 15, 2012
Chartered Accountants
RED DEER AND DISTRICT MUSEUM SOCIETY Contents December 31, 2011
Financial Statements
Page
Statement of Financial Position
1
Statement of Changes in Net Assets
2
Statement of Operations
3
Statement of Cash Flows
4
Notes to the Financial Statements
5 - 13
RED DEER AND DISTRICT MUSEUM SOCIETY Statement of Financial Position As at December 31, 2011
2011
2010
ASSETS Current assets Cash (note 3) Accounts receivable Investments (note 4) Prepaid expenses
$
399,493 10,018 12,224 11,571
$
507,098 37,231 12,224 5,443
433,306 609,349
561,996 539,421
$ 1,042,655
$ 1,101,417
$
$
Capital assets (note 5)
LIABILITIES Current liabilities Accounts payable and accruals Deferred revenue (note 6) Unamortized deferred capital contributions (note 7)
70,035 251,619
120,328 355,128
321,654 95,359
475,456 20,289
417,013
495,745
114,296
84,772
11,346
20,900
500,000
500,000
625,642
605,672
$ 1,042,655
$ 1,101,417
NET ASSETS Unrestricted Internally restricted (note 8) Contributed assets
Approved by the board: Director Director
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RED DEER AND DISTRICT MUSEUM SOCIETY Statement of Changes in Net Assets Year ended December 31, 2011
Internally Restricted
Unrestricted
Balance, beginning of year
$
84,772
$
20,900
Contributed assets
$
500,000
Total 2011
$
605,672
Total 2010
$
641,413
Excess (deficiency) of revenues over expenditures
19,970
-
-
19,970
(35,741)
Transfer from internally restricted
9,554
(9,554)
-
-
-
Balance, end of year $
114,296
$
11,346
-2-
$
500,000
$
625,642
$
605,672
RED DEER AND DISTRICT MUSEUM SOCIETY Statement of Operations Year ended December 31, 2011
2011 Budget (unaudited)
Revenues Grants from The City of Red Deer Grants Admissions and programs Bingo and casino Other (note 9) Donations Admin recovery Memberships Amortization of deferred capital contributions Investment income GST recovery and interest
$
898,764 132,500 50,550 15,000 5,000 5,000 -
2011 Actual
$
1,106,814 Expenditures Wages and benefits Utilities Repairs and maintenance Contract services Office Artist fees Advertising and promotion Exhibits Equipment rental Supplies Professional fees Amortization Equipment lease Travel Memberships Interest and bank charges Collections acquisition Transfer from restricted Insurance
$ -3-
-
715,702 77,262 105,616 91,386 35,606 19,472 16,044 53,629 15,970 21,996 14,550 4,287 5,869 3,983 1,326 1,004 10,000 6,587
1,129,011
-
1,200,289
19,970 $
19,970
874,946 169,121 31,142 26,746 6,697 16,175 3,410 2,377 12,522 626 25,245 1,169,007
725,208 87,667 84,626 61,679 32,411 30,275 22,339 19,625 15,983 15,768 14,964 6,331 6,255 3,190 2,190 1,233 (733)
1,106,814
Excess (deficiency) of revenues over expenditures
$
1,148,981
695,152 83,000 124,915 6,500 17,867 19,200 70,000 26,630 11,000 15,000 7,000 2,000 1,500 24,000 3,050
Excess (deficiency) of revenues over expenditures from operations Loss on disposal of capital assets
902,098 151,481 35,087 33,700 12,342 4,492 4,003 3,660 1,189 929 -
2010 Actual
(31,282) 4,459 $
(35,741)
RED DEER AND DISTRICT MUSEUM SOCIETY Statement of Cash Flows Year ended December 31, 2011
2011
2010
CASH PROVIDED BY (USED FOR) Operating activities Cash receipts from grants and other sources Interest received Cash paid to suppliers and employees Interest paid
$ 1,070,566 $ 1,288,389 929 4,589 (1,177,867) (1,149,806) (1,233) (1,004)
Investing activities Purchase of capital assets Contributions related to capital assets
Increase (decrease) in cash Cash, beginning of year Cash, end of year
$
-4-
(107,605)
142,168
(76,259) 76,259
(18,167) 18,167
-
-
(107,605)
142,168
507,098
364,930
399,493
$
507,098
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
1.
Nature of Activities
Red Deer and District Museum Society was incorporated under the Societies Act of the Province of Alberta for the purposes of maintaining museum artifacts, managing and operating the museum and to administer special projects related to the museum. The Society is a registered charitable organization entitled to issue charitable donation receipts and is exempt from income tax in accordance with the Income Tax Act.
2.
Significant Accounting Policies
These financial statements are prepared in accordance with Canadian generally accepted accounting principles. The significant policies are detailed as follows: Measurement uncertainty 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 expenditures during the period. Significant areas requiring the use of estimates include: estimated useful lives of capital assets, amortization of deferred capital allocations, employee future benefits and fair value of financial instruments. Actual results may differ from management's best estimates as additional information becomes available in the future. Investments Investments are recorded at the lower of cost and net realizable value. Capital assets Amortization of capital assets is calculated using the straight line method as follows: Computer equipment Leasehold improvements Computer software Furniture and fixtures
3 years 25 years 3 years 5 years
One half amortization is calculated in the year of acquisition. calculated in the year of disposition.
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No amortization is
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
2.
Significant Accounting Policies, continued
Financial instruments The Society has chosen to apply Canadian Institute of Chartered Accountants (CICA) Handbook Section 3861 "Financial Instruments - Disclosures and Presentations" in place of Section 3862 "Financial Instruments - Disclosures" and Section 3863 "Financial Instruments - Presentation". The Society has classified its significant financial assets and financial liabilities as follows: Cash and investments are classified as held for trading and are measured at fair value with subsequent gains or losses included in excess of revenues over expenditures. Accounts receivable are classified as loans and receivables. After initial fair value measurement, they are measured at amortized cost. Accounts payable and accruals are classified as other financial liabilities. After their initial fair value measurement, they are measured at amortized cost. Collections The Society maintains a collection of aboriginal artifacts, aboriginal art, artifacts from the Central Alberta area, artwork and agricultural artifacts. Generally, the Society does not purchase any artifacts. Items donated to the Society are not recognized in the financial statements. Contributed services Volunteers contribute a significant amount of time in assisting the Society with its operations. Because of the difficulty of determining the fair value of this time, contributed services are not recognized in the financial statements. Valuation of donations in kind Donations of gifts-in-kind, excluding collections, are valued at fair market value at the date of the donation.
-6-
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
2.
Significant Accounting Policies, continued
Revenue recognition The Society follows the deferral method of accounting for contributions. Restricted contributions are recognized as revenue in the year in which the related expenditures are incurred. Unrestricted contributions are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured. Capital contributions are recorded as deferred contributions until the amount is invested in capital assets, then transferred to unamortized deferred capital contributions. These invested capital contributions are amortized to revenue in the same period as the related amortization expense of the funded capital asset. Fees and other income are recognized as revenue when received or when a service is provided if the amount to be received can be reasonably estimated and collection is reasonably assured. Investment revenue is recognized when earned.
3.
Cash
Included in cash are casino funds of $15,830 (2010 - $16,210) which are restricted as they must be spent in accordance with the casino license granted by the Alberta Gaming and Liquor Commission. The Society receives grants specified for various programs. Included in cash is $235,789 (2010 - $298,972) of undisbursed funds that are subject to the restrictions as disclosed in note 6. Included in accounts receivable is $3,305 (2010 - $29,941) of unreceived funds that are subject to the restrictions as disclosed in note 6.
4.
Investments
Investments consist of funds held in the managed fund of the Red Deer and District Community Foundation. No income has been recognized by the Society on these funds in 2011 or 2010 as the Society has not requested any distributions from the fund. The fair market value of this investment is not readily determinable as the funds are pooled with other investments to earn a higher return. (See note 9 regarding distributions from the Red Deer and District Community Foundation's designated fund). -7-
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
5.
Capital Assets
Accumulated Cost Amortization Land and improvements Leasehold improvements Computer equipment Furniture and fixtures Computer software
2011 Net
2010 Net
$
500,000 104,999 43,144 7,750 4,303
$
6,433 39,336 775 4,303
$
500,000 98,566 3,808 6,975 -
$
500,000 35,942 2,761 718
$
660,196
$
50,847
$
609,349
$
539,421
The land and improvements consist of the Sunnybrook Farm property.
6.
Deferred Revenue
2011 City of Red Deer Other contributions Casino Community Facility Enhancement Program Alberta Foundation for the Arts Bingo
2010
$
214,658 21,131 15,830 -
$
198,390 29,206 16,210 52,366 48,951 10,005
$
251,619
$
355,128
The City of Red Deer deferred revenue represents money received to be used for operations in the first quarter of 2012. Other contributions consist of restricted contributions that are being deferred until the restrictions placed on the use of these contributions are met. The casino deferred revenue represents money received from providing volunteers for casinos and will be recognized when the funds are utilized in accordance with the license granted by the Alberta Gaming and Liquor Commission.
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RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
7.
Unamortized Deferred Capital Contributions
2011 Balance, beginning of the year Add: Contributions received during the year Less: Amount amortized to revenue
2010
$
20,289 $ 76,259 (1,189)
$
95,359
$
14,644 18,167 (12,522) 20,289
Deferred contributions related to capital assets represents funds raised and contributed to purchase capital assets for the organization. The funds are amortized to revenue at the same rate as the related capital asset that was acquired is amortized to expenditures.
8.
Internally Restricted Net Assets
Internally restricted net assets consist of funds that have been established for specific programs or events.
9.
Other Revenue
Included in other revenue is $4,306 (2010 - $3,963) received from the Red Deer and District Community Foundation (the Foundation). The revenue is from a designated donation that was made to the Foundation from which the Foundation distributes earnings to the Society. The Society has no control over the designated fund, it is only entitled to earnings from the fund.
-9-
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
10.
Commitments
The Society has entered into a lease agreement for purchase of a photocopier expiring March 2013, which require total monthly payments of $265. Payments for the next two years are as follows: 2012 2013
$
3,180 795
$
3,975
The Society has entered into a fixed rate contract for electricity and natural gas services expiring October 2013 and June 2013 respectively. Electricity is to be supplied at $0.08764/kWh and Natural gas at $10.63/GJ. The Society has entered into a contract for maintenance of heating, ventilating and airconditioning systems expiring January 2015. The contract requires quarterly payments and the payments for the next year three years are: 2012 2013 2014
11.
$
17,118 17,632 18,161
$
52,911
Related Party Transactions
The Red Deer and District Museum Society is related to the City of Red Deer as the City can influence the Society's operating, financing and investing activities. During the year the Society had the following transactions with the City: 2011 Revenue Operating and capital expenditure grants Deferred revenue recognized in the year Deferred capital contributions included above
Expenses - Utilities
- 10 -
2010
$
885,963 $ 40,028 (23,893)
858,421 34,692 (18,167)
$
902,098
$
874,946
$
2,761
$
2,021
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
11.
Related Party Transactions, continued
At the end of the year the Society had a balance receivable of $3,305 (2010 - $29,241) and a payable of $7,320 (2010 - $7,209) with the City of Red Deer. The Society has a lease agreement with the City of Red Deer for the Red Deer & District Museum building. Annual rent totals $1 (2010 - $1). These transactions are in the normal course of operations and have been valued in these financial statements at the exchange amount which is the amount of consideration established and agreed to by the related parties.
12.
Economic Dependence
Red Deer and District Museum Society receives 79% (2010 - 75%) of its funding from the City of Red Deer. The Red Deer and District Museum building and land is owned by the City of Red Deer and is not reflected in these financial statements. During 2009 and 2010, the City of Red Deer contracted out renovations to the building with a budgeted cost of $3,052,874. The actual costs incurred are not readily available. The value of the costs to renovate the building are not reflected in these financial statements.
13.
Local Authorities Pension Plan
Employees of the Society participate in the Local Authorities Pension Plan (LAPP), which is one of the plans covered by the Alberta Sector Pension Plans Act. The Plan covers approximately 206,249 employees and 421 employers. It is financed by employer and employee investment earnings of the LAPP Fund. Contributions for current service are recorded as expenditures in the year in which they become due. The Society is required to make current service contributions to the Plan of 9.49% of pensionable payroll up to the year's maximum pensionable earnings under the Canada Pension Plan, and 13.13% on pensionable earnings above this amount.
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RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
13.
Local Authorities Pension Plan, continued
Employees of the Society are required to make current service contributions of 8.496% of pensionable salary up to the year's maximum pensionable earnings under the Canada Pension Plan, and 12.13% on pensionable salary above this amount. Total contributions by the Society to the Local Authorities Pension Plan in 2011 were $23,564 (2010 - $18,711). Total contributions by the employees of the Society to the Local Authorities Pension Plan in 2011 were $20,165 (2010 - $20,858). At December 31, 2010, the LAPP disclosed an actuarial deficiency of $4.635 billion (2009 - $3.999 billion).
14.
Comparative Amounts
Certain items in the financial statements have been reclassified to conform to the presentation adopted in the current year.
15.
Financial Risk Management
The Society's financial instruments consist of cash, accounts receivable, investments and accounts payable and accruals. The fair value of these financial instruments approximates their carrying value, unless otherwise noted. It is management's opinion that the Society is not exposed to significant interest, currency or credit risk arising from these financial instruments. Market risk The Society is exposed to market price risk as the investments are pooled with other investments which are traded in the market.
- 12 -
RED DEER AND DISTRICT MUSEUM SOCIETY Notes to the Financial Statements December 31, 2011
15.
Financial Risk Management, continued
Capital management The Society's capital consists of its unrestricted net assets and internally restricted net assets. The unrestricted net assets are available to the Society's board of directors and management in maintaining the Society's operations. As legislated by the Alberta Societies Act and the Income Tax Act, the Society's capital is restricted in that it may not be distributed to its members. The internally restricted net assets are restricted to the projects set out by the board of directors. These funds can only be used for these purposes, unless amended by approval of the board. During the year the Society was in compliance with the restrictions on the use of its capital.
16.
Subsequent Events
Subsequent to the year-end, the Society began the process of transferring the Sunnybrook Farm property to the Friends of Sunnybrook Farm Society. When the transfer is completed capital assets and contributed assets will both be reduced by $500,000. There will be no impact on operations as a result of the transfer.
- 13 -