Shortgrass Library System Financial Statements December 31, 2012
Management's Responsibility
To the Stakeholders of Shortgrass Library System: Management is responsible for the preparation and presentation of the accompanying financial statements, including responsibility for significant accounting judgments and estimates in accordance with Canadian accounting standards for not-for-profit organizations. This responsibility includes selecting appropriate accounting principles and methods, and making decisions affecting the measurement of transactions in which objective judgment is required.
In discharging its responsibilities for the integrity and fairness of the financial statements, management designs and maintains the necessary accounting systems and related internal controls to provide reasonable assurance that transactions are authorized, assets are safeguarded and financial records are properly maintained to provide reliable information for the preparation of financial statements.
The Board of Trustees is composed entirely of Directors who are neither management nor employees of the Organization. The Board is responsible for overseeing management in the performance of its financial reporting responsibilities, and for approving the financial information. The Board fulfils1hese responsibilities by reviewing the financial information prepared by management and discussing relevant matters with management and external auditors. The Board is also responsible for recommending the appointment of the ,'
Organization's external auditors.
MNP LLP is appointed by the trustees to audit the financial statements and report directly to them; their report follows. The external auditors have full and free access to, and meet periodically and separately with, both the Board and management to discuss their audit findings.
April 17, 2013
Independent Auditors' Report
To the Stakeholders of Shortgrass Library System: We have audited the accompanying financial statements of Shortgrass Library System which comprise the statements of financial position as at December 31, 2012 and the statements of operations, changes in net assets and cash flows, including related schedules, for the year then ended, and a summary of significant accounting policies and other explanatory information.
Management's Responsibilily for the Financial Statements Management is responsible for the preparation and fair presentation 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.
Auditors' Responsibilily Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with Canadian generally accepted auditing standards. Those stcfndards 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, 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 in our audits is sufficient and appropriate to provide a basis for our audit opinion.
Opinion In our opinion, except for the effects of failing to capitalize and amortize assets as described in the Other Matter Paragraph, the financial statements present fairly, in all material respects, the financial �osition of Shortgrass Library System as at December 31, 2012, and the results of its operations, changes in net assets and its cash flows for the year then ended in accordance with Canadian accounting standards for not-for-profit organizations.
Other Matter Note 3 describes the Organization's accounting policy with respect to capital assets and indicates that the Organization has not adopted
the policy of capitalization and amortization as recommended under Canadian generally accepted accounting principles. The
informational requirements of the users of the financial statements are more closely met by the current policy of expensing the cost of ' capital assets fully in the year of acquisition. The amount of adjustment necessary under Canadian accounting standards for not-for profit organizations is not readily determinable at this time.
Comparative Information Without modifying our opinion, we draw attention to Note 2 to the financial statements which describes that Shortgrass Library System adopted Canadian accounting standards for not-for-profit organizations on January 1, 2012 with a transition date of January 1, 2011.
These standards were applied retrospectively by management to the comparative information in these financial statements, including the statements of financial position as at December 31, 2011 and January 1, 2011 and the statements of operations, changes in net assets, and cash flows for the year ended December 31, 2011 and related disclosures. We were not engaged to report on the restated
comparative information and, as such, it is unaudited.
Medicine Hat, Alberta April 17, 2013
Box 580, 666- 4t!J Street SE, Medicine Hat, Alberta, T1A 7G5, Phone: (403) 527-4441, 1 (877) 500-0786
MN?LLP Chartered Accountants
MNP
Shortgrass Library System Statement of Financial Position As at December 31, 2012 January 1 2012
2011
(Unaudited)
2011
(Unaudited)
Assets Current Cash
(Note 4)
Marketable securities
(Note 5)
Accounts receivable
Goods and Service Tax receivable Prepaid expenses and deposits
Restricted cash
(Note 6)
110,338 649,077 26 ,977 2 9,588 52,022
291,579
33,917
40,082
36,943 32,466
8 68 ,002
764,990
750,855
282,155
202,236
183,126
1 ,1 50,157
967,226
933,981
88 ,57 9 72,374
1 11 ,134
199,852
160,953
196,086
298,205
186 ,559 95,596 707,049
133,492
132,187
68,685
568,963
50,711 452,878
98 9,204
771,140
635,776
1,150,157
967,226
933,981
337,340 62,072
1,028
655,800
24,618
Liabilities Current Accounts payable and accruals
Deferred revenue (Note 7)
Commitments
84,952
98,353
(Note 8)
Net Assets Internally restricted capital Internally restricted contingency Unrestricted
Approved on behalf of the Board
�·�C� Irector
�.lbL--Directo
The accompanying notes are an integral part of these fn i ancial statements
Shortgrass Library System Statement of Operations year ended December 31, 2012
For t he
2012
2011 (Unaudited)
3 ,329 31 ,426 111,521 4,344 5,476 16,349 20,614 8,520 417,129 477,979 14,664 527,106 2 9,421 500
35,566
Revenue APLEN CAP grant - libraries APLEN Grant - SLSHQ
Contract services - MHSD #76 & Prairie Rose
Datacom reimbursements
Donated monies and staff order reimbursements Establishment grant
Integrated library system reimbursements Investment income
Member library boards materials (Note 10) Member municipalities operational
Miscellaneous Provincial grants
Special grants
Special projects
Expenses APLEN CAP grant expense & capital - libraries APLEN grant expense & capital - SLSHQ
Additional resources Advertising Alberta library Board expenses
Building costs - repairs, maintenance and supplies
Capital purchases Consultancy and programs Contract work - MHSD #76 Contract work - Prairie Rose Donated monies and staff order purchases
Establishment grant expenses - capital Insurance - building Library materials Member library manager expense Resource sharing payments
Rural services payments
.
Special grants expense & capital SLSHQ Special projects
Telephone Utilities
8,883 108,599 5,595 15,864 36,051 18,278 4,554 488,852 468,748 6,779 521,470 72,910
1 ,668,378
1,792,149
3,32 9 31,426 7,900 1 1,962 6,181 10,305 33,621 3,828 4,779 11,489 12,359 5,936 16,349 5,693 300,503 5,173 14,000 48,647 2 9,421 2 ,950 494 2 5,300
34,301
591,64 5
8,883 5,026 13,361 5,382 13.462 25,332 4,107 8,615 5,124 15,896 36,051 6,148 395,076 6,299 14,000 48,200 24,361 484 27,497 697,605
Continued on next page
The accompanying notes are an integral part of these financial statements 2
Shortgrass Library System Statement of Operations For the year ended December 31, 2012 2012
2011
Expenses (Continued from previous page)
591 ,645
697,605
Administrative Expenditures (Sch edule 1) Tech & Public Services Expenditures (Sch edule 2) Delivery & Communication Expenditures (Sch edule 3)
206,278 550,190 102,201
209,911
1 ,45 0,314
1,656,785
218,064
135,364
Total expenses Excess of revenue over expenses
The accompanying notes are an integral part of these financial statements 3
642,429 106,840
Shortgrass Library System Statement of Changes in Net Assets For tl7e year ended December 31, 2012 Internally restricted capital
Internally restricted contingency
Unrestricted
2012
2011 (Unaudited)
Net assets, beginning of y ear
133,492
68,685
Excess of revenue over expenses Transfer of investment income (Note 9) Transfer of funds (Note 9)
Net assets, end of y ear
568,963
771 '1 4 0
635,776
218,064
218 ,064
135,364
989,204
771,140
1,867
9 03
(2,770)
51,200
26, 008
(77,2 08)
1 8 6,559
. 95,596
Tl1e accompanying nates are an integral part of these financial statements 4
707, 049
Shortgrass Library System Statement of Cash Flows For the year ended December 31, 2012 2012
2011 (Unaudited)
1 ,669,042 (739 ,51 3 ) (721,884)
1,669,001 (812,217) (867,341)
Cash provided by( used for) the following activities Operating Cash received from customers and funders Cash paid to suppliers
Cash paid to employees
207,645
(10,557)
Investing Purchase of marketable securities
(1,885,170) 1 ,4 96,284
Disposal of marketable securities
Increase (decrease) in cash resources Cash resources, beginning of year Cash resources, end of year
The accompanying notes are an integral part of these financial statements 5
(774,692) 1,075,800
(388,886)
301,108
(181,241 ) 291,579
290,551 1,028
110,338
291,579
Shortgrass Library System Notes to the Financial Statements For the year ended December 31, 2012
1.
Incorporation a n d nature of the organization The Shortgrass Library System ("the Organization") is a non-profit, charitable Organization that was incorporated on March 1, 1988. The Organization provides centralized purchasing, cataloguing and distribution services of various library media to its members from its location in Medicine Hat, Alberta. The Organization also provides contract services to third parties.
2.
Impact of adopting accounting standards for not-for-profit organizations These are the Organization's first financial statements prepared in accordance with Canadian accounting standards for not足 for-profit organizations (ASNPO). The accounting policies in Note 3 have been applied in preparing the financial statements for the year ended December 31, 2012, the comparative information for the year ended December 31, 2011, and the opening ASNPO balance sheet as at January 1, 2011 (the Organization's date of transition to ASNPO). In preparing these financial statements, the Organization has not elected to apply any transitional provisions permitted by
CICA 1501 First time adoption by not-for-profit organizations at the date of transition to ASNPO. -
The transition to ASNPO had no effect on the statements of financial position and statements of operations of the Organization as compared to amounts that would have been reported under Canadian GAAP.
3.
Significant accounting policies The financial statements have been prepared in accordance with Canadian accounting standards for not-for-profit organizations, except as explained below:
Capital assets Capital assets are expensed on acquisition and proceeds of disposal are reported as revenue in the year of disposal. Capital
assets held include land, building, furniture, equipment, artwork, computers and software, library automation system, and
vehicles. During the year, computers and computer eq.uipment, office furniture and other equipment were purchased for a total
cost of $36,356 (in 2011 computer equipment, office furniture, and other equipment were purchased for a total cost of $18,363). During the year computer equipment, vehicles and office furniture were disposed for total proceeds of $6,100 (in 2011
computers and computer equipment for no proceeds). These amounts are included in the statement of operations and related schedules under various capital or hardware purchases accounts and miscellaneous revenue. In addition the Organization has applied the following significant accounting policies:
Cash and cash equivalents Cash and cash equivalents include balances with banks and short-term investments with original maturities of three months
or less. Cash subject to restrictions that prevent its use for current purposes is included in restricted cash.
Marketable securities Marketable securities consist of Guaranteed Investment Certificates with an original maturity term of greater than three months and are stated at market value. As of December 31, 2012 and December 31, 2011, the market value of these investments approximates cost.
Restricted cash Restricted cash balance consists of balances with banks and guaranteed investment certificates. As of December 31, 2012 and December 31, 2011, the market value of these investments approximates cost.
6
Shortgrass Library System Notes to the Financial Statements For the year ended December 31, 2012 3.
Significant accounting policies
{Continued from previous page)
Revenue recognition The Organization follows the deferral method of revenue recognition. Restricted contributions are recognized as revenue in the year in which the related expenses are incurred. Unrestricted contributions and investment income are recognized as revenue when received or receivable if the amount to be received can be reasonably estimated and collection is reasonably assured.
Internally restricted funds The Organization has internally restricted capital and contingency funds as approved by the Board of Trustees. The Capital Fund is for the purchase of capital items in excess of $1 ,000 if necessary. The Contingency Fund is for unexpected expenditures that result in over-expenditures in the operating fund.
Income taxes The Organization is registered as a charitable organization under the Income Tax Act (the "Act") and as such is exempt from income taxes and is able to issue donation receipts for income tax purposes. In order to maintain its status as a registered charity under the Act, the Organization must meet certain requirements within the Act. In the opinion of management, these requirements have been met.
Measurement uncertainty The preparation of 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 disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenues and expenses during the reporting period. Accounts receivable are stated after evaluation as to their collectibility and an appropriate allowance for doubtful accounts is provided where considered necessary. These estimates and assumptions are reviewed periodically and, as adjustments become necessary they are reported in earnings in the periods in which they become known.
Contributed materials and services Contributed materials and services are recognized in the financial statements when their fair value can be reasonably determined and they are used in the normal course of the Organization's operations and would otherwise have been purchased.
7
Shortgrass Library System Notes to the Financial Statements For the year ended December 31, 2012 3.
Significant accounting policies
(Continued from previous page)
Pension expense The Shortgrass Library System participates in the Local Authorities Pension Plan (LAPP), which is one of the plans covered by the Alberta Public Sector Pension Plans Act. The LAPP serves about 200,000 people and over 400 employers. The LAPP is financed by employer and employee contributions and by investment earnings of the LAPP Fund. Contributions for current service are recorded as expenditures in the year in which they become due. The Organization is required to make current service contributions to the LAPP of 9.91% (9.49% in 2011) of pensionable
earnings up to the year's maximum pensionable earnings under the Canadian Pension Plan and 13.74% (13.13% in 2011) on pensionable earnings above this amount. Employees of thf') Organization are required to make current service
contributions of 8.91% (8.49% in 2011) of pensionable salary up to the year's maximum pensionable salary and 12.74%
{12.13% in 2011) on pensionable salary above this amount.
Total current service contributions by the Organization to the LAPP in 2012 were $56,185 (20 11 - $59,804 ). Total current
service contributions by the employees of the Organization to the Local Authorities Pension Plan in 20路12 were $47,307
(2011 - $52,946). Financial instruments The Organization recognizes its financial instruments when the Organization becomes party to the contractual provisions of the financial instrument. All financial instruments are initially recorded at their fair value, including financial assets and
liabilities originated and issued in a related party transaction with management. Financial assets and liabilities originated and issued in all other related party transactions are initially measured at their carrying or exchange amount in accordance with CICA 3840 Related Party Transactions. At initial recognition, the Organization may irrevocably elect to subsequently measure any financial instrument at fair value. The Organization has not made such an election during the year.
The Organization subsequently measures investments in equity instruments quoted in an active market and all derivative
instruments, except those designated in a qualifying hedging relationship or that are linked to, and must be settled by delivery of, unquoted equity instruments of another entity, at fair value. Fair value is determined by published price
quotations. Investments in equity instruments not quoted in an active market and derivatives that are linked to, and must be settled by delivery of, unquoted equity instruments of another entity, are subsequently measured at cost less impairment. With the exception of financial liabilities indexed to a measure of the Organization's performance or value of its equity and those instruments designated at fair value, all other financial assets and liabilities are subsequently measured at amortized cost.
Transaction costs and financing fees directly attributable to the origination, acquisition, issuance or assumption of financial instruments subsequently measured at fair value are immediately recognized in the statement of operations for the current period. Conversely, transaction costs and financing fees are added to the carrying amount for those financial instruments
subsequently measured at amortized cost or cost.
Financial assets include cash, marketable securities, accounts receivable and restricted cash. Financial asset impairment: The Organization assesses impairment of all of its financial assets measured at cost or amortized cost. The Organization groups assets for impairment testing when available information is not sufficient to permit identification of each individually impaired financial asset in the group. Management considers whether there has been a breach in contract, such as a
default or delinquency in interest or principal payments, in determining whether objective evidence of impairment exists. When there is an indication of impairment, the Organization determines whether it has resulted in a significant adverse
change in the expected timing or amount of future cash flows during the year. If so, the Organization reduces the carrying amount of any impaired financial assets to the highest of: the present value of cash flows expected to be generated by holding the assets; the amount that could be realized by selling the assets; and the amount expected to be realized by
exercising any rights to collateral held against those assets. Any impairment, which is not considered temporary, is included
in current year excess of revenues over expenses.
8
Shortgrass Library System Notes to the Financial Statements For the year ended December 31, 2012
3.
Significant accounting policies (Continued from previous page) TheOrganization reverses impairment losses on financial assets when there is a decrease in impairment and the decrease
can be objectively related to an event occurring after the impairment loss was recognized. The amount of the reversal is
recognized in the excess of revenues over expenses in the year the reversal occurs.
4.
Cash 2012
Cash in bank
Petty cash
5.
2011 (Unaudited)
110,038 300
291,279 300
110,338
291,579
Marketable securities Maturity Date Interest Rate
2012
Interest Rate
2011 (Unaudited)
Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate
Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate GuaranteedInvestmentCertificate Guaranteed InvestmentCertificate Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate
February 11, 2012
1.20% 1 20% 1.20% 1.20% 1.00%
February 11, 2012
.
February 11, 2012 February 11, 2012
December 29, 2012 January 23, 2013 January 23, 2013 January 23, 2013 January 23, 2013 January23, 2013 January 23, 2013 January 23, 2013 January 23, 2013 March 20, 2013 March 24, 2013 April 7, 2013 April 7, 2013 April 7, 2013 A�ril1 0 , 2013
Less reclassification to restricted cash
9
1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.25% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
50,180 50,180 50,180 50,180 50,180 50,180 50,180 50 ,180 20,767 75,778 40,291 40,291 50,170 97, 489 726,226 {77.149) 649,077
60,205 60,205 60,205 60,205 96,519
337,340 337,340
Shortgrass Library System Notes to the Financial Statements For the year ended December 31, 2012 6.
Restricted cash Maturity Date
Interest Rate
2012 Interest Rate
2011
(Unaudited) Cashin Bank Guaranteed 路Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate
Guaranteed Investment Certificate
Guaranteed Investment Certificate Guaranteed Investment Certificate Guaranteed Investment Certificate
Guaranteed InvestmentCertificate GuaranteedInvestmentCertificate Guaranteed InvestmentCertificate GuaranteedInvestmentCertificate Guaranteed InvestmentCertificate Guaranteed InvestmentCertificate GuaranteedInvestment Certificate
9 February 11, 2012 February 11, 2012 February 11, 2012
February 11, 2012 February 11, 2012 February 11, 2012
December 29,2012
March 20, March 20, MaFch 20, March 20, March 20, March 20, Aerii10,
Add reclassificationfrom marketable securities
2013 2013 2013 2013 2013 2013 2013
11 2,948 10,429 17,495 25,686 63,065 67,467 15,135
1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 0.75% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20% 1.20%
2,989 10,575 17,740 26,046 63,948 68,412 15,287 205,006 77,149
202,236
282, 155
202,236
The cash and marketable securities have been restricted to fund the internally restricted net assets.
7.
Deferred revenue 2012
2011
(Unaudited) Grant revenue Contract revenue
10,736 15,307 4 6,331 72,374
Underseent materials budget
8.
63,511 19,655 27,968 111'134
Commitments The Organization owns the integrated library system in partnership with Chinook Arch Regional Library System. The Organization has committed to share the annual maintenance costs of the system. The upgrade and maintenance costs for
the upcoming year that the Organization will be obligated to pay will be approximately $22,601. These costs will be paid out of the Organizations operating funds. These costs are then charged back to the school districts and municipalities that the Organization administers the program for. To terminate participating in the contract, the Organization must deliver written
notice and explanation on or before December 31 of any year to become effective December 31 of the year immediately
following.
9.
Fund transfers Funds were transferred to internally restricted net assets from unrestricted net assets to account for interest earned on marketable securities held to fund the internally restricted funds. The Board of Trustees also approved transfers of $51,200 from unrestricted net assets to the internally restricted capital fund and $26,008 from unrestricted net assets to the internally restricted contingency fund as of December 31, 2012 ($17,352 from unrestricted net assets to internally restricted contingency fund in 2011 ).
10
Shortgrass Library System Notes to the Financial Statements For the year ended December 31, 2012
1 0.
Member library boardsmaterials 2012
2011
(Unaudite d) Annual member library boards materials revenue
437,977 27,968 ( 46,331) (5,364) 2 ,879 417,129
Prior year unspent amount
Current year unspent amount Prior year overspent amount Current year overspent amount
11.
429,826 85,300 (27,968) (3,670) 5,364 488,852
Contingencies The Organization is contingently i l ablefor corporate credit cards issued with a combined authorized credit limit of $37,000
($37,000 in 2011 ). The amount charged against this limit at December 31, 2012 is $7,717 ($3,568 in 2011). The credit cards bear interest at 19.99% (19.99% in 2011) and are unsecured.
1 2.
Financial Instruments The Organization, as part of its operations, carries a number of financial instruments. It is management's opinion that the Organization is not exposed to significant interest, currency, credit, liquidity or other price risks arising from these financial
instruments except as otherwise disclosed.
Credit concentration As at December 31, 2012, one customer and funder aGcounted for 58% (2011 - three customers and funders for 70%) of
the accounts receivable. The Organization believes that there is no unusual exposure associated with the collection of these receivables. The Organization performs regular credit assessments of its customers and provides allowances for potentially
uncollectible accounts receivable.
Fair value of financial instruments The c arry ing amount of cash, restricted cash, marketable securities, accounts receivable, accounts payable and accruals approximates their fair value due to the short-term maturities of these items.
Interest rate risk Interest rate risk is the risk that the value of a financial instrument might be adversely affected by achange in the interest rates. In seeking to minimize the risks from interest rate fluctuations, the Organization manages exposure through its normal operating and financing activities.
Risk management policy The Organization, as part of operations, has established avoidance of debt as risk management objectives. In seeking to
meet this objectives, the Organization follows a risk management policy approved by its Board of Trustees.
13.
Comparative figures Cet r aincomparative figures have been reclassified to conform with current year presentation. The only significant reclassification in 2011 was to reclassify $240,821 of GIG's from cash to marketable securities.
11
Shortgrass Library System Schedule 1 - Administrative Expenditures For the year ended December 31, 2012 2012
2011 (Unaudited)
Administrative Expenditures Advertising
494 1,583 12,098 1,731 504 19,154 1,459 160,076 1,075 8,104
Computer software purchase and repair
Conferences and workshops Dues and memberships
Interest and bank charges
Professional fees
Repairs and maintenance Salaries, wages and benefits Stationary supplies and photocopying Travel
206,278
12
8,013 2,190 10,205 3,093 1,299 15,472 287 159,375 4,906 5,074 209,911
Shortgrass Library System Schedule 2- Tech & Public Services Expenditures For the year ended December 31, 2012 2012
2011 (Unaudited)
10 ,998 596 289 506 ,917 10,502 1,219 9,862 9 , 8 47
11,861 695 250 622,134
Tech & Public Services Expenditures Cataloguing tools and software Computer hardware
Repa irs and maintenance Salaries and benefits
Salaries and benefits - project cataloguer
Stationary supplies and photocopying Supplies - processing
Technologysoftware and support
550, 190
13
1,020
2,658 3,767 44
642,429
Shortgrass Library System Schedule 3
-
Delivery & Communication Expenditures For the year ended December 31, 2012 2012
2011 (Unaudited)
Delivery& Communication Expenditures Data communications Fax
Integrated library system repairs and maintenance Internet Postage Rent - telephone
Salaries and benefits Vehicle
14
430 32, 462 7,3 92 1 , 5 90 3,619 33,414 23,294
950 433 15,590 8,647 1,266 6,571 47,644 25,739
102,201
106,840