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					 EAST BAY ZOOLOGICAL
       SOCIETY
  FINANCIAL STATEMENTS WITH
INDEPENDENT AUDITOR’S REPORT

        YEARS ENDED
  SEPTEMBER 30, 2011 AND 2010
                         INDEPENDENT AUDITOR’S REPORT



Board of Directors
East Bay Zoological Society
Oakland, California


We have audited the accompanying statements of financial position of East Bay Zoological Society
(Society) as of September 30, 2011 and 2010, and the related statements of activities and of cash flows for
the years then ended. These financial statements are the responsibility of the Society’s management. Our
responsibility is to express an opinion on these 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 financial statements are free of material misstatement. An audit includes examining,
on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also
includes assessing the accounting principles used and significant estimates made by management, as well
as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable
basis for our opinion.

In our opinion, the financial statements referred to above present fairly, in all material respects, the
financial position of East Bay Zoological Society as of September 30, 2011 and 2010, and the changes in
its net assets and its cash flows for the years then ended, in conformity with accounting principles
generally accepted in the United States of America.




GILBERT ASSOCIATES, INC.
Sacramento, California

February 24, 2012




                                                                                                           1
                           EAST BAY ZOOLOGICAL SOCIETY
                             STATEMENTS OF FINANCIAL POSITION
                                 SEPTEMBER 30, 2011 AND 2010



                                                                         2011               2010
ASSETS

CURRENT ASSETS:
 Cash and equivalents                                               $    4,367,893     $    1,531,853
 Inventories                                                               162,017            139,156
 Prepaid expenses and other                                                300,598            321,655
 Bond proceeds receivable                                                  285,983             58,538
 Current portion of pledges receivable                                   3,144,478            674,605
      Total current assets                                               8,260,969          2,725,807

PLEDGES RECEIVABLE, Net                                                      871,128        1,468,054

INVESTMENTS                                                              2,503,510          2,494,386

PROPERTY AND EQUIPMENT, Net                                             26,874,446         25,246,539

TOTAL ASSETS                                                        $ 38,510,053       $ 31,934,786

LIABILITIES AND NET ASSETS

CURRENT LIABILITIES:
  Accounts payable                                                  $    1,272,114     $      367,612
  Accrued liabilities                                                      591,248            550,640
  Deferred revenue and unearned rental income                            1,022,186          1,477,458
      Total liabilities                                                  2,885,548          2,395,710

NET ASSETS:
  Unrestricted                                                          28,283,793         26,135,141
  Temporarily restricted                                                 7,340,712          3,403,935
      Total net assets                                                  35,624,505         29,539,076

TOTAL LIABILITIES AND NET ASSETS                                    $ 38,510,053       $ 31,934,786




The accompanying notes are an integral part of these financial statements.                              2
                           EAST BAY ZOOLOGICAL SOCIETY
                           STATEMENTS OF ACTIVITIES (Page 1 of 2)
                          YEARS ENDED SEPTEMBER 30, 2011 AND 2010



                                                                         2011               2010
UNRESTRICTED NET ASSETS:
REVENUES AND SUPPORT:
Program revenues:
   Operating revenue                                                $    4,051,742     $    3,616,535
   Concessions                                                           3,248,255          3,352,584
   Membership revenue                                                    1,712,904          1,598,592
   Education                                                               642,341            537,032
   Special events                                                          392,884            385,702
       Total program revenue                                            10,048,126          9,490,445
Other support:
   Government funding                                                    1,640,933          1,751,685
   Contributions                                                           481,999            659,442
   Miscellaneous income                                                     61,403             32,937
   Investment income                                                         4,012              7,088
   Satisfaction of restrictions - operations                               489,873            533,643
       Total other support                                               2,678,220          2,984,795
        Total revenue and support                                       12,726,346         12,475,240

OPERATING EXPENSES:
Program services:
   Operations                                                            3,479,881          3,476,599
   Animal management                                                     2,820,654          2,678,250
   Concessions                                                           1,765,464          1,835,907
   Education                                                               994,890          1,023,182
   Special events                                                          224,401            197,957
       Total program services                                            9,285,290          9,211,895
Supporting services:
   Marketing and public relations                                          496,121            539,586
   Fund development                                                        350,046            326,116
   Capital campaign fundraising                                            228,568            212,135
   Administration                                                        1,679,532          1,575,212
       Total supporting services                                         2,754,267          2,653,049
        Total operating expenses                                        12,039,557         11,864,944

NET INCOME FROM OPERATIONS                                                   686,789         610,296


The accompanying notes are an integral part of these financial statements.                              3
                           EAST BAY ZOOLOGICAL SOCIETY
                           STATEMENTS OF ACTIVITIES (Page 2 of 2)
                          YEARS ENDED SEPTEMBER 30, 2011 AND 2010



                                                                         2011              2010

   Donated materials and services revenue                           $      660,900    $      230,593
   Donated materials and services expense                                 (660,900)         (230,593)
   Depreciation expense                                                 (1,872,736)       (1,972,429)
   Bond proceeds from City of Oakland                                    1,493,909           586,339
   Satisfaction of restrictions - capital projects                       1,840,690           399,986

INCREASE (DECREASE) IN UNRESTRICTED
  NET ASSETS                                                             2,148,652          (375,808)

TEMPORARILY RESTRICTED NET ASSETS:
   Contributions                                                         6,284,809         1,016,201
   Loss/reserve for pledges deemed uncollectible                           (17,469)
   Satisfaction of restrictions - operations                              (489,873)         (533,643)
   Satisfaction of restrictions - capital projects                      (1,840,690)         (399,986)

INCREASE IN TEMPORARILY RESTRICTED
  NET ASSETS                                                             3,936,777           82,572

INCREASE (DECREASE) IN NET ASSETS                                        6,085,429          (293,236)

NET ASSETS, Beginning of Year                                           29,539,076        29,832,312

NET ASSETS, End of Year                                             $ 35,624,505      $ 29,539,076




The accompanying notes are an integral part of these financial statements.                              4
                         EAST BAY ZOOLOGICAL SOCIETY
                              STATEMENTS OF CASH FLOWS
                         YEARS ENDED SEPTEMBER 30, 2011 AND 2010



                                                                        2011               2010
CASH FLOWS FROM OPERATING ACTIVITIES:
 Increase (decrease) in net assets                                 $    6,085,429      $    (293,236)
 Reconciliation to net cash and equivalents provided by
   operating activities:
    Depreciation                                                        1,872,736          1,972,429
    Provision for doubtful pledges receivable                              17,469
    Net realized and unrealized loss on investments                         2,837              6,411
    Changes in:
      Grants receivable                                                                      238,604
      Bond proceeds receivable                                           (227,445)           194,131
      Pledges receivable                                               (1,890,416)           240,840
      Inventories                                                         (22,861)            21,737
      Prepaid expenses and other                                           21,057              9,442
      Accounts payable                                                    (78,678)             4,837
      Accrued liabilities                                                  40,608           (119,280)
      Deferred revenue and unearned rental income                        (455,272)           694,560
        Net cash and equivalents provided by operating
         activities                                                     5,365,464          2,970,475

CASH FLOWS FROM INVESTING ACTIVITIES:
 Purchases of investments                                              (1,652,556)         (2,498,202)
 Proceeds from sale and maturities of investments                       1,640,595           1,863,912
 Purchases of property and equipment                                   (2,517,463)         (1,344,574)
        Net cash and equivalents used by investing activities          (2,529,424)         (1,978,864)

NET INCREASE IN CASH AND EQUIVALENTS                                    2,836,040            991,611

CASH AND EQUIVALENTS, Beginning of Year                                 1,531,853            540,242

CASH AND EQUIVALENTS, End of Year                                  $    4,367,893      $   1,531,853

NON-CASH INVESTING ACTIVITIES:
 Property and equipment financed through accounts payable          $         983,180   $




The accompanying notes are an integral part of these financial statements.                               5
                       EAST BAY ZOOLOGICAL SOCIETY
                            NOTES TO FINANCIAL STATEMENTS
                              SEPTEMBER 30, 2011 AND 2010



1.   OPERATIONS AND AGREEMENT WITH THE CITY OF OAKLAND

     The East Bay Zoological Society (Society) is a nonprofit public benefit corporation formed to
     operate a zoo and related facilities in Knowland Park within the City of Oakland.

     In addition to providing exhibits and compounds for animals, birds, and reptiles, the Society
     provides a variety of educational programs through facilities, which include the Education and
     Science Center, its Zoomobile program and other educational studies. The Society also has
     available amusement and recreation equipment, structures and grounds, including picnic areas, to
     supplement its zoological exhibits.

     The Society and the City of Oakland (City) have a management agreement for the Oakland Zoo
     and Knowland Park (Zoo and Park). Under the agreement, the Society has the exclusive right to
     maintain, operate, and control the zoological and botanical gardens and park areas in Knowland
     Park. The City retains ownership of the Zoo grounds real property, animal collection, and certain
     other fixed assets. The current management agreement expires on October 31, 2039.

     In consideration for operating the Zoo and Park, the City provided $634,875 and $846,900 to the
     Society in management fees during 2011 and 2010, respectively.


2.   SIGNIFICANT ACCOUNTING POLICIES

     Basis of presentation – The financial statements are presented in conformity with professional
     standards applicable to not-for-profit entities. Under professional standards, the Society reports
     information regarding its financial position and activities according to three classes of net assets:
     unrestricted, temporarily restricted, and permanently restricted. The Society has no permanently
     restricted net assets.

     Revenue recognition – Revenues from grants and bond proceeds are recognized when qualifying
     expenses are incurred. Membership revenue is recognized over the term of the membership,
     typically one year. Education and special event revenue is recognized when the related event
     occurs.

     Contributions are recognized in full when received or unconditionally pledged, in accordance
     with professional standards. All contributions are considered available for unrestricted use unless
     specifically restricted by donors for future periods or specific purposes. Donor-restricted
     amounts are reported as increases in temporarily or permanently restricted net assets.
     Temporarily restricted net assets become unrestricted, and are reported in the statement of
     activities as satisfaction of restrictions, when the time restrictions expire or the contributions are
     used for the restricted purposes.




                                                                                                             6
                  EAST BAY ZOOLOGICAL SOCIETY
                       NOTES TO FINANCIAL STATEMENTS
                         SEPTEMBER 30, 2011 AND 2010



Donated materials, equipment, and professional services are recorded as in-kind donations and
recognized at the estimated fair value as of the date of donation or service. Contributed services
that do not meet the criteria for recognition under professional standards are not reflected in the
financial statements.

Cash and equivalents – For financial statement purposes, the Society considers all investments
with a maturity at purchase of three months or less to be cash equivalents, unless held for long-
term investing purposes.

Investments are stated at fair market value.

Inventories – Food inventories are valued at the lower of cost or market, computed on the first-
in, first-out basis. Gift shop merchandise inventories are valued using the weighted-average cost
method.

Property and equipment are recorded at cost and depreciated using the straight-line method
over estimated useful lives of 3 to 60 years. The Society’s policy is to capitalize such items with
a cost of $2,500 or more. Property and equipment represent costs the Society has incurred
purchasing, building, and improving exhibits on the premises of the Zoo and includes the value of
the collection of animals purchased by the Society. These assets would become the property of
the City of Oakland should the City and the Society terminate their agreement.

Functional expenses – The costs of providing the program and supporting services have been
summarized on a functional basis in the statement of activities. Certain costs have been allocated
to program services based on estimates of employees’ time incurred and usage of resources.

Income taxes – The Society is publicly supported and exempt from income taxes under
Section 501(c)(3) of the Internal Revenue Code but is subject to income taxes from activities
unrelated to its tax-exempt purpose. The Society has implemented the amended accounting
principles related to accounting for uncertainty in income taxes and has determined that there is
no material impact on the financial statements. With some exceptions, the Society is no longer
subject to U.S. federal and state income tax examinations by tax authorities for years prior to
2007.

Use of estimates – The preparation of financial statements in conformity with accounting
principles generally accepted in the United States of America requires management to make
estimates and assumptions that affect certain reported amounts and disclosures. Accordingly,
actual results could differ from those estimates.

Subsequent events have been reviewed through February 24, 2012, the date the financial
statements were issued.




                                                                                                      7
                       EAST BAY ZOOLOGICAL SOCIETY
                            NOTES TO FINANCIAL STATEMENTS
                              SEPTEMBER 30, 2011 AND 2010



3.   PLEDGES RECEIVABLE

     The Society recognizes pledges receivable at their estimated fair value, on a nonrecurring basis, at
     the time the pledge is made. Fair value is determined by calculating the present value of the
     estimated future cash flows. The discount rates used in determining the net present value of
     pledges receivable at September 30, 2011 and 2010 ranged from 2.45% to 5.8%. The estimated
     fair value of pledges made during 2011 totaled $2,500,985 at September 30, 2011, included a
     discount rate of 2.45% and are included within level 3 of the fair value hierarchy because
     determination of the net present value of future cash flows is based on little or no market data and
     requires management to develop their own assumptions.

     Pledges receivable consist of the following:

                                                                            2011              2010

     Gross pledges receivable                                           $ 4,108,728       $ 2,282,855
     Less: Unamortized discount                                             (40,611)         (101,653)
     Less: Reserve for uncollectible pledges                                (52,511)          (38,543)

     Pledges receivable, net                                            $ 4,015,606       $ 2,142,659

     Pledges receivable are due to be collected as follows:

                                                                            2011              2010

     Within one year                                                    $ 3,144,478       $     674,605
     In one to five years                                                   871,128           1,468,054

     Pledges receivable, net                                            $ 4,015,606       $ 2,142,659

     Approximately 91% of the Society’s pledges receivable are from four donors as of September 30,
     2011, and approximately 75% of the Society’s pledges receivable are from three donors as of
     September 30, 2010




                                                                                                       8
                        EAST BAY ZOOLOGICAL SOCIETY
                            NOTES TO FINANCIAL STATEMENTS
                              SEPTEMBER 30, 2011 AND 2010



4.   INVESTMENTS

     Investments consist of the following:

                                                                               2011              2010

     Money market mutual funds                                             $ 1,617,007       $     255,107
     Cash, held for long term purposes                                         586,655           1,588,293
     Corporate bonds                                                           299,848             551,017
     Government bonds                                                                               99,969

     Total                                                                 $ 2,503,510       $ 2,494,386

     The Society values its financial assets and liabilities based on the price that would be received to
     sell an asset or paid to transfer a liability in an orderly transaction between market participants at
     the measurement date. In determining fair value, the Society utilizes valuation techniques that
     maximize the use of observable inputs and minimize the use of unobservable inputs to the extent
     possible. In order to increase consistency and comparability in fair value measurements, a fair
     value hierarchy that prioritizes observable and unobservable inputs is used to measure fair value
     into three broad levels, as follows:

     Level 1 Inputs Unadjusted quoted prices in active markets that are accessible at the
                    measurement date for identical assets or liabilities.

     Level 2 Inputs Inputs other than quoted prices in active markets that are observable either
                    directly or indirectly.

     Level 3 Inputs Unobservable inputs in which there is little or no market data, which require
                    management to develop its own assumptions.

     The Society’s investments are classified within Level 1 of the hierarchy because they are valued
     using quoted market prices in active markets for identical assets.

     Interest and investment income consists of the following:

                                                                               2011              2010

     Interest and dividends                                                $       6,849     $      13,499
     Net realized and unrealized loss                                             (2,837)           (6,411)

     Total                                                                 $       4,012     $       7,088




                                                                                                              9
                      EAST BAY ZOOLOGICAL SOCIETY
                          NOTES TO FINANCIAL STATEMENTS
                            SEPTEMBER 30, 2011 AND 2010



5.   PROPERTY AND EQUIPMENT

     Property and equipment consist of the following:

                                                                          2011                2010

     Buildings and structures                                         $ 36,611,913    $ 36,561,410
     Construction in progress                                            6,328,524       3,094,762
     Equipment                                                           3,166,868       3,330,639
     Land improvements                                                   4,409,184       4,409,184
     Furniture and fixtures                                                320,727         350,612
     Zoological collection                                                 210,206         210,206
     Vehicles                                                              352,699         320,696
         Total                                                          51,400,121      48,277,509
     Less accumulated depreciation                                     (24,525,675)    (23,030,970)

     Total                                                           $ 26,874,446     $ 25,246,539

     Management estimates that approximately 97% and 94% of depreciation expense relates to
     program services and 3% and 6% to supporting services for 2011 and 2010, respectively.


6.   DONATED MATERIALS AND SERVICES

     The Society received donated materials and services, which were used for the following
     activities:

                                                                          2011                2010

     Marketing and public relations                                   $    435,382    $       218,174
     Operations                                                            204,987
     Fund development                                                       12,500              1,500
     Animal management                                                       7,411             10,719
     Education                                                                 620                200

     Total donated materials and services                             $    660,900    $       230,593

     Management estimates that approximately 2% and 5% of donated materials and services expense
     relates to program services and 98% and 95% to supporting services for 2011 and 2010,
     respectively.




                                                                                                     10
                        EAST BAY ZOOLOGICAL SOCIETY
                            NOTES TO FINANCIAL STATEMENTS
                              SEPTEMBER 30, 2011 AND 2010



7.    NET ASSETS

      Temporarily restricted net assets are available for the following purposes:

                                                                             2011              2010

      Veterinary hospital                                                $ 3,907,504       $     271,176
      California project                                                   3,290,175           2,896,489
      Elephant barn                                                           77,533             159,648
      Other projects                                                          65,500              26,622
      Time restricted                                                                             50,000

      Total                                                              $ 7,340,712       $ 3,403,935


8.    EMPLOYEES’ INCENTIVE PLAN

      The Society sponsors a retirement plan under Internal Revenue Code 403(b). Prior to November
      12, 2010, employees over the age of 18 were eligible to participate once they had completed three
      months of service. As of November 12, 2010, the plan was amended, changing the eligibility age
      to 21, and the service period to six months. The Society makes matching contributions to the
      plan up to three percent of the participant’s compensation. Employer matching and discretionary
      contributions vest immediately upon employee participation. The Society’s contributions to this
      plan amounted to $96,967 and $85,277 during 2011 and 2010, respectively.


9.    LINE OF CREDIT

      The Society has a $750,000 revolving line of credit with a bank, with a variable interest rate equal
      to the bank’s floating prime rate plus 0.50% (3.75% as of September 30, 2011), expiring on
      September 30, 2012. There was no outstanding balance as of September 30, 2011 and 2010.


10.   CONCENTRATIONS OF CASH

      The Society maintains its cash in bank deposit accounts that, at times, may exceed federally
      insured limits. The Society has not experienced any losses in such accounts. Management
      believes the Society is not exposed to any significant credit risk related to cash.




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