P. 1
Taubman Museum of Art tax audit and financial statements for years ended June 30, 2010 and 2009

Taubman Museum of Art tax audit and financial statements for years ended June 30, 2010 and 2009

|Views: 4,283|Likes:
Published by The Roanoke Times

More info:

Published by: The Roanoke Times on Jan 07, 2012
Copyright:Attribution Non-commercial

Availability:

Read on Scribd mobile: iPhone, iPad and Android.
download as PDF or read online from Scribd
See more
See less

01/07/2012

TAUBMAN MUSEUM OF ART FINANCIAL STATEMENTS YEARS ENDED JUNE 30, 2010 AND 2009

TABLE OF CONTENTS PAGE

INDEPENDENT AUDITORS’ REPORT STATEMENT OF FINANCIAL POSITION STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS STATEMENT OF FUNCTIONAL EXPENSES STATEMENT OF CASH FLOWS NOTES TO FINANCIAL STATEMENTS

1 2 3 4 5-6 7-24

Foti, Flynn, Lowen & Co.
C a lc ulated s o lu tio n s .

David B. Lowen, CPA W illiam R . B rum field, Jr., C PA J. Phillip W indschitl, CPA Frank B . H ancock, C PA , C VA B radley J. D avis, C P A

INDEPENDENT AUDITORS’ REPORT

To the Board of Trustees Taubman Museum of Art

We have audited the accompanying statements of financial position of the Taubman Museum of Art (the Museum) as of June 30, 2010 and 2009 and the related statements of activities, functional expenses and cash flows for the year ended June 30, 2010. These financial statements are the responsibility of the Museum's management. Our responsibility is to express an opinion on these financial statements based on our audits. The prior year summarized comparative information has been derived from the Museum’s 2009 financial statements and, in our report dated November 24, 2009, we expressed an unqualified opinion on those financial statements. We conducted our audits in accordance with U.S. generally accepted auditing standards. Those standards require that we plan and perform the audits 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 made 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 the Taubman Museum of Art as of June 30, 2010 and 2009, and the changes in its net assets and its cash flows for the year ended June 30, 2010, in conformity with U.S. generally accepted accounting principles.

ABCDEF
Roanoke, Virginia January 28, 2011

-1A firm of C P A s and Financial C onsultants (5 4 0) 3 44 -9 2 46 F a x: (5 4 0) 3 44 -9 2 64 5 0 1 S.Jefferson Street, R oanoke,V irginia 2401 I P ost O ffice B ox 12765, R oanoke,V irginia 24028-2765 http://www.fflc.com

TAUBMAN MUSEUM OF ART STATEMENTS OF FINANCIAL POSITION JUNE 30, 2010 and 2009 ASSETS 2010 Current assets: Cash and cash equivalents Cash restricted for capital campaign Restricted cash - other Accounts receivable Grants receivable Inventory Prepaid expenses Total current assets Investments Property and equipment, net of accumulated depreciation Property and equipment held for investment Loan costs Total assets $ 91,188 1,054,997 148,083 10,324 81,850 78,609 78,186 1,543,237 2,038,923 55,047,577 $ 58,629,737 $ 2009 194,004 172,732 99,487 19,589 220,625 73,005 60,329 839,771 2,341,590 56,956,407 460,956 63,318 $ 60,662,042

LIABILITIES AND NET ASSETS Current liabilities: Current portion of long term-debt $ Cash overdraft Accounts payable Accrued expenses Total current liabilities Non-current liabilities: Interest rate swap liability Line of credit Long-term debt Total non-current liabilities Total liabilities Net assets: Unrestricted Temporarily restricted Permanently restricted Total net assets Total liabilities and net assets See accompanying notes to financial statements. -2-

1,705,506 78,327 59,275 85,640 1,928,748

$

12,500 88,743 337,068 119,569 557,880

2,148,286 2,148,286 4,077,034

430,076 17,109,098 74,288 17,613,462 18,171,342

51,372,913 219,256 2,960,534 54,552,703 $ 58,629,737

39,248,729 334,435 2,907,536 42,490,700 $ 60,662,042

TAUBMAN MUSEUM OF ART STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS YEAR ENDED JUNE 30, 2010 (With Comparative Totals for 2009)

Unrestricted Support and revenue: Contributions: Individual Corporate Foundation Donated premises Donated goods and services Governmental grants Capital campaign Admissions Membership fees Space rental income Special events Museum store Café commissions Other service revenue Interest and dividends Gain (loss) on investments Gain (loss) on disposal of equipment Other Assets released from restrictions Total support and revenue Expenses: Program services Management and general Fundraising Total expenses Change in net assets before changes related to collection items not capitalized Collection items purchased Changes in net assets Net assets, beginning of year Net assets, end of year $

Temporarily Restricted

$

1,218,578 125,029 75,700 109,283 38,000 173,493 354,404 127,295 81,847 127,533 42,770 189,351 39,125 189,935 57,941 17,674 14,627,988 17,595,946

$

100 115,000 61,850 14,335,859 (14,627,988) (115,179)

2,962,935 1,582,435 918,827 5,464,197

-

12,131,749 (7,565) 12,124,184 39,248,729 51,372,913 $

(115,179) (115,179) 334,435 219,256

See accompanying notes to financial statements. -3-

Permanently Restricted

2010 Total

2009 Total

$

200 12,500 40,298 52,998

$

1,218,878 137,529 230,998 109,283 99,850 14,335,859 173,493 354,404 127,295 81,847 127,533 42,770 189,351 39,125 189,935 57,941 17,674 17,533,765

$

3,499,033 222,414 174,965 255,000 1,955,025 258,623 5,985,453 279,595 417,591 88,045 353,889 158,896 46,915 232,841 89,247 (569,635) (509) 14,959 13,462,347

-

2,962,935 1,582,435 918,827 5,464,197

2,625,142 6,255,897 743,970 9,625,009

52,998 52,998 2,907,536 $ 2,960,534 $

12,069,568 (7,565) 12,062,003 42,490,700 54,552,703 $

3,837,338 (60,000) 3,777,338 38,713,362 42,490,700

TAUBMAN MUSEUM OF ART STATEMENT OF FUNCTIONAL EXPENSES YEAR ENDED JUNE 30, 2010 (With Comparative Totals for 2009)

2010 Program Services Collections and Exhibitions $ 369,907 68,904 21,474 10,296 24,656 33,154 20,579 8,191 4,063 29,885 5,900 424 2,214 487 64,299 16,074 981 2,753 16,340 44,403 25,779 60,584 349,513 $ 1,180,860 22% Total Program Services $ 862,712 142,640 25,734 26,861 255 60,026 33,154 20,579 49,281 6,952 47,971 4,799 17,555 14,786 5,400 1,710 67,256 22,681 3,682 33,276 40,539 112,952 75,193 66,665 3,034 150,343 1,066,899 $ 2,962,935 54%

Programs Salaries Benefits Advertising and marketing Bank and merchant fees Contractual services Dues and subscriptions Event and programming Exhibition loan fees Exhibition installation Honorariums Information technology Insurance Interest Janitorial services M aterials and supplies M iscellaneous Office supplies Postage and shipping Printing costs Professional fees Rent Repairs and maintenance Security services Store purchases Taxes and licenses Travel Telephone and utilities Depreciation Amortization $ 320,435 49,637 2,105 10,115 34,961 41,090 60 8,598 4,563 13,862 2,849 324 2,565 6,424 4,360 9,908 30,123 20,695 42,126 379,898 $ Percentage of total 984,698 18%

M useum Store $ 80,186 11,190 85 255 1,029 1,069 491 291 835 94 38 959 1,262 3,348 75,193 2,319 3,034 5,366 34,852 $ 221,896 4%

Café and Catering $ 7,533 1,132 6 2,668 4,799 1,226 46 140 474 5,976 8,358 5,663 13,394 130,083 $ 181,498 3% $ $

Space Rentals 84,651 11,777 2,070 6,450 403 1,800 5,751 5,375 500 64 158 145 1,268 26,163 7,053 26,720 12,209 28,873 172,553 393,983 7%

See accompanying notes to financial statements. -4-

2010

2009

M anagement and General Operating $ 221,582 33,307 66,084 18,553 22,036 7,984 1,123 11,946 18,102 8,316 2,522 6,446 3,893 6,914 4,010 39,412 20,747 21,374 56,705 38,426 13,392 90,875 513,827 $ 1,227,576 22%

M anagement and General Campaign $ 12,718 262,489 8,429 4,333 3,572 63,318 $ 354,859 7%

Total M anagement and General $ 221,582 33,307 66,084 18,553 34,754 7,984 1,123 11,946 18,102 262,489 8,316 10,951 10,779 3,893 6,914 4,010 42,984 20,747 21,374 56,705 38,426 13,392 90,875 513,827 63,318 $ 1,582,435 29% $ $

Fund Raising 298,745 43,495 5,297 500 26,873 2,000 461 12,068 5,564 214 12,298 709 9,774 17,264 18 1,377 14,249 39,140 25,647 60,583 342,551 918,827 17% $ $

Total Expenses 1,383,039 219,442 97,115 18,553 62,115 8,239 88,022 33,154 20,579 51,281 19,359 78,141 267,288 31,435 25,951 28,477 6,312 83,944 43,955 46,684 55,400 76,162 208,797 75,193 130,738 16,426 301,801 1,923,277 63,318 5,464,197 100% $ $

Total Expenses 1,908,809 267,242 1,982,959 26,864 315,038 14,371 398,724 19,515 83,509 30,111 37,762 79,670 945,180 23,977 488,970 157,077 50,935 102,249 67,670 37,349 400,973 134,088 236,298 90,296 110,238 6,043 297,508 1,260,930 50,654 9,625,009 100%

TAUBMAN MUSEUM OF ART STATEMENTS OF CASH FLOWS YEAR ENDED JUNE 30, 2010 (With Comparative Totals for 2009)

2010 CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation and amortization (Gain) loss on sale of investments (Gain) loss on disposal of property and equipment Forgiveness of debt Imputed discount on debt Contributions restricted for capital campaign Permanently restricted contributions Collection items purchased Change in operating assets and liabilities: Restricted cash Accounts receivable Grant receivable Inventory Prepaid expenses Bank overdraft Accounts payable Accrued expenses Interest rate swap liability Net cash used by operating activities CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of property and equipment Proceeds from sale of property and equipment Collection items purchased Purchase of investments Proceeds from sale of investments Cash restricted for capital campaign Net cash provided (used) by investing activities $ 12,062,003 $

2009 3,777,338

1,986,595 (189,935) (74,441) (12,500) 4,799 (14,335,859) (52,998) 7,565 (48,596) 9,265 138,775 (5,604) (17,857) (10,416) (277,793) (33,929) (430,076) (1,281,002)

1,311,584 569,635 509 (12,500) (25,712) (8,407,441) (22,700) 60,000 (6,141) (19,510) (217,198) (61,915) (39,467) 88,743 (811,933) 19,549 430,076 (3,367,083)

(14,989) 535,940 (7,565) (961,547) 1,454,149 (882,265) 123,723

(9,011,204) 301,012 (60,000) (398,555) 378,000 292,824 (8,497,923)

-5-

TAUBMAN MUSEUM OF ART STATEMENTS OF CASH FLOWS - (Continued) YEAR ENDED JUNE 30, 2010 (With Comparative Totals for 2009)

2010 CASH FLOWS FROM FINANCING ACTIVITIES: Permanently restricted contributions Contributions restricted for capital campaign Contributions received for debt service Net change in line of credit Payments on long-term debt Proceeds from long-term debt Net cash provided by financing activities Net increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year $ $ 52,998 3,587,728 10,748,131 (17,109,098) (634,621) 4,409,325 1,054,463 (102,816) 194,004 91,188 $ $

2009 22,700 8,407,441 2,715,325 125,000 11,270,466 (594,540) 788,544 194,004

Supplemental disclosure of cash flow information Cash paid during the year for interest, net of capitalized interest of $-0- and $292,432 for 2010 and 2009

$

229,924

$

807,481

See accompanying notes to financial statements. -6-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: Nature of Activities The Taubman Museum of Art (the Museum), located in Roanoke, Virginia, is a not-forprofit corporation which, as an educational institution, fosters an appreciation and understanding of art. The Museum exhibits, collects, preserves, and interprets significant works of art with a special focus on American Art. Financial Statement Presentation The accompanying financial statements have been prepared on the accrual basis of accounting in accordance with U.S. generally accepted accounting principles. Net assets and revenues, expenses, gains, and losses are classified based on the existence or absence of donor-imposed restrictions. Accordingly, net assets of the Museum and changes therein are classified and reported as follows: Unrestricted net assets - all resources over which the governing board has discretionary control. The governing board of the Museum may elect to designate such resources for specific purposes. This designation may be removed at the board’s discretion. Temporarily restricted net assets - net assets subject to donor-imposed stipulations that may or will be met, either by actions of the Museum and/or the passage of time. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Permanently restricted net assets - net assets subject to donor-imposed stipulations that they be maintained permanently by the Museum. Generally, the donors of the assets permit the Museum to use all or part of the income earned on any related investments for general or specific purposes. Cash Equivalents For purposes of the statement of cash flows, the Museum considers all unrestricted shortterm investments with an original maturity of three months or less to be cash equivalents. Restricted Cash Restricted cash is restricted by donors or board designated for specific purposes.

-7-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued): Inventory Inventory is stated at lower of cost (first-in, first-out) or market. Contributions Contributions, including unconditional promises to give, are recorded as made. In-kind contributions are recorded at their estimated fair market value on the date of contribution. All contributions are available for unrestricted use unless specifically restricted by the donor. Unconditional promises to give that are due in the next year are reflected as current promises to give and are recorded at their net realizable value using Level 1 inputs. Contributions received with donor-imposed restrictions that are met in the same year as received are reported as revenues of the temporarily restricted net asset class, and a reclassification to unrestricted net assets is made to reflect the expiration of such restrictions. Cash restricted for capital campaign The Museum maintains donations restricted for capital campaign in separate accounts. This cash is used towards payments of debts related to the new building. Investments The Museum records investments in marketable securities with readily determinable fair values and all investments in debt securities at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets. Gifts of investments are recorded at their fair value (based upon quotations or appraisals) at the date of gift. Purchases and sales of investments are recorded on the trade date. The Museum’s investments are invested in various types of investment securities and in various companies within various markets. Investment securities are exposed to several risks, such as interest rates, and market and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities will occur in the near term and that such changes could materially affect the amounts reported in the Museum’s financial statements.

-8-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued): Property and Equipment Property and equipment are stated at cost, or if donated, at estimated fair market value at the time of donation. It is the policy of the Museum to record in-kind donations of fixed assets as unrestricted support unless the donor has restricted the donated asset to a specific purpose. The Museum currently capitalizes all assets with a useful life in excess of one year. The amount of capitalized interest included in construction in progress is $-0- and $292,432 at June 30, 2010 and 2009. Depreciation is provided using the straight-line method over the useful lives of the assets, which range as follows: Furniture and equipment Building Statement of activities: Revenues, expenses, gains and losses are classified as unrestricted, temporarily restricted or permanently restricted based on the existence or absence of donor-imposed restrictions. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in unrestricted net assets. Gains and losses, on investments and other assets or liabilities, are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor stipulation or by law. Expirations of temporary restrictions on net assets (i.e., the donor-stipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as reclassifications between the applicable classes of net assets. Income and realized and unrealized net gains on investments of endowment and similar funds are reported as follows: • as increases in permanently restricted net assets if the terms of the gift require that they be added to the principal of a permanent endowment fund; • as increases in temporarily restricted net assets if the terms of the gift impose restrictions on the use of the income; • as increases in unrestricted net assets in all other cases. 3-20 years 40 years

-9-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued): Contributed Services A substantial number of unpaid volunteers have made significant contributions of their time to develop the Museum’s programs. The value of this contributed time is not reflected in these statements since it is not susceptible to objective measurement or valuation. Auxiliary Activities The Museum operates a gift store whereby merchandise relating to the permanent collections and current exhibitions are sold. The Museum purchases inventory for resale. The Museum also sells consignment items from local artists for a commission. The Museum also receives commission from a third party which operates a café and does catering within the Museum. Functional Allocation of Expenses The cost of providing the various programs and other activities have been summarized on a functional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Estimates The preparation of financial statements in conformity with U.S. generally accepted accounting principles includes the use of estimates that affect the financial statements. Accordingly, actual results could differ from those estimates. Income Taxes The Museum is tax-exempt organization under Section 501(c)(3) of the Internal Revenue Code and is not classified as a private foundation. On July 1, 2009, the Museum adopted newly issued accounting rules that prescribe when to recognize and how to measure the financial statement effects, if any, of income tax positions taken or expected to be taken on its income tax returns. These new rules require management to evaluate the likelihood that, upon examination by relevant taxing jurisdictions, those income tax positions would be sustained.

-10-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

1.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - (Continued): Based on that evaluation, if it were more than 50% probable that a material amount of income tax would be imposed upon examination by the relevant taxing authorities, a liability would be recognized in the accompanying statement of financial position along with any interest and penalties that would result from that assessment. Should any such penalties and interest be incurred, the Museum’s policy would be to recognize them as management and general expenses. Based on the results of management’s evaluation, adoption of the new rules did not have a material effect on the Museum’s financial statements. Further, no interest or penalties have been accrued or charged to expense as of June 30, 2010 or for the year then ended. The income tax returns of the Museum for the years 2007, 2008, 2009 and 2010 are subject to examination by taxing authorities, generally for three years after they were filed. Credit risk concentrations Financial instruments which potentially subject the Museum to concentrations of credit risk consist principally of cash and cash equivalents and marketable securities. The Museum places its temporary cash investments with high credit quality financial institutions. The Foundation maintains cash balances at one bank. Accounts at this institution are insured by the Federal Deposit Insurance Corporation up to $250,000. Concentration of contributions The Museum received approximately 68% of its total contributions from two donors for the year ended June 30, 2010.

2.

INVESTMENTS: The Museum’s investments consist of five brokerage accounts that are held and managed by two banks and pooled investments at the Virginia Tech Foundation. Income and expense of the investment accounts are recognized when received or incurred, respectively. The following is a description of investment accounts: Accessions Endowment The accessions endowment account was established in January 1984 by action of the Museum’s Board of Trustees. The income generated by this account is to be used to fund the Museum’s art accessions. -11-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

2.

INVESTMENTS - (Continued): Shaftman The Shaftman account was established in December 1993 by action of the Museum’s Board of Trustees. This account is to be used for the funding of the establishment and maintenance of the Rosalie and Sydney Shaftman Gallery and acquisition of decorative art. The account’s income and principal, if necessary, may be used for the establishment of the Shaftman Gallery. Virginia Tech Foundation Investments which are held by the Virginia Tech Foundation consist of pooled investments. The account was created through an agency agreement between the Museum and the Foundation. Capital Operating Endowment The capital operating endowment was established as part of the capital campaign for an unrestricted operating endowment fund. Proceeds are accounted for separately and earnings are used for unrestricted operating purposes. Capital Investments Investments which are held for use towards the capital campaign. The income and principal may be used for campaign expenses. Thomas Endowment The Peggy MacDowell Thomas endowment was established for the establishment and maintenance of the Peggy MacDowell Thomas Gallery. Earnings to the extent not needed for the gallery are used for unrestricted operating purposes.

-12-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

2.

INVESTMENTS - (Continued): Investments are presented in the financial statements at fair value. Investments held are summarized as follows: 2010 2009 Cost Market Cost Market Accessions endowment Shaftman account VA Tech Foundation Capital investments Capital operating endowment Thomas endowment $ 3,535 2,721 7,291 148 220,250 1,814,091 $ 2,048,036 Investments are composed of the following: 2010 Cost Cash and cash equivalents Mutual Funds U.S. Government securities Corporate bonds Common stocks Limited partnerships Pooled investments $ 273,035 671,454 323,825 123,790 627,812 20,829 7,291 $ 2,048,036 $ Market 273,035 661,832 338,039 128,088 619,725 10,913 7,291 $ 2,038,923 $ Cost 418,345 218,286 493,723 1,718,302 20,829 3,522 $ 2,873,007 $ 2009 Market 418,345 229,600 464,413 1,214,797 10,913 3,522 $ 2,341,590 $ 3,535 2,721 7,291 148 220,250 1,804,978 $ 2,038,923 $ 3,334 2,727 3,522 50,058 223,866 2,589,500 $ 2,873,007 $ 3,334 2,727 3,522 50,058 155,766 2,126,183 $ 2,341,590

-13-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

2.

INVESTMENTS - (Continued): The following summarizes the relationship between the cost and market value of investment accounts. Excess of Market Cost Cost Value Over Market Balance June 30, 2010 Balance June 30, 2009 Unrealized gain for the year Realized net loss for the year Total net gain for the year $ $ 2,048,036 $ 2,873,007 $ 2,038,923 $ 2,341,590 $ 9,113 531,417 522,304 (332,369) 189,935

Investment income is net of associated investment fees in the amount of $19,722 in 2010. Limitations and restrictions on the use of income and assets of the accounts are at the discretion and approval of the Museum’s Board of Trustees. 3. PROPERTY AND EQUIPMENT: Property and equipment consist of the following: 2010 $ 1,353,898 53,950,504 2,034,929 749,860 223,021 11,488 58,323,700 3,276,123 $ 55,047,577 2009 $ 1,353,898 53,948,716 2,032,926 738,661 223,021 11,488 58,308,710 1,352,303 $ 56,956,407

Land Buildings Furniture and fixtures Equipment Software Vehicles

Less: accumulated depreciation

-14-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

4.

LOAN COSTS: The Museum incurred $164,626 in loan costs associated with the construction loan described in Note 5. The loan costs were amortized over thirty-nine months on a straight line basis. The loan was paid off in 2010, therefore loan costs were fully amortized in current year and amortization expense was $63,318.

5.

LINES OF CREDIT: The Museum had a $100,000 unsecured line of credit agreement with a bank which is due on demand at an interest rate of bank’s prime plus 0.50%. The agreement expired May, 2010. There was no outstanding balance under this agreement at June 30, 2010 or 2009. On December 20, 2006, the Museum secured a construction loan for the new building. The Museum could borrow up to $23,900,000 from two banks and the Virginia Tech Foundation. The interest was payable monthly at LIBOR plus 150 basis points. Principal payments were due monthly based upon receipt of capital contributions. All unpaid principal was due September 30, 2010. The loan was secured by two deeds of trust on real estate and guaranteed by a group of donors (Guarantors). The line of credit was paid off in January 2010. Outstanding borrowings under this agreement were $-0- and $17,195,886 for the year ended June 30, 2010 and 2009, respectively. In 2009, the Museum entered into two interest rate swap arrangements on the line of credit that effectively fixed $10,000,000 at a rate of 5.3% until September 2010 to reduce the impact of changes in its floating rate debt. The Museum accounted for the interest rate swaps as cash flow hedges whereby the fair value of the contracts were reflected in the statement of financial position. The interest rate swap was terminated in January 2010. The fair value of this contract at June 30, 2010 and 2009 was a liability of $-0- and $430,076, respectively.

6.

LONG-TERM DEBT: In September 2008, the Museum entered into an unsecured $125,000 loan with the food service operator of the café. The loan is due in annual installments of $12,500 with interest at 0%. The loan agreement specified a portion of the loan will be forgiven on an annual basis as long at the food service agreement is maintained. Long term debt is reflected at the present value of the estimated future cash flows using a discount rate of 5.53%. In November 2009, the Museum entered into an unsecured $4,409,325 loan with several Guarantors. The loan is due in quarterly payments based on capital campaign contributions received. Interest will accrue on outstanding principal at a rate of 3%. All unpaid principal and interest will be due in January 2017. However, payments for principal and interest are limited to the amount of capital campaign contributions received. -15-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

6.

LONG-TERM DEBT - (Continued): Future maturities of long-term debt are as follows: Guarantor Loan $ 1,693,006 845,417 529,393 292,210 280,500 134,179 3,774,705 1,693,006 2,081,699 $ 2,081,699 $

Café Loan

2011 2012 2013 2014 2015 2016 and thereafter

$

12,500 12,500 12,500 12,500 12,500 37,500 100,000

$

Total 1,705,506 857,917 541,893 304,710 293,000 171,679 3,874,705 1,705,506 2,169,199 20,913 2,148,286

Less current portion Long-term portion Less discount $ 7.

12,500 87,500 20,913 66,587

FAIR VALUE MEASUREMENT: Assets and liabilities are measured at fair value which is an exit price, representing the amount that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants. As such, fair value is a market-based measurement that should be determined based on assumptions that market participants would use in pricing an asset or liability. As a basis for considering such assumptions, standards establish a three-tier value hierarchy, which prioritizes the inputs used in measuring fair value as follows: Level 1 Inputs - Unadjusted quoted prices in active markets that are accessible at the measurement date for identical assets and 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 requires management to develop their assumptions. -16-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

7.

FAIR VALUE MEASUREMENT - (Continued):

Fair value of assets and liabilities measured on a recurring basis at June 30, 2010 are as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Fair Value Active Markets Other Significant at for Identical Observable Unobservable 6/30/2010 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Investments: Cash & cash equivalents $ 273,035 $ 273,035 $ $ Government bonds 338,039 338,039 Corporate bonds 128,088 128,088 Common stock 619,725 619,725 Mutual funds 661,832 661,832 Limited partnerships 10,913 10,913 Pooled investments 7,291 7,291 Total investments $ 2,038,923 $ 2,020,719 $ $ 18,204

Fair value of assets and liabilities measured on a recurring basis at June 30, 2009 are as follows: Fair Value Measurements at Reporting Date Using Quoted Prices in Significant Fair Value Active Markets Other Significant at for Identical Observable Unobservable 6/30/2009 Assets (Level 1) Inputs (Level 2) Inputs (Level 3) Investments: Cash & cash equivalents $ 418,345 $ 418,345 $ $ Government bonds 229,600 229,600 Corporate bonds 464,413 464,413 Common stock 1,214,797 1,214,797 Limited partnerships 10,913 10,913 Pooled investments 3,522 3,522 Total investments Interest rate swap $ 2,341,590 $ 430,076 $ $ -172,327,155 $ $ 430,076 $ $ 14,435 -

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

7.

FAIR VALUE MEASUREMENT - (Continued):

The change in assets and liabilities measured at fair value on a recurring basis using significant unobservable inputs (Level 3 inputs) are as follows: 2010 Investments Beginning balance Additional investments Net return on investment Transfer to operations Ending balance 8. RESTRICTED NET ASSETS: Temporarily restricted net assets consisted of the following at June 30,: 2010 106,850 112,406 219,256 2009 245,625 88,810 334,435 $ 14,435 689,215 (731) (684,715) 18,204

$

Time restrictions Other

$

$

$

$

Permanently restricted net assets consisted of the following at: 2010 221,098 2,739,436 2,960,534 2009 168,100 2,739,436 2,907,536

Operating endowment Peggy Thomas endowment

$

$

$

$

For the Peggy Thomas endowment, the earnings from which is restricted to establishment and maintenance of the Museum’s Peggy Macdowell Thomas Gallery and to the extent not needed, the earnings are used for unrestricted operating purposes. The earnings of the Operating endowment are used for unrestricted operations. As of June 30, 2010, borrowings of permanently restricted net assets for unrestricted purposes that contravene the donor’s restrictions amounted to $550,000. The Museum plans to reinvest the permanently restricted net assets as funds become available. Management anticipates that donors will not require the contributions to be returned, and accordingly, no provision has been made for any liabilities that might arise from this noncompliance. -18-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

8.

RESTRICTED NET ASSETS - (Continued): Net assets were released from donor restrictions when expenses were incurred to satisfy the restricted purposes or by occurrence of other events as specified by donors. Restrictions were satisfied as follows for the years ended June 30: 2010 $ 14,335,859 245,625 46,504 $ 14,627,988

Capital campaign expenses Time restrictions Other

9.

COMMITMENTS AND CONTINGENCIES: Grants, bequests, and endowments require the fulfillment of certain conditions as set forth in the instrument of grant. Failure to meet the conditions, or in the case of endowments, failure to continue fulfilling them, could result in the return of the funds to grantors. The Board deems the likelihood of not meeting these conditional restrictions to be very remote, and as such, no estimate of any refundable amounts has been made.

10.

DONATED PREMISES AND MATERIALS: Miscellaneous materials, supplies and advertising were donated to the Museum by various individuals and corporations. The estimated fair market values of the donated items have been included in the financial statements as contributions with like amounts included in expense. Amounts included in in-kind contributions and expenses are $109,283 for the year ended June 30, 2010.

11.

ART COLLECTION: The Museum’s art collections as of June 30, 2010 and 2009 consists of 2,104 and 2,095 objects, respectively. These range from a growing number of works by internationally renowned American artists to works reflecting the history and aesthetic tastes of the region. The collection is inventoried annually, and is protected round-the-clock by various alarm systems and gallery security staff. The Museum has elected, as permitted by standards, not to capitalize its art collection. The cost of all art objects purchased is reported separately as a decrease in unrestricted net assets. For the year ended June 30, 2010, purchases of art objects amounted to $7,565. -19-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

12.

GRANT REVENUES: For the year ended June 30, 2010 the Museum received grant monies as follows: City of Roanoke Virginia Commission for the Arts $ 61,100 38,750 99,850

$ 13. DEFINED CONTRIBUTION PLAN:

The Museum has a 403(b) plan which covers all employees. Participants may make elective deferrals of their compensation. The Museum’s contributions are discretionary. Contributions to the Plan amounted to $3,478 for the year ended June 30, 2010. 14. ENDOWMENTS: The Museum’s endowment consists of approximately five individual funds established for a variety of purposes. Its endowment includes both donor-restricted endowment funds and funds designated by the Museum to function as endowments. As required by generally accepted accounting principles, net assets associated with endowment funds, including funds designated by the Museum to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions. Interpretation of Relevant Law The Museum has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds absent explicit donor stipulations to the contrary. As a result of this interpretation, the Museum classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment, and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the Museum in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Museum considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: -20-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

14.

ENDOWMENTS - (Continued): (1) (2) (3) (4) (5) (6) (7) The duration and preservation of the fund The purposes of the Museum and the donor-restricted endowment fund General economic conditions The possible effect of inflation and deflation The expected total return from income and the appreciation of investments Other resources of the Museum The investment policies of the Museum

Net Asset Composition by Type of Endowment Fund as of June 30: 2010 Unrestricted $ 13,547 (935,306) $ (921,759) Temporarily Restricted $ $ Permanently Restricted $ 2,960,534 $ 2,960,534 Total 13,547 2,025,228 2,038,775

Board-designated Donor-restricted

$ $

Board-designated Donor-restricted

Unrestricted $ 9,583 (625,587) $ (616,004)

2009 Temporarily Permanently Restricted Restricted $ $ 2,907,536 $ $ 2,907,536

$ $

Total 9,583 2,281,949 2,291,532

-21-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

14.

ENDOWMENTS - (Continued): Changes in endowment net assets for the year ending June 30, 2010: Temporarily Restricted $ Permanently Restricted $ 2,907,536

Unrestricted Endowment net assets, beginning of year Other income (loss) Investment return: Investment income Net appreciation (realized and unrealized) Total investment return Contributions Appropriation of endowment assets for expenditure Borrowing of restricted assets Endowment net assets, end of year Funds with Deficiencies $ (616,004)

Total $ 2,291,532

38,143

-

-

38,143

189,085 227,228 701,733

-

52,998

189,085 227,228 754,731

(684,716)

-

-

(684,716)

(550,000)

-

-

(550,000)

$

(921,759)

$

-

$

2,960,534

$ 2,038,775

From time to time, the fair value of assets associated with individual donor restricted endowment funds may fall below the level that the donor or UPMIFA requires the organization to retain as a fund of perpetual duration. In accordance with generally accepted accounting principles, deficiencies of this nature are to be reported in unrestricted net assets. These deficiencies result from unfavorable market fluctuations that occur shortly after the investment of new permanently restricted contributions and continued appropriation for certain programs that are deemed prudent by the Board of Directors. There were two funds with deficiencies totaling $935,306 as of June 30, 2010 and two funds with deficiencies totaling $625,587 as of June 30, 2009. -22-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

14.

ENDOWMENTS - (Continued): Return Objectives and Risk Parameters The Museum has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Museum must hold in perpetuity or for a donor-specified period(s) as well as any board-designated funds. Under this policy, as approved by the applicable committees, the endowment assets are invested in a manner that is intended to produce moderate annual return results while assuming a moderate level of investment risk. The Museum expects its endowment funds, over time, to provide an average rate of return annually after inflation to cover spending needs. Actual returns in any given year may vary from this amount. Strategies Employed for Achieving Objectives To satisfy its long-term rate-of-return objectives, the Museum relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current year (interest and dividends). The Museum targets a diversified multi-asset allocation to achieve its long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy The Museum has a committee in place to govern the investment and spending policies of the endowment assets. For the years ended June 30, 2010 and 2009, the spending formulas allow for 4.0% to 5.5% to be appropriated for current operations. This is consistent with the Museum’s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return.

15.

RELATED PARTY TRANSACTIONS: The Museum purchases commercial insurance from a company which employs a member of the Board. The Board Member abstains from voting on the decision. The Museum paid approximately $40,000 for the year ending June 30, 2010.

-23-

TAUBMAN MUSEUM OF ART NOTES TO FINANCIAL STATEMENTS - (Continued)

16.

FINANCIAL STATEMENT PRESENTATION: Certain amounts in the 2009 financial statements have been reclassified to conform to the 2010 presentation.

17.

GOING CONCERN: The Museum had reductions in cash flows from operating activities of approximately $1,266,000 and $3,367,000 for the years ending June 30, 2010 and 2009, respectfully. For the year ended June 30, 2011, the Museum has a budgeted operating cash outflow of approximately an additional $1,230,000. At June 30, 2010, the Museum has unrestricted cash, net of bank overdrafts, of approximately $13,000. To cover this projected shortfall, the Museum has made an appeal to the public to raise additional revenue of approximately $1,500,000 through increase in memberships, contributions and corporate sponsorships. To cover immediate cash flow needs as the funds are being raised, the Museum intends to use the cash restricted for capital campaign, which is used as security on the loans, to fund operations.

18.

SUBSEQUENT EVENTS: On December 3, 2010, the operator of the Café notified the Museum that it was terminating the contract effective December 18, 2010. On December 10, 2010, the Museum filed a breach of contract lawsuit and received a temporary injunction preventing the operator from leaving the Café. The Museum and the operator reached a settlement in which the operator will run the Café through January 31, 2011. The Museum is absolved from the debt which was recorded at $79,087 on June 30, 2010. In addition, the Museum will keep all of the equipment purchased using that loan. The Museum is searching for a replacement vendor to operate the Café and has opened up catering opportunities to multiple vendors in the area. The Museum has evaluated all subsequent events through January 28, 2011, the date the financial statements were available to be issued.

-24-

You're Reading a Free Preview

Download
scribd
/*********** DO NOT ALTER ANYTHING BELOW THIS LINE ! ************/ var s_code=s.t();if(s_code)document.write(s_code)//-->