KCBX, INC. INDEPENDENT ACCOUNTANT'S AUDIT …mediad.publicbroadcasting.net/p/kcbx/files/kcbx_audit_report_fy...FINANCIAL ST ATEMENTS & SUPPLEMENTARY INFORMATlON YEARS ENDED ... other

KCBX, INC.

INDEPENDENT ACCOUNTANT'S AUDIT REPORT

&

FINANCIAL ST ATEMENTS

& SUPPLEMENTARY INFORMATlON

YEARS ENDED SEPTEMBER 30, 2015 AND 2014

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6 15 C lar io n Court, Suit e I • San Lu is Ob ispo, C A 93401 ' (805 ) 544 - 7094 ' FAX (80S ) 54 1· 9366

Certified Public t\cCOlllltallfS . A LimiterJ Liability Partl1ers/lip

INDEPENDENT AUDITOR'S REPORT

Board of Directors KCBX, Inc. San Luis Obispo, CA

Fred Russell Rona ld A. Mai nini Keit h H. Franklin

We have audited the accompanying fi nancial statements of KCBX, Inc. (a nonprofit organization), which comprise the statements of financial position as of September 30, 2015 and 20 14, and the related statements of activities and cash flows for the years then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements

Management is responsible fo r the preparation and fair presentation of these financial statements in accordance with accounting principles generally accepted in the Uni ted States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of financ ial statements that are free from material misstatement, whether due to fra ud or error.

Auditor's Responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted our audi t in accordance with audi ting standards genera lly 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 from material misstatement.

An audit involves performing procedures to obtain audit evidence abo ut the amounts and disclosures in the financial statements. The procedures selected depend on the audi tor's judgment, including the assessment of the ri sks of material misstatement of the financial statements, whether due to fra ud or error. In making those ri sk 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 enti ty's internal control. Accordingly, we express no such opinion. An aud it also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

6 15 Clar io n Co urt , Suite I • San Lui s O bi spo, CA 9340 1 • (805 ) 544 -7094 • FAX (805) 541 -9366

Opinion

In our opinion, the financial statements referred to above present fairly , in all material respects, the financial position of KCBX, Inc. as of September 30, 20 15 and 2014, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles genera ll y accepted in the United States of America.

Other Matter

Our audit was conducted for the purpose of forming an opinion on the financial statements as a whole. The Schedule I - General Administration Expenses is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was deri ved from and relates direct ly to the underl ying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the financia l statements themselves, and other additiona l procedures in accordance with auditing standards generally accepted in the United States of America. In our opin ion, the in formati on is fa irly stated in all material respects in relation to the financial statements as a whole.

RUSSELL, M San Luis Obis , California December 7, 20 15

KCBX, INC. STATEMENTS OF FINANCIAL POSITION AS OF SEPTEMBER 30, 2015 AND 2014

ASSETS

2015 2014

Current assets

Cash and cash equivalents $ 108,753 $ 100,051 Trade accounts receivable 32,841 34,721 Less reserve for bad debts (3,500) (3,500) Promises to give 12,351 9,605 Other receivables 2,000 Prepaid expenses 6,683 2,788

Total current assets 157,128 145,665

Productive facilities

Machinery, fixtures, equipment and leasehold improvements, at cost 679,815 636,886

Less accumulated depreciation and amortization (540,442) (530,340)

Total productive facilities - net 139,373 106,546

Other assets

Broadcast license, net of $114,835 amortization in 2015 and net of $96,974 amortization in 2014 153,340 168,026

Security deposit 2,589 2,589 Endowment fund 34,721 35,247 Certificate of deposit 78,205

Total other assets 190,650 284,067

Total assets $ 4872151 $ 5362218

See independent auditor's audit report and accompanying notes.

KCBX, INC. STATEMENTS OF FINANCIAL POSITION AS OF SEPTEMBER 30,2015 AND 2014

LIABILITIES AND NET ASSETS

Current liabilities

Accounts payable $ Current portion - notes payable

Total current liabilities

Long-term liabilities

Long-term debt, net of current portion

Total long-term liabilities

Net assets

Unrestricted Temporarily restricted Permanently restricted

Total net assets

Total liabilities and net assets $


2015 2014

47,090 $ 51,883 72,558

47,090 124,441

78,000

78,000

410,762 306,538

29,299 27,299

440,061 333,837

4811151 $ 536!278

KCBX, INC. STATEMENTS OF ACTIVITIES YEARS ENDED SEPTEMBER 30,2015 AND 2014

YEAR ENDED SEPTEMBER 30, 2015

Unrestricted Restricted Total

REVENUE AND SUPPORT

Community service grants $ 1272574 $ 372206 $ 1642780 Total support 127,574 37206 1642780

Capital campaign 293,082 4,169 297,251 Subscriptions, underwriting, PSA and

advertising 867,100 867,100 Fund raising 524,894 524,894 Other income 22770 22770

Total revenue 1,687,846 42 169 126922015

Total revenue and support 1,815A20 41J75 1,8562795

EXPENSES

Program services: Programming and production 834,228 39,375 873,603 Broadcasting 53,695 53,695

Total program services 887,923 39,375 927,298

Supporting service General administration 308,892 308,892 Fund raising 5142381 514,381

Total supporting services 823,273 823,273

Total program and supporting services 1,711,196 39,375 1,750,571

Increase - net assets 104,224 2,000 106,224

Net assets - beginning of year 306,538 27,299 333,837

Net assets - end of year $ 4101762 $ 221222 $ 440jlO61


KCBX, INC. STATEMENTS OF ACTIVITIES YEARS ENDED SEPTEMBER 30, 2015 AND 2014

YEAR ENDED SEPTEMBER 30, 2014

Unrestricted Restricted Total

REVENUE AND SUPPORT

Community service grants $ 134,668 $ 38,723 $ 173,391 Total support 134,668 38,723 173,391

Capital campaign 10,590 10,590 Subscriptions, underwriting, PSA and

advertising 737,128 737,128 Fund raising 517,574 517,574 Other income 2,185 2,185

Total revenue 1,256,887 10,590 1,267,477

Total revenue and support 1,391,555 49,313 1,440,868

EXPENSES

Program services: Programming and production 763,507 49,313 812,820 Broadcasting 51,775 51,775

Total program services 815,282 49,313 864,595

Supporting service General administration 236,501 236,501 Fund raising 456,761 456,761

Total supporting services 693,262 693,262

Total program and supporting services 1,508,544 49,313 1,557,857

Decrease - net assets (116,989) (116,989)

Net assets - beginning of year 423,527 27,299 450,826

Net assets - end of year $ 3061538 $ 211222 $ 333 1831


KCBX, INC. STATEMENTS OF CASH FLOWS YEARS ENDED SEPTEMBER 30,2015 AND 2014

2015 2014

CASH FLOW FROM OPERATING ACTIVITIES

Change in net assets $ 106,224 $ (116,989) Adjustments to reconcile net income to net cash

used in operating activities: Depreciation and amortization 45,580 41,279 Loss on disposition of assets 143

Change in: Accounts receivable 1,134 (13,617) Other assets (3,895) 623 Accounts payable and accrued expenses (4,793) 24,191

Net cash provided by (used in) operating activities 144,393 (64,513)

CASH FLOW FROM INVESTING ACTIVITIES

Certificates of deposit 78,205 (193) Endowment fund 526 (1,381) Purchase of equipment (63,864) (13,642)

Net cash provided by (used in) investing activities 14,867 (15,216)

CASH FLOW FROM FINANCING ACTIVITIES

Repayments of long-term debt 050,558) (1.730)

Net cash used in financing activities (150,558) (1.730)

CHANGE IN CASH AND CASH EQUIVALENTS 8,702 (81,459)

CASH AND CASH EQUIVALENTS, beginning of year 100,051 181.510

CASH AND CASH EQUIVALENTS, end of year $ 108~Z53 $ 100~051


KCBX, INC. NOTES TO AUDITED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2015 AND 2014

NATURE OF OPERATIONS

KCBX Inc., the Organization, operates the public radio station in San Luis Obispo County.

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

ACCOUNTING METHOD

Assets, liabilities, revenues and expenses are recorded under the accrual method of accounting.

ADVERTISING COSTS

Advertising costs are expensed as incurred. The total advertising expense for the years ended September 30,2015 and 2014 amounts to $6,408 and $9,365 respectively.

ALLOWANCE FOR DOUBTFUL ACCOUNTS

The Organization uses the allowance method to determine uncollectible accounts receivable. The allowance is based on prior years' experience and management's analysis of specific promises made. The allowance for doubtful accounts is provided for as a percentage of accounts receivable. The percentage as of September 30, 2015 and 2014 was approximately 7.7% and 7.5% respectively.

BASIS OF PRESENTATION

The Organization's net assets and revenues, expenses, gains and losses are classified based on the existence or absence of donor-imposed restriction. Accordingly, net assets of the company and changes therein are classified and reported as follows:

Unrestricted net assets - Net assets that are not subject to donor-imposed stipulations.

Temporarily restricted - Net assets whose use by the Organization is subject to donorimposed restrictions that can be fulfilled by actions of the Company pursuant to those restrictions or that expire by the passage of time.

Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Organization.

See independent auditor's audit report.

KCBX, INC. NOTES TO AUDITED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30, 2015 AND 2014

SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (continued)

CASH AND CASH EQUIVALENTS

For purpose of the statement of cash flows, the Organization considers all highly liquid debt instruments purchased with a maturity of three months or less to be cash equivalents.

CONCENTRATION OF CREDIT RISK

Financial instruments that potentially subject the Organization to credit risk include accounts receivable, which are unsecured.

CONTIBUTED SERVICES

No amounts have been reflected in the financial statements for donated services. The Organization generally pays for services requiring specific expertise. However, individuals volunteer their time and perform a variety of tasks that assist the Organization during fundraisers, but these services do not meet the criteria for recognition as contributed services.

DEPRECIATION AND AMORTIZATION

Productive facilities are shown at cost. Leasehold improvements and licenses are being amortized on the declining balance method over a seven-year period and on the straight line method over a thirty-nine year period. Office, broadcasting and transmission equipment are being depreciated on the declining balance method over a five-to-seven-year period. Expenditures for repairs and maintenance are charged to expense as incurred. Renewals and betterments that materially extend the life of an asset are capitalized.

Depreciation and amortization for the years ended September 30, 2015 and 2014 were computed as follows:

Amortization Depreciation


$

$

2015

17,861 $ 27,719

2014

17,667 23,612

45,580 ~$ ===4:=1==,2:=:::79===

KCBX, INC. NOTES TO AUDITED FINANCIAL STATEMENTS YEARS ENDED SEPTEMBER 30,2015 AND 2014


ENDOWMENT FUND

Permanently restricted net assets at September 30, 2015 and 2014 consist of an endowment fund establishment in 1998 to support KCBX. Contributions to the endowment fund are subject to donor restrictions that stipulate the original principal of the gift is to be held and invested in a separate account by the Organization indefinitely. Income from the fund may be used at the discretion of the board of directors in support of KCBX's mission and purpose.

ESTIMATES

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

FAIR VALUE MEASUREMENTS

The fair value measurements and levels within the fair value hierarchy of those measurements for the assets reported at fair value on a recurring basis at September 30, 2015 and 2014 are as follows:

Quoted prices in active markets for

identical assets Fair Value (Levell)

September 30,2015 Wells Fargo Advisors Endowment Fund $ 34,721 $ 34,721

Total $ 34.721 $ 34.721

September 30, 2014 Wells Fargo Advisors Endowment Fund $ 35,247 $ 35,247 Certificate of deposit 78,205 78,205

Total $ 1132452 $ 1132~52

Fair values for the Wells Fargo Advisors Endowment Fund and the certificate of deposit are determined by reference to quoted market prices and other relevant information generated by market transactions.




RESTRICTED CASH

Permanently restricted cash in the amount of $29,299 is to be retained as principal and will be invested for the purpose of generating income and growth of principal according to the investment policies of the Board of Directors. The principal of the fund shall never be withdrawn. The restricted amount plus earning is reflected in the Wells Fargo Advisors Endowment Fund balance of $32,841.

PROMISES TO GIVE

Contributions are recognized when the donor makes a promise to give to the Organization that is, in substance, unconditional. Contributions that are restricted by the donor are reported as increases in unrestricted net assets if the restrictions expire in the fiscal year in which the contributions are recognized. All other donor - restricted contributions are reported as increases in temporarily or permanently restricted net assets depending on the nature of the restrictions. When a restriction expires, temporarily restricted assets are reclassified to unrestricted net assets.

UNINSURED CASH BALANCES

Cash accounts at Heritage Oaks Bank are insured by the FDIC for up to $250,000. There were no amounts in excess of insured limits at September 30, 2015.

UNCERTAIN TAX POSITIONS

The organization has determined that there are not any uncertain tax positions and associated unrecognized benefits that materially impact the financial statements or related disclosures.

RECLASSIFICATION

Certain amounts in the September 30, 2014 statement of activities have been reclassified for comparative purposes to conform to the September 30, 2015 statement of activities presentation.



FUND RAISING

A summary of fund raising activities as of September 30,2015 and 2014 is as follows:

September 30, 2015 Folk Festival All other fundraisers

Total

September 30, 2014 Folk Festival All other fundraisers

Total

INCOME TAXES

Revenue

$ 487,063 37,831

$ 5242824

$ 475,261 42,313

Cash Expenses

$ 480,717 $ 33,664

$ 5142381 $

$ 436,671 $ 20,090

In-Kind Dollars

$ 5172574 $ 456.761 ~$ ===

Total Expenses

$ 480,717 33,664

$ 5142381

$ 436,671 20,090

$ 456.761

The Organization is exempt from federal and state income tax, except on activities unrelated to its exempt purpose, under Internal Revenue Code Section 501 (c )(3) and California Revenue and Taxation Code Section 23701 d. Accordingly, there was no provision recorded on the financial statements for the years ended September 30, 2015 and 2014.

The Organization's Form 990, Return o/Organization Exemptfrom Income Tax, for the years ending September 30, 2011, September 30, 2012, and September 30, 2013 are subject to examination by the IRS, generally for three years after they were filed.

PRODUCTIVE FACILITIES

A summary of productive facilities, as of September 30, 2015 and 2014 is as follows:

Broadcasting Equipment Furniture and fixtures Leasehold improvements

Total productive facilities, at cost


$

$

2015

488,796 66,795

124,224

6722815

2014

$ 453,760 59,769

123,357

$ 6362886


RESTRICTIONS ON NET ASSETS

Substantially all of the restrictions as of September 30, 2015 and September 30, 2014 are related to funds raised through the Capital Campaign, a drive to raise funds restricted for the purchase of programming equipment and use for programming expenses. The Capital Campaign raised $4,169 for the year ended September 30, 2015 and $10,590 for the year ended September 30, 2014. All funds raised were used for programming equipment and expenses.

Permanently restricted net assets consist of endowment fund investments to be held indefinitely, the income from which is expendable to support the Company's·operations.

OPERATING LEASES

The Organization leases space at a monthly rental of $6,261. The lease calls for a monthly rental of $0.67 per square foot on the lease dated June 2009 plus annual cost of living increases and common area maintenance paid quarterly. The lease is month-to-month.

LONG-TERM DEBT

Long-term debt as of September 31, 2015 and 2014 consists of the following:

Note payable to Heritage Oaks Bank, payment of note plus interest at 2.5% is due August 2015. The note is collateralized by certificates of deposit. The note was paid in full November 2014.

Notes payable to investors to be repaid within 10 years. Interest earned on certificates of deposit are paid to investors as it is received.

Subtotal

Less current maturities

Net long-term debt


2015

$ $

$ $

2014

72,558

78,000

150,558

(72,558)

78,000


NET OPERATING LOSS

The Company has a net operating loss carryover of$52,989 as of September 30,2015.

SUPPLEMENTAL INFORMATION TO STATEMENTS OF CASH FLOWS

2015 Cash flow information:

2014

Cash paid for interest $ 827 ~$======::'!!!:::i3,!::::!::::7:!!:::l30~

RELATED PARTY TRANSACTIONS

The Organization began subletting to KCBX.NET, a related party, approximately 1,000 square feet of the 4,317 square feet acquired in April 2002. The rent income for the year was $7,200.

SUBSEQUENT EVENTS

DATE OF MANAGEMENT EVALUATION

Management has evaluated subsequent events through December 7, 2015, the date on which the financial statements were available to be issued.


KCBX, INC.

SUPPLEMENTARY INFORMATION

YEARS ENDED SEPTEMBER 30, 2015 AND 2014

KCBX, INC. SCHEDULE I - GENERAL ADMINISTRATION EXPENSES YEARS ENDED SEPTEMBER 30,2015 AND 2014

GENERAL ADMINISTRATION EXPENSES

Accounting $ Depreciation Dues & fees Employee benefits Equipment rental & leasing Insurance Interest & bank charges Legal Miscellaneous Payroll Payroll taxes Rent & utilities Staff development Supplies Telephone

Total general administration expenses $


2015 2014

3,538 $ 3,433 4,333 1,115

334 617 22,247 18,497

1,717 1,705 7,101 5,577 4,081 5,936

802 1,206 605 1,052

191,072 139,178 14,357 11,245 20,988 20,903

6,933 4,577 26,450 17,680 4,334 3,780

3082822 $ 2362501

Documents

KCBX, INC. INDEPENDENT ACCOUNTANT'S AUDIT …mediad.publicbroadcasting.net/p/kcbx/files/kcbx_audit_report_fy...FINANCIAL ST ATEMENTS & SUPPLEMENTARY INFORMATlON YEARS ENDED ... other