SUNSET CULTURAL CENTER, INC.

FINANCIAL STATEMENTS
FOR THE YEAR ENDED
JUNE 30, 2007
AND INDEPENDENT AUDITORS' REPORT
SUNSET CULTURAL CENTER, INC.
Independent Auditors' Report
Financial Statements:
Statement of Financial Position
Statement of Activities
Statement of Cash Flows
Notes to Financial Statements
Supplemental Schedule:
Table of Contents
Exhibit B Summary Financial Information and Grant Requirements
Notes to Supplemental Schedule
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Sunset Cultural Center, Inc.
We have audited the accompanying statement of financial position of Sunset Cultural Center,
Inc. (a nonprofit organization) as of June 30, 2007, and the related statement of activities and
cash flows for the year then ended. These financial statements are the responsibility of the
management of Sunset Cultural Center, Inc. Our responsibility is to express an opinion on
these financial statements based on our audit
We conducted our audit 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 audit provides a reasonable basis for our opinion
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of Sunset Cultural Center, Inc. as of June 30, 2007 and the results of its
activities and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America.,
Our audit was made for the purpose of forming an opinion on the basic financial statements of
Sunset Cultural Center, Inc. taken as a whole. The supplementary information listed in the
table of contents is presented for purposes of additional analysis and is not a required part of the
basic financial statements. Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a whole ..
September 14,2007
2
ASSETS
Cash
Marketable securities
Accounts receivable- net
Interest receivable
Prepaid expenses
Treasury Bills
SUNSET CULTURAL CENTER, INC.
STATEMENT OF FINANCIAL POSITION
JUNE 30, 2007
Property and equipment -net
TOTAL ASSETS
LIABILITIES AND NET ASSETS
Liabilities:
Accounts payable
Accrued expenses
Deferred revenue
Lease payable
I otalliabilities
Net Assets:
Umestricted
Temporarily restricted
Total net assets
TOTAL LIABILITIES AND NET ASSETS
See Notes to Financial Statements
3
$
$
$
$
31,151
20,098
22,261
4,182
10,376
521,034
50 084
652,186
97,007
78,689
14,080
5 240
195 016
234,230
229 940
464 170
652,186
SUNSET CULTURAL CENTER, INC.
STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED JUNE 30, 2007
Unrestricted
REVENUE AND PUBLIC SUPPORT:
Revenue:
Ticket sales $ 864,155
Theater rental 175,685
Facility use and other fee income 166,429
Reimbursed expenses 151,031
Sponsorship income 50,000
Investment income 20,801
Rental and other income 99 570
Total revenue 1,527,671
Public support:
Enabling grant 713,000
Perfmmance Carmel Venture Fund
Producers Guild
Other grants and donations 1,000
In-kind donation 11,250
Net assets released from restrictions 91 763
Total public support 817 013
Total revenue and public support 2,344,684
EXPENSES:
Theater services 1,713,448
Community services 235,391
Management and general 316,149
I otal expenses 2,264,988
CHANGES IN NET ASSETS 79,696
NET ASSETS, BEGINNING 154 534
NET ASSETS, ENDING $ 234,23Q
See Notes to Financial Statement
4
Temporarily
Restricted
$
3,255
3 255
1,231
129,626
58,838
__{91,763)
97 932
101 187
101,187
128,753
$ 222,24Q
Total
$ 864,155
175,685
166,429
151,031
50,000
24,056
99 570
1,530,926
713,000
1,231
129,626
59,838
11,250
914 945
2,445,871
1,713,448
235,391
316 149
2,264,988
180,883
283,287
$ 464,17Q
SUNSET CULTURAL CENTER, INC.
STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED JUNE 30, 2007
CASH FLOWS FROM OPERATING ACTIVITIES:
Changes in net assets
Aqjustments to reconcile increase in net assets
to net cash provided by operating activities:
Depreciation
Gain on sale of equipment
Donated marketable securities
(Increase) decrease in:
Accounts receivable
Pledges I eceivable
Interest receivable
Prepaid expenses
Increase (decrease) in:
Accounts payable
Accrued expenses
Deferred revenue
NET CASH PROVIDED BY OPERATING
ACTIVITIES
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from sale of equipment
Purchase of Treasury Bills
NET CASH USED BY
INVESTING ACTIVITIES
CASH FLOWS FROM FINANCING ACTIVITIES:
Lease payments
Repayment of working capital advance
NET CASH USED BY FINANCING
ACTIVITIES
NET DECREASE IN CASH
CASH AT BEGINNING OF YEAR
CASH AT END OF YEAR
See Notes to Financial Statement
5
$ 180,883
49,661
(166)
(20,098)
(2,905)
7,686
(4,182)
56,784
37,397
10,404
59,527)
255 937
827
283,762)
282,935)
(2,614)
120,000)
122,614)
(149,612)
180 763
$ 31,151
SUNSET CULTURAL CENTER, INC ..
NOTES TO FINANCIAL STATEMENTS
FOR THE YEAR ENDED JUNE 30, 2007
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Nature of Operations - Sunset Cultural Center, Inc .. ("SCC") is a California nonprofit
public benefit corporation that was formed to operate and manage the Sunset Community
and Cultural Center ("the Center"), owned by the City of Carmel-by-the-Sea, ("the City"),
for the benefit of the City, its residents and visitors, and the users of the Center.
The Center includes a 718 seat theater with stage, rehearsal rooms, dressing rooms and
related facilities.. The theater is rented to third party presenters and is used for events
produced by SCC. In addition, there are meeting rooms and office space unrelated to the
theater that are used by SCC, tenants and many other outside community groups ..
Basis of Presentation - The accompanying financial statements are presented using the
accrual basis of accounting in accordance with generally accepted accounting principles ..
The net assets, revenues, gains and losses, and other support, expenses and other charges in
the accompanying financial statements are classified based on the existence or absence of
donor-imposed restrictions.. Accordingly, for reporting purposes, net assets of SCC and
changes therein are classified as follows:
Unrestricted Net Assets - Net assets that are not subject to
stipulations.. This includes any amounts designated by the Board for certain purposes.
Temporarily Restricted Net Assets - Net assets subject to
stipulations that may or will be met either by actions of SCC and/or the passage of
time ..
Permanently Restricted Net Assets - Net assets subject to
restrictions that they be maintained permanently by SCC As ofJune 30, 2007, there
were no permanently restricted net assets.
Recognition of Donor Restrictions - Support that is restricted by the donor is reported as
an increase in temporarily or permanently restricted net assets, depending on the nature of
the restriction. When a restriction expires (that is, when a stipulated time restriction ends
or purpose restriction is accomplished), temporarily restricted net assets are reclassified to
unrestricted net assets and reported in the Statement of Activities as "net assets released
from restrictions "
Marketable Securities - Marketable securities represent donated common stock received
in June 2007 and sold on July 3, 2007.. It is the policy of SCC to sell donated securities and
convert the gift to cash.
Accounts Receivable - Accounts receivable are recorded using the allowance method and
are presented net of the allowance for uncollectibility. At June 30, 2007 the allowance is
estimated to be zero..
Treasury Bills- Treasury Bills are recorded at cost and range in maturity from three to six
months at the time of purchase .. Interest is recognized as it is earned
6
NOTE 1. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (Continued)
Property and Equipment - The City owns the Center and the related property, plant and
equipment SCC purchases certain tangible assets to support managing the facility. The
City has reversionary rights to any assets purchased by SCC. Property and equipment with
a useful life of more than one year and an acquisition cost of$1 ,000 or more are recognized
at cost. Donated property is recorded at fair market value on the date received.. Such
donations are reported as umestricted support unless the donor has restricted the donated
asset to a specific purpose.. Assets donated with explicit restrictions regarding their use and
contributions of cash that must be used to acquire property and equipment are reported as
restricted support. Absent donor stipulations regarding how long those donated assets must
be maintained, SCC reports expirations of donor restrictions when the donated or acquired
assets are placed in service. Depreciation is computed using the straight-line method over
the estimated useful lives ofthe assets ranging from three to seven years.
Income Taxes- SCC is exempt from federal income tax under Section 50l(c)(3) of the
Internal Revenue Code and from state franchise tax under California Revenue and Taxation
Code 2370l(d) but is subject to taxes on umelated business income when earned
Defened Revenue - Reservation fees are recognized as revenue in the fiscal year which
includes the related performance.. Amounts received in advance are repmted as deferred
revenue .. At June 30,2007, deferred revenue was $14,080
Contributed Services and Facilities - Volunteers contribute services that have not been
recorded in the accompanying financial statements because the criteria for recognition
under SFAS No .. 116 have not been met. SCC receives the use of office space at no cost,
the in-kind donation is recognized at the fair value of rent for similar nonprofit
organizations in the area. The amount recorded for the year ending June 30, 2007 was
$11 ,250, which is reflected in the financial statements as in-kind donation with an
offsetting charge to rent
Functional Allocation of Expenses - The costs of providing program services and other
activities have been presented on a functional basis in the Statement of Activities
Accordingly, certain costs have been allocated among the programs and supporting
services benefited
Use of Estimates - The preparation of financial statements in accordance with generally
accepted accounting principles requires management to make estimates and assumptions
that affect the amounts reported. Actual results are not expected to differ from those
estimates
NOTE 2. CONCENTRATION OF CREDIT RISK
SCC holds cash balances in one financial institution in amounts exceeding the federal
insurance limits.. However, management believes that SCC does not face a significant risk
ofloss on these assets.
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NOTE 3. TREASURY BILLS
Treasury Bills held at June 30, 2007, have various maturities between August 9 and
December 6, 2007 and amounted to $521,034
The following schedule summarizes the investment return and its classification in the
statement of activities for the year ended June 30, 2007:
Umestricted
Interest/dividends $ 20.801 $
NOTE 4. PROPERTY AND EQUIPMENT
Temporarily
Restricted Total
3 255 !lk$
At June 30, 2007, property and equipment consisted of the following:
Office equipment and software
Building improvements
Theater equipment
Total
Less accumulated depreciation and amortization
Net property and equipment
NOTE 5. LEASING ARRANGEMENTS
$
$
129,494
19,467
18 534
167,495
117411
50.084
SCC leases office equipment under a capital lease.. The economic substance of the lease is
that sec is financing the acquisition of the equipment through the lease and accordingly,
the equipment is recorded as an asset and the lease is recorded as a liability.
Future minimum lease payments under the capital lease as of June 30, 2007 for each of the
remaining years and in the aggregate are as follows:
Year Ended
June 30,
2008
2009
Total
Less: amount representing interest
Present value of minimum lease payments
8
$
Amount
3,356
2 237
5,593
353
5.240
NOTE 5. LEASING ARRANGEMENTS (Continued)
In addition, SCC as lessor, leased office space to eight tenants under operating leases.. The
term of the leases range from two years to two and one half years beginning January 1,
2006 and expiring June 30, 2008.. The monthly rental payments range from $70 to $1,761.
One tenant has an armual rent of $1 for use of library book receipt and storage.. Rental
income for these leases as of June 30, 2007 was $66,670
Minimum future rentals to be received on the operating leases are $59,965 for the year
ending June 30, 2008 ..
NOTE 6. TEMPORARILY RESTRICTED NET ASSETS
As of June 30, 2007, temporarily restricted net assets are composed of cash and cash
equivalents which are restricted for the following purposes:
Performance Carmel
Producers Guild
Facility
Total
$
$
50,071
159,771
20 098
229.940
The City produced a performance series, Performance Carmel, and under the terms of the
Agreement, SCC is to continue producing this series.. The City transferred all funds held
for Performance Crume! to SCC.. The Producers Guild is a fund established to support
events produced by Sunset Center Presents.
During the year ended June 30, 2007 net assets were released from donor restrictions when
expenses satisfying the restricted purpose were incurred, or by occurrence of other events
specified by donors, These assets are shown in the Statement of Activities as "Items
released from restriction"
Purpose restriction accomplished:
Performance Crume!
Producers Guild
Facility
Sunset Center Presents
Total
$
$
9
29,745
23,278
23,145
15 595
91.763
NOTE 7. RETIREMENT PLAN
During 2005, the Board of Trustees approved the creation of the Sunset Cultural Center,
Inc .. 403(b) Plan (the Plan), a defined contribution plan. Employees voluntarily make
contributions to the Plan in amounts based upon the limits established by Sections 402(g)
and 414(v) of the Internal Revenue Code .. The Plan's assets are invested in certain self-
directed income, money market and mutual funds.
The Board of Trustees may approve a discretionary employer contribution to be allocated
in proportion to the participants' total armual compensation. The Board of Trustees has not
approved a contribution for the period ended June 30, 2007.
NOTE 8. MANAGEMENT AGREEMENT
A management agreement ("the Agreement") was signed by SCC and the City and
accepted by the City Council on June 8, 2004.. Responsibility for management of the
Center was transferred to SCC on July I, 2004 for a term of3 years ending June 30, 2007.
SCC has the option to extend the term for two additional three-year terms. The renewal
option has been exercised for the period July 1, 2007 through June 30, 2010. The
Agreement sets performance criteria and provides remedies in the event SCC fails to meet
such criteria, including early termination of the Agreement The City is committed to
providing an Enabling Grant of $750,000 for the fiscal year ending June 30, 2008.. SCC is
economically dependent on the Enabling Grant received from the City
NOTE 9. COMMITMENTS AND CONTINGENCIES
SCC has entered into various contracts for services.. The contracts range from a period of
three years to five years and total $284,568. At June 30, 2007, the remaining commitments
were $90, 170 ..
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SUPPLEMENTAL SCHEDULE
SUNSET CULTURAL CENTER, INC.
SUPPLEMENTAL SCHEDULE
EXHIBIT B SUMMARY FINANCIAL INFORMATION AND GRANT REQUIREMENTS
FOR THE YEAR ENDED JUNE 30, 2007
REVENUE:
Rentals:
Theater
Rooms
Offices
Other
Facility fees
Grants/sponsorships
Total revenue
Performance Carmel - net
Sunset Center Presents -net
Box Office - net
Adjusted revenue
COSTS:
Direct costs:
All personnel
All other
Total direct costs
Indirect costs
Total costs
SHORTFALL
ENABLING GRANT
EXCESS OF REVENUE AND GRANTS OVER COSTS
11
$ 163,091
27,718
66,670
53,769
93,723
74145
479,116
13,680
21,654
37,542)
476 908
594,778
218 317
813,095
275 994
1,089,089
(612,181)
713 000
$ 1QQ,812
SUNSET CULTURAL CENTER, INC.
NOTES TO SUPPLEMENTAL SCHEDULE
EXHIBIT B- SUMMARY FINANCIAL INFORMATION AND GRANT REQUIREMENTS
FOR THE YEAR ENDED JUNE 30, 2007
NOTE 1. The supplemental schedule presents the results of operations as defined in the Agreement
in Article 4 Expenses, Section 4.2, for the year ended June 30, 2007. The financial results
shown in Exhibit B Summary Financial Information and Grant Requirements differ from
the preceding financial statements as follows:
1) The supplemental schedule does not reflect the in-kind donation and expense
related to Sunset Cultural Center's use of administrative offices owned by the City
2) The supplemental schedule shows as expenditures the costs of acquired assets with
useful lives in excess of one year.. In the accompanying financial statements these
assets have been capitalized and depreciation and amortization expense has been
recorded for the period
3) The supplemental schedule shows as expenditures certain lease payments related to
a capital lease. In the accompanying financial statements this asset has been
capitalized and future lease payments have been recorded as a liability, and
depreciation expense has been recorded for the period
4) The supplemental schedule does not include donations of temporarily restricted net
assets for Producers Guild and facilities which remain restricted as of June 30,
2007..
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INDEPENDENT AUDITORS' REPORT
To the Board of Directors
Sunset Cultural Center, Inc.
We have audited the accompanying statement of financial position of Sunset Cultural Center,
Inc. (a nonprofit organization) as of June 30, 2007, and the related statement of activities and
cash flows for the year then ended These financial statements are the responsibility of the
management of Sunset Cultural Center, Inc. Our responsibility is to express an opinion on
these financial statements based on our audit
We conducted our audit 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 audit provides a reasonable basis for our opinion.
In our opinion, the accompanying financial statements present fairly, in all material respects, the
financial position of Sunset Cultural Center, Inc. as of Tune 30, 2007 and the results of its
activities and its cash flows for the year then ended, in conformity with accounting principles
generally accepted in the United States of America ..
Our audit was made for the purpose of forming an opinion on the basic financial statements of
Sunset Cultural Center, Inc. taken as a whole. The supplementary information listed in the
table of contents is presented for purposes of additional analysis and is not a required part of the
basic financial statements Such information has been subjected to the auditing procedures
applied in the audit of the basic financial statements and, in our opinion, is fairly stated in all
material respects in relation to the basic financial statements taken as a whole.
September 14, 2007
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