SPECIAL OLYMPICS TEXAS, INC. INDEPENDENT AUDITORS' …...special olympics texas, inc. independent...

SPECIAL OLYMPICS TEXAS, INC.

INDEPENDENT AUDITORS' REPORT AND

December 31, 2017 and 2016

FINANCIAL STATEMENTS

Page

INDEPENDENT AUDITORS' REPORT 1

STATEMENTS OF FINANCIAL POSITION 2

Year ended December 31, 2017 3Year ended December 31, 2016 4

Year ended December 31, 2017 5Year ended December 31, 2016 6

7

8

STATEMENTS OF ACTIVITIES

STATEMENTS OF FUNCTIONAL EXPENSES

STATEMENTS OF CASH FLOWS

NOTES TO FINANCIAL STATEMENTS

TABLE OF CONTENTS

SPECIAL OLYMPICS TEXAS, INC.

To the Board Of DirectorsSpecial Olympics Texas, Inc.

Management’s Responsibility for the Financial Statements

Auditors' Responsibility

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

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in thefinancial statements. The procedures selected depend on the auditors’ judgment, including the assessment of therisks of material misstatement of the financial statements, whether due to fraud or error. In making those riskassessments, the auditor considers internal control relevant to the entity’s preparation and fair presentation ofthe financial statements in order to design audit procedures that are appropriate in the circumstances, but not forthe purpose of expressing an opinion on the effectiveness of the entity’s internal control. Accordingly, weexpress no such opinion. An audit also includes evaluating the appropriateness of accounting policies used andthe reasonableness of significant accounting estimates made by management, as well as evaluating the overallpresentation of the financial statements.

Independent Auditors' Report

Management is responsible for the preparation and fair presentation of these financial statements in accordancewith accounting principles generally accepted in the United States of America; this includes the design,implementation, and maintenance of internal control relevant to the preparation and fair presentation offinancial statements that are free from material misstatement, whether due to fraud or error.

Our responsibility is to express an opinion on these financial statements based on our audit. We conducted ouraudit in accordance with auditing standards generally accepted in the United States of America. Thosestandards require that we plan and perform the audit to obtain reasonable assurance about whether the financialstatements are free of material misstatement.

We have audited the accompanying financial statements of Special Olympics Texas, Inc. (a nonprofitcorporation), which comprise the statement of financial position as of December 31, 2017, and the relatedstatements of activities, functional expenses, and cash flows for the year then ended, and the related notes to thefinancial statements.

1005 La Posada Drive Austin, Texas 78752-3815T: (512) 346-2086 (877) 977-6850 F: (512) 338-9883 www.atchleycpas.com

Opinion

Other Matter

Austin, TexasApril 6, 2018

In our opinion, the financial statements referred to above present fairly, in all material respects, the financialposition of Special Olympics Texas, Inc. as of December 31, 2017, and the changes in its net assets and cashflows for the year then ended in accordance with accounting principles generally accepted in the United Statesof America.

The financial statements of Special Olympics Texas, Inc. as of and for the year ended December 31, 2016, wereaudited by other auditors, whose report, dated March 31, 2017, expressed an unmodified opinion on thosestatements.

- 2 -

2017 2016

Current Assets:Cash and cash equivalents 361,911$ 440,898$Accounts receivable, net 174,527 379,864Promises to give - current portion 31,445 125,452Investments 1,844,650 551,347Prepaid expenses, deposits, and other current assets 149,609 112,994

Total Current Assets 2,562,142 1,610,555

Promises to give - long term portion 9,309 264,150Property and equipment - net 6,634,683 6,852,685

Total Assets 9,206,134$ 8,727,390$

Current Liabilities:Accounts payable and accrued expenses 192,722$ 124,237$Accrued employee benefits 169,755 258,750Deferred revenue 60,480 -Note Payable, current 67,438 -Line of credit - 500,000

Total Current Liabilities 490,395 882,987

Note Payable, net of current 1,896,436 -

Total Liabilities 2,386,831 882,987

Net Assets:UnrestrictedOperating 2,943,995 5,016,221Board designated 1,492,898 450,760

Total Unrestricted 4,436,893 5,466,981Temporarily restricted 2,038,830 2,033,842Permanently restricted 343,580 343,580 Total Net Assets 6,819,303 7,844,403

Total Liabilities and Net Assets 9,206,134$ 8,727,390$

Liabilities and Net Assets

DECEMBER 31, 2017 AND 2016

SPECIAL OLYMPICS TEXAS, INC. STATEMENTS OF FINANCIAL POSITION

Assets

The accompanying notes are an integral part of these financial statements.- 3 -

UnrestrictedTemporarily

RestrictedPermanently

Restricted TotalOPERATING REVENUEContributions 1,179,205$ 1,180,858$ -$ 2,360,063$In-kind donations 10,414,596 9,043 - 10,423,639Fundraising events 4,141,418 10,336 - 4,151,754Grants 676,009 233,909 - 909,918Sales of materials 176,342 - - 176,342Program services fees 213,590 - - 213,590

16,801,160 1,434,146 - 18,235,306

Released from restrictions 1,489,086 (1,489,086) - -

Total Operating Revenue 18,290,246 (54,940) - 18,235,306

OPERATING EXPENSESProgram services 16,912,688 - - 16,912,688Management and general 498,696 - - 498,696Development and fundraising 1,933,628 - - 1,933,628

Total Operating Expenses 19,345,012 - - 19,345,012

Total Operating Income (Loss) (1,054,766) (54,940) - (1,109,706)

NONOPERATING INCOME (EXPENSE)Investment return 28,556 59,928 - 88,484Investment advisory fees (3,878) - - (3,878)

Total Nonoperating Income (Loss) 24,678 59,928 - 84,606

Change in Net Assets (1,030,088) 4,988 - (1,025,100)

Net Assets, Beginning of the Year 5,466,981 2,033,842 343,580 7,844,403

Net Assets, End of the Year 4,436,893$ 2,038,830$ 343,580$ 6,819,303$

SPECIAL OLYMPICS TEXAS, INC.STATEMENT OF ACTIVITIES

FOR THE YEAR ENDED DECEMBER 31, 2017


UnrestrictedTemporarily

RestrictedPermanently

Restricted TotalOPERATING REVENUEContributions 1,280,933$ 1,693,773$ -$ 2,974,706$In-kind donations 9,781,197 5,370 - 9,786,567Fundraising events 3,788,305 - - 3,788,305Grants 1,112,809 18,062 - 1,130,871Sales of materials 285,938 - - 285,938Program services fees 192,276 - - 192,276

16,441,458 1,717,205 - 18,158,663

Released from restrictions 1,410,313 (1,168,313) (242,000) -

Total Operating Revenue 17,851,771 548,892 (242,000) 18,158,663

OPERATING EXPENSESProgram services 17,702,789 - - 17,702,789Management and general 1,293,574 - - 1,293,574Development and fundraising 122,400 - - 122,400

Total Operating Expenses 19,118,763 - - 19,118,763

Total Operating Income (Loss) (1,266,992) 548,892 (242,000) (960,100)

NONOPERATING INCOME (EXPENSE)Investment return 50,778 - - 50,778Investment advisory fees (7,126) - - (7,126)

43,652 - - 43,652

Released Unrealized Accumulated Inv Return 12,884 (12,884) - -

Total Nonoperating Income (Loss) 56,536 (12,884) - 43,652

Change in Net Assets (1,210,456) 536,008 (242,000) (916,448)

Net Assets, Beginning of the Year 6,677,437 1,497,834 585,580 8,760,851

Net Assets, End of the Year 5,466,981$ 2,033,842$ 343,580$ 7,844,403$

SPECIAL OLYMPICS TEXAS, INC.STATEMENT OF ACTIVITIES



DevelopmentProgram Management andServices and General Fundraising Total

Area and state game expenses 1,891,956$ -$ -$ 1,891,956$Bank charges - 122,259 - 122,259Bad debt expense - 322,799 - 322,799Chapter assessment fees 185,122 - - 185,122Depreciation 165,452 2,206 52,944 220,602Direct mail and telemarketing services 51,886 - 51,885 103,771Employee benefits 256,636 3,422 82,124 342,182Equipment rental and maintenance 141,495 - - 141,495Fundraising events direct costs 300,754 - 300,754 601,508In-kind expenses 10,423,639 - - 10,423,639Insurance expense 115,391 1,539 36,925 153,855Meeting and workshops 32,675 - - 32,675Occupancy 281,455 3,753 90,065 375,273Payroll taxes 177,572 2,732 92,884 273,188Postage and shipping 16,111 248 8,428 24,787Professional fees 86,722 1,156 27,751 115,629Salaries 2,599,915 37,142 1,077,107 3,714,164Supplies 16,277 271 10,581 27,129Telephone expense 75,954 1,169 39,729 116,852Travel and training 93,676 - 62,451 156,127Total 16,912,688$ 498,696$ 1,933,628$ 19,345,012$

SPECIAL OLYMPICS TEXAS, INC.STATEMENT OF FUNCTIONAL EXPENSES



Development Program Management andServices and General Fundraising Total

Area and state game expenses 2,018,952$ -$ -$ 2,018,952$Bank charges 71,453 5,556 2,399 79,408Bad debt expense 20,463 1,592 682 22,737Chapter assessment fees 203,932 15,861 6,798 226,591Depreciation 168,860 33,772 22,514 225,146Direct mail and telemarketing services 38,390 38,390 - 76,780Employee benefits 407,291 52,035 9,365 468,691Equipment rental and maintenance 129,737 8,316 421 138,474Fundraising events direct costs 338,755 - 338,755 677,510In-kind expenses 9,786,567 - - 9,786,567Insurance expense 132,728 10,323 4,424 147,475Meeting and workshops 69,824 - - 69,824Occupancy 347,454 23,495 1,986 372,935Payroll taxes 231,060 48,606 4,082 283,748Postage and shipping 34,226 2,662 1,141 38,029Professional fees 163,429 9,866 3,909 177,204Salaries 3,126,823 662,776 58,247 3,847,846Supplies 41,938 3,262 1,398 46,598Telephone expense 136,506 10,617 4,550 151,673Travel and training 234,401 27,690 484 262,575Total 17,702,789$ 954,819$ 461,155$ 19,118,763$

SPECIAL OLYMPICS TEXAS, INC.STATEMENT OF FUNCTIONAL EXPENSES



2017 2016Cash Flows from Operating Activities:

Current year's excess revenues over expenses (1,025,100)$ (916,448)$Adjustments to reconcile change in excess revenues to

net cash provided by operating activities:Depreciation expense 220,602 225,146(Appreciation) depreciation in investments (36,615) (50,778)Bad debt expense 322,799 22,737

Changes in assets and liabilities:Accounts receivable and other receivables 205,337 (61,660)Promises to give 26,049 (229,653)Prepaid expenses and other current assets (36,615) (27,234)Accounts payable and accrued expenses 68,485 (17,235)Accrued employee benefits (88,995) 34,148Deferred revenue 60,480 -

Net Cash from Operating Activities (283,573) (1,020,977)

Cash Flows from Investing Activities:Purchases of property and equipment (2,600) (22,521)Proceeds from sales of investments, net of purchases (1,256,688) 710,371

Net Cash Flows from Investing Activities (1,259,288) 687,850

Cash Flows from Financing Activities:Proceeds from revolving line of credit, net of payments (500,000) 410,000Proceeds from note payable, net of payments 1,963,874 -

Net Cash Flows from Financing Activities 1,463,874 410,000

Net Increase (Decrease) In Cash and Cash Equivalents (78,987) 76,873

Beginning Cash and Cash Equivalents 440,898 364,025Ending Cash and Cash Equivalents 361,911 440,898

Supplemental Disclosure of Cash Flow InformationCash paid for income taxes - -Cash paid for interest expense 15,869$ -$

SPECIAL OLYMPICS TEXAS, INC.STATEMENTS OF CASH FLOWS

FOR THE YEARS ENDED DECEMBER 31, 2017 AND 2016


SPECIAL OLYMPICS TEXAS, INC.NOTES TO FINANCIAL STATEMENTS

DECEMBER 31, 2017 and 2016

1.

Organization

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Special Olympics Texas, Inc. (the Organization) provides year-round athletic training and Olympic-typesports competition to children and adults with mental/intellectual disabilities and other closely relateddevelopmental disabilities. The Organization’s mission is to provide continuing opportunities to developphysical fitness, demonstrate courage, experience joy, and participate in the sharing of gifts, skills andfriendship with their families, other Special Olympians, and the community. Events are held at the area,regional, and state levels culminating in the Summer, Winter, and Fall Classic Games. Special OlympicsTexas, Inc. is a registered 501(c)(3) not-for-profit organization supported by private donations fromindividuals, corporations, and organizations throughout the state. The program is dependent on volunteerswho serve as coaches, officials, committee members, and more.

Cash and Cash Equivalents - For purposes of the statement of cash flows, cash and cash equivalentsconsist of cash held in bank deposit accounts, and short-term and highly liquid investments with anoriginal purchase maturity date of three months or less.

Basis of Presentation - The Organization’s financial statements have been prepared on the accrual basisof accounting in accordance with generally accepted accounting principles in the United States ofAmerica. For financial statement purposes, the Organization distinguishes between contributions ofunrestricted assets, temporarily restricted assets, and permanently restricted assets.

Contributions and Accounts Receivable - Contributions received (including unconditional promises togive) are recorded as unrestricted, temporarily restricted, or permanently restricted support in the periodreceived depending on the existence and/or nature of any donor restrictions. Contributions received whichare part of the Organization’s ongoing major or central activities are recognized as revenue. Conditionalpromises to give are recognized as the conditions upon which they depend are substantially met. TheOrganization measures promises to give with time horizons of cash flow greater than one year using anappropriate discount rate that is consistent with the general principles of fair value measurement. Promisesto give are recognized as revenue only if sufficient evidence exists in the form of verifiable documentationthat a promise was made and received.

The Organization reports contributions as restricted support if the support is received with donorstipulations that limit the use of the donated assets. When a donor restriction expires, that is, when astipulated time restriction ends or purpose restriction is accomplished, temporarily restricted net assets arereclassified to unrestricted net assets and reported in the statement of activities as net assets released fromrestrictions. However, if a restriction is fulfilled in the same period in which the contribution is received,the Organization reports the support as unrestricted. Support that is not restricted by the donor is reportedas an increase in unrestricted net assets in the reporting period in which the support is recognized.Donated assets are recorded at their estimated fair market values at the date of receipt.

Summary of Significant Accounting Policies

- 9 -



1.

Unrestricted - Net assets that are not subject to donor-imposed stipulations. Unrestricted net assetsmay be used for any purpose or designated for specific purposes by action of the Board of Directors.

Temporarily Restricted - Net assets subject to donor-imposed stipulations that can be fulfilled byactions of the Organization pursuant to those stipulations or that expire by the passage of time.Temporarily restricted net assets include the portion of donor-restricted endowment funds that havenot been appropriated for expenditure by the Organization.

Permanently Restricted - Net assets subject to donor-imposed stipulations that they be maintainedpermanently by the Organization.

ORGANIZATION AND SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES - CONTINUED

Net Assets Classifications - The Organization classifies its net assets into three categories as follows:

Investments - Investments in equity securities with readily determinable fair values are based on quotedmarket values while the time deposits are estimated at fair value by summing the principal investmentplus accrued interest. Investment income and unrealized gains and losses are reported as increases inunrestricted net assets unless the donor placed restrictions on the use of earnings. The change in fair valuebetween years is reflected in the statement of activities in the year of the change as investment return.

Fair Value Measurements - The fair value hierarchy prioritizes the inputs to valuation techniques used to measure fair value. Fair value is defined as the price that would be received to sell an asset or paid totransfer a liability in an orderly transaction between market participants at the measurement date. The fairvalue hierarchy ranks the quality and reliability of the information used to determine fair values. The fairvalue hierarchy is categorized into three levels based on the inputs as follows:

Level 1 - Values are unadjusted quoted prices for identical assets and liabilities in active marketsaccessible at the measurement date.

Level 2 - Inputs include quoted prices for similar assets or liabilities in active markets, quoted pricesfrom those willing to trade in markets that are not active, or other inputs that are observable or can becorroborated by market data for the term of the instrument. Such inputs include market interest ratesand volatilities, spreads, and yield curves.

Level 3 - Certain inputs are unobservable (supported by little or no market activity) and significant tothe fair value measurement. Unobservable inputs reflect the Organization's best estimate of whathypothetical market participants would use to determine a transaction price for the asset or liability atthe reporting date.

- 10 -



1.

Contributed Services and Assets - Contributed assets and services are recorded at their estimated fairvalue on the date of donation. The Organization received in-kind contributions and donated services forthe years ended December 31, 2017 and 2016 of $10,423,639 and $9,786,567, respectively, and primarilyrepresent contributed services related to coaches’ time and services for the winter and spring games. Inaddition, many individuals volunteer their time to assist the Organization, but these services do not meetthe criteria for recognition as contributed services, and therefore have not been recorded in theaccompanying financial statements.

The Organization reports contributions of land, buildings, and equipment as unrestricted unless explicitdonor stipulations specify how the donated assets must be used. Gifts of assets with explicit restrictionsthat specify how the assets are to be used are accounted for as restricted support. The Organization reportsexpirations of donor restrictions when the donated or acquired long-lived assets are placed in service.There were no fixed asset in-kind donations made during 2017 or 2016.

Allowance for Doubtful Accounts - The Organization provides an allowance for doubtful accounts equalto the estimated uncollectible amounts. The Organization’s estimate is based on historical collections, anda review of the current status of the accounts receivable. Management has determined that no allowancefor doubtful accounts is necessary as of December 31, 2017 and 2016.

Property and Equipment - Property and equipment is recorded at cost on the date of acquisition or atfair value on the date of donation. Repairs and maintenance are charged to expenses. Betterments andrenewals, which add significantly to the utility or useful lives of the assets, are capitalized. Gains andlosses from normal retirements or dispositions are credited or charged to revenue.

Use of Estimates - The preparation of financial statements in conformity with generally acceptedaccounting principles requires management to make estimates and assumptions that affect the reportedamount of assets and liabilities and disclosure of contingent assets and liabilities at the date of thefinancial statements and the reported amounts of revenues and expenses during the reporting period.Actual results could differ from those estimated.

The Organization currently capitalizes property and equipment having an estimated useful life of morethan one year, and meets or exceeds $1,000 in cost, individually. Property and equipment are depreciatedusing the straight-line method over the following useful lives: building 30 years, building improvements10 years, and furniture and equipment 5 years.


- 11 -



1.

Reclassifications in Prior Year Financial Statements - Certain reclassifications have been made to theprior year’s financial statements to conform to the current year’s presentation.

For contributions and promises to give, the Organization performs ongoing credit evaluations of thedonor’s financial condition.

Income Taxes – The Organization is exempt from federal income taxes pursuant to the provisions ofSection 501(a) of the Internal Revenue Code as an organization described in Section 501(c)(3). Therefore,no provision for federal income taxes has been reflected in the financial statements.

The Organization has adopted the recognition requirements for uncertain income tax positions as requiredby generally accepted accounting principles, with no cumulative effect adjustment required. Income taxbenefits are recognized for income tax positions taken or expected to be taken in a tax return, only when itis determined that the income tax position will more likely than not be sustained upon examination bytaxing authorities. The Organization has analyzed the tax positions taken in its filings with the InternalRevenue Service and state jurisdictions where it operates. The Organization believes that its income taxfiling positions will be sustained upon examination and does not anticipate any adjustments that wouldresult in a material adverse effect on the Organization’s financial position, changes in net assets, or cashflows. Accordingly, the Organization has not recorded any reserves, or related accruals for interest andpenalties for uncertain income tax positions at December 31, 2017 and 2016. The tax returns for the yearsending December 31, 2014, and after are open to examination by federal, local, and state authorities.There are currently no income tax audits for any tax periods in progress.

Functional Expenses - The expense information contained in the statements of activities and functionalexpenses is presented on a functional basis. Accordingly, certain expenses are allocated betweenfunctional categories based on management’s estimates.


Concentration of Credit Risk - Financial instruments which potentially subject the Organization toconcentrations of credit risk consist principally of cash and cash equivalents, contributions and accountsreceivable, and investments. There were no cash or cash equivalent accounts that exceeded the maximumFederal Deposit Insurance Corporation limits at December 31, 2017.

In management’s opinion, the Organization’s cash and cash equivalents and investments do not representa significant concentration of credit risk due to the diversification of the Organization’s portfolio amonginstitutions, instruments, and issuers.

- 12 -



1.

2.

2017 2016408,754$ 340,124$

US government and agency security 278,705 130,238Corporate bonds 1,157,191 80,985 Total Investments 1,844,650$ 551,347$

2017 2016Interest and dividends 22,872$ 22,941$Unrealized gain (loss) 65,612 27,837

88,484$ 50,778$

The following schedule summarizes the investment return and its classification in the statement ofactivities for the years ended December 31:

INVESTMENTS

Equity securities


Recently Issued Accounting Pronouncements - In August 2016, the FASB issued ASU No. 2016-14,Not-for-Profit Entities (Topic 958): Presentation of Financial Statements of Not-for-Profit Entities, whichrequires presentation on the face of the statement of financial position amounts for two classes of netassets at the end of the period, net assets with donor restrictions and net assets without donor restrictions,rather than the currently required three classes. The standard also requires the presentation on the face ofthe statement of activities to show the amount of the change in each of these two classes of net assets. Thestandard will no longer require the presentation or disclosure of the indirect method of reporting cashflows if an entity elects to use the direct method, however, it will be required for an entity to provideenhanced disclosures about liquidity in the footnotes to the financial statements. The standard is effectivefor fiscal years beginning after December 15, 2017, and early adoption is permitted. The Organization iscurrently evaluating the impact the standard will have on its financial statements.

Investments are stated at fair value and consisted of the following as of December 31:

Total Investment

Subsequent Events - Subsequent events have been evaluated through the date of the IndependentAuditors' Report, which is the date the financial statements were available to be issued.

- 13 -



3.

Level 1 Level 2 Level 3 TotalEquity securities 408,754$ -$ -$ 408,754$U.S. Government and agency securities 278,705 - - 278,705Corporate bonds - 1,157,191 - 1,157,191

687,459$ 1,157,191$ -$ 1,844,650$

Level 1 Level 2 Level 3 TotalEquity securities 340,124$ -$ -$ 340,124$U.S. Government and agency securities 130,238 - - 130,238Corporate bonds - 80,985 - 80,985

470,362$ 80,985$ -$ 551,347$

4. PROPERTY AND EQUIPMENT

Property and equipment as of December 31 consisted of the following:

2017 2016Land 3,542,703$ 465,601$Buildings and improvements 3,383,827 6,460,929Leasehold improvements 11,851 9,251Computer equipment 835,735 795,673

410,502 450,564Total 8,184,618 8,182,018Accumulated depreciation (1,549,935) (1,329,333)Property and equipment, net 6,634,683$ 6,852,685$

FAIR VALUES

Office, fitness and other equipment

Depreciation expense was $220,602 and $225,146 for the years ended December 31, 2017 and 2016,respectively.

The following schedule summarizes the investment return and its classification in the statements ofactivities for the years ended December 31:

December 31, 2017

December 31, 2016

- 14 -



5.

6.

CLASSIFICATION OF NET ASSETS

The Organization’s endowment consists of donor-restricted funds, which are restricted for the purposeof furthering the Organization’s mission. Net assets associated with the endowment funds, which mayinclude funds designated by the board of directors to function as endowments, are classified andreported based on the existence or absence of donor imposed restrictions.

Permanently restricted

ENDOWMENTS

The Organization’s Board of Directors has designated the use of a building fund cash savings accountand the value of certain investments. Board designated investments include an equity investmentaccount in which all the investment earnings are reinvested totaling $203,487 and $448,819 atDecember 31, 2017 and 2016, respectively, and a fixed income investment account in which allinvestment earnings are distributed for current operations totaling $1,289,411 and $1,941, at December31, 2017 and 2016. A three-fourth's vote of the Board of Directors is required before the funds may beused.

Temporarily Restricted

Temporarily restricted net assets were $2,023,830 and $2,033,842, at December 31, 2017 and 2016,respectively, and they are restricted primarily for team funds.

Permanently restricted net assets consist of endowed gifts received from various donors. Earnings onthe related investments may be expended on specific programs of the Organization which werestipulated by the respective donors in accordance with endowment policies. Permanently restricted netassets totaled $343,580 and $343,580 at December 31, 2017 and 2016.

Net assets, which are free of donor-imposed restrictions, consist of all revenues, expenses, gains, andlosses that are not changes in permanently or temporarily restricted net assets. These funds are to beused to fund current operations at management’s discretion.

Unrestricted - Operating

Unrestricted - Board Designated

- 15 -



6.

2017 2016Endowment net assets, beginning of year 343,580$ 585,580$

Contributions - -Appropriation of endowment - (242,000)

Endowment net assets, end of year 343,580$ 343,580$

The Organization’s endowment net asset composition by type of fund was as follows as of December 31:

In accordance with Texas UPMIFA, the Organization considers the following factors in making adetermination on the amount, if any, to be available for distribution from each endowment fund:

1. The duration and preservation of the fund2.The purposes of the organization and the donor-restricted endowment fund3. General economic conditions4. The possible effect of inflation and deflation5. The expected total return from income and the appreciation of investments6. Other resources of the Organization7. The investment policies of the Organization.

The Organization has interpreted Texas Uniform Prudent Management of Institutional Funds Act (TexasUPMIFA) 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 thisinterpretation, the Organization classifies as permanently restricted net assets (a) the original value of giftsdonated to the permanent endowment, (b) the original value of subsequent gifts to the permanentendowment, and (c) accumulations to the permanent endowment made in accordance with the direction ofthe applicable donor gift instrument at the time the accumulation is added to the fund. The remainingportion of the donor-restricted endowment fund that is not classified as permanently restricted net assets isclassified as temporarily restricted net assets until those amounts are appropriated for expenditure by theOrganization in a manner consistent with the standard of prudence prescribed by Texas UPMIFA.

ENDOWMENTS - CONTINUED

From time to time, the fair value of assets associated with individual donor restricted endowment fundsmay fall below the level that the donor or Board of Directors requires the Organization to retain as a fundof perpetual duration. The Organization did not have any funds with deficiencies as of December 31, 2017or 2016.

- 16 -



7. COMMITMENTS AND CONTINGENICES

2018 189,633$2019 155,6442020 140,0022021 127,0472022 37,916

Thereafter 28,900650,242$

8.

9.

Leases

The Organization is exposed to risk due to the number of volunteers that are involved in carrying out theOrganization’s programs. The Organization’s umbrella insurance coverage adequately covers anypotential damages and liabilities arising from claims related to current and future litigation.

DIRECT MARKETING PLAN

The Organization conducts direct marketing campaigns, including direct mail and telemarketing, to raisefunds and to increase public relations and awareness of the Organization’s mission and activities. Suchcosts are expensed as incurred.

Direct mail and telemarketing projects for the years ended December 31, 2017 and 2016 resulted in grosscontributions of $687,889 and $1,088,425, respectively. The campaigns incurred total costs for the yearsended December 31, 2017 and 2016, of $103,771 and $331,604, respectively, for activities that includedboth a fundraising appeal and public education content.

The Organization leases certain office space and office equipment under operating leases. Minimumfuture rentals for the office space lease and equipment leases as of December 31, 2017 are as follows:

Rent expense for the years ended December 31, 2017 and 2016 was $256,579 and $248,125, respectively.

The Organization maintains a 401(k) pension plan for all eligible employees. Employer contributions tothe plan are based on the participants’ compensation and level of participation and are funded currently.Employer contributions to the plan for the years ended December 31, 2017 and 2016, were $98,109 and$131,906, respectively.

RETIREMENT PLAN

Contingencies

- 17 -



10.

11.

Less than one year 31,445$One to five years 9,309

40,754$

12.

13.

2018 67,438$2019 70,3472020 73,3812021 76,5462022 79,847

Thereafter 1,596,315Total 1,963,874$

NOTE PAYABLE

The Organization entered into a note payable in the amount of $2,000,000 on July 18, 2017, with aninterest rate of 4.23%. The note requires monthly payments of principle and interest of $12,434, with afinal payment of $1,223,769 on July 21, 2027. The note payable is secured by real property andimprovements. Outstanding balances on the note payable as of December 31, 2017, was $1,963,874.

The Organization entered into a committed line of credit up to $500,000 on October 15, 2010, amendedon December 1, 2011, June 25, 2013, August 10, 2016, and July 5, 2017, with interest at the BBA LIBORdaily floating rate plus 3%, due July 7, 2019. Outstanding balances on the line of credit as of December31, 2017 and 2016 were $0 and $500,000, respectively. The Organization was in compliance with allrestrictive covenants pertaining to the line of credit as of December 31, 2017.

AFFILIATED ORGANIZATIONS AND RELATED PARTY TRANSACTIONS

Promises to give consist of amounts pledged for the capital campaign. Promises to give are $40,754 and$389,602 at December 31, 2017 and 2016. Due to the immaterial amount of discount calculated as ofDecember 31, 2017 and 2016, no discount to present value is reflected in these financial statements. AtDecember 31, 2017, promises to give consist of the following:

The Organization is accredited by Special Olympics International, Inc. (SOI) to conduct activities withinthe State of Texas. For the years ended December 31, 2017 and 2016, the Organization received $717,588and $731,740, respectively, from SOI cooperative national fundraising projects and incurred expenses of$200,122 and $241,591 in 2017 and 2016, respectively, to SOI for program support.

PROMISES TO GIVE

LINE OF CREDIT

Expected to be collected in:

Promises to give

Maturities of the note payable as of December 31, 2017, are:

- 18 -

Finance Committee Special Olympics Texas, Inc. 1804 Rutherford Lane Austin, Texas 78754

We have audited the financial statements of Special Olympics Texas, Inc. as of and for the year ended December 31, 2017, and have issued our report thereon dated April 6, 2018. Professional standards require that we advise you of the following matters relating to our audit.

Our Responsibility in Relation to the Financial Statement Audit

As communicated in our engagement letter dated January 22, 2018, our responsibility, as described by professional standards, is to form and express an opinion about whether the financial statements that have been prepared by management with your oversight are presented fairly, in all material respects, in conformity with U.S. generally accepted accounting principles. Our audit of the financial statements does not relieve you or management of your respective responsibilities.

Our responsibility, as prescribed by professional standards, is to plan and perform our audit to obtain reasonable, rather than absolute, assurance about whether the financial statements are free of material misstatement. An audit of financial statements includes consideration of internal control over financial reporting as a basis for designing audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity’s internal control over financial reporting. Accordingly, as part of our audit, we considered the internal control of Special Olympics Texas, Inc. solely for the purpose of determining our audit procedures and not to provide any assurance concerning such internal control.

We are also responsible for communicating significant matters related to the audit that are, in our professional judgment, relevant to your responsibilities in overseeing the financial reporting process. However, we are not required to design procedures for the purpose of identifying other matters to communicate to you.

Planned Scope and Timing of the Audit

We conducted our audit consistent with the planned scope and timing we previously communicated to you.

Compliance with All Ethics Requirements Regarding Independence

The engagement team and our firm have complied with all relevant ethical requirements regarding independence.

Qualitative Aspects of the Entity’s Significant Accounting Practices

Significant Accounting Policies

Management has the responsibility to select and use appropriate accounting policies. A summary of the significant accounting policies adopted by Special Olympics Texas, Inc. is included in Note 1 to the financial statements. There have been no initial selection of accounting policies and no changes in significant accounting policies or

1005 La Posada Drive Austin, Texas 78752-3815T: (512) 346-2086 (877) 977-6850 F: (512) 338-9883 www.atchleycpas.com

their application during 2017. No matters have come to our attention that would require us, under professional standards, to inform you about (1) the methods used to account for significant unusual transactions and (2) the effect of significant accounting policies in controversial or emerging areas for which there is a lack of authoritative guidance or consensus.

Significant Accounting Estimates

Accounting estimates are an integral part of the financial statements prepared by management and are based on management’s current judgments. Those judgments are normally based on knowledge and experience about past and current events and assumptions about future events. Certain accounting estimates are particularly sensitive because of their significance to the financial statements and because of the possibility that future events affecting them may differ markedly from management’s current judgments.

The most sensitive accounting estimates affecting the financial statements are:

Management’s estimate of useful lives of capital assets based on the lives of similar assets. Management’s estimate of in-kind donations and expense which is based on estimated values of services and contributions received. Management’s estimate of the fair value of investments which are based on unadjusted quoted prices for identical assets and liabilities in active markets accessible at the measurement date and quoted prices for similar assets or liabilities in active markets.

We evaluated the key factors and assumptions used to develop the estimates and determined that they are reasonable in relation to the basic financial statements taken as a whole.

Significant Difficulties Encountered during the Audit

We encountered no significant difficulties in dealing with management relating to the performance of the audit.

Uncorrected and Corrected Misstatements

For purposes of this communication, professional standards require us to accumulate all known and likely misstatements identified during the audit, other than those that we believe are trivial, and communicate them to the appropriate level of management. Further, professional standards require us to also communicate the effect of uncorrected misstatements related to prior periods on the relevant classes of transactions, account balances or disclosures, and the financial statements as a whole. We noted no such misstatements.

Disagreements with Management

For purposes of this letter, professional standards define a disagreement with management as a matter, whether or not resolved to our satisfaction, concerning a financial accounting, reporting, or auditing matter, which could be significant to Special Olympics Texas, Inc.’s financial statements or the auditor’s report. No such disagreements arose during the course of the audit.

Representations Requested from Management

We have requested certain written representations from management, which are included in the attached letter dated April 6, 2018.

Management’s Consultations with Other Accountants

In some cases, management may decide to consult with other accountants about auditing and accounting matters. Management informed us that, and to our knowledge, there were no consultations with other accountants regarding auditing and accounting matters.

Other Significant Matters, Findings or Issues

In the normal course of our professional association with Special Olympics Texas, Inc., we generally discuss a variety of matters, including the application of accounting principles and auditing standards, business conditions affecting the entity, and business plans and strategies that may affect the risks of material misstatement. None of the matters discussed resulted in a condition to our retention as Special Olympics Texas, Inc.’s auditors.

This report is intended solely for the information and use of the Finance Committee and management and is not intended to be and should not be used by anyone other than these specified parties. It will be our pleasure to respond to any questions you have regarding this report. We appreciate the opportunity to continue to be of service to Special Olympics Texas, Inc.

Austin, Texas April 6, 2018

SPECIAL OLYMPICS TEXAS, INC. INDEPENDENT AUDITORS' …...special olympics texas, inc. independent...

Documents

Transcript of SPECIAL OLYMPICS TEXAS, INC. INDEPENDENT AUDITORS' …...special olympics texas, inc. independent...