2015 audited financials

CHRISTIAN SCHOOL FOUNDATION (CANADA) INC.

Financial Statements For the period ended June 30, 2015

DRAFT for discussion purposes only


Financial Statements For the period ended June 30, 2015

Contents Page

Independent Auditor's Report 3

Statement of Financial Position 5

Statement of Operations and Changes in Fund Balances 6

Statement of Cash Flows 7

Notes to Financial Statements 8

Schedule 1 - Opening Statement of Financial Position 15

Schedule 2 - Statement of Financial Position of 16

Ontario Association of Christian Schools Foundation

as at June 26, 2015

DRAFT for discussion purposes only 2

Independent Auditor's ReportGrant Thornton LLP

5026 King StreetBeamsville, ONL0R 1B0

T +1 905 563 4528F +1 905 563 7780www.GrantThornton.ca

To the Board of Directors of Christian School Foundation (Canada) Inc.

We have audited the accompanying financial statements of Christian School Foundation(Canada) Inc., which comprise the statement of financial position as at June 30, 2015, and thestatements of operations and changes in fund balances and cash flows for the period thenended, and a summary of significant accounting policies and other explanatory information.

Management's responsibility for the financial statements

Management is responsible for the preparation and fair presentation of these financialstatements in accordance with Canadian accounting standards for not-for-profit organizations,and for such internal control as management determines is necessary to enable the preparationof financial statements that are free from material misstatement, whether due to fraud or error.

Auditor's responsibility

Our responsibility is to express an opinion on these financial statements based on our audit. Weconducted our audit in accordance with Canadian generally accepted auditing standards. Thosestandards require that we comply with ethical requirements and plan and perform the audit toobtain reasonable assurance about whether the financial statements are free from materialmisstatement.

An audit involves performing procedures to obtain audit evidence about the amounts anddisclosures in the financial statements. The procedures selected depend on the auditor'sjudgment, including the assessment of the risks of material misstatement of the financialstatements, whether due to fraud or error. In making those risk assessments, the auditorconsiders internal control relevant to the foundation's preparation and fair presentation of thefinancial statements in order to design audit procedures that are appropriate in thecircumstances, but not for the purpose of expressing an opinion on the effectiveness of thefoundation's internal control. An audit also includes evaluating the appropriateness ofaccounting policies used and the reasonableness of 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 abasis for our qualified audit opinion.

Audit • Tax • AdvisoryGrant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 3

Independent Auditor's Report (continued)

Basis for qualified opinion

In common with many charitable organizations, Christian School Foundation (Canada) Inc.derives revenue from donations the completeness of which is not susceptible to satisfactoryaudit verification. Accordingly our verification of these revenues was limited to the amountsrecorded in the records of Christian School Foundation (Canada) Inc. and we were not able todetermine whether any adjustments might be necessary to donation revenue, excess of revenuesover expenses, changes in fund balances, and cash flows from operations for the period endedJune 30, 2015.

As set out in Note 1 the Foundation was founded on July 18, 2014 as a result of the merger ofthree predecessor foundations. The opening statement of financial position of the Foundation,as at that date was not audited. We are unable to determine the affect, if any, of anymisstatements in the opening statement of financial position on the statement of operationsand cash flows for the period ending June 30, 2015.

Qualified opinion

In our opinion, except for the possible effects of the matter described in the Basis for qualifiedopinion paragraphs, these financial statements present fairly, in all material respects, thefinancial position of Christian School Foundation (Canada) Inc. as at June 30, 2015 and theresults of its operations, changes in fund balances and its cash flows for the period then endedin accordance with Canadian accounting standards for not-for-profit organizations.

Beamsville, Canada Chartered AccountantsLicensed Public Accountants

Audit • Tax • AdvisoryGrant Thornton LLP. A Canadian Member of Grant Thornton International Ltd 4


Statement of Financial Position

June 30, 2015 July 18, 2014

(unaudited)

(Note 1)

ASSETS

Current assets

Cash and cash equivalents 226,179$ 116,518$

Accounts receivable 10,835 22,401

Prepaid expenses 1,673 -

238,687 138,919

Capital assets (Note 4) 932,172 1,087

Cash surrender value of life insurance (Note 5) 83,722 79,654

Investments (Note 6) 3,792,898 3,582,480

5,047,479$ 3,802,140$

LIABILITIES AND EQUITY FUNDS

Current liabilities

Accounts payable and accrued liabilities 60,213$ 52,112$

Unearned rent 10,012 -

70,225 52,112

Callable debt scheduled to be paid after one year (Note 7) 550,000 -

620,225 52,112

Net assets

Unrestricted Fund 146,060 29,226

Internally Restricted Funds -

General Reserve Fund 175,783 119,965

Capital Assets Fund 193,837 1,087

Restructuring Fund - 48,237

Curriculum Development Fund 184,654 -

Scholarship Fund 3,680 -

Externally Restricted Funds 3,723,240 3,551,513

4,427,254 3,750,028

5,047,479$ 3,802,140$

On behalf of the Board of Directors:

Chair Director

DRAFT for discussion purposes only See accompanying notes and schedules to the financial statements 5


Statement of Operations and Changes in Fund Balances

For the period July 18, 2014 to June 30, 2015

Unrestricted Externally Total

Fund RestrictedGeneral Capital Restructuring Curriculum Scholarship FundsReserve Assets Development

Revenues

Donations - seed funding 294,500 - - - - - - 294,500

Donations - other gifts 44,498 67,447 - - - - 399,792 511,737

338,998 67,447 - - - - 399,792 806,237

Revenues from member schools

Membership fees 22,776 - - - - - - 22,776

Management fees 21,361 - - - - - - 21,361

Other fees 6,248 - - - - - - 6,248

50,385 - - - - - - 50,385

Investment income - 9,491 - - - - 218,532 228,023

RDA investor pool income 12,401 - - - - - 11,752 24,153

Interest 936 - - - - - - 936

402,720 76,938 - - - - 630,076 1,109,734

Expenses

Salaries, contract positions and benefits 198,555 - - - - - - 198,555

Office 18,505 - - - - - - 18,505

Communications 11,299 - - - - - - 11,299

Investment administration fees - 1,120 53,562 54,682

Consulting 22,537 - - - - - - 22,537

Fund development 15,149 - - - - - - 15,149

Legal and audit 17,982 - - - - - - 17,982

Membership fees 6,292 - - - - - - 6,292

Rent 7,680 - - - - - - 7,680

Promotion 7,599 - - - - - - 7,599

Amortization - - 447 - - - - 447

305,598 1,120 447 - - - 53,562 360,727

Excess (deficiency) of Revenues over Expenses 97,122 75,818 (447) - - - 576,514 749,007

before Other Receipts (Disbursements)

Other Receipts (Disbursements)

Net assets (liabilities) received (assumed) on combination with

Ontario Association of Christian Schools Foundation (Note 2) (12,158) - 184,291 - 184,654 3,680 - 360,467

Donations to member schools - - - - - - (403,287) (403,287)

Donations to other charities (27,461) - - - - - (1,500) (28,961)

Excess of Revenues over Expenses 57,503 75,818 183,844 - 184,654 3,680 171,727 677,226

Fund balances, beginning of period 29,226 119,965 1,087 48,237 - - 3,551,513 3,750,028

Transfers between funds (Note 8) 59,331 (20,000) 8,906 (48,237) - - - -

Fund balances, end of period 146,060 175,783 193,837 - 184,654 3,680 3,723,240 4,427,254


Internally Restricted Funds


Statement of Cash Flows

For the period July 18, 2014 to June 30, 2015

Operating Activities

Excess of revenue over expenses 677,226$

Items not affecting cash:

Amortization of capital assets 447

Net assets assumed from OACSF (Note 2) , net of

cash included in assets assumed and land transfer tax paid (357,548)

Increase in cash surrender value of life insurance (4,068)

316,057

Changes in non-cash working capital items, net of affects of combinations:

Accounts receivable 11,644

Prepaid expenses (1,673)

Accounts payable and accrued liabilities (4,518)

5,453

Cash flow from operating activities 321,510

Investing Activities

Purchase of capital assets (1,431)

Investments (210,418)

Cash flow from (used by) investing activities (211,849)

Increase in cash 109,661

Cash - beginning of period 116,518

Cash - end of period 226,179$


CHRISTIAN SCHOOL FOUNDATION (CANADA) INC. Notes to Financial Statements Period Ended June 30, 2015

DRAFT FOR DISCUSSION PURPOSES ONLY 8

1. FORMATION OF CHRISTIAN SCHOOL FOUNDATION (CANADA) INC.

The Christian School Foundation (Canada) Inc. (the Foundation) was established on July 17, 2014 by way of

formal amalgamation of three predecessor foundations, the Central Ontario Christian Education

Foundation (COCEF), the Foundation for Niagara & Hamilton area Christian Schools (FNHCS) and the Grand

River Advancement of Christian Education (GRACE) Foundation. The Foundation is incorporated under

the Canada Corporations Act as a not-for-profit organization, and is registered as a public charitable

foundation under the Income Tax Act and, accordingly, is not subject to income taxes.

The vision of the Foundation is to make Christian education excellent and accessible for everyone who

wants it. The purpose of the Foundation is to receive and maintain funds and to apply these funds and the

investment income earned thereon to member independent Christian schools and their affiliated

organizations that are also registered charities under the Income Tax Act, to advance Christian education.

The Foundation currently consists of 24 member schools in the Province of Ontario, and is governed by a

board of directors which includes a representative director from each member school, plus four at-large

directors.

Canadian generally accepted accounting principles for not for profit organizations, as set out in Part III of

the CPA Canada Handbook (“the Handbook”), do not address combinations of not for profit organizations.

Section 1101 of Part III of the Handbook recommends that when the Handbook does not contain guidance

on a particular accounting issue, the organization should consider applying guidance contained in

secondary sources of generally accepted accounting principles (GAAP), including, if appropriate, guidance

issued by accounting bodies in other jurisdictions. The Foundation has elected to apply the principles set

out in Topic 985-805 of the United States’ Financial Accounting Standard Board (FASB) Accounting

Standards Codification (“the Codification”). In determining that it is appropriate to apply Topic 985-805 of

the Codification, the Foundation determined that the guidance contained therein met the criteria set out in

Section 1101 for applying secondary sources of GAAP.

Topic 985-805 of the Codification classifies combinations as either mergers or acquisitions. A merger is a

combination in which the governing bodies of two or more not-for-profit entities cede control of those

entities to create a new not-for-profit entity. An acquisition is a combination in which a not-for-profit

acquirer obtains control of one or more non-profit activities or businesses. The Foundation has determined

that the combination of FNCHS, GRACE and COCEF was a merger. Accordingly, as prescribed by Topic 985-

805 of the Codification, these financial statements have been prepared by applying the “carryover method”

under which the combined entity’s initial financial statements carry forward the assets and liabilities of the

combining entities at their carrying amount. See Schedule 1 for the unaudited opening Statement of

Financial Position of the Foundation as at July 18, 2014.

2. COMBINATION WITH ONTARIO ASSOCIATION OF CHRISTIAN SCHOOLS FOUNDATION

On June 26, 2015, the Foundation concluded a merger agreement with the Ontario Association of Christian

Schools Foundation (OACSF). OACSF was established in 2005 as a registered charity under the Income Tax

Act to promote Christian education, provide educational support programs to Christian schools and to



establish a fund to assist Christian schools. Under the terms of the agreement between the Foundation

and OACSF, the assets, liabilities, obligations and operations of OACSF have been assumed by the

Foundation, and OACSF will be dissolved. Applying the principals of Topic 985-805 of the FASB Accounting

Standards Codification (See Note 1), the Foundation has determined that this combination is an acquisition

for accounting purposes. Accordingly, as prescribed by Topic 985-805 this combination has been recorded

by applying the “acquisition method”, under which the assets and liabilities of OASCF have been recognized

by the Foundation at their fair value and the variance between them has been recognized as a contribution

received. See Schedule 2 for the Statement of Financial Position of OACSF as at June 26, 2015.

As at June 26, 2015, OACSF did not have sufficient cash or marketable securities to enable it to pay for

$188,334 of anticipated curriculum development and scholarship activities in accordance with the

corresponding internally restricted funds it had established for these purposes. OACSF intended to finance

these activities from a future sale of its land and buildings. Similarly, it is the intention of the Foundation to

fund these amounts from the net proceeds of the future sale of the land and buildings after repayment of

related debts and expenses. Should the net proceeds be insufficient to fund the full amount of these

internally restricted funds, the internally restricted funds will be reduced accordingly.

3. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of presentation

These financial statements have been prepared using Canadian accounting standards for not-for-profit

organizations.

Fund accounting

The Foundation has established the following funds to account for and to report on separate activities or

objectives of the Foundation.

Unrestricted Fund

All revenues, expenditures, assets and liabilities relating the day to day operations of the Foundation

are reported in the Foundation’s Unrestricted Fund.

Internally Restricted Funds

General Reserve Fund

From time to time, the Foundation receives donations intended to ensure the long-term viability

of operations, or donations received with no purpose specified. The Foundation maintains these

funds in a general reserve, using them to fund operations as required form time to time, at the

discretion of the Board of Directors.

Capital Assets Fund

The Capital Assets Fund reports the assets, liabilities, revenues and expenses related to the

Foundation’s capital assets.



Restructuring Fund

The Restructuring Fund was established in 2014 to complete the merger referred to in Note 1.

With the merger completed as of the start of this current fiscal period, the Restructuring Fund was

wound up in to the Unrestricted Fund.

Curriculum Development Fund

The Curriculum Development Fund was assumed as part of the combination with OACSF (Note 2),

and is intended to fund programs and activities related to developing learning materials for

Christian schools.

Scholarship Fund

The Scholarship Fund was also assumed as part of the combination with OACSF (Note 2), and is

intended for financial assistance to students and teachers of Christian schools.

Externally Restricted Funds

Resources contributed to the Foundation for the benefit of member schools are reported as externally

restricted funds. The Foundation maintains funds for a variety of purposes, according to the wishes of

donors. Certain funds are designated as benefiting specific member schools, while others are

designated as benefiting all member schools. Investment income earned on externally restricted funds

is reported as revenue of those funds.

Revenue recognition

The Foundation uses the restricted fund method of accounting for revenue. Under this method

contributions designated for the benefit of one or more member schools and investment income earned

on such funds are recognized as revenue of the Externally Restricted Funds. Unrestricted contributions,

membership fees and investment income earned on unrestricted funds are recognized as revenue of the

Unrestricted Fund. Donations received for a specific purpose for which an externally restricted fund has

not been established are recognized as revenue when the funds have been expended on the purpose

specified.

Unrestricted and restricted fund contributions, revenues from member schools and other income are

recognized as revenue when received or receivable, if the amount to be received can be reasonably

estimated and collection is reasonably assured.

Donations in-kind consist of life insurance policies and marketable securities. The donation of a life

insurance policy is recognized as revenue in the period in which legal ownership of the policy is transferred

to the Foundation, in the amount of the cash surrender value at that time. Subsequent changes in the

cash surrender value are recognized annually as they occur. Donations of marketable securities are

recognized as revenue in the period in which the Foundation receives the securities, based on the quoted

market value of the securities at that time.



Capital assets

Capital assets are stated at cost less accumulated amortization. Capital assets are amortized over their

estimated useful lives at the following rates and methods:

Computer equipment 3 years straight-line method

Furniture and fixtures 5 years straight-line method

Building 40 years straight-line method

Amortization expense is reported in the Capital Asset Fund.

The Foundation tests for impairment whenever events or changes in circumstances indicate the carrying

amount of an item of property, plant and equipment may not be recoverable. The recoverability of long-

lived assets is based on the net recoverable amounts determined on an undiscounted cash flow basis. If

the carrying amount of an asset exceeds its net recoverable amount, an impairment loss is recognized to

the extent that fair value is below the asset's carrying amount. Fair value is determined based on quoted

market prices when available, otherwise on discounted cash flows over the life of the asset.

Use of Estimates

The preparation of financial statements in accordance with Canadian accounting standards for not-for-

profit organizations requires management to make estimates and assumptions that affect the reported

amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the

financial statements and the reported amounts of revenue and expenditures for the year. Actual results

could differ from those estimates as additional information becomes available in the future.

These estimates are reviewed periodically and adjustments are made to net income as appropriate in the

year they become known.

Items subject to significant management estimate include the estimated useful life of capital assets.

Financial instruments

The Foundation initially measures its financial assets and liabilities at fair value.

The Foundation subsequently measures all its financial assets at amortized cost, except for investments in

equity instruments that are quoted in an active market which are measured at fair value and investments

in equity instruments that are not quoted in an active market which are measured at cost less any

reduction for impairment. Changes in fair value are recognized in net income.

Financial assets and liabilities measured at amortized cost include cash, accounts receivable, investments,

accounts payable and accrued liabilities, and mortgage payable.

Financial assets measured at cost are tested for impairment when there are indicators of impairment.

Previously recognized impairment losses are reversed to the extent of the improvement provided the



asset is not carried at an amount, at the date of the reversal, greater than the amount that would have

been the carrying amount had no impairment loss been recognized previously. The amounts of any write-

downs or reversals are recognized in net income.

4. CAPITAL ASSETS

5. CASH SURRENDER VALUE ON LIFE INSURANCE

The Foundation is the assignee and owner of life insurance policies with death benefits totalling $412,000

and cash surrender values totalling of $83,722. The cash surrender value of these policies has been

included in these financial statements.

6. INVESTMENTS

All of the Foundation’s investments are currently held under Revocable Deposit Agreements (RDA’s) with

Christian Stewardship Services (CSS). CSS is a registered charity under the Income Tax Act, and is a certified

member of the Canadian Council of Christian Charities. CSS promotes Christian principles of giving and

stewardship, and serves as an investment portfolio manager which provides mortgages to qualified

Christian organizations and manages funds on behalf of investors.

The Foundation’s RDA’s are held within a restricted portfolio maintained by CSS. Investment income

earned thereon, less an administration fee, is credited to the Foundation’s account on a monthly basis.



7. CALLABLE DEBT

As a result of its combination with OACSF (Note 2), the Foundation has assumed the mortgage that OACSF

had used to finance its land and buildings.

June 30, 2015

CRC Community Retirement Savings Plan mortgage, interest

adjusted quarterly, current interest rate of 3%, interest only

payable monthly. $550,000

The mortgage matures on March 31, 2020. During the term of the mortgage, there are no scheduled

principal payments. The Foundation may make principal payments at any time, in increments of $1,000.

However, the lender has the right to demand payment at any time with 75 days’ notice. Accordingly,

although no principal payments are scheduled or anticipated in the next fiscal year, the mortgage is

classified as a current liability.

The mortgage is secured by the land and buildings which have a net book value of $925,000.

8. TRANSFERS BETWEEN FUNDS

Transfers between funds represent reallocations of funds between the various funds the Foundation

maintains to account for its separate activities or objectives. In the current year $48,237 was transferred

from the Restructuring Fund to the Unrestricted Fund to cover initial start-up costs for the Foundation,

$8,906 was transferred to the Capital Asset Fund from the Unrestricted Fund to cover the cost of capital

asset purchases in the current year and the cost of the land transfer tax on the acquisition of the land from

OACSF, and $20,000 was transferred to the Unrestricted Fund from the General Reserve Fund to finance

operating expenses.

9. FINANCIAL INSTRUMENT RISKS

Interest rate risk

Interest rate risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in market interest rates. The Foundation is exposed to interest rate risk arising from

the possibility that changes in interest rates will affect the value of fixed income denominated investments

held within its restricted portfolio maintained by CSS. The Foundation is also exposed to interest rate risk

from the possibility that the interest rate on its’ long term debt may change, since it can be adjusted

quarterly. However, the rate has not changed for several years. There was no significant change in the

Foundation’s exposure to interest rate risk in the period.



Currency risk

Currency risk is the risk that the fair value or future cash flows of a financial instrument will fluctuate

because of changes in foreign exchange rates. The Foundation is exposed to currency rate risk arising from

foreign equities and other investments held within its restricted portfolio maintained by CSS. The risk is

mitigated by the relatively low exposure to foreign investments within the restricted portfolio.

Market risk

Market risk is the risk that the fair value or future cash flows from investments will decline because of

changes in market prices or other factors affecting the value of the investments. There was no significant

change in the Foundation’s exposure to market risk in the period.

Liquidity risk

Liquidity risk is the risk that the Foundation will encounter difficulty in meeting a demand for cash or fund

its obligations as they come due. The rental income on the land and buildings is currently sufficient to

cover all or substantially all of the operating costs and principal repayments related to the land and

buildings. All of the Foundation’s investments are held under RDA’s with CSS, which can generally be

withdrawn in 30 to 90 days.

CHRISTIAN SCHOOL FOUNDATION (CANADA) INC. Schedule 1

Unaudited Opening Statement of Financial Position

As at July 18, 2014

Christian

FNHCS GRACE COCEF School

Foundation

ASSETS (Canada) Inc.

Current assets

Cash 91,823$ 19,245$ 5,450$ 116,518$

Accounts receivable 21,712 - 689 22,401

113,535 19,245 6,139 138,919

Capital assets 1,087 - - 1,087

Cash surrender value of life insurance 61,606 - 18,048 79,654

Investments 2,149,342 415,209 1,017,929 3,582,480

2,325,570$ 434,454$ 1,042,116$ 3,802,140$


Current liabilities

Accounts payable and accrued

liabilities 48,315$ -$ 3,797$ 52,112$

Equity Funds

Unrestricted 7,639 19,245 2,342 29,226

Internally restricted -

General Reserve 119,965 - - 119,965

Capital Assets 1,087 - - 1,087

Restructuring Fund 48,237 - - 48,237

Externally restricted 2,100,327 415,209 1,035,977 3,551,513

2,277,255 434,454 1,038,319 3,750,028

2,325,570$ 434,454$ 1,042,116$ 3,802,140$


CHRISTIAN SCHOOL FOUNDATION (CANADA) INC. Schedule 2

Statement of Financial Position of

Ontario Association of Christian Schools Foundation

As at June 26, 2015

ASSETS

Current assets

Cash 10,394$

Accounts receivable 79

10,473

Capital assets 930,100

940,573$


Current liabilities

Accounts payable and accrued liabilities 12,619$

Unearned rent 10,012

22,631

Callable debt scheduled to be paid after one year 550,000

572,631

Equity Funds

Unrestricted - General Fund (12,158)

Internally restricted funds

Curriculum Development 184,654

Scholarship 3,680

Capital Assets 191,766

367,942

940,573$


2015 audited financials

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