clark county public education foundation, inc. years … · clark county public education...

CLARK COUNTY PUBLIC EDUCATION FOUNDATION, INC.

YEARS ENDED SEPTEMBER 30, 2018 AND 2017



CONTENTS Page Independent auditors' report 1-2 Financial statements: Statements of financial position 3 Statements of activities 4-5 Statements of cash flows 6-7 Statements of functional expenses 8-9 Notes to financial statements 10-20

2018 2017Current assets:

Cash and cash equivalents 1,803,622$ $1,839,318Current portion of grants and contributions receivable 2,091,167 987,294 Inventory 6,153,532 6,255,862 Accrued income 434 473

Total current assets 10,048,755 9,082,947 Other assets:

Cash and cash equivalents - restricted 102,271 102,271 Buildings, furniture and equipment, net depreciation 6,071,503 6,292,509 Investments 5,062,088 4,638,641 Grants and contributions receivable, less current portion 179,345 229,845 Other assets 21,226 40,898 Charitable FLP investments 911,911 898,228

Total other assets 12,348,344 12,202,392

Total assets 22,397,099$ 21,285,339$

Current liabilities:Accounts payable and accrued expenses 339,335$ 253,888$ Agency liability 900,000 Current portion of long term debt 77,498 74,798

Total current liabilities 1,316,833 328,686 Long term liabilities:

Note payable, less current portion 2,606,772 2,679,549 Total long term liabilities 2,606,772 2,679,549

Total liabilities 3,923,605 3,008,235 Net assets:

Unrestricted 4,326,804 5,178,253 Temporarily restricted 14,044,419 12,996,580 Permanently restricted 102,271 102,271

Total net assets 18,473,494 18,277,104

Total liabilities and net assets 22,397,099$ 21,285,339$

part of these financial statements3

CLARK COUNTY PUBLIC EDUCATION FOUNDATION, INC.STATEMENTS OF FINANCIAL POSITION

SEPTEMBER 30 , 2018 AND 2017

ASSETS

LIABILITIES AND NET ASSETS

The accompanying notes are an integral

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Revenue and support:Contributions and grants 897,667$ 8,523,426$ 9,421,093$ Special events 855,383 855,383 Direct special event costs (470,451) (470,451) Investment gain, net 261,936 11,848 273,784

Net revenues 1,544,535 8,535,274 10,079,809

Expenses:Program activities 8,193,127 8,193,127 Supporting activities

Fundraising 465,538 465,538 General and administration 1,224,754 1,224,754

Total expenses 9,883,419 9,883,419

Excess of revenuesover (under) expenses (8,338,884) 8,535,274 196,390

Net assets releasedfrom restrictions:Satisfaction of restrictions 7,487,435 (7,487,435)

Increase (decrease) in net assets (851,449) 1,047,839 196,390

Net assets, beginning of year 5,178,253 12,996,580 102,271 18,277,104

Net assets, end of year 4,326,804$ 14,044,419$ 102,271$ 18,473,494$

The accompanying notes are an integralpart of these financial statements

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YEAR ENDED SEPTEMBER 30, 2018

STATEMENT OF ACTIVITIES

Temporarily PermanentlyUnrestricted Restricted Restricted Total

Revenue and support:Contributions and grants 528,005$ 8,370,665$ 8,898,670$ Special events 652,091 652,091 Direct special event costs (320,218) (320,218) Investment gain, net 376,328 4,464 380,792

Net revenues 1,236,206 8,375,129 9,611,335

Expenses:Program activities 7,985,609 7,985,609 Supporting activities

Fundraising 301,839 301,839 General and administration 1,302,191 1,302,191

Total expenses 9,589,639 9,589,639

Excess of revenuesover (under) expenses (8,353,433) 8,375,129 21,696

Net assets releasedfrom restrictions:Satisfaction of restrictions 9,724,957 (9,724,957)

Increase in net assets 1,371,524 (1,349,828) 21,696

Net assets, beginning of year 3,806,729 14,346,408 102,271 18,255,408

Net assets, end of year 5,178,253$ 12,996,580$ 102,271$ 18,277,104$


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STATEMENT OF ACTIVITIES


2018 2017

Cash flows from operating activities:Contributions 5,482,087$ 5,287,170$ Return on investments 84,385 75,892 Interest (82,536) (105,912) Grants and allocations paid (2,360,749) (2,152,622) Cash paid to suppliers and employees (2,841,114) (3,755,963)

Net cash flow provided by (used in) operating activities 282,073 (651,435)

Cash flows from investing activities:Proceeds from redemption and sale of investments 318,194 850,915 Purchase of investments (565,887) (451,720) Purchase of property and equipment (29,044)

Net cash flow provided by (used in) investing activities (247,693) 370,151

Cash flows from financing activities:Payments on note payable (70,076) (65,553)

Net cash flow used in financing activities (70,076) (65,553)

Net increase (decrease) in cash and cash equivalents (35,696) (346,837)

Cash and cash equivalents, beginning of year 1,941,589 2,288,426

Cash and cash equivalents, end of year 1,905,893$ 1,941,589$



STATEMENTS OF CASH FLOWS



2018 2017

Increase (decrease) in net assets 196,390$ 21,696$

Adjustments to reconcile excess supportand revenue over expenses:

Depreciation 221,004 216,086 Net realized and unrealized (gain) loss on investments (189,437) (304,620) Noncash donations (3,741,016) (4,098,048) Noncash donated expenses 3,843,347 3,881,906

(Increase) decrease in:Receivables (1,053,373) (165,543) Accrued income 39 (281) Other assets 19,672 (27,299)

Increase (decrease) in:Accounts payable and accrued expenses 85,447 (175,332) Agency liability 900,000

Total adjustments 85,683 (673,131)

Net cash provided by operating activities 282,073$ (651,435)$



STATEMENTS OF CASH FLOWS, CONTINUED


Reconciliation of increase in net assetsto net cash flow from operating activities


InitiativesProjects Initiatives Initiatives Education

& Services Technology Literacy Leadership G&A Fundraising Total

Direct services 2,315,165$ $ 34,299$ 11,284$ $ 3,275$ 2,364,023$ Depreciation and amortization 222,313 222,313

In-kind 125,431 42,186 2,954,964 354,775 167,342 3,644,698 Insurance 101 44 1,515 13,688 29,900 569 45,817

Interest expense 853 371 12,813 51,979 30,557 4,814 101,387 Maintenance and utilities 1,011 440 15,182 63,713 35,460 115,806

Meals and banquets 34,771 5,628 68,760 5,559 1,968 116,686 Miscellaneous 47,851 846 16,083 57,359 44,899 13,122 180,160 Printing and postage 11,642 348 6,338 27,317 14,595 61,891 122,131 Professional fees 300,669 19 37,734 433,114 33,959 805,495 Salaries and benefits 199,170 89,350 512,107 565,480 423,079 211,653 2,000,839 Software licenses 18,930 150 2,249 29,401 50,730 Training, travel and conferences 100,246 2,590 9,337 257 904 113,334

Total expenses 3,155,840$ 91,568$ 686,475$ 4,259,244$ 1,224,754$ 465,538$ 9,883,419$

Total program services 8,193,127$


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STATEMENT OF FUNCTIONAL EXPENSES


Program SupportingServices Activities

InitiativesProjects Initiatives Initiatives Education

& Services Technology Literacy Leadership G&A Fundraising Total

Direct services 2,054,117$ $ 77,667$ 20,838$ $ 250$ 2,152,872$ Depreciation and amortization 216,086 216,086

In-kind 117,079 115,693 3,130,597 354,725 91,175 3,809,269 Insurance 7,087 30,617 37,704

Interest expense 56,584 49,328 105,912 Maintenance and utilities 129,163 129,163

Meals and banquets 25,065 5,665 86,584 2,887 6,824 127,025 Miscellaneous 22,164 1,318 3,633 88,159 40,989 12,510 168,773 Printing and postage 10,639 204 7,030 13,903 10,785 62,608 105,169 Professional fees 224,253 148,191 441,575 27,832 841,851 Salaries and benefits 234,260 38,572 424,924 595,264 424,891 122,159 1,840,070 Software licenses 4,128 159 3,062 12,912 2,381 22,642 Training, travel and conferences 7,471 7,236 12,386 1,976 3,932 33,001

Write-off uncollectible receivables 102 102

Total expenses 2,699,278$ 155,787$ 674,505$ 4,456,039$ 1,302,191$ 301,839$ 9,589,639$

Total program services 7,985,609$

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STATEMENT OF FUNCTIONAL EXPENSES


Program SupportingServices Activities


NOTES TO FINANCIAL STATEMENTS

SEPTEMBER 30, 2018 AND 2017 1. Nature of activities and significant accounting policies: Organization:

The Clark County Public Education Foundation, dba The Public Education Foundation (Foundation), is a nonprofit Nevada corporation established in 1991 to mobilize global and community resources to support public education in Clark County, Nevada. The Foundation works collaboratively with educators in the Clark County School District to impact public education through initiatives, programs and promising practices designed to improve student performance and advance quality educational opportunities for all children.

In partnership and collaboration with local, regional and national businesses, governments and community organizations, the Foundation has developed dozens of innovative initiatives and programs that range from helping educators electronically share ideas to strengthening school leadership and recognizing best practices, to establishing early childhood and parent engagement literacy programs. The Foundation’s Early Learning, Family Engagement and Literacy programs include Literacy Liftoff, Family Literacy and Reach Out and Read which seek to increase development for children of non-English speaking families and to promote school readiness and early literacy. The goal of these programs is also to provide children from low-income families with access to quality pre-school, after-school and out-of-school experiences to close the readiness gap in the early stages of learning. Every year, the Foundation awards grants to teachers and hundreds of scholarships to graduating seniors. Since establishing the Scholarship Program in 1994, the Foundation has awarded more than 6,841 scholarships totaling over $13 million.

The Teacher EXCHANGE™ is a re-use and recycling resource center developed by the Foundation to support public school teachers while encouraging our community to protect and sustain the environment. Donations of supplies, surplus materials and office equipment are collected from the community and provided to teachers for use in their classrooms.

Artists 4 Kidz is an organized effort that connects the creative energy of the Las Vegas community with students in the Clark County School District in order to enrich their exposure to the arts and improve their education experience.

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NOTES TO FINANCIAL STATEMENTS, CONTINUED

SEPTEMBER 30, 2018 AND 2017 1. Nature of activities and significant accounting policies, continued: Organization, continued:

The Leadership Institute of Nevada (Institute) is teaching the leadership of our schools, both at the executive level and in the classroom, to be strategic thinkers. It takes great leaders to solve the problems facing public education and deliver improved outcomes for students. The Institute consists of several high-impact programs: the Executive Leadership Academy, the Teacher Leader Academy, the 21st Century Site-based Leadership Program and regional summits. The Institute’s programs are designed to catalyze a culture-shift by creating and supporting a critical mass of good-to-great leaders throughout the state. Designed with nationally recognized thought leaders, the Institute offers a responsive and cutting-edge curriculum within a Nevada context. This place-based approach is not only cost efficient but also allows participants to immediately apply big ideas to local challenges.

Revenue and support:

The Foundation receives substantially all of its financial support from businesses and residents in the Las Vegas, Nevada area. Contributions are recognized when the donor makes a promise to give to the Foundation that is, in substance, unconditional. Contributions that are not intended to be used in the current period or are restricted by the donor are reported as increases in temporarily restricted net assets. When the contribution becomes available or the restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets.

The Foundation follows the provisions of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (ASC) 958, Financial Statements of Not-for-Profit Organizations, which requires a foundation that receives assets for a financially interrelated beneficiary to recognize contribution revenue when the foundation receives assets from donors. Therefore, all contributions are recognized as revenues, even those contributions where the funds are specifically designated by donors for the benefit of Clark County School District programs and the Foundation does not have the discretion to redirect the use of the assets transferred. Consequently, cash or other assets received and transferred are also recognized as program or other expenses.

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SEPTEMBER 30, 2018 AND 2017 1. Nature of activities and significant accounting policies, continued: Donated services, use of facilities and equipment:

Certain contributed services and use of facilities are recorded as support and expenses at fair market value when determinable, otherwise at values indicated by the donor. During the year, the Foundation received contributions of service and use of facilities and equipment from various donors, including Clark County School District, in the amount of $830,080 in 2018, and $839,572 in 2017. The Foundation also received a substantial amount of volunteer hours donated by individuals to the various programs that are not reflected in the financial statements since their services do not meet the recognition criteria.

Use of estimates:

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

Cash and cash equivalents:

For purposes of the statements of financial position and statements of cash flows, the Foundation considers all highly liquid instruments purchased with the maturity of three months or less to be cash equivalents. The cash consists of demand, savings and money market accounts.

Investments:

All investments in mutual funds have readily determinable fair values and are measured at fair value in the statements of financial position. Investment income or loss (including gains and losses on investments, interest, and dividends) is included in the statements of activities as increases and decreases in unrestricted net assets unless restricted by the donor.

The investments in the charitable family limited partnerships (FLP) are valued based upon the Foundation’s capital account in the partnerships which are then discounted for the lack of marketability and control over the partnership.

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SEPTEMBER 30, 2018 AND 2017

1. Nature of activities and significant accounting policies, continued: Property and equipment:

Expenditures for property and equipment are capitalized at cost when purchased or fair market value when donated with an original cost or value of $2,500 or more. The Foundation’s policy is to provide depreciation by use of the straight line method.

Inventory:

Inventory consists of donated school supplies, computers, books and various other items used in the Teacher EXCHANGE™ Program. Inventory also includes $11,382 in 2018 and $10,691 in 2017 of donated items to be auctioned off at special events. The Foundation values inventory at estimated fair value at the time of contribution.

Income tax:

The Foundation has received a letter dated December 19, 1991 exempting it, except on net income derived from unrelated business activities, from federal income taxes under Internal Revenue Code section 501(c)(3) and is a publicly supported organization as described in Internal Revenue Code sections 509(a)(1) and 170(b)(1)(A)(vi). The Foundation files its forms 990 and 990-T (unrelated business activity) and believes that it has appropriate support for any tax positions taken, and as such, does not have any uncertain tax positions that are material to the financial statements. The Foundation’s federal exempt organization’s tax returns are subject to examination by the IRS for three years after the forms were filed.

2. Temporarily restricted net assets:

Temporarily restricted net assets are restricted for the following purposes: 2018 2017

Literacy programs $ 550,667 $ 740,677 Charitable FLP investments 736,909 741,873 Other programs 9,994,379 10,069,736 Scholarships 2,587,864 1,262,931 Focus on Youth 99,527 108,527 William McCool Science Center 75,073 72,836

Total $14,044,419 $12,996,580

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3. Permanently restricted net assets:

Permanently restricted net assets consist of life insurance proceeds received where the donor stipulated that the original principal of the proceeds, $102,271, be held and invested by the Foundation indefinitely. The income earned annually by the segregated funds is to be expended and used for the support of a particular elementary school named after the donor.

4. Promises to give:

Certain Nevada businesses and individuals have made pledges in support of the Foundation. In accordance with FASB ASC 958, Not-for-Profit Entities, the promises to give are recorded at their present value of $2,270,512 at September 30, 2018. Pledges of $2,111,741 are scheduled to be received in 2019 with $35,500 to be received in 2020, and $143,845 to be received thereafter. A discount is applied to the promises to give that carryover into future years and amounts to $20,573 as of September 30, 2018. The entire amount is considered collectible.

5. Investments:

The Foundation’s investments consist of:

Unrealized Market Cost Gain (Loss) Value

2018 Mutual funds $ 3,857,883 $ 707,924 $ 4,565,807 Certificates of deposit 496,281 496,281 Totals $ 4,354,164 $ 707,924 $ 5,062,088 Unrealized Market Cost Gain (Loss) Value

2017 Mutual funds $ 3,501,141 $ 641,848 $ 4,142,989 Certificates of deposit 495,652 495,652 Totals $ 3,996,793 $ 641,848 $ 4,638,641

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SEPTEMBER 30, 2018 AND 2017 5. Investments, continued:

Reported investment return for the years consist of:

2018 2017 Interest and dividend income $ 99,742 $ 91,451 Charitable FLP investment earnings 24,865 6,267 Less investment expenses (15,357) (15,558) 109,250 82,160

Realized gains 98,497 152,130 Net unrealized appreciation 66,037 146,502

Total $ 273,784 $ 380,792

6. Charitable family limited partnership (FLP) investments:

The Foundation was the recipient of a 97% limited partnership interest in a charitable family limited partnership with all the rights, powers and privileges of a limited partner. Per the partnership agreement, the partnership is to operate as an investment entity with the Foundation receiving annual distributions throughout the life of the partnership. Upon the death of the general partner the Foundation will receive a buyout of the Foundation’s capital account value at the time of death. The Foundation recorded as a donation at the time of receipt the capital account value of $1,210,932 less a 20% discount for the lack of control and marketability of the limited partnership interest. The Foundation adjusts the value of the partnership interest based upon the yearly activity of the partnership.

As of September 30, 2018, the estimated value of the limited partnership interest was $911,911 (partnership’s ending capital account of $1,131,911 less a discount of $220,000).

7. Fair value measurements:

FASB ASC 820, Fair Value Measurements, establishes a framework for measuring fair value. That framework provides a fair value hierarchy that prioritizes the inputs to valuation techniques used to measure fair value. The hierarchy gives the highest priority to unadjusted quoted prices in active markets for identical assets or liabilities (level 1 measurement) and the lowest priority to unobservable inputs (level 3 measurements). The three levels of the fair value hierarchy under FASB ASC 820 are described as follows:

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SEPTEMBER 30, 2018 AND 2017 7. Fair value measurements, continued:

Level 1 Inputs to the valuation methodology are unadjusted quoted prices for identical assets or a liability in active markets the Foundation has the ability to access.

Level 2 Inputs to the Valuation methodology include:

• Quoted prices for similar assets or liabilities in active markets; • Quoted prices for identical or similar assets or liabilities in inactive

markets; • Inputs other than quoted prices that are observable for the asset or

liabilities; • Inputs that are derived principally from or corroborated by observable

market data by correlation or other means.

Level 3 Inputs to the valuation methodology are unobservable and significant to the fair value measurement.

The asset or liability’s fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to be the fair value measurement. Valuation techniques used need to maximize the use of observable inputs and minimize the use of unobservable inputs.

Following is a description of the valuation methodologies used for assets measured at fair value.

Mutual funds: Valued at the closing price reported on the active markets on which the mutual funds are traded.

Certificates of deposit: Valued at original cost plus accrued interest.

Charitable FLP investments: Valued at the donated value less discount for lack of control and marketability and adjusted for the yearly activity of the partnerships.

The preceding methods described may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values. Further, although the Foundation believes its valuation methods are appropriate and consistent with other markets, the use of different methodologies or assumptions to determine the fair value of certain financial instruments could result in a different fair value measurement at the reporting date.

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7. Fair value measurements, continued:

Fair values of assets and liabilities measured on a recurring basis at September 30, 2018 and 2017 are as follows:

Quoted Prices In Active Significant Markets For Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair value (Level 1) (Level 2) (Level 3)

September 30, 2018 Mutual funds: Intermediate-term bond $ 1,110,783 $ 1,110,783 $ $ Large blend 492,019 492,019 Emerging markets 117,636 117,636 Developed markets 467,813 467,813 Large growth 378,578 378,578 Large value 371,327 371,327 Mid blend 327,488 327,488 Short-term bond 1,110,151 1,110,151 Small blend 190,012 190,012 Certificates of deposit 496,281 496,281 Charitable FLP investments 911,911 911,911

Total $ 5,973,999 $ 4,565,807 $ 496,281 $ 911,911

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7. Fair value measurements, continued: Quoted Prices In Active Significant Markets For Other Significant Identical Observable Unobservable Assets Inputs Inputs Fair value (Level 1) (Level 2) (Level 3)

September 30, 2017 Mutual funds: Intermediate-term bond $ 1,011,560 $ 1,011,560 $ $ Large blend 450,119 450,119 Emerging markets 103,716 103,716 Developed markets 427,656 427,656 Large growth 343,971 343,971 Large value 345,957 345,957 Mid blend 300,189 300,189 Short-term bond 1,012,686 1,012,686 Small blend 147,135 147,135 Certificates of deposit 495,652 495,652 Charitable FLP investments 898,228 898,228

Total $ 5,536,869 $ 4,142,989 $ 495,652 $ 898,228

Level 3 Gains and Losses

The following table sets forth a summary of changes in the fair value of the plan’s level 3 asset for the year ended September 30, 2018.

Charitable FLP Investments

Balance, beginning of the year $ 898,228 Allocation of income 24,865 Distributions (11,182)

Balance, end of the year $ 911,911

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SEPTEMBER 30, 2018 AND 2017 8. Property and equipment:

The cost, accumulated depreciation, and useful lives by assets classification are as follows: Estimated Accumulated Useful Cost Depreciation Life 2018

Vehicle $ 6,865 $ 6,865 5 Years Furniture and office equipment 104,692 58,747 5 Years Computer equipment and software 355,950 304,784 5 Years Buildings and improvements 6,553,725 579,333 40 Years

Total $ 7,021,232 $ 949,729

2017

Vehicle $ 6,865 $ 5,835 5 Years Furniture and office equipment 104,692 46,644 5 Years Computer equipment and software 355,950 247,576 5 Years Buildings and improvements 6,553,725 428,668 40 Years

Total $ 7,021,232 $ 728,723

9. Note payable:

The Foundation obtained a note payable from a financial institution in an amount up to $3,000,000 to purchase and remodel a building to house the Foundation’s operations. The Foundation was able to draw upon the note, with interest fixed at a rate of 3.55% which accrued monthly, until the conversion date. The conversion of the note occurred on June 16, 2014 with a total principal amount of $2,985,711. The note was refinanced in April 2017. The note is amortized based upon a maturity of 25 years which requires monthly payments of $14,289 at an interest rate of 3.55%. The actual note matures on September 10, 2021 at which time all unpaid principal and accrued interest shall be due and payable. The note is collateralized by the purchased building. As of September 30, 2018, the balance on the note is $2,684,270. Long term debt maturities for each of the three subsequent years are as follows: $77,498; $80,294 and $2,526,478.

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SEPTEMBER 30, 2018 AND 2017 10. Functional allocation of expenses:

The costs of providing the various programs and activities have been summarized on a functional basis in the statement of functional expenses. Accordingly, certain costs have been allocated among the programs and supporting services benefited.

The program services shown on the functional expenses are broken out by projects and services, initiatives technology, initiatives literacy, and initiatives education leadership. Projects and services includes grants, scholarship development, school projects and school services. Initiatives technology includes InterAct. Initiatives literacy includes Reach Out and Read, Family Literacy, and Library Enhancement. Initiatives education leadership includes the Teacher EXCHANGETM, and Leadership Institute.

The in-kind line item consists of in-kind salaries, rent, equipment, printing, advertising, Teacher EXCHANGETM donations, and fundraising facilities.

11. Concentration of credit risk and uncertainties:

The Foundation receives its support from the general public as well as the Clark County School District. Accordingly, future support and activities could be affected by adverse changes in economic and political conditions in the Las Vegas area, including public perception of the needs and performance of the Foundation and the CCSD. Cash in one bank account exceeded the current FDIC insurance limit by $1,602,698 at September 30, 2018 and $1,217,102 at September 30, 2017.

The Foundation invests in various investment securities. Investment securities are exposed to various risks such as interest rate, market, and credit risks. Due to the level of risk associated with certain investment securities, it is at least reasonably possible that changes in the values of investment securities may occur in the near term and that such changes could materially affect the Foundation’s balances and the amounts reported in the statement of financial position. Financial instruments that potentially expose the Foundation to concentrations of credit and market risk consist primarily of cash equivalents and investments.

12. Subsequent events:

The Foundation has evaluated subsequent events through April 3, 2019, the date the financial statements were available to be issued.

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