PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM
ENDOWMENT FUND, INC.
PHOENIX, ARIZONA
CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JUNE 30, 2014
INDEPENDENT AUDITORS' REPORT
1 CONSOLIDATED FINANCIAL STATEMENTS CONSOLIDATED STATEMENT OF FINANCIAL POSITION
3 CONSOLIDATED STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
4 CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES
5 CONSOLIDATED STATEMENT OF CASH FLOWS
6 NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
7 SUPPLEMENTARY INFORMATION CONSOLIDATING STATEMENT OF FINANCIAL POSITION
33 CONSOLIDATING STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
34 CliftonLarsonAllen LLP
CLAconnect.com
INDEPENDENT AUDITORS’ REPORT
Board of Directors
Phoenix Art Museum and
Phoenix Art Museum Endowment Fund, Inc.
Phoenix, Arizona
We have audited the accompanying consolidated financial statements of Phoenix Art Museum and
Phoenix Art Museum Endowment Fund, Inc., which comprise the consolidated statement of financial
position as of June 30, 2014, and the related consolidated statements of activities and changes in net
assets, functional expenses and cash flows for the year then ended, and the related notes to the
consolidated financial statements.
Management's Responsibility for the Consolidated Financial Statements
Management is responsible for the preparation and fair presentation of these consolidated financial
statements in accordance with 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 of consolidated financial statements that are free from material
misstatement, whether due to fraud or error.
Auditors’ Responsibility
Our responsibility is to express an opinion on these consolidated financial statements based on our
audit. We conducted our audit in accordance with auditing standards generally accepted in the United
States of America. Those standards require that we plan and perform the audit to obtain reasonable
assurance about whether the consolidated financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in
the consolidated financial statements. The procedures selected depend on the auditors’ judgment,
including the assessment of the risks of material misstatement of the consolidated financial statements,
whether due to fraud or error. In making those risk assessments, the auditor considers internal control
relevant to the entity's preparation and fair presentation of the consolidated financial statements in
order to design audit procedures that are appropriate in the circumstances, but not for the purpose of
expressing an opinion on the effectiveness of the entity's internal control. Accordingly, we express no
such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the
reasonableness of significant accounting estimates made by management, as well as evaluating the
overall presentation of the consolidated financial statements.
We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for
our audit opinion.
(1)
Opinion
In our opinion, the consolidated financial statements referred to above present fairly, in all material
respects, the financial position of Phoenix Art Museum and Phoenix Art Museum Endowment Fund,
Inc. as of June 30, 2014, and changes in their net assets and their cash flows for the year then ended
in accordance with accounting principles generally accepted in the United States of America.
Report on Supplementary Information
Our audit was conducted for the purpose of forming an opinion on the consolidated financial statements
as a whole. The consolidating statement of financial position, and consolidating statement of activities
and changes in net assets, are presented for purposes of additional analysis and are not a required
part of the consolidated financial statements. Such information is the responsibility of management and
was derived from and relates directly to the underlying accounting and other records used to prepare
the consolidated financial statements. The information has been subjected to the auditing procedures
applied in the audit of the consolidated financial statements and certain additional procedures, including
comparing and reconciling such information directly to the underlying accounting and other records
used to prepare the consolidated financial statements or to the consolidated financial statements
themselves, and other additional procedures in accordance with auditing standards generally accepted
in the United States of America. In our opinion, the information is fairly stated in all material respects in
relation to the consolidated financial statements as a whole.
Report on Summarized Comparative Information
We have previously audited Phoenix Art Museum’s and Phoenix Art Museum Endowment Fund, Inc.’s
2013 consolidated financial statements, and we expressed an unmodified audit opinion on those
audited financial statements in our report dated March 19, 2014. In our opinion, the summarized
comparative information presented herein as of and for the year ended June 30, 2013, is consistent, in
all material respects, with the audited financial statements from which it has been derived.
a
Phoenix, Arizona
November 11, 2014
An independent member of Nexia International
(2)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATED STATEMENT OF FINANCIAL POSITION
JUNE 30, 2014
(WITH COMPARATIVE TOTALS AT JUNE 30, 2013)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable
Pledges receivable
Grants receivable
Museum store inventories
Prepaid expenses
Unrestricted
Temporarily
Restricted
Endowment
Restricted
$
$
$
Total current assets
424,942
111,166
425,843
103,579
1,478,513
517,670
47,500
-
-
Totals
2014
$
2013
1,903,455
111,166
517,670
47,500
425,843
103,579
$
1,322,141
72,125
321,436
625,559
371,242
205,467
1,065,530
2,043,683
-
3,109,213
2,917,970
CASH DUE FROM INTERNAL FUNDS
-
2,279,255
-
2,279,255
2,814,594
CHARITABLE GIFT ANNUITIES
-
522,741
-
522,741
1,259,052
5,384,657
-
-
5,384,657
5,680,733
ASSETS RESTRICTED TO LONG-TERM
INVESTMENT PURPOSES, net
-
540,836
16,140
556,976
673,599
LAND HELD FOR SALE
-
-
1,104,000
1,104,000
1,104,000
INVESTMENTS
-
-
25,422,566
25,422,566
23,800,603
5,386,515
$ 26,542,706
$ 38,379,408
$ 38,250,551
2014
PROPERTY AND EQUIPMENT, net
TOTAL ASSETS
$
6,450,187
$
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable and accrued expenses
Deferred revenue
Unrestricted
Temporarily
Restricted
Endowment
Restricted
$
$
$
Total current liabilities
1,587,996
377,300
-
-
Totals
$
1,587,996
377,300
2013
$
1,274,712
376,520
1,965,296
-
-
1,965,296
1,651,232
LINE OF CREDIT
3,465,010
-
-
3,465,010
2,100,010
CASH DUE TO INTERNAL FUNDS
2,279,255
-
-
2,279,255
2,814,594
-
377,664
-
377,664
993,346
CHARITABLE GIFT ANNUITIES LIABILITY
ACCRUED PENSION LIABILITY
Total liabilities
NET ASSETS
Unrestricted:
Board designated for working capital reserve
Unrestricted endowment gains (losses)
Undesignated
Total unrestricted
Board Reserve Fund
Donor restricted
-
-
529,233
1,435,741
377,664
-
8,616,458
8,994,923
650,000
(2,577,427)
-
1,499,830
-
650,000
1,499,830
(2,577,427)
650,000
(161,782)
(1,296,790)
(1,927,427)
-
1,499,830
(427,597)
(808,572)
5,008,851
25,042,876
138,820
30,051,727
188,968
29,875,232
5,008,851
26,542,706
29,762,950
29,255,628
5,386,515
$ 26,542,706
$ 38,379,408
$ 38,250,551
138,820
(1,788,607)
TOTAL NET ASSETS
TOTAL LIABILITIES AND NET ASSETS
529,233
8,238,794
$
6,450,187
$
See accompanying Notes to Consolidated Financial Statements.
(3)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATED STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2014
(WITH COMPARATIVE TOTALS FOR THE ENDED JUNE 30, 2013)
OPERATING ACTIVITIES
Revenues:
Admissions
Museum store income
Membership income
Projects and fundraising activities
Less cost of direct donor benefits
Dividend and interest income
Other
Total revenues
Public support:
Contributions:
Private
Less cost of direct donor benefits
Change in charitable gift annuities
Governmental
Donated facilities, materials and services:
Governmental
Private
Total public support
Net assets released from restrictions:
Purpose restrictions met
Total revenues and public support
Expenses:
Programs services
Management and general
Fundraising
Total expenses
Unrestricted
Temporarily
Restricted
Endowment
Restricted
$
$
$
1,477,920
839,565
1,138,158
1,077,293
(779,142)
748,325
730,633
5,232,752
-
-
-
-
2,156,941
4,238
-
199,494
-
4,892,897
582,625
-
8,585,317
2,161,179
2,479,605
16,297,674
3,156,834
(142,235)
95,196
Totals
2014
$
2013
1,477,920
839,565
1,138,158
1,077,293
(779,142)
748,325
730,633
$
633,966
537,577
989,353
1,369,981
(551,135)
703,959
544,173
5,232,752
4,227,874
5,513,269
(142,235)
4,238
95,196
4,169,250
(133,710)
(28,492)
103,358
-
4,892,897
582,625
4,693,127
667,174
199,494
10,945,990
9,470,707
(2,479,605)
-
-
-
(318,426)
199,494
16,178,742
13,698,581
13,497,025
2,448,277
1,262,873
-
-
13,497,025
2,448,277
1,262,873
11,789,273
2,114,550
1,015,014
17,208,175
-
-
17,208,175
14,918,837
199,494
(1,029,433)
(1,220,256)
OPERATING PROFIT (LOSS)
(910,501)
(318,426)
NON-OPERATING ACTIVITIES
Net realized/unrealized investment gain (loss)
Acquisitions of fine art
261,386
(492,702)
94,616
-
1,673,455
-
2,029,457
(492,702)
1,335,154
(533,960)
TOTAL NON-OPERATING ACTIVITIES
(231,316)
94,616
1,673,455
1,536,755
801,194
(223,810)
1,872,949
507,322
5,232,661
24,669,757
29,255,628
29,674,690
5,008,851
$ 26,542,706
$ 29,762,950
$ 29,255,628
CHANGES IN NET ASSETS
NET ASSETS, BEGINNING OF YEAR
NET ASSETS, END OF YEAR
(1,141,817)
(646,790)
$ (1,788,607)
See accompanying Notes to Consolidated Financial Statements.
(4)
$
(419,062)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES
YEAR ENDED JUNE 30, 2014
(WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2013)
Program Services
Education
and
Community
Services
Collections
and
Exhibits
Salaries and employee benefits:
Salaries and wages
Employee benefits
$
Total salaries, wages and
employee benefits
Advertising and marketing
Exhibition fees
Audit fees
Bad debt expense
Bank fees
Catering and hospitality
Collections conservation
Collections management
Conferences and meetings
Cost of sales
Depreciation and amortization
Dues and subscription
Equipment rental
Facilities - other
Fundraising expenses - other
Fundraising professionals
Honoraria
In-kind contributions
Insurance
Interest expense
Internet and website
Legal fees
Lodging and meals
Office expense - other
Other
Postage and shipping
Printing
Production and exhibition costs
Professional development
Professional and search fees
Repairs and maintenance
Supplies
Support organizations
Telephone
Travel
Utilities
TOTAL FUNCTIONAL EXPENSES
$
2,136,393
304,478
$
235,532
29,981
Museum
Store
$
134,280
21,104
Supporting Services
Total
Program
Services
Membership
$
118,366
10,120
$
2,624,571
365,683
Management
and
General
$
858,665
148,024
Total
Supporting
Services
Fundraising
$
510,071
50,453
$
Total
2014
2013
1,368,736
198,477
$ 3,993,307
564,160
$ 3,651,147
970,251
2,440,871
265,513
155,384
128,486
2,990,254
1,006,689
560,524
1,567,213
4,557,467
4,621,398
643,106
540,233
4,264
27
12,271
37,073
11,661
4,524
460,609
54,378
2,218
246,053
2,323
31,350
3,940,334
94,898
27,578
7,104
26,179
16,366
698,790
88,267
554,015
358
242,809
59,365
8,488
426,026
2,354
71,225
242,429
191
14,227
26,030
5,261
68,469
23,398
24,778
31,002
2,141
13,333
447,115
3,025
280
11,354
132
2,900
13,129
27,515
116,950
3,688
10,375
38,585
29,291
1,416
176
659
477,956
31,123
1,304
8,282
165
124,570
843
8
1,400
529
31,844
32
348
2,521
446
3,659
8,162
72
600
21,693
18,673
926
15,744
2,958
1,860
200
120,711
301
126
7,017
46,727
97,421
99
1,081
2,183
176
2,916
644,785
554,460
4,264
627
60,170
37,073
11,661
10,444
477,956
578,874
80,006
42,740
288,295
6,489
44,883
4,632,730
99,067
27,578
7,518
45,950
17,027
780,261
198,849
581,977
358
363,361
63,053
21,492
426,026
2,354
113,645
282,798
8,568
33,990
108,161
19,355
2,597
18,673
28,990
4,510
68,541
2,777
509,398
23,768
35,845
17,962
34,218
14,933
94,572
3,195
4,490
6,625
25,565
2,051
221,947
51,275
16,980
19,186
25,340
38,076
191
52
92
50,936
889
24,898
10,265
31,706
4,438
29,469
2,900
333,394
451
14,925
100,612
24,925
47,221
2,322
2,882
3,677
1,491
10,242
4,371
8,759
33,990
52
108,253
70,291
3,486
43,571
39,255
36,216
72,979
32,246
2,900
842,792
24,219
35,845
17,962
34,218
29,858
195,184
3,195
29,415
53,846
27,887
2,051
224,829
51,275
20,657
20,677
35,582
42,447
653,544
554,460
38,254
679
108,253
130,461
37,073
11,661
13,930
477,956
622,445
119,261
78,956
361,274
38,735
47,783
5,475,522
123,286
35,845
45,540
34,218
37,376
241,134
20,222
809,676
252,695
609,864
2,409
588,190
114,328
42,149
426,026
23,031
149,227
325,245
436,480
70,102
37,600
45,197
79,631
101,771
24,819
2,012
5,782
300,144
575,824
104,503
68,165
348,111
50,104
10,523
29,540
5,360,301
104,924
21,282
25,547
357
20,496
137,231
12,227
214,965
200,158
493,538
7,873
222,159
152,064
34,788
545,903
22,780
110,723
319,815
469,970
$ 13,497,025
2,448,277
$ 1,262,873
3,711,150
$ 17,208,175
$ 14,918,837
10,997,546
$
1,178,682
$
850,827
$
See accompanying Notes to Consolidated Financial Statements.
(5)
$
$
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
YEAR ENDED JUNE 30, 2014
(WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2013)
2014
CASH FLOWS FROM OPERATING ACTIVITIES
Changes in net assets
Adjustments to reconcile changes in net assets to
net cash used in operating activities:
Depreciation and amortization
Change in discount on assets restricted
Net realized/unrealized investment (gain)/loss
Change in charitable gift annuities, net
Change in operating assets and liabilities:
Decrease (increase) in:
Accounts receivable
Pledges receivable
Grants receivable
Museum store inventories
Prepaid expenses
Increase (decrease) in:
Accounts payable and accrued expenses
Deferred revenue
Accrued pension liability
$
Net cash used in operating activities
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments
Proceeds from the sale of investments
Purchases of property and equipment
Proceeds from assets restricted to long-term investment
purposes
Net cash provided by investing activities
CASH FLOWS FROM FINANCING ACTIVITIES
Proceeds from line of credit
Net cash provided by financing activities
NET INCREASE (DECREASE) IN CASH AND CASH EQUIVALENTS
507,322
2013
$
622,445
56,994
(2,029,457)
120,629
575,824
56,994
(1,335,154)
(1,465)
(39,041)
(196,234)
578,059
(54,601)
101,888
45,386
41,739
(604,717)
26,006
(96,668)
313,284
780
(906,508)
485,949
(205,100)
12,274
(924,440)
(1,417,994)
(6,866,145)
7,274,633
(326,369)
(4,487,461)
5,019,152
(182,610)
59,629
43,001
141,748
392,082
1,365,000
400,000
1,365,000
400,000
582,308
(625,912)
1,322,141
CASH AND CASH EQUIVALENTS, BEGINNING OF YEAR
(419,062)
1,948,053
CASH AND CASH EQUIVALENTS, END OF YEAR
$
1,903,455
$
1,322,141
SUPPLEMENTAL DISCLOSURE OF CASH FLOW INFORMATION
Cash paid for interest
$
35,845
$
7,543
See accompanying Notes to Consolidated Financial Statements.
(6)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Museum and Endowment Fund Operations:
The Phoenix Art Museum (the Museum) is a nonprofit museum incorporated in May 1949
as an Arizona nonprofit corporation. The purpose of the Museum is to educate and expose
the broadest segment of the population to the historical and aesthetic attributes of the visual
arts.
Phoenix Art Museum Endowment Fund, Inc. (Endowment Fund) was incorporated in
January 1994 as an Arizona nonprofit corporation. The purpose of the Endowment Fund is
to receive and accept title of donated assets, to hold such assets as an endowment, to
invest said assets, and to distribute income and gains from these assets for the benefit of
the Museum.
The significant accounting policies followed by the Museum and the Endowment Fund are
as follows:
Consolidated Financial Statements
The Phoenix Art Museum has an economic interest and control over the Phoenix Art
Museum Endowment Fund, Inc. The consolidated financial statements include both the
accounts of the Phoenix Art Museum and the Phoenix Art Museum Endowment Fund, Inc.
(collectively referred to as the “Museum”). In addition, the Museum is supported by 11
volunteer organizations as follows:











Phoenix Art Museum League
Docent Committee of the Phoenix Art Museum
Western Art Associates
Arizona Costume Institute
Contemporary Forum
Asian Arts Council
Friends of European Art
Latin America Art Alliance
Women’s Metropolitan Arts Council
In Focus
Collectors Study Club
All of the financial activities and balances of these organizations are included in these
consolidated financial statements. All significant interorganization accounts and transactions
have been eliminated.
(7)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Basis of Presentation
The accompanying consolidated financial statements are presented in accordance with the
American Institute of Certified Public Accountants Audit and Accounting Guide for Not-ForProfit Organizations (Audit Guide). Under the Audit Guide, the Museum is required to report
information regarding the financial position and activities according to three classes of net
assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted
net assets as follows:
Unrestricted Net Assets
Unrestricted net assets are not subject to donor imposed stipulations and are those currently
available at the discretion of the Board of Directors for use in the Museum’s operations, in
accordance with its bylaws.
Temporarily Restricted Net Assets
Temporarily restricted net assets are those which are subject to donor-imposed stipulations
that will be met by the Museum and/or the passage of time.
Permanently Restricted Net Assets
Permanently restricted net assets (Endowment restricted) are those which represent
permanent endowments where it is stipulated by donors that the principal remain in
perpetuity and only the income is available as unrestricted or temporarily restricted, as per
the endowment agreements.
Revenues are reported as increases in unrestricted net assets unless use of the related
assets is limited by donor-imposed restrictions. Expenses are reported as decreases in
unrestricted net assets. Gains and losses on investments and other assets or liabilities are
reported as increases or decreases in unrestricted net assets unless their use is restricted
explicitly by donor stipulation or by law. Expirations of temporary restrictions on net assets,
i.e., the donor stipulated purpose has been fulfilled and/or the stipulated time period has
elapsed, are reported as reclassifications to unrestricted net assets.
Prior Year Summarized Information
The consolidated financial statements include certain prior year summarized comparative
information in total but not by net asset class. Such information does not include sufficient
detail to constitute a presentation in conformity with accounting principles generally
accepted in the United States of America. Accordingly, such information should be read in
conjunction with the consolidated financial statements as of and for the year ended June 30,
2013, from which the summarized information was derived.
(8)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Use of Estimates in the Preparation of Consolidated Financial Statements
The preparation of consolidated financial statements in conformity with accounting principles
generally accepted in the United States of America requires management to make a number
of estimates and assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the consolidated 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
Cash consists of cash and at times cash equivalents consisting of highly liquid financial
instruments purchased with original maturities of three months or less. Cash and cash
equivalents on the consolidated statements of cash flows is reflected net of cash due to
internal funds.
Accounts Receivable
Accounts receivable are stated at the amount management expects to collect. Management
provides for probable uncollectible amounts through a charge to earnings and an increase to
a valuation allowance based upon its assessment of the current status of individual
balances. Account balances with invoices over ninety days old are considered delinquent.
Balances that are still outstanding after management has used reasonable collection efforts
are written off through a charge to the valuation allowance and a reduction of accounts
receivable. Accounts receivable as of June 30, 2014 and 2013 are considered by
management to be collectible in full and, accordingly, an allowance for doubtful accounts
has not been provided.
Pledges Receivable and Assets Restricted for Long Term Investment Purposes
The Museum Pledges Receivable consist primarily of amounts due for general purposes
(pledges receivables) and amounts due from a capital campaign conducted to raise funds
for the expansion of facilities and endowment fund. (Assets restricted for long term
investment purposes). Unconditional promises to give (pledges receivable and assets
restricted for long term investment purposes) are recognized as revenues in the period the
promise is received and as assets, decreases of liabilities, or expenses depending on the
form of the benefits received. Conditional promises to give are recognized when the
conditions on which they depend are substantially met. Monies received pursuant to
conditional promises are reflected as deferred revenue. Unconditional promises to give that
are to be collected within one year are recorded at their net realizable value. Unconditional
promises to give that are expected to be collected in future years are recorded at the
present value of their estimated future cash flows. The discounts on those amounts are
computed using rates as determined by management, applicable to the years in which the
promises are received. Amortization of the discounts is included in contribution support. The
carrying amount of pledges receivable is reduced by a valuation allowance that reflects
management’s best estimate of amounts that will not be collected.
(9)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Grants receivable consist primarily of amounts due from various foundations for funding
specific purposes. Grants receivable are stated at the amount management expects to
collect. Management believes that all grants receivable at June 30, 2014 and 2013, were
collectible.
Investments
Investments, consisting primarily of equity mutual funds (domestic and international) and
U.S. government securities, with readily determinable market values are measured at fair
value as of year-end in the consolidated statement of financial position. Investment income
or loss (including realized and unrealized gains and losses on investments, interest and
dividends) are recognized in the consolidated statement of activities and changes in net
assets.
Investments in equity securities with readily determinable fair values and all investments in debt
securities are presented at fair value in the consolidated statement of financial position as
determined by available market prices. Limited marketability investments, representing
amounts in hedge funds are valued at the quoted market price for securities for which
market quotations are readily available or an estimate of value (fair value) as determined in
good faith by the general partner. Changes in the values of limited marketability investments
that occur between the time audited net asset values are last communicated by the general
partner and the close of the Museum’s fiscal year are reflected in the fair value recorded in
the Museum’s consolidated financial statements.
Museum Store Inventories
Museum store inventories consist of books, gift items and art related objects held for resale
and are carried at average cost.
Property and Equipment
Purchased property and equipment are initially recorded at cost and donated property and
equipment is recorded at the fair value at the date of gift to the Museum. Maintenance and
repairs are charged to operations when incurred. Betterments and renewals in excess of
$1,500 are capitalized. When property and equipment is sold or otherwise disposed of, the
assets and related accumulated depreciation accounts are relieved, and any gain or loss is
included in operations. Depreciation and amortization of property and equipment is
computed on a straight-line basis over the following estimated useful lives:
Estimated Useful Lives
Buildings and improvements
Furniture, fixtures and equipment
5 to 50 years
5 to 50 years
(10)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Property and Equipment (Continued)
Donations of property and equipment are recorded as contributions at their estimated fair
value at the date of donation. Such donations are reported as increases in unrestricted net
assets unless the donor has restricted the donated asset to a specific purpose. Assets
donated with explicit restrictions regarding their use and contributions of cash that must be
used to acquire property and equipment are reported as temporarily restricted contributions
absent donor stipulations regarding how long those donated assets must be maintained.
The Museum reports expirations of donor restrictions when the donated or acquired assets
are placed in service as instructed by the donor. The Museum reclassifies temporarily
restricted net assets to unrestricted net assets at that time.
Impairment of Long-Lived Assets
The Museum reviews long-lived assets for impairment whenever events or changes in
circumstances indicate that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by the asset. If such
assets are considered to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair value of the assets.
Assets to be disposed of are reported at the lower of the carrying amount or fair value less
costs to sell. Management does not believe impairment indicators are present.
Deferred Revenue
Deferred revenue consists of prepaid membership dues and money received in advance for
fiscal 2015 dues and events.
Admissions
Admissions revenue consists of ticket sales and is recognized when the tickets are sold.
Membership Dues
The Museum defers revenue from membership dues collected in advance. Deferred
revenue is amortized into revenue over the membership period.
Contributions
Contributions received are recorded as unrestricted, temporarily restricted, or permanently
restricted support depending on the existence and/or nature of any donor restrictions. All
donor-restricted support is reported as an increase in temporarily or permanently restricted
net assets depending on the nature of the restrictions. When a restriction expires (that is,
when a stipulated time restriction ends or purpose restriction is accomplished or a donor
removes a restriction), temporarily or permanently restricted net assets are reclassified to
unrestricted net assets and reported in the consolidated statement of activities and changes
in net assets as net assets released from restrictions.
(11)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Special Events Revenue
The Museum conducts special events in which a portion of the gross proceeds paid by the
participant represents payments for the direct cost of the benefits received by the participant
at the event. Unless a verifiable objective means exists to demonstrate otherwise, the fair
value of meals and entertainment provided at special events is measured at the actual cost
to the Museum. The direct costs of the special events which ultimately benefit the donor
rather than the Museum are included in special events revenues and then expensed as
costs of direct donor benefits.
Nonoperating Activities
Changes in unrestricted net assets, which are excluded from operating profit (loss) include
net realized and unrealized investment gains and losses and acquisition of fine art, which is
consistent with industry practice.
Donated Services and Materials
Donated services and materials are recorded at their estimated fair value if they enhance
the Museum’s nonfinancial assets or require specialized skills that the Museum would
normally purchase if not provided by donation. The Museum recognized $582,625 and
$667,174 of contributed materials and services related to specialized skills during the years
ended June 30, 2014 and 2013, respectively. No amounts have been reflected in the
consolidated financial statements for certain donated volunteer services because they did
not qualify for recording under the generally accepted accounting principle guidelines;
however, a substantial number of volunteers have donated significant amounts of their time
to the Museum’s program services and fund raising campaigns.
Advertising
The Museum uses advertising to promote its programs to the various groups it serves.
Advertising costs are charged to operations as incurred. Advertising expense charged to
operations was $579,908 and $276,977 during the years ended June 30, 2014 and 2013,
respectively.
Functional Expenses
The costs of providing various programs and other activities have been summarized on a
functional basis in the consolidated statement of activities and changes in net assets and
detailed in the consolidated statement of functional expenses. Accordingly, certain costs
have been allocated among program and supporting services benefited. Management and
general expenses include those expenses that are not directly identifiable with any specific
program but provide for the overall support and direction of the Museum.
(12)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 1
SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)
Income Taxes
The Phoenix Art Museum and the Phoenix Art Museum Endowment Fund, Inc. qualify as
tax-exempt organizations under Section 501(c)(3) of the Internal Revenue Code (the
“Code”) and, accordingly, there is no provision for corporate income taxes. In addition, they
qualify for the charitable contribution deduction under Section 170 of the Code and have
been classified as organizations that are not private foundations. Income determined to be
unrelated business taxable income (UBTI) would be taxable.
The federal and state corporate tax returns of the Museum for 2011, 2012 and 2013 are
subject to examination by the Internal Revenue Service and state taxing authorities,
generally for three years after they were filed.
NOTE 2
PLEDGES RECEIVABLE
Pledges receivable consist of unconditional promises to give. Pledges receivable are
considered collectible in one year or less; balances are $515,756 and $321,436 at June 30,
2014 and 2013, respectively.
Three donors make up 46% and 58% of the pledges receivable balance at June 30, 2014
and 2013, respectively.
NOTE 3
ENDOWMENT RESTRICTED INVESTMENTS
Endowment restricted investments consist of the following:
2014
Fair Value
Common Stock
Equity mutual funds – domestic
Equity mutual funds – international
Corporate bonds – domestic
Corporate bonds – international
Alternative investments
Money market
$
5,770,719
5,497,671
5,810,283
647,857
7,129,483
566,553
Total investments
$ 25,422,566
(13)
2013
Cost
$
4,185,840
4,721,062
5,466,494
625,000
5,828,854
566,553
$ 21,393,803
Fair Value
$
62,018
4,776,685
3,999,781
6,685,552
1,372,067
5,848,198
1,056,302
$ 23,800,603
Cost
$
52,705
3,745,578
3,974,995
6,289,791
1,423,417
5,095,088
1,056,302
$ 21,637,876
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 3
ENDOWMENT RESTRICTED INVESTMENTS (CONTINUED)
Investment return on the long-term investments, which includes net realized and unrealized
gains and losses that are included as part of the change in unrestricted and temporarily
restricted net assets, consist of the following:
2014
NOTE 4
2013
Dividend and interest income
Net realized/unrealized investment gains (loss)
$
748,325
2,029,457
$
703,959
1,335,154
Investment return
$
2,777,782
$
2,039,113
FAIR VALUE OF FINANCIAL INSTRUMENTS
In determining fair value, the Museum uses various valuation approaches within the fair
value measurement framework. Fair value measurements are determined based on the
assumptions that market participants would use in pricing an asset or liability.
Fair value measurements framework establishes a hierarchy for inputs used in measuring
fair value that maximizes the use of observable inputs and minimizes the use of
unobservable inputs by requiring that the most observable inputs be used when available.
Fair value measurements define levels within the hierarchy based on the reliability of inputs
as follows:
Level 1 – Valuations based on unadjusted quoted prices for identical assets or liabilities
in active markets;
Level 2 – Valuations based on quoted prices for similar assets or liabilities or identical
assets or liabilities in less active markets, such as dealer or broker markets;
and
Level 3 – Valuations derived from valuation techniques in which one or more significant
inputs or significant value drivers are unobservable, such as pricing models,
discounted cash flow models and similar techniques not based on market,
exchange, dealer or broker-traded transactions.
(14)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
Following is a description of the nature and risks of the categories of assets by major
security type.
Endowment Restricted Investments
Equity securities, corporate bonds, government issued securities, money market funds, and
other funds listed on a national market or exchange are valued at the last sales price, or if
there is no sale and the market is still considered active at the last transaction price before
year-end. Such securities are classified within Level 1 of the valuation hierarchy.
Debt securities consisting of government agency debt obligations are generally valued at the
most recent price of the equivalent quoted yield for such securities, or those of comparable
maturity, quality and type. There are no directly held debt securities in the investment portfolio.
Debt securities are generally classified within Level 2 of the valuation hierarchy.
Hedge funds, private equity, venture capital, and other investments for which there is not an
active market are valued at the quoted market price for underlying marketable securities or
an estimate of underlying asset fair values as determined in good faith by the general
partner. These alternative investments are classified within Level 3 of the valuation hierarchy.
Temporarily Restricted Investments
Temporarily restricted investments are common stocks with readily available quoted market
prices. These securities are classified within Level 1 of the valuation hierarchy.
Charitable Gift Annuities
The charitable gift annuity assets are carried at fair value and are invested in funds listed on
the national market or exchange. These annuities are classified within Level 1 of the
valuation hierarchy.
(15)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following table presents assets measured at fair value by classification within the fair
value hierarchy as of June 30, 2014:
Fair Value Measurements Using
(Level 2)
(Level 3)
(Level 1)
Equities:
U.S. large cap
U.S. mid cap/small cap
Non U.S. equity
Debt securities:
U.S. corporate bonds
Non U.S. corporate bonds
Alternative assets:
Hedge funds
Private equity
Commodities
Real estate
Money market
$
3,905,397
1,865,322
5,497,671
$
-
$
-
Total
$
3,905,397
1,865,322
5,497,671
5,810,283
647,857
-
-
5,810,283
647,857
585,475
566,553
-
5,260,391
766,624
516,993
-
5,260,391
766,624
585,475
516,993
566,553
$ 25,422,566
Total endowment restricted
investments
$ 18,878,558
$
-
$
6,544,008
Temporarily restricted
investments
$
-
$
-
$
-
$
-
Cash and cash equivalents
Equities:
U.S. mid-cap/small-cap
Non U.S. equity
Debt securities:
U.S. corporate bonds
Complementary strategies
Real estate
$
21,942
$
-
$
-
$
21,942
Charitable gift annuities
$
143,126
87,118
-
-
143,126
87,118
160,017
60,958
49,580
-
-
160,017
60,958
49,580
522,741
(16)
$
-
$
-
$
522,741
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The Museum uses the Net Asset Value (NAV) to determine the fair value of all the
underlying investments which (a) do not have a readily determinable fair value and (b)
prepare their consolidated financial statements consistent with the measurement principles
of an investment company or have the attributes of an investment company. The following
table lists investments in other investment companies (in partnership format) by major
category at June 30, 2014:
Strategy
Hedge Funds:
Blackstone Partners Offshore Fund
Global Access Hedge Fund Strategies
NAV
in Funds
$ 1,262,020
3,057,089
HMLP Multi Strategy
936,010
HB Multi-Strategy
5,272
Real Estate:
Blackstone Real Estate
Private Equity: *
Diversified across general partners,
industries, stages of business
development and geographies
Total
Redemption Frequency and Restrictions
No lock up, semi-annual redemption with
100 Days notice, No holdback
12 month lock up, quarterly redemption
with 95 Days, 5% holdback
No lock up, quarterly redemption with 70
Days notice, No holdback
Holdback
516,993
No lock up, semi-annual redemption with
95 Days notice, No holdback
766,624
N/A
$ 6,544,008
*Unfunded commitment totals $797,055 term to draw down is 10 years.
(17)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The following table presents assets measured at fair value by classification within the fair
value hierarchy as of June 30, 2013:
(Level 1)
Equities:
U.S. large cap
U.S. mid cap/small cap
Non U.S. equity
Debt securities:
U.S. corporate bonds
Non U.S. corporate bonds
Alternative assets:
Hedge funds
Private equity
Commodities
Real estate
Money market
$
3,216,311
1,560,374
3,999,781
Fair Value Measurements Using
(Level 2)
(Level 3)
$
-
$
-
Total
$
3,216,311
1,560,374
3,999,781
6,685,552
1,372,067
-
-
6,685,552
1,372,067
350,147
499,347
386,558
1,056,302
-
3,730,400
412,564
469,182
-
4,080,547
412,564
499,347
855,740
1,056,302
$ 23,738,585
Total endowment restricted
investments
$ 19,126,439
$
-
$
4,612,146
Temporarily restricted
investments
$
62,018
$
-
$
-
$
62,018
Cash and cash equivalents
Equities:
U.S. mid-cap/small-cap
Non U.S. equity
Debt securities:
U.S. corporate bonds
Complementary strategies
Real estate
$
73,819
$
-
$
-
$
73,819
Charitable gift annuities
$
336,864
209,272
-
-
336,864
209,272
374,861
127,188
137,048
-
-
374,861
127,188
137,048
1,259,052
(18)
$
-
$
-
$
1,259,052
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 4
FAIR VALUE OF FINANCIAL INSTRUMENTS (CONTINUED)
The Museum uses the Net Asset Value (NAV) to determine the fair value of all the
underlying investments which (a) do not have a readily determinable fair value and (b)
prepare their consolidated financial statements consistent with the measurement principles
of an investment company or have the attributes of an investment company. The following
table lists investments in other investment companies (in partnership format) by major
category at June 30, 2013:
Strategy
Hedge Funds:
Blackstone Partners Offshore Fund
Global Access Hedge Fund Strategies
NAV
in Funds
$ 1,167,705
1,225,252
Golden Tree CLO Debt Investment
HMLP Multi Strategy
6,412
1,321,926
HB Multi-Strategy
9,105
Redemption Frequency and Restrictions
No lock up, semi-annual redemption with
100 Days notice, 5% holdback
12 month lock up, quarterly redemption
with 95 Days, 5% holdback
No lock, quaterly redemption with 95 Days
notice, 5% holdback
No lock up, quarterly redemption with 70
Days notice, No holdback
Holdback
Real Estate:
Blackstone Real Estate
469,182
No lock up, semi-annual redemption with
95 Days notice, No holdback
Private Equity: *
Diversified across general partners,
412,564
N/A
Total
$ 4,612,146
*Unfunded commitment totals $1,126,616, term to draw down is 10 years.
The following table presents the change in fair value measurements that used Level 3 inputs
during the years ended June 30, 2014 and 2013:
2014
2013
Balance, beginning of year
Total purchases/sales
Total realized and unrealized gains
$
4,612,146
756,506
1,175,356
$
4,218,308
47,212
346,626
Balance, end of year
$
6,544,008
$
4,612,146
(19)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 5
PROPERTY AND EQUIPMENT
Property and equipment consists of:
2014
Cost and donated value:
Land
Building and improvements
Furniture, fixtures and equipment
$
Total cost and donated value
Less accumulated depreciation and amortization
Property and equipment, net of accumulated
depreciation and amortization
699,253
10,727,230
3,599,879
2013
$
15,026,362
(9,641,705)
$
5,384,657
699,253
10,710,471
3,306,063
14,715,787
(9,035,054)
$
5,680,733
Depreciation and amortization expense charged to operations was $622,445 and $575,824
for the years ended June 30, 2014 and 2013, respectively.
NOTE 6
ASSETS RESTRICTED TO LONG-TERM INVESTMENT PURPOSES
The Museum had conducted a capital campaign to raise funds for expansion of the facility
and endowment funds. Assets attributable to long-term investment purposes consist of:
2014
Pledges receivable
$
556,976
2013
$
673,599
Pledges receivable consist of unconditional promises to give as follows:
2014
$
Due in less than one year
Due in one to five years
583,462
290,000
2013
$
873,462
(54,450)
(262,036)
Total pledges receivable
Less discount to present value
Less allowance for uncollectible pledges
Net pledges receivable attributable to long-term
investment purpose
(20)
$
556,976
618,375
330,000
948,375
(62,740)
(212,036)
$
673,599
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 6
ASSETS RESTRICTED TO LONG-TERM INVESTMENT PURPOSES (CONTINUED)
Three and two donors make up 95% and 93% of the long-term pledges receivable balance
at June 30, 2014 and 2013, respectively.
The estimated cash flows for pledges receivable are discounted over a five-year collection
period using a management determined discount rate of 3.9%.
NOTE 7
LINE OF CREDIT
The Museum has a line of credit with JP Morgan Chase Bank, N.A. with an available limit of
$4,000,000; collateralized by marketable securities with a variable interest rate payable at a
floating rate equal to an adjusted LIBOR rate plus 1.00% or a rate equal to the money
market rate (1.19% as of June 30, 2014). The outstanding balance on the line of credit was
$3,465,010 and $2,100,010 at June 30, 2014 and 2013, respectively. In March 2014, the
line of credit was increased to $4,000,000, collateralized by marketable securities with
interest payable at either (i) a fixed rate per annum equal to the Bank’s prime rate, (ii) a fixed
rate per annum equal to the Adjusted Libor Rate plus 1.00%, or (iii) a fixed rate per annum
equal to the offered rate, as defined in the agreement. The line of credit expires on
March 31, 2016.
NOTE 8
CHARITABLE GIFT ANNUITIES
The Museum administers thirteen charitable gift annuities. The assets contributed under the
charitable gift annuities are carried at fair value. Contribution support is recognized at the
date the annuities are established after recording liabilities for the present value of the
estimated future payments to be made to the donors and/or other beneficiaries. Present
values are calculated using a risk-free discount rate determined at the time the annuities are
established, and actuarial table and guidelines are used for calculating the available
deduction for income tax purposes. The liabilities are adjusted for the accretion of the
discount and other changes in the estimates of future benefits. The present value of the
estimated annuity payments associated with the charitable gift annuities was $377,664 and
$993,346 at June 30, 2014 and 2013, respectively. See Note 4 for assets held under
charitable gift annuities.
(21)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 9
PENSION PLAN
The Museum has a defined benefit pension plan covering eligible employees. The plan calls
for benefits to be paid to employees at retirement based on an actuarial valuation consisting
primarily of years of service and compensation. Employees are 100% vested after five years
employment with the Museum.
The following sets forth the funded status, change in plan assets, and net periodic benefit
costs of the plan at June 30:
2014
2013
Projected benefit obligation
$
3,805,048
$
4,458,728
Fair value of plan assets
$
3,275,815
$
3,022,987
Funded status of plan at year-end
$
$
(1,435,741)
Accumulated benefit obligation
$
$
4,094,755
Assumptions used to determine benefit obligation:
Discount rate
Rate of compensation increase
(529,233)
3,805,048
4.00%
2.00%
4.00%
2.00%
2014
2013
Employer contributions
$
500,000
$
146,252
Plan participants’ contributions
$
-
$
-
Benefits paid
$
(691,327)
$
(189,659)
Net pension cost
$
43,847
$
231,736
Assumptions used to develop net pension cost were:
Discount rate
Expected long-term rate of return on plan assets
Rate of compensation increase
(22)
4.00%
6.50%
2.00%
3.25%
6.50%
2.00%
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 9
PENSION PLAN (CONTINUED)
The following sets forth the amounts recognized in the consolidated statement of financial
condition at June 30:
2014
Noncurrent liability
$
(529,233)
2013
$
(1,435,741)
The following sets forth the amounts recognized in operations for the year ended June 30:
2014
2013
Net loss
Prior service cost
$
197,106
-
$
643,338
4,123
Net amount recognized
$
197,106
$
647,461
The discount rate and expected rate of return on plan assets are critical assumptions which
significantly affect pension accounting. Even relatively small changes in these rates would
significantly change the recorded pension expense and accrued liability. Management
believes the discount rate and expected rate of return on plan assets used in determining its
year-end pension accounting are reasonable based on currently available information.
However, it is at least reasonably possible that these assumed rates will be revised in the
near term, based on future events and changes in circumstances.
The overall expected long-term rate of return on plan assets represents a weighted average
composition rate based on expected rates of return. The Museum’s pension plan weighted
average asset allocations by asset category are as follows:
Cash and cash equivalents
Fixed income
Equity securities
2014
2013
2.81%
34.90%
62.29%
2.98%
36.63%
60.39%
The Museum’s overall strategy is to invest in high-grade securities with a minimum amount
of market fluctuation. In general, the Museum’s objective is to maintain the following
allocation ranges:
Fixed income
Equity securities
(23)
2014
2013
40.00%
60.00%
40.00%
60.00%
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 9
PENSION PLAN (CONTINUED)
Such rates are estimated by adjusting historical results for each category of investment for
anticipated market movement. Under its terms, the plan investments will be limited to
marketable securities including common and preferred stocks, convertible securities,
government, municipal and corporate bonds, mutual and collective investment funds, and
short-term money market instruments.
The fair value of the Museum’s pension plan assets, by asset category, at June 30, 2014,
are as follows:
(Level 1)
Money market fund
Equities:
U.S. large cap
U.S. small cap
Non U.S. equity
Debt securities
$
91,890
Total assets at fair value
$ 3,275,815
Fair Value Measurements Using
(Level 2)
(Level 3)
$
1,078,802
444,000
517,668
1,143,454
-
$
$
-
$
-
Total
$
91,890
-
1,078,802
444,000
517,668
1,143,454
-
$ 3,275,815
The fair value of the Museum’s pension plan assets, by asset category, at June 30, 2013,
are as follows:
(Level 1)
Money market fund
Equities:
U.S. large cap
U.S. small cap
Non U.S. equity
Debt securities
$
90,120
Total assets at fair value
$ 3,022,987
Fair Value Measurements Using
(Level 2)
(Level 3)
$
972,458
409,964
443,182
1,107,262
$
$
The Museum’s expected contribution for 2014 is $193,295.
(24)
-
-
$
-
Total
$
90,120
-
972,458
409,964
443,182
1,107,262
-
$ 3,022,987
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 9
PENSION PLAN (CONTINUED)
The following pension benefit payments, which reflect expected future service, as
appropriate, are expected to be paid as follows:
2015
2016
2017
2018
2019
Thereafter
$
192,388
191,974
198,617
207,926
208,305
1,051,357
Total
$
2,050,567
NOTE 10 LEASE COMMITMENTS
The Museum leases equipment and a vehicle under non-cancelable operating leases
expiring at various dates through November 2018. Rent expense under these leases was
$48,582 and $32,120 for the years ended June 30, 2014 and 2013, respectively.
Future minimum lease payments are as follows:
2015
2016
2017
2018
$
37,363
37,363
22,528
4,800
Total
$
102,054
(25)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 11 TEMPORARILY RESTRICTED NET ASSETS
Temporarily restricted net assets consist of:
2014
Purpose restrictions for:
Deaccessed art
Building construction
Art acquisition
Exhibits and education
Program restricted interest
Other
$
Total purpose restrictions
Timing restrictions
Time restricted gifts
Charitable gift annuities, net
Stock held
$
Total temporarily restricted net assets
1,281,114
917,810
293,788
1,197,740
458,672
676,577
2013
$
1,281,114
909,520
375,530
816,434
364,016
1,148,742
4,825,701
4,895,356
38,074
145,076
-
38,074
237,213
62,018
5,008,851
$
5,232,661
During the years ended June 30, 2014 and 2013, donors released their restrictions on
$2,380,751 and $2,272,760, respectively, of temporarily restricted funds which related to
building, art acquisition, exhibits and education and time restricted restrictions.
During the years ended June 30, 2014 and 2013, the Museum had $2,279,255 and
$2,814,594, respectively, outstanding from the temporarily restricted funds used for
operations. This amount has been classified in the accompanying consolidated statement of
financial position as cash due to internal funds.
NOTE 12 PERMANENTLY RESTRICTED NET ASSETS
Permanently restricted net assets consist of funds for which the donors stipulate the
principal is to be maintained in perpetuity. The earnings and net appreciation on these funds
are unrestricted and temporarily restricted and are allocated for specific purposes by the
Museum’s Board of Directors or in accordance with the donor agreement. During fiscal
2010, the Museum was donated land in a residential area that is recorded as held for sale
on the accompanying consolidated statement of financial position. A portion of the proceeds
from the sale of the land is permanently restricted and is to be used as an endowment.
The Museum's endowments consist of several funds established to support a variety of
charitable efforts of the Museum. Its endowments consist of donor-restricted endowment
funds. As required by generally accepted accounting principles, net assets associated with
endowment funds, including funds designated by the Board to function as endowments, are
classified and reported based on the existence or absence of donor-imposed restrictions.
(26)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 12 PERMANENTLY RESTRICTED NET ASSETS (CONTINUED)
Interpretation of Relevant Law
The Board of Trustees of the Museum has interpreted the State Prudent Management of
Institutional Funds Act (SPMIFA) 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. Consequently, the Museum classifies permanently restricted net
assets as:


The original value of gifts donated to the permanent endowment
The original value of subsequent gifts to the permanent endowment
The remaining portion of the donor-restricted endowment fund not classified as permanently
restricted is classified as temporarily restricted net assets until those amounts are
appropriated for expenditure by the Museum’s Board. In accordance with SPMIFA, the
Museum considers the following factors in making a determination to appropriate or
accumulate donor-restricted endowment funds:
1.
2.
3.
4.
5.
6.
7.
The duration and preservation of the fund
The purpose of the Museum and the donor-restricted endowment fund
General economic conditions
The possible effect of inflation and deflation
The expected total return from income and the appreciation of investments
Other resources of the Museum
The investment policies of the Museum
Return Objectives and Risk Parameters
The Museum has adopted investment and spending policies for endowment assets that
attempt to provide a predictable stream of funding to the programs supported by its
endowment while seeking to maintain the purchasing power of the endowment assets.
Endowment assets include those assets of donor-restricted funds that the Museum must
hold in perpetuity or for a donor-specified period(s). Under this policy, as approved by the
Board of Trustees, the endowment assets are invested to seek income and capital growth
as well as preservation of principal. It is intended to have an average level of risk and may
experience moderate levels of volatility.
2014 Endowment Net Asset Composition by Type of Fund as of June 30, 2014:
Unrestricted
Donor restricted endowment funds $
902,338
Undesignated endowment funds
Board-designated endowment funds
138,820
Total endowment funds
$ 1,041,158
(27)
Temporarily
Restricted
$
$
458,672
458,672
Donor
Permanently
Restricted
Total
$25,042,876
$25,042,876
$25,501,548
902,338
138,820
$26,542,706
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 12 PERMANENTLY RESTRICTED NET ASSETS (CONTINUED)
Changes in endowment net assets for the year ended June 30, 2014, are as follows:
Endowment net assets,
beginning of year
Unrestricted
Temporarily
Restricted
Donor
Permanently
Restricted
Total
$
$
364,056
$ 24,843,382
$ 24,681,600
748,325
-
-
748,325
1,934,841
94,616
-
2,029,457
96,400
-
199,494
295,894
-
-
458,672
$ 25,042,876
Interest and dividend income
Net realized/unrealized gain
Contributions
(1,212,570)
Grants and expenses
Endowment net assets
(525,838)
$ 1,041,158
$
(1,212,570)
$ 26,542,706
2013 Endowment Net Asset Composition by Type of Fund as of June 30, 2013:
Unrestricted
Donor restricted endowment funds $
Undesignated endowment funds
Board-designated endowment funds
Total endowment funds
$
(714,806)
188,968
(525,838)
Temporarily
Restricted
Permanently
Restricted
Total
$
$ 24,843,382
$ 24,843,382
$ 25,207,438
(714,806)
188,968
$ 24,681,600
$
364,056
364,056
Changes in endowment net assets for the year ended June 30, 2013, are as follows:
Endowment net assets,
beginning of year
Unrestricted
Temporarily
Restricted
Donor
Permanently
Restricted
$ (1,036,202)
$
288,259
$ 24,715,817
$ 23,967,874
695,977
-
-
695,977
1,256,745
75,797
-
1,332,542
-
-
127,565
127,565
-
-
364,056
$ 24,843,382
Interest and dividend income
Net realized/unrealized loss
Contributions
(1,442,358)
Grants and expenses
Endowment net assets
$
(525,838)
(28)
$
Total
(1,442,358)
$ 24,681,600
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 13 FINE ARTS COLLECTION
Fine arts collection consists of purchased and donated works of art. The collection is on
display to the general public. The Museum employs professional staff to ensure that the
collection items are preserved and protected. The collection items are not capitalized by the
Museum. Costs of purchasing collection items, deaccessions of collection items and
proceeds from insurance recoveries are included as a change in the appropriate category of
net assets. Proceeds from the deaccession of collection items are restricted for purchases of
additional collection items. Acquisitions of fine art, included as a decrease in unrestricted net
assets, totaled $492,702 and $533,960 for the years ended June 30, 2014 and 2013,
respectively.
NOTE 14 DONATED FACILITIES, UTILITIES AND MAINTENANCE – GOVERNMENTAL
The Museum has an operating agreement with the City of Phoenix (the City) which
commenced on June 30, 1993, and ends on June 30, 2052, which is subject to cancellation.
This agreement stipulates that the Museum will pay one dollar per year as rent for the
current Museum facilities. The agreement also stipulates that the City will pay certain
security, utilities and pay certain maintenance and landscaping for the benefit of the
Museum. The utilities paid by the City are based upon actual utilities billings for the year
ended June 30, 1993, adjusted by the Consumer Price Index for all Urban Areas – U.S. City
Average.
The Museum has estimated the fair value of facilities rent donated by the City at $3,375,900
and $3,375,900 for the years ended June 30, 2014 and 2013, respectively. Utilities paid and
ground maintenance and landscaping performed by the City for the benefit of the Museum
have a fair value of $1,516,997 and $1,317,227 for the years ended June 30, 2014 and
2013, respectively. The income related to these amounts is included in public support in the
accompanying consolidated statement of activities and changes in net assets.
(29)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 15 RELATED PARTY TRANSACTIONS
The Men’s Arts Council (the MAC) is a separate legal entity that is affiliated with the
Museum that provides contributions to assist in the support of the Museum’s operations.
The Museum had accounts receivable from the MAC of $5,419 and $5,462 at June 30, 2014
and 2013, respectively. The MAC provided $134,375 and $141,600 of unrestricted
contributions in 2014, and in 2013, respectively. The Museum provides for payment of
salaries and wages, which are reimbursed to the Museum. Salaries paid on behalf of the
MAC and reimbursed to the Museum were $66,157 and $62,789 for the years ended
June 30, 2014 and 2013, respectively.
Artenders is a separate legal entity that provides for beverage services at many of the
Museum’s special events. The Museum had accounts receivable from Artenders of $7,511
and $7,371 at June 30, 2014 and 2013, respectively. Included in accounts payable and
accrued expenses is a payable to Artenders of $6,498 and $7,874 at June 30, 2014 and
2013, respectively. The Museum rents office space to Artenders and provides for payment
of salaries and wages, which are reimbursed to the Museum. Rental income from Artenders
was $47,600 and $35,171 for the years ended June 30, 2014 and 2013, respectively.
Salaries paid on behalf of Artenders and reimbursed to the Museum were $112,093 and
$112,022, for the years ended June 30, 2014 and 2013, respectively.
NOTE 16 CONCENTRATION OF CREDIT RISKS
The Museum maintains all of its cash with banks located in Arizona. Balances on deposits
are insured by the Federal Deposit Insurance Corporation (FDIC) up to specified limits.
Balances in excess of FDIC limits are uninsured. The Museum, in the normal course of
business, periodically maintains account balances in excess of the FDIC’s insurance
coverage limit.
NOTE 17 COMMITMENTS AND CONTINGENCIES
From time to time, the Museum is contingently liable in respect to claims incidental to the
ordinary course of its operations. In the opinion of management, the effect of such matters
will not have a material adverse effect on the Museum's financial position, results of
operations, or liquidity. Therefore, no provision has been made in the accompanying
consolidated financial statements for losses, if any, that might result from the ultimate
outcome of these matters.
NOTE 18 RISKS AND UNCERTAINTIES
The Museum 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 will occur in the near term and that such changes
could materially affect the amounts reported in the consolidated financial statements.
(30)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
JUNE 30, 2014 AND 2013
NOTE 19 SUBSEQUENT EVENTS
Management evaluated subsequent events through November 11, 2014, the date the
consolidated financial statements were available to be issued. Events or transactions
occurring after June 30, 2014, but prior to November 11, 2014, that provided additional
evidence about conditions that existed at June 30, 2014, have been recognized in the
consolidated financial statements for the year ended June 30, 2014. Events or transactions
that provided evidence about conditions that did not exist at June 30, 2014, but arose before
the consolidated financial statements were available to be issued.
This information is an integral part of the accompanying consolidated financial statements.
(31)
SUPPLEMENTARY INFORMATION
(32)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATING STATEMENT OF FINANCIAL POSITION
JUNE 30, 2014
(WITH COMPARATIVE TOTALS AT JUNE 30, 2013)
ASSETS
CURRENT ASSETS
Cash and cash equivalents
Accounts receivable
Pledges receivable
Grants receivable
Museum store inventories
Prepaid expenses
Phoenix Art
Museum
Support
Organizations
Phoenix Art
Museum
Endowment
Fund, Inc.
$ 1,149,442
131,330
517,670
47,500
425,843
103,579
$
$
754,013
1,815
-
-
Total
Eliminations
2014
2013
$
(21,979)
-
$ 1,903,455
111,166
517,670
47,500
425,843
103,579
$ 1,322,141
72,125
321,436
625,559
371,242
205,467
(21,979)
3,109,213
2,917,970
Total current assets
2,375,364
755,828
-
CASH DUE FROM INTERNAL FUNDS
2,279,255
-
-
-
2,279,255
2,814,594
522,741
-
-
-
522,741
1,259,052
5,384,657
-
-
-
5,384,657
5,680,733
540,836
-
16,140
-
556,976
673,599
LAND HELD FOR SALE
-
-
1,104,000
-
1,104,000
1,104,000
INVESTMENTS
-
-
25,422,566
-
25,422,566
23,800,603
755,828
$ 26,542,706
CHARITABLE GIFT ANNUITIES
PROPERTY AND EQUIPMENT, net
ASSETS RESTRICTED TO LONG-TERM
INVESTMENT PURPOSES, net
TOTAL ASSETS
$ 11,102,853
$
$
(21,979)
$ 38,379,408
$ 38,250,551
$
(21,979)
-
$ 1,587,996
377,300
$ 1,274,712
376,520
(21,979)
1,965,296
1,651,232
LIABILITIES AND NET ASSETS
CURRENT LIABILITIES
Accounts payable and accrued expenses
Deferred revenue
Total current liabilities
$ 1,572,300
377,300
$
17,298
-
$
20,377
-
1,949,600
17,298
20,377
LINE OF CREDIT
3,465,010
-
-
-
3,465,010
2,100,010
CASH DUE TO INTERNAL FUNDS
2,279,255
-
-
-
2,279,255
2,814,594
CHARITABLE GIFT ANNUITIES LIABILITY
377,664
-
-
-
377,664
993,346
ACCRUED PENSION LIABILITY
529,233
-
-
-
529,233
1,435,741
8,600,762
17,298
20,377
8,616,458
8,994,923
650,000
(3,156,760)
738,530
138,820
1,340,633
-
788,820
(1,077,597)
650,000
(1,470,615)
(2,506,760)
5,008,851
738,530
-
1,479,453
25,042,876
-
(288,777)
30,051,727
(820,615)
30,076,243
2,502,091
738,530
26,522,329
-
29,762,950
29,255,628
755,828
$ 26,542,706
$ 38,379,408
$ 38,250,551
Total liabilities
NET ASSETS
Unrestricted:
Board designated
Undesignated
Total unrestricted
Donor restricted
TOTAL NET ASSETS
TOTAL LIABILITIES AND NET ASSETS
$ 11,102,853
$
The accompanying notes are an integral part of the consolidated financial statements.
(33)
(21,979)
$
(21,979)
PHOENIX ART MUSEUM AND
PHOENIX ART MUSEUM ENDOWMENT FUND, INC.
CONSOLIDATING STATEMENT OF ACTIVITIES AND CHANGES IN NET ASSETS
YEAR ENDED JUNE 30, 2014
(WITH COMPARATIVE TOTALS FOR THE YEAR ENDED JUNE 30, 2013)
OPERATING ACTIVITIES
Revenues:
Admissions
Museum store income
Membership income
Projects and fundraising activities
Less cost of direct donor benefits
Dividend and interest income
Other
Total revenues
Public support:
Contributions:
Private
Less cost of direct donor benefits
Change in charitable gift annuities
Governmental
Endowment fund grant
Support organizations grants
Donated facilities, materials, services:
Governmental
Private
Phoenix Art
Museum
Support
Organizations
Phoenix Art
Museum
Endowment
Fund, Inc.
$ 1,477,920
839,565
952,930
473,700
(607,771)
729,928
$
$
185,228
603,593
(171,371)
705
3,866,272
618,155
748,325
5,048,025
(142,235)
4,238
95,196
1,324,623
240,240
169,350
(240,240)
295,894
-
4,892,897
582,625
-
Total public support
12,045,609
(70,890)
Total revenues and public support
15,911,881
Expenses:
Programs services
Grants
Management and general
Fundraising
Total expenses
748,325
-
Total
Eliminations
$
-
(1,324,623)
-
-
-
2014
$ 1,477,920
839,565
1,138,158
1,077,293
(779,142)
748,325
730,633
2013
$
633,966
537,577
989,353
1,369,981
(551,135)
703,959
544,173
5,232,752
4,227,874
5,513,269
(142,235)
4,238
95,196
-
4,169,250
(133,710)
(28,492)
103,358
-
4,892,897
582,625
4,693,127
667,174
295,894
(1,324,623)
10,945,990
9,470,707
547,265
1,044,219
(1,324,623)
16,178,742
13,698,581
13,070,999
2,377,971
1,262,873
426,026
-
1,324,623
70,306
-
(1,324,623)
-
13,497,025
2,448,277
1,262,873
11,789,273
2,114,550
1,015,014
16,711,843
426,026
1,394,929
(1,324,623)
17,208,175
14,918,837
-
(1,029,433)
(1,220,256)
OPERATING PROFIT (LOSS)
(799,962)
121,239
NONOPERATING ACTIVITIES
Net realized/unrealized investment gains (loss)
Acquisitions of fine art
(468,110)
(24,592)
2,029,457
-
-
2,029,457
(492,702)
1,335,154
(533,960)
TOTAL NONOPERATING ACTIVITIES
(468,110)
(24,592)
2,029,457
-
1,536,755
801,194
(1,268,072)
96,647
1,678,747
-
507,322
3,770,163
641,883
24,843,582
-
29,255,628
29,674,690
738,530
$ 26,522,329
-
$ 29,762,950
$ 29,255,628
CHANGES IN NET ASSETS
NET ASSETS, BEGINNING OF YEAR
NET ASSETS, END OF YEAR
$ 2,502,091
$
(350,710)
The accompanying notes are an integral part of the consolidated financial statements.
(34)
$
(419,062)