Settlement Music School of Philadelphia Consolidated Financial Statements Years Ended June 30, 2019 and 2018 SETTLEMENT MUSIC SCHOOL OF PHILADELPHIA CONTENTS INDEPENDENT AUDITOR'S REPORT 1 FINANCIAL STATEMENTS Consolidated Statements of Financial Position 2 Consolidated Statements of Activities 3 Consolidated Statements of Functional Expenses 5 Consolidated Statements of Cash Flows 7 Notes to Consolidated Financial Statements 8 INDEPENDENT AUDITOR'S REPORT Central Board Settlement Music School of Philadelphia We have audited the accompanying consolidated financial statements of Settlement Music School of Philadelphia (a nonprofit organization), which comprise the consolidated statements of financial position as of June 30, 2019 and 2018, and the related consolidated statements of activities, functional expenses and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with U.S. generally accepted accounting principles; 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. Auditor's Responsibility Our responsibility is to express an opinion on these consolidated financial statements based on our audits. We conducted our audits in accordance with U.S. generally accepted auditing standards. 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 auditor's 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. Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Settlement Music School of Philadelphia as of June 30, 2019 and 2018, and the changes in its net assets and its cash flows for the years then ended in accordance with U.S. generally accepted accounting principles. Philadelphia, Pennsylvania November 25, 2019 SETTLEMENT MUSIC SCHOOL OF PHILADELPHIA CONSOLIDATED STATEMENTS OF FINANCIAL POSITION June 30, 2019 and 2018 2019 2018 ASSETS CURRENT ASSETS Cash $ 1,635,239 $ 2,720,841 Accounts receivable 93,534 117,497 Contributions receivable Grants receivable 601,250 115,000 Pledges and bequests receivable, net of allowance for doubtful accounts of $25,000 in 2019 and 2018 335,643 374,155 Prepaid expenses 119,153 119,553 Total current assets 2,784,819 3,447,046 PROPERTY AND EQUIPMENT, NET 16,696,133 17,173,338 INVESTMENTS 7,637,540 7,830,174 NONCURRENT ASSETS Life insurance policies 300,000 300,000 Beneficial interest in charitable remainder unitrust 668,841 649,098 Contributions receivable Grants receivable, due beyond one year 295,000 - Pledges and bequests receivable, due beyond one year 2,251,108 1,650,773 Total noncurrent assets 3,514,949 2,599,871 $ 30,633,441 $ 31,050,429 LIABILITIES AND NET ASSETS CURRENT LIABILITIES Accounts payable and accrued expenses$ 173,070 $ 228,293 Agency obligations 579,435 535,100 Deposits and advance payments 487,207 440,657 Current portion of term loans 149,197 150,184 Total current liabilities 1,388,909 1,354,234 NONCURRENT LIABILITIES Agency obligations, net of current portion - 578,650 Term loans, net of current portion 4,783,125 4,942,319 Total noncurrent liabilities 4,783,125 5,520,969 Total liabilities 6,172,034 6,875,203 NET ASSETS Without donor restrictions 12,900,953 13,650,134 With donor restrictions 11,560,454 10,525,092 Total net assets 24,461,407 24,175,226 Total liabilities and net assets $ 30,633,441 $ 31,050,429 See accompanying notes -2- SETTLEMENT MUSIC SCHOOL OF PHILADELPHIA CONSOLIDATED STATEMENT OF ACTIVITIES Year ended June 30, 2019 with comparative totals for 2018 Without Donor With Donor Totals Restrictions Restrictions 2019 2018 OPERATING Public support, revenues and gains Public support Contributions, bequests and grants$ 647,382 $ 2,527,364 $ 3,174,746 $ 2,808,477 Special event 398,412 - 398,412 346,840 Net assets released from restrictions 2,378,342 (2,378,342) - - Total public support 3,424,136 149,022 3,573,158 3,155,317 Revenues and gains Tuition and registration fees 4,680,202 - 4,680,202 4,498,259 Endowment spending policy distribution 325,000 - 325,000 325,000 Rental and miscellaneous income 218,533 - 218,533 149,313 Total revenues and gains 5,223,735 - 5,223,735 4,972,572 Total public support, revenues and gains 8,647,871 149,022 8,796,893 8,127,889 Expenses Program services Instruction and student activities 5,470,234 - 5,470,234 5,304,918 Non-Core programs 1,879,656 - 1,879,656 1,833,073 Total program services 7,349,890 - 7,349,890 7,137,991 Supporting services Management and general 1,424,820 - 1,424,820 1,355,926 Fundraising 637,675 - 637,675 606,848 Total supporting services 2,062,495 - 2,062,495 1,962,774 Total expenses 9,412,385 - 9,412,385 9,100,765 Change in net assets from operating activities (764,514) 149,022 (615,492) (972,876) NONOPERATING Contributions - 817,143 817,143 245,159 Loss on uncollectible contributions receivable - - - (2,950) Investment income 68,370 321,417 389,787 598,980 Endowment spending policy distribution (53,037) (271,963) (325,000) (325,000) Change in value of split-interest agreements - 19,743 19,743 19,458 Change in net assets from nonoperating activities 15,333 886,340 901,673 535,647 CHANGE IN NET ASSETS (749,181) 1,035,362 286,181 (437,229) NET ASSETS Beginning of year 13,650,134 10,525,092 24,175,226 24,612,455 End of year $ 12,900,953 $ 11,560,454 $ 24,461,407 $ 24,175,226 See accompanying notes -3- SETTLEMENT MUSIC SCHOOL OF PHILADELPHIA CONSOLIDATED STATEMENT OF ACTIVITIES Year ended June 30, 2018 Without Donor With Donor Restrictions Restrictions Total OPERATING Public support, revenues and gains Public support Contributions, bequests and grants$ 748,958 $ 2,059,519 $ 2,808,477 Special event 346,840 - 346,840 Net assets released from restrictions 2,578,723 (2,578,723) - Total public support 3,674,521 (519,204) 3,155,317 Revenues and gains Tuition and registration fees 4,498,259 - 4,498,259 Endowment spending policy distribution 325,000 - 325,000 Rental and miscellaneous income 149,313 - 149,313 Total revenues and gains 4,972,572 - 4,972,572 Total public support, revenues and gains 8,647,093 (519,204) 8,127,889 Expenses Program services Instruction and student activities 5,304,918 - 5,304,918 Non-Core programs 1,833,073 - 1,833,073 Total program services 7,137,991 - 7,137,991 Supporting services Management and general 1,355,926 - 1,355,926 Fundraising 606,848 - 606,848 Total supporting services 1,962,774 - 1,962,774 Total expenses 9,100,765 - 9,100,765 Change in net assets from operating activities (453,672) (519,204) (972,876) NONOPERATING Contributions - 245,159 245,159 Loss on uncollectible contributions receivable (2,950) - (2,950) Investment income 99,545 499,435 598,980 Endowment spending policy distribution (61,267) (263,733) (325,000) Change in value of split-interest agreements - 19,458 19,458 Change in net assets from nonoperating activities 35,328 500,319 535,647 CHANGE IN NET ASSETS (418,344) (18,885) (437,229) NET ASSETS Beginning of year 14,068,478 10,543,977 24,612,455 End of year $ 13,650,134 $ 10,525,092 $ 24,175,226 See accompanying notes -4- SETTLEMENT MUSIC SCHOOL OF PHILADELPHIA CONSOLIDATED STATEMENT OF FUNCTIONAL EXPENSES Year ended June 30, 2019 Mary Louise Willow Management Curtis Germantown Northeast Grove Wynnfield Camden Non-Core and Branch Branch Branch Branch Branch Branch Programs Total General Fundraising Total Salaries, wages and related expenses Faculty Salaries and wages$ 718,729 $ 300,666 $ 455,249 $ 386,780 $ 290,262 $ 38,243 $ 935,813 $ 3,125,742 $ - $ - $ 3,125,742 Benefits and payroll taxes 93,167 35,034 49,470 53,883 31,757 4,900 142,138 410,349 - - 410,349 811,896 335,700 504,719 440,663 322,019 43,143 1,077,951 3,536,091 - - 3,536,091 Staff Salaries and wages 327,288 221,325 272,955 246,972 216,076 41,689 372,648 1,698,953 820,864 384,421 2,904,238 Benefits and payroll taxes 42,116 22,535 37,597 33,078 45,645 5,453 48,900 235,324 117,525 55,973 408,822 369,404 243,860 310,552 280,050 261,721 47,142 421,548 1,934,277 938,389 440,394 3,313,060 Total salaries, wages and related expenses 1,181,300 579,560 815,271 720,713 583,740 90,285