PwC Audit Report - USC Radio FY18 Final
USC Radio
Combined Financial Statements For KUSC-FM, KDSC-FM, KDB-FM, KPSC-FM, KESC-FM, KDFC-FM, KOSC-FM, KDFG-FM, and KXSC-FM June 30, 2018 and 2017
USC Radio
Index to Combined Financial Statements June 30, 2018 and 2017
Page (s) Independent Auditor's Report .....................................................................................................................1 Combined Financial Statements Combined Statements of Financial Position ...............................................................................................2
Combined Statements of Activities and Changes in Net Assets ................................................................3
Combined Statements of Cash Flows.........................................................................................................4
Notes to Combined Financial Statements............................................................................................. 5-15
Report of Independent Auditors
To the Board of Trustees of the University of Southern California
We have audited the accompanying combined financial statements of the KUSC-FM, KDSC-FM, KDB-FM, KPSC-FM, KESC-FM, KDFC-FM, KOSC-FM and KXSC-FM radio stations operated by the University of Southern California ("USC Radio"), which comprise the combined statements of financial position as of June 30, 2018 and 2017, and the related combined statements of activities and changes in net assets for the year ended June 30, 2018 and of cash flows for the years ended June 30, 2018 and 2017.
Management's Responsibility for the Combined Financial Statements
Management is responsible for the preparation and fair presentation of the combined 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 combined 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 the combined financial statements based on our audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America and the standards applicable to the financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States. Those standards require that we plan and perform the audits to obtain reasonable assurance about whether the combined financial statements are free from material misstatement.
An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the combined financial statements. The procedures selected depend on our judgment, including the assessment of the risks of material misstatement of the combined financial statements, whether due to fraud or error. In making those risk assessments, we consider internal control relevant to the USC Radio preparation and fair presentation of the combined 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 USC Radio'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 combined 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 combined financial statements referred to above present fairly, in all material respects, the financial position of the KUSC-FM, KDSC-FM, KDB-FM, KPSC-FM, KESC-FM, KDFC-FM, KOSC-FM and KXSC-FM radio stations operated by the University of Southern California as of June 30, 2018 and 2017, and the changes in their net assets for the year ended June 30, 2018 and of cash flows for the years ended June 30, 2018 and 2017 in accordance with accounting principles generally accepted in the United States of America.
Other Matter
We previously audited the combined statement of financial position as of June 30, 2017, and the related combined statement of activities and changes in net assets, and of cash flows for the year then ended, and in our report dated December 8, 2017, we expressed an unqualified opinion on those combined financial statements. In our opinion, the information set forth in the accompanying summarized financial information as of June 30, 2017 and for the year then ended is consistent, in all material respects, with the audited combined financial statements from which it has been derived
Los Angeles, CA December 14, 2018
PricewaterhouseCoopers LLP, 601 South Figueroa Street, Los Angeles, CA 90017 T: (213) 356 6000, F: (813) 637 4444, us
USC Radio
Combined Statements of Financial Position June 30, 2018 and 2017
Assets Cash Accounts receivable Pledges receivable Investments Due from the University of Southern California Prepaid expenses Intangible assets Property and equipment, net
Total assets
Liabilities and Net Assets Liabilities
Accounts payable and accrued expenses Deferred revenue Note payable to University of Southern California Actuarial liability for annuities payable
Total liabilities
Net assets Without donor restrictions With donor restrictions Total net assets Total liabilities and net assets
2018
2017
$
-
-
654,463
7,550,718
11,061,752
-
17,107,718
493,706
$ 36,868,357
$ 207,954 131,888 757,295
5,968,185 8,868,586
5,110 17,107,718
547,097
$ 33,593,833
$
360,347 $ 400,391
997,926
723,726
3,648,399
4,385,282
676,521
721,821
5,683,193
6,231,220
25,778,858 5,406,306
31,185,164
$ 36,868,357
23,257,197 4,105,416
27,362,613
$ 33,593,833
The accompanying notes are an integral part of these financial statements. 2
USC Radio
Combined Statement of Activities and Changes in Net Assets for the year ended June 30, 2018, with summarized comparative information for the year ended June 30, 2017
Revenue and Support Subscription, associate and individual
contributions Corporation and foundation contributions Corporation for Public Broadcasting grants Contribution from the University of
Southern California Net appreciation in fair value of investments Present value adjustment to annuities payable Other Loss on impairment Net assets released from redesignation
Total revenue and support
Without Donor Restrictions
$ 11,474,656 2,139,552 453,352
101,983 224,108
274,791
110,552 14,778,994
Expenses Programming and production Broadcast operations Fundraising Underwriting and grant solicitation General and administrative Web development
Total expenses
3,110,032 2,148,320 2,490,106 2,041,726 2,170,397
296,752
12,257,333
With Donor Restrictions
$ 1,404,357 -
7,531 (446)
(110,552) 1,300,890
-
Change in net assets
Net assets at beginning of year Net assets at end of year
2,521,661
23,257,197 $ 25,778,858
1,300,890
4,105,416 $ 5,406,306
2018 Total
2017 Total
$ 12,879,013 2,139,552 453,352
$ 11,810,237 3,164,217 703,346
101,983 231,639
(446) 274,791
85,713 339,002
4,007 179,876 (440,000)
16,079,884
15,846,398
3,110,032 2,148,320 2,490,106 2,041,726 2,170,397
296,752
12,257,333
3,493,716 3,358,848 3,127,598 1,073,507 1,070,588
159,774
12,284,031
3,822,551
3,562,367
27,362,613
23,800,246
$ 31,185,164 $ 27,362,613
The accompanying notes are an integral part of these financial statements. 3
USC Radio
Combined Statements of Cash Flows June 30, 2018 and 2017
Cash flows from operating activities Change in net assets Adjustments to reconcile change in net assets to net cash provided by operating activities:
Depreciation and amortization Net appreciation in fair value of investments Actuarial adjustment to annuities payable Loss on impairment Gain on the sale of investments Contribution of corporate sponsor Contributions with donor restrictions for long-term investments Changes in operating assets and liabilities:
Decrease (increase) in accounts receivable Decrease in pledges receivable Due from the University of Southern California Decrease in prepaid expenses Decrease in accounts payable and accrued expenses Increase in deposits and deferred revenue
Net cash provided (used) by operating activities
Cash flows from investing activities Proceeds from sale of investments Purchase of intangibles Purchase of investments Purchases of property and equipment
Net cash used in investing activities
Cash flows from financing activities Increase in annuities payable due to new gifts Endowment contributions with donor restrictions Decrease in note payable with University of Southern California Investment gain on annuities payable Payments on annuities payable
Net cash provided (used) in financing activities Net change in cash
Cash at beginning of year Cash at end of year
2018
2017
$ 3,822,551 $ 3,562,367
84,282 (231,640)
(6,468) -
(1,396,639)
131,888 102,832 (2,193,166)
5,110 (40,044) 274,200
552,906
116,781 (339,002)
(4,009) 440,000 (64,298) (525,000) (615,172)
(49,700) 94,241 (4,692,207) 48,560 (176,600) 48,219
(2,155,820)
94,292 -
(1,445,185) (30,891)
(1,381,784)
89,438 (475,000) (846,164)
(77,129)
(1,308,855)
6,914 1,396,639 (736,883)
48,547 (94,293)
615,172 (695,173)
48,870 (89,438)
620,924
(120,569)
(207,954)
(3,585,244)
207,954
3,793,198
$
- $ 207,954
The accompanying notes are an integral part of these financial statements. 4
USC Radio
Notes to the Combined Financial Statements June 30, 2018 and 2017
1.
General
KUSC-FM, located in Los Angeles, and affiliated stations KDSC-FM, located in Thousand Oaks, KDB-FM, located in Santa Barbara, KPSC-FM, located in Palm Springs, KXSC-FM, located in Sunnyvale, KOSC-FM, located in Angwin, KDFC-FM, located in San Francisco, KESC-FM, located in Morro Bay, and KDFG-FM located in Seaside, (collectively referred to as "USC Radio") are noncommercial, not-for-profit, educational radio stations which are owned and operated by the University of Southern California (the "University").
In accordance with the Corporation for Public Broadcasting Financial Reporting Guidelines, the financial statements of KUSC-FM, KDSC-FM, KDB-FM, KPSC-FM, KESC-FM, KOSC-FM, KDFCFM, KDFG-FM, and KXSC-FM have been combined for financial statement presentation purposes.
On June 10, 2016, an agreement was entered into by Mount Wilson Broadcasters and USC Radio whereby USC Radio would purchase the broadcast license and certain related assets of KBOQ, a commercial FM station in Seaside, California for $475,000 and would receive as a donation the broadcast license and certain related assets of KMZT, a commercial FM station in Big Sur, California. The assignment application was filed June 15, 2016, with the Federal Communications Commission by Mount Wilson Broadcasters. The call signs for the stations did not transfer; therefore, they were changed upon closing to KDFG, Seaside and KDFH, Big Sur. On August 26, 2016, a bill of sale was signed pursuant to the agreement dated June 15, 2016. The donated KDFH license and related assets were subsequently surrendered in 2017 as they were not employed by USC Radio. Furthermore, USC Radio recognized a contribution of $525,000 on the acquisition of KDFG, which was the difference between the purchase price of $475,000 and the market value of $1 million that was assigned to the KDFG license.
On January 26, 2017, CPRN assigned ownership of the California radio stations KDFC (FM), K223AJ and KOSC (FM) to USC pursuant to the terms of the Assignment and Assumption of the FCC Licenses agreement. The FCC approved the consent to assignment on January 23, 2017.
As of May 1, 2017, KOSC and KDFC swapped call letters. KOSC became KDFC and KDFC became KOSC.
2.
Summary of Significant Accounting Policies
Basis of Presentation The accompanying combined financial statements present the financial position and operations of USC Radio, which includes the combined stations and a consolidated subsidiary, CPRN. They have been prepared on the accrual basis of accounting, in accordance with accounting principles generally accepted in the United States of America.
All material inter-station transactions have been eliminated in the combined financial statements.
Net assets without and with donor restrictions Net assets without donor restrictions are the part of net assets of a not-for-profit entity that are not subject to donor-imposed restrictions. A donor-imposed restriction is a donor stipulation that specifies a use for a contributed asset that is more specific than broad limits resulting from the following: a) the nature of the not-for-profit entity b) the environment in which it operates c) the purposes specified in its articles of incorporation or bylaws or comparable documents.
5
USC Radio
Notes to the Combined Financial Statements June 30, 2018 and 2017
2.
Summary of Significant Accounting Policies (Continued)
This classification includes all revenues, gains, and expenses not restricted by donors. USC Radio reports all expenditures in this class of net assets, since the use of restricted contributions in accordance with donors' stipulations results in the release of the restriction.
The part of net assets of a not-for-profit entity that is subject to donor-imposed restrictions includes contributions for which donor imposed restrictions have not been met (primarily future capital projects), endowment appreciation, charitable remainder unitrusts, pooled income funds, gift annuities and pledges receivable which are included in with donor restrictions net assets.
Summarized Comparative Information The financial statements include certain prior-year summarized comparative information in total but not by net asset category. 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 USC Radio's combined financial statements for the year ended June 30, 2017 from which the summarized financial information was derived.
Cash and Cash Equivalents All highly liquid investments with original maturities of three months or less are considered to be cash equivalents.
Investments Investments are stated at fair value. Net appreciation (depreciation) in the fair value of investments, which consists of realized gains or losses and the unrealized appreciation (depreciation) on those investments, is shown on the Statement of Activities. Realized gains and losses upon the sale of investments are calculated using the specific identification method and trade date.
Investments included units in the University's pooled investment fund and real estate. The University's pooled investment fund invests in bonds, stocks, hedge funds, private capital and other investments. The value of USC Radio's investment in pooled investment fund is reported based on its percentage of investment in relation to the entire pool. Real estate received in connection with charitable gift annuities and outright gift of the donor's estate is recorded at fair value at the date of gift.
USC Radio applies the provision of Financial Accounting Standards Board ("FASB") Accounting Standards Codification ("ASC") 820, Fair Value Measurements, which defines fair value as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date.
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