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NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION, INC.

NEW ORLEANS. LOUISIANA

FINANCIAL STATEMENTS

AUGUST 3L 2012

Under provisions of state law, this report is a public document A copy of the report has been submitted to the entity and other appropnate public offtciais The report is available for public inspection at the Baton Rouge office of the LegislativeAuditor and, where appropnate, at the office of the pansh clerk of court

Release Date M A R 1 A M _ _

• I S M I Postlethwaite .•^•^H & Netterville

A Professional Accounting Corporation

VAVW pncpa com

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION, INC.

NEW ORLEANS. LOUISIANA

FINANCLVL STATEMENTS

AUGUST 3L 2012

C O N T E N T S

Page

INDEPENDENT AUDITORS* REPORT 1

FINANCIAL STATEMENTS

Statements of Fmancial Position 2

Statements of Activities and Changes in Net Assets

For the Years Ended August 31,2012 and 2011 3

Statements of Cash Flows 4

NOTES TO FINANCIAL STATEMENTS 5

REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND 21 ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCL^L STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUPn^ING STANDARDS

INDEPENDENT AUDITORS' REPORT

To the Board of Du-ectors New Orleans Jazz & Henlage Festival and Foundation, Inc New Orleans, Louisiana

We have audited the accompanying statement of financial position of New Orleans Jazz & Hentage Fesdval and Foundation, Inc (a nonprofit organization) as of August 31, 2012, and the related statements of activities and cash flows for the year then ended These fmancial statements are the responsibihty of the Foundation's management Our responsibility is to express an opmion on these financial statements based on our audits. The financial Statements of New Orleans Jazz & Hentage Festival and Foundation, Inc. as of August 31, 2011, were audited by other auditors whose report dated January 12, 2012, expressed an unqualified opmion on those statements

We conducted our audit m accordance with auditmg standards generally accepted in the United States of America and the standards applicable to financial audits contained in Govemment Auditmg Standards issued by the Comptroller General of the Umted States Those standards require that wc plan and perform the audits to obtain reasonable assurance about whether the financial statements are free of matenal misstatement An audit mcludes examining, on a test basis, evidence supportmg the amounts and disclosures in the financial statements An audit also includes assessmg the accountmg pnnciples used and significant estimates made by management, as well as evaluating the overall financial statement presentation We beheve that our audits provide a reasonable basis for our opinion.

In our opinion, the fmancial statements referred to above present fairly, in all material respects, the fmancial position of the New Orleans Jazz & Hentage Festival and Foundation, Inc as of August 31, 2012, and the changes in its net assets and its cash flows for the year then ended m confonnity with accountmg prmciples generally accepted m the United States of Amenca

In accordance with Govemment Auditmg Standards, we have also issued our report dated February 27, 2013, on our consideration of the New Orleans Jazz & Heritage Festival and Foundation, Inc.'s mtemal control over financial reportmg and on our tests of its compliance with certain provisions of laws, regulations, contracts, and grant agreements and other matters The purpose of this report is to descnbe the scope of our testing of mtemal control over financial reportmg and compliance and the results of that testmg, and not to provide an opimon on the intemal control over fmancial reportmg or on comphance That report is an integral part of an audit perfomied m accordance with Government Auditmg Standards and should be considered m assessing the results of our audit

^ ^ ^ r z / h ^ ^ ^'Hf^^tJiCc

New Orleans, Louisiana February 27,2013

P&N

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION. INC. NEW ORLEANS. LOUISIANA

STATEMENTS OF FINANCIAL POSITION AUGUST 31.2012 AND 2011

A S S E T S 2012 2011

Cash and cash equivalents Receivables from sponsors, vendors, and

miscellaneous, net Investments Jazznet Program investments Unconditional promises to give - Capital Campaign Prepaid expenses and other assets Property and equipment, net

TOTAL ASSETS

8,156,003 6.991,863

376,618 11,363,841

663,215 197,541 85,562

2,416,950

$ 23,259,730 S

776,812 8,751,781 643,680 285,941 208,044

2,239,651

5 19.897,772

U A B I L I T I E_S_A N D N E T A S S E T S

Accounts payable Deferred revenue

TOTAL LIABILITIES

2,561,453 1,143,200

3,704.653

1,933,664 1,143,200

3.076,864

N E T A S S E T S Unrestncted

Board designated Undesignated

TOTAL IINRFSTRICTED NET ASSETS

Temporanly restncted Permanently restncted

TOTAL NET ASSETS

TOTAL LIABILITIES AND NET ASSETS

8,553,277 9,494,148

18,047,425

1,007,652 500,000

19,555,077

$ 23,259,730 !

7,490,052 8,083,019

15,573,071

747,837 500,000

16,820,908

£ 19,897,772

The accompanying notes are an integral part of these financial statements


STATEMENTS OF ACTIVITIES AND CHANGES IN NET ASSETS FOR THE YEARS ENDED AUGUST 31. 2012 AND 2011

2012 201 CHANGE IN UNRESTRICTED NET ASSETS

REVENUES Festival revenues Less expenses Festival - net revenues Foundation Gala (net of expenses of $292,571 in 2012

and $299,964 m 2011) Grants/contnbutions Miscellaneous Interest and dividends Membership - net

Total net revenues

Net assets released from restrictions Satisfaction of restnctions Required transfer

Total revenues and other support

EXPENSES Budgeted programs Special programs Administrative expenses Operating expenses Salaries and benefits

Total expenes

Change in unrestricted net assets

CHANGE IN TEMPORARILY RESTRICTED NET ASSETS REVENUES

Capltal campaign Grants Interest and dividends Required transfer Net assets released from restrictions

Change in temporanly restricted net assets

Total change in net assets Net Assets

Beginning of year

End of year

$ 30,897,674 ! (26,056,779)

4,840.895

67,651 1,560,820

175,678 165,585 49,920

6,860,549

26,772 -

6,887,321

2,150,957 808,562 344,277 250,183 858,988

4.412,967

2,474,354

267,053 -

19,534 -

(26,772) 259,815

2,734,169

16,820,908

$ 19.555,077

t 25,045,901 (21,591,113)

3,454.788

70,157 1,297,437

178,803 162,094 52,270

5,215,549

126,850 (81,250)

5,261,149

1,879,990 309,628 520.327 382.525 868,634

3,961,104

1,300.045

286,441 5,080

52.830 81.250

(126,850) 298,751

1,598,796

15,222,112

$ 16,820,908

The accompanymg notes are an integral part of these financial statements


STATEMENTS OF CASH FLOWS FOR THE YEARS ENDED AUGUST 31,2012 AND 2011

2012 2011 CASH FLOWS FROM OPERATING ACTIVITIES

Change in net assets $ 2,734,169 $ 1,598,796 Adjustment to reconcile change in net assets to net cash provided by operating activities

Depreciation 95,762 77,511 Decrease (increase) in assets

Receivables from sponsors, vendors, and miscellaneous, net Unconditional promises to give - Capital Campaign Prepaid expenses and other assets

Increase (decrease) in liabilities Accounts payable Defen-ed revenue

Net cash provided by operating activities

CASH FLOWS FROM INVESTING ACTIVITIES Purchases of property and equipment Purchases of investments Proceeds from sales of investments

Net cash used in investing activities

Net change in cash and cash equivalents

NET CHANGE IN CASH AND CASH EOUIVALENTS Cash and cash equivalents, beginning of year

Cash and cash equivalents, end of year

400,194 88,400 122.482

627.789

4,068,796

(273,061) (5,204,612) 2,573,017 (2.904,656)

1,164,140

6,991,863

$ 8,156,003 $

(203,232) (285,941) (96,975)

(653,948) 1,143,200 1,579,411

(71,352) (833,215) 649,295 (255.272)

1,324,139

5,667,724

6,991,863

The accompanying notes are an integral part of these financial statements

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION, INC. NEW ORLEANS. LOUISLVNA

NOTES TO FINANCIAL STATEMENTS AUGUST 31.2012

L Nature of Activities

The New Orleans Jazz & Hentage Festival and Foundation, Inc (the "Foundation**) is a nonprofit organization located m New Orleans, Louisiana The primary purpose of the Foundation is the promotion of New Orleans jazz and Lomsiana hentage The Foundation fulfills its purpose by producing the New Orleans Jazz & Heritage Festival on an annual basis The festival is also the major source of funding for the Foundation's operations throughout the year.

In 1986 the Foundation formed the Fnends of WWOZ, Inc ("WWOZ"). The Foundation is the sole member of WWOZ, a 501(c) 3 for the purpose of operating WWOZ as a public radio station, to promote jomt projects m support of New Orleans jazz and Louisiana heritage The financial statements presented herem only consist of the financial statements of the Foundation and do not mclude the fmancial statements of WWOZ

2, Summarv of Significant Accounting Pohcies

Basis of Accountmg

The accompanymg financial statements are prepared on the accrual basis of accounting in accordance with accountmg pnnciples generally accepted m the United States of Amenca

Basis of Presentation

Net assets, revenues, and expenses are classified based on the existence or absence of donor-imposed restnctions Accordingly, net assets of the Foundation and changes therein are classified and reported as follows*

Unrestricted Net Assets - Net assets that are not subject to donor-imposed stipulations The Board of Dnectors has designated a portion of unrestncted net assets for specific purposes as described m Note 9.

Temporarilv Restncted Net Assets - Net assets subject to donor-imposed stipulations that may or will be met either by actions of the Foundation and/or the passage of time (see Note 10)

Permanently Restncted Net Assets - Net assets that are subject to donor-imposed stipulations that the pnncipal net be expended, but rather invested to provide a permanent source of mcome for the Foundation's programs.

NEW ORLEANS JAZZ & HERTTAGE FESTIVAL AND FOUNDATION. INC. NEW ORLEANS. LOUISIANA


2. Summarv of Significant Accounting Policies (continued)

Cash and Cash Equivalents

The Foundation considers all highly liquid investments in money market funds and mvestments with initial maturities of three months or less to be cash equivalents, except for money maHcet funds maintamed at mvestment brokerage companies which are reported as investments

Allowance for Doubtful Accounts

The Foimdation uses the reserve method to recognize uncollectible accoimts The allowance for doubtful accounts is based on management's analysis of delinquent accounts receivable. No allowance was deemed necessary by management as of August 31, 2012 and 2011

Investments

Investments are earned at fair market value, based on quoted market pnces Investments acquu-ed through donations are recorded at fair market value on the date of donation

Dividends, mterest and other investment mcome is recorded as mcreases m unrestricted net assets unless the use is restncted by the donor Donated investments are recorded at fair market value at the date of receipt Investments consisting of real property contributed to the Foundation are recorded at fair value at the date of the donation

Realized gams and losses and declines in value Judged to be other than temporary, are included in net mterest mcome of mvestments Realized gams and losses on the sales of secunties are determmed using the specific-identification method A decline m the fair value of investments below cost that is deemed to be other than temporary results in a charge to change in net assets and the establishment of a new cost basis for the mvestment

Jazznet Program Investments

The Jazznet Program Fund is a separate mvestment account compnsed of a money market fund and mutual funds earned at fair market value based on quoted market prices This fimd is managed separately to hold contributions and transfers in previous years totaling $500,000 which are permanently restncted under the Jazznet Program

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION. INC. NEW ORLEANS, LOUISIANA

NOTES TO FINANCLVL STATEMENTS AUGUST 31.2012

2. Summarv of Significant Accounting Policies (continned)

Promises to Give

Contributions are recognized when the donor makes an unconditional (in substance) pledge to the Foundation. Conditional promises to give are recognizes when the conditions on which they depend are substantially met. All promises to give are recognized as assets, less an allowance for uncollectible amounts, and revenues. A promise to give to be made over several years is discounted to net present value

Propertv and Equipment

The Foundation records all asset acquisitions at cost, except for assets donated to the Foundation Donated assets are recorded at appraised value as of the date of donation. Such donations are reported as unrestncted support unless the donor has restricted the donated asset for a specific purpose Assets donated with exphcit restnctions regarding their use and contributions of cash that must be used to acquu-e property and equipment are reported as temporarily restncted support

Absent donor stipulations regarding how long those donated assets must be maintamed, the Foundation reports expirations of donor restnctions when the donated or acquired assets are placed in service as instructed by the donor. The Foundation reclassifies temporanly restricted net assets to unrestricted net assets at that time

Repairs and maintenance are charged to expense as incun'ed Major renewals, replacements, and betterments are capitalized

Property and equipment are depreciated usmg the straight-lme method and estimated useful lives shown below

Classification

Buildings and improvements Furniture and fixtures Equipment

Life in Years

15 5-3-

-39 10 10

Grants / (Contributions and Revenue Recognition

Contnbutions and other revenue sources are recorded as unrestncted, temporarily restncted, or permanently restncted support, depending on the existence or nature of any donor restrictions Support that IS restncted by a donor is reported as an increase in temporanly or permanently restricted net assets, depending on the nature of the restnctions.




Grants / Contributions and Revenue Recognition (contmued')

When a restnction expires (that is, when a stipulated time restriction ends or a purpose restnction is accomplished), temporarily restncted net assets are reclassified to unrestncted net assets and reported m the Statements of Activities as net assets released from restnctions Donor restncted contnbutions whose restnctions are met in the same reportmg penods are reported as unrestncted support In addition to cash contributions received from the vanous sponsors, the following goods and services were also received at no cost to the Foundadon-

• Discounted and complimentary au* and ground transportations • Television production time and promotional air time • Hotel accommodations • Beverages • Communications equipment • Printmg • Musical mstruments and equipment

The value of these non-cash contnbutions is not considered to be readily determinable, and neither the revenues nor the related offsetting expenses have been recorded in the financial statements

Advertising Costs

Advertising costs are charged to operation when the advertising is incurred. Advertising expense for the years ended August 31, 2012 and 2011 was $252,064 and $193,770, respectively

Income taxes

The Foundation is a non-profit organization that is exempt from Federal mcome tax under Section 501 (c) (3) of the Intemal Revenue Code It is exempt from Louisiana mcome tax under the Section 121(5) of Title 47 of tlie Louisiana Revised Statues of 1950

The Foundation applies a "more-likcly-than-not** recognition threshold for all tax imcertamties This approach only allows the recognition of those tax benefits that have a greater than fifty percent likelihood of being sustamed upon exammation by the taxing authonties The Foundation has reviewed its tax positions and determined there were no outstandmg or retroactive tax positions with less than a 50% likelihood of bemg sustamed upon examination by the taxing authonties The Foundation's tax returns for the years ended August 31, 2011, 2010 and 2009 remam open and subject to examination by taxmg authorities The Foundation's tax returns for the year ended August 31, 2012 has not yet been filed

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION, INC. NEW ORLEANS. LOUISIANA



Use of Estimates

The preparation of financial statements m conformity with U S generally accepted accountmg prmciples requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amount of revenues and expenses during the reportmg penod. Actual results could differ from those estimates

Donated Services of Volunteers

A substantial number of volunteers have donated significant amounts of their time m the conduct of the Foundation's program services However, no amounts have been included in the financial statements for donated services smce no objective basis is available to measure the value of such services

Presentation of Sales Taxes

The State ofLouisiana and panshes withm the State unpose a sales tax on all of the Foundation's sales to non-exempt customers The Foundation will collect that sales tax from customers and remits the amounts to the State and panshes The Foundation's accounting policy is to exclude the tax collected and remitted to the State and panshes from revenue and costs of sales

3. Cash and Cash Equivalents

Cash and cash equivalents as of August 31, 2012 and 2011 were compnsed of the following

2012 2011 Non-mterest beanng checking accounts

Operating (office and festival) Payroll account

Subtotals

Interest bearing savings account (SEED) Other interest bearing savings account Sweep accounts (Repurchase Agreements) Cash on hand and transfers

Total cash and cash equivalents

$ 1,017,457 3,860

1,021317

37,457 209.486

6,887,643 100

$ 8.156,003

S

$

1,678,416 42,609

1.721,025

37,215 208.128

5,025.395 100

6,991.86j_


NOTES TO FINANCUL STATEMENTS

AUGUST 31, 2012

4. Investments

Investments as of August 31, 2012 and 2011 are composed of the following

2012

Investments Equity securities Money market funds and

certificates of deposits

Total mvestments

Jazznet Program Investments Money market funds Mutual funds

Total Jaz?net Program mvestments

Investments Equity securities Money market funds and

certificates of deposits

Total investments

Jazznet Program Investments Money market funds Mutual ftinds

Total JazTnet Program investments

$

$

$

$

$

$

$

$

Cost

2,521

11,361,400

11.363^921

22,364 596,000

618,364

Cost

2.521

8,669,451

8,671.972

64,498 468.348

532,846

Fair Market Value

$ 2,441

11,361,400

$ 11,363,841

$ 22,364 640,851

$ 663,215

2011

Fair Market Value

$ 3,952

8,747.829

$ 8,751,781

$ 64,498 579,182

$ 643,680

Excess of Fair Market Value Over

Cost

$

$

$

$

(80)

(80)

44,851

44,851

Excess of Fair Market Value Over

Cost

$

$

$

$

1,431

78,378

79.809

110,834

110.834

NEW ORLEANS JAZZ & HERIIAGE FESTIVAL AND FOUNDATION, INC. NEW ORLEANS. LOUISLVNA


5. Concentration of Credit Risk

The Foundation maintams its cash balances at five financial mstitutions in the New Orleans area where they are insured by the Federal Deposit Insurance Corporation up to $250,000 for interest beanng accounts and the entire balance for non-mterest bearing accounts as of August 31, 2012 As of August 31, 2012, the Foundation had no balances m excess of the msured lunits at these mstitutions

The repurchase ^reements are considered overnight sweeps into other financial institutions and secured by collateralized secunties held by those institutions As of August 31, 2012, the Foundation had $6,887,643 held m a sweep account

The Foundation maintamed mvestments m certificates of deposit and money market accounts totaJmg approximately $ 11,364,000 as of August 31, 2012 in vanous banks and brokerage fums, where accounts are msured by the Federal Deposit Insurance Corporation for balances up to $250,000 and Securities Investor Protection Corporation for balances up to $500,000 (with a limit of $100,000 for cash) As of August 31,2012, the Foundation had no balances in excess of the msured bmits at these mstitutions.

6. Fair Value Measurements

Fair value concepts are applied in recordmg investments A fau- value hierarchy which has three levels based on the reliability of the inputs is used to determine fair value These levels mclude Level 1, unadjusted quoted pnces in active markets for identical assets or liabilities. Level 2, directly or indirectly observable mputs other than quoted prices for the asset of liability, such as quoted market prices for similar assets or liabilities, and Level 3, unobservable inputs for use when httle or no market data exists, therefore requinng an entity to develop its ovwi assumptions

The asset's fair value measurement level within the fair value hierarchy is based on the lowest level of any input that is significant to the fair value measurement Valuation techmques used need to maximize the use of unobservable mputs

The FoundaUon uses the market approach for valuing mutual funds, money market funds, and certificates of deposits which is within the Level 1 hierarchy This method may produce a fair value calculation that may not be indicative of net realizable value or reflective of future fair values Furthennore, while the Foundation believes its valuation method is appropriate and consistent with other market participants, the use of difference methodologies or assumptions to determme the fair value of certain financial instruments could result in a different fair value measurement at tlie reportmg date

11


NOTES TO FINANCUL STATEMENTS AUGUST 31.2012

6. Fair Value Measurements (contmued)

As of August 31, 2012 and 2011, assets measured at fair value on a recumng basis are compnsed of and determmed as follows

2012

Description

Investments Money market funds and

certificates of deposits Equity securities

Technology

Total mvestments

Jazznet Program Investments Money market funds

Mutual funds Growth Bond Value Blended

Total Jazznet Program mvestments

Total Assets Measured at Fair Value

$ 11,361,400

2,441

$ 11,363,841

$ 22,364

231,890 170,491 139.075 99,395

640,851

$ 663,215

Basec Quoted Pnces

In Active Markets (Level 1)

$ 11,361,400

2,441

$ 11,363,841

$ 22,364

231,890 170,491 139,075 99,395

640.851

$ 663.215

Ion Other

Observable

1

$

$

$

$

Inputs [Level 2)

-

-

-

-

----

_

-

Unobservable Inputs

(Level 3)

$

-

$

$

----

_

$

12


NOTES TO FINANCUL STATEMENTS AUGUST 3L 2012

6. Fair Value Measurements (continued)

Based on

Descnption

Investments Money market funds and

certificates of deposits Equity securities

Technology

Total mvestments

Total Assets Measured at Fair Value

$ 8,747,829

3,952

$ 8,751,781

Quoted Pnces In Active Markets (Level 1)

$ 8,747,829

3,952

$ 8,751,781

Other Observable

Inputs (Level 2)

$

-

$

Unobservable Inputs

(Level 3)

$

-

$

Jazznet Program Investments Money market funds $ 64,498 $ 64,498 $

Mutual funds Blended Bond (jrowth Value

Total Jazznet Program mvesUnents

246,253 163,264 103,425 66,240

579.182

643,680

246,253 163,264 103,425 66,240

579.182

643,680 $

As of August 31, 2012 and 2011, there were no assets measured at fair value on a non-recumng basis

13


NOTES TO FINANCIAL STATEMENTS AUGUST 31. 2012

7, Unconditional Promises to Give

Promises of donors to make contnbutions to the Foundation are included m the financial statements as unconditional promises to give and revenue of the temporarily restncted net assets class after discounting projected future cash flows to the present value Unconditional promises to give of more than one year are discounted to present value using a discount rate of 5%

Unconditional promises to give as of August 31,2012 and 2011 consist of the follovmig.

2011 Uncondiuonal promises to give -

Capital Campaign $ 200,000 $ 300,000 Less unamortized discount (2,459) (14,059)

$

$

2012

200,000 (2,459)

197,541 Net unconditional promises to give -

Capital C:ampaign $ 197,541 $ 285,941

A capital campaign was organized to raise funds for the Jazz & Hentage Center, which will house the Don Jamison Hentage School of Music The official launch date of the campaign was m September 2011

8. Propertv and Equipment

Property and equipment at August 31, 2012 and 2011 consist of the following

2012 2011 Land Buildmgs and unprovemenls Equipment, fiirmture and fixtures

Less accumulated depreciation

Total

$

$

446,250 2,756,014

348,357

3,550,621 (1,133.671)

2,416,950

$

S

446,250 2,483,123

348,358

3,277,731 (1,038,080)

2,239,651

Depreciation expense for the years ended August 31, 2012 and 2011 totaled $95,591 and $77,511, respectively

14

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION, INC, NEW ORLEANS. LOUISIANA

NOTES TO FINANCL\L STATEMENTS AUGUST 31.2012

9* Designated Net Assets

The Foundation's Board of Duectors has dedicated a portion of the unrestricted net assets for the following purposes

August 31.

Allen Jaffe Memoral Fund Foundatwn programs Jazz & Hentage Center Reserves

Total designated net assets

Restrictions on Net Assets

$

$

2012 15,059

321,254 2,459,704 5,757,260

8.553.277

$

$

2011 15,406

161,995 2,459,704 4,852,947

7,490,052

The Foundation maintains an account for activities attnbutable lo the Supporting, Enfranchising, Economic, Development (SEED.) program The program was established to support small busmess development m the New Orleans community for entrepreneurs who are associated with the New Orleans Jazz & Hentage Festival

Net assets have been temporarily restncted for the followmg purposes

August 31,

Capltal campaign S E.E D program Jazznet program Capltal outlay matching funds -

building renovations Raisin' the Roof Heritage School of Music

Total

$

$

2012 553.493 180.327 163,215

81,250 29.367

-

1,007,652

$

$

20U 286.441 172,941 143,680

81.250 59,368 4,157

747,837

15



10. Restrictions on Net Assets (continued)

Permanently restncted net assets consist of funds held m a separate investment account under the Jazznet Program For each of the years ended June 30, 2005, 2003, 2002, 2001, and 2000, the Foundation transferred $50,000 to an account held jomtly with another nonprofit organization which was matched by a donor. In July 2005, the account was split with each organization being allocated its proportionate share. The Foundation manages its fimds independently These funds are to be maintamed in perpetuity, the mcome on which is available to support jazz programs under the stipulations of the donor

11. Litigation

The Foundation is a defendant m vanous lawsuits These claims are being defended by the Foundation's babihty insurer. The Foundation's legal counsel is of the opinion that the Foundation has mmimal nsk of mcurrmg any iminsured loss

12. Related Party Transactions

Certain members of the Foundation's Board of Directors also serve on the Board of Directors of WWOZ Funding and payments to WWOZ totaled $1,544,898 and $1,334,120 for the years ended August 31,2012 and 2011, respectively

Durmg the year ended August 31, 2008, the Foundation pledged $300,000 toward the capital campaign of WWOZ The capital campaign is for workmg capital, the construction of a new facility or the restoration of a fiiture site, to be owned by WWOZ The Foundation has paid $29,380 toward this pledge as of August 31,2012.

The Foundation loaned $100,000 to WWOZ durmg the year ended August 31, 2010 which was subsequently repaid to the Foundation dunng the year ended August 31, 2011

13. Retirement Plan

The Foundation has a defined contnbution retirement plan for all eligible employees Employees are eligible to participate in the plan after completmg one year of service The plan specifies that the Foundation contnbute on behalf of the employees based on their annual contributions The Foundation's contributions were $68,015 and $56,355 for the years ended August 31, 2012 and 2011, respectively, which represents 50% of the employees' contnbutions

16



14. Functional Allocation of Expenses

Expenses have been reported on the Statements of Activities by natural classification for 2012 and 2011 To present total expenses by functional classifications, expenses are charged to program services and supporting services (management and general expenses) based on management's estimate of periodic time and expense evaluation Management and general expenses include those expenses that are not directly identifiable with any other specific function, but provide for the overall support and direction of the Foundation

Total expenses are allocated by function as follows

2012 2011 Program services Supporting services -

management and general

Totals

15. Endowments

$

$

29,308,869

1,453,448

30,762,317

$

$

24,080,695

1,771,486

25,852,181

The Endowments The Foundation's endowment is comprised of one fund, established to promote jazz programming to its community, and consists of both donor-restricted and temporanly restricted endowment funds Income generated by the endowment shall be directly utilized for jazz programmmg As required by accountmg pnnciples generally accepted in the United States of America, net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restnctions

Interpretation of Relevant Law The Board of Directors has interpreted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) as requinng the preservation of the fair value of an onginal gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary As a result of this interpretation, the Foundation classifies the following amounts as permanently restricted net assets in the accompanying financial statements

• the original value of the gifts donated to the permanent endowment,

• the original value of subsequent gifts to the permanent endowment, and

NEW ORLEANS JAZZ & HERITAGE FESTIVAL AND FOUNDATION. INC. NEW ORLEANS. LOUISLWA

NOTES TO FINANCUL STATEMENTS AUGUST 31.2012

15. Endowments (continued)

• when applicable, accumulations to the permanent endowment, made m accordance with the direction of the applicable donor gift mstrument at the time the accumulation is added to the fimd There were no additional gifts during the year.

The remaming portion of the donor-restncted endowment fund that is not classified m permanently restricted net assets is classified as temporanly restricted net assets until those amoimts are appropriated for expenditure by the Foundation m a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the Foundation considers the followmg factors m making a determination to appropnate or accumulate donor-restncted endowment fimds

• The duration and the preservation of the fund • The purposes of the Foundation and the donor-restncted endowment fund • General economic conditions • The possible effect of infiation and deflation • The expected total return from income and the appreciation of investments • Other resources of the Foundation • The investment policies of the Foundation

Endowment net asset composition by type of fimd as of August 31, 2012 and 2011 is as follows

Donor-restncted endowment fimds

Temporanly Restncted

2012 Pennanently Restncted Total

$ 163,215 $ 500,000 $ 663,215

Donor-restncted endowment fiinds 143,680

2011 Temporanly Permanently Restncted Restncted Total

500,000 $ 643,680

18

NEW ORLEANS JAZZ & HERTTAGE FESTIVAL AND FOUNDATION. INC. NEW ORLEANS. LOUISIANA



Changes m endowment net assets are as follows

2012

Net assets, beginnmg of the year Investment return

Investment mcome Net realized gains

Net assets, end of the year

Net assets, beginnmg of the year Investment return

Investment income Net realized gains

Net assets, end of the year


$ 143,680

5,967 13,568

$ 163,215


$ 90,850

7,332 45,498

$ 143,680

Permanently Restncted

$ 500,000

$ 500,000

2011 Permanently Restncted

$ 500,000

$ 500,000

$

$

$

$

Total 643,680

5,967 13,568

663,215

Total 590,850

7,332 45,498

643,680

Fimds yvith Deficiencies The fair value of assets associated with mdividual donor-restricted endowment fiinds may fall below the level that either the donor or UPMIFA requires the Foundation to retain as a fiind of perpetual duration These deficiencies can result from unfavorable market fluctuations and when continued appropnations for certain programs that were deemed prudent by the Board of Duectors occur in concurrence with the unfavorable market fluctuations There were no such deficiencies as of August 31,2012and2011

Return Objectives and Risk Parameters Endowment assets include donor restricted funds that the Foundation must hold in perpetuity Under this policy, as approved by the Board of Directors, permanent gifts to the Foundation are invested in equity mvestments, fixed mcome, money market fiinds, and cash equivalents. The investment objective of the Endowment shall be that funds invested receive a yield of a 3% - 5% retum The Board of Directors, with the recommendation of the Finance Committee, shall make mvestment decisions. The Fmance Committee reviews these guidelines with management on a quarterly basis.

19




Strategies Employed for Achieving Objectives. To satisfy its long-term rate of retum objectives, the Foundation relies on a total return strategy m which investment returns are achieved through current yield (mterest and dividends).

Spendmg Policy and How Investment Objectives Relate to ihe Spendmg Policy A policy was implemented to distribute a percentage of the dividend and mterest income directly for j'azz programs for each fiscal year m those years that the financial perfonnance of the mvestment exceeds expectation. The Fmance Committee will make a recommendation on an annual basis to release a certam percentage when appropriate In estabhshmg this policy, the Foundation considered the nsk m the investment envuonment related to its endowment gifts This is consistent with the Foundation's objective to maintain the purchasmg power of the endowment assets held in perpetuity.

16. Commitments

The Foundation mamtains employment contracts with certain directors and an officer providmg for a base annual salary and incentives As of August 31,2012, the remaining commitment for these contracts IS considered to be immaterial to the fmancial statements.

On January 27, 2005, the Foundation entered into a production management and financing agreement ("the Agreement") between two Companies, collectively the Producers, to produce and manage the New Orleans Jazz and Hentage Festival The Agreement includes two extension periods of five years or longer as a result of an option for a successive one year extension as a result of specially cancelled festivals, as defmed in the agreement The current expiration date of the Agreement is January 27, 2019 The Agreement provides for a base producers* fee and an addiUonal allocation of festival net revenues to be paid by the Foundation each year for each annual festival produced, subject to adjustment at the start of each extension tenn in accordance with a cost of hvmg adjustment The agreement requires an annual advance to the Foundation also subject to adjustment at the start of each extension term in accordance with a cost of living adjustment The advance is to be paid to the Foundation on September 1st of each fiscal year The advance was received by the Foundation on August 31, 2012 and 2011, respectively and therefore, is recorded as defeired revenue on the Statements of Fmancial Position.

17. Subsequent Events

Management has evaluated subsequent events through the date that the financial statements were available to be issued, February 27, 2013 and determined that there were no other items for disclosure.

20

• I j n i ^ l Postlethwaite m S t t J & Netterville

A Pro^ijjcnal AccouriNni] Coiooto ton AsKOOtftd OiRccs in Pnnftpat Ciiwi cl lh» Unitad Smte^

www pncpa com

REPORT ON INTERNAL CONTROL OVKR FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDTT OF FINANCIAL STATEMENTS PERFORMED

IN ACCORDANCE WITH GOVERNMENT AUDITING STAIVDARDS

To the Board of Duectors of New Orleans Jazz & Heritage Festival and Foundation, Inc New Orleans, Louisiana

We have audited the financial statements of New Orleans Jazz & Heritage Festival and Foundation, Inc (the Foundation) (a nonprofit organization) as of and for the year ended August 31, 2012, and have issued our report thereon dated February 27, 2013. We conducted our audit in accordance with auditing standards generally accepted m the United States of America and the standards applicable to financial audits contamed in Govemment Auditmg Standards, issued by the Comptroller General of the United States.

Intemal Control Over Fmancial Reporting Management of the Foundation is responsible for establishmg and maintaming effective intemal control over financial reporting. In plannmg and performmg our audit, we considered the Foundation's intemal control over financial reporting as a basis for designmg our auditmg procedures for the purpose of expressing our opinion on the financial statements, but not for the purpose of expressing an opmion on the effectiveness of the Foundation's intemal control over financial reporting Accordmgly, we do not express an opmion on the effectiveness of the organization's internal control over fmancial reportmg

A deficiency in intemal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned fimctions, to prevent, or detect and con-ect misstatements on a timely basis A material weakness is a deficiency, or a combmation of deficiencies, in mtemal control such that there is a reasonable possibility that a matenal misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis.

Our consideration of mtemal control over financial reporting was for the limited purpose descnbed in the first paragraph of this section and was not designed to identify all deficiencies in internal control over financial reporting that might be deficiencies, significant deficiencies, or matenal weaknesses We did not identify any deficiencies m internal control over financial reporting that we consider to be matenal weaknesses, as defmed above

Compliance and Other Matters As part of obtaining reasonable assurance about whether the Foundation's financial statements are free of matenal misstatement, we performed tests of its compliance with certam provisions of laws, regulations, contracts, and grant agreements, noncompliance with which could have a direct and material effect on the determination of financial statement amounts However, providing an opinion on compliance with those provisions was not an objective of our audit, and accordmgly, we do not express such an opinion The results of our tests disclosed no instances of noncompliance or other matters that are required to be reported under Government Auditing Standards

21

30th Floor - Energy Centre • HOG Poydras St'-eet. • New Orleans, LA 70163-3000 • Tel S04 569 2978

One Galleria Blvd, Suite 2100 • Metaine LA 70001 • Tel 504 837 5990 • Fax 504834 3609

This report is mtended solely for the information and use of the Board of Dueclors, management. State of Louisiana Legislative Auditor's Office, and is not mtended to be and should not be usedby^anyone otherthan-these specified parties

fpO^An**^*^ O c T i ^ ^ , ^

New Orleans, Louisiana February 27. 2013

P&N

NEW ORLEANS JAZZ & HERTTAGE FESTIVAL AND FOUNDATION. INC. NEW ORLEANS. LOUISUJ^A

Schedule of Findings and Ouestioned Costs

Year ended August31. 2012

(1) Summarv of Auditors' Results

(a) The type of report issued on the basic financial statements' unqualified opinion

(b) Significant deficiencies m mtemal control were disclosed by the audit of the financial statements, no Matenal weaknesses, no

(c) Noncompliance which is matenal to the financial statements no

2) Federal Awards

New Orleans Jazz & Hents^e Foundation, Inc. did not expend Federal awards in excess of $500,000 durmg the year ended August 31, 2012, and therefore is exempt from the audit requirements under the Single Audit Act and OMB Circular A-133, Audits of States. Local Govemments, and Nonprofit Organizations

3) Fmdings Relating to the Fmancial Statements Reported m accordance with Govemment Auditmg Standards: none

23

NEW ORLEANS BUILDING CORPORATION New Orleans. Louisiana

Summarv Schedule of Pnor Audit Findmgs

U-01 Preparation of Financial Statements and Disclosures

Criteria. Adequate mtemal controls m relation to financial reportmg require the Foundation to have the ability to prepare it own financial statements in accordance with accounting principles generally accepted m the Umted States of America (GAAP), mcluding all required footnote disclosures, or detect misstatements or errors in statements prepared by others

Current status Resolved

11-02 Intemal Control Structure

Criteria The intemal control structure should be designed to contam the following 1) Accounting software that does not allow postings to pnor periods once closed, 2) Documentation of all accountmg policies and procedures m a fonnal wntten document, and 3) A capitalization policy for purchases of property and equipment over a certain amount that must be capitalized and depreciated over their estimated useful lives

Current status Resolved.

24

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