MCCARTER THEATRE COMPANY FINANCIAL ......MCCARTER THEATRE COMPANY TABLE OF CONTENTS June 30, 2013 Page Number Independent Auditors Report..... I Financial Statements Statement of Financial

MCCARTER THEATRE COMPANY

FINANCIAL STATEMENTS

June 30, 2013


TABLE OF CONTENTS

June 30, 2013

Page Number

Independent Auditors Report........ I

Financial Statements

Statement of Financial Position...............................................................................................3

Statement of Activities and Changes in Net Assets..................................................................4

Statementof Cash Flows........................................................................................................6

Notes to Financial Statements................................................................................................7

Supplementary Information

Schedule to Reconcile Internal Financial Reports with Financial Statements........................21

Schedule of Expenditures of Federal Awards........................................................................22

Schedule of Expenditures of State Awards ...........................................................................23

Note to the Schedules of Expenditures of Federal and State Awards...................................24

Schedule of Findings and Questioned Costs.........................................................................25

independent Auditors Report on Internal Control Over Financial Reporting and on Compliance and Other Matters Based on an Audit of Financial Statements Performed in Accordance with Government Auditing Standards.............................................................. 26

Independent Auditors Report on Compliance for Major State Program; Report on Internal Control Over Compliance; and Report on the Schedule of Expenditures of State Awards Required by 0MB Circular A-133 and State of New Jersey Circular Letter 04-04-0MB.................................................................28

MERCAdIEN, P.C. CLu I iliLd Public Accouw IAN i

• Au INDEPENDEHILY OWHED MEMBER,

McGI400EY AELIAUCE

• AMEoicoI IHSTITUTE OF

CERTIFIED Poetic Accoomoius

• NEw JeosE SOtior OF

CeoliFiw Poetic AccoocrouTs

• Ntw YORK SOCIETY OF

CERTIFIED Pueuc ACCO0NTAHIS

• PETINSYLVAIUA INSTITUTE OF

CERTIFIED PUBLIC ACCOUNTANTS

o AICPA's PRIVATE COMPAP1IES PRACTICE

SEciloc

• AICPA's CENTER FOR AUDIT Ooourv

• REGISTERED WITH TOE PCAOB

INDEPENDENT AUDITORS' REPORT

To the Board of Trustees of McCarter Theatre Company

Report on the Financial Statements We have audited the accompanying financial statements of McCarter Theatre Company (the "Theatre") which comprise the statement of financial position as of June 30, 2013, and the related statements of activities and changes in net assets, and cash flows for the year then ended, and the related notes to the financial statements.

Management's Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these 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 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 financial statements based on our audit. We conducted our audit in accordance with auditing standards generally accepted in the United States of America and the standards applicable to 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement.

An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the financial statements. The procedures selected depend on the auditors' judgment, including the assessment of the risks of material misstatement of the 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 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 financial statements.

II tRI.\I iNJ( ? C) Yi AI.RS (>1 l ADING 13's EXAMFLL

P.O. Box 7648 • Princel on, NI 08543-7648 • 609.689.9700 • Fax 609.689.9720

www.mercadien.com

The McGiadrcyAlliance isa premier afliraton of independent a ounhing and consulting Rims. The McGladrcy/sihancc member firms mainrain their name. ant000lrty and

independence and are responsible for their own client lee arrangements. deuce0 oT services and mainrcnancc of client relationships.

INDEPENDENT AUDITORS' REPORT (CONTINUED)

Auditors' Responsibility (Continued) We believe that the audit evidence we have obtained is sufficient and appropriate to provide a reasonable basis for our audit opinion.

Opinion In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Theatre as of June 30, 2013, and the changes in its net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Other Matters Supplementa,y In formation Our audit was conducted for the purpose of farming an opinion on the financial statements as a whole, The accompanying schedules of expenditures of federal and state awards are presented for purposes of additional analysis as required by Office of Management and Budget Circular A-i 33, Audits of States, Local Governments, and Non-Profit Organizations, and State of New Jersey Circular Letter 04-04-0MB, and are not a required part of the financial statements. The schedule to reconcile internal financial reports with the financial statements is presented for purposes of additional analysis and is not a required part of the 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 financial statements. The information has been subjected to the auditing procedures applied in the audit of the financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the financial statements or to the 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 financial statements as a whole.

Comparative In formation The financial statements of the Theatre as of and for the year ended June 30, 2012, were audited by other auditors whose report dated January 18, 2013, expressed an unmodified opinion on those statements.

Other Reporting Required by Government Auditing Standards In accordance with Government Auditing Standards, we have also issued our reports dated November 14, 2013 for the year ended June 30, 2013, on our consideration of the Theatres internal control over financial reporting and on our tests of its compliance with certain provisions of laws, regulations, contracts and grant agreements and other matters. The purpose of those reports is to describe the scope of our testing of internal control over financial reporting and compliance and the results of that testing, and not to provide an opinion on internal control over financial reporting or on compliance. Those reports are an integral part of an audit performed in accordance with Government Auditing Standards in considering the Theatre's internal control over financial reporting and compliance.

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STATEMENT OF CASH FLOWS Years Ended June 30 2013 and 2012

Cash Flows from Operating Activities Change in net assets Adjustments to reconcile change in net assets to net cash from operating activities:

Depreciation expense Unrealized and realized (gain) loss on investments Permanently restricted gifts and grants Change in allowance for doubtful accounts on receivables Change in discount on receivables Change in allowance for doubtful accounts on endowment

receivables Change in discount on endowment receivables Change in assets and liabilities:

Receivables Endowment receivables Government grants receivable Inventory Prepaid expenses Charitable remainder trusts Other assets Accounts payable and accrued expenses Deferred revenue

Net cash from operating activities

Cash Flows from Investing Activities Purchase of property and equipment Purchase of investments Proceeds from sales of investments

Net cash from investing activities

Cash Flows from Financing Activities Cash restricted for long-term purposes Repayment of loan payable Investment in permanent endowment

Net cash from financing activities

Net change in cash and cash equivalents Cash and cash equivalents, beginning of year Cash and cash equivalents, end of year

Supplemental Disclosure of Cash Flow Information: Cash paid during the year for

Interest

In-kind rent and building maintenance

2013 2012

$ (331128) $(1,956,077)

921,489 925337 (595,078) 225,397 (121,820) (226,998)

(3,815) (221) (3628) (5702)

(350) (542) (311) (829)

312,529 (98916) 28,068 38,747 47,486 29,948 89,248 (11,924) 61,000 53,493

(22,342) 15,740 4,540 (2,732)

(156,606) (133,526) (61,274 (149,942) 168.008 (1,298.747)

(28,735) (158,778) (743,551) (526,679) 502.917 1,433,084

(269,369) 747.627

- 564,156 (2707) (7,921)

121,820 226,998 119.113 783,233

17,752 232,113 409.770 177657

$ 427,522 $ 409,770

549 $ 3.674

$ 789,016 $ 878,018

See notes to financial statements.


NOTES TO FINANCIAL STATEMENTS

A. NATURE OF ORGANIZATION

McCarter Theatre Company, (the 'Theatre') is a private, non-profit corporation established in 1973. The Theatre's artistic mission is to operate a multi-disciplinary performing arts center for the educational and cultural benefit of audiences principally from New Jersey and Eastern Pennsylvania. The Theatre is dedicated to bringing a diverse selection of artistic forms, cultural traditions and aesthetic styles to its audiences. With programs in theater, music and dance as well as special artistic events, the Theatre produces and presents the full range of performing arts at the highest level of excellence.

B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES

Basis of Presentation The financial statements of the Theatre have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. Net assets and revenues and gains and losses are classified based on the existence or absence of donor-imposed restrictions.

The Theatre is required to report information regarding its financial position and activities according to three classes of net assets:

• Unrestricted net assets -. Net assets that are not subject to donor-imposed restrictions. Unrestricted net assets include both designated and undesignated funds.

• Temporarily restricted net assets - Net assets subject to donor-imposed stipulations that will be met by the passage of time or which will be fulfilled by actions of the Theatre.

• Permanently restricted net assets - Net assets subject to donor-imposed stipulations that they be maintained permanently by the Theatre. Generally, the donors of these assets permit the Theatre to use all or part of the income earned on related investments for general or donor-specified purposes.

Use of Estimates The preparation of financial statements in conformity with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts of assets and liabilities, and disclosure of contingent assets and liabilities, at the statement of financial position date. Accordingly, actual results could differ from those estimates.

Reclassification Certain prior year amounts have been reclassified in order to conform to the current year presentation. See also Note T.

Income Taxes The Theatre is exempt from income taxes under Section 501(c)(3) of the Internal Revenue Code and applicable state law. Income generated by activities that would be considered unrelated to the Theatres mission would be subject to tax which, if incurred, would be recognized as a current expense. No such tax liability has been recognized as of June 30, 2013.



B. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Income Taxes (Continued) The Theatre accounts for uncertainty in income taxes recognized in the financia' statements using a recognition threshold of more likely than not as to whether the uncertainty will be sustained upon examination by the appropriate taxing authority. Measurement of the tax uncertainty occurs if the recognition threshold has been met. Management determined that there were no tax uncertainties that met the recognition threshold. The Theatres federal exempt organization returns are no longer subject to examination by the Internal Revenue Service for fiscal years prior to 2010.

Sales Tax The Theatre collects sales tax on store and concession sales. The amount received is credited to a liability account and as sales tax is remitted, the account is charged. At any point in time, this account balance represents the net amount owed to taxing authorities for amounts collected but not yet remitted.

Cash and Cash Equivalents and Cash Restricted for Long-Term Purposes For the purpose of the statement of cash flows, cash and cash equivalents include cash on hand, on deposit and in money market funds. The Theatre considers all unrestricted short-term investments with an original maturity of ninety days or less to be cash equivalents. Cash and cash equivalents designated for long-term purposes or received with donor-imposed restrictions limiting their use to long-term purposes are not considered cash and cash equivalents for the purposes of the statement of cash flows and are presented as cash restricted for long-term purposes on the statement of financial position.

Accounts and Endowments Receivable Receivables include amounts due from program services and donor support with varying collection terms. Amounts expected to be collected beyond one year are discounted at a risk-adjusted interest rate at the time the promise to give is made. The change in net assets is charged with an allowance for estimated uncollectible amounts based on past experience and an analysis of current accounts receivable collectability. Amounts deemed uncollectible are charged to the allowance in the year they are deemed uncollectible.

Grants Receivable The Theatre considers all grants receivable to be fully collectible; accordingly, no allowances for doubtful amounts are required. If amounts become uncollectible, they will be charged to the change in net assets when that determination is made.

Inventory Inventory, which is comprised completely of finished goods, is stated at the lower of cost or fair value using the first-in, first-out method. During the year ended June 30, 2013 1 the Theatre closed its company store and wrote off the remaining store inventory upon closing.

Property and Equipment Property and equipment and leasehold improvements costing in excess of $1,000, and with useful lives greater than one year, are capitalized as assets and recorded at cost, except for donated items, which are recorded at fair value on the date of donation. Depreciation is provided using the straight line method over the estimated lives of the assets according to the following asset classes:




Property and Equipment (Continued) Description

Equipment Automotive equipment Leasehold improvements Scenery shops Reusable scenery and costumes

Estimated Life

3-5 years 5 years

15-25 years 20 years

3 years

Maintenance and repairs which do not extend the useful lives of the related assets are charged to expense as incurred.

Fair Value Measurements Valuation techniques used to measure fair value are prioritized into the following hierarchy:

Level 1 - Determined using quoted market prices in active markets for identical assets and liabilities.

Level 2 - Determined using quoted market prices in active markets for similar assets and liabilities, quoted prices or identical or similar instruments in markets that are not active, and model-based valuation techniques for which all significant inputs are observable in the market for substantially the full term of the assets or liabibties.

Level 3 - Determined using inputs that are generally unobservable and typically reflect management's estimates of assumptions that market participants would use in pricing the asset or liability. The market for assets and liabilities using Level 3 measurements is typically inactive.

Investments Investments are stated at fair value in the statement of financial position. Due to the timing of the release of the June 30 investment fair values by Princeton University (the "University'), it is the policy of the Theatre that funds held by Princeton University Investment Company (' PRINCO") are recorded in the statement of financial position at fair value as of May 31. All interest, dividends 1 distributions, and unrealized gains and losses are reported in the statement of activities and changes in net assets as increases or decreases in unrestricted net assets unless their use is temporarily or permanently restricted by explicit donor stipulations or by law.

Restricted Investments - Letter of Credit The Theatre maintains certificates of deposit to meet the letter of credit requirements imposed on the Theatre by various Actors Unions to ensure payment to union members in the event the Theatre is unable to meet its obligations. Interest rates on the certificates of deposit range from 0.25% to 0.40% and the dates of maturity run through January 2014 as of June 30, 2013.

Deferred Revenue Ticket sales collected in advance of the pending season and funds received under exchange contracts in advance of their usage are reported as deferred revenue.




Revenue Recognition Operating revenues are recognized as they are earned. Advance ticket sales are deferred in the statement of financial position.

Contributions are recognized when the donor makes a promise to give to the Theatre that is, in substance, unconditional. Unconditional promises to give that are due in the next year are reflected as current promises to give and are recorded at their net realizable values. Unconditional promises to give that are due in subsequent years are reflected as non-current promises to give and are recorded at the present value of their net realizable values, using risk adjusted interest rates applicable to the years in which the promises are received to discount the amounts.

Contributions that are based on conditional promises to give are recognized when the conditions on which they are dependent are substantially satisfied.

Support that is restricted by the donor is reported as an increase in unrestricted net assets if the restriction expires in the reporting period in which the support is recognized. AU other donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires, temporarily restricted net assets are reclassified to unrestricted net assets as net assets released from restrictions.

Investment income and gains restricted by donors are reported as increases in unrestricted net assets if the restrictions are met in the reporting period in which the income and gains are recognized.

The Theatre recognizes contract and grant revenues as exchange transactions in the statement of activities and changes in net assets to the extent that expenses have been incurred for the purpose specified by the grantor during the period. In applying this concept, the legal and contractual requirements of each individual program are used as guidance. All money not expended in accordance with the grant or contract is recorded as a liability to the grantor as the Theatre does not maintain any equity in the grant or contract.

Contributions of donated non-cash assets are recorded at fair value in the period received. Contributions of donated services that create or enhance non-financial assets or that require specialized skills, which are provided by individuals possessing those skills and which would typically need to be purchased if not provided by donation, are recorded at fair value in the period received, During the years ended June 30 2013 and 2012, there were no contributed donated services meeting the requirements for recognition in the financial statements.

In-Kind Contributions The Theatre records the value of in-kind goods and services as revenue and expense when the in-kind contribution is both budget-relieving and relates to events and programs under the TheatrWs control. During the years ended June 30 r 2013 and 2012, the Theatre received $789,016 and $878,018, respectively, of in-kind contributions, which consisted of in-kind rent and building maintenance for theater space, travel and lodging and miscellaneous expenses.

10



B, SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED)

Functional Allocation of Expenses The cost of providing various programs and other activities has been summarized on a functional basis in the functional aVocation of expenses footnote. Costs are allocated to program, general and administrative, and fundraising based on evaluation of the related benefits of the costs incurred.

Marketing and Advertising Costs The costs of marketing and advertising are expensed as incurred. Marketing and advertising expense amounted to $1007664 and $792,527 for the years ended June 30,2013 and 2012, respectively.

C. RECEIVABLES

Receivables are recorded at present value using a discount rate of 4.75% on all receivables expected to be coflected beyond one year from the financial statement date for both June 30, 2013 and 2012.

Receivables are expected to be collected as follows: June 30.

2013 2012 Current

Receivable in less than one year Less: allowance for doubtful accounts

Net current receivables Non-current

Receivable in I - 5 years Loss: discount to present value Less: allowance for doubtful accounts

Net non-current receivables Net receivables

D. ENDOWMENT RECEIVABLES

$ 340,247 $ 651,884 (5.995 (6.518)

334.252 645.366

95,000 95,000 (680) (4,308) (450) (2.850)

93,870 87.842 $ 428,122 $ 733.208

Endowment receivables are recorded at present value using a discount rate of 4.75% on all receivables expected to be collected beyond one year from the financial statement date for June 30, 2012. During the year ended June 30, 2013, the Theatre wrote off all remaining endowment receivables in anticipation of starting a new campaign in fiscal year 2014.

Endowment receivables are expected to be collected as follows: June 30.

2013 2012 Current

Receivable in less than one year Less: allowance for doubtful accounts

Net current receivables Non-current

Receivable in I - 5 years Less: discount to present value Less: allowance for doubtful accounts

Net non-current receivables Net endowment receivables

- $ 24,568 - (246) - 24322

- 3500 - (105) - (310) - 3.085 - $ 27,407

Ii



E. PROPERTY AND EQUIPMENT

Property and equipment consist of the following:

Equipment Automotive equipment Leasehold improvements Scenery shops Reusable scenery and costumes

Total property and equipment Less: accumulated depreciation

Property and equipment, net

June 30, 2013 2012

$ 2115566 $ 2,094,548 129,367 129,367

16,661,867 16,659714 1,588,207 1,588,207

249774 249,774 20,744,781 20721610

(16766782) (15.850857) $ 3.977.999 $ 4870753

Depreciation expense amounted to $921489 and $925,337 for the years ended June 30, 2013 and 2012, respectively.

F. INVESTMENTS

The Theatres investments are held primarily in the University's investment pools. The Theatres permanently restricted endowment funds and certain temporarily restricted funds are invested with PRINCO and are held in the University's primary pool of investments. These funds are invested in a combination of debt and equity securities in the University's investment pools. The Theatre also has endowment funds invested in a mutual fund account with Morganstanley. The restricted investments - letter of credit is held in certificates of deposit at PNC Bank.

A summary of investments at fair value is as follows: June 30,2013

Temporarily Permanently Unrestricted Restricted Restricted Total

PRINCO primary investment pool

Mutual funds Total investments

Restricted investments 1 letter of credit - certificates of deposit

PRINCO primary investment pool

Mutual funds Total investments

Restricted investments, letter of credit - certificates of deposit

$ 3409,119 $ 1,048,761 $ 7,070702 $11,528,582 - - 416116 416,116

$ 3,409119 $ 1,048,761 $ 7.486.818 $11,944,698

$ 150.959 $ - - $ 150,969

June 30. 2012 Temporarily Permanently

Unrestricted Restricted Restricted Total

$ 2,849,282 $ 922,474 $ 7,046141 $10817897 - - 291450 291,450

$ 2,849,282 $ 922,474 $ 7.337,591 $11109347

$ 150,598 $ - .. $ 150.598

12



F. INVESTMENTS (CONTINUED)

A summary of investment return in the statement of activities and changes in net assets is as follows:

Interest and distributions Net realized and unrealized

gains (losses) Total investment return

Year Ended June 30, 2013 Temporarily Permanently

Unrestricted Restricted Restricted Total $ 555247 $ 232563 $ - $ 787810

517,148 77.930 - 595,078 $ 1,072,395 $ 310.493 $ - $ 1,382,888

Year Ended June 30, 2012 Temporarily Permanently

Unrestricted Restricted Restricted Total $ 467,290 $ 188857 $ - $ 656,147

(253.558) 28,161 - (225.397) $ 213,732 $ 217,018 $ - $ 430.750

Interest and distributions Net realized and unrealized

gains (losses) Total investment return

0. FAIR VALUE MEASUREMENTS

The fair value of the Theatre's investments, including the endowment in the University's "Primary Pool" is determined monthly by PRINCO and made available to all participants in the 'Primary Pool." Since there is no comparable investment there is no comparable pricing available. From PRINCO's standpoint, the assets in the 'Primary Pool' could be classified as Level 2, as PRINCO has full knowledge of the assets and nature of their valuation. From the Theatre's perspective, since it has no knowledge of the specific assets in the Primary Pool' and is not in a position to value them, the Theatre's investment in the "Primary Pool" has been conservatively classified as Level 3.

The classification of the Theatre's investment in the Primary Pool' as Level 3 has no material impact on the financial statements.

The following table represents the Theatres fair value hierarchy for its financial assets measured at fair value on a recurring basis:

June 30. 2013 Level 1 Level 2 Level 3 Total

Certificates of deposit $ 150959 $ - $ - $ 150,959 Mutualfunds 416116 - - 416,116 Charitable remainder trusts - - 391975 391975 PRINCO primary pool - - 11,528,582 11,528,582

Total $ 567.075 $ - $11,920,557 $12487632

June 30, 2012 Level I Level 2 Level 3 Total

Certificates of deposit $ 150598 $ - $ - $ 150,598 Mutual funds 291,450 - - 291,450 Charitable remainder trusts - - 369,633 369,633 PRINCO primary pool - - 10,817,897 10,817,897

Total $ 442,048 $ - $ 11,187,530 $11,629,578

13



S. FAIR VALUE MEASUREMENTS (CONTINUED)

The following is a reconciliation of Level 3 assets for which significant unobservable inputs were used to determine fair value:

Balance at beginning of year Change in unrealized appreciation Change in value of charitable remainder trusts Net purchases Balance at end of year

H. CHARITABLE REMAINDER TRUSTS

Year Ended June 30, 2013 2012

$11187530 $12519859 571931 (1,505190) 22342 (54,137)

138.754 226.998 $11920557 $11,187,530

The Theatre is a 60% and 40% beneficiary of two charitable remainder trusts. The trusts are held by a third-party trustee. The Theatre will receive its portion of the trusts upon the termination of each trust. The recorded balance of the charitable remainder trusts represents the Theatre's allocated percentages of the net present value of the remaining trust assets at June 30, 2013 and 2012, respectively, and are reflected in permanently restricted net assets.

I. LOAN PAYABLE

Loan payable consists of the following: June 30,

2013 2012 Loan payable due October 2012, payable in monthly installments

of $664 with zero interest $ - $ 2707 Less: current portion - 2707 Loan payable, non-current portion - -

J. LINE OF CREDIT

The Theatre entered into an agreement with a financial institution on December 23, 2008, for a $500,000 revolving line of credit. The line of credit agreement was extended through January 1, 2014, and is collateralized by all of the Theatre's business assets. Under the terms of the agreement, the Theatre can borrow against all business assets up to the maximum line of credit. As of June 30, 2013 and 2012, no amounts were outstanding on the line of credit.

K. NET ASSETS

Unrestricted Unrestricted net assets are available for the following purposes as designated by the Theatres Board of Trustees:

June 30, 2013 2012

Long term investment and cash reserve $ 1,766,772 $ 1595,464 Costs of fundraising campaign 30000 -

Total board designated unrestricted net assets 1,796,772 1 595,464 Undesignated 5,137.307 5,498,488

Total unrestricted net assets $ 6,934079 $ 7.093.952

14



K. NET ASSETS (CONTINUED)

Temporarily Restricted Temporarily restricted net assets are available for the following purposes or periods:

Fiscal year 2013 productions and operations Fiscal year 2014 productions and operations Fiscal year 2015 productions and operations Fiscal year 2016 productions and operations Theatre Series Presented Series Audience Access program Education and Engagement Intern program

Total temporarily restricted net assets

June 30, 2013 2012

$ - $ 745218 411871 75,000

7500 - 7500 -

505,704 460933 5,822 3869 4769 -

89479 79,158 16116 -

$ 1.048761 $ 1,364.1 78

Net assets were released from donor restrictions as follows:

Expense incurred to satisfy donor restrictions Time restrictions expired

Net assets released from restrictions

Year Ended June 30. 2013 2012

$ 232,563 $ 188857 506,939 547212

$ 739.502 $ 736,069

Permanently Restricted Permanently restricted net assets at June 30, 2013 and 2012, are restricted for investment in perpetuity, the income from which is expendable to support the following:

General operations of the Theatre Theatre Series Presented Series Audience Access program Education and Engagement Intern program

Total permanently restricted net assets

June 30, 2013 2012

$ 5969032 $ 5,924,870 1,019761 1,019,761

190000 190,000 100,000 100,000 200,000 200000 400.000 300000

$ 7878793 $ 7.734,631

See Note N regarding matching contributions from the New Jersey Cultural Trust included in the permanently restricted net assets amount above. The earnings from these funds are available for general operations of the Theatre.

L. ENDOWMENT

The Theatre's endowment funds consist of several funds established to continue the purpose of the Theatre. Net assets associated with endowment funds are classified and reported based on the existence or absence.of donor-imposed restrictions.

15



L ENDOWMENT (CONTINUED)

The Theatre follows the accounting pronouncement, Endowments of Not-for-Profit Organizations: Net Asset Classification of Funds Subject to an Enacted Version of the Uniform Prudent Management of Institutional Funds Act, and Enhanced Disclosures for All Endowment Funds. This pronouncement provides guidance on the net asset classification of donor-restricted endowment funds for a not-for-profit organization that is subject to an enacted version of the Uniform Prudent Management of Institutional Funds Act

(HUPMIFA), which serves as a model act

for states to use in enacting legislation. The State of New Jersey follows UPMIFA. Endowments for Not-for-Profits also improves disclosures about an organizations endowment funds (both donor-restricted endowment funds and board-designated endowment funds). The enhanced disclosures required as a result of the adoption of this pronouncement have been incorporated within this note,

The Theatre's investment in the 'Primary Pool" managed by PRINCO, who also manages the Universitys endowment, consists of a permanently restricted endowment fund, a board-designated fund, and other unrestricted investments. The 'Primary Pool' is an equity-based investment portfolio which partners with other investment management firms to invest across diverse asset categories with a long-term investment horizon. Under the terms of the various endowment instruments the Theatre is restricted from utUizing the corpus of the permanently restricted endowment assets for operations. The board-designated funds are available for operations under certain circumstances. The income earned from these assets is available for operations or as stipulated by the donors. The Board of Trustees of the Theatre has interpreted state law as requiring the preservation of the value of the original 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 Theatre classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment and (b) the original value of subsequent gifts to the permanent endowment. The Theatre considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:

• The duration and preservation of the fund; • The purposes of the Theatre 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 Theatre; and • The investment policies of the Theatre.

Changes in endowment net assets were as follows:

Invested endowment assets, beginning of year Interest and distributions Unrealized and realized gains (losses) Investment fees

Net investment return Contributions Endowment receivables collected Amounts appropriated for expenditure

Invested endowment assets, end of year Charitable remainder trusts Uncollected endowment receivables, net Total endowment net assets, end of year

Year Ended June 30. 2013 Temporarily Permanently

Unrestricted Restricted Restricted Total $ 120,279 $ 543,960 $ 7,337,591 $ 8,001,830

554,887 232,563 - 767,450 517148 77,930 - 595,078

(3,922) - - (3922) 1,068,113 310,493 - 1,378606

- - 121,520 121,820 - - 27407 27,407

(781.123) (232.563) - (1013686) 407269 621,890 7,486,818 8515977

- - 391,975 391,975

$ 407269 $ 621.890 $ 7.878.793 $ 8,907,952

16



L. ENDOWMENT (CONTINUED)

Invested endowment assets, beginning of year Interest and distributions Unrealized and realized gains (losses) Investment fees

Net investment return Contributions Endowment receivables collected Amounts appropriated for expenditure

Invested endowment assets, end of year Charitable remainder trusts Uncollected endowment receivables, net Total endowment net assets, end of year

June 30. 2012 Temporarily Permanently

Unrestricted Restricted Restricted Total $ 1,669,380 $ 515,799 $ 7,073,217 $ 9,258396

466,609 188857 - 655,466 (246,714) 28161 - (218,553)

219895 217,018 __________ 436,913 - - 226,998 226998 - - 37,376 37,376

(1,768,996) (188,857) - (1,957,853) 120279 543,960 7337,591 8001830

- 369,633 369633 - - 27407 27,407

$ 120,279 $ 543.960 $ 7.734,631 $ 8,398,870

The Theatre has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment whiie maintaining the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Theatre must hold in perpetuity or for a donor-specified period. The investment goal for the Theatre's endowment is to preserve and maintain the purchasing power, adjusted for inflation, of the endowment after taking into effect the Endowment Draw Policy as described below. The Theatre expects its endowment funds, over time, to provide an average annual rate of return to be greater than the S&P 500 index plus inflation. Actual returns in any given year may vary from this amount.

The Theatre has a poucy of appropriating for distribution each year five percent of its endowment fund's average fair value over the prior 12 quarters through the final year end preceding the fiscal year in which the distribution is planned. In establishing this policy, the Theatre considers the long term expected return on its endowment. Accordingly, over the long term, the Theatre expects the current spending policy to allow its endowment to grow at an annual rate that exceeds inflation. This is consistent with the Theatre's objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. For the years ended June 30, 2013 and 2012, the board elected to draw seven percent and six percent, respectively.

M. FUNCTIONAL ALLOCATION OF EXPENSES

Expenditures are allocated according to their functional classifications as follows:

Program services Management and general Fundraising

Total expenses

Year Ended June 30. 2013 2012

$11,050,296 $10772080 1,395,259 1,840829

384.931 426,593 $12,830,486 $13039502

17



N. NEW JERSEY CULTURAL TRUST

In the years ended June 30, 2013 and 2012, the Theatre was provided matching grants totaling $24228 and $20000, respectively, from the New Jersey Cultural Trust (the Trust"). These grants are included as an increase to permanently restricted net assets for the year. These grants brought the total contribution made to the Theatre from the Trust to $218586 and $194,358 for the years ended June 30, 2013 and 2012, respectively. These grants are matching payments based on certified private donations to the Theatre's endowment. These grants, as well as the donations to the permanent endowment previously certified by the Trust, are held and managed by the University and included in permanently restricted endowment funds.

0. DEFINED CONTRIBUTION RETIREMENT PLAN

The Theatre has a defined contribution retirement plan under Section 403(b) (the Plan') available to substantially all eligible full-time employees. Under the terms of the Plan, the Theatre will contribute 3% of eligible payroll for employees of the Theatre who are employed for at least two years. The Plan allows for participant contributions and the Theatre, at its discretion may match those contributions up to an additional 2% of the participants eligible salary. The Plan expense for the year ended June 30, 2012 totaled $150,061. Effective July 1, 2012, the Theatre froze the Theatre's contribution and matching portion of the Plan until sufficient funds are available to resume contribution to the Plan.

P. RELATIONSHIP WITH THE UNIVERSITY

The Theatre has a close relationship with the University. In addition to managing certain of the Theatre's investments, the following relationships exist:

• The property and building used by the Theatre are owned by the University and leased without charge to the Theatre under a lease agreement expiring June 30, 2020. The fair value of the rent for the premises was estimated to be $500,000 for each of the fiscal years ended June 30, 2013 and 2012. This amount is reported as Princeton University in-kind contribution and an expense in the statement of activities and changes in net assets.

• The University provides repair and maintenance services for the property and building to the Theatre. The cost of the services, which amounted to $289,016 and $365,041 for the years ended June 30, 2013 and 2012, respectively, are reflected as both an expense and Princeton University in-kind contribution in the financial statements.

• The University provided the Theatre with unrestricted contributions totaling $420767 and $155,710 for the years ended June 30, 2013 and 2012, respectively.

• The University Triangle Club uses the Theatre's facilities for various projects, at no charge.

• The Theatre has entered into a rental agreement with the University for a property located in West Windsor, New Jersey, which serves as the primary location for the Theatre's scenery shop. The rental agreement calls for an annual rent with an increase of one percent per year thereafter, for the term of the lease, which expires June 30, 2020.

18



P. RELATIONSHIP WITH THE UNIVERSITY (CONTINUED)

Future minimum payments under the terms of this lease are as follows:

Fiscal year ending June 30, 2014 2015 2016 2017 2018 Thereafter

Total

$ 138,060 139,441 140,835 142244 143,666 291,657

$ 995.903

By its organizational by-laws, the Board of Trustees has between 20 and 50 members. Of that number, between five and eight board members are appointed by the President of the University from among the University's staff and faculty, in consultation with the Theatre's board development committee.

Q. CONCENTRATION OF RISK AND

Custodial Credit Risk Financial instruments that potentially subject the Theatre to significant concentrations of credit risk consist principally of cash deposits. The Theatre places its interest bearing cash balances in a limited number of financial institutions. The balances are insured by the Federal Deposit Insurance Corporation up to $250000. At times, the deposits in the financial institutions may exceed the amount of insurance provided on such deposits. The Theatre monitors the financial health of these financial institutions. Historically, the Theatre has not experienced any losses on deposits.

Investment Risk Investments are primarily financial instruments which are monetary in nature. Accordingly, interest rates have a more significant impact on performance than do the effects of general levels of inflation. Interest rates generally do not move in the same direction or with the same magnitude as prices of goods and services as measured by the consumer price index. The investments are subject to risk conditions of the investments' objectives, stock market performance, interest rates, economic conditions and world affairs.

PRINCO holds and manages significant amounts of the Theatre's investments. The fair value of the PRINCO investments is calculated as of May 31 on an annual basis as discussed in Note B. As such, it is possible that a significant change in the fair value of the PRINCO investments could occur between the May 31 calculation date and the statement of financial position date as a result of market fluctuation.

Concentration of Revenue The Theatre derives its revenue principally from performance activities, individual, corporate and foundation contributions, and state grants. The Theatre received grants totaling $609,820 and $619,008 from the New Jersey State Council on the Arts for the years ended June 30, 2013 and 2012, respectively.

19



Q. CONCENTRATION OF RISK AND UNCERTAINTIES (CONTINUED)

Operating Leases In addition to the eases with the University described above, the Theatre leases facilities in the Princeton area to provide housing for certain performers and employees. These leases have a term of no more than one year and are renewed annually at the discretion of the Theatre and the lessor.

Collective Bargaining Agreements The Theatre operates under collective bargaining agreements with various actors 1 artists and performers unions which establish the minimum terms and conditions of employment. These agreements are periodically renegotiated in accordance with industry standards and trends on a periodic basis.

R. RELATED PARTY

The Theatre entered into a Ib -je of credit agreement with a bank that is considered a related party for a maximum line of credit of $500000. For the years ended June 30, 2013 and 2012, the Theatre had a fine of credit with this bank, for which a member of the Theatre's Board of Trustees is an executive.

S. SUBSEQUENT EVENTS

The Theatre has evaluated events occurring after June 30, 2013, but before November14, 2013, which is the date the financial statements were available to be issued. Based on that evaluation, the Theatre has determined that there have been no events during that period that require disclosure in the financial statements.

T. RECLASSIFICATION OF NET ASSETS

During the year ended June 30, 2013 the Theatre identified certain endowment funds for which the donors had designated the earnings on the funds for a specified purpose. In the past, the Theatre had classified the earnings on these funds as unrestricted. In order to more accurately reflect the intent of the donors in restricting the earnings on the funds more specifically than for general operations of the Theatre, the Theatre reclassified its net asset balances to record the earnings in these funds as temporarily restricted until appropriated for expenditure under its endowment spending policy. As a result, temporarily restricted net assets as of July 1, 2011 were increased by $515,799 and unrestricted net assets were decreased by $515,799. There was no impact on total net assets as of July 1, 2011. In addition, certain amounts in the statement of activities and changes in net assets for the year ended June 30, 2012, were reclassified to reflect the earnings on these funds as increases in temporarily restricted net assets, and the amounts appropriated for expenditure as net assets released from restriction. There was no net impact on the change in net assets for the year ended June 30, 2012.

20

SUPPLEMENTARY INFORMATION


SCHEDULE TO RECONCILE INTERNAL FINANCIAL REPORTS WITH FINANCIAL STATEMENTSYear Ended June 30, 2013_________________________________________________________________________________

The Theatre budgets its operations on a traditional fund accounting basis. The Board of Trusteesmakes certain resources available to the management for day-to-day operations, and designatesother resources for longer term purposes. A reconciliation of unrestricted functional operatingrevenue and expenses to operating results as budgeted follows for the year ended June 30, 2013:

Change in Unrestricted Operating Net Assets $ (159,873)Less: unrealized gain on investments (517,148)Plus: depreciation expense 809,736Less: allocation to board designated reserve (9,315)

Net Operating Surplus $ 123,400

See independent auditors' report on supplemental information. 21

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NOTE TO THE SCHEDULES OF EXPENDITURES OF FEDERAL AND STATE AWARDS Year Ended June 30, 2013

Note 1. Basis of Presentation

The accompanying schedules of expenditures of federal and state awards include the federal and state grant activity of the Theatre and are presented on the accrual basis of accounting. The information in these schedules is presented in accordance with the requirements of 0MB Circular A-133, Audits of States, Local Governments, and Non-Profit Organizations and State of New Jersey Circular Letter 04-04-0MB. Therefore, some amounts presented in these schedules may differ from amounts presented in, or used in the preparation of, the basic financial statements.

24


SCHEDULE OF FINDINGS AND QUESTIONED COSTS Year Ended June 30, 2013

Section I - Summary of Auditors' Results

Financial Statements

Type of auditors report issued: Unmodified

Internal control over financial reporting: • Material weaknesses identified? ________ Yes X No • Significant deficiencies identified that are not

considered to material weaknesses? _______ Yes X None reported

Noncompliance material to financial statements noted? ________ Yes X No

State Awards

Internal control over major programs: • Material weaknesses identified? ________ Yes X No • Significant deficiencies identified that are not

considered to material weaknesses? ________ Yes X None reported

Type of auditors' report issued on compliance for major program: Unmodified

Any audit findings disclosed that are required to be reported in accordance with section 510(a) of Circular A-I 33? ________Yes X No

Identification of major program:

Grant Number! State Account Number Name of State Program 100-074-2530-032-6130 State of New Jersey, Department of State,

New Jersey State Council on the Arts

Dollar threshold used to distinguish between type A and type B programs: $ 300,000

Auditee qualified as ow-risk auditee? X Yes ________ No

All Federal and State payroll tax returns were filed timely and all required tax payments were made.

Section II - Financial Statement Findings None

Section III - State Award Findings and Questioned Costs None

Summary Schedule of Prior Audit Findings None

25

MERCAdIEN, P.C. CERSII d Public AccOUNIANIS

INDEPENDENT AUDITORS' REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS


We have audited, in accordance with auditing standards generally accepted in the United States of America and the standards applicable to financial audits contained in Government Auditing Standards issued by the Comptroller General of the United States, the financial statements of McCarter Theatre Company (the "Theatre") as of and for the year ended June 30, 2013, and the related notes to the financial statements, which collectively comprise the Theatre's basic financial statements, and have issued our report thereon dated November 14, 2013.

Internal Control Over Financial Reporting In planning and performing our audit of the financial statements, we considered the Theatre's internal control over financial reporting (internal control) to determine the audit procedures that are appropriate in the circumstances for the purposes of expressing our opinion on the financial statements, but not for the purpose of expressing an opinion on the effectiveness of the Theatre's internal control. Accordingly, we do not express an opinion on the effectiveness of the Theatre's internal control.

A deficiency in internal control exists when the design or operation of a control does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct misstatements on a timely basis. A material weakness is a deficiency, or combination of deficiencies, in internal control, such that there is a reasonable possibility that a material misstatement of the entity's financial statements will not be prevented, or detected and corrected on a timely basis. A significant deficiency is a deficiency, or a combination of deficiencies, in internal control that is less severe than a material weakness, yet important enough to merit attention by those charged with governance.

(2ELEI3I.tATINC, C) Yt AI.tS ()I Li AI)IN(; CAY EXAMPLE 26 P.O. Box 7648 . Pl'inceton, Nj 08543-7648 • 609.689.9700 • Fax 609.689.9720

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INDEPENDENT AUDITORSt REPORT ON INTERNAL CONTROL OVER FINANCIAL REPORTING AND ON COMPLIANCE AND OTHER MATTERS BASED ON AN AUDIT OF FINANCIAL STATEMENTS PERFORMED IN ACCORDANCE WITH GOVERNMENT AUDITING STANDARDS (CONTINUED)

Internal Control Over Financial Reporting (Continued) Our consideration of internal control was for the Umited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control that might be material weaknesses or significant deficiencies. Given these limitations, during our audit, we did not identify any deficiencies in internal control over financial reporting that we consider to be material weaknesses. However material weaknesses may exist that have not been identified.

Compliance and Other Matters As part of obtaining reasonable assurance about whether the Theatre's financial statements are free of material misstatement, we performed tests of its compliance with certain provisiQrls 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 1 accordingly, 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.

Purpose of this Report The purpose of this report is solely to describe the scope of our testing of internal control and compliance and the results of that testing, and not to provide an ophiion on the effectiveness of the Theatre's internal control or on compliance. This report is an integral part of an audit performed in accordance with Government Auditing Standards in considering the Theatre's internal control and compliance. Accordingly, this communication is not suitable for any other purpose.

C,

November 14,2013

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1tMERCAdIEN, P.C. CiRIIiti:Cl Public ACCOIJNIANIS

• Au INBEPEHDEIITLY OWNED METIBIR,

MCGIADREY ALLIANCE

• AMERICAN INSTITUTE OF


• NEW JERSEY SOCIETY OF


• NEw YORK SOCIETY OF

CERTIFIED PuBLIC ACCOUNTANTS

• PENNSYLVANIA INSTITUTE OF


• AICPA's PRIVATE COMFANIES PRACTicE

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR MAJOR STATE PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF STATE AWARDS REQUIRED BY 0MB CIRCULAR A-133 AND STATE OF NEW JERSEY CIRCULAR LETTER 04-04-0MB


Report on Compliance for Major State Program We have audited the Theatre's compliance with the types of compliance requirements described in 0MB Circular A-I 33, Compliance Supplement and State of New Jersey Circular Letter 04-04-0MB that could have a direct and material effect on the Theatre's major state program for the year ended June 30, 2013. The Theatre's major state program is identified in the summary of auditors' results section of the accompanying schedule of findings and questioned costs.

Management's Responsibility Management is responsible for compliance with the requirements of laws, regulations, contracts and grant agreements applicable to its state programs.

Auditors' Responsibility Our responsibility is to express an opinion on compliance for the Theatre's major state program based on our audit of the types of compliance requirements referred to above. We conducted our audit of compliance in accordance with auditing standards generally accepted in the United States of America; the standards applicable to financial audits contained in Government Auditing Standards, issued by the Comptroller General of the United States; 0MB Circular A-I 33, Audits of States, Local Governments, and Non-Profit Organizations; and State of New Jersey Circular Letter 04-04-0MB. Those standards and circulars require that we plan and perform the audit to obtain reasonable assurance about whether noncompliance with the types of compliance requirements referred to above that could have a direct and material effect on a major state program occurred. An audit includes examining, on a test basis, evidence about the Theatre's compliance with those requirements and performing such other procedures as we considered necessary in the circumstances.

SECTION We believe that our audit provides a reasonable basis for our opinion on •AICPA's CENTER FOR AUDIT QUALIFY compliance for the Theatre's major state program. However, our audit does not

REGISTEREB WITH THE PCAOB provide a legal determination of the Theatre's compliance.

CELEI3WAI INC ' 0 YEI\I..'S 01 LEADING KY ExAMI'I I 28

P.O. Box 7648 • Princeton. NJ 08543-7648 • 609.689.9700 • Fax 609.689.9720

www.mercadicn.com

The MeGladrey ,\Jllance i 5 prenrler alfihlallon at Independent accounting and consulting firms. The MccIa&ey Alliance orember flints prraintairi their nanre. autonomy and

independence and are responsible (or their own client fcc anangcmcnts. dctivcV' of scrsdccs and maIntenance at client relationships.

INDEPENDENT AUDITORS' REPORT ON COMPLIANCE FOR MAJOR STATE PROGRAM; REPORT ON INTERNAL CONTROL OVER COMPLIANCE; AND REPORT ON THE SCHEDULE OF EXPENDITURES OF STATE AWARDS REQUIRED BY 0MB CIRCULAR A-133 AND STATE OF NEW JERSEY CIRCULAR LETTER 04-04-0MB (CONTINUED)

Opinion on Major State Program In our opinion the Theatre complied, in all material respects, with the compHance requirements referred to above that could have a direct and material effect on its major state program for the year ended June 30, 2013.

Report on Internal Controt Over Compliance Management of the Theatre is responsible for establishing and maintaining effective internal control over compliance with the types of compliance requirements referred to above. In planning and performing our audit of compliance, we considered the Theatres internal control over compliance with the types of requirements that could have a direct and material effect on a major state program to determine the auditing procedures that are appropriate in the circumstances for the purpose of expressing an opinion on compliance for the major state program and to test and report on internal control over compliance in accordance with 0MB Circular A-133, but not for the purpose of expressing an opinion on the effectiveness of internal control over compliance. Accordingly, we do not express an opinion on the effectiveness of the Theatre's internal control over compliance.

A deficiency in intern a! control over compliance exists when the design or operation of a control over compliance does not allow management or employees, in the normal course of performing their assigned functions, to prevent, or detect and correct, noncompliance with a type of compliance requirement of a state program on a timely basis. A material weakness in internal control over compliance is a deficiency, or combination of deficiencies, in internal control over compliance, such that there is a reasonable possibility that material noncompliance with a type of compliance requirement of a state program will not be prevented, or detected and corrected, on a timely basis. A significant deficiency in internal control over compliance is a deficiency, or a combination of deficiencies in internal control over compliance with a type of compliance requirement of a state program that is less severe than a material weakness in internal control over compliance, yet important enough to merit attention by those charged with governance.

Our consideration of internal control over compliance was for the limited purpose described in the first paragraph of this section and was not designed to identify all deficiencies in internal control over compliance that might be material weaknesses or significant deficiencies. We did not identify any deficiencies in internal control over compliance that we consider to be material weaknesses. However, material weaknesses may exist that have not been identified.

The purpose of this report on internal control over compliance is solely to describe the scope of our testing of internal control over compliance and the results of that testing based on the requirements of 0MB Circular A-133 and State of New Jersey Circular Letter 04-04-0MB. Accordingly, this report is not suitable for any other purpose.

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Documents

MCCARTER THEATRE COMPANY FINANCIAL ......MCCARTER THEATRE COMPANY TABLE OF CONTENTS June 30, 2013 Page Number Independent Auditors Report..... I Financial Statements Statement of Financial