TELLURIDE COUNCIL

FOR THE ARTS AND HUMANITIES

Audited Financial Statements December 31, 2022

INDEPENDENT AUDITOR’S REPORT

To the Board of Directors of
Telluride Council for the Arts and Humanities

Opinion

We have audited the accompanying financial statements of Telluride Council for the Arts and Humanities (the “Organization”), which comprise the statement of financial position as of December 31, 2022 and the related statements of activities, functional expenses, and cash flows for the year then ended, and the related notes to the financial statements.

In our opinion, the accompanying financial statements present fairly, in all material respects, the financial position of the Organization as of December 31, 2022 and the changes in net assets and its cash flows for the year then ended in accordance with accounting principles generally accepted in the United States of America.

Basis for Opinion

We conducted our audits in accordance with auditing standards generally accepted in the United States of America (GAAS). Our responsibilities under those standards are further described in the Auditors’ Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of the Organization and to meet our other ethical responsibilities in accordance with the relevant ethical requirements relating to our audits. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion.

Responsibilities of Management for the Financial Statements

Management is responsible for the preparation and fair presentation of the financial statements in accordance with accounting principles generally accepted in the United States of America, and for 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.

In preparing the financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization’s ability to continue as a going concern within one year after the date that the financial statements are available to be issued.

Auditors’ Responsibilities for the Audit of the Financial Statements

Our objectives are to obtain reasonable assurance about whether the financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditors’ report that includes our opinion. Reasonable assurance is a high level of assurance but is not absolute assurance and therefore is not a guarantee that an audit conducted in accordance with generally accepted auditing standards will always detect a material misstatement when it exists. The risk of not detecting a material misstatement resulting from fraud is higher than for one resulting from error, as fraud may involve collusion, forgery, intentional omissions, misrepresentations, or the override of internal control. Misstatements are considered material if there is a substantial likelihood that, individually or in the aggregate, they would influence the judgment made by a reasonable user based on the financial statements.

In performing an audit in accordance with generally accepted auditing standards, we:

•   Exercise professional judgment and maintain professional skepticism throughout the audits.

•   Identify and assess the risks of material misstatement of the financial statements, whether due to fraud or error, and design and perform audit procedures responsive to those risks. Such procedures include examining, on a test basis, evidence regarding the amounts and disclosures in the financial statements.

•   Obtain an understanding of internal control relevant to the audits 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 Organization’s internal control. Accordingly, no such opinion is expressed.

•   Evaluate the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluate the overall presentation of the financial statements.

•   Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about the Organization’s ability to continue as a going concern for a reasonable period of time.

  We are required to communicate with those charged with governance regarding, among other matters, the planned scope and timing of the audits, significant audit findings, and certain internal control related matters that we identified during the audits.

  New York, NY February 12, 2025

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TELLURIDE COUNCIL FOR THE ARTS AND HUMANITIES STATEMENT OF FINANCIAL POSITION
AT DECEMBER 31, 2022

Cash and cash equivalents
Pledges receivable, net
Prepaid expenses
Right-of-use operating lease assests Property and equipment, net

Total assets

$1,658,435 2,569,707 2,773 85,900 4,649,694

$8,966,509

$122,732 86,775 150,490 359,997

5,606,397 3,000,115 8,606,512

$8,966,509

Assets

Liabilities:
Accounts payable and accrued expenses Operating lease liabilities
Loan payable

Total liabilities

Net assets:
Without donor restrictions With donor restrictions

Total net assets
Total liabilities and net assets

Liabilities and Net Assets

The attached notes and auditor's report are an integral part of these financial statements.

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TELLURIDE COUNCIL FOR THE ARTS AND HUMANITIES STATEMENT OF ACTIVITIES
FOR THE YEAR ENDED DECEMBER 31, 2022

Without Donor Restrictions

Public support and revenue:
Contributions: 643,743 Government grants 77,335 Venue and equipment rental fees 143,749 Event income 292,313 Consigned art and merchandise sales 225,428 Program fees 36,725 Other income 48,645 In-kind revenue 175,491 Net assets released from restrictions 722,634

Total public support and revenue 2,366,063

Expenses:
Program services 972,825 Supporting services:

Management and general 213,052 Fundraising 59,315

With Donor Restrictions

$2,314,000

(722,634) 1,591,366

0 1,591,366 1,408,749 $3,000,115

Total

$2,957,743 77,335 143,749 292,313 225,428 36,725 48,645 175,491 0

3,957,429

972,825

213,052 59,315

1,245,192 2,712,237 5,894,275

$8,606,512

Total expenses Change in net assets

Net assets - beginning of year Net assets - end of year

1,245,192 1,120,871 4,485,526

$5,606,397

The attached notes and auditor's report are an integral part of these financial statements.

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TELLURIDE COUNCIL FOR THE ARTS AND HUMANITIES STATEMENT OF FUNCTIONAL EXPENSES
FOR THE YEAR ENDED DECEMBER 31, 2022

Supporting Services Management

Program and Services General

Salaries $212,428 $90,820 Payroll taxes and employee benefits 29,901 12,784 Professional fees 107,634 41,157 Performers and artists 174,218

Grants 16,500
Office expenses 38,064 28,981 Travel and transportation 9,481 3,422 Insurance 8,719 Events 240,436
Program related expenses 35,562
Occupancy 59,868 26,470 Depreciation 48,733
Other expenses 699

Total expenses $972,825 $213,052

Fundraising

$28,564 4,021 3,180

8,271 7,229

8,050

$59,315

Total Expenses

$331,812 46,706 151,971 174,218 16,500 75,316 20,132 8,719 240,436 35,562 94,388 48,733 699

$1,245,192

The attached notes and auditor's report are an integral part of these financial statements.

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TELLURIDE COUNCIL FOR THE ARTS AND HUMANITIES STATEMENT OF CASH FLOWS
FOR THE YEAR ENDED DECEMBER 31, 2022

Cash flows from operating activities:
Change in net assets
Adjustments to reconcile change in net assets to

net cash provided by operating activities: Depreciation
Change in right-of-use assets and liability Changes in assets and liabilities:

Government grants and contributions receivable Prepaid expenses
Accounts payable and accrued expenses

Total adjustments
Net cash flows provided by operating activities

Cash flows from investing activities: Purchases of fixed assets

Net cash flows used for investing activities Net increase 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: Total interest paid
Total taxes paid

$2,712,237

48,733 875

(1,509,177) 21,833

(38,570) (1,476,306)

1,235,931

(722,634) (722,634)

513,297 1,145,138 $1,658,435

$3,829 $0

The attached notes and auditor's report are an integral part of these financial statements.

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Note 1 -

Note 2 -

TELLURIDE COUNCIL FOR THE ARTS AND HUMANITIES NOTES TO FINANCIAL STATEMENTS DECEMBER 31, 2022

Organization

Telluride Council for the Arts and Humanities (the “Organization”) was organized to provide programs and services that connect and strengthen the community through the arts.

The Organization has been notified by the Internal Revenue Service that it is a not- for-profit organization exempt from Federal income tax under Section 501(c)(3) of the Internal Revenue Code and has not been determined to be a private foundation.

Summary of Significant Accounting Policies

1. Basis of Accounting
   The financial statements have been prepared on the accrual basis of accounting which is the process of recognizing revenue and expenses when earned or incurred rather than received or paid.

2. Recently Adopted Accounting Standard
   Effective January 1, 2022, the Organization adopted the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Update (“ASU”) No. 2016-02, Leases, which requires lessees to recognize leases on the statement of financial position and disclose key information about leasing arrangements. The Organization elected transition relief that allows entities, in the period of adoption, to present the current period under FASB’s Accounting Standards Codification (“ASC”) 842 and the comparative period under FASB ASC 840. It also elected not to reassess at adoption (i) expired or existing contracts to determine whether they are or contain a lease, (ii) the lease classification of any existing leases, or (iii) initial direct costs for existing leases. As a result of implementing FASB ASU No. 2016-02, the Organization recognized right-of-use (“ROU”) assets of $106,009 and lease liabilities totaling $106,009 in its statement of financial position as of June 1, 2022, the date the lease began. The adoption did not result in a significant effect on amounts reported in the statement of activities for the year ended December 31, 2022.

   Effective January 1, 2022, the Organization adopted FASB ASU No. 2020-07, Presentation and Disclosures by Not-for-profit Entities for Contributed Nonfinancial Assets. This ASU focuses on improving transparency in the reporting of contributed nonfinancial assets and requires a separate line-item presentation on the statement of activities and additional disclosures. Adoption of this standard did not have a material impact on the Organization’s financial statements.

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c. Basis of Presentation
The Organization reports information regarding their financial position and activities according to the following classes of net assets:

•   Net Assets Without Donor Restrictions – represents those resources for which there are no restrictions by donors as to their use

•   Net Assets With Donor Restrictions – represents those resources, the uses of which have been restricted by donors to specific purposes or the passage of time and/or must remain intact, in perpetuity. The release from restrictions results from the satisfaction of the restricted purposes specified by the donor. At December 31, 2022, all donor restricted net assets were restricted towards the Telluride Transfer Warehouse Project.

d. Revenue Recognition
The Organization follows the Financial Accounting Standards Board’s (“FASB”) Accounting Standards Codification (“ASC”) 958-605 for recording contributions, which are recorded at the earlier of when cash is received or at the time a pledge becomes unconditional in nature. Contributions are recorded in one of the classes of net assets described above, depending on the existence and/or nature of any donor-imposed restriction. When a restriction expires, that is, when a stipulated time restriction ends, or purpose restriction is accomplished, net assets with donor restrictions are reclassified to net assets without donor restrictions. If donor restricted contributions are satisfied in the same period they are received, they are classified as without donor restrictions.

The Organization records unconditional promises to give as revenue in the period received at net realizable value if expected to be received within one year or at fair value using risk adjusted present value techniques if material and expected to be received after one year.

Government grants received by the Organization are conditional, non-exchange transactions and fall under FASB ASC 958-605. Revenue from these transactions is recognized when qualifying expenditures are incurred, performance related outcomes are achieved, and other conditions under the agreements are met. Payments received in advance of conditions being met are recorded as deferred revenue.

The Organization follows the requirements of FASB ASC 606 for recognizing revenue from contracts with customers, which includes venue and equipment rental fees, event income, art and merchandise sales and program fees. These revenues are recognized as the performance obligation is satisfied over the service period. Payments received in advance of performing services are recorded as deferred income and will be recognized as income in the period earned. Fees that have yet to be collected at year end are reflected as receivables.

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Management has not established a reserve for receivables because all receivables are considered to be fully collectible based on specific analysis and historical experience. Write-offs, if any, will be recorded as expenses in the year they are deemed to be uncollectible.

5. Cash and Cash Equivalents
   The Organization considers all liquid investments with an initial maturity of three months or less to be cash and cash equivalents, which includes cash held in banks and money market funds other than those held by the investment manager.

6. Concentration of Credit Risk
   Financial instruments which potentially subject the Organization to a concentration of credit risk consist of cash, money market accounts and investment securities which have been placed with high-quality financial institutions that management deems to be creditworthy. Investments are subject to market value fluctuations and principal is not guaranteed. At times, balances may exceed federally insured limits. While at year end there were material uninsured balances, management feels they have little risk and has not experienced any losses due to bank failure.

7. Capitalization Policies
   Items of property and equipment and leasehold improvements that have a long- term benefit and exceed certain predetermined levels are recorded at cost. Routine maintenance and repair costs that do not materially extend the estimated useful lives of property and equipment are expensed as incurred.

8. In-Kind Services
   Donated services are recognized in circumstances where those services create or enhance non-financial assets or require specialized skills, are provided by individuals possessing those skills, and would typically need to be purchased if not provided in-kind.

   The Organization pays for most services requiring specific expertise. Board members and other individuals volunteer their time and perform a variety of services that assist the Organization. These services do not meet the criteria of in-kind services and have not been recorded in the financial statements.

9. Management Estimates
   The preparation of financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect certain reported amounts and disclosures. Actual results could differ from those estimates.

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Note 3 -

10. Functional Allocation of Expenses
    The costs of providing various programs and other activities have been summarized on a functional basis in the financial statements. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 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 Organization.

    The following expenses were allocated using time and effort as the basis:  Salaries

    The following expenses were allocated using salaries as the basis:

    •   Payroll taxes and benefits

    •   Occupancy

    •   Travel and transportation

    •   Office expenses

      All other expenses have been charged directly to the applicable program or supporting services.

11. Accounting for Uncertainty of Income Taxes
    The Organization does not believe its financial statements include any material, uncertain tax positions. Tax filings for years ended December 31, 2019 and later are subject to examination by applicable taxing authorities.

Pledges Receivable

Pledges receivable are expected in the following periods:

Year ending:

December 31, 2023 December 31, 2024 December 31, 2025 December 31, 2026 December 31, 2027

$1,574,644 430,933 303,900 273,900 50,500 2,633,877

(64,170) $2,569,707

Note 4 -

Present value discount
Total pledges receivable, net

Property and Equipment

Property and equipment at December 31, 2022 consist of the following:

Warehouse acquisition Warehouse improvements

Less: accumulated depreciation Total property and equipment, net

$3,223,977 1,652,336 4,877,113

(227,419) $4,649,694

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Note 5 -

Operating Lease Right-of-Use Asset and Operating Lease Liability

The Organization evaluated current contracts to determine which met the criteria of a lease. The Organization leases space in Telluride, CO under a non-cancelable lease, which expires on May 31, 2025 and has been determined to be an operating lease. The lease does not include specific extension terms.

The ROU assets represent the Organization’s right to use the underlying asset for the lease term, and the lease liabilities represent the Organization’s obligation to make lease payments arising from this lease. The ROU asset and lease liability were calculated based on the present value of future lease payments over the lease terms. The Organization has made an accounting policy election to use a risk-free rate in lieu of its incremental borrowing rate to discount future lease payments. The weighted-average discount rate applied to calculate lease liabilities as of December 31, 2022 was 2.94%. As of December 31, 2022, the weighted average remaining lease term for the Organization’s operating lease was 30 months.

For the year ended December 31, 2022, total operating lease cost was $20,109. There were no short-term lease costs during the year ended December 31, 2022. ,

Cash paid for operating leases for the year ended December 31, 2022 was $20,650. There were no noncash investing and financing transactions related to leasing other than the transition entry described in Note 2b. The future payments due under the operating lease as of December 31, 2022 are as follows:

Year ending: December 31, 2023 December 31, 2024 December 31, 2025

Less: present value adjustment Total

Economic Injury Disaster Loan

$36,275 37,775 16,000 90,050

(3,275) $86,775

Note 6 -

Note 7 -

During the year ended December 31, 2020, the Organization entered into a loan agreement with the SBA in the amount of $150,000 through the Economic Injury Disaster Loan Program for working capital. Payments on the loan began in June of 2021. Interest will accrue at 2.75% per annum. Monthly installments of $641, including principal and interest, will be payable over 30 years from the date of the note. The loan is collateralized by all assets of the organization.

Retirement Plan

The Organization maintains a tax deferred 403(b) retirement plans. Under the plan, all employees can participate by designating a percentage of their salaries, subject to regulatory limits, to be contributed to the plan on a pre-tax basis. The Organization contributed approximately $6,500 towards this plan during the years ended December 31, 2021.

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Note 8 -

Liquidity and Availability of Financial Resources

The following reflects the Organization’s financial assets available to meet general expenses in the upcoming year:

Cash and cash equivalents Pledges receivable

Total financial assets

Less amounts not available to be used within one year: Donor restricted for programmatic purposes

Financial assets available to meet cash needs for general expenditures within one year

Subsequent Events

$1,658,635 2,569,707

$4,228,142 (3,000,115)

$1,228,028

Note 9 -

Subsequent events have been evaluated through February 12, 2025, the date the financial statements were available to be issued. Adjustments and disclosures have been made for all subsequent events that have occurred.