Bishop Dunne Catholic School, Inc. and Trusts
Consolidated Financial Statements
June 30, 2022 and 2021
Board of Directors
Bishop Dunne Catholic School, Inc. and Trusts
Dallas, Texas
We have audited the accompanying consolidated financial statements of Bishop Dunne Catholic School, Inc. and Trusts, which comprise the consolidated statements of financial position as of June 30, 2022 and 2021, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements.
In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the financial position of Bishop Dunne Catholic School, Inc. and Trusts as of June 30, 2022 and 2021, and the changes in their net assets and their cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America.
We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Our responsibilities under those standards are further described in the Auditor’s Responsibilities for the Audit of the Financial Statements section of our report. We are required to be independent of Bishop Dunne Catholic School, Inc. and Trusts 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.
Management is responsible for the preparation and fair presentation of these consolidated 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 consolidated financial statements that are free from material misstatement, whether due to fraud or error.
In preparing the consolidated financial statements, management is required to evaluate whether there are conditions or events, considered in the aggregate, that raise substantial doubt about Bishop Dunne Catholic School, Inc. and Trusts's ability to continue as a going concern within one year after the date that the consolidated financial statements are available to be issued.
Our objectives are to obtain reasonable assurance about whether the consolidated financial statements as a whole are free from material misstatement, whether due to fraud or error, and to issue an auditor’s 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, including omissions, 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 consolidated financial statements.
In performing an audit in accordance with generally accepted auditing standards, we:
Exercise professional judgment and maintain professional skepticism throughout the audit.
Identify and assess the risks of material misstatement of the consolidated 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 consolidated financial statements.
Obtain an understanding of internal control relevant to the audit 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 Bishop Dunne Catholic School, Inc. and Trusts'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 consolidated financial statements.
Conclude whether, in our judgment, there are conditions or events, considered in the aggregate, that raise substantial doubt about Bishop Dunne Catholic School, Inc. and Trusts'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 audit, significant audit findings, and certain internal control related matters that we identified during the audit.
For the Year Ended June 30, 2021 Without
June 30, 2022 and 2021
Bishop Dunne Catholic School, Inc. (the "School") is a nonprofit educational institution of the Roman Catholic Diocese of Dallas (the "Diocese") providing a Catholic middle and high school education for grades 6-12 in the Dallas, Texas area. Bishop Dunne began operations in 1961.
The School is a continuing trustee of the Bishop Dunne Catholic School Building and Endowment Trust ("BE Trust"), a charitable nonprofit trust. The BE Trust was established to create a fund to which individual donors may transfer property and from which the BE Trust can construct, expand, equip and maintain an educational institution. The School also established the Bishop Dunne Catholic School Education and Endowment Trust ("EE Trust"), a charitable nonprofit trust, to create continuing endowment funds for the purpose of assisting, promoting, enhancing and furthering the education of students enrolled in the School and to advance and support the operations of the School.
The consolidated financial statements include the assets, liabilities and related financial activity managed by the School, as well as the accounts of the BE Trust and the EE Trust, referred to herein as the "Organization". All significant intercompany transactions have been eliminated.
The consolidated financial statements have been prepared on the accrual basis of accounting in accordance with generally accepted accounting principles in the United States of America ("GAAP").
Net assets and changes therein are classified as follows:
Net assets without donor restrictions - Net assets available for use in general operations and not subject to donor-imposed restrictions. The Organization's governing board may designate net assets without restrictions for specific purposes.
Net assets with donor restrictions - Net assets subject to stipulations imposed by donors and grantors. Some donor restrictions are temporary in nature, such as those that will be met by the passage of time or other events specified by the donor. Other donor-imposed restrictions are perpetual in nature, whereby the donor has stipulated the funds be maintained in perpetuity. Net assets with donor restrictions also include the portion of donor-restricted endowment funds that are not required to be maintained in perpetuity until such funds are appropriated for expenditure by the Organization. Donor-imposed restrictions are released when a restriction expires, that is, when the stipulated time has elapsed, when the stipulated purpose for which the resource was restricted has been fulfilled, or both.
June 30, 2022 and 2021
Basis of accounting and financial statement presentation (continued)
Revenues are reported as increases in net assets without donor restrictions unless use of the related assets is limited by donor-imposed restrictions. Expenses are reported as decreases in net assets without donor restrictions. Gains and losses on assets and liabilities are reported as increases or decreases in net assets without donor restrictions unless their use is restricted by explicit donor restriction or by law. Expirations of restrictions on net assets (i.e., the donorstipulated purpose has been fulfilled and/or the stipulated time period has elapsed) are reported as transfers between the applicable classes of net assets. Restricted contributions whose restrictions are satisfied in the same reporting period the contribution is received are reported as net assets without donor restrictions.
The Organization maintains cash and cash equivalents with major financial institutions. The Organization considers all highly liquid investments purchased with original maturities of three months or less to be cash equivalents, excluding certificates of deposit as presented separately in the accompanying consolidated statements of financial position. Periodically, cash on deposit may be in excess of federally insured limits. The Organization believes it mitigates this risk by maintaining deposits with high credit quality institutions. The Organization has not experienced any losses in such accounts and believes it is not exposed to any significant credit risk on cash and cash equivalents.
The Organization maintains funds held in certificates of deposit with original maturities ranging from less than 3 months to 12 months. Certificates of deposit are reported using Level 2 inputs that are valued by the custodians using pricing models based on credit quality, time to maturity, stated interest rates and market-rate assumptions.
Tuition receivables, net includes tuition receivables for prior school years. Beginning in the fiscal year ended June 30, 2022, Organization has elected to reserve for all past due receivables based on historical collectability. The allowance for doubtful tuition receivables was $72,260 and $80,000 as of June 30, 2022 and 2021, respectively.
Investments are recorded at fair value. Investments received by donation are recorded at fair value at the date of donation. Net realized and unrealized gains or losses and interest and dividends are classified as increases or decreases in net assets without donor restrictions, unless their use is restricted by explicit donor restriction or by law.
June 30, 2022 and 2021
Investments (continued)
The Organization invests in various investment securities. Investments are exposed to various risks such as interest rate, market and credit risks. Due to the level of risk associated with certain investments, it is at least reasonably possible that changes in the values of investments will occur in the near term and that such changes could materially affect the amounts reported in the accompanying consolidated statements of financial position.
Fair value is defined as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants on the measurement date. GAAP requires the Organization to disclose assets and liabilities measured at fair value based on the level of observable inputs. The three levels of the fair value hierarchy are as follows:
Level 1 - Quoted prices in active markets for identical assets or liabilities. An active market is a market in which transactions occur with sufficient frequency and volume to provide pricing information on an ongoing basis.
Level 2 - Significant other observable inputs other than Level 1 prices such as quoted prices for similar assets or liabilities, quoted prices in markets that are not active, or other inputs that are observable or can be corroborated by observable market data.
Level 3 - Unobservable inputs that are supported by little or no market activity, are significant to the fair value of the assets or liabilities and reflect management's assumptions and best estimates based on available data.
The Organization holds investments in equity and bond funds which are reported at net asset value (NAV) per share (or its equivalent) as a practical expedient to determine the fair value of investments which (a) do not have a readily determinable fair value and (b) either have the attributes of an investment fund or prepare their financial statements consistent with the measurement principles of an investment fund.
Valuation techniques used in fair value measurements need to maximize the use of observable inputs and minimize the use of unobservable inputs. A valuation method may produce a fair value measurement that may not be indicative of net realizable value or reflective of future fair values. Furthermore, although management believes the valuation methods are appropriate and consistent with those used by other market participants, the use of different methodologies or assumptions could result in different fair value measurements at the reporting date.
The equity index fund and bond funds were transferred from level 1 investments to NAV on a retrospective basis during the year ended June 30, 2022 after the Organization evaluated the measurement within the fair value hierarchy.
June 30, 2022 and 2021
The Organization capitalizes all property and equipment with a cost greater than $5,000 and an estimated useful life in excess of one year. Property and equipment are recorded at cost or, if donated, at the estimated fair value on the date of donation. Such donations are reported as contributions without donor restrictions unless the donor has restricted the donated asset to a specific purpose. Assets donated with explicit restrictions regarding their use and contributions of cash that must be used to acquire or maintain property and equipment are reported as restricted contributions. Absent donor stipulations regarding how long those donated assets must be maintained, Organization reports expirations of donor restrictions when the donated or acquired assets are placed in service. Maintenance and repairs are charged to expense when incurred. Major improvements are capitalized.
Depreciation of property and equipment is computed using the straight-line method over the following estimated useful lives:
Buildings and improvements40 years
Furniture, fixtures and equipment7 - 10 years
Vehicles5 years
Whenever events or changes in circumstances indicate that the carrying amount of any asset may not be recovered, the Organization, using its best estimates and projections, reviews the carrying value of long-lived identifiable assets to be held and used in the future for impairment. No longlived assets were deemed to be impaired as of June 30, 2022 or 2021.
The Organization acts as a fiscal agent for various parties including booster clubs, student accounts, class clubs and senior clubs. As a fiscal agent, the Organization holds cash on behalf of these parties, which is reported as a liability on the consolidated statements of financial position. As of June 30, 2022 and 2021, the amount of funds held by the Organization for other parties was $167,275 and $101,965, respectively.
Contributions received are reported as net assets with or without donor restrictions, depending upon the presence or absence of any donor restrictions.
June 30, 2022 and 2021
Contributions and contributions receivable, net (continued)
Contributions, including unconditional promises to give, are recognized as revenues in the period the promise is received. Contributions that are promised in one year but are not expected to be collected until after the end of that year are discounted at an appropriate discount rate commensurate with the risks involved. Amortization of any such discounts is recorded as additional contribution revenue in accordance with donor-imposed restrictions, if any, on the contributions. An allowance for doubtful contributions receivable is provided based upon management's judgment including such factors as prior collection history, type of contribution and current aging of contributions receivable. Management has determined that no allowance for doubtful contributions receivable was necessary as of June 30, 2022 or 2021.
Conditional promises to give are not recognized until they become unconditional, that is, when the barriers on which they depend are substantially overcome, or there is no longer a right of return or right of release. There were no conditional promises to give as of June 30, 2022 or 2021.
Contributed materials and equipment are reflected as contributions in the accompanying consolidated statements of activities at their estimated fair values at date of receipt. There were no contributed materials and equipment donated to the School during the years ended June 30, 2022 or 2021. Contributed services are reflected in the consolidated financial statements at the fair value of the services received. Contributions of services are recognized if the services received (a) create or enhance nonfinancial assets or (b) require specialized skills that are provided by individuals possessing those skills and would typically need to be purchased if not provided by donation. The Organization receives donated services from a variety of unpaid volunteers who make contributions of their time in conjunction with programs and events. No amounts have been recognized in the accompanying consolidated statements of activities because the criteria for recognition of such volunteer efforts as contributed services have not been satisfied.
The Organization recognizes revenue from student tuition and fees during the year in which the related services are provided to students. The performance obligation of delivering educational services is simultaneously received and consumed by the students; therefore, the revenue is recognized ratably over the course of the academic year. Payment for tuition may be required before the start of the academic year. All amounts received prior to the commencement of the academic year, including registration fees and enrollment deposits, are deferred and fully recognized as revenue within the next fiscal year. Financial aid provided to students is recorded as a reduction from the posted tuition at the time revenue is recognized.
June 30, 2022 and 2021
Revenue recognition and deferred revenue (continued)
Contractual tuition and fees receivable, net includes tuition and fee amounts due under fully executed student enrollment agreements, net of financial aid, for the upcoming 2022-2023 school year. Contractual unearned tuition and fees, net include unearned tuition and fee amounts that will be collected within the next twelve months and will be satisfied through the performance obligations of delivering educational services to students during the upcoming 2022-2023 school year. The Organization uses the allowance method to account for doubtful tuition and fees for the upcoming school year based on historical collection experience and an evaluation of the outstanding receivables. Recoveries of bad debt are recorded within income. Management has determined no allowance for doubtful tuition and fees receivable was necessary as of June 30, 2022 and 2021.
Cafeteria and auxiliary activities revenue includes the Organization's store sales, bussing fees, cafeteria fees and revenue from various other school related activities. Revenue is recorded for cafeteria and auxiliary activities at the time services are provided or goods are delivered.
Fundraising and special events revenue consists of revenue generated from events such as the Organization's annual golf classic. Fundraising and special event revenue is recognized when the events are held.
The costs of providing program and other activities have been summarized on a functional basis in the consolidated statements of activities. Expenses, such as payroll and benefits, have been allocated among program services and supporting services based upon the employees' estimated time spent by function. Facility related costs such as depreciation, interest and utilities have been allocated based upon estimated square footage usage.
The Organization is organized as a single-member, Texas nonprofit corporation exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code through the annual Internal Revenue Service Group Ruling for the Catholic Church in the United States. The single member of the School is the Bishop of the Diocese. The EE Trust and BE Trust are separate 501(c)(3) organizations under the Internal Revenue Code. Accordingly, no provision for income taxes has been made in the accompanying consolidated financial statements. The Organization has evaluated its current tax positions and has concluded that as of June 30, 2022 and 2021, the Organization does not have any significant uncertain tax positions for which a reserve would be necessary.
June 30, 2022 and 2021
The preparation of financial statements in accordance with GAAP 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 consolidated financial statements and the reported amounts of revenues and expenses during the reporting period. Uses of estimates include, but are not limited to, the estimated useful lives of property and equipment, the fair value of investments measured at NAV as a practical expedient, the allowance for doubtful accounts and the allocation of expenses by function. Actual results could differ from those estimates.
The Organization has evaluated subsequent events through September 9, 2022, the date the consolidated financial statements were available to be issued. No subsequent events have occurred that would have a material impact on the presentation of the Organization's consolidated financial statements.
The Organization monitors its liquidity in order to meet operating needs and other contractual commitments while maintaining sufficient resources to meet donor restrictions placed on contributed financial assets.
As part of the Organization's liquidity management, it has a policy to structure its financial assets to be available as its general expenditures, liabilities and other obligations come due.
June 30, 2022 and 2021
The following quantitative disclosure describes financial assets that are available or expected to be available within one year of June 30, 2022 to fund general expenditures and other obligations as they become due:
amounts unavailable for general expenditure within one year due to:
not due within one
June 30, 2022 and 2021
Investments consisted of the following:
The following table sets forth by level, within the fair value hierarchy, the Organization's assets at fair value as of June 30, 2022:
The following table sets forth by level, within the fair value hierarchy, the Organization's assets at fair value as of June 30, 2021:
June 30, 2022 and 2021
Investments in certain entities that are measured at fair value using NAV per share as a practical expedient are as follows at June 30, 2022:
Investments in certain entities that are measured at fair value using NAV per share as a practical expedient are as follows at June 30, 2021:
Equity funds - Funds focused on growth in equity, buyout opportunities, or distressed debt. These investments are not readily redeemable; however, a secondary market does exist. Distributions normally are received through the liquidation of the underlying assets in the fund.
Bond funds - Funds focused on diversifying the Organization's portfolio by allocating assets to other fixed income securities and strategies, including but not limited to global bonds, inflation indexed bonds, high yield bonds, emerging markets debt and opportunistic fixed income strategies.
June 30, 2022 and 2021
Property and equipment consisted of the following:
In April 2017, the Organization received a loan for $165,494 from a financial institution in conjunction with the purchase of vehicles. The note is secured by the vehicles and had a maturity date of April 26, 2022. Principal and interest at a rate of 3.5% are payable monthly. As of June 30, 2021, the outstanding balance on this note was $32,257. This note was paid in full in April 2022.
In April 2020, the Organization received loan proceeds of $990,792 from a promissory note issued by a financial institution, under the PPP which was established under the Coronavirus Aid, Relief, and Economic Security Act ("CARES Act") and is administered by the United States Small Business Administration. Under the terms of the CARES Act, PPP loan recipients can apply for and be granted forgiveness for all or a portion of the loans granted under the PPP. Such forgiveness is determined based on the use of the loan proceeds for payroll costs, rent and utility expenses and the maintenance of workforce and compensation levels with certain limitations. The Organization qualified for full forgiveness of the loan in April 2021. The Organization elected to record the loan under Accounting Standard Codification ("ASC") 470, Debt. Therefore, the Organization recorded a gain on forgiveness of the PPP loan in the accompanying consolidated statement of activities during the year ended June 30, 2021.
In February 2021, the Organization received additional loan proceeds of $1,234,969 from a promissory note issued by a financial institution, under the PPP. The Organization qualified for full forgiveness of the loan in November 2021. The Organization elected to record the loan under ASC 470, Debt. Therefore, the Organization recorded a gain on forgiveness of the PPP loan in the accompanying consolidated statement of activities during the year ended June 30, 2022.
In July 2021, the Organization received a loan for $109,663 from a financial institution in conjunction with the purchase of a vehicle. The note is secured by the vehicle and has a maturity date of August 3, 2025. Principal and interest payments are due monthly. The note's interest rate is 3.5%. The outstanding balance on this note was $87,866 as of June 30, 2022.
June 30, 2022 and 2021
The future maturities of the notes payable are as follows:
Year ending June 30,
The Organization's endowment consists of several individual funds established for a variety of purposes. Its endowment includes only donor-restricted endowment funds. As required by GAAP, net assets associated with endowment funds, including funds designated by the EE Trust's Board of Trustees to function as endowments, are classified and reported based on the existence or absence of donor-imposed restrictions.
The EE Trust's Board of Trustees has interpreted the State of Texas enacted version of the Uniform Prudent Management of Institutional Funds Act ("UPMIFA") as allowing the Organization to appropriate for expenditure or accumulate so much of an endowment fund as the Organization determines is prudent for the uses, benefits, purposes and duration for which the endowment fund is established, subject to the intent of the donor as expressed in the gift instrument. Unless stated otherwise in the gift instrument, the assets in an endowment fund shall be donor-restricted assets until appropriated for expenditure by the EE Trust's Board of Trustees. The remaining portion of the donor-restricted endowment fund that is not to be held in perpetuity is classified as with donor restrictions until those amounts are appropriated for expenditure in a manner consistent with the standard of prudence prescribed by UPMIFA.
In accordance with UPMIFA, the Organization considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds:
(1) The duration and preservation of the fund
(2) The purposes of the Organization and the donor-restricted endowment fund
(3) General economic conditions
(4) The possible effect of inflation and deflation
(5) The expected total return from income and the appreciation of investments
(6) Other resources of the Organization
(7) The investment policies of the Organization
June 30, 2022 and 2021
The Organization has adopted investment and spending policies for endowment assets that attempt to provide a predictable stream of funding to programs supported by its endowment while seeking to maintain the purchasing power of the endowment assets. Endowment assets include those assets of donor-restricted funds that the Organization must hold in perpetuity or for a donorspecified period(s). Under this policy, as approved by the EE Trust's Board of Trustees, the Organization diversifies its investments, subject to practicality constraints, among a variety of asset classes so as to provide a balance that will enhance total real return while avoiding undue risk concentration in any single asset class or investment category.
To satisfy its long-term rate-of-return objectives, the Organization relies on a total return strategy in which investment returns are achieved through both capital appreciation (realized and unrealized) and current yield (interest and dividends). The Organization targets a diversified asset allocation among equity and bond based investments to achieve its long-term return objectives within prudent risk constraints.
In the EE Trust Agreement, the EE Trust's Board of Trustees is authorized to distribute funds of the Trust, in their discretion and in accordance with the EE Trust Agreement. Distributions in any calendar year shall be made in an amount which may be set by the EE Trust's Board of Trustees, but shall in no event exceed 5% of the fair market value of the Trust's unexpended earnings on the first day of the calendar year.
Endowment net asset composition by type of fund as of June 30, 2022 is as follows:
Donor-restricted endowment funds: Original donor-restricted gift amount and amounts required to be maintained
With
June 30, 2022 and 2021
9. ENDOWMENT (continued)
Endowment composition (continued)
Endowment net asset composition by type of fund as of June 30, 2021 is as follows:
Donor-restricted endowment funds: Original donor-restricted gift amount and amounts required to be maintained in perpetuity
Changes in endowment net assets for the fiscal years ended June 30, 2022 and 2021 are as follows:
with deficiencies
From time to time, the fair value of assets associated with individual donor-restricted endowment funds may fall below the level that the donor or UPMIFA requires to be maintained for a perpetual duration. As of June 30 2022, funds with original gift values of $86,974, fair values of $76,892 and deficiencies of $10,082 were reported in net assets with donor restrictions. For a variety of reasons, including but not limited to the stated purposes of the underwater funds, the EE Trustees in its discretion applied the Organization's standard spending policy to its underwater endowment funds. There were no such deficiencies as of June 30, 2021.
June
2022 and 2021
Net assets with donor restrictions consisted of the following:
Subject to expenditure for a specified purpose:
Subject to the Organization's spending policy and appropriation: Investments in perpetuity (including amounts above the original gift amount of $1,299,707 and $1,183,807, respectively), the income of which is expendable to support:
Subject to the passage of time and purpose:
net
Net assets with donor restrictions released from restriction during the year were as follows:
Retirement plan
The Organization participates in the Diocese's 403(b) retirement savings plan ("the Plan") for lay employees. The Plan is a defined contribution self-directed plan open to all eligible employees. Employee contributions to the Plan are fully vested whereas contributions made by the Organization on behalf of the employee vest over five years. After one year of service, the Organization contributes 3% of the eligible employee's compensation to the Plan and matches employee contributions on a dollar-for-dollar basis up to 3% of compensation. The Organization's contributions to the Plan were $113,329 and $122,035 for the years ended June 30, 2022 and 2021, respectively.
June 30, 2022 and 2021
The Organization participates in the Diocesan workers' compensation, property and casualty insurance plan and Organization personnel participate in the Diocesan group insurance and flexible benefit plans. Amounts paid to the Diocese for these services were $639,188 and $688,012 for the years ended June 30, 2022 and 2021 , respectively. As of June 30, 2021, the Organization owed $2,532,747 to the Diocese. These obligations were forgiven by the Diocese during the year ended June 30, 2022. Accordingly, the Organization recorded the forgiveness of $2,532,747 within contributions in the accompanying consolidated statements of activities.
The Organization received contributions totaling approximately $312,500 and $82,000 from board members and employees during the year ended June 30, 2022 and 2021, respectively.
The table below presents expenses by both their natural and functional classifications for the year ended June 30, 2022:
June 30, 2022 and 2021
The table below presents expenses by both their natural and functional classifications for the year ended June 30, 2021: