The Freedom Theatre Audit Report 2013

The Freedom Theatre - TFT Financial Statements December 31, 2013

Ernst Young P.O. Box 1373 7th Floor, PADICO House Bldg.

Al-Masyoun Ramallah-Palestine

Tel: +972 22421011 Fax: +972 22422324 www.ey.com

Independent Auditors’ Report to The Board of Directors of The Freedom Theatre - TFT We have audited the accompanying financial statements of The Freedom Theatre (TFT), which comprise the statement of financial position as at December 31, 2013, the statement of activities and changes in net assets and the statement of cash flows for the year then ended and a summary of significant accounting policies and other explanatory information.

Management’s Responsibility for the Financial Statements Management is responsible for the preparation and fair presentation of these financial statements in accordance with International Financial Reporting Standards, and for such internal control as management determines is necessary to enable the preparation 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 International Standards on Auditing.

Those standards require that we comply with ethical requirements and plan and perform the audit to obtain reasonable assurance about whether the financial statements are free from 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. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of accounting estimates made by management, as well as evaluating the overall presentation of the financial statements.

We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our qualified audit opinion.

Opinion In our opinion, the financial statements present fairly, in all material respects, the financial position of TFT as at December 31, 2013 and the results of its activities and cash flows for the year then ended in accordance with International Financial Reporting Standards.

Other matters The financial statements of TFT for the year ended December 31, 2012 were audited by other auditors whose report expressed a unqualified opinion dated May 14, 2013.

Ernst & Young – Middle East

May 7, 2014 Ramallah - Palestine A member firm of Ernst & Young Global Limited

THE FREEDOM THEATRE - TFT Statement of Financial Position As at December 31, 2013 Notes

2013 ILS

2012 ILS

ASSETS Non–Current Assets Property and equipment

3

329,542 329,542

352,978 352,978

Current Assets Contributions receivable Other current assets Cash and cash equivalents

4 5 6

320,108 7,954 441,299 769,361 1,098,903

737,474 45,867 314,180 1,097,521 1,450,499

31,406 31,406

60,759 60,759

7 9

216,577 25,427 242,004

212,963 212,963

8

Total Liabilities

783,505 7,384 34,604 825,493 1,067,497

1,037,349 33,302 106,126 1,176,777 1,389,740

Total Net Assets and Liabilities

1,098,903

1,450,499

Total Assets NET ASSETS AND LIABILITIES Net assets Total net assets Non–Current Liabilities Provision for employees’ indemnity Deferred revenues

Current Liabilities Temporarily restricted contributions Accounts payable Other current liabilities

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The accompanying notes from 1 to 19 form part of these financial statements 1

THE FREEDOM THEATRE - TFT Statement of Activities and Changes in Net Assets For the year ended December 31, 2013

Revenues Temporarily restricted contributions released from restrictions Unrestricted contributions Deferred revenues recognized Other revenues Total revenues Expenses Projects’ expenses General and administrative expenses Depreciation of property and equipment Total expenses Decrease in net assets Net assets, beginning of the year Net assets, end of the year

Notes

2013 ILS

2012 ILS

8 11 9 12

1,580,654 415,677 5,597 65,508 2,067,436

1,497,243 349,545 19,265 1,866,053

13 14 3

1,580,654 457,515 58,620 2,096,789

1,497,243 541,968 206,508 2,245,719

(29,353) 60,759 31,406

(379,666) 440,425 60,759

The accompanying notes from 1 to 19 form part of these financial statements 2

THE FREEDOM THEATRE - TFT Statement of Cash Flows For the year ended December 31, 2013 2013 ILS

2012 ILS

(29,353)

(379,666)

58,620 28,204 (5,597) 51,874

206,508 105,854 (67,304)

Contributions receivable Other current assets Temporarily restricted contributions Deferred revenues Accounts payable Other current liabilities Employees’ indemnity paid Net cash from operating activities

417,366 37,913 (253,844) 31,024 (25,918) (71,522) (24,590) 162,303

737,474 124,743 (437,350) (101,575) (149,821) (27,703) 78,464

Investing activities Purchases of property and equipment Net cash used in investing activities Increase (decrease) in cash and cash equivalents Cash and cash equivalents, beginning of the year

(35,184) (35,184) 127,119 314,180

(164,182) (164,182) (85,718) 399,898

441,299

314,180

Notes Operating activities Decrease in net assets Adjustments for: Depreciation of property and equipment Provision for employees’ indemnity Deferred revenues recognized Working capital changes:

Cash and cash equivalents, ending of the year

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The accompanying notes from 1 to 19 form part of these financial statements 3

THE FREEDOM THEATRE - TFT Notes to the Financial Statements As at December 31, 2013 1. General The Freedom Theatre (TFT) is a Palestinian private not for profit association registered on November 15, 2007 in Jenin Refugee Camp under registration number (JN-938-CU).

TFT is developing a vibrant and creative artistic community in the northern part of the West Bank. While emphasising professionalism and innovation, the main goal of the theatre is to empower youth and women in the community and to explore the potential of arts as an important catalyst for social change.

The financial statements as at December 31, 2013 were approved by TFT’s Board of Directors on May 7, 2014.

2.1 Basis of preparation The financial statements have been prepared in accordance with International Financial Reporting Standards (IFRS), as issued by the International Accounting Standards Board (IASB).

The financial statements have been prepared under the historical cost convention.

The financial statements have been presented in New Israeli shekel (ILS), which is the functional currency of TFT. 2.2 Changes in accounting policies and disclosures The accounting policies adopted are consistent with those of the previous financial year.

Furthermore, several standards and interpretations have been issued but are not yet mandatory. TFT believes that the new standards and interpretations will have no significant impact on disclosures, financial position or performance when applied at a future date.

2.3 Judgments and estimation uncertainty TFT financial position and results of activities are sensitive to accounting methods, assumptions, estimates and judgments that underlie the preparation of the financial statements. TFT bases its estimates on its past experience and on various other assumptions deemed reasonable, the results of which form the basis for making judgments about the carrying values of assets and liabilities. Due to different assumptions and situations, the actual results may differ significantly from these estimates.

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2.4 Significant accounting policies Donation revenues Donors’ unconditional pledges are those pledges where the donors do not specify prerequisites that have to be carried out by the recipient before obtaining the fund.

Donation revenues from unconditional pledges are recognized as follows:

-

Unconditional pledges that are not restricted by the donor for a specific purpose or time are recognized as revenue when the pledge is obtained.

-

Unconditional pledges that are temporarily restricted by the donor for a specific purpose or time are recognized as revenue when such purpose or time is satisfied.

Deferred revenues Donations related to property and equipment are stated at fair value, recorded as deferred revenues and recognized as revenue on a systematic basis over the useful life of the asset.

Expenses recognition Expenses are recognized when incurred based on the accrual basis of accounting.

Impairment An assessment is made at each reporting date to determine whether there is objective evidence that a specific financial asset may be impaired. If such evidence exists, any impairment loss is recognized in the statement of activities and changes in net assets.

Property and equipment Property and equipment are stated at cost, net of accumulated depreciation and/or accumulated impairment losses, if any. Such cost includes the cost of replacing part of the property and equipment and borrowing costs for long-term construction projects if the recognition criteria are met. All other repair and maintenance costs are recognized in the statement of activities and changes in net assets as incurred. Land is not depreciated.

Depreciation is calculated on a straight line basis over the estimated useful lives of the assets as follows: Useful lives (Years) Equipment 4-5 Furniture and fixtures 5 Multimedia network 6-7 An item of property and equipment and any significant part initially recognized is derecognized upon disposal or when no future economic benefits are expected from its use or disposal. Any gain or loss arising on derecognition of the asset (calculated as the difference between the net disposal proceeds and the carrying amount of the asset) is included in the statement of activities and changes in net assets when the asset is derecognized.

The assets’ residual values, useful lives and methods of depreciation are reviewed at each financial year end and adjusted prospectively, if appropriate.

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Cash and cash equivalents Cash and cash equivalents comprise cash on hand, bank balances and short-term deposits with an original maturity of three months or less.

Contributions receivable Contributions receivable are stated at the original amount of the unconditional pledge less amounts received and any uncollectible pledges. An estimate for the uncollectible amount is made when the collection of full unconditional pledge is no longer probable.

Income taxes TFT is a not-for-profit organization; accordingly, it is not subject to income tax.

Accounts payable and accruals Liabilities are recognized for amounts to be paid in the future for goods or services received, whether billed by the supplier or not.

Provisions Provisions are recognized when TFT has an obligation (legal or constructive) arising from a past event, and the costs to settle the obligation are both probable and reliably measurable.

Foreign currencies Transactions in foreign currencies are recorded at the rate ruling at the date of the transaction. Monetary assets and liabilities denominated in foreign currencies are retranslated at the rate of exchange ruling at the statement of financial position date. All differences are recognized in the statement of activities and changes in net assets.

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3.

Property and equipment

Land ILS

Equipment ILS

Furniture and fixtures ILS

188,235 188,235

849,555 34,174 883,729

93,454 1,010 94,464

121,500 121,500

1,252,744 35,184 1,287,928

-

800,965

80,576

18,225

899,766

-

27,350 828,315

13,045 93,621

18,225 36,450

58,620 958,386

At December 31, 2013

188,235

55,414

843

85,050

329,542

At December 31, 2012

188,235

48,590

12,878

103,275

352,978

Cost At January 1, 2013 Additions At December 31, 2013

Multimedia network ILS

Total ILS

Accumulated depreciation At January 1, 2013 Depreciation charge for the year At December 31, 2013 Net carrying amount

Property and equipment include ILS 889,919 and ILS 752,264 of fully depreciated assets that are still being used in TFT’s activities as at December 31, 2013 and 2012, respectively.

4.

Contributions receivable Balance, beginning of the year ILS

Postkod Lotteriets Kulturstiftelse Swedish International Development Cooperation Agency Medico Kinderpostzegels EWASH – OXFAM Middle East Children’s Alliance (MECA) CCAS SWISS Representative Office British Council Kickstarter Tides Foundation Friends of TFT in France (ATLJ) French Consulate Global Giving Foundation AFAC Roddick Foundation Sparkplug Foundation French Real Estate Company (BTNR)

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Cash received ILS

Additions ILS

Balance, end of the year ILS

728,474

-

(728,474)

-

9,000 737,474

200,119 46,878 96,424 44,700 137,812 84,182 117,450 43,412 356,400 9,360 42,857 29,071 73,000 16,920 35,296 23,953 1,357,834

(200,119) (46,878) (67,624) (44,700) (137,812) (70,769) (9,000) (117,450) (43,412) (115,005) (9,360) (42,857) (29,071) (36,500) (16,920) (35,296) (23,953) (1,775,200)

28,800 13,413 241,395 36,500 320,108

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5.

Other current assets

Accounts receivable Prepayments 6.

2013 ILS 7,503 451 7,954

2012 ILS 27,217 18,650 45,867

2013 ILS

2012 ILS 2,000 312,180 314,180

Cash and cash equivalents

Cash in hand Cash at banks

9 441,290 441,299

7.

Provision for employees’ indemnity Following is the movement on the provision for employees’ indemnity: 2013 ILS 212,963 28,204 (24,590) 216,577

Balance, beginning of the year Additions during the year Payments during the year Balance, end of the year

2012 ILS 134,812 105,854 (27,703) 212,963

8.

Temporarily restricted contributions This item comprises temporarily restricted contributions subject to purpose or time restriction by donors. These amounts represent the difference between the pledges received and the expenditures made out to satisfy the purpose stipulated by the donor. As at December 31, 2013, temporarily restricted contributions comprise of the following:

Postkod Lotteriets Kulturstiftelse Swedish International Development Cooperation Agency Medico Kinderpostzegels EWASH – OXFAM Middle East Children’s Alliance (MECA) CCAS British Council Kickstarter Tides Foundation Friends of TFT in France (ATLJ) French Consulate Global Giving Foundation AFAC Roddick Foundation Sparkplug Foundation French Real Estate Company (BTNR)

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-

Temporarily restricted contributions released from restriction ILS 631,895

Deferred revenues ILS 6,047

Balance end of the year ILS 343,859

5,000 -

200,119 46,878 96,424 44,700

205,119 46,878 44,349 44,700

-

52,075 -

50,548 -

137,812 84,182 117,450 43,412 356,400 9,360 42,857 29,071 73,000 16,920 35,296

137,812 110,619 111,681 38,912 115,005 6,920 42,857 3,800 23,737 16,370 -

24,111 866

5,769 4,500 241,395 2,440 25,271 49,263 550 34,430

1,037,349

23,953 1,357,834

1,580,654

31,024

23,953 783,505

Balance beginning of the year ILS 981,801

8

Additions ILS

9.

Deferred revenues 2013 ILS

Balance, beginning of the year Additions during the year (Note 8) Deferred revenues recognized Balance, end of the year 10.

2013 ILS 18,855 15,749 34,604

2012 ILS 11,131 66,401 28,594 106,126

2013 U.S. $ 206,145 18,702 190,830 415,677

2012 U.S. $ 100,875 19,857 228,813 349,545

2013 ILS 36,962 18,610 9,936 65,508

2012 ILS

Other revenues

Participation fees Products sales Rent income

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-

Unrestricted Contributions

Friends of Jenin in USA The Boston Consulting Group Other unrestricted contributions 12.

31,024 (5,597) 25,427

Other current liabilities

Accrued expenses Postponed checks Vacation allowance 11.

2012 ILS

9

16,831 2,434 19,265

13.

Projects’ expenses

Following are the components of projects’ expenses:

Salaries and related expense

Postkod Lotteriets Kulturstiftelse

Swedish International Development Cooperation Agency

ILS

ILS

Medico

Kinderpostzegels

Ewash Oxfam

Middle East Children’s Alliance (MECA)

ILS

ILS

ILS

ILS

CCAS

British Council

Kickstarter

Tides Foundation

ILS

ILS

ILS

ILS

Friends of TFT In France (ATLJ)

French Consulate

Global giving Foundation

AFAC

Roddick Foundation

2013

2012

ILS

ILS

ILS

ILS

ILS

ILS

ILS

362,858

95,000

9,600

22,600

-

93,000

16,676

14,900

3,612

43,000

500

12,989

3,800

8,800

6,250

693,585

693,667

Student grants

6,400

52,000

-

-

-

-

-

-

-

-

-

-

-

-

-

58,400

39,256

Hotel accommodation

4,764

2,800

5,812

1,780

-

1,500

-

6,524

-

-

-

3,000

-

800

-

26,980

-

Maintenance

15,637

3,000

-

-

-

-

9,550

1,000

16,000

-

-

1,000

-

-

250

46,437

33,217

Actors fees

23,700

-

9,150

13,750

13,450

258

1,000

52,380

500

-

-

7,800

-

8,530

500

131,018

119,108

Film making

13,035

-

-

-

-

-

-

-

17,950

-

-

-

-

-

-

30,985

40,308

Rent

11,939

-

1,120

-

-

22,700

-

4,176

-

46,955

4,950

-

-

-

-

91,840

73,991

Production materials

32,532

23,000

220

942

6,638

-

67,780

1,000

-

-

-

4,000

-

465

4,820

141,397

102,105

Utilities

2,044

2,319

250

600

614

5,000

1,000

-

-

-

-

330

-

-

-

12,157

17,428

Transportation

70,333

15,000

13,190

1,353

10,788

7,562

8,154

21,146

850

15,000

276

10,000

-

3,230

450

177,332

180,507

Professional fees

6,701

-

-

-

-

-

4,000

-

-

8,330

-

-

-

-

2,000

21,031

20,071

Printing Postage, telephone, fax and internet

37,888

6,400

-

300

1,510

-

-

1,220

-

-

-

1,000

-

1,200

680

50,198

38,322

24,995

3,600

864

900

1,886

6,288

1,300

1,800

-

-

1,000

2,161

-

200

720

45,714

97,575

Others

19,069

2,000

6,672

2,124

9,814

1,504

1,159

7,535

-

1,720

194

577

-

512

700

53,580

41,688

Total

631,895

205,119

46,878

44,349

44,700

137,812

110,619

111,681

38,912

115,005

6,920

42,857

3,800

23,737

16,370

1,580,654

1,497,243

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14.

General and administrative expenses

Salaries and related expense Transportations Currency exchange Rent Professional fees Hospitality Postage, telephone, fax and internet Insurance Actors fees Maintenance Printing Production materials Others

2013 ILS 159,322 110,601 56,603 39,076 32,504 24,071 5,894 5,425 2,324 2,017 1,481 630 17,567 457,515

2012 ILS 156,538 123,004 105,054 36,464 39,056 24,951 17,785 6,552 7,840 3,080 4,073 5,300 12,271 541,968

2013 ILS

2012 ILS

78,000 6,500

44,500 1,460

15. Related party transactions This represents transaction with key management personnel:

Key management personnel compensation: Short-term benefits Long-term benefits

16. Fair values of financial instruments Financial instruments comprise financial assets and financial liabilities. Financial assets consist of contributions receivable, cash and cash equivalents and some other current assets. Financial liabilities consist of accounts payable and some of accruals and temporarily restricted contributions.

The fair values of financial instruments are not materially different from their carrying values.

17. Risk management Liquidity risk TFT limits its liquidity risk by maintaining adequate cash balances and funds from donors to meet its current obligations and to finance its operating activities. Most of TFT’s financial liabilities are due within a period of less than three months from the date of the statement of financial position.

Credit risk Credit risk is the risk that counterparty will not meet its obligations under a financial instrument or a contract, leading to a financial loss. TFT is exposed to credit risk from its operating activities primarily for contributions receivable as disclosed in note (4).

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Foreign currency risk The table below indicates TFT’s foreign currency exposure, as a result of its monetary assets and liabilities. The analysis calculates the effect of a reasonably possible movement of the Israel New Shekel (ILS) rate against the European Monetary Unit (EURO), Swedish Krone (SEK), Great Britain Pound (GBP), and United States Dollar (USD) with all other variables held constant, on the statement of activities and changes in net assets. The effect of the decrease in foreign currency rates is expected to be equal and opposite to the effect of the increase shown below:

Increase in foreign currency rate against ILS % 2013 USD EURO SEK GBP 2012 USD EURO SEK GBP

+ 10 + 10

Effect on statement of activities and changes in net assets for the year ILS

+ 10 + 10

(1,963) 7,011 27,964 (560)

+ 10 + 10 + 10 + 10

2,455 268 27,245 537

18. Concentration of risk in geographic area TFT is carrying out all of its activities in Palestine. The political and economical situation in the area increases the risk of carrying out business and could adversely affect TFT’s performance.

19. Comparative figures The corresponding figures for December 31, 2012 have been reclassified in order to conform with the presentation for the current year, such reclassifications do not affect previously reported net assets.

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