RONALD MCDONALD HOUSE CHARITIES OF DENVER, INC. FINANCIAL STATEMENTS DECEMBER 31, 2015

Transcription

1 RONALD MCDONALD HOUSE CHARITIES OF DENVER, INC. FINANCIAL STATEMENTS DECEMBER 31, 2015

2 Contents Page Independent Auditors Report Statement Of Financial Position... 3 Statement Of Activities Statement Of Activities Statement Of Functional Expenses Statement Of Functional Expenses Statement Of Cash Flows... 8 Notes To Financial Statements

3 RubinBrown LLP Certified Public Accountants & Business Consultants th Street Suite 300 Denver, CO Independent Auditors Report Board of Directors Ronald McDonald House Charities of Denver, Inc. Denver, Colorado T F W rubinbrown.com E info@rubinbrown.com Report On The Financial Statements We have audited the accompanying financial statements of the Ronald McDonald House Charities of Denver, Inc. (the House), which comprise the statements of financial position as of December 31, 2015 and 2014, and the related statements of activities, functional expenses and cash flows for the years 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 audits. We conducted our audits in accordance with auditing standards generally accepted in the United States of America. Those standards require that we 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. 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.

4 Board of Directors Ronald McDonald House Charities of Denver, Inc. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a 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 House as of December 31, 2015 and 2014, and the changes in its net assets and its cash flows for the years then ended in accordance with accounting principles generally accepted in the United States of America. February 18, 2016 Page 2

5 STATEMENT OF FINANCIAL POSITION December 31, 2015 And 2014 Assets Current Assets Cash and cash equivalents $ 669,788 $ 1,481,430 Investments (Note 4) 1,304,404 5,655,252 Receivables Net pledges (Note 5) 46,090 64,320 Contributions 667,900 Prepaid expenses 19,813 14,002 Inventory 38,043 28,437 Restricted cash equivalents (Note 2) 595,750 1,770,893 Restricted investments (Notes 2 and 4) 330, ,417 Total Current Assets 3,004,031 9,990,651 Beneficial Use Of Land (Note 9) 130, ,743 Property And Equipment Land 167, ,000 Construction in progress 1,020,281 Buildings and improvements 26,474,846 17,353,338 Furnishings and equipment 702, ,849 27,344,268 18,906,468 Less: Accumulated depreciation 4,689,063 4,186,172 Net Property And Equipment 22,655,205 14,720,296 Total Assets $ 25,789,901 $ 24,841,690 Liabilities And Net Assets Liabilities Accounts payable and accrued liabilities $ 124,388 $ 492,071 Net Assets Unrestricted Undesignated 1,735,544 7,185,034 Property and equipment 22,655,205 14,720,296 Board-designated maintenance fund (Note 11) 171, ,917 Total Unrestricted 24,562,666 22,065,247 Temporarily restricted (Note 7) 556,597 1,738,122 Permanently restricted (Note 8) 546, ,250 Total Net Assets 25,665,513 24,349,619 Total Liabilities And Net Assets $ 25,789,901 $ 24,841,690 The accompanying notes are an integral part of the financial statements. Page 3

6 STATEMENT OF ACTIVITIES For The Year Ended December 31, 2015 Revenues, Gains And Other Support Temporarily Permanently Unrestricted Restricted Restricted Total Contributions $ 1,528,043 $ 549,813 $ $ 2,077,856 Sky High Hope Camp contributions 95,723 95,723 In-kind contributions (Note 1) 1,316,660 1,316,660 Guest donations 134, ,875 Special events, net of expenses 434,021 80, ,721 Room revenue 248, ,567 Investment return (Note 4) 19,779 1,099 20,878 Other revenue 1,782 1,782 Net assets released from restrictions (Note 7) 1,908,860 (1,908,860) Total Revenues, Gains And Other Support 5,592,587 (1,181,525) 4,411,062 Expenses Program services Ronald McDonald House 2,114,219 2,114,219 Grants to other nonprofits 214, ,037 Sky High Hope Camp 109, ,059 Family Room program 32,884 32,884 Total Program Services 2,470,199 2,470,199 Supporting services Management and general 238, ,279 Fundraising 291, ,505 Total Supporting Services 529, ,784 Unallocated payments to RMHC Global 95,185 95,185 Total Expenses 3,095,168 3,095,168 Change In Net Assets 2,497,419 (1,181,525) 1,315,894 Net Assets At Beginning Of Year 22,065,247 1,738, ,250 24,349,619 Net Assets At End Of Year $ 24,562,666 $ 556,597 $ 546,250 $ 25,665,513 The accompanying notes are an integral part of the financial statements. Page 4

7 STATEMENT OF ACTIVITIES For The Year Ended December 31, 2014 Revenues, Gains And Other Support Temporarily Permanently Unrestricted Restricted Restricted Total Contributions $ 1,397,874 $ 2,271,762 $ $ 3,669,636 Sky High Hope Camp contributions 105, ,298 In-kind contributions (Note 1) 1,063, ,358 1,200,765 Guest donations 161, ,093 Special events, net of expenses 259, , ,651 Room revenue 137, ,425 Investment return (Note 4) 51,785 1,239 53,024 Other revenue 8,934 8,934 Net assets released from restrictions (Note 7) 1,253,029 (1,253,029) Total Revenues, Gains And Other Support 4,332,728 1,385,098 5,717,826 Expenses Program services Ronald McDonald House 2,170,128 2,170,128 Grants to other nonprofits 132, ,032 Sky High Hope Camp 90,804 90,804 Family Room program 28,920 28,920 Total Program Services 2,421,884 2,421,884 Supporting services Management and general 225, ,742 Fundraising 355, ,493 Total Supporting Services 581, ,235 Unallocated payments to RMHC Global 85,422 85,422 Total Expenses 3,088,541 3,088,541 Change In Net Assets 1,244,187 1,385,098 2,629,285 Net Assets At Beginning Of Year 20,821, , ,250 21,720,334 Net Assets At End Of Year $ 22,065,247 $ 1,738,122 $ 546,250 $ 24,349,619 The accompanying notes are an integral part of the financial statements. Page 5

8 STATEMENT OF FUNCTIONAL EXPENSES For The Year Ended December 31, 2015 Program Services Supporting Services Ronald Grants Sky High Family Total Management Total McDonald To Other Hope Room Program And Fund- Supporting Total House Nonprofits Camp Program Services General raising Services Expenses Salaries $ 256,044 $ 12,216 $ 10,179 $ 22,338 $ 300,777 $ 139,275 $ 140,625 $ 279,900 $ 580,677 Payroll taxes 22, ,765 26,067 10,833 11,105 21,938 48,005 Benefits 60, ,349 64,511 17,880 16,761 34,641 99,152 Miscellaneous professional services 22,373 22,373 17,479 64,184 81, ,036 Advertising ,246 8,246 8,456 Dues, subscriptions and licenses ,327 3,182 5,702 8,884 10,211 Community grants 137, , ,227 Scholarships 62,125 62,125 62,125 Depreciation 497, ,607 15,786 1,872 17, ,265 Rent expense 6, ,640 6,640 Utilities 147, ,643 5, , ,326 Insurance 49, , ,330 8,188 3,075 11,263 62,593 Supplies and printing 50, , ,527 10,206 61,765 Repairs and maintenance 117, , ,492 Event expenses ,521 57,521 57,945 Sky High Hope Camp 56,118 56,118 56,118 Telephone and postage 20, ,963 1,309 4,652 5,961 26,924 Volunteers and donors 2, ,408 4, ,146 3,216 7,327 Donated food and cleaning supplies 814,456 1, , ,203 Donated services 22,290 33,316 55,606 10,940 10,940 66,546 Other 21, ,076 5,939 29,527 7,395 21,549 28,944 58,471 2,114, , ,059 32,884 2,470, , , ,305 3,057,504 Cost of direct benefits to donors (57,521) (57,521) (57,521) Total Expenses $ 2,114,219 $ 214,037 $ 109,059 $ 32,884 $ 2,470,199 $ 238,279 $ 291,505 $ 529,784 $ 2,999,983 The accompanying notes are an integral part of the financial statements. Page 6

9 STATEMENT OF FUNCTIONAL EXPENSES For The Year Ended December 31, 2014 Program Services Supporting Services Ronald Grants Sky High Family Total Management Total McDonald To Other Hope Room Program And Fund- Supporting Total House Nonprofits Camp Program Services General raising Services Expenses Salaries $ 247,278 $ 12,596 $ 10,497 $ 21,786 $ 292,157 $ 130,563 $ 150,791 $ 281,354 $ 573,511 Payroll taxes 21, ,730 25,107 10,447 11,924 22,371 47,478 Benefits 46, ,143 15,863 18,884 34,747 82,890 Miscellaneous professional services 21,871 2,595 24,466 15,847 62,935 78, ,248 Advertising ,150 8,150 8,570 Dues, subscriptions and licenses ,125 2,805 9,141 11,946 13,071 Community grants 68,649 68,649 68,649 Scholarships 48,028 48,028 48,028 Depreciation 530, ,441 17,633 28,726 46, ,800 Rent expense 6,615 6,615 6,615 Utilities 153, ,746 5, , ,537 Insurance 49, ,603 7,818 2,894 10,712 61,315 Supplies and printing 36, ,466 1,686 17,865 19,551 57,017 Repairs and maintenance 105, , ,027 Event expenses ,297 57,297 57,957 Sky High Hope Camp 49,533 49,533 49,533 Telephone and postage 18, ,702 1,346 5,399 6,745 25,447 Volunteers and donors ,013 4,307 5,226 Donated food and cleaning supplies 897,087 2, , ,087 Donated services 20, , ,609 13, ,496 55,105 Other 13,611 1,566 4,739 19,916 2,219 33,170 35,389 55,305 2,170, ,032 90,804 28,920 2,421, , , ,532 3,060,416 Cost of direct benefits to donors (57,297) (57,297) (57,297) Total Expenses $ 2,170,128 $ 132,032 $ 90,804 $ 28,920 $ 2,421,884 $ 225,742 $ 355,493 $ 581,235 $ 3,003,119 The accompanying notes are an integral part of the financial statements. Page 7

10 STATEMENT OF CASH FLOWS For The Years Ended December 31, 2015 And Cash Flows From Operating Activities Changes in net assets $ 1,315,894 $ 2,629,285 Adjustments to reconcile change in net assets to net cash provided by operating activities Depreciation 515, ,800 Contributed lease agreement (130,816) Loss on disposal of property and equipment 1,869 Net realized and unrealized loss on investments 27,385 23,866 Dividends reinvested (48,263) Donated property and equipment (329,157) (50,587) Net discount amortization (Increase) decrease in operating assets Contributions receivable 667,900 (667,200) Pledges receivable 18,230 (5,340) Prepaid expenses (5,811) 1,485 Inventory (9,606) (5,185) Increase (decrease) in operating liabilities Accounts payable and accrued liabilities (367,683) 425,903 Grants payable (25,000) Net Cash Provided By Operating Activities 1,784,232 2,775,153 Cash Flows From Investing Activities Purchases of investments (125,523) Proceeds from sale of investments 4,350,000 Purchases of property and equipment (8,121,017) (1,011,700) Net Cash Used In Investing Activities (3,771,017) (1,137,223) Net Increase (Decrease) In Cash And Cash Equivalents (1,986,785) 1,637,930 Cash And Cash Equivalents At Beginning Of Year 3,252,323 1,614,393 Cash And Cash Equivalents At End Of Year $ 1,265,538 $ 3,252,323 Cash And Cash Equivalents Cash and cash equivalents $ 669,788 $ 1,481,430 Restricted cash and cash equivalents 595,750 1,770,893 Cash And Cash Equivalents At End Of Year $ 1,265,538 $ 3,252,323 Supplemental Cash Flow Information Noncash investing and financing activities Gifts of property and equipment $ 329,157 $ 50,587 The accompanying notes are an integral part of the financial statements. Page 8

11 NOTES TO FINANCIAL STATEMENTS December 31, 2015 And Summary Of Significant Accounting Policies General The Ronald McDonald House Charities of Denver, Inc. (the House) is a not-forprofit corporation established to operate facilities (the Ronald McDonald Houses) in Denver and Aurora, Colorado. The Ronald McDonald Houses provide temporary housing for seriously ill children and their families while children are receiving treatment at nearby hospitals. The House s Community Grants program supports 501(c)(3) organizations and their programs that directly improve the health and well-being of children. These include a partnership with Rocky Mountain Youth in three mobile medical/dental vans. In addition, the Scholarship Program offers scholarships to students from the community who face limited access to educational and career opportunities. These scholarships are part of the House s ongoing commitment to education and the well-being of children. The House s Sky High Hope Camp is a residential mountain camp for children with cancer and their siblings. Campers, under close medical supervision, are allowed to participate in recreational activities and just be a kid with other children living with cancer. The House s Family Room program offers families a place to rest and regroup at two Denver area hospitals. Services at the Ronald McDonald Family Room include a kitchen area, shower facilities, laundry facilities, internet access, a seating area and a quiet room. The House s activities are supported primarily through contributions and special events. Basis Of Accounting The accompanying financial statements have been prepared on the accrual basis of accounting and, accordingly, reflect all significant receivables, payables and other liabilities. Financial Statement Presentation Information regarding the financial position and activities of the House is reported according to three classes of net assets: unrestricted net assets, temporarily restricted net assets and permanently restricted net assets. Page 9

12 Contributions And Contributions Receivable Contributions received by the House are recorded as unrestricted, temporarily restricted or permanently restricted support, depending on the existence and/or nature of any donor restrictions. 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 (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets that are released from restrictions. Restrictions met in the same period in which the related contributions are received are recorded as temporarily restricted support then released to unrestricted net assets. Unconditional contributions receivable are recognized as revenue when the pledge is received. Conditional pledges are recognized as receivables and revenue when the conditions on which they depend are substantially met. Contributions receivable are recorded at net realizable value if expected to be collected in one year and at fair value if expected to be collected in more than one year. Accordingly, an allowance for uncollectible pledges receivable of $6,000 and $10,000 is recorded at December 31, 2015 and 2014, respectively. Contributed Property And Services Contributed property and equipment are recorded at fair value on the date of donation. If donors stipulate how long the assets must be used, the contributions are recorded as restricted support. In the absence of such stipulations, contributions of property and equipment are recorded as unrestricted support. Contributed goods and services are recorded as contributions and corresponding expenses at their estimated fair values on the date of donation. In-kind contributions for the years ended December 31, 2015 and 2014 consist of the following: Services and overflow rooms $ 66,546 $ 55,105 Food, supplies and activities 816, ,087 Auction items 104,754 58,628 Aurora land use 137,358 Property and equipment 329,157 50,587 Total In-Kind Contributions $ 1,316,660 $ 1,200,765 Page 10

13 The House pays for most services requiring specific expertise. However, many individuals volunteer their time and perform a variety of tasks that assist the House with specific programs and activities. The House received 87,337 and 62,757 volunteer hours in 2015 and 2014, respectively. No amounts have been reflected in the accompanying financial statements for volunteers donated services unless they meet the criteria of recognition under generally accepted accounting principles. Cash And Cash Equivalents For purposes of the statement of cash flows, the House considers all unrestricted highly liquid investments with an initial maturity of three months or less, and that are not part of the investment portfolio, to be cash equivalents. Investments Investments in marketable securities with readily determinable fair values and all investments in debt securities are stated at their fair values in the statement of financial position. Unrealized gains and losses are included in the change in net assets in the statement of activities. Accounts Receivable The House reviews accounts receivable for collectability at year end. The allowance method is used to determine the uncollectible amounts. The allowance is based upon prior-years experience and management s analysis of subsequent collections. Inventory Inventory consists of donated auction items that have not yet been sold. These contributed items are recorded at their estimated fair value at the date of receipt. Property And Equipment Furniture, fixtures and equipment are carried at cost and depreciated over their estimated useful lives of 3 to 5 years for furniture and equipment and 40 years for buildings. Capitalization of expenditures is based on costs and useful lives. Donated property and equipment is recorded as estimated fair market value at the date of donation. Repairs and maintenance are charged to operations when incurred. Property is capitalized only if it has a cost greater than $5,000 per asset invoice or group. Depreciation expense is computed using the straight-line method over the estimated useful lives. Page 11

14 The House evaluates its long-lived assets for any events or changes in circumstances which indicate that the carrying amount of such assets may not be fully recoverable. The House evaluates the recoverability of long-lived assets by measuring the carrying amount of such assets against the estimated undiscounted future cash flows associated with them. At the time such evaluation indicates that the future undiscounted cash flows of certain long-lived assets are not sufficient to recover the carrying value of such assets, the assets are adjusted to their fair values. At December 31, 2015 and 2014, no impairment losses have been recognized. Concentrations Of Credit Risk Financial instruments which potentially subject the House to concentrations of credit risk consist principally of cash, cash equivalents and investments. The House maintains cash balances with multiple financial institutions. Accounts at each institution are insured by the Federal Deposit Insurance Corporation up to $250,000. The House believes it is not exposed to any significant credit risk on its cash balances. Investment managers that have been identified and utilized by the National Ronald McDonald House Charities through its McDonald s Charities Investment Program are engaged by the House Board of Directors to make investments, and the investments are monitored by the Board. Although the market value of investments is subject to fluctuations on a year-to-year basis, management believes that the investment policy is prudent for the long-term welfare of the House. Use Of Estimates The preparation of financial statements in conformity with generally accepted accounting principles 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 financial statements and the reported amounts of revenue and expenditures during the reporting period. Actual results could differ from those estimates. Functional Allocation Of Expenses The costs of providing the various programs and other activities have been summarized on a functional basis in the accompanying financial statements. Accordingly, certain costs have been allocated among the programs and supporting services benefited. Page 12

15 Income Taxes The House has received a determination letter from the Internal Revenue Service for exemption from federal income tax under Section 501(c)(3) of the Internal Revenue Code. Therefore, no income tax liability was recorded for the years ended December 31, 2015 or Advertising The House uses advertising to promote its programs in the communities it serves. The production costs of advertising are expensed as incurred. During 2015 and 2014, advertising costs totaled $8,456 and $8,570, respectively. Subsequent Events The House has reviewed and considered subsequent events for disclosure in the financial statements through February 18, 2016, which is the date the financial statements were available for issuance. 2. Restricted Cash And Investments Restricted cash and investments consisted of the following at December 31: Cash and cash equivalents $ 595,750 $ 1,770,893 Mutual funds 330, ,417 Total Restricted Cash And Investments $ 925,893 $ 2,079,310 Restricted cash and investments are restricted to the following purposes at December 31: Cash received for expansion project $ $ 1,191,917 Cash received for future Sky High Hope Camp 330, ,417 Cash received for Coca-Cola purchases 26,444 19,390 Cash received for scholarships 5,363 8,048 Cash received for family entertainment 4,943 5,288 Cash received from RMHC Global 12,750 Permanent endowment (Note 8) 546, ,250 Total Restricted Cash And Investments $ 925,893 $ 2,079,310 Page 13

16 3. Cash Held For Others The House periodically receives funds from Global Ronald McDonald House Charities (RMHC Global) which were passed through to grant and scholarship recipients. No undistributed funds were available as of December 31, The financial effects of transactions related to custodial funds were recorded as changes in custodial funds held for others liability and were not included in the statement of activities. The changes in that liability are summarized as follows: 2014 Additions Funds received from RMHC Global $ Deductions Grants and scholarships distributed 25,000 Change in balance (25,000) Balance In Funds, Beginning Of Year 25,000 Balance In Funds, End Of Year $ In 2015, the House started receiving the community grant donation upfront from RMHC Global and was able to determine who should receive the community grant funds. As the House had variance power to determine the recipient, the monies received in 2015 were recorded as a restricted contribution. As year end, $12,750 was recorded in temporarily restricted net assets (Note 2) relating to this program. 4. Investments The House s investments, at fair value, consisted of the following at December 31: Money market funds $ 450,637 $ 2,696,781 Mutual funds Bond funds 519,122 2,623,754 Equity funds 664, ,134 Total Investments $ 1,634,547 $ 5,963,669 Page 14

17 The House s investments are restricted or unrestricted to the following at December 31: Restricted investments $ 330,143 $ 308,417 Unrestricted investments 1,304,404 5,655,252 Total Investments $ 1,634,547 $ 5,963,669 Investment return consists of the following for the years ended December 31: Net unrealized gain (loss) on investments $ (55,045) $ (46,896) Net realized gain on sale of investments 27,660 23,030 Interest and dividend income 48,263 76,890 Total Investment Return $ 20,878 $ 53, Pledges Receivable The House s pledges receivable of $52,090 and $74,320 consist of pledges of support for general operations in 2015 and 2014, respectively. Management has recorded an allowance for doubtful accounts of $6,000 and $10,000 for the year ended December 31, 2015 and 2014, respectively. The pledges receivable are due in less than one year. 6. Contributions Receivable And Expansion Project The House s contributions receivable consisted of donations for the Denver House Expansion project. During 2014, construction began to expand the Denver House location and add 44 rooms. Construction was completed in Management has determined that all contributions receivable are fully collectible; therefore, no allowance for uncollectible accounts is considered necessary at December 31, There were no contributions receivable and, therefore, no allowance for uncollectible accounts as of December 31, The contributions receivable are due in less than 1 year. Page 15

18 7. Temporarily Restricted Net Assets The House s temporarily restricted net assets consisted of the following at December 31: Contributions receivable $ $ 667,900 Expansion Fund 524,017 Pledges receivable 46,090 74,320 Family Activity Fund 4,943 2,812 Family Room Fund 2,476 Coca-Cola 26,444 19,389 Scholarships 5,363 8,048 Aurora land use 130, ,743 Global 12,750 Sky High Hope Camp 330, ,417 Other 199 Total Temporarily Restricted Net Assets $ 556,597 $ 1,738,122 Net assets totaling $1,908,860 in 2015 and $1,253,029 in 2014 were released from restrictions as a result of the House incurring expenditures satisfying the related restricted purposes. 8. Permanently Restricted Net Assets The House s permanently restricted net assets consist of two donor-restricted endowment funds established for the operating expenses of the House. As required by generally accepted accounting principles, net assets associated with these endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The House follows 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, issued by the Financial Accounting Standards Board. The State of Colorado adopted the Uniform Prudent Management of Institutional Funds Act (UPMIFA) effective September 1, Page 16

19 The House has interpreted UPMIFA as requiring the preservation of the fair 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 House classifies as permanently restricted net assets (a) the original value of gifts donated to the permanent endowment, (b) the original value of subsequent gifts to the permanent endowment and (c) accumulations to the permanent endowment made in accordance with the direction of the applicable donor gift instrument at the time the accumulation is added to the fund. The remaining portion of the donor-restricted endowment fund that is not classified in permanently restricted net assets is classified as temporarily restricted net assets until those amounts are appropriated for expenditure by the House in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, the House 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 purpose of the House 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 House resources (7) The investment policies of the House Following are the changes in the endowment net assets for the years ended December 31, 2015 and 2014: Temporarily Permanently Restricted Restricted Total Endowment net assets at December 31, 2013 $ $ 546,250 $ 546,250 Investment income 1,239 1,239 Appropriation of endowment assets (1,239) (1,239) Endowment net assets at December 31, , ,250 Investment income 1,099 1,099 Appropriation of endowment assets (1,099) (1,099) Endowment net assets at December 31, 2015 $ $ 546,250 $ 546,250 Page 17

20 Funds With Deficiencies From time to time, the fair value of assets associated with individual donorrestricted endowment funds may fall below the level that the donor or UPMIFA requires the House to retain as a fund of perpetual duration. At December 31, 2015 and 2014, there was no such deficiency. Return Objectives And Risk Parameters The House 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. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is intended to maximize utilization of investments in income-producing instruments which preserve principal, maximize income commensurate with risk, provide liquidity to help ensure adequate reserves and fit within the House s preference of acceptable principal and interest risk. Strategies Employed For Achieving Objectives To satisfy its long-term rate-of-return objectives, the House 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 House targets a diversified asset allocation that places a greater emphasis on money market funds and bond funds to achieve its long-term return objectives within prudent risk constraints. Spending Policy And How The Investment Objectives Relate To Spending Policy The House has a policy of appropriating for distribution each year a prudent amount for the operating expenses of the House. This policy applies to restricted and unrestricted funds unless those funds have their own distribution requirements. In establishing the distribution policy, the House considers the long-term expected return on its endowment. This is consistent with the House s objective to maintain the purchasing power of the endowment assets held in perpetuity, as well as to provide additional real growth through new gifts and investment return. In determining the annual distribution to the House for operating expenses, the Board of Directors may make an exception to the distribution policy. Page 18

21 9. Leases In 2006, the House entered into a lease agreement with HealthONE, whereby the House would lease from HealthONE certain land it owned. The initial term of the lease was for a 99-year term that ends in 2105, with an aggregate annual base rent of $1.00. The fair value of the lease at the time of inception was approximately $655,000. In connection with this lease agreement, the House discounted the value of the 99-year initial term of the lease and recorded a restricted contribution in Additionally, a beneficial use of land of $130,743 is recorded at year end. For the years ended December 31, 2015 and 2014, net assets released from restriction and rent expense of $6,615 and $6,615, respectively, were recorded. These amounts are included in total rent expense of $6,640 and $6,615 in 2015 and 2014, respectively. The discount on the beneficial use of land was amortized by $6,537 and $6,541 into temporarily restricted contribution revenue during the years ended December 31, 2015 and 2014, respectively. 10. Retirement Plan The House has a 403(b) defined contribution plan (the Plan) that covers substantially all employees who are 21 years old and have completed 1 year of service. Employer contributions are a discretionary percentage as determined by the House and are matching contributions. Plan benefits vest 100% after 3 years of service. House matching contributions to the Plan totaled $20,365 in 2015 and $20,523 in Board-Designated Funds On March 26, 2002, the House Board of Directors voted to establish a reserve for maintenance (the Maintenance Fund) and to fund the designated reserve at the rate of $1,000 per month plus interest. At December 31, 2015 and 2014, the Maintenance Fund totaled $171,917 and $159,917, respectively. These funds are invested in cash equivalents. Page 19

22 12. Fair Value Measurements The House reports required types of financial instruments in accordance with fair value accounting standards. Fair value is the price that would be received to sell an asset or paid to transfer a liability in an orderly transaction between market participants at the measurement date. These standards require an entity to maximize the use of observable inputs (such as quoted prices in active markets) and minimize the use of unobservable inputs (such as appraisals or other valuation techniques) to determine fair value. Fair value measurement standards also require the House to classify these financial instruments into a three-level hierarchy, based on the priority of inputs to the valuation technique or in accordance with net asset value practical expedient rules, which allow for either Level 2 or Level 3 reporting, depending on lock-up and notice periods associated with the underlying funds. Instruments measured and reported at fair value are classified and disclosed in one of the following categories: Level 1 - Quoted prices are available in active markets for identical investments as of the reporting date. The type of investments included in Level 1 includes mutual funds, listed equities, listed derivatives and money market funds. Level 2 - Pricing inputs are other than quoted prices in active markets, which are either directly or indirectly observable as of the reporting date, and fair value is determined through the use of models or other valuation methodologies. Investments which are generally included in this category include corporate and government bonds, less liquid and restricted equity securities and certain overthe-counter derivatives. Level 3 - Pricing inputs are unobservable for the investment and include situations where there is little, if any, market activity for the investment. The inputs into the determination of fair value require significant management judgment or estimation. Investments that are included in this category generally include limited partnership interests in corporate private equity and real estate funds, funds of hedge funds and distressed debt. In certain cases, the inputs used to measure fair value may fall into different levels of the fair value hierarchy. In such cases, an investment s level within the fair value hierarchy is based on the lowest level of input that is significant to the fair value measurement. These classifications (Levels 1, 2 and 3) are intended to reflect the observability of inputs used in the valuation of investments and are not necessarily an indication of risk or liquidity. Page 20

23 No changes in the valuation methods were made during the years ended December 31, 2015 and The following table summarizes the valuation of the House s investments on a recurring basis by the above fair value hierarchy levels as of December 31, 2015: 2015 Level 1 Money market funds $ 450,637 $ 450,637 Mutual funds Bond funds - low-duration institutional funds 519, ,122 Equity funds U.S. stock funds 394, ,064 International stock funds 176, ,636 U.S. targeted value 60,146 60,146 Emerging markets stock funds 33,942 33,942 Total Investments $ 1,634,547 $ 1,634,547 The following table summarizes the valuation of the House s investments on a recurring basis by the above fair value hierarchy levels as of December 31, 2014: 2014 Level 1 Money market funds $ 2,696,781 $ 2,696,781 Mutual funds Bond funds - low-duration institutional funds 2,623,754 2,623,754 Equity funds U.S. stock funds 386, ,701 International stock funds 167, ,136 U.S. targeted value 60,673 60,673 Emerging markets stock funds 28,624 28,624 Total Investments $ 5,963,669 $ 5,963, Related-Party Transactions The House remits 25% of the proceeds from certain fundraising events to RMHC Global. During the years ended December 31, 2015 and 2014, total donations to RMHC Global recognized were $120,075 and $117,699, respectively. As of December 31, 2015 and 2014, the House owed RMHC Global $22,620 and $24,889, respectively. These amounts are included in accounts payable. Page 21

24 RMHC Global also makes donations to the House throughout the year. These gifts totaled $465,114 and $211,689 for the years ended December 31, 2015 and 2014, respectively. The House Board of Directors made pledges for the expansion project at the Denver House location during The Board pledged $55,200 relating to this project, and $37,200 was outstanding at December 31, This amount is included in contributions receivable on the statement of financial position. There were no outstanding pledges receivable from related parties at December 31, Commitments The House entered into a contract with the Sheraton Denver Downtown Hotel in 2015 for a gala that will be held at the Hotel in The contract specifies that there must be a committed food and beverage minimum revenue of $22,000. Should the contract be canceled prior to the event, the House will be required to pay a percentage of the minimum revenue as outlined in the agreement. Page 22