CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA

Transcription

1 CHIEF SEATTLE COUNCIL BOY SCOUTS OF AMERICA Consolidated Financial Statements For the Years Ended December 31, 2011 and 2010

2 Table of Contents Report of Independent Auditors 1 Consolidated Financial Statements: Consolidated Statements of Financial Position 2 Consolidated Statements of Activities 3-4 Consolidated Statements of Cash Flows 5 Consolidated Statement of Functional Expenses Consolidated Statement of Functional Expenses Page

3 10900 NE 4th Street Suite 1700 Bellevue WA tel fax clarknuber.com Report of Independent Auditors Certified Public Accountants and Consultants Board of Directors Chief Seattle Council, Boy Scouts of America Seattle, Washington We have audited the accompanying consolidated statements of financial position of Chief Seattle Council, Boy Scouts of America and the Chief Seattle Council Scoutreach Foundation (the Council) as of December 31, 2011 and 2010, and the related consolidated statements of activities, cash flows and functional expenses for the years then ended. These financial statements are the responsibility of the Council s management. 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 audits to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the financial position of the Council as of December 31, 2011 and 2010, and the changes in its net assets and its cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Certified Public Accountants May 9, 2012

4 Consolidated Statements of Financial Position December 31, 2011 and 2010 Assets Operating Fund Capital Fund Endowment Fund Total Current Assets: Cash and cash equivalents $ 1,315,452 $ 1,107,878 $ - $ - $ 483,218 $ 281,186 $ 1,798,670 $ 1,389,064 Short-term investments (Note 5) 57, ,717 57, ,717 Accounts, grants and pledges receivable, net of allowance for doubtful accounts of $11,861 and $11,524 for 2011 and 2010, respectively (Note 3) 350, , , ,062 Prepaid expenses 74,700 86,668 74,700 86,668 Due (to) from other funds 332, ,111 (812,110) (721,927) 479, , Merchandise inventories 79, ,410 79, ,410 Total Current Assets 2,210,793 2,019,846 (812,110) (721,927) 962, ,002 2,361,246 2,045,921 Long-term investments (Note 5) 160, ,987 14,187,340 14,584,890 14,348,025 14,753,877 Long-term accounts, grants and pledges receivable (Note 3) 42,998 57,997 42,998 57,997 Interfund promissory note (Note 8) (389,148) (541,833) 389, ,833 Contributed land held for sale (Note 15) 114, , , ,874 Assets designated or restricted for improvement of long-term assets (Note 4) 5,944,772 1,195,056 5,944,772 1,195,056 Land, buildings, equipment, and construction in progress, net (Note 6) 8,903,807 8,915,037 8,903,807 8,915,037 Beneficial interests in trusts (Note 7) 461, , , ,103 Other non-current assets 78,585 92,797 78,585 92,797 Total Assets $ 2,025,328 $ 1,704,997 $ 14,036,469 $ 9,388,166 $ 16,193,937 $ 17,329,499 $ 32,255,734 $ 28,422,662 Liabilities and Net Assets Current Liabilities: Accounts payable and accrued liabilities $ 254,429 $ 187,509 $ - $ - $ - $ - $ 254,429 $ 187,509 Custodial funds held for others 348, , , ,890 Deferred income 171, , , ,403 Total Current Liabilities 774, , , ,802 Total Liabilities 774, , , ,802 Net Assets: Unrestricted 1,063, ,578 8,094,915 8,193,110 10,015,789 10,951,275 19,173,780 19,957,960 Temporarily restricted (Note 11) 187, ,617 5,941,554 1,195,056 1,207,223 1,405,462 7,336,416 2,878,138 Permanently restricted (Note 12) 4,970,925 4,972,762 4,970,925 4,972,762 Total Net Assets 1,250,715 1,091,195 14,036,469 9,388,166 16,193,937 17,329,499 31,481,121 27,808,860 Total Liabilities and Net Assets $ 2,025,328 $ 1,704,997 $ 14,036,469 $ 9,388,166 $ 16,193,937 $ 17,329,499 $ 32,255,734 $ 28,422,662 See accompanying notes

5 Consolidated Statements of Activities Total Operating Capital Endowment Fund Fund Fund Changes in Unrestricted Net Assets: Support, Revenue and Reclassifications Support- Friends of Scouting contributions, net of provision for uncollectibles of $72,925 and $95,931 for 2011 and 2010, respectively $ 1,708,257 $ - $ - $ 1,708,257 $ 1,713,351 United Way 272, , ,144 Other contributions, net of expenses of $154,923 and $264,833 for 2011 and 2010, respectively 354,065 50, , ,506 Total Support 2,334,779 50,000 2,384,779 2,475,001 Revenues- Camp fees 1,689,325 69,345 1,758,670 1,599,211 Scouting activities 182, , ,284 Investment income (Note 5) 379,759 46, , ,036 Trading Post and BSA stores (Note 9) 143, , ,933 Sale of product to the public, net of expenses of $1,013,218 and $1,085,726 for 2011 and 2010, respectively (Note 17) 571, , ,450 Realized and unrealized (losses) gains on investments (Note 5) - (555,088) (555,088) 899,525 Miscellaneous 21,734 (17,830) 3,904 50,640 Total Revenues 2,987,886 97,625 (554,184) 2,531,327 4,545,079 Net Assets Released From Restrictions- Expiration of time restrictions 296, , ,251 Satisfaction of use restrictions 52, , , , , , , , ,232 1,202,477 Reclass to recover endowments with prior deficiencies - - 5,848 Total Support, Revenues and Reclassifications 5,670, ,604 (355,945) 5,843,338 8,228,405 Expenses: Program services 4,489, ,649 5,115,558 5,891,459 Supporting services- Management and general 594,364 18, , ,029 Fundraising 469,177 15, , ,957 Total Supporting Services 1,063,541 33,529-1,097,070 1,079,986 Charter and national service fee 77,213 77,213 77,213 Loss on the sale of assets (Note 15) 337, ,680 Impairment loss on land held for sale (Note 15) - 144,240 Total Expenses 5,630, , ,680 6,627,521 7,192,898 Change in Unrestricted Net Assets $ 40,016 $ (130,574) $ (693,625) $ (784,183) $ 1,035,507 See accompanying notes

6 Consolidated Statements of Activities (Continued) Total Operating Capital Endowment Fund Fund Fund Change in Unrestricted Net Assets $ 40,016 $ (130,574) $ (693,625) $ (784,183) $ 1,035,507 Changes in Temporarily Restricted Net Assets: United Way 33,319 33,319 44,985 Friends of Scouting contributions, net of provision for uncollectibles of $10,861 and $2,000 for 2011 and 2010, respectively 169, , ,455 Other contributions 55,249 5,127,477 5,182, ,198 Realized and unrealized gains on investments and interest - 310,948 Reclass to recover endowments with prior deficiencies - (5,848) Net assets released from restrictions (348,014) (380,979) (198,239) (927,232) (1,202,477) Change in Temporarily Restricted Net Assets (89,978) 4,746,498 (198,239) 4,458,281 (423,739) Changes in Permanently Restricted Net Assets: Contributions 33,839 33, ,218 Change in value of beneficial interests in trusts (35,676) (35,676) 44,000 Change in Permanently Restricted Net Assets (1,837) (1,837) 221,218 Change in Net Assets (49,962) 4,615,924 (893,701) 3,672, ,986 Net Assets, Beginning of Year: Unrestricted 813,578 8,193,110 10,951,275 19,957,963 18,922,453 Temporarily restricted 277,617 1,195,056 1,405,462 2,878,135 3,301,877 Permanently restricted 4,972,762 4,972,762 4,751,544 Total Net Assets, Beginning of Year 1,091,195 9,388,166 17,329,499 27,808,860 26,975,874 Transfers 209,482 32,379 (241,861) - - Net Assets, End of Year: Unrestricted 1,063,076 8,094,915 10,015,789 19,173,780 19,957,960 Temporarily restricted 187,639 5,941,554 1,207,223 7,336,416 2,878,138 Permanently restricted - - 4,970,925 4,970,925 4,972,762 Total Net Assets, End of Year $ 1,250,715 $ 14,036,469 $ 16,193,937 $ 31,481,121 $ 27,808,860 See accompanying notes

7 Consolidated Statements of Cash Flows See accompanying notes. Total Operating Capital Endowment Fund Fund Fund Cash Flows from Operating Activities: Change in net assets $ (49,962) $ 4,615,924 $ (893,701) $ 3,672,261 $ 832,986 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities- Depreciation 634, , ,535 Increase in accounts, grants and pledges receivable (15,165) (5,009,500) 0 (5,024,665) (837) Increase in allowance for doubtful accounts ,524 Decrease in prepaid expenses 11,968 11, ,278 Decrease (increase) in merchandise inventories 20,508 20,508 (5,293) Transfers 209,482 32,379 (241,861) Change in amounts due to/from other funds (180,962) 90,183 90,779 - Decrease (increase) in accounts payable and accrued liabilities 66, ,920 (82,225) (Decrease) increase in custodial accounts 26,818 26,818 (10,805) Increase (decrease) in deferred income 67,073 67,073 (420,544) Decrease in cash surrender value of life endowments (383) (383) (662) Change in value of beneficial interests in trusts 35,676 35,676 (44,000) Contributions restricted for long-term investments 0 - (172,735) Contributions restricted for long-term assets or endowments (117,977) (33,839) (151,816) (299,916) Interest and dividends retained by long-term investments (3,216) (904) (4,120) 1,066,308 Loss (gain) on sales of assets 337, ,680 (22,603) Net realized and unrealized losses (gains) on long-term investments 557, ,448 (495,559) Net Cash Provided (Used) by Operating Activities 157, ,123 (149,105) 250,035 1,246,452 Cash Flows from Investing Activities: Purchases of buildings and equipment (623,100) (623,100) (717,266) Proceeds from sale of assets 412, , ,093 Proceeds from gift annuities 12,235 12,235 Purchases of investments (7,170,688) (7,170,688) (7,234,369) Interest retained by long-term investments designated for capital asset acquisitions (3,216) (3,216) Proceeds from sales and maturities of investments 99, ,000 7,014,054 7,376,988 6,704,925 Net Cash (Used) Provided by Investing Activities 99,934 (363,316) 267,921 4,539 (430,617) Cash Flows from Financing Activities: Contributions received restricted for capital asset acquisitions 117, , ,915 Contributions received restricted for endowment 33,839 33, ,218 Increase (decrease) in long-term obligations (58,930) Interest received from long-term investments designated for capital asset acquisitions 3,216 3,216 Payments received (made) on interfund loan (49,377) 49,377 Note payable principal repayments - 0 (763,630) Net Cash (Used) Provided by Financing Activities (49,377) 121,193 83, ,032 (290,427) Net Change in Cash and Cash Equivalents 207, , , ,408 Cash and Cash Equivalents, Beginning of Year 1,107, ,186 1,389, ,656 Cash and Cash Equivalents, End of Year $ 1,315,452 $ - $ 483,218 $ 1,798,670 $ 1,389,064 Supplemental Disclosures of Cash Flow Information: Cash paid for interest $ - $ - $ - $ - $ 1,

8 Consolidated Statement of Functional Expenses For the Year Ended December 31, 2011 Supporting Services Program Management Services and General Fundraising Total 2011 Total Employee Compensation: Salaries and wages $ 2,097,960 $ 291,135 $ 249,480 $ 540,615 $ 2,638,575 Employee benefits 380,450 76,703 50, , ,513 Payroll taxes 222,104 25,185 21,582 46, ,871 Total Employee Compensation 2,700, , , ,445 3,414,959 Other: Bank fees 49,510 3,432 52,942 52,942 Conferences, conventions and meetings 57,593 6,798 5,826 12,624 70,217 Depreciation 600,996 17,951 15,383 33, ,330 Insurance 100,806 5,991 5,134 11, ,931 Interest 36,975 36,975 Membership and advancement 74,413 74,413 Miscellaneous 44,353 1,896 13,418 15,314 59,667 Occupancy 323,678 12,689 11,349 24, ,716 Postage and shipping 20,881 2,972 11,461 14,433 35,314 Printing and publications 26,036 1,340 20,459 21,799 47,835 Professional fees 76,769 76,769 76,769 Public relations ,040 4,138 4,705 Recognition awards 97,486 2,350 18,416 20, ,252 Rental and maintenance of equipment 86,279 8,764 7,510 16, ,553 Scoutreach dues 87,100 87,100 Specific assistance to individuals 43,334 43,334 Supplies 598,182 4,598 20,424 25, ,204 Telephone 49,645 5,623 4,818 10,441 60,086 Travel 166,720 22,138 21,468 43, ,326 Total Other 2,415, , , ,625 2,797,669 Total Functional Expenses $ 5,115,558 $ 612,510 $ 484,560 $ 1,097,070 $ 6,212,628 See accompanying notes

9 Consolidated Statement of Functional Expenses For the Year Ended December 31, 2010 Supporting Services Program Management Services and General Fundraising Total 2010 Total Employee Compensation: Salaries and wages $ 2,016,343 $ 265,732 $ 259,622 $ 525,354 $ 2,541,697 Employee benefits 341,710 50,386 49,135 99, ,231 Payroll taxes 200,594 22,559 21,999 44, ,152 Total Employee Compensation 2,558, , , ,433 3,228,080 Other: Bank fees 49,360 2,384 51,744 51,744 Conferences, conventions and meetings 227,267 4,929 4,807 9, ,003 Depreciation 545,124 16,409 16,002 32, ,535 Insurance 98,597 3,992 3,893 7, ,482 Interest 38,280 38,280 Membership and advancement 93,911 93,911 Miscellaneous 78,436 35,003 7,257 42, ,696 Occupancy 300,363 11,277 10,997 22, ,637 Postage and shipping 13,610 1,594 15,070 16,664 30,274 Printing and publications 16,276 2,073 30,003 32,076 48,352 Professional fees 68,571 68,571 68,571 Public relations 4, ,628 6,312 Recognition awards 107,150 1,746 22,812 24, ,708 Rental and maintenance of equipment 66,114 7,914 7,717 15,631 81,745 Scoutreach dues 96,211 96,211 Specific assistance to individuals 166, ,438 Supplies 762,147 3,776 27,924 31, ,847 Telephone 47,629 5,226 5,097 10,323 57,952 Travel 670,575 19,694 23,398 43, ,667 Total Other 3,332, , , ,553 3,743,365 Total Functional Expenses $ 5,891,459 $ 571,029 $ 508,957 $ 1,079,986 $ 6,971,445 See accompanying notes

10 Note 1 - Summary of Significant Accounting Policies Purpose of Organization - The Chief Seattle Council, Boy Scouts of America (the Council) is chartered by the National Council of Boy Scouts of America (the National Council). The Council is a not-for-profit organization within the State of Washington s counties of King, Jefferson, Clallam, and Kitsap. The Council has four camping facilities: Camp Parsons in Jefferson County, Camp Sheppard in Pierce County, and Camps Pigott and Brinkley in Snohomish County. The Council is devoted to preparing young people to make ethical and moral choices over their lifetimes by instilling in them the values of the Scout Oath and Law. Teaching leadership, participating citizenship, character development and self-reliance are the objectives of Scouting. The Council s programs are classified as follows: Tiger Cubs - A family-oriented program for first-grade boys and an adult partner (usually a parent). Together they search, discover and share. Tiger Cubs is the first year of the Cub Scout program. Cub Scouts - A family- and community-centered program for boys 8 to 10 years of age. Cub Scouts learn citizenship, compassion, and courage through service projects, ceremonies, games, and other activities promoting character development and physical fitness. Boy Scouts - A family- and community-centered program for boys 11 to 18 years of age. With the Scout Oath and Scout Law as guides, and the support of parents and community and religious organizations, these youth develop an awareness and appreciation of their role in the community and become good citizens. The program teaches leadership and character development through different methods, such as, advancement, camping and training. Varsity Scouting - A program for young men 14 to 17 years of age. Varsity Scouting provides options for those who are looking for rugged high adventure or challenging sporting activities and still want to be a part of a Scouting program that offers the advancement opportunities and values of the Boy Scouts of America. There are five fields of emphasis: Advancement, high adventure, personal development, service and special programs and events. Venturing - A program for young men and women 14 (or 13 with completion of the eighth grade) through 20 years of age. Venturing provides experiences to develop youth to become mature, responsible, caring adults. Each program is specific to the youth participating. There are robotic groups, high adventure groups, computer groups, and ships. The one thing that is consistent with Venturing is that the youth run the program. Learning for Life/Exploring - A co-educational mix of worksite and classroom-based programs that offer career education through role models and hands-on experiences by bringing youth, up to age 20, and organizations in the community together. This program gives youth an opportunity to explore careers or fields of interest

11 Note 1 - Continued These programs served: (Unaudited) (Unaudited) Youth members 26,501 26,386 Registered adult volunteers 7,439 7,884 Pack, troops, and posts 1,034 1,063 The Council s website address is: SeattleBSA.org. The Chief Seattle Council Scoutreach Foundation (the Foundation) was established as a 501(c)(3) organization in 2004 to operate exclusively to support the Chief Seattle Council, Boy Scouts of America and its tax exempt mission, purposes, goals and objectives. The Foundation solicits donations for the benefit of the Council. All such donations in 2011 and 2010 were given by donors directly to the Council. Definition of Funds - The Council accounts for its activities in various funds with the following definitions and purposes: Operating Fund - The Operating Fund consists of assets and support/revenue available and used for the unrestricted operations of the Council. Contributions which will ultimately be available for the unrestricted operations of the Council but currently have temporary restrictions related to use or the passage of time are also recorded in the Operating Fund. Capital Fund - The Capital Fund consists of donated and purchased fixed assets used in program operations. Capital Fund operations include related depreciation and contributions restricted for capital acquisitions. Endowment Fund - The Endowment Fund consists of the amounts of gifts, legacies, and bequests, which were accepted with donor restrictions that the principal be invested, and other amounts designated by the Board of the Council. A portion of the investment income earned in the Endowment Fund is transferred to the Operating Fund and used to fund general, administrative, and camp maintenance expenses. Principles of Consolidation - The consolidated financial statements include the accounts of the Foundation. All intercompany transactions have been eliminated. Basis of Presentation - The consolidated financial statements are presented in accordance with generally accepted accounting principles (GAAP) and reporting standards for not-for-profit organizations. Under these standards net assets and revenues, expenses, gains and losses are classified based on the existence or absences of donor-imposed restrictions. Accordingly, the net assets of the Council and changes therein are classified and reported as follows: Unrestricted Net Assets - Net assets that are not subject to externally imposed restrictions. Amounts designated by the Board of the Council are included in this classification

12 Note 1 - Continued Temporarily Restricted Net Assets - Net assets subject to externally imposed restrictions that will be met by actions of the Council and/or the passage of time. Permanently Restricted Net Assets - Permanently restricted net assets must be maintained by the Council in perpetuity, the income of which is expendable. Permanently restricted net assets increase when the Council receives contributions for which donor-imposed restrictions exist, which limit the Council s use of an asset for its economic benefits and neither expire with the passage of time nor can be removed by the Council meeting certain requirements. Revenues are reported as increases in unrestricted net assets unless use of the related assets is limited by restrictions imposed by donors. When donor restrictions expire, temporarily restricted net assets are reclassified to unrestricted net assets and are reported in the statement of activities as assets released from restriction. If a restriction is fulfilled in the same time period in which the contribution is received, the contribution is reported as unrestricted. Expenses are reported as decreases in unrestricted net assets. Gains and losses on investments and other assets or liabilities are reported as increases or decreases in unrestricted net assets unless their use is restricted by explicit donor restriction or by law. The Council reports gifts of land, buildings, and equipment as unrestricted support unless explicit donor stipulations specify how the donated assets must be used. Gifts of long-lived assets with explicit restrictions that specify how the assets are to be used and gifts of cash or other assets that must be used to acquire long-lived assets are reported as restricted support. Absent explicit donor stipulations about how those long-lived assets must be maintained, the Council reports expirations of donor restrictions when the donated or acquired long-lived assets are placed in service. Fair Value of Financial Instruments - In September 2006, the Financial Accounting Standards Board ( FASB ) issued guidance related to fair value measurements. The guidance establishes a framework for measuring fair value and expands related disclosures. To increase consistency and comparability in fair value measurements, the framework requires fair value to be determined based on the exchange price that would be received for an asset or paid to transfer a liability (exit price) in the principal or most advantageous market for the asset or liability in an orderly transaction between market participants. The guidance uses a three-level valuation hierarchy based on observable and non-observable inputs. Observable inputs consist of data obtained from independent sources. Non-observable inputs reflect market assumptions. These two types of inputs are used to create the fair value hierarchy, giving preference to observable inputs. Financial assets and liabilities classified as Level 1 have fair values based on unadjusted market prices quoted for identical instruments in active markets. Financial assets and liabilities classified as Level 2 have fair values based on prices quoted for similar instruments in active markets, prices quoted for identical or similar instruments in inactive markets, and valuations derived from models whose inputs are observable. Financial assets and liabilities classified as Level 3 have fair values based on value drivers that are unobservable. Financial instruments not reflected at fair value on a recurring basis include cash, short-term investments, receivables, accounts payable, and accrued liabilities. The carrying amount of these financial instruments approximates fair value

13 Note 1 - Continued Cash and Cash Equivalents - Cash and cash equivalents consists of deposits with financial institutions, which at times exceeds federally insured limits. Short-Term Investments - Short-term investments consist of investments directed by the Council that have an original maturity of less than 90 days. Investments - Investments in securities with quoted market values are carried at fair value using Level 1 inputs. Accordingly, unrealized gains or losses due to fluctuations in the fair value are reflected in the statement of activities. The Council pools the investments of each of the funds to obtain investment flexibility with a primary goal of providing safety of principal with maximum current income to assist in the operations of the Council s activities. In addition, a secondary goal is capital appreciation to offset the effects of inflation. Realized gains and losses are determined based on the specific identification method. Interfund Loans - Interfund loans result from the Operating Fund making advances of cash to the Capital Fund to provide funds for camp maintenance expenditures and purchases of fixed assets and from the Endowment Fund to the Operating Fund to repay an existing bank note (See Note 8). Merchandise Inventory - Inventory consist of items for sale through the camp stores of the Council. They are stated at the lower of cost (first-in, first-out basis) or market. Land, Buildings, and Equipment - Land, buildings, and equipment are recorded at cost, if purchased, or at fair value, if donated, if the value exceeds the Council s capitalization threshold of $1,000. Depreciation is computed using the straight-line method based upon estimated useful lives of ten to twenty years for buildings and three to ten years for equipment. Contributed Land - Contributed land, whether held for resale or development, is recorded at the lesser of fair value at the date of the gift or the property s current fair value. Donated Materials and Services - Donated materials and services which meet the criteria for recognition are reflected as other contributions and expenses in the accompanying financial statements to the extent fair value is objectively determinable. The value of materials and services donated in 2011 and 2010 were nominal. Some members of the Council have donated significant amounts of time to the Council to further the Council s programs and objectives. No amounts have been included in the financial statements for donated member volunteer services since they did not meet the criteria for recognition. Income Taxes - The Council and the Foundation are exempt from federal income taxes under Section 501(c)(3) of the Internal Revenue Code as charitable organizations whereby only unrelated business income, as defined by Section 509(a)(1) of the Code, is subject to federal income tax. The Council and the Foundation have no unrelated business income. Accordingly, no provision for income taxes has been recorded

14 Note 1 - Continued The Council and Foundation are subject to income tax examinations by the U.S. government for the current year and certain prior years based on the applicable laws and regulations of each jurisdiction. The Council s and Foundation s informational returns for the years 2008, 2009, and 2010 are still open for review. The Council and Foundation recognize the financial statement effects of a tax position when it is more likely than not, based on technical merits, that the position will be sustained upon examination. The Council and Foundation do not believe there are any material uncertain tax positions and, accordingly, have not recognized any liability for unrecognized tax benefits. For the years ended December 31, 2011 and 2010, there were no interest or penalties recorded or included in the consolidated financial statements. Statement of Functional Expenses - The costs of providing the various programs and other activities have been summarized on a functional basis in the statements of activities. Accordingly, certain costs have been allocated among the programs and supporting services based on the benefits derived. Administrative expenses are allocated between programs and supporting services based on personnel time studies performed periodically throughout the year, in accordance with the guidelines provided by the National Council. Direct costs are assigned to the respective programs as they are incurred. Use of Estimates - The preparation of financial statements in conformity with GAAP requires management to make estimates and assumptions that affect the amounts reported in the financial statements and accompanying notes. Actual results could differ from those estimates. Significant estimates include collectability of pledges and accounts receivable, discounts on multi-year pledges, contributed non-cash assets, contributed land held for sale, functional allocation of expenses, and useful lives of fixed assets. Reclassifications - Certain reclassifications have been made to the 2010 financial statements to conform to the 2011 presentation. Such reclassifications had no effect on the change in net assets or net asset balances as previously reported. Subsequent Events - The Council has evaluated subsequent events through May 9, 2012, the date on which the financial statements were available to be issued. Note 2 - Capital and Endowment Campaign During 2007, the Council s Board approved a campaign which will run for a minimum of 20 months and which will target raising $12 million for capital improvements and $8 million for the endowment fund. As of December 31, 2011 the Council has received donations in excess of $7.4 million for the capital improvement campaign, construction of projects totaling $1.4 million were placed in service in 2011, and several other projects were in progress at year end. Note 3 - Accounts, Grants and Pledges Receivable Operating Fund - The Operating Fund had accounts, grants and pledges receivable of $350,889 and $321,062 due within one year, and $42,998 and $57,997 due in more than one year at December 31, 2011 and 2010, respectively. Accounts, grants and pledges receivable are stated at unpaid balances, less an allowance for doubtful accounts. The Council provides for losses on uncollectible pledges on a percentage basis. It is the Council s policy to writeoff uncollectible receivables when management determines the receivable will not be collected

15 Note 4 - Assets Designated or Restricted for Improvement of Long-Term Assets Assets designated for the improvement of long-term assets consist of the following as of December 31: Cash $ 935,272 $ 1,195,056 Pledges receivable 5,009,500 $ 5,944,772 $ 1,195,056 A pledge from a Board member amounted to 93% of total outstanding pledges receivable and 67% of contribution revenue as of and for the year ended December 31, The entire pledge receivable was collected from this donor in early Note 5 - Investments The following schedule summarizes the cost and market values of investments by fund: December 31, Cost Market Value Cost Market Value Operating fund $ 217,770 $ 217,770 $ 317,704 $ 317,704 Endowment fund 13,309,645 14,187,340 12,514,500 14,584,890 $ 13,527,415 $ 14,405,110 $ 12,832,204 $ 14,902,594 Investments (including short-term investments) are comprised of the following: December 31, Cost Market Value Cost Market Value Money market funds $ 2,329,022 $ 2,239,022 $ 997,710 $ 997,710 Debt securities 4,045,864 4,031,504 4,237,037 4,276,277 Equity securities 7,242,529 8,134,584 7,597,457 9,628,607 $ 13,617,415 $ 14,405,110 $ 12,832,204 $ 14,902,594 Valuation Techniques - Financial assets and liabilities valued using Level 1 inputs are based on unadjusted quoted market prices within active markets. Financial assets and liabilities valued using Level 2 inputs are based primarily on quoted prices for similar assets or liabilities in active or inactive markets. Financial assets and liabilities using Level 3 inputs were primarily valued using management s assumptions about the assumptions market participants would utilize in pricing the asset or liability. Valuation techniques utilized to determine fair value are consistently applied

16 Note 5 - Continued Following is a description of the valuation methodologies used for assets measured at fair value. There have been no changes in the methodologies used at December 31, 2011 and Interest-Bearing Cash - Includes money market funds valued at cost plus accrued interest, which approximates fair value. Mutual Funds - Valued at market prices quoted in active markets, which represent the net asset value (NAV) of shares held by the Council at year-end. Comingled Funds - Valued using the NAV provided by the fund s manager. The NAV is based on the fair value of the underlying assets owned by the fund, minus its liabilities, and then divided by the number of units outstanding at the valuation date. The fund is traded on a private market that is not active; however, the unit price is based on observable market data of the fund s underlying assets. Marketable Equity and Debt Securities - Valued at the closing price reported on the active market on which the securities are traded. Fair Values Measured on a Recurring Basis - Fair values of assets measured on a recurring basis at December 31, 2011 and 2010, were as follows: Fair Value Measurements at December 31, 2011 Level 1 Level 2 Level 3 Total Money market funds $ 2,239,022 $ - $ - $ 2,239,022 Debt securities- Investment grade taxable 3,670,153 3,670,153 Global high yield taxable 361, ,351 Marketable securities- Equities: US Large Cap 3,984,740 3,984,740 US Mid Cap 1,328,301 1,328,301 US Small cap 591, ,410 International Developed 936, ,996 Emerging Markets 718, ,665 Public REITs 574, ,472 Total at December 31, 2011 $ 10,373,606 $ 4,031,504 $ - $ 14,405,

17 Note 5 - Continued Fair Value Measurements at December 31, 2010 Level 1 Level 2 Level 3 Total Money market funds $ 997,710 $ - $ - $ 997,710 Debt securities- Investment grade taxable 3,691,340 3,691,340 International developed bonds 210, ,532 Global high yield taxable 374, ,405 Marketable securities- Equities: US Large Cap 4,979,124 4,979,124 US Mid Cap 1,614,652 1,614,652 US Small cap 582, ,869 International Developed 1,300,265 1,300,265 Emerging Markets 836, ,853 Public REITs 314, ,844 Total at December 31, 2010 $ 10,626,317 $ 4,276,277 $ - $ 14,902,594 The following schedule summarizes the activity in each fund for 2011: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Operating Fund $ 317,704 $ - $ (98,918) $ (1,016) $ 217,770 Endowment Fund 14,584, ,000 (659,514) (88,036) 14,187,340 $ 14,902,594 $ 350,000 $ (758,432) $ (89,052) $ 14,405,110 The following schedule summarizes the activity in each fund for 2010: Beginning Distributions Investment Ending Balance Contributions and Other Return Balance Operating Fund $ 454,924 $ - $ (136,771) $ (449) $ 317,704 Endowment Fund 14,153, ,881 (1,340,923) 1,598,964 14,584,890 $ 14,608,892 $ 172,881 $ (1,477,694) $ 1,598,515 $ 14,902,594 Included in the investment funds above at December 31, 2011 and 2010, is $57,805 and $148,717, respectively, of Council-directed short-term investments. The Council has a (total return) spending policy which has been approved by the Board which currently provides that the operating fund receive and recognize investment earnings originating from the endowment fund. For the years 2011 and 2010, the Board-approved spending policy is 4.5% of the average market value over the past three years

18 Note 5 - Continued The following schedule summarizes the investment return and classification in the statement of activities: Dividends and interest on long-term investments $ 481,712 $ 411,239 Net realized and unrealized (losses) gains (555,247) 1,187,276 Return on long-term investments (73,535) 1,598,515 Interest on short-term investments and cash deposits 1,178 12,646 Total return on investments (72,357) 1,611,161 Investment return designated for current operations (667,433) (613,366) Investment Return in Excess of Amounts Designated for Current Operations $ (739,790) $ 997,795 Investment expenses for 2011 and 2010 were $64,260 and $63,849, respectively. Note 6 - Land, Buildings, Equipment, and Construction in Progress Land, buildings, equipment, and construction in progress are as follows for December 31: Buildings and improvements $ 12,837,221 $ 13,143,812 Equipment 884,232 1,729,095 Less accumulated depreciation (7,162,028) (8,108,355) 6,559,425 6,764,552 Construction in progress 415, ,563 Land 1,928,922 1,928,922 $ 8,903,807 $ 8,915,037 Note 7 - Perpetual Trusts The Council is named as a 15% beneficiary of a trust held for the benefit of local non-profit agencies and a sole beneficiary of a trust held for its benefit. The trusts, which are held in perpetuity, are administered by financial institutions and provide for at least annual earnings distributions to the Council. The earnings are available for general operating purposes. The Council s interests in the trust agreements are included in permanently restricted net assets. The Council s interests in gains and losses in the trust value are recognized in the statement of activities as permanently restricted activities

19 Note 7 - Continued Fair values of the Council s share of investment securities held by the trust measured on a recurring basis at December 31, 2011 and 2010, were $461,427 and $497,103, respectively. A reconciliation of the beginning and ending balances for fair value measurements made using significant unobservable inputs (Level 3) for perpetual trusts is as follows: Beginning balance $ 497,103 $ 453,103 Investment return (24,700) 56,112 Distributions (10,976) (12,112) Ending Balance $ 461,427 $ 497,103 Note 8 - Interfund Promissory Note To partially fund the repayment of the Bank note, In January 2010 the Council entered into a promissory note between its operating fund payable to the endowment fund for $633,746 payable in equal monthly payments over ten years plus interest at 6.5% per year on the unpaid balance. The loan had an unpaid balance of $541,833 at the end of 2011 and is shown on the balance sheet as inter-fund promissory note in the operating and endowment funds. All scheduled payments were made in 2011 and The Council made an additional $100,000 payment to reduce principal in April Note 9 - Boy Scouts of America Store Revenue The National Council is responsible for managing the Boy Scouts of America stores. Under this agreement, the National Council remits 8% of store revenues to the Council for use of its facilities plus an additional 5% of store revenues on sales in excess of $750,000 in a calendar year. This agreement was extended through June Revenue received from the National Council was $143,684 and $141,933 for 2011 and 2010, respectively. Note 10 - Retirement Plans The Boy Scouts of America has a defined benefit multi-employer plan, administered by the National Council, which covers substantially all full-time employees of the national office and the local councils, including the Council. The plan name is the Boy Scouts of America Master Pension Trust Boy Scouts of America Retirement Plan for Employees and covers all employees who have completed one year of service and who have agreed to make contributions. Eligible employees contribute 2% of compensation, and the Council contributes an additional 6.75% to the plan. The Council s policy is to fund accrued pension costs when incurred. The Council s pension expense, net of contributions made by employees, was $144,699 and $113,475 for 2011 and 2010, respectively, which approximated the current service cost. Because the Council participates in the plan with the Boy Scouts of America and other local councils, specific identification of the Council s portion of net plan assets or the actuarial present value of accumulated plan benefits is not determined

20 Note 10 - Continued Additionally, the Council has a 403(b) defined contribution retirement plan available to all employees. Employees may voluntarily contribute a portion of their compensation to the plan subject to limits set by the federal tax code. The Council contributes to the plan an amount equal to 50% of the first 6% of compensation contributed by eligible employees. Employees are eligible for Council contributions upon completing one year and one thousand hours of service. The Council s contributions under the plan are fully vested with the employee after five years of service. Defined contribution retirement plan expense amounted to $52,122 and $41,353 for 2011 and 2010, respectively. It is the policy of the Council to fund retirement costs accrued currently. Note 11 - Temporarily Restricted Net Assets Temporarily restricted net assets are available for the following purposes or periods: December 31, Purchase/maintenance of land and fixed assets $ 5,948,680 $ 1,202,186 Unappropriated earnings from permanently restricted net assets 1,207,224 1,405,463 Time restricted for future periods 180, ,489 $ 7,336,416 $ 2,878,138 Note 12 - Permanently Restricted Net Assets Permanently restricted net assets are restricted to investment in perpetuity, the income from which is available to support: December 31, General operations of the Council $ 3,893,519 $ 3,895,356 Scoutreach 1,000,000 1,000,000 Camp operations of the Council 3,090 3,090 Camp maintenance 74,316 74,316 $ 4,970,925 $ 4,972,

21 Note 13 - Endowment The Council s endowment consists of both endowment funds restricted by donors and funds designated by the Board of Directors to function as endowments (quasi-endowments). Net assets associated with endowment funds, including quasi-endowments, are classified and reported based on the existence or absence of restrictions imposed by donors. Interpretation of Relevant Law - The Council s Board of Directors has interpreted the Washington State Prudent Management of Institutional Funds Act (PMIFA) 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 Organization 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 Council in a manner consistent with the standard of prudence prescribed by PMIFA. In accordance with PMIFA, the Council considers the following factors in making a determination to appropriate or accumulate donor-restricted endowment funds: - The duration and preservation of the fund; - The purposes of the Council and the donor-restricted endowment fund; - General economic conditions; - The possible effect of inflation and deflation; - The expected total return from income and the appreciation of investment; - Other resources of the Council; and - The investment policies of the Council. As of December 31, 2011 and 2010, endowment net assets consisted of the following: Temporarily Permanently Unrestricted Restricted Restricted 2011 Total Donor restricted endowment funds $ - $ 1,207,223 $ 4,970,925 $ 6,178,148 Board designated quasiendowment fund 10,015,789 10,015,789 Endowment Net Assets $ 10,015,789 $ 1,207,223 $ 4,970,925 $ 16,193,

22 Note 13 - Continued Temporarily Permanently Unrestricted Restricted Restricted 2010 Total Donor restricted endowment funds $ - $ 1,405,462 $ 4,972,762 $ 6,378,224 Board designated quasiendowment fund 10,951,275 10,951,275 Endowment Net Assets $ 10,951,275 $ 1,405,462 $ 4,972,762 $ 17,329,499 Changes to endowment net assets for 2011 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2010 $ 10,951,275 $ 1,405,462 $ 4,972,762 $ 17,329,499 Endowment investment return- Interest and dividends, net of fees , ,637 Realized and unrealized gains and losses (936,390) 43,461 (35,676) (928,605) Total endowment investment return (935,486) 469,194 (35,676) (501,968) Contributions 33,839 33,839 Appropriation of assets for expenditure (667,433) (667,433) Endowment Net Assets, December 31, 2011 $ 10,015,789 $ 1,207,223 $ 4,970,925 $ 16,193,

23 Note 13 - Continued Changes to endowment net assets for 2010 are as follows: Temporarily Permanently Unrestricted Restricted Restricted Total Endowment net assets, December 31, 2009 $ 10,556,469 $ 1,100,362 $ 4,751,544 $ 16,408,375 Endowment investment return- Interest and dividends, net of fees , ,462 Realized and unrealized gains and losses 388, ,514 44,000 1,009,810 Total endowment investment return 388, ,314 44,000 1,357,272 Contributions 177, ,218 Appropriation of assets for expenditure (613,366) (613,366) Reclass to recover endowment with prior deficiencies 5,848 (5,848) - Endowment Net Assets, December 31, 2010 $ 10,951,275 $ 1,405,462 $ 4,972,762 $ 17,329,499 Funds 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 PMIFA requires the Council to retain as a fund of perpetual duration. Deficiencies of this nature that are reported in unrestricted net assets were $132,721 and $129,913 as of December 31, 2011 and 2010, respectively. This deficiency resulted from unfavorable market fluctuations that occurred shortly after the investment of new permanently restricted contributions. Subsequent gains that restored the fair value of the assets of the endowment fund to the required level were classified as an increase in unrestricted net assets. Return Objectives and Risk Parameters - The Council 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 Council must hold in perpetuity or for a donor-specified period as well as board-designated funds. Under this policy, as approved by the Board, the endowment assets are invested in a manner that is intended to produce results that are comparable to the price and yield results of a weighted average of widely followed market indexes matching the asset allocation of the endowment investments while assuming a moderate level of investment risk. The Council expects its endowment funds, over time, to provide an average rate of return of approximately 8 percent annually. Actual returns in any given year may vary from this amount

24 Note 13 - Continued Strategies Employed for Achieving Objectives - To satisfy the long-term rate-of-return objectives, the Council 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 Council targets a diversified asset allocation that places a greater emphasis on equity-based investments to achieve the long-term return objectives within prudent risk constraints. Spending Policy and How the Investment Objectives Relate to Spending Policy - The Council has a policy of appropriating for distribution each year 4.5 percent in 2011 and 2010 of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In establishing this policy, the Council considered the long-term expected return on the endowment. Accordingly, over the long term, the Council expects the current spending policy to allow the endowment to grow at an average of 3.5 percent annually. This is consistent with the Council s objective to maintain the purchasing power of the endowment assets held in perpetuity or for a specified term as well as to provide additional real growth through new gifts and investment return. Transfers - The Council has a policy of appropriating for distribution each year 4.5 percent of the endowment fund s average fair value over the prior 12 quarters ending one year prior to the year in which the distribution is planned. In the event investment income is insufficient to meet the amount required by the spending policy, the difference is recorded as a transfer between funds in the statement of activities between the beginning net assets and the ending net assets. Note 14 - Commitments and Contingencies Operating Leases - A summary of annual non-cancelable minimum commitments under equipment leases is as follows: For the Year Ending December 31, 2012 $ 46, , , ,550 $ 159,060 Rental expense incurred amounted to $92,683 and $81,745 in 2011 and 2010, respectively. The Council also leases space from a government agency for one of the Council s camps. The rent is set at the beginning of each year based on the fair market value of the land and a percentage of the previous year s retail sales at the camp store. Rental payments are in the form of cash payments, and in-kind labor to maintain the property and for providing youth programs at the facility. Rental expense for the camp for 2011 and 2010 was $5,025 and $4,875, respectively

25 Note 14 - Continued Legal Claims - From time to time, the Council is involved in claims, proceedings and litigation arising in its operations. The Council carries adequate insurance coverage relative to any such incidents and does not believe that any such claims, proceedings or litigation either alone or in the aggregate, will have a material effect on the Council s financial position or results of operations. Note 15 - Land Held for Sale The Council holds certain contributed land with the intent to sell it. Due to a decline in the real estate market and economy the value of the land was written down by $144,240 in 2010, which is reflected in the statement of activities as an impairment loss on land held for sale. During 2011, the Council sold land held for sale recorded at $750,000. The contract sales price was $450,000. Cost related to the sale totaled $37,680 resulting in a loss of $337,680, which is included in endowment fund investment losses on the statement of changes in net assets. Note 16 - Related Party Transactions During 2010, the Council entered into a contract with a Board member s company to renovate a home which had been bequeathed to the Council. Renovation costs totaled $129,277 during 2010 and 2009 and these costs were reimbursed to the Council. The home was sold in A new Chief Executive Officer was hired in 2010 and provided with housing assistance in the form of an unsecured, non-interest bearing loan of $70,000. In each of the next five years assuming continued employment with the Council, $14,000 of the loan will be forgiven by the Council on the anniversary of the Chief Executive Officer s hire date. Should the Chief Executive Officer terminate employment, any unforgiven loan balance would be immediately due to the Council. The remaining balance due was $56,000 at December 31, Note 17 - Popcorn Sales For the years ended December 31, 2011 and 2010, popcorn sales were as follows: Gross product sales $ 1,584,508 $ 1,654,176 Cost of goods sold (487,887) (478,049) Commissions paid to units (525,330) (607,677) Net Product Sales $ 571,291 $ 568,