SUMMER INSTITUTE OF LINGUISTICS, INC.

Transcription

1 SUMMER INSTITUTE OF LINGUISTICS, INC. Consolidated Financial Statements With Independent Auditors' Report

2 Table of Contents DcYZeZcYZci <jy^idghq MZedgi 1 Financial Statements Consolidated Statements of Financial Position 3 Consolidated Statement of Activities Consolidated Statement of Activities Consolidated Statements of Cash Flows 6 7 Supplementary Data DcYZeZcYZci <jy^idghq MZedgi dc NjeeaZbZciVgn?ViV 22 NX]ZYjaZ d[ 23 Page

3 ,/()1)/()/4 &5(,4023L 2)1024 Audit Committee of the Board of Directors Summer Institute of Linguistics, Inc. Dallas, Texas We have audited the accompanying consolidated financial statements of Summer Institute of Linguistics, Inc., which comprise the consolidated statements of financial position as of, and the related consolidated statements of activities and cash flows for the years then ended, and the related notes to the consolidated financial statements. Management Ls 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 L 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 VjY^idgqh 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 Zci^inqh 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 Zci^inqh 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. -2- %$$$!.2?06!.9034"!-=3<2!%&(,9082>362"!./!*)$(% +%*#'&+#)(%$ =;2#175

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5 Consolidated Statements of Financial Position (in thousands of dollars) September 30, , restated ASSETS: Cash $ 9,201 $ 16,814 Investments (Note 3) 30,481 22,066 Accounts receivable 1,323 1,831 Notes receivable (Note 4) 1, Amounts due from related entities (Note 7) 1,180 1,187 Inventory (Note 2) 2,339 2,570 Property and equipment&net of accumulated depreciation (Note 5) 39,195 41,218 Other assets (Note 2) 2,810 3,264 Total Assets $ 87,529 $ 89,184 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 4,588 $ 4,864 Amounts due to staff and affiliated entities (Note 7) 6,489 10,714 Other liabilities (Note 2) Total liabilities 12,057 16,544 Net assets: ^c egdezgin VcY Zfj^ebZcipcZi 38,215 40,252 Board designated (Note 8) 10,744 10,640 Undesignated 17,911 13,080 Total unrestricted 66,870 63,972 Temporarily restricted (Note 8) 8,339 8,406 Permanently restricted (Note 9) Total net assets 75,472 72,640 Total Liabilities and Net Assets $ 87,529 $ 89,184 See notes to consolidated financial statements -3-

6 Consolidated Statement of Activities (in thousands of dollars) Year Ended September 30, 2015 Temporarily Permanently Unrestricted Restricted Restricted Total OPERATING SUPPORT AND REVENUE: Support from affiliates (Note 7) $ 93,595 $ 19,671 $ - $ 113,266 Contributions 1,504 2, ,091 Donated goods and services 1, ,404 Program service revenue 1, ,112 Sales and service income, net (Note 2) Other Net assets released from restrictions: Satisfaction of program restrictions 22,477 (22,477) - - Total operating support and revenue 120,199 (72) 1 120,128 OPERATING EXPENSES: Program services: Language development and training 111, ,601 Supporting services: General and administrative 8, ,574 Fund-raising Total supporting services 9, ,515 Total operating expenses 121, ,116 Change in net assets from operating activities (917) (72) 1 (988) NON-OPERATING ACTIVITES Interest and dividends (Note3) ,004 Gain on preferred debt (Note 2) 1, ,326 Net realized/unrealized loss on investments (Note 3) (40) - - (40) Gain on sale of fixed assets 1, ,530 Change in net assets from non-operating activities 3, ,820 Change in Net Assets 2,898 (67) 1 2,832 Net Assets, Beginning of Year 63,972 8, ,640 Net Assets, End of Year $ 66,870 $ 8,339 $ 263 $ 75,472 See notes to consolidated financial statements -4-

7 Consolidated Statement of Activities (in thousands of dollars) Year Ended September 30, 2014, restated Temporarily Permanently Unrestricted Restricted Restricted Total OPERATING SUPPORT AND REVENUE: Support from affiliates (Note 7) $ 95,639 $ 20,278 $ - $ 115,917 Contributions 1,444 2, ,078 Donated goods and services 1, ,083 Program service revenue Sales and service income, net (Note 2) Other Net assets released from restrictions: Satisfaction of program restrictions 27,552 (27,486) (66) - Total operating support and revenue 126,305 (4,568) (65) 121,672 OPERATING EXPENSES: Program services: Language development and training 116, ,463 Supporting services: General and administrative 8, ,449 Fund-raising Total supporting services 8, ,975 Total operating expenses 125, ,438 Change in net assets from operating activities 867 (4,568) (65) (3,766) NON-OPERATING ACTIVITES Interest and dividends (Note 3) Loss on preferred debt (Note 2) (4,379) - - (4,379) Net realized/unrealized loss on investments (Note 3) (413) - - (413) Gain on sale of fixed assets Change in net assets from non-operating activities (3,676) 6 - (3,670) Change in Net Assets (2,809) (4,562) (65) (7,436) Net Assets, Beginning of Year 66,781 12, ,076 Net Assets, End of Year $ 63,972 $ 8,406 $ 262 $ 72,640 See notes to consolidated financial statements -5-

8 Consolidated Statements of Cash Flows (in thousands of dollars) Year Ended September 30, , restated CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ 2,832 $ (7,436) Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 4,001 3,986 Gain on sale of fixed assets (1,530) (288) Net realized loss on sale of investments 1 25 Net unrealized loss on investments (Gain) loss on preferred debt (1,326) 4,379 Noncash contributions of property and equipment (42) - Contributions restricted for capital expenditures (277) (352) Contributions restricted for endowment (1) (1) Changes in assets and liabilities: Accounts receivable 508 (400) Amounts due from staff and affiliated entities Inventory 231 (503) Other assets 1, Accounts payable and accrued expenses (276) 341 Amounts due to staff and affiliated entities (4,225) (1,705) Net Cash Provided (Used) by Operating Activities 1,722 (965) CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from sale of investments Purchase of investments (8,455) (534) Purchase of property and equipment (2,552) (2,261) Proceeds from sale of property and equipment 2,146 1,212 Issuance of notes receivable (1,000) - Payments on notes receivable Net Cash Used by Investing Activities (9,627) (1,438) CASH FLOWS FROM FINANCING ACTIVITIES: Other liabilities 14 (28) Contributions restricted for capital expenditures Contributions restricted for endowment 1 1 Net Cash Provided by Financing Activities Net Change in Cash (7,613) (2,078) Cash, Beginning of Year 16,814 18,892 Cash, End of Year $ 9,201 $ 16,814 See notes to consolidated financial statements -6-

9 1. NATURE OF ORGANIZATION: The Summer Institute of Linguistics, Inc. (SIL) is a Texas non-profit educational corporation. SIL seeks to carry out, and to encourage and train others to carry out, the following activities with the assistance and cooperation of governmental and private agencies engaged in similar activities: ' To train linguists. ' To sponsor such linguists in their study of languages, especially less known and unwritten languages. ' To make available the data gathered by linguists through publication or other means. ' To publish resource materials for persons engaged in linguistic research. ' To prepare literature, both by original composition and by translation into the languages studied. ' To promote literacy among the people who speak the languages studied. ' To train people to promote literacy, and prepare literature in their own languages. SIL is exempt from income tax under Section 501(c)(3) of the U.S. Internal Revenue Code (Code) and comparable state law. It is classified as a publicly supported organization, which is not a private foundation under Section 509(a)(1) of the Code. NDGqh work is carried out primarily by over 4,000 individuals, many of whom are recruited and supported by organizations which participate in Wycliffe Global Alliance (The Alliance). The organizations contribute to the holistic transformation of all peoples through Bible translation and compassionate services. This support is NDGqh primary source of revenue. The Alliance is not included in these consolidated financial statements because they are financially and administratively independent of SIL. 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES: PRINCIPLES OF CONSOLIDATION The consolidated financial statements of SIL include SIL, its field offices, and JAARS, Inc. (JAARS), because they are under the control of SIL. Significant transactions and balances between the organizations and offices have been eliminated for consolidated financial statement purposes. JAARS, Inc. exists to make Bible translation and language development possible, especially in the most remote and difficult places on earth, by enabling locally-appropriate and sustainable solutions in transportation, technology, media and training. -7-

10 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: PRINCIPLES OF CONSOLIDATION, continued These consolidated financial statements include the activities and balances of SIL field offices located overseas. As of September 30, 2015, assets held overseas, including cash, accounts receivable, inventory and other assets, totaled $9,296,000 and property and equipment, net of accumulated depreciation, amounted to $28,077,000. As of September 30, 2014, assets held overseas, including cash, accounts receivable, inventory and other assets, totaled $10,209,000 and property and equipment, net of accumulated depreciation, amounted to $29,757,000. Related entities, not included in these consolidated financial statements due to their financial and administrative independence, are listed below: ' Wycliffe Bible Translators, Inc. (Wycliffe USA) is an interdenominational, nonprofit, missionary organization with the goal of forwarding, in every way possible, the translation of the Word of God into all those languages of the world where it is needed. Wycliffe USA controls and has an economic interest in Wycliffe Foundation (WF). ' ' Wycliffe Bible Translators International (dba Wycliffe Global Alliance) (The Alliance) promotes the efforts of the Wycliffe Global Alliance Organizations as they engage the worldwide Church in providing resources for Bible translation and related ministry around the globe. The Seed Company (TSC), a California religious non-profit corporation, works with local translators and international prayer organizations as well as financial and prayer partners in a concentrated effort to make God's Word readily available for faster church planting, effective discipleship and greater community transformation. These partnerships ensure the Scriptures are translated accurately and provided in the most accessible forms for maximum impact in the local communities. ' RIA Charitable Investments Inc. (RIACII) exists to provide a pooled investment opportunity for Wycliffe Global Alliance organizations. ' Graduate Institute of Applied Linguistics (GIAL) is a graduate professional institute that provides training and research opportunities and equips students with the skills to train and serve others. ' SIL LEAD, Inc. exists to serve minority language communities and support the purposes and ends of SIL. It does so through advocacy, educational programs, development programs and linking communities with humanitarian and other multi-sectoral forms of assistance. BASIS OF ACCOUNTING The consolidated financial statements of SIL have been prepared on the accrual basis of accounting in accordance with accounting principles generally accepted in the United States of America. ESTIMATES The preparation of consolidated financial statements in accordance with accounting principles generally accepted in the United States of America requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities, the disclosure of contingent assets and liabilities at the date of the consolidated financial statements and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. -8-

11 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: CASH Cash consists primarily of checking accounts deposited with financial institutions. Deposits in excess of FDIC insurance limits (including cash held outside the U.S.) at, were approximately $8.5 million and $16.3 million, respectively. Due to the diverse locations and financial cycles of SIL, management does not believe there is significant unmitigated risk. SIL operates a system that facilitates the financial interaction between SIL and Wycliffe Global Alliance organizations. As part of that system, SIL holds deposits from these organizations, which are included in cash and amounts due to staff and affiliated entities, in the amounts of $2 million and $6.5 million at September 30, 2015 and 2014, respectively. INVESTMENTS Investments in money market funds are reported at fair market value. The investment in captive insurance company is accounted for using the equity method. Other investments are carried at cost on the consolidated statements of financial position. Realized and unrealized gains and losses are included in non-operating activities in the consolidated statements of activities. Investment income consist primarily of interest. RIA Charitable Investment Funds, Inc. (RIACII) operates as an investment pool available to certain Wycliffe Global Alliance organizations. Funds deposited with RIACII are invested in a variety of fixed income securities including U.S. Treasury issues, corporate bonds and mortgage backed bonds, which borrow and pay in U.S. dollars. RIACII carries two investment pools. The short term portfolio pays interest at a stated rate as determined from time to time by the board of directors (2.25% and 2.75% as of, respectively) to participants in proportion to the amount they have on deposit in the pool. The short term portfolio is carried at the value of actual deposits made plus accrued interest. The long term portfolio does not pay out interest, but allocates all net income or loss to the participants deposit in the pool. The long term pool also invests in equity securities, mutual funds, and exchange traded funds. Interest income and dividends recorded in the consolidated statements of activities for 2015 and 2014 was approximately $504,000 and $534,000, respectively. As of, RIACII reported total assets with a fair value of approximately $88,058,000 and $75,362,000, respectively, of which SIL holds approximately $27,727,000 (32%) and $19,723,000 (26%), respectively. Credit risk is the failure of another party to perform in accordance with the contract terms. SIL is exposed to credit risk for the amount invested in the pool, which management believes is mitigated because the RIACII investment pool is only available to a small closed-group of affiliated entities with common missional purposes and RIACII has a limited scope of business as a supporting organization to the small closed-group of affiliated organizations. Dividend income recorded in the consolidated statements of activities for the years ended September 30, 2015 and 2014, was approximately $494,000 and $300,000, respectively. -9-

12 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ACCOUNTS RECEIVABLE Accounts receivable are primarily related to amounts due from mission organizations and other local organizations and individuals and an aircraft lease. Past collection experience has been that essentially 100% of receivables have been collected. Therefore, no allowance for doubtful accounts has been established. INVENTORY Inventory consists primarily of books, publications, construction materials, aviation and other parts, supplies and consumer goods that are held for sale. Inventory is stated at the lower of cost or market. Cost is determined using the weighted-average method, the retail method, or the first-in, first-out method, depending on the type of inventory. 54% and 64% of inventories are held at overseas locations as of September 30, 2015 and 2014, respectively. The organization classifies certain aviation parts and materials with other assets. These items are maintained for future use as replacement parts because there are limited supply sources for such parts. MUSEUMS AND COLLECTIONS JAARS established the Mexico Museum and the Museum of the Alphabet (Museums) on its campus. The collections of the Museums at JAARS, which were acquired through purchases and contributions since the dg\vc^ovi^dcqh inception, are not recognized as assets on the statements of financial position and, thus, are not reflected on the financial statements. Purchases of collection items are recorded as decreases in unrestricted net assets in the year in which the items are acquired or as temporarily or permanently restricted net assets if the assets used to purchase the items are restricted by donors. Proceeds for deaccessions or insurance recoveries are reflected as increases in the appropriate net asset classes. PROPERTY AND EQUIPMENT Property and equipment expenditures in excess of $1,000 to $5,000 are capitalized at cost. SIL allows its smaller offices to set a capitalization limit lower than $5,000 based on office size and expected impact of larger purchases on the local financial statements. Depreciation is provided using the straight-line method over the estimated useful lives of the depreciable assets as follows: Buildings Equipment Furniture & Fixtures 10 to 40 years 3 to 10 years 7 to 10 years -10-

13 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: OTHER ASSETS Other assets of $2,810,000 and $3,264,000 as of, respectively, consist of the following: Beneficial interest in split-interest agreements: At, the Wycliffe Foundation holds charitable gift annuities in the amount of $485,000 and $422,000 for JAARS, respectively. The amount represents the beneficial interest JAARS has in those charitable gift annuities. Preferred debt agreement: In 2011, Quest Aircraft Company (Quest), an airplane manufacturer, entered into a recapitalization and restructuring that resulted in previously recorded notes receivable and aircraft advances being converted into a preferred debt with Quest Aircraft Company. Since 2011 the preferred debt has been valued at cost plus accrued interest at an annual interest rate of 2.33% and redeemable through discounts on airplane purchases. JAARS received and SIL-Papua New Guinea placed a fleet of four Kodiak 100s in service from 2008 to 2013, realizing total purchase discounts of $1,214,000. During the years ended, an allowance for the accrued interest earned on the preferred debt was recorded in the amount of $0 and $418,000, respectively. On October 1, 2014, New Quest, manufacturer of the Kodiak 100, was restructured again with Old Quest moving from a capital investor into an equity position with New Quest. Going forward, preferred debt payoff to JAARS would no longer be in the form of aircraft purchase discounts but in the form of payments directly from Old Quest funded by dividend payments to Old Quest from New Quest. The structure of New Quest and the equity position of Old Quest made a full payoff of the preferred debt unlikely. The value of the preferred debt was reduced to $355,000 as of September 30, 2014, resulting in a loss on preferred debt of $4,379,000 during the year ended September 30, In fiscal year 2015, New Quest was sold. The sales agreement permitted JAARS to receive a portion of its entire preferred debt balance as payment in full. In April 2015, JAARS received $1,681,000 resulting in a gain on preferred debt of $1,326,000 during the year ended September 30, The balance of the preferred debt as of, were $0 and $355,000, respectively. Combining the activity of fiscal years 2014 and 2015 results in a final czi adhh d[ $2+/42+/// dc E<<MNq egz[zggzy YZWi edh^i^dc Vi LjZhi- Aviation parts held for internal use (rather than those held for sale, which are included in Inventory): $1,262,000 and $1,240,000 at, respectively. Prepaid expenses: $1,063,000 and $1,247,000 at, respectively. OTHER LIABILITIES Other liabilities consists primarily of Asset Retirement Obligations (ARO) for SIL and JAARS. As of September 30, 2015, the balances were $362,000 and $618,000, respectively, for SIL and JAARS. As of September 30, 2014, the balances were $348,000 and $618,000, respectively, for SIL and JAARS. The JAARS ARO is fully depreciated as of September 30, The remaining balance is other long-term deposits. -11-

14 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: NET ASSETS The net assets of SIL are classified into net asset categories according to externally (donor or legal) imposed restrictions as follows: Unrestricted net assets are those available for the general operations of SIL, funds designated for specific uses by the Board of Directors (including designations by the executive committees of overseas offices) and equity in property and equipment. Equity in property and equipment is reported net of related notes payable and asset retirement obligations. Temporarily restricted net assets include gifts for projects for which donor-imposed restrictions have not been met, but for which the ultimate purpose of the proceeds is not permanently restricted. Permanently restricted net assets include gifts that have been contributed by donors with stipulations that they be invested in perpetuity with the income generally restricted for specific programs. REVENUE Revenue is recognized when earned and support when contributions are made, which may be when cash is received, unconditional promises are made, or ownership of donated assets is transferred to the organization. SALES AND SERVICE INCOME SIL provides items for sales and services for use by staff whose work requires them to reside in remote locations and the local economy does not provide what is needed for either staff personal needs or work needs. This includes aviation services, housing and maintenance as well as more personal needs such as groceries or basic medical services. Sales and services income is presented net of expenses of $14,789,000 and $15,793,000 for the years ended, respectively. Since these sales and services are provided to assist our staff in accomplishing programs, there is no profit motive and these operations result in a very small net income margin which could easily slip into a loss position. In cases where staff used to provide these sales and services are staff assigned from Wycliffe Global Alliance organizations, the value of those staff are not included in the expenses netted against income, but are included in program services. See Note 7. DONATED GOODS AND SERVICES Donated goods and services are recorded at fair market value at the time of donation. Donated services are recognized as contributions if the services (a) create or enhance non-financial assets or (b) require specialized skills, are performed by people with those skills and would otherwise be purchased by SIL. Donated goods and services does not include the value of labor contributed by affiliates which is recorded at the cost recognized by the affiliates for the personnel providing those services and is included in Support from Affiliates as discussed in Note

15 2. SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES, continued: ALLOCATION OF EXPENSES The costs of providing program and supporting services are allocated and summarized on a functional basis in the consolidated statements of activities. All expenses are recorded when incurred in accordance with the accrual basis of accounting. FOREIGN CURRENCY TRANSLATION SIL has offices in over 40 countries. The U.S. Dollar is the functional currency throughout the organization. Transactions made in other currencies are translated into U.S. Dollars at an average exchange rate during the month of the transaction. For the year ending September 30, 2015, exchange gains were $25,000 and for the year ending September 30, 2014, exchange losses were $71,000. UNCERTAIN TAX POSITIONS The consolidated financial statement effects of a tax position taken or expected to be taken are recognized in the consolidated financial statements when it is more likely than not, based on the technical merits, that the position will be sustained upon examination. Interest and penalties, if any, are included in expenses in the consolidated statements of activities. As of September 30, 2015, SIL had no uncertain tax positions that qualify for recognition or disclosure in the consolidated financial statements. SIL files informational tax returns in the U.S. SIL is generally no longer subject to U.S. federal tax examinations by tax authorities for years before RECLASSIFICATIONS Certain amounts in the 2014 consolidated financial statements have been reclassified to conform to the 2015 presentation. 3. INVESTMENTS: SIL's investments consist of the following (in thousands): September 30, Investments held at fair value: Money market fund $ - $ 4 Investments held at other than fair value: Deposits with RIA Charitable Investments, Inc. 27,727 19,723 Investment in captive insurance company* 2,279 2,319 Certificates of deposit Other ,481 22, $ 30,481 $ 22,066

16 3. INVESTMENTS, continued: SIL's investments consist of the following (in thousands): September 30, Investments to be held in perpetuity $ 263 $ 262 Investments available for unrestricted and temporarily restricted purposes 30,218 21,804 $ 30,481 $ 22,066 *SIL invests along with several unrelated nonprofit organizations, in Stewardship Insurance, Ltd (Stewardship), a captive insurance company. As of September 30, 2015, NDGqh investment in Stewardship is $2,279,000 (cost basis $330,000) and represents 10% of Stewardship. As of September 30, 2014, NDGqh investment in Stewardship was $2,319,000 (cost basis $330,000) and represented 10% of Stewardship. Stewardship insures claims relating to ldg`zgqh compensation, general liability, auto liability, property and emergency medical evacuation. Claim experience is identified to each participating entity, and subsequent egzb^jbh VgZ bdy^[^zy WVhZY dc Vc Zci^inqh ZmeZg^ZcXZ- Investment income consists of the following (in thousands): Year Ended September 30, Interest and dividends $ 1,004 $ 834 Net realized/unrealized loss (1) (25) Loss on investment in captive insurance company (39) (388) $ 964 $

17 4. NOTES RECEIVABLE: Notes receivable consist of the following (in thousands): Secured note receivable for land, building and equipment sold in Kenya from SIL Educational Trust Registered Trustees of Nairobi, Kenya; principal and interest payments of $5,968 per month at an interest rate of 3%; loan was paid off in October Secured note receivable for land and buildings sold in USA from Grace Place Properties, Inc.; principal and interest of $970 per month at an interest rate of 3.75%; loan was paid off in January Unsecured line of credit with SIL LEAD for funding operations; principal and interest payments of $8,458 per month at an interest rate of 2.75%; balance was paid off in September Secured note receivable from Claver Florencio Acosta y Rodriguez for land and buildings sold in Peru ; note matures January 2016; balance of note was paid January September 30, $ - $ , PROPERTY AND EQUIPMENT: Property and equipment at September 30, 2015, consist of the following (in thousands): $ 1,000 $ 234 Domestic International Total Land and land improvements $ 2,040 $ 2,791 $ 4,831 Buildings 22,016 32,008 54,024 Furniture and equipment 7,995 4,751 12,746 Vehicles 257 3,310 3,567 Aircraft 2,862 9,066 11,928 Utilities ,541 52,440 87,981 Less accumulated depreciation (25,579) (25,066) (50,645) 9,962 27,374 37,336 Construction in progress 1, , $ 11,118 $ 28,077 $ 39,195

18 5. PROPERTY AND EQUIPMENT, continued: Property and equipment at September 30, 2014, consist of the following (in thousands): Domestic International Total Land and land improvements $ 2,040 $ 2,865 $ 4,905 Buildings 21,913 32,261 54,174 Furniture and equipment 8,117 4,725 12,842 Vehicles 269 3,326 3,595 Aircraft 2,483 8,796 11,279 Utilities ,193 52,492 87,685 Less accumulated depreciation (24,671) (23,457) (48,128) 10,522 29,035 39,557 Construction in progress ,661 $ 11,461 $ 29,757 $ 41,218 SIL believes the above assets are properly stated as of, respectively. However, the political situation in many countries is subject to rapid change which could adversely affect the realizable value of the assets. In addition, the carrying value of assets may not be representative of the amount that would be realized should the assets be sold. For both years ended, 40% of the international property and equipment is in Papua New Guinea and 10% is in Australia. 6. OPERATING LEASES: Many SIL offices lease property or have been granted the use of property by the local government. For most of those offices, the leases are on a month-to-month basis and the amounts are immaterial. Others have terms of one year or longer. In addition, JAARS has entered into several leases for equipment. Future minimum rental payments that are required under the annual or long-term leases are presented below (in thousands): Year Ending September 30, 2016 $ Thereafter $ 1,649

19 6. OPERATING LEASES, continued: Total rental expense for the years ending, were $2,046,000 and $2,062,000, respectively. 7. TRANSACTIONS WITH RELATED ENTITIES: SIL had investments with related entities as follows (in thousands): September 30, RIACII $ 27,727 $ 19,723 SIL had notes receivable with related entities as follows (in thousands): September 30, SIL LEAD $ - $ 100 SIL had amounts due from related entities as follows (in thousands): September 30, Staff $ 318 $ 472 Wycliffe Global Alliance organizations SIL LEAD 20 2 $ 1,180 $ 1,187 SIL had amounts due to related entities as follows (in thousands): September 30, Staff $ 3,780 $ 3,819 Wycliffe Global Alliance organizations Wycliffe Global Alliance organizations cash deposits 1,971 6,528 $ 6,489 $ 10,

20 7. TRANSACTIONS WITH RELATED ENTITIES, continued: SIL received support from and provided support and revenue to related entities as follows (in thousands): Year Ended September 30, Received support from Wycliffe Global Alliance organizations $ 113,266 $ 115,917 Provided support and revenue to Wycliffe Global Alliance organization $ 1,297 $ 1,295 Grant to SIL LEAD $ 120 $ 120 Of the total amounts received from Wycliffe Global Alliance organizations during the year ended September 30, 2015, $85,453,000 are non-cash contributions consisting of the value of labor of staff assigned to SIL and $601,000 of donated skilled volunteer labor. Of these amounts, $81,159,000 is included in program expenses and $4,895,000 is included in general and administrative expenses. Of the total amounts received from Wycliffe Global Alliance organizations during the year ended September 30, 2014, $88,347,000 are non-cash contributions consisting of the value of labor of staff assigned to SIL and $849,000 of donated skilled volunteer labor. Of these amounts, $82,964,000 is included in program expenses and $6,232,000 is included in general and administrative expenses. SIL LEAD has an unsecured revolving line of credit with SIL in the amount of $400,000, monthly payments of principal and interest vary based on outstanding balance, rate is determined at the date of the draw, no set maturity date. During the year ended September 30, 2015, there were no draws on the line of credit. 8. NET ASSETS: Board designated net assets consist of the following (in thousands): September 30, Repair/replacement funds $ 1,022 $ 2,983 Aviation overhaul funds 4,991 2,949 Stewardship Insurance, LTD. 2,279 2,319 International conference travel fund 1,071 1,169 Insurance reserves Language development/publishing Scholarships $ 10,744 $ 10,

21 8. NET ASSETS, continued: Temporarily restricted net assets consist of the following (in thousands): September 30, Language and literacy support projects $ 6,379 $ 6,768 Aviation and aircraft support projects 1, Beneficial interest in charitable gift annuities Strategic support initiative projects Logistical support projects $ 8,339 $ 8,406 Minority interest: SIL operates a school overseas in which partners hold a minority interest. SIL has a 66% interest in the school with minority interest of 34%. SIL's majority interest and the minority interest in the school are included in SIL's net assets and change in net assets as follows (in thousands): SIL Interest 66% Minority Interest 34% September 30, September 30, Beginning net assets $ 1,190 $ 1,227 $ 601 $ 621 Change in net assets (23) (38) (11) (19) Ending net assets $ 1,167 $ 1,189 $ 590 $ 602 As of, $7,800 and $7,700, are included in temporarily restricted net assets. 9. ENDOWMENT FUNDS: NDGqh endowment assets consist of two individual permanently restricted funds established for a variety of purposes. Net assets associated with endowment funds are classified and reported based on the existence or absence of donor-imposed restrictions. The disclosures required by the Reporting Endowment Funds topic of the FASB ASC have not been included in these consolidated financial statements due to immateriality. -19-

22 10. FAIR VALUE MEASUREMENTS: SIL follows the provisions of the Fair Value Measurements and Disclosure topic of the FASB ASC. These provisions define fair value, establish a framework for measuring fair value, and enhance disclosures about fair value measurements. Fair value is defined under the standards as the exchange price that would be received for an asset or paid to transfer a liability (an exit price) in the principal or most advantageous market between market participants on the measurement date. SIL uses appropriate valuation techniques to determine fair value based on inputs available. When available, SIL measures fair value using Level 1 inputs because they generally provide the most reliable evidence of fair value. Level 3 inputs are only used when Level 1 or Level 2 inputs are not available. Level 1 inputs consist of unadjusted quoted market prices in active markets for identical assets and have the highest priority, Level 2 inputs consist of observable inputs other than quoted prices for identical assets, and Level 3 inputs have the lowest priority. Changes in methods and assumptions: None. The following table presents the fair value measurements of assets and liabilities recognized in the accompanying consolidated statements of financial position measured at fair value on a recurring basis and the level within the fair value hierarchy in which the fair value measurements fall. Fair values of assets measured on a recurring basis are as follows (in thousands): September 30, 2015 Total Level 1 Level 2 Other assets: Beneficial interest in split-interest agreements $ 485 $ - $ 485 September 30, 2014 Total Level 1 Level 2 Investments: Money market fund $ 4 $ 4 $ - Other assets: Beneficial interest in split-interest agreements $ 422 $ - $

23 11. EMPLOYEE RETIREMENT PLAN: SIL has a 403(b) retirement plan for qualifying US employees, meaning those employees who normally work more than 20 hours per week. Eligible employees may make deferral contributions up to limits set by law, which may be matched by employer contributions equal to 100% of the first 2.5% of compensation deferred. Employer matching contributions as of were $29,000 and $21,000, respectively. 12. SEVERANCE LIABILITY: As of, SIL had accrued approximately $1,643,000 and $2,033,000, respectively, which is made up entirely of severance liabilities required by local laws in many countries around the world in which SIL employs local citizens as staff. This amount is included in accounts payable and accrued expenses on the consolidated statements of financial position. 13. PRIOR PERIOD ADJUSTMENT: As discussed in Note 2 for Other Assets, management has determined after further review of the facts and circumstances related to the sale of the preferred debt, that the sale transaction in fiscal year 2015 was not a clarification of a previous estimate but rather a subsequent event that should have been recorded in fiscal year Consequently, the 2014 financial statements have been restated to reduce other assets and increase the loss on preferred debt in the amount of $1,326,000, which resulted in decreases in total assets and unrestricted and total net assets in the amount of $1,326,000 for the fiscal year ended September 30, The restatement also resulted in the fiscal year 2014 change in unrestricted and total net assets decreasing in the amount of $1,326,000. This transaction has appropriately been included in fiscal year 2015 activity. 14. SUBSEQUENT EVENTS: Subsequent events have been evaluated through the report date, which represents the date the consolidated financial statements were available to be issued. Subsequent events after that date have not been evaluated. -21-

24 SUPPLEMENTARY DATA

25 INDEPENDENT AUDITORS REPORT ON SUPPLEMENTARY DATA Audit Committee of the Board of Directors Summer Institute of Linguistics, Inc. Dallas, Texas We have audited the consolidated financial statements of Summer Institute of Linguistics, Inc. as of and for the years ended, and our report thereon dated April 27, 2016, which expresses an unmodified opinion on those consolidated financial statements, appears on page 1. Our audits were conducted for the purpose of forming an opinion on the consolidated financial statements as a whole. The schedule of functional expenses is presented for purposes of additional analysis and is not a required part of the financial statements. Such information is the responsibility of management and was derived from and relates directly to the underlying accounting and other records used to prepare the financial statements. The information has been subjected to the auditing procedures applied in the audits of the consolidated financial statements and certain additional procedures, including comparing and reconciling such information directly to the underlying accounting and other records used to prepare the consolidated financial statements or to the consolidated financial statements themselves, and other additional procedures in accordance with auditing standards generally accepted in the United States of America. In our opinion, the information is fairly stated in all material respects in relation to the consolidated financial statements as a whole. Dallas, Texas April 27, 2016

26 Schedule of Functional Expenses Year Ended September 30, 2015 Program Services Supporting Activities Language Language Publications Related Program Fund- General & Total All Logistics Development & Printing Training Research Support Total raising Administration Total Functions Cost of goods sold $ 3,408,110 $ 458 $ 1,278,325 $ 6,085 $ - $ 15,505 $ 4,708,484 $ - $ 94,755 $ 94,755 $ 4,803,239 Labor cost 15,230,534 45,529,594 3,611,921 3,871,276 5,474,389 15,427,471 89,145,186-4,157,682 4,157,682 93,302,868 Equipment expense 429, ,464 71,184 28,751 18,665 85, ,790-24,386 24, ,176 Postage & shipping 20,844 15,765 9,079 2,738 1,047 6,559 56,032-2,966 2,966 58,998 Maintenance 1,133,813 (62,054) 117, ,136 72,157 (25,702) 1,360,112-23,359 23,359 1,383,471 Fuel 882,712 15, , , ,119 Insurance 591,836 23,782 4,908 10,062 6,491 42, , , ,030 1,132,265 Supplies (227,595) 296,409 (17,311) 117,061 15, , ,604 - (15,820) (15,820) 283,785 Utilities 1,628, ,822 25,595 76,140 76, ,093 2,550,655-57,377 57,377 2,608,032 Rent (348,778) 774,231 37, ,564 44, , , , , ,339 Property taxes 25, ,407 26, ,852 Depreciation 2,857, ,066 1,041 8, ,707 3,341, ,341,946 Project admin fee (104,948) 282,249 3,801 23,879 4,629 (197,252) 12, ,358 Taxes 167,639 15,486 1,041 1,998-92, ,148-1,800 1, ,948 Travel 392,255 3,516, , , , ,003 6,116, , ,000 6,766,881 Printing & media prod (15,939) 587,371 21,774 25,747 22,917 (80,560) 561,310-10,484 10, ,794 Computer & data processing 191, ,842 71,973 66,918 89, , , , ,373 1,458,337 Professional services 92,767 1,002, , , ,023 (444,972) 1,376, , ,565 1,725,813 Accounting & auditing 1,120 40,719 5,360 29,189 6,573 (36,566) 46,395-60,675 60, ,070 Legal 16,681 30, ,338 13,223 78,205-33,190 33, ,395 Meetings & conferences 43, ,929 15,259 13,044 24, , ,325-38,455 38, ,780 Training workshops 5, ,655 20, ,983 65,361 24, , ,163 Grants to organizations 16,067 1,626,245 27, , ,097 2,284, , ,000 2,404,280 Grants to WMO's 13, ,172 33,743 23,514-69, , , ,862 1,293,330 Grants to individuals - 52, ,120-10, , ,051 Internal grants (188,532) 100,118 (1,220,670) (66,855) 1,188, ,462 (70,614) - 70,614 70,614 - Cost of sales & services (11,945,694) (466,513) (374,744) (595,922) (90,991) (726,565) (14,200,429) - (588,218) (588,218) (14,788,646) General expenses (648,438) 352,180 (10,203) 80,297 55, ,636 43, , , ,438 JAARS expenses 7,205, ,205, ,671 1,481,784 2,422,455 9,627,910 Total $ 20,875,778 $ 55,940,165 $ 4,116,830 $ 5,909,805 $ 7,825,892 $ 16,932,460 $ 111,600,929 $ 940,671 $ 8,574,393 $ 9,515,064 $ 121,115,