SUMMER INSTITUTE OF LINGUISTICS, INC.

Transcription

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

2 Table of Contents Independent Auditors Report 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 Independent Auditors Report on Supplemental Information 22 Consolidating Statement of Financial Position Consolidating Statement of Financial Position Consolidating Statement of Activities Consolidating Statement of Activities Page

3 INDEPENDENT AUDITORS REPORT 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 s Responsibility for the Consolidated Financial Statements Management is responsible for the preparation and fair presentation of these consolidated financial statements in accordance with accounting principles generally accepted in the United States of America; this includes the design, implementation, and maintenance of internal control relevant to the preparation and fair presentation of consolidated financial statements that are free from material misstatement, whether due to fraud or error. Auditors Responsibility Our responsibility is to express an opinion on these consolidated 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 consolidated financial statements are free from material misstatement. An audit involves performing procedures to obtain audit evidence about the amounts and disclosures in the consolidated financial statements. The procedures selected depend on the auditor s judgment, including the assessment of the risks of material misstatement of the consolidated financial statements, whether due to fraud or error. In making those risk assessments, the auditor considers internal control relevant to the entity s preparation and fair presentation of the consolidated financial statements in order to design audit procedures that are appropriate in the circumstances, but not for the purpose of expressing an opinion on the effectiveness of the entity s internal control. Accordingly, we express no such opinion. An audit also includes evaluating the appropriateness of accounting policies used and the reasonableness of significant accounting estimates made by management, as well as evaluating the overall presentation of the consolidated financial statements. We believe that the audit evidence we have obtained is sufficient and appropriate to provide a basis for our audit opinion Texan Trail, Suite 125 Grapevine, TX capincrouse.com

4 Audit Committee of the Board of Directors Summer Institute of Linguistics, Inc. Dallas, Texas Opinion In our opinion, the consolidated financial statements referred to above present fairly, in all material respects, the consolidated financial position of Summer Institute of Linguistics, Inc. as of, and the changes in its net assets and cash flows for the years then ended in conformity with accounting principles generally accepted in the United States of America. Prior Period Adjustment Grapevine, Texas April 27,

5 Consolidated Statements of Financial Position (in thousands of dollars) September 30, ASSETS: Cash $ 15,633 $ 9,201 Investments (Note 3) 30,989 30,481 Accounts receivable 1,284 1,323 Notes receivable (Note 4) 80 1,000 Amounts due from related entities (Note 7) 1,181 1,180 Inventory (Note 2) 2,267 2,339 Property and equipment net of accumulated depreciation (Note 5) 36,474 39,195 Other assets (Note 2) 2,503 2,810 Total Assets $ 90,411 $ 87,529 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 4,060 $ 4,588 Amounts due to staff and affiliated entities (Note 7) 10,888 6,489 Other liabilities (Note 2) ,932 12,057 Net assets: Unrestricted: Equity in property and equipment net 35,489 38,215 Board designated (Note 8) 10,577 10,744 Undesignated 19,107 17,911 Total unrestricted 65,173 66,870 Temporarily restricted (Note 8) 9,042 8,339 Permanently restricted (Note 9) ,479 75,472 Total Liabilities and Net Assets $ 90,411 $ 87,529 See notes to consolidated financial statements -3-

6 Consolidated Statement of Activities (in thousands of dollars) Year Ended September 30, 2016 Temporarily Permanently Unrestricted Restricted Restricted Total OPERATING SUPPORT AND REVENUE: Support from affiliates (Note 7) $ 91,566 $ 18,120 $ - $ 109,686 Contributions 2,014 3, ,098 Donated goods and services 1, ,662 Program service revenue (Note 2) 1, ,178 Sales and service income, net (Note 2) Other (114) - - (114) Net assets released from restrictions: Satisfaction of program restrictions 20,545 (20,545) - - Total operating support and revenue 116, ,651 OPERATING EXPENSES: Program services: Language development and training 110, ,784 Supporting services: General and administrative 7, ,822 Fund-raising Total supporting services 8, ,773 Total operating expenses 119, ,557 Change in net assets from operating activities (2,610) (1,906) NON-OPERATING ACTIVITIES: Interest and dividends (Note 3) Net realized/unrealized gain on investments (Note 3) Gain on sale of fixed assets Change in net assets from non-operating activities Change in Net Assets (1,697) (993) Net Assets, Beginning of Year 66,870 8, ,472 Net Assets, End of Year $ 65,173 $ 9,042 $ 264 $ 74,479 See notes to consolidated financial statements -4-

7 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 (Note 2) 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 112, ,064 Supporting services: General and administrative 8, ,111 Fund-raising Total supporting services 9, ,052 Total operating expenses 121, ,116 Change in net assets from operating activities (917) (72) 1 (988) NON-OPERATING ACTIVITIES: Interest and dividends (Note 3) ,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 -5-

8 Consolidated Statements of Cash Flows (in thousands of dollars) Year Ended September 30, CASH FLOWS FROM OPERATING ACTIVITIES: Change in net assets $ (993) $ 2,832 Adjustments to reconcile change in net assets to net cash provided (used) by operating activities: Depreciation 4,034 4,001 Gain on sale of fixed assets (11) (1,530) Noncash grant of property and equipment Net realized/unrealized (gain) loss on sale of investments (642) 1 Loss on investment in captive insurance company Gain on preferred debt - (1,326) Noncash contributions of property and equipment (53) (42) Contributions restricted for capital expenditures (22) (277) Contributions restricted for endowment (1) (1) Changes in assets and liabilities: Accounts receivable Amounts due from staff and affiliated entities (1) 7 Inventory Other assets 307 1,780 Accounts payable and accrued expenses (528) (276) Amounts due to staff and affiliated entities 4,399 (4,225) Net Cash Provided by Operating Activities 7,135 1,722 CASH FLOWS FROM INVESTING ACTIVITIES: Purchase of investments (774) (8,455) Purchase of property and equipment (2,025) (2,552) Proceeds from sale of investments Proceeds from sale of property and equipment 394 2,146 Issuance of notes receivable (80) (1,000) Payments on notes receivable 1, Net Cash Used by Investing Activities (730) (9,627) CASH FLOWS FROM FINANCING ACTIVITIES: Other liabilities 4 14 Contributions restricted for capital expenditures Contributions restricted for endowment 1 1 Net Cash Provided by Financing Activities Net Change in Cash 6,432 (7,613) Cash, Beginning of Year 9,201 16,814 Cash, End of Year $ 15,633 $ 9,201 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. SIL s 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 SIL s primary source of revenue. The Alliance is not included in these consolidated financial statements because it is 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, 2016, assets held overseas, including cash, accounts receivable, inventory and other assets, totaled $9,340,000 and property and equipment, net of accumulated depreciation, amounted to $27,085,000. 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. 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) and The Seed Company (TSC). 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. 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. RIA Charitable Investments Inc. (RIACII) exists to provide a pooled investment opportunity for SIL and certain 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 $14.9 million and $8.5 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 approximately $7 million and $2 million at, respectively. INVESTMENTS Investments in money market funds are reported at fair market value. The investment in the 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 SIL and 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 (2.00% and 2.25% 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 2016 and 2015 was approximately $389,000 and $504,000, respectively. As of, RIACII reported total assets with a fair value of approximately $89,243,000 and $88,058,000, respectively, of which SIL holds approximately $28,258,000 (32%) and $27,727,000 (32%), 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 from the captive insurance company recorded in the consolidated statements of activities for the years ended, was approximately $0 and $494,000, 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. 58% and 54% of inventories are held at overseas locations as of, 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 organization s inception, are not recognized as assets on the statements of consolidated financial position and, thus, are not reflected on the consolidated 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 $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 $2,503,000 and $2,810,000 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 $512,000 and $485,000 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. 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. 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, Aviation parts held for internal use (rather than those held for sale, which are included in Inventory): $1,134,000 and $1,262,000 at, respectively. Prepaid expenses: $857,000 and $1,063,000 at, respectively. OTHER LIABILITIES Other liabilities consists primarily of Asset Retirement Obligations (ARO) for SIL and JAARS. As of September 30, 2016, the balances were $376,000 and $608,000, respectively, for SIL and JAARS. As of September 30, 2015, the balances were $362,000 and $618,000, respectively, for SIL and JAARS. -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 $13,969,000 and $14,789,000 for the years ended, respectively. Since these sales and services are provided to assist 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: PROGRAM SERVICE INCOME Program service income is generated from the sale of inventory and use of services provided by JAARS, net of related expense. 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, 2016, exchange losses were $175,000, and for the year ending September 30, 2015, exchange gains were $25,000. 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, 2016, 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 2015 consolidated financial statements have been reclassified to conform to the 2016 presentation. 3. INVESTMENTS: SIL s investments consist of the following (in thousands): September 30, Investments held at other than fair value: Deposits with RIA Charitable Investments, Inc. $ 28,258 $ 27,727 Investment in captive insurance company* 2,126 2,279 Certificates of deposit Other $ 30,989 $ 30,481

16 3. INVESTMENTS, continued: SIL s investments consist of the following (in thousands): September 30, Investments to be held in perpetuity $ 264 $ 263 Investments available for unrestricted and temporarily restricted purposes 30,725 30,218 $ 30,989 $ 30,481 *SIL invests along with several unrelated nonprofit organizations, in Stewardship Insurance, Ltd (Stewardship), a captive insurance company. As of September 30, 2016, SIL s investment in Stewardship is $2,126,000 (cost basis $330,000) and represents 9% of Stewardship. As of September 30, 2015, SIL s investment in Stewardship was $2,279,000 (cost basis $330,000) and represented 10% of Stewardship. Stewardship insures claims relating to worker s compensation, general liability, auto liability, property and emergency medical evacuation. Claim experience is identified to each participating entity, and subsequent premiums are modified based on an entity s experience. Investment income consists of the following (in thousands): Year Ended September 30, Interest and dividends $ 413 $ 1,004 Net realized/unrealized gain (loss) 642 (1) Loss on investment in captive insurance company (153) (39) $ 902 $

17 4. NOTES RECEIVABLE: Notes receivable consist of the following (in thousands): September 30, Secured note receivable for land, sold in Mozambique from Youth with a Mission, balance due on $700,000 purchase price is expected to be paid in Secured note receivable from Claver Florencio Acosta y Rodriguez for land and buildings sold in Peru; note matured January 2016; balance of note was paid January $ 80 $ - - 1, PROPERTY AND EQUIPMENT: Property and equipment at September 30, 2016, consist of the following (in thousands): $ 80 $ 1,000 Domestic International Total Land and land improvements $ 2,072 $ 2,798 $ 4,870 Buildings 22,427 32,278 54,705 Furniture and equipment 7,974 4,894 12,868 Vehicles 274 3,444 3,718 Aircraft 2,885 9,233 12,118 Utilities ,003 53,150 89,153 Less accumulated depreciation (27,140) (26,845) (53,985) 8,863 26,305 35,168 Construction in progress ,306 $ 9,389 $ 27,085 $ 36,

18 5. PROPERTY AND EQUIPMENT, continued: Property and equipment at September 30, 2015, consist of the following (in thousands): 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, ,859 $ 11,118 $ 28,077 $ 39,195 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 the years ended, 41% and 40%, respectively, of the international property and equipment is in Papua New Guinea and 11% and 10%, respectively, 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, 2017 $ Thereafter $ 1,187

19 6. OPERATING LEASES, continued: Total rental expense for the years ending, was $1,977,000 and $2,046,000, respectively. 7. TRANSACTIONS WITH RELATED ENTITIES: SIL had investments with related entities as follows (in thousands): September 30, RIACII $ 28,258 $ 27,727 SIL had amounts due from related entities as follows (in thousands): September 30, Staff $ 337 $ 318 The Alliance organizations SIL LEAD $ 1,181 $ 1,180 SIL had amounts due to related entities as follows (in thousands): September 30, Staff $ 3,724 $ 3,780 The Alliance organizations The Alliance organizations cash deposits 6,835 1,971 $ 10,888 $ 6,

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 the Alliance organizations $ 109,685 $ 113,266 Provided support and revenue to the Alliance organizations $ 1,128 $ 1,297 Grant to SIL LEAD $ 120 $ 120 Of the total amounts received from Wycliffe Global Alliance organizations during the year ended September 30, 2016, $85,363,000 are non-cash contributions consisting of the value of labor of staff assigned to SIL. Of these amounts, $80,552,000 is included in program expenses and $4,811,000 is included in general and administrative expenses. 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. Of these amounts, $80,731,000 is included in program expenses and $4,722,000 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, 2016, 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 $ 1,275 $ 1,022 Aviation overhaul funds 5,346 4,991 Stewardship Insurance, LTD. 2,126 2,279 International conference travel fund 928 1,071 Insurance reserves Language development/publishing Scholarships $ 10,577 $ 10,

21 8. NET ASSETS, continued: Temporarily restricted net assets consist of the following (in thousands): September 30, Language and literacy support projects $ 6,860 $ 6,379 Aviation and aircraft support projects 1,143 1,117 Beneficial interest in charitable gift annuities Strategic support initiative projects Logistical support projects $ 9,042 $ 8,339 Minority interest: SIL operates a school overseas in which partners hold a minority interest of 34%. SIL has a 66% interest in the school. 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 $ 1,163 $ 1,190 $ 594 $ 601 Change in net assets 7 (23) 3 (11) Ending net assets $ 1,170 $ 1,167 $ 597 $ 590 As of, $17,300 and $7,800, respectively, are included in temporarily restricted net assets. 9. ENDOWMENT FUNDS: SIL s 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, 2016 Total Level 1 Level 2 Other assets: Beneficial interest in split-interest agreements $ 512 $ - $ 512 September 30, 2015 Total Level 1 Level 2 Other assets: Beneficial interest in split-interest agreements $ 485 $ - $ 485 WF holds certain charitable gift annuities for JAARS. This amount represents the beneficial interest JAARS has in those charitable gift annuities. The annuity assets held at WF are reported at fair value based on observable inputs other than quoted prices for identical assets, which is Level 2 of the fair value hierarchy. The fair value for the beneficial interest in split-interest agreements is determined by calculating the present value of the future distributions expected to be received, using published life expectancy tables and an appropriate discount rate. -20-

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 $36,000 and $29,000, respectively. 12. SEVERANCE LIABILITY: As of, SIL had accrued approximately $1,797,000 and $1,643,000, 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. 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, 2017, which expressed 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 consolidating statements of financial position and the consolidating statements of activities are presented for purposes of additional analysis of the consolidated financial statements, rather than to present financial position, results of operations, and cash flows of the individual organizations, and are not a required part of the consolidated 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 consolidated financial statements. The consolidating information has been subjected to the auditing procedures applied in the audit 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. Grapevine, Texas April 27, Texan Trail, Suite 125 Grapevine, TX capincrouse.com

26 Consolidating Statement of Financial Position (in thousands of dollars) September 30, 2016 Summer Institute of Linguistics JAARS, Inc. Eliminations Total ASSETS: Cash $ 15,376 $ 257 $ - $ 15,633 Investments 31,031 4,445 (4,487) 30,989 Accounts receivable 1, ,284 Notes receivable Amounts due from related entities 1,199 4 (22) 1,181 Inventory 1, ,267 Property and equipment net of accumulated depreciation 32,512 3,962-36,474 Other assets 1, ,503 Total Assets $ 85,021 $ 9,899 $ (4,509) $ 90,411 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 3,845 $ 215 $ - $ 4,060 Amounts due to staff and affiliated entities 15, (4,459) 10,888 Other liabilities , (4,459) 15,932 Net Assets: Unrestricted: Undesignated 18, ,107 Equity in property and equipment net 32,135 3,354-35,489 Board designated 7,748 2,879 (50) 10,577 58,359 6,864 (50) 65,173 Temporarily restricted 6,840 2,202-9,042 Permanently restricted ,463 9,066 (50) 74,479 Total Liabilities and Net Assets $ 85,021 $ 9,899 $ (4,509) $ 90,

27 Consolidating Statement of Financial Position (in thousands of dollars) September 30, 2015 Summer Institute of Linguistics JAARS, Inc. Eliminations Total ASSETS: Cash $ 8,924 $ 274 $ 3 $ 9,201 Investments 30,512 3,795 (3,826) 30,481 Accounts receivable 1, ,323 Notes receivable ,000 Amounts due from related entities 1,185 - (5) 1,180 Inventory 1, ,339 Property and equipment net of accumulated depreciation 34,612 4,583-39,195 Other assets 2, ,810 Total Assets $ 81,238 $ 10,059 $ (3,768) $ 87,529 LIABILITIES AND NET ASSETS: Liabilities: Accounts payable and accrued expenses $ 4,235 $ 292 $ 61 $ 4,588 Amounts due to staff and affiliated entities 10,268 - (3,779) 6,489 Other liabilities , (3,718) 12,057 Net Assets: Unrestricted: Undesignated 17, ,911 Equity in property and equipment net 34,251 3,964-38,215 Board designated 8,252 2,542 (50) 10,744 59,734 7,186 (50) 66,870 Temporarily restricted 6,376 1,963-8,339 Permanently restricted ,373 9,149 (50) 75,472 Total Liabilities and Net Assets $ 81,238 $ 10,059 $ (3,768) $ 87,

28 Consolidating Statement of Activities (in thousands of dollars) Year Ended September 30, 2016 Summer Institute of Linguistics JAARS, Inc. Eliminations Total OPERATING SUPPORT AND REVENUE: Support from affiliates $ 109,613 $ 6,958 $ (6,885) $ 109,686 Contributions 2,965 2,133-5,098 Donated goods and services 1, (327) 1,662 Program service revenue - 1,178-1,178 Sales and service income 14, (15,112) 141 Other (158) 105 (61) (114) Total operating support and revenue 128,296 11,740 (22,385) 117,651 OPERATING EXPENSES: Program services: Bible translation and related programs 119,239 9,530 (17,985) 110,784 Supporting services: General and administrative 11,037 1,103 (4,318) 7,822 Fund-raising (82) ,119 2,054 (4,400) 8,773 Total operating expenses 130,358 11,584 (22,385) 119,557 Change in net assets from operating activities (2,062) (1,906) NON-OPERATING ACTIVITIES: Interest and dividends Net realized/unrealized gain/(loss) 490 (1) Gain/(loss) on sale of fixed assets 251 (240) - 11 Change in net assets from non-operating activities 1,153 (240) Change in Net Assets (909) (84) - (993) Net Assets, Beginning of Year 66,372 9,150 (50) 75,472 Net Assets, End of Year $ 65,463 $ 9,066 $ (50) $ 74,

29 Consolidating Statement of Activities (in thousands of dollars) Year Ended September 30, 2015 Summer Institute of Linguistics JAARS, Inc. Eliminations Total OPERATING SUPPORT AND REVENUE: Support from affiliates $ 113,238 $ 6,396 $ (6,368) $ 113,266 Contributions 2,419 1,672-4,091 Donated goods and services 643 1,081 (320) 1,404 Program service revenue - 1,112-1,112 Sales and service income 15, (16,469) 153 Other (55) 102 Total operating support and revenue 132,165 11,175 (23,212) 120,128 OPERATING EXPENSES: Program services: Bible translation and related programs 123,565 8,983 (20,484) 112,064 Supporting services: General and administrative 9,282 1,482 (2,653) 8,111 Fund-raising (75) 941 9,357 2,423 (2,728) 9,052 Total operating expenses 132,922 11,406 (23,212) 121,116 Change in net assets from operating activities (757) (231) - (988) NON-OPERATING ACTIVITIES: Interest and dividends ,004 Gain on preferred debt - 1,326-1,326 Net realized/unrealized gain/(loss) (40) - - (40) Gain/(loss) on sale of fixed assets 1, ,530 Change in net assets from nonoperating activities 2,374 1,446-3,820 Change in Net Assets 1,617 1,215-2,832 Net Assets, Beginning of Year 64,756 7,934 (50) 72,640 Net Assets, End of Year $ 66,373 $ 9,149 $ (50) $ 75,