Population Action International. Financial Report December 31, 2011

Transcription

1 Population Action International Financial Report December 31, 2011

2 Contents Independent Auditor s Report 1 Financial Statements Balance Sheet 2 Statement Of Activities 3 Statement Of Functional Expenses 4 Statement Of Cash Flows

3 Independent Auditor s Report To the Board of Directors Washington, D.C. We have audited the accompanying balance sheet of (PAI) as of December 31, 2011, and the related statements of activities, functional expenses and cash flows for the year then ended. These financial statements are the responsibility of PAI s management. Our responsibility is to express an opinion on these financial statements based on our audit. The prior year s summarized comparative information has been derived from the 2010 financial statements, and in our report, dated April 8, 2011, we expressed an unqualified opinion on those statements. We conducted our audit 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 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 audit provides a reasonable basis for our opinion. In our opinion, the 2011 financial statements referred to above present fairly, in all material respects, the financial position of as of December 31, 2011, and the change in its net assets and its cash flows for the year then ended in conformity with accounting principles generally accepted in the United States of America. Vienna, Virginia March 22,

4 Balance Sheet December 31, 2011 (With Comparative Totals For 2010) Assets Cash And Cash Equivalents Unrestricted $ 2,398,616 $ 1,595,307 Restricted 2,538,652 1,916,869 4,937,268 3,512,176 Investments (Note 2) 2,124,234 2,203,932 Prepaid Expenses And Other 59,619 63,710 Promises To Give 692,168 31,966 Property And Equipment, net (Note 3) 277, ,568 $ 8,090,457 $ 5,922,352 Liabilities And Net Assets Liabilities Accounts payable and accrued expenses (Note 4) $ 200,796 $ 135,064 Refundable advances (Note 5) 3,278,328 2,581,411 Capital lease obligation (Note 6) 44,137 62,063 Deferred rent (Note 10) 457, ,106 3,981,140 2,946,644 Commitments (Notes 6 and 10) Net Assets Unrestricted Undesignated 515, ,042 Board designated (Note 7) 1,799,500 1,799,500 2,314,567 2,464,542 Temporarily restricted (Note 8) 1,638, ,498 Permanently restricted (Note 9) 156, ,668 4,109,317 2,975,708 See. $ 8,090,457 $ 5,922,352 2

5 Statement Of Activities Year Ended December 31, 2011 (With Comparative Totals For 2010) Temporarily Permanently Restricted Restricted 2010 Unrestricted (Note 8) (Note 9) Total Total Support and revenue: Grants and contributions $ 5,376,746 $ 2,265,875 $ - $ 7,642,621 $ 3,930,055 Investment (loss) income (Note 2) (74,614) - - (74,614) 145,750 Other 1, ,604 20,822 Net assets released from restrictions (Note 8) 982,291 (982,291) Total support and revenue 6,286,027 1,283,584-7,569,611 4,096,627 Expenses: Program services 5,517, ,517,693 4,107,052 Resource development 448, , ,103 General and administrative 470, , ,101 Total expenses 6,436, ,436,002 5,024, Change in net assets (149,975) 1,283,584-1,133,609 (927,629) Net assets: Beginning 2,464, , ,668 2,975,708 3,903,337 Ending $ 2,314,567 $ 1,638,082 $ 156,668 $ 4,109,317 $ 2,975,708 See. 3

6 Statement Of Functional Expenses Year Ended December 31, 2011 (With Comparative Totals For 2010) General Program Resource And Total 2010 Services Development Administrative Expenses Total Salaries and benefits $ 2,040,378 $ 308,120 $ 342,689 $ 2,691,187 $ 2,593,768 International partnership grants 1,048, ,048, ,382 Consulting fees* 415, , ,745 Travel and meetings 666,212 4,652 1, , ,938 Occupancy 511,318 80,959 85, , ,409 Professional fees and contract services** 312,992 16,626 6, , ,737 Administrative and office support 156,000 24,987 20, , ,266 Publications 215, ,463 79,751 Program support 97,176 3,814 4, ,552 93,173 Depreciation 54,573 8,641 9,095 72,309 92, $ 5,517,693 $ 448,237 $ 470,072 $ 6,436,002 $ 5,024,256 *Consulting fees include fees and expenses of consultants engaged as independent contractors for specified services. **Professional fees include fees and expenses related to legal; auditing and accounting; artwork and design; translation, editing, and proofreading; payroll service; computer consulting; web design consultants; legislative consultants; and temporary help. See. 4

7 Statement Of Cash Flows Year Ended December 31, 2011 (With Comparative Totals For 2010) Cash Flows From Operating Activities Change in net assets $ 1,133,609 $ (927,629) Adjustments to reconcile change in net assets to net cash provided by operating activities: Depreciation 72,309 92,087 Realized and unrealized loss (gain) on investments, net 106,218 (109,829) Deferred rent 84, ,170 Changes in assets and liabilities: (Increase) decrease in: Restricted cash (621,783) (1,339,939) Prepaid expenses and other 4,091 (20,026) Promises to give (660,202) 1,405,054 Increase (decrease) in: Accounts payable and accrued expenses 65,732 (10,994) Refundable advances 696,917 1,524,090 Net cash provided by operating activities 881, ,984 Cash Flows From Investing Activities Proceeds from sale of investments 160,026 1,473,672 Purchase of investments (186,546) (953,831) Purchase of property and equipment (33,956) (7,525) Net cash (used in) provided by investing activities (60,476) 512,316 Cash Flows From Financing Activities Principal payments on capital lease obligations (17,926) (18,418) Net cash used in financing activities (17,926) (18,418) Net increase in cash and cash equivalents 803,309 1,208,882 Cash And Cash Equivalents Unrestricted Beginning 1,595, ,425 Ending $ 2,398,616 $ 1,595,307 Supplemental Disclosure Of Cash Flow Information Cash payments for interest $ 1,195 $ 2,119 Supplemental Schedule Of Noncash Operating Activities Donated materials and services $ 121,954 $ 48,288 Supplemental Schedule Of Noncash Investing And Financing Activities Leasehold improvements provided by landlord $ 204,953 $ - Equipment acquired under capital lease $ - $ 35,251 See. 5

8 Note 1. Nature Of Activities And Significant Accounting Policies Nature of activities: Since 1965, (PAI) has worked to ensure that every person has the right and access to sexual and reproductive health so that humanity and the natural environment can exist in balance and fewer people live in poverty. To effectively promote change, PAI draws upon its primary strengths of exploring and investigating critical issues relating to population, reproductive health and family planning, yielding groundbreaking research and policy analysis; communicating and advocating those findings to target audiences such as policymakers and civil society leaders; and strengthening the capacity of people and partnerships globally to raise funds and improve policies relating to family planning and reproductive health. PAI s program departments include International Advocacy, U.S. Government Relations, Research and Communications. PAI is guided by its three long-term goals: 1. To mobilize political and financial support for family planning programs which promote sexual and reproductive health and rights; 2. To highlight population as one of the critical factors in reducing poverty and achieving balance between humanity and the natural environment; and 3. To convene and enhance the ability of coalitions, partnerships and in-country civil society organizations to leverage advocacy skills and activities on a range of population, family planning, and sexual and reproductive health and rights issues. International Advocacy Initiatives: PAI s global advocacy efforts seek to mobilize political and financial support for family planning programs and sexual and reproductive health and rights. Our advocacy also focuses on highlighting the linkages between population and family planning and critical global issues such as poverty reduction, human security, and environmental sustainability. PAI works to support the advocacy capacity of regional alliances and networks through the provision of financial and technical assistance. Current focus has been on the EuroNGOs and on the Asia Pacific Alliance, with scattered support going to youth networks as needed and relevant. With the emergence of the Youth Initiative, PAI will help develop a more coherent plan for supporting youth advocacy vis-a-vis regional networks. PAI will also, through its project work on Reproductive Health Supplies and the Global Fund to Fight AIDS, Tuberculosis, and Malaria, seek out African networks with which we can begin to partner more generally on Reproductive Health/Family Planning advocacy. We also monitor the United Nations, the World Bank, and other multilateral organizations to assess progress achieved on the development and implementation of international population and reproductive health policies. United States Government Relations Initiatives: In the United States (U.S.), PAI works with national policymakers and opinion leaders, particularly in Congress and the Executive Branch, to strengthen U.S. policies and funding for these programs. PAI works to promote political and financial commitment from U.S. foreign assistance for international family planning and reproductive health. The United States is one of the most important players in the global arena of population, family planning and reproductive health policies and programs, including those addressing the HIV/AIDS pandemic. It is the largest bilateral donor in sheer dollar amounts (but not when measured as a proportion of gross national income), and it holds powerful sway over global institutions. U.S. commitment to reproductive health as part of its foreign assistance ebbs and flows depending on domestic politics in funding amounts and the policies that govern that funding. These policies have profound effects on programs around the world and ultimately, on those for which they are intended. 6

9 Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Research: PAI s Research Department collaborates closely with other departments at PAI to provide evidence to strengthen policies and resources for family planning and sexual reproductive health and family planning, and to highlight linkages between population and other global issues. PAI s research and analysis focuses on key issues for reproductive health and population policy, such as strategies for improving the quality of and access to reproductive health care and supplies, and for mobilizing the funds and political will to support these efforts. PAI has been a leader tracking funding for family planning and reproductive health and holding donors and developing countries accountable to their funding commitments. As donor funding mechanisms have gotten more complicated and donor funds more difficult to track, PAI has worked to better understand the changing funding landscape for sexual and reproductive health. PAI research has also focused on gender transformative approaches to reproductive health programs. Furthermore, research conducted by PAI and others indicates that demographics can have a significant impact on countries stability, governance, economic development and the well-being of its people. Accordingly, programs that promote a society s demographic transition from high to low rates of birth and death programs such as family planning and girls education must become a priority for donors of development assistance and developing nations themselves. Finally, to date, population issues have been largely absent from the global discourse on climate change. PAI s Climate Change Initiative, an ambitious multi-year initiative, promotes research, advocacy, and strategic communications designed to bring our experience and expertise to bear on these critical and complex relationships. A summary of PAI s significant accounting policies follows: Basis of accounting: The financial statements are prepared on the accrual basis of accounting, whereby, revenue is recognized when earned and expenses are recognized when incurred. Basis of presentation: PAI follows the Not-for-Profit Topic of the Financial Accounting Standards Board (FASB) Accounting Standards Codification (the Codification). Under this topic, PAI is required to report information regarding its financial position and activities according to three classes of net assets: unrestricted net assets, temporarily restricted net assets, and permanently restricted net assets. Cash and cash equivalents: For purposes of reporting cash flows, PAI considers all highly liquid investments purchased with a maturity of three months or less to be cash equivalents. All cash and investments, regardless of maturity, held by an investment advisor, are considered investments. The restricted cash represents $2,538,652 for The Integration Partnership grant from The Gates Foundation. Financial risk: PAI maintains its cash in bank deposit accounts which, at times, may exceed federally insured limits. PAI has not experienced any losses in such accounts. PAI believes it is not exposed to any significant financial risk on cash and cash equivalents. PAI invests in professionally managed portfolios that contain U.S. government agency bonds, common shares of publicly-traded companies, and mutual funds. Such investments are exposed to various risks such as market and credit. Due to the level of risk associated with such investments, and the level of uncertainty related to changes in the value of such investments, it is at least reasonably possible that changes in risks in the near term could materially affect investment balances and the amounts reported in the financial statements. 7

10 Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Investments: Investments in equity securities with readily determinable fair values and all investments in debt securities are reflected at fair market value. To adjust the carrying values of these securities, the change in fair market value is charged to investment income in the statement of activities. Promises to give: Unconditional promises to give are recognized as revenue or gains in the period acknowledged. Conditional promises to give are only recognized when the conditions on which they depend are substantially met. Unconditional promises to give are carried at fair value less an estimate made for doubtful promises based on a review of all outstanding promises on a monthly basis. Management determines the allowance for doubtful promises by using the historical experience applied to an aging of promises. Promises are written off when deemed uncollectible. There was no provision for doubtful promises, based on management s evaluation of the collection of promises, at December 31, All promises to give are due in the year ending December 31, Property and equipment: PAI capitalizes all property and equipment with a cost of $2,000 or more. Property and equipment are stated at cost, and depreciated on a straight-line basis mid-year over the estimated useful lives of the assets. Leasehold improvements are amortized over the lesser of the lease term or the estimated useful lives of the assets. Valuation of long-lived assets: PAI accounts for the valuation of long-lived assets under the Accounting for the Impairment or Disposal of Long-Lived Assets Topic of the Codification. This Codification requires that long-lived assets and certain identifiable intangible assets be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. Recoverability of long-lived assets is measured by a comparison of the carrying amount of the asset to future undiscounted net cash flows expected to be generated by the asset. If such assets are considered to be impaired, the impairment to be recognized is measured by the amount by which the carrying amount of the assets exceeds the estimated fair value of the assets. Assets to be disposed of are reportable at the lower of the carrying amount or fair value, less costs to sell. Support and revenue: Contributions received are recorded as unrestricted, temporarily restricted, or permanently restricted support, depending on the existence and/or nature of any donor restrictions. All donor-restricted support is reported as an increase in temporarily or permanently restricted net assets, depending on the nature of the restriction. When a restriction expires (that is, when a stipulated time restriction ends or purpose restriction is accomplished), temporarily restricted net assets are reclassified to unrestricted net assets and reported in the statement of activities as net assets released from restrictions. Time restricted net assets are reported as unrestricted net assets if the restrictions are met in the same period received. PAI receives grants from foundations for various purposes. Grant awards not yet received are accrued to the extent unreimbursed expenses have been incurred for the purposes specified by an approved grant. PAI defers grant revenues received under approved awards to the extent they exceed expenses incurred for the purposes specified under the grant restrictions. These deferrals are recorded as Refundable Advances in the liabilities section of the Balance Sheet and are available for use in subsequent years. The deferrals are recorded as revenue when expenses for the purpose specified are incurred. Donated materials and services: The donated services are recorded as revenue with a corresponding offset to donated services expense. The donated services are calculated based on fair market value of the service. For the year ended December 31, 2011, PAI recorded $4,807 of donated legal services, and $117,147 of donated website advertising. Functional allocation of expenses: The costs of providing the various programs and other activities have been summarized on a functional basis in the statement of activities. Accordingly, certain costs have been allocated among the programs and supporting services benefited. 8

11 Note 1. Nature Of Activities And Significant Accounting Policies (Continued) Income taxes: PAI is generally exempt from federal income taxes under the provisions of Section 501(c)(3) of the Internal Revenue Code (the Code). In addition, PAI qualifies for charitable contributions deductions and has been classified as an organization that is not a private foundation. Income which is not related to exempt purposes, less applicable deductions, is subject to federal and state corporate income taxes. There was no tax liability for unrelated business income tax for the year ended December 31, PAI has adopted the accounting standard on accounting for uncertainty in income taxes, which addresses the determination of whether tax benefits claimed or expected to be claimed on a tax return should be recorded in the financial statements. Under this policy, PAI may recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position would be sustained on examination by taxing authorities, based on the technical merits of the position. Management has evaluated PAI s tax positions and has concluded that PAI has taken no uncertain tax positions that require adjustment to the financial statements to comply with provisions of this guideline. PAI would be liable for income taxes in the U.S. federal jurisdiction. Generally, PAI is no longer subject to U.S. federal tax examinations by tax authorities before Use of estimates: The preparation of financial statements requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements, and the reported amounts of revenue and expenses during the reporting period. Actual results could differ from those estimates. Recently issued accounting standard: In May 2011, the FASB issued Accounting Standards Update No , Amendments to Achieve Common Fair Value Measurement and Disclosure Requirements in U.S. GAAP and IFRSs (ASU ). ASU clarifies existing fair value measurement requirements, changes certain fair value measurement principles, and expands disclosure requirements that will be effective for the fiscal year ending December 31, Management has not yet determined the impact that ASU will have on PAI s financial statements. Subsequent events: PAI evaluated subsequent events through March 22, 2012, which is the date the financial statements were available to be issued. Prior year information: The financial statements include prior period summarized comparative information in total but not by net asset class. Such information does not include sufficient detail to constitute a presentation in conformity with accounting principles generally accepted in the United States of America. Accordingly, such information should be read in conjunction with PAI s financial statements for the year ended December 31, 2010, from which the summarized information was derived. 9

12 Note 2. Investments Investments at December 31, 2011, consist of the following: Cash equivalents $ 1,156,880 Equities 529,851 U.S. Government agency bonds 335,362 Mutual funds $ 102,141 2,124,234 Investment income (loss) for the year ended December 31, 2011, consists of the following: Interest and dividends $ 40,053 Realized gain on investments 8,006 Unrealized loss on investments (114,224) Investment management fees $ (8,449) (74,614) Fair Value Measurements: The Fair Value Measurements and Disclosures Topic of the FASB Codification establishes a fair value hierarchy that is based on the valuation inputs used in the fair value measurements. The topic requires that assets and liabilities carried at fair value will be classified and disclosed in one of the following three categories: Level 1 Quoted market prices in active markets for identical assets or liabilities Level 2 Observable market based inputs or unobservable inputs corroborated by market data Level 3 Unobservable inputs that are not corroborated by market data In determining the appropriate levels, PAI performs a detailed analysis of the assets and liabilities that are subject to fair value measurements. At each reporting period, all assets and liabilities for which the fair value measurement is based on significant unobservable inputs are classified as Level 3. There were no Level 3 inputs for any assets held by PAI at December 31,

13 Note 2. Investments (Continued) The table below presents the balances of assets and liabilities measured at fair value on a recurring basis by level within the hierarchy: Total Level 1 Level 2 Level 3 U.S. Government agency bonds $ 335,362 $ - $ 335,362 $ - Equities and mututal funds Consumer discretionary 47,642 47, Consumer supplies 31,721 31, Energy 134, , Finance 190, , Health care 38,518 38, Industrial 32,863 32, Information technology 20,246 20, Materials 101, , Telecommunication 15,818 15, Utilities 19,006 19, $ 967,354 $ 631,992 $ 335,362 $ - Based on its analysis of the nature and risks of these investments, PAI has determined that presenting the U.S. Government bonds as a single class is appropriate. PAI did not have any transfers between investment levels for the year ended December 31, Cash equivalents of $1,156,880 are stated at cost and therefore not included in the above schedule. Note 3. Property And Equipment Property and equipment and accumulated depreciation at December 31, 2011, and depreciation expense for the year ended December 31, 2011, is as follows: Estimated Accumulated Depreciation Asset Category Lives Cost Depreciation Net Expense Computer equipment and software 2 to 5 years $ 402,099 $ 323,541 $ 78,558 $ 43,024 Leasehold improvements Life of lease 631, , ,352 27,962 Furniture and equipment 5 to 7 years 240, ,848 2,258 1,323 $ 1,273,955 $ 996,787 $ 277,168 $ 72,309 11

14 Note 4. Accounts Payable And Accrued Expenses Accounts payable and accrued expenses at December 31, 2011, consist of the following: Accounts payable $ 142,051 Accrued vacation 40,277 Salaries payable $ 18, ,796 Note 5. Refundable Advances During the year ended December 31, 2011, PAI, in accordance with its revenue recognition policy, recognized as income $2,442,375 of the following conditional grants totaling $2,581,411 that cash was received in prior years. PAI anticipates recognizing the remainder of these conditional grants as income during the year ending December 31, In addition, during the year ended December 31, 2011, PAI received cash for the following conditional grants totaling $3,337,674. In accordance with its revenue recognition policy, PAI recognized $198,382 of these grants as income during the year ended December 31, PAI anticipates recognizing the remainder of these conditional grants as income in the next fiscal year. Grantee Cash Received On Conditional Grants In Prior Years Cash Received On Conditional Grants In 2011 Revenue Recognized In 2011 Conditional Grant Cash Available For Subsequent Years The Bill & Melinda Gates Foundation $ 1,878,545 $ 2,340,008 $ 1,886,620 $ 2,331,933 Summit Foundation 32,507 45,000 38,314 39,193 United Nations Foundation 283, , , ,752 The David and Lucile Packard Foundation 49,188-44,743 4,445 The William and Flora Hewlett Foundation 50, ,000 52, ,655 The Richard and Rhoda Goldman Fund 71,600-71,600 - Arnow Family Fund 10,000-10,000 - Compton Foundation, Inc. 40,000 50,000 40,000 50,000 University of North Carolina 120,929 70,514 16, ,637 PATH 44, , ,243 94,713 Engender Health - 100, ,522 - Fledging Fund - 20,000 20,000 - Brush Foundation - 25,000-25,000 $ 2,581,411 $ 3,337,674 $ 2,640,757 $ 3,278,328 12

15 Note 6. Capital Leases PAI leases one copier and a telephone system under the provisions of two capital leases. The terms of the capital leases provide for monthly payments of $1,560. Future minimum lease payments remaining are as follows: Years Ending December 31, 2012 $ 19, , , ,157 Less the amount representing interest $ 2,020 44,137 Note 7. Board Designated Net Assets Board designated net assets include funds designated by the Board for specific programs. Board designated net assets at December 31, 2011, were available in the Working Capital Fund (Helen Edey Bequest), and the balance was $1,799,500. Note 8. Temporarily Restricted Net Assets Temporarily restricted net assets include donor-restricted and other funds, which are only available for program activities or general support designated for future years. Temporarily restricted net assets were released from restrictions during the year ended December 31, 2011, due to the purpose restriction being accomplished, or the time restriction was met. Temporarily restricted net assets at December 31, 2011, were available for the following programs: Balance Balance Purpose restricted: December 31, December 31, 2010 Additions Released 2011 Climate Change $ 349,498 $ 1,000,000 $ 964,041 $ 385,457 Wallace Global Fund 5,000 5,000 - Amy Coen International Fellowship - 15,875 13,250 2,625 Time restricted general support - 1,250,000-1,250,000 $ 354,498 $ 2,265,875 $ 982,291 $ 1,638,082 13

16 Note 9. Permanently Restricted Net Assets Interpretation of relevant law: The Board of Directors of PAI has interpreted the District of Columbia enacted version of UPMIFA as requiring the preservation of the fair value of the original gift as of the gift date of the donor-restricted endowment funds, absent explicit donor stipulations to the contrary. As a result of this interpretation, PAI 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 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 expenditures by PAI in a manner consistent with the standard of prudence prescribed by UPMIFA. In accordance with UPMIFA, PAI 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 PAI and the donor-restricted endowment fund General economic conditions The possible effects of inflation and deflation The expected total return from income and the appreciation of investments Other resources of PAI The investment policies of PAI There were no contributions nor any releases to the Board Reserve Fund or Permanently Restricted Fund during the year ended December 31, Income earned on the Board Reserve Fund and permanently restricted fund is unrestricted. Return objectives and risk parameters: PAI has adopted an investment policy for endowment assets that attempts 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 PAI must hold in perpetuity or for a donor-specified period, as well as board designated funds. Under this policy, as approved by the Board of Directors, the endowment assets are invested in a manner that is longer-term oriented and include assets which are not intended for current use. The primary objective will be to provide for consistent long-term growth of principal, without undue exposure to risk. Investment performance will be measured on a roiling five-year basis. The total return will be expected to exceed the return of a Blended Market Index that represents the target asset allocation. Strategies employed for achieving objectives: To satisfy its long-term rate-of-return objectives, PAI 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 objectives shall be accomplished utilizing a strategy of fixed income, equities and cash equivalents in a mix which is conducive to participation in rising markets while allowing for protection in falling markets within prudent risk constraints. Spending policy and how the investment objectives relate to spending policy: Currently, PAI does not have a spending policy. Spending is in accordance with any donor-imposed restrictions. Accordingly, over the long-term, PAI expects to allow its endowment to grow annually. This is consistent with PAI 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. 14

17 Note 10. Operating Leases PAI is obligated under a noncancelable lease for its headquarters office expiring in Under the terms of the agreement, PAI is committed to annual rental payments adjusted for defined escalations based on building operating expenses. A deferred rent amount was recognized to allocate the benefit throughout the term of the individual lease. The deferred rent amount was $457,879 at December 31, Future minimum lease payments are as follows: Years Ending December 31, 2012 $ 660, , , , , $ 2,902,444 6,376,606 Total rent expense on the office lease was $675,925 for the year ended December 31, Note 11. Retirement Plans PAI maintains a defined contribution plan with TIAA-CREF (the Plan). All regular full and part time employees who have completed 30 days of service are eligible to participate in the Plan. PAI contributes 1% of a participant s portion of compensation within the Social Security Earnings Base. All rights to the contributions are fully vested with the participant. PAI contributed $21,499 to the Plan during the year ended December 31, PAI also maintains a tax deferred annuity plan. All employees are eligible to participate on the first day of the month following 30 days of employment at PAI. All employees are fully vested in the defined contribution plan after one year of employment. 15